The Dow rallied +127 points at the open then plunged -220 points to -93 before struggling back to a +10 point gain late in the afternoon. The Nasdaq spiked +40 at the open before declining -80 points to -40 with a struggle to creep higher by the close to lose only -9 points. Hopefully the sellers got it out of their system.

Market Statistics

There were multiple reasons for the Friday morning crash but the main one was probably just profit taking. Now that we are in a new tax year investors can take profits and reinvest them without having to pay taxes for another 12 months. This almost always produces some early January volatility and I warned everyone over the last two weeks to expect volatility around New Years. Hopefully everyone that was itching to sell has now accomplished that task and they will be ready to buy next week.

If you look at the stocks that declined on Friday it was the prior winners. The stocks that had a good day were the prior losers. This happens at the beginning of every year. Since we had two sell offs in the last couple months the damage on Friday was minimal.

Problems from overseas were also weighing on the market. Mario Draghi made some comments to a German newspaper suggesting in the strongest words yet that he can't rule out deflation in the euro area and saying "We have to act against such a risk." German Bundesbank President, Jens Weidman has argued that more stimulus is unwarranted claiming low oil prices are already stimulus but others have warned that falling oil prices could tip the euro area into full-fledged deflation. The Euro fell to its lowest level in more than four years.

Draghi said "We are in technical preparations to alter the size, speed and composition of new stimulus measures at the beginning of 2015, should this become necessary, to react to a too-long period of low inflation. There is unanimity in the ECB council on that." The 25 member Governing Council will review a QE package at its next meeting on January 22nd. An interim meeting will be held on January 7th, the same day the euro-area inflation data is published.

The dollar soared on the Draghi comments to an 11.5 year high. This will further prevent the Fed from raising interest rates anytime in the near future. A 10% spike in the dollar has long been seen as the equivalent of a 50 basis point hike in rates. A high dollar weakens sales overseas that account for about 50% of revenue from S&P-500 companies. A rise in the dollar pressures commodities and the entire commodity complex declined on Friday.

Secondly, the ISM Manufacturing Index came in much weaker than expected and throwing doubt on the strength of the economy. The headline number fell from 58.7 to 55.5 and a six month low. This was the third decline in the last four months.

The new orders component fell from 66.0 to 57.3 and order backlogs declined from 55.0 to 52.5. Production fell from 64.4 to 58.9 and the inventory component declined from 51.5 to 45.5. While anything over 50 still suggests economic expansion the pace of decline from the high of 59.0 in October is concerning.

As we have seen in various regional reports the manufacturing activity in the U.S. appears to be weakening. Whether this is due to slowing overseas sales as a result of the strong dollar is still unknown. Some respondents noted problems at West coast ports and others said energy related projects are being cancelled because of low oil prices. Overall the falling energy prices will be positive for economic growth but there will be areas of weakness where business depends on the energy sector to buy their goods.

The combination of the deflation risk in Europe and the slowing manufacturing in the U.S. pushed treasuries sharply higher and yields sharply lower. Yields on the 10-year hit 2.1% intraday after hitting 2.3% just a week ago. The Treasury market is not acting like it believes the Fed will hike rates in June. Yields are threatening to dip under 2.0% for an 18 month low. We started 2014 with everyone saying yields would rise but the first week of January was the high for the year at 3.0%.

What is the bond market telling us? Bond investors are typically seen as smarter than stock investors. They have a longer time horizon and they really focus on economic matters rather than short term headlines. The decline in treasury yields suggests the bond market is expecting further declines in Europe, Japan and China and weakness in the USA. The U.S. bond market is benefitting from a flight to quality since even at our low rates we are still higher than the majority of the world plus the default risk is very low.

Even more disturbing is the yield on the 30-year treasury at 2.697% and already at two-year lows. If it falls under 2.50% it will be at a multi-decade low. My charts only go back to 1993 but I researched it online and you have to go back to 1950 to see a yield under 2.5% for more than a few days. That suggests the majority of investors are definitely not expecting any Fed rate hikes for a very long time for a multitude of reasons.

Construction Spending also weighed on the market with a drop of -0.3% in November after a gain of +1.2% the prior month. Private spending for residential construction rose +0.9% but non-residential declined -0.3%. However, the big hit came from public spending, which declined -1.7%. Total spending was still a robust $975 billion in November and +2.4% higher than November 2013. This was the first decline since June and will be a drag on Q4 GDP.

The economic calendar for next week has the biggest reports for the month with the payrolls on Wednesday and Friday. Jobs are expected to decline from their fevered pace in November but still be well over 200,000. The December number is always volatile because of the temporary holiday workers and the huge seasonal adjustments.

If the Nonfarm Payrolls on Friday come in hot again the Fed is going to be having some sleepless nights. They can't raise rates because of the items discussed above but they can't let the economy overheat either. Obviously we are a long way from overheating given the decline in manufacturing but a suddenly hot job market will perplex the Fed heads.

Personally I think we will moderate back to the 200,000 range over the next several months once the holiday workers go back on unemployment and the seasonal adjustments fade. This is what the Fed will be hoping for to match their long term forecasts.

The ISM Nonmanufacturing (services) report is Tuesday and it is also expected to decline by about a point. As long as that is the extent of the decline everyone will be fine. If it drops 2-3 points like the ISM Manufacturing then treasury yields are going lower again. All the rest of the reports for the week will only be filler ahead of the payroll report.

Fortunately we are moving into the earnings cycle and there will be something for traders to focus on other than the economic reports. Earnings are in pink on the calendar.

Split Calendar - Only one split so far for 2015.

In stock news Yahoo (YHOO) was facing double trouble on Friday. Yahoo's search engine went down on Friday afternoon for several hours following a Bing outage earlier in the day. Yahoo's search is powered by Bing. However, Bing was out for only 20 minutes while Yahoo search was out for several hours.

The search outage was not the biggest problem for Yahoo. News broke early Monday that CEO Marissa Myer may be trying to buy a cable business like CNN or Scripps Network Interactive (SNI). Scripps has been for sale for a long time with an asking price of $10 billion or so. The initial talks were to acquire the Scripps Food Network but subsequently expanded to involve all of the parent company as well. Another media industry insider said Marissa also wanted to buy CNN with a price tag of roughly $6 billion.

Scripps has multiple channels that have "super brand friendly content" according to one analyst. Many of the Scripps brands fit the female 25-35 demographic that Yahoo is seeking. Apparently Myer believes that by having some TV networks she can package online and on TV advertising and receive a higher price for the package. Also by having multiple networks available it gives Yahoo an outlet for its original content on cable as well as online. They could come closer to competing with Netflix if Yahoo had its own cable outlets. If the new shows did not work on the web they might work on TV.

Yahoo shares sold off intraday on the rumors but recovered at the close to end down only -34 cents. Most analysts felt that buying a cable network was probably not what Yahoo shareholders wanted the company to do with the money from the Alibaba sale.

Apple shares traded lower after analyst Fred Wilson trashed the Apple Watch saying it will not be a homerun product like the iPad or iPhone. "The focus on wearables will be a bit of a headfake and take up a lot of time, energy and money in 2015 without a lot of results."

Apple shares also took a hit from a new lawsuit trying to get class action status. The suit claims that iOS takes up to 21% of the available memory in an Apple device. The suit claims that Apple is fraudulently advertising when it says it is a 16GB iPhone when nearly 4gb is taken over by the OS. The suit claims Apple profits from this misrepresentation by selling iCloud space to store the pictures and videos that won't fit on the device. Microsoft has also faced suits like this in the past. They were sued over the 32gb Surface tablet because the Windows OS took over 50% of that 32gb of advertised storage. This is a nuisance suit and any eventual judgment would miniscule in the larger scheme of things.

Apple also got its first target price increase for 2015 from Argus with a bump from $120 to $125 and a reiterated buy rating. Argus expects iPhone revenue for Q1 to rise +24% to $40.4 billion on a 32% gain in sales to 67.3 million units. They also expect continued double digit earnings per share growth in 2015.

Linn Energy (LINE) joined the parade of energy companies slashing their dividends and cutting spending for 2015. The company said it could cut spending -53% to $730 million. They will also cut their annual dividend from $2.90 to $1.25. The company said it would finance the spending from internally generated cash. They are being forced to do this because they have $11 billion in debt and a market cap of less than $4 billion.

In addition Linn announced a drilling partnership with GSO Capital Partners, the credit arm of Blackstone Group, for $500 million for five years. GSO will fund the entire cost of new wells in exchange for an 85% working interest in the wells until GSO achieves a 15% rate of return on the money invested. Once that level is reached GSO's interest drops to 5% and Linn's will increase to 95%. Linn's budget for 2015 assumes a $60 price for WTI and $3.50 for natural gas. Linn shares rallied +12% on the news. Consensus estimate for LINN shares is $18.25.

The world's gambling capital in Macau finally ran out of bettors. The government corruption crackdown in China is taking its toll. Revenue for 2014 fell -2.6% for the first decline ever since numbers were first released in 2002. December was especially brutal with a -30.5% decline and the seventh consecutive month of declines. The revenues hit a record of $45 billion in 2013. The "tigers and flies" corruption crackdown in China has scooped up more than 150,000 government workers guilty of corruption. Macau is dependent on the big spending high-ranking officials described as tigers and the government is aggressively curbing lavish spending.

High rollers in China are now afraid to show their wealth by spending in public lest they become the target of a government probe. China is also squeezing the transfers of illicit funds sent from the mainland to the casinos. Analysts said Macau is now undergoing a period of consolidation until the Chinese government ends its anti-corruption drive. Beijing said Macau should diversify from gambling into other areas. Analysts believe it will take until Q2-2016 for the business to recover. There are some new properties coming online in that timeframe and they are expected to rekindle interest in Macau.

In keeping with the casino topic Caesars Entertainment (CZR) is moving closer to bankruptcy. However, it may be a friendly event as much as those can be friendly. The company said 39% of the senior bond holders had backed the reorganization plan. Caesars will put its operating unit into bankruptcy and then split into a casino operator and a property company. The casinos will pay rent to the property company. Caesars Palace Las Vegas will pay $160 million a year for five years. The base rent for the other 43 properties will be $475 million a year for three years. The bankruptcy of the operating unit will reduce the debt from $18.4 billion to $8.6 billion. The operating company will then issue about $1.7 billion in new debt and the property company $3.8 billion in new debt. Caesars Palace Las Vegas will issue $2.6 billion in new debt. Caesars still needs to garner 60% approval of the senior bond holders by January 9th in order for the restructuring plan to become effective.

Last year Caesars Entertainment (CZR) spun off Caesars Acquisition Company (CACQ). As part of the new deal those two companies will merge again.

Freeport McMoran (FCX) was cursed with a strong sell rating by Zacks but shares rallied +19 cents. Zacks warned about the potential impact to Q4 earnings from the global economic slowdown and the lower demand for copper. They also warned that strikes and accidents at the big copper mine in Indonesia would reduce copper and gold production in Q4. I agree all those things may depress Freeport but I believe that is already priced into the stock. FCX declined from $39 to $21 since July due to those headlines above. The bad news is over but the good news is yet to come. Copper prices are struggling at $2.81 and gold prices are stuck in the $1180 level. The strong dollar has crushed the commodity sector and the drop in oil prices has penalized them for their acquisitions in the energy sector last year. All of these issues will eventually turnaround and Freeport is a long term buy at this level. Resistance is $23.85 so a move over $24 would be buyable. Note that the "strong sell" by Zacks had no impact on the stock price.

Tesla (TSLA) shares declined on Friday because of the drop in oil prices to $52.03 intraday and from general profit taking on the first day of 2015. Some analysts claim lower gasoline prices make Tesla automobiles unattractive. I claim they are a luxury car that just happens to be electric and gasoline is not a factor. The new Tesla Model S P85D with dual battery motors, all wheel drive and 691 horsepower is NOT dependent on gasoline prices. The quoted range on a P85D is 253 miles with a maximum of 350 miles under ideal conditions.

I was surfing the Tesla website looking for mileage information and ran across the Driving Range Blog with some very interesting customer comments. For instance:

Morrison: Thanks for the detailed and thoughtful posting of information. I've put 500+ miles on my P85D in the first week and can say it's been nothing short of exhilarating. It's the smoothest, most amazing vehicle on the planet. Thanks for the great work, commitment, and for building the finest machines on the road. The Model S is the smartphone vs. a flip phone. No comparison. I'll never own a gas powered vehicle again.

Spentan: Thanks for the info. Picking up my P85D in 23 hours. Can't wait to own my 3rd Tesla.

In other Tesla news Elon Musk filed for divorce from British actress Talulah Riley for the second time. The couple divorced in 2012 and then remarried a year later. Riley and Musk have been living apart for the last five months while she directed her first feature film, "Scottish Mussel," which she also wrote. The divorce filing says Riley will receive $16 million as payment under a prenuptial agreement. Musk claims they are both still friends. He has five sons from his first marriage. Clearly the prenuptial payment is pocket change and will not impact his lifestyle. On the bright side he is single again and the ladies will be lining up for a chance to be wife number four.

Shares closed at $219 with price targets as high as $400.

GoPro (GPRO) rallied nearly 6% after an analyst predicted the company would announced its own drone with a built in GoPro camera in the CES presentation on Tuesday. The presentation will be at 3:55 ET on Tuesday. A JP Morgan analyst said despite the flood of competitors nobody comes close to the total GoPro platform of Capture, Manage, Share, Enjoy. The GoPro booth at CES will be one of the busiest and will be helped by free beer. The analyst is expecting strong Q4 sales and launches into international markets to drive the stock.


The Dow gained +7.5% in 2014 or +1,247 points. Since the Dow rebounded +1,962 points from the October lows of 16,141 all of the gains were made in the last two months. At the October lows the Dow was down -435 points for the year.

The majority of the Dow gains were made by only 7 stocks. Those are UNH, HD, DIS, NKE, V, MMM and GS. The biggest drag on the Dow was IBM for the second consecutive year. The table below is sorted by individual gains with Intel the biggest gainer. Coke, Pfizer, United Technologies and Caterpillar barely finished with a gain.

Only slightly more than half of the Dow components actually contributed meaningfully to the Dow's gains for the year. Low dollar stocks like CSCO posted decent percentage gains individually but contributed little to the Dow's gains. As a price weighted index the higher dollar stocks contribute the most. The Dow Points column is not exact but it is as close as I can make it without a lot of extra work. I think everyone will get the general idea of how the Dow is pushed around by half its constituents while the rest are just along for the ride.

Basically the public's view of the stock market is controlled by the actions of about 15 stocks.

The Investor's Business Daily (IBD) pointed out on Friday that the strength in the IBD50 was weakening and a "defensive investing posture is warranted." The IBD50 is a grouping of 50 top-rated growth stocks including tech stocks, healthcare, automotive, retail and biotech names. IBD pointed out that a number of these stocks closed below their 10-week moving average on Friday due to institutional selling.

I believe this is a warning for January but this could have simply been end of year portfolio restructuring. We just need to be cautious until we see what January brings.

The S&P dropped back to the 2,050 level intraday before rebounding to close on prior uptrend resistance at 2,058. Taken by itself I would be really cautious but several of the other indexes hit real support and rebounded so the S&P is just one of the group and not a leader.

We also have to remember that early January typically has some bouts of volatility as investors cash out profits from the prior year and put the money back to work for the coming year. One day does not make a trend.

Resistance is 2,090 and support 2,040-2,050.

The Dow chart is similar with a dip back to 17,730 followed by a +100 point rebound. The prior uptrend support is back in play at 17,800. The dogs of the Dow for 2014 were gainers on Friday. Of the seven Dow stocks that lost ground in 2014, five of them were gainers on Friday (BA, XOM, CVX, IBM, T) with Verizon and Boeing the ones that continued their losing ways. This will probably be the pattern over the next week since a lot of people subscribe to the Dogs of the Dow strategy. It is one of the longest running investment strategies. Those that do poorly one year are expected to outperform in the coming year.

The Dow has finally retraced some of its December rebound gains and should be open to moving higher from here. The keyword there is "should" and there is no sure thing in the market. With Dow forecasts of 20,000 by July 4th and 21,000 by the end of 2015 there is a lot of "hopium" built into those predictions. Personally I will just be happy to exit January with a decent gain and then worry about the rest of the year. "As January goes, so goes the year" is a market expression that makes the rounds every January.

Unfortunately another one is "If Santa Clause should fail to call, bears may come to Broad and Wall." Santa did not show up this year with a -220 point Dow decline last week.

Predicting market direction in early January is a fool's errand. There are so many seasonal factors that contradict each other that anything can and does happen. Fortunately the U.S is still the best house on a bad block and everyone wants to invest here. That "should" support our markets in the weeks to come.

Support is 17,800 but that was breached intraday on Friday making 17,750 the number to watch on the Dow for next week. Resistance is 18,050-18,100. Let's hope we test that again this week.

The Nasdaq retested the 4,700 level on Friday and was rewarded with a minor rebound. The Nasdaq now has a clearly defined trading range from 4,700-4,800 and plenty of room to wander. Unfortunately if it wanders below that 4,700 level we could be in for a decent bout of profit taking that retests the 4,550 level.

A lot of the symbols on the winners/sinners list for Friday are names that most investors would not recognize. This was due to the low volume, which increased the volatility and allowed stocks to bounce around a lot.

The low on Friday at 4,698 was the gap open low from the 18th. This should be decent interim support but will not likely sustain a real bout of profit taking. There are several stair steps down at 4,650, 4,605, 4,545 and 4,500. I really hope we don't have to retest them all. We are not too far away to retest overhead resistance at 4,800 next week if fund managers show up and buy something for 2015.

The Russell 2000 was the leader to the upside with a new high at 1,220 until New Year's Eve. The index took a serious beating on Friday to retest 1,190, which was rock solid as support. The next two weeks are normally small cap heaven as investors load up on small cap stocks for the new year. That seasonal trend has a lot of history but it is not infallible. We need the Russell to hold over that 1,190 support and begin to move higher early in the week. That will support market sentiment and hopefully get all the averages moving higher again.

Oil prices traded down to $52 on Friday and the Dow Transports gave back -41 points. This could be a sign the transports are done moving higher just because of cheap oil. The weak ISM number and disturbing words from Mario Draghi may have put a top on the transport index. There could be a double top forming at 9,230. Cheap oil does not help much if there is nothing to ship.

There is another negative chart. The NYSE Composite failed to reach the November high after the December rebound. The November high was the second lower high since June and the failure to reach make a new high in Nov/Dec when all the other indexes were breaking out is a serious sentiment problem. This suggests market breadth is declining and there may be trouble ahead. However, the NYSE has a lot of energy stocks and they could be the sole reason for the weakness. We need to watch the NYSE to confirm any rallies in the other indexes. If it does not confirm we should remain defensive on any long positions.

Volume was light on Wednesday and Friday averaging 5.28 billion shares but Friday was the heaviest day since Tuesday before Christmas. The sharp spike at the open and sharp drop intraday gave buyers and sellers an opportunity to do their thing in the market. It would be really nice if all the sellers were done but with the low volume we know there is likely to be some more show up next week. Friday was a holiday for most people. Next week business resumes as usual.

There are a lot of predictions for new market highs for 2015. Fundamentally they are sound with employment growing, low gasoline prices stimulating retail spending, low interest rates and a decent growth spurt in the economy. The negatives are of course the strong dollar that is depressing U.S. product sales overseas and the weakness in Europe, Japan and China. All of those countries have various stimulus programs that should begin to lift those economies in 2015.

If the pieces begin to fit together correctly in the months ahead we could have a good year. According to various seasonal patterns I discussed in recent weeks 2015 could be strong. Only one year ending in 5 has been down in the last 130 years. It is also the third year in the presidential cycle and that is normally strong. I could go on but you get the idea. Nothing prevents us from a bad year in the markets but as of today the majority of the factors are all pointing to good times ahead.

I said last week, "I am looking for a choppy market next week as the remaining tax sellers try to capitalize on the bullish end of year trend. However, window dressing should win out with funds adding to their winners for end of year statements. I would remain long into January but then maintain a cautious stance into January option expiration.

Window dressing did not appear and tax sellers were definitely driving the market. I am still advising cautious optimism into the January expiration cycle.



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Random Thoughts

It is time for the final wrap up on the 2014 S&P target forecasts. With the S&P closing 2014 at 2,059 the winner in this informal poll was an analyst named Edwards at Bank of America with a 2,060 target. Quite a few analysts missed the mark by a mile with estimates in the 1900s. The forecasters targeting 2,100 were very close since the intraday high last week was 2,093.

I updated the table with the 2015 forecasts when I could find them and every single forecast is above our present location with some quite bullish at 2300 or better.

This is the last time I am going to show the 2014 targets and we will focus on 2015 in the weeks ahead.

The shaded entries were revisions from the number behind their name. The average forecast was 2,030 and the average for 2015 is 2,224. That would represent a +165 point gain from here. The points on the right would be the gain from the 12/31 close at 2,059.

The Polar Vortex is returning. The nation is expected to see the coldest weather of the year this week as a polar cold wave surges down across the U.S. with freezing temperatures down to the Gulf Coast. Colorado broke temperatures records last week that lasted for 116 years with -25 degree days in the northern half of the state. We have already had more sub-zero days this year than we did all last winter. Grab those long johns and get ready to go sledding with the kids.

The average price of gasoline nationwide has now fallen for a record 99 consecutive days. Gas prices fell -9.3 cents over the last week to $2.231 per gallon. Nine southern states now have prices under $2 a gallon in some areas. More analysts are starting to predict the average price falling below $2 because of the glut of gasoline. Gasoline futures set a new five-year low on Wednesday at $1.41 per gallon. Refiners are operating at record levels of utilization at 94.4% as they tried to refine as much oil as possible before Dec-31st or be faced with paying property taxes on the oil in inventory. This pushed gasoline inventories well above the five-year average to 229.0 million barrels. The blue line in the chart below is the current inventory level.

AAA said the rout in oil prices could save consumers as much as $75 billion in 2015. The drop since June has already saved consumers $14 billon. Drivers are now saving $15 to $30 on every fill up compared to a year ago. That is some serious pocket change.

The U.S. government levied additional sanctions against North Korea for the cyberattack against Sony. President Obama issued an executive order in response to "ongoing provocative, destabilizing, and repressive actions and policies, particularly its destructive and coercive cyberattack against Sony." The White House said this was only the first phase of its response to North Korea's actions. Since North Korea is already the most sanctioned nation on earth the impact of the sanctions will be limited.

In the "you have got to be kidding" department a Russian startup announced plans to build a lunar base camp for roughly $9.4 billion to explore mining on the moon. Privately owned Lin Industrial said it was prepared to establish a moon base as soon as it received government approval. From approval to completion is expected to take about 10 years with the initial base installation in 5 years. The company said they would use readily available existing technology and would need 13 launches of heavy rockets to shuttle the required equipment for the initial base plus an additional 37 launches to establish adequate living conditions on the moon. The base would become financially viable by mining for rare earth metals.

The S&P 500 has just finished its sixth year of positive returns and its third straight year of double-digit gains. According to FactSet via the Wall Street Journal, "The S&P 500 index now trades at 16.4 times forecasted earnings over the next 12 months, compared with 15.4 a year ago…the average over the last 10 years is 13.2." Should we be worried?

Saudi Arabia has a labor force of 8.412 million of which about 80% are foreigners. Saudi Arabia spent $67 billion on its military in 2013 to put it in fourth place behind the US, China and Russia. Saudi Arabia has a deal with Pakistan to purchase nuclear weapons and delivery systems if Iran goes nuclear. The unemployment rate for Saudi males is 20.8%, under 25 youth is 30.5%, female unemployment is 54.4%. More than 46% of the Saudi population is under the age of 24 and 25% are under the age of 14. More than 45% of Saudi's GDP comes from oil. More than 95% of Saudi Arabia is desert.

The Kingdom Tower, currently under construction in Saudi Arabia, will be 1 kilometer tall (3,281 ft) and temporarily become the tallest building in the world. Why? The Burj Khalifa tower in Dubai is 2,717 feet tall and currently the tallest building is mostly vacant. Apparently nobody wants to rent an office or condo in a likely terrorist target and pay extremely high prices for the privilege. On Saturday an Indian developer said they were going to build a 1.2 kilometer tower (3,937 ft) as part of the Dream City project. Apparently there are egotistical idiots born every day.

The Hulbert Financial Digest tracked the performance of funds over the last 20 years. If you chased past performance in hopes of future gains you lost money. The top performing fund over each of the last 20 years produced an annualized loss of -17% in the following year. That means putting your money with the top fund the prior year would have been a bad idea. However, if you put your money with the lowest performing fund in hopes of capitalizing on their attempts to correct that under performance it would have cost you even more. The lowest performing funds each year averaged a -52% loss the following year. Hulbert recommends tracking performance of a fund over a 15 year period that will likely include both bull and bear markets. Funds with decent performance over a long term horizon are the ones you want to own.

Allen Greenspan said the economy is doing better than anybody else but it is still not doing well with an expected 2.5% GDP rate in Q4. He said vibrant growth will not return until the housing market bounces back and American companies invest in more productive assets. Today the biggest investment is in buying back stock and that does not help the economy grow.

The economy is shaping up as "too good to be true" for 2015 but the market may not have a banner year. Analysts expect low inflation, low interest rates, low oil prices to benefit the economy but low growth is also expected to continue and the Fed is likely to raise interest rates later in the year. Overseas economies will likely avoid deflation but they will also fail to grow. The indexes are still expected to rise double digits but not like 2013. This could be a repeat of 2014 where solid 10% gains will be the norm with a few stock rockets in the mix. The first six months of 2015 are expected to show the best gains with the markets moderating in the last six months as the divided government goes into gridlock and the presidential primary races heat up.

About half of all Obamacare enrollees for 2014 will end up owing taxes to the federal government. If they made more than they estimated when they applied then they will have to refund a portion of their subsidy payments. Since the enrollment period was in October 2013 they did not know how much they would earn in 2014. Most used their 2012 totals. If they made more in 2014 than 2012 they will owe taxes. Roughly 85% of enrollees received subsidies of roughly $264 per month. The administration said there were 6.7 enrollees at the end of 2014. Those that don't have insurance will have to pay a penalty with their taxes and that penalty more than doubles in 2015. With the employer mandate taking effect in 2015 there will be even more confusion in the months ahead.

2014 was a bad year for GM. They had 84 recalls affecting 26.9 million vehicles in the US and 30.4 million in all of North America. The costs for these recalls have yet to flow to the bottom line so GM profits are going to be under pressure for a long time.

Enter passively and exit aggressively!

Jim Brown

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