As we discuss “The Week Ahead” we are once again faced with a rising US stock market, improving macro data points along with a still cautious investor… Yes - the market is marching to new highs – yet the disconnect still exists for the investor between what the market is saying and what the economy is saying.

Overnight - Japan rallied strongly – in fact “soared to new highs” because of our strong jobs data…..(really?) taking the focus off of the spending cuts. How about a weaker Yen? In fact the Yen is near a 3 1/2 yr low vs. the $ - This weaker Yen has caused the Nikkei to soar 20% higher ytd.... Increasing stimulus by BoJ = weaker Yen = stronger stock mkt. Australia – also moving higher on stronger gold miners. Other mkts around the region fell back due to some mixed to disappointing Chinese economic data....... inflation data – hitting a 10 month high - 3.2% suggesting that the PBoC (Peoples Bank of China) will tighten monetary policy to control inflation causing weakness in Chinese banking stocks due to central bank tightening....

In Europe this morning - mkts there all under pressure - though not in a tailspin at all - after Friday's Italian downgrade by Fitch. Fitch reduces Italy's credit rating to BBB+ just 3 notches above junk....raising the question - "Could Italy blow up this week"? Will yields in Italy rise above those of Spain? Will the Eurozone crisis rear its ugly head again? Fitch cites:

"The inconclusive results of the Italian parliamentary elections....make it unlikely that a stable new gov't can be formed in the next few weeks" .adding that the inconclusive results could hinder further structural reforms...

In addition - German trade balance narrows, France industrial production falling 1.2% month over month and updated estimates of 4th qtr GDP for Italy, Portugal, Greece and Cyprus are all expected to show sharp declines....

That being said –the US market is making new highs and it appears that it wants to move higher still….the Dow has broken to the upside quite impressively and the S&P is teasing with its all-time high of 1564…..currently we are just 13 pts away from smashing this record….This morning futures are waffling back and forth around the flat line -
Sequestration took a back seat to the macro data on Friday.....the mkts focused on the NFP report - which "blew the roof off the house" - causing speculators to immediately question what the Fed will do now? (Very premature...). But was the NFP report all that it was cracked up to be?

As is usually the case, the jobs report always has hair on it….and comes with surprises behind the headline numbers – Friday’s report was no different. First they revised downward January’s payroll number by 25% (loss of 60k jobs), they reported a strong February number which will most likely be revised downward next month – and a similar 25% revision will mean that the real number was closer to 180k…. The employment gains came from part time, construction and healthcare workers, unemployment fell from 7.9% to 7.7% - most will think that – WOW! How great is that? Well – it’s not how it really happened….. Despite the improvement in new jobs - the Labor Department reported that 130,000 people walked away from the labor force, bringing the total labor participation rate down from 63.6% to 63.5%. Walked away – just stopped looking for a job – so if they are not counted as unemployed then they are not counted at all – so the drop in unemployment is NOT due to an improving environment – necessarily.

The drop in unemployment led many to speculate that the Fed would now take another look; remember Benny said that he would stick around until the unemployment rate stabilizes below 6.5% or inflation rises above 2.5%. If we continue to have people leave the workforce in the numbers like this we will hit that lower unemployment rate in 6 months….or September 2013 because our total labor participation rate will fall – not because employment is up - again another disconnect in the data.....but hey - housing is improving.

So the jobs market continues to struggle yet the liquidity-induced rising stock mkt continues to cause angst – Though the Fed refuses to admit it, they are driven to inflate what they can – currently – that would be commodities and equities. While we all appreciate and enjoy a strong stock mkt, an economy that cannot stand on its own feet and grow becomes (at some point) overbought and short term risky.

The Fed cannot stop all this liquidity from drifting into oil and food commodities and that is when the damage becomes obvious. The cost of energy and food affecting consumers worldwide..... When world economies and manipulated mkts become sufficiently out of balance a correction must occur in one of them….Would Alan Greenspan call this “irrational exuberance”? Are the mkts really trading at all time highs because the fundamentals are that strong? If yes – then why is the FED still pumping $85 bil/month into the system? Tell the Fed to walk away…..and see how fast this mkt rolls over…..

This week is loaded with broad macro data…. We will get reports on Advanced retail sales exp of 0.5% ex autos and gas exp of 0.2%, , business inventories exp of 0.4%, producer price index (PPI) exp of 0.7%, ex food and energy of 0.2%, consumer price index (core CPI) exp of 0.5%, ex food and energy of 0.2% - Note that the numbers are lower (less inflationary pressure) when you take out FOOD AND ENERGY - I mean really? How can you take out FOOD AND ENERGY? and say everything's alright? The increasing cost of food and energy is what will sap the consumers discretionary income causing a "trickle down effect" throughout....

Empire manufacturing exp of 10, Ind Production of 0.4%, Capacity Util of 79.4. If the reports are weak then expect the mkt to come under pressure - absent add'l Fed support - yet during times of economic pressure (sequestration), the Feds support for the mkts becomes even more clear…..

Look for the S&P to run into real resistance in the 1555/1560 range. On Friday we challenged 1555 (intraday) and backed off a bit.....now look for the next move to push a bit higher....will it stall out or will they continue to push it to create more "excitement"?

Overnight in Asia – Japan +1.9% , Hong Kong flat, China -0.34% , ASX+0.46%

In Europe – FTSE +0.16%, CAC 40 -0.5%, DAX -0.37%, Eurostoxx -0.7%, Spain -1.26% and Italy -0.9%

In the US – futures are -2 right now at 1542....as the mkt continues to consolidate the most recent action. Little economic data today will force the discussion to be about the broader global macro issues as the mkt looks for direction. We remain solidly in the 1525/1555 range and see no reason right now to break out either way.

Roasted Leg of Lamb w/Roasted Potatoes


As we move into spring - and this weekend was spectacular - we celebrate the re-birth that the change of seasons always brings. For this - let's try a delicious Roasted Leg of Lamb.... with roasted potatoes. For this you need Boneless leg of lamb and potatoes. That's it!

First you need to make the dressing for the lamb and for this you need

Olive oil, Fresh lemon juice, 6 cloves garlic, Fresh rosemary, kosher salt and black pepper. Now make the marinade....Add the ingredients to a blender or food processor and process until smooth. The marinade should be thick in consistency so it doesn’t run off the meat while cooking and forms a bit of a crust.

Preheat the oven to 425 degrees.

Next peel and dress the potatoes with olive oil, s&p, fresh lemon juice, garlic powder and oregano. Toss and mix well. Put the potatoes on the bottom of the roasting pan. Now place the lamb on top and put in the oven covered and roast for 25 mins. Now turn the oven down to 350 degrees and continue to cook - uncovered.....(rule of thumb - 20 mins per pound is about right).

Make sure to baste the potatoes and the roast while cooking. When done - remove, cover and let rest for 15 mins. You can now broil the potatoes so that they become almost golden brown.
Slice the lamb - arranging nicely on the platter, circle the meat with the roasted potatoes. Make sure to serve with a lg mixed salad and enjoy.

Buon Appetito.