Q1- Blink and You Missed It

2014s first reporting period is already upon us. The quarter is remarkable only for the failure to deliver what most of us, on both sides of the spectrum, predicted. We felt the year ended with enough forward momentum to focus on an attenuated "Exit" that would put the 5 year Note around 2%. Bears threw darts at anything that crossed the tape shy of expectations as proof a market collapse was imminent. Neither scenario panned out.

The Olympic closing ceremony turned out to be Neo-Soviet aggression. Mother Nature tormented much of the nation with snow and bitter cold. The noble intention of national health insurance slowly collided with the reality of business management and retooling 17% of the economy. New issues came to market, some up-some down. Corporations tapped into the debt markets and junk, cov-lite and PIk instruments found their way back onto the field.

We noticed the 2 main beneficiaries of crisis policy that has Structurally Impaired (trapped) the economy still haunt us. The "Banks" moved ever more securities into the "Held to Maturity" bucket as IOR and regulatory reform continue to chill behavior. Citi (and Zions) proves an opportunity to bust up and reduce capacity was missed. The same could be said for the Autos. GMs recall-a-palooza, after massive government help, must make Ford wonder why they strive to do better.

The fine line between stability and quagmire is getting muddier. Still, tax numbers indicate that the budget situation continues to improve and employment should grow a tad quicker. C&I data are popping as Greenspan said of the 1993 credit crunch, "Eventually bankers act like bankers." "Things" in the commodity world are percolating. We are holding on to our general view: Rates- a tad higher. Equities - up (its a bubble) and down (its a crisis) with a ton of hype and not much actual significance. The economy does a bit better than 2.5%. The Fed keeps inching toward the door. As always, Hooper drives the boat, I throw chum off the stern.

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