Friday Potpouri - Royal Wedding Free Zone

Terrible news from the south with impending floods:

Mississippi River Flooding 2011

"NEW ORLEANS -- A surge of water not seen since the Great Mississippi Flood of 1927 is forecast in coming days to test the enormous levees lining the Mississippi River on its course through the Deep South, adding another element of danger to a region already raked by deadly tornadoes and thunderstorms."

I was riding my bicycle either on the Mississippi levee or beside it when I rode the Great River Road last spring and I was shocked how close to the river entire towns or historic plantation houses were situated. Many times, the levee towered over the homes just a few hundred feet below and I could not understand how those people could sleep at night knowing how close that river was to their homes. And the levee is only as strong as it's weakest section.

If those levees don't hold it will be a disaster of epic proportions.

I did my weekly sector analysis to see how different sectors and indexes were faring at the new post-recovery highs for the S&P.

New all time highs

HMO - HMO's
XLP - Consumer Staples
GLD - Gold
SLV - Silver
XRT - Retailers
IYT - Transports
IBB - Biotech
IJR - Small Caps
MDY - Mid Caps

New post-recovery highs

COMPQX - highest since 2001
DJIA
NYSE
SP-500
EEM - Emerging Markets
ICF - Real Estate
IYR - Real Estate
VNQ - Real Estate
PPH - Pharma
SMH - Semi Conductors
XLI - Industrials
XLU - Utilities
XLV - Health Care

Muni's are also coming back from the dead.

So do we listen to the conventional wisdom that real estate is collapsing, when ICF, IYR and VNQ are at new recovery highs?

Or that interest rates are going up when XLU is at a new recovery high and the dollar is at a new recovery low?

Do we believe that the states are going bankrupt when munis are moving up sharply?

Do we believe that the consumer is tapped out when the retailers are at new recovery highs?

How can the Transports be at all time highs when energy costs are so high?

And if all of these things are are new highs or new post recovery highs, why is gold and silver going crazy?

And can we have any true recovery without the participation of the financials and the homebuilders? (Obviously, yes we can)

David Rosenberg on Muni's January 17, 2011

ROSENBERG: FADE MEREDITH WHITNEY’S MUNI CALL

“There is a clear buyers’ strike in the market for state and local government debt that is largely based on fear and misperception. The mass selling of muni’s, which represent the bedrock of the U.S. economy, is incredible ― nine consecutive weeks of net redemptions totalling $16.5 billion ($1.5 billion in the January 15 week). Talk about fertile ground for a huge long-term buying opportunity.

First, even if you buy into the default talk, look at the yield protection you get now. There are some long-term muni’s trading north of eight percent ― even higher than junk bonds (a premium of over 100bps!). Long-term AAA-rated muni’s are now trading well north of five percent or 116% vis-a-vis Treasury bonds (typically, muni bond yields are equivalent to 82% of Treasury yields given their tax advantage). California off-the-run 30-year 6% bonds are now being quoted at a yield premium to dollar-denominated debts offered by the likes of Mexico and Columbia.

Give me a giant break.

Even in California, only teachers come in front of bond holders. In other states, the debt holders are the first to get paid. It’s amazing how few people know that.