Charts in the Babson Style for Midweek January 14

As a reminder, this Friday January 16 is options expiration.

Also, US markets will be closed on Monday January 19 for the Martin Luther King national holiday.

The markets will be open on Tuesday January 20 which is the Inauguration Day for the incoming President Barack Obama.

US Military Warns on 'Sudden Collapse' of Mexico and Pakistan

It is easy to accept that Pakistan is risky, and nuclear, but Mexico seems more like a toss up with Detroit.

There may be an Amero in Mexico's future.

El Paso Times
U.S. military report warns 'sudden collapse' of Mexico is possible
By Diana Washington Valdez
01/13/2009 03:49:34 PM MST

EL PASO - Mexico is one of two countries that "bear consideration for a rapid and sudden collapse," according to a report by the U.S. Joint Forces Command on worldwide security threats.

The command's "Joint Operating Environment (JOE 2008)" report, which contains projections of global threats and potential next wars, puts Pakistan on the same level as Mexico. "In terms of worse-case scenarios for the Joint Force and indeed the world, two large and important states bear consideration for a rapid and sudden collapse: Pakistan and Mexico.

"The Mexican possibility may seem less likely, but the government, its politicians, police and judicial infrastructure are all under sustained assault and press by criminal gangs and drug cartels. How that internal conflict turns out over the next several years will have a major impact on the stability of the Mexican state. Any descent by Mexico into chaos would demand an American response based on the serious implications for homeland security alone."

The U.S. Joint Forces Command, based in Norfolk, Va., is one of the Defense Departments combat commands that includes members of the different military service branches, active and reserves, as well as civilian and contract employees. One of its key roles is to help transform the U.S. military's capabilities.

In the foreword, Marine Gen. J.N. Mattis, the USJFC commander, said "Predictions about the future are always risky ... Regardless, if we do not try to forecast the future, there is no doubt that we will be caught off guard as we strive to protect this experiment in democracy that we call America."

The report is one in a series focusing on Mexico's internal security problems, mostly stemming from drug violence and drug corruption. In recent weeks, the Department of Homeland Security and former U.S. drug czar Barry McCaffrey issued similar alerts about Mexico.

Despite such reports, El Pasoan Veronica Callaghan, a border business leader, said she keeps running into people in the region who "are in denial about what is happening in Mexico."

Last week, Mexican President Felipe Calderon instructed his embassy and consular officials to promote a positive image of Mexico.

The U.S. military report, which also analyzed economic situations in other countries, also noted that China has increased its influence in places where oil fields are present.

ECB to Consider Rate Cut at its Thursday Meeting

The European Central Bank will be meeting tomorrow to consider a change in the Euro interest rate target.

The market widely expects a 50 basis point cut from 2.5% to 2.0%, which is still at a substantial premium to the US interest rate range of 0 to .25%.

Yesterday rumours of a deeper 100 basis point rate cut swept the trading desks and roiled the Euro/Dollar cross taking it down below support at 1.32. This provided a lift to the euro-heavy Dollar DX Index.

There is key support for the euro at 1.30. If Trichet holds the line at 50 basis points and does not signal rate cuts commensurate with the aggressive quantitative easing of the US Fed we would expect the euro to a few more sparks for the week, in addition to the JPM and Citi earnings reports.


Wall Street Journal Europe
ECB Expected to Cut Rates as Inflation Worries Ease
By NINA KOEPPEN
JANUARY 13, 2009, 6:15 P.M.

FRANKFURT -- Most economists say they believe the European Central Bank will continue with its monetary easing campaign and cut interest rates by half a percentage point Thursday to stem the risk of a deepening recession in the euro zone, although policy makers have given no clear signal about their decision.

Thirty-four of 42 private-sector banks polled by Dow Jones Newswires expect the ECB to cut the key policy rate to 2% from 2.5% currently. The ECB has already lowered interest rates by 175 basis points ...

Citi and JPM Move Their Earnings Reports to This Week

On Tuesday J. P. Morgan surprised the market by moving its earnings release from January 21 to tomorrow, January 15th, the day before the options expiration.

Today Citi announced that it is moving its own earnings release to this week, on Friday.

Is there a significance to this?

Perhaps. One likely reason is that they did not wish to put their earnings out at the same time as an historic event with the inauguration of Barack Obama on Tuesday January 20, with what is likely to be considered bad news.

There is also a likelihood that Citi and JPM wished to 'throw their cards on the table' ahead of the initial decision by Congress with regard to the disposition of TARP funds which is likely to occur next week. Economic blackmail is de rigeur for Wall Street when it is back on its heels.

Whatever does happen, we are certainly in for an interesting month of January.


Citi Fourth Quarter and Full-Year 2008 Earnings Review - Revised Date

NEW YORK -- (Business Wire) --

Citi announced it will review fourth quarter and full-year 2008 results on Friday, January 16, 2009, at 8:00 AM (EST), instead of January 22. Fourth quarter results will be issued via press release at approximately 6:00 AM (EST) on January 16, 2009.

A live webcast of the presentation, as well as financial results and presentation materials, will be available at http://www.citigroup.com/citigroup/fin. A replay of the webcast will be available at http://www.citigroup.com/citigroup/fin/pres.htm.