Stocks jumped in early trade on better than expected economic data and enter the final hour with decent gains. Since Monday the DOW is up about 180 points or 1.5% while the NASDAQ has added some 110 points or 4% putting the index at a 11 year high with double digit gains for 2012 so far.

The January ISM Services index increased 3.8 points to 56.8. Strength was seen across the board; new orders jumped 4.8 points to 59.4, employment increased 7.6 points to 57.4 while prices paid increased slightly to 63.5. Freddie Mac reports that mortgage rates have hit a new record low as their 30-year index fell to just 3.87% last week.

The January employment report came in considerably above expectations with 243,000 new jobs which pushed the unemployment rate down to 8.3%, a nearly 3 year low. A strong report , the workweek was unchanged at 34.4 hours, average earnings gained .2%. Previous months employment figures were revised higher by 60,000 for November and December, continuing the trend of improving labor market conditions seen since last summer. Revisions produced the first monthly increase in employment since 2006 as the March 2011 number was advanced by 165,000. Adjustments to methodology resulted in a dramatic increase in the labor force +1,145,000 and also an equally dramatic increase in the not in the labor force +2,420,000, essentially folks who have given up trying to find a job. The labor force participation rate fell to 63.7% taking out a 1984 low. So a lot of the supposed improvement in the official unemployment rate is attributable not to job creation, though this is occurring, but folks giving up and leaving the workforce. Hence all the talk about the chronically unemployed, 5.5 million have been unemployed 6-months or longer and a total of 12.8 million Americans are still without work.

Though its no surprise at this point that 2 sets of rules exist in America, one for the banksters and one for the rest of us. We have a piece in the New York times detailing how the SEC has allowed the biggest financial firms the opportunity to skirt and avoid laws and regulations through exemptions and waivers, as the piece found almost 350 instances in the last 10-years when the SEC handed out a free pass. Just another example of the failure to enforce existing rules and regulations something the FCIC found as a primary cause of the current crisis. That for some reason finds our political representatives busy writing new laws and regulations despite the fact that nobody really bothers to enforce the ones we already have.

Stocks struggled into the final hour about even on mixed economic data. 4th quarter productivity increased .7% as unit labor costs jumped 1.2%. Both figures came in worse than expectations. Auto sales continue to improve reaching 14.18 million units annualized in January. Another nice gain but sales remain some 2 million units annualized below the pre-crisis average. CoreLogic reports that house prices fell 1.4% in December to a new post bubble low as the 2011 decline hit 4.7% nationally and marks a 5th consecutive year of lower real estate prices.

A close look at the 4th quarter GDP report compliments of the BEA shows that fixed investment, essentially real estate started to show signs of improvement as 2011 ended as a nascent recovery was seen for both residential and commercial structures. Now one quarter does not make a trend but this is a real improvement over the sharp declines and or sideways motion for these indices seen post bust.

Seems we actually have some criminal charges filled against some banksters with the Federal Prosecutors going after 3 former Credit Suisse Group employees. Two of which pled guilty, one was caught on a taped conversation talking about fraudulent MBS prices back in 2007 and 2008, interesting that it has taken until now to get a conviction. Then again we have multiple events post bust of sworn testimony, affidavits, and a host of other items from various banksters admitting criminal acts that for some reason has resulted in precious few criminal convictions when there should be thousands by now. Then with rumors of bribes being paid to Justice Department officials rolling around perhaps that is the reason we have so a pathetically low number of prosecutions, none of which have involved significant players save the failed attempt to prosecute former Countrywide CEO Anthony Mozillo.

Despite generally disappointing economic data, stocks opened higher and enter the final hour with decent gains. In fact, stocks are off to a decent start this year with 4%+ gains common in January for the major averages despite anemic earnings and questionable economic data. January often sets the tone for the year, but not always. Also of note last year’s goats have largely become this year’s heroes so far, while last year’s heroes have lagged, an all too common pattern and why luck is frequently confused with skill when it comes to investment management and selection. Seems B of A is the best performing DOW stock year to date, a fine example of the herds’ sentiment and or analyst opinion being far more important than fundamentals. Put another way you can have accurate data and still be wrong.

Construction spending increased a better than expected 1.5% in December with gains seen in private, residential and commercial construction during the month. ISM Manufacturing came in at 54.1 in January, better than last month, but below expectations. Employment slipped, new orders gained while the inflation measuring prices paid jumped 8 points to 55.5 snapping a 4-month declining price trend.

ADP reports 170,000 new private sector jobs were added during January, December was revised lower to + 292,000. BLS will be out Friday expectations are for +135,000 jobs last month. ADP is frequently at odds with the BLS so will just have to wait and see.

While I certainly won’t be holding my breath it seems that the new Federal task force set up to investigate mortgage and underwriting fraud has signed off on subpoenas against 11 as yet unnamed financial institutions so at least in theory we might, just might see some justice served. Then again they couldn’t seem to convict ex Countrywide CEO Anthony Mozillo and MF Global ex CEO Jon Corzine hasn’t even had his feet held to the fire yet, so color me a little skeptical.

Stocks kicked off the week with modest losses on generally disappointing data. The show me the money season is off to an anemic start with just 57.9% of companies beating earnings while just 54% have exceeded revenues. Guidance is also missing as the ratio of companies lowering guidance to raising guidance is 3.3 to 1. Much was made of the 2.8% GDP figure despite it coming in lower than expectations. That said it marks the 10th consecutive quarter of GDP growth coming in below the median for post WW2 economic recoveries.

Consumer spending gained .1% in December, matching expectations. The Price Index increased to 2.4% during the same period, slightly higher than consensus.

Pro Publica is out with a piece about how Freddie Mac, their the taxpayer funded mortgage GSE backstopped by you and I. As they have apparently taken to placing bets that Americans will remain trapped in high interest rate mortgages. If your thinking this doesn’t sound fair, your right. Not only did Freddie Mac dramatically tighten underwriting standards making it more difficult to get refied but it took our tax Dollars and used them to bet against tax paying American homeowners trapped by a vicious cycle of declining values and underwater mortgages, truth, justice and the American way.

But wait, there’s more! It is increasingly looking like a billion plus in MF Global client funds is “missing”. Now of course it “went” somewhere and most likely that is to the counterparties of its misguided bets. Which would include banks like JP Morgan Chase and other firms that provided trade-clearing services and who more or less stole MF Global client funds, with the help of off shore repo agreements, regulator waivers and a CEO as crooked as a dogs leg. Now of course nobody has been arrested and I seriously doubt they will be because the law doesn’t apply to the banksters. If it did Jon Corzine and others would already be in jail.

But don’t worry as the new Dodd-Frank Act will rein in the rapacious banksters so that these types of things don’t happen again, or will it? Seems their lobbyists are hard at work bribing, – oops! I mean influencing our political representatives to declaw the bill, the latest example is a move to exempt overseas bank derivative trading. More or less what MF Global did, but then the regulators don’t enforce the existing rules as it is, so more rules are kind of a non-starter anyway something the FCIC report detailed extensively.

Stocks enter the final hour mixed on disappointing news. Since Monday the DOW is down about 60 points or ½% while the NASDAQ has gained some 25 points or 1%.

The advance 4th quarter GDP came in at +2.8%, a little lower than expectations of +3%. Worse, much of the gain was attributable to inventory building, which accounted for 1.9% of the 2.8% reported. Personal consumption also came in weak at +2%, expectations were for an increase of 2.4%. The one real plus in the advance report was the price measuring core deflator plunging to +.4% from the 3rd quarter’s +2.4%, an unusually large change to the price measuring component indicating that inflationary pressures slipped in the 4th quarter. The top line number certainly sounds great despite coming in a little below expectations. That said a close look at the report does not inspire confidence especially in light of growing evidence that Europe has gone back into recession.

Kansas City Fed Index increased 9 points in January to +7, new orders, shipments and production all jumped. The Chicago Fed National Activity Index advanced to +.17 in December a gain of .63 points, the 3-month moving average improved from -.19 to -.08 as the economy continued to move away from recession during December.

Stocks opened higher but slipped late on generally disappointing but second tier data and enter the final hour about even. Durable Goods Orders gained 3% in December, a fifth increase in the last 6-months pushing the 2011 advance to 10%. New home sales fell in December as the annualized rate slipped to 307,000. For all of 2011 a total of just 302,000 new homes were sold, a new record low. The median price dropped to $210,300 as months’ supply increased to 6.1.

Looks like our AG Kamela Harris has declared the proposed fraudclosure settlement with the big banks inadequate due to its inclusion of indemnity from prosecution for the very miscreants who helped create the mess in the first place by perpetrating the largest fraud upon the courts in the history of the republic. Kudos to Kamela Harris for doing her job and demanding that the rule of law be applied fairly to all, New York’s AG has voiced similar concerns and it’s nice to see that a few government representatives still believe in doing their jobs honestly and fairly.

Despite a real attempt to quietly sweep it under the rug the failure of MF Global, the nation’s 5th largest bankruptcy, continues with no mention of prosecution for then CEO Jon Corzine, though he did say he was sorry. Continued wrangling over 700 million in missing US client funds, another 1.4 billion in segregated UK client funds and 1.6 billion in unsegregated funds that face a long and uncertain future as those clients will be treated as unsecured creditors. Once again another absolutely glaring example of the regulators being asleep at the switch, and worse aiding the now bankrupt firm by granting regulatory waivers prior to its failure. No pointed investigation, no criminal charges, Obama says we need a special commission to investigate these types of crimes. That’s great but what about the DOJ, the SEC, CFTC and a whole host of other regulators who’s job it is to investigate and prosecute these types of frauds. Because there has been virtually none since the crisis started despite the clock ticking and the statute of limitations starting to expire on the largest fraud committed in the history of the republic that destroyed the economy, real estate and visited considerable social dislocation on society.

Stocks enter the final hour with modest gains on little significant news. As expected the Fed kept interest rates unchanged and more or less promised to do so through next year. That said QE 3 was played down as the Fed figures it doesn’t need to offer more stimulus besides rock bottom interest rates. Will see what happens when Europe slips into recession as the year advances because if history is any guide will follow them. The Pending Home Sales Index fell 3.5% in December, but remains 5.6% higher than last year. The western region fell 11% while the mid-west managed the only gain up 4%. The MBA reports that its activity index fell 5% last week as refis dropped 5.2% and purchase apps slipped 5.4%. The 30-year contract rate increased 5 basis points to 4.11%.

Last night’s state of the union indicated that the government just might be beginning to realize that trust is a critical component of both society and the economy and that those that violate this trust must be held accountable. Specifically the president indicated that it was time for the banks to regain some of their lost trust by offering refi deals to homeowners current on their mortgage with minimal red tape. In addition he went on to state that a special commission will be formed to go after those responsible for the current crisis. Certainly it sounds good, but the last several years have left me more than a little skeptical. Further the current fraudclosure settlement proposal with the State’s AG’s contains a no criminal prosecution clause and the statue of limitations is running out on a lot of the events that precipitated the crisis. So even if a special committee is formed I would expect that by the time their investigation is complete most of the opportunities to prosecute will have passed. Leaving another great looking and wonderful sounding initiative that goes effectively nowhere, just like the Financial Crisis Inquiry Commission because the bankster lobbyists own Washington lock, stock and barrel and can do as the please never mind the rule of law or other inconveniences such as the Constitution etc.

Stocks struggled into the final hour mixed on little economic data, though the 4th quarter earnings season continues on an anemic tone. So far just 58% of companies have managed to beat the earnings number the lowest beat rate seen since the 4th quarter of 2008. Even fewer, 57%, have beaten revenues, which in turn is the lowest figure since the 3rd quarter of 2009.

The Richmond Fed Manufacturing Index jumped 9 points to 12 in January. Strength was seen across the board which helped the topline number to handily beat expectations.

The off again on again settlement between the nation’s biggest banks, mortgage services and states AG’s over the fraudclosure or robo signing scandal has gone out to said AG’s for consideration. Some highlights of the proposed settlement include a 25 billion Dollar fine. Up to an additional 17 billion earmarked for principal reduction for homeowners facing foreclosure. A fund to compensate those homeowners that were victims of improper foreclosure practices. This is figured to be about 750,000 families who will receive about $1,800 each. Mortgage principal reduction of about $20,000, and the kicker, drum roll please. A halt to all fraudclosure and robosigning investigations and no criminal prosecutions for illegal bank activities, incidentally the fraudclosure or robosigning scandal has been described as the largest fraud perpetrated on the American legal system in the history of the republic. We’re not talking about a bunch of misdemeanors here, but thousands and thousands of felonies involving fraud, falsification of documents, violation of trust law, misrepresentations and violation of due process amongst a host of other items. That could include the use of shareholder funds to buy immunity from criminal prosecution, the denial of due process for those individuals who were victimized by these frauds and on and on. Once again we see the power of the lobbyists laid bare and the hazards of allowing too big to fail get even bigger. As it is quite clear that the banksters can act with impunity, thumbing their nose at the rule of law, whilst demanding and receiving bailouts for their reckless, lawless and irresponsible behavior, bailouts funded with tax Dollars provided by our so-called political representatives and paid by the very people their rapacious behavior victimized.

Stocks struggled into the final hour with modest losses on little real news though the latest Debt and Deleveraging report from the Mckinsey Global Institute has a few pundits making the rounds claiming that America’s debt deleveraging cycle is over. The implication being that a new credit cycle can begin and that our period of economic purgatory is over. As it cites our financial institution debt at just 40% compared to England at 219% and Germany 87%. It goes on to note that US Debt is lower than Spain 363%, France 346% and Italy 314% and may soon pass Germany’s 278%. Moving to our property boom and it cited the average annual income to price ratio of just 5.1 at the peak as being fairly modest, further price declines have now pushed this ratio down to its modern average of 3. In comparison, some of China’s cities feature ratios closer to 18. As per a piece by Ambrose Evans-Pritchard, just another supposed expert demonstrating that they are completely off-track.

Going back to the original report and we find a completely different picture. While modest deleveraging has occurred in the US since 2008. The 4% reduction in household debt levels is primarily the result of default and foreclosure, which accounts for 2/3’s of the decline. Financial institution debt has dropped from 8 trillion to 6.1 trillion, other companies have reduced debt 584 billion or 15%. Additionally some 2.2 trillion in mortgage equity withdrawal occurred from 2003 to 2007, the wealth effect as people spent a portion of their perceived net worth. The report figured this added some 1% per year to GDP growth, a trend unlikely to restart absent substantial home price improvement. With government debt growing rapidly, in an attempt to pick up consumer slack any claims that our deleveraging, or debt reduction cycle is over are premature at best. The reports look at household debt service ratios figured the earliest recovery would be 2013. As debt service ratios have dropped from a peak of 130% of disposable personal income to about 115%, the general rule of thumb is that this ratio needs to reach about 100% before a new credit cycle can begin.

As much as I would like to agree with the report credit busts just don’t end quickly as the cycle of excessive debt, declining income and the destruction of the wealth effect plays out over many years. Japan has already done 2 lost decades, it can be fairly effectively argued that we have done one lost decade so far, with still falling house prices and expectations for millions more defaults and foreclosures in the next few years it hard to picture a recovery. California in particular remains very hard hit as your average Californian sports $313,749, in mortgage debt, nearly 5.5 times the average income of $57,708 and an additional $6,434 in credit card debt as per Michael Sauter at 24/7 Wall Street.

Stocks enter the final hour mixed on disappointing, mostly real estate related data. Poor and relatively unchanged fundamentals with respect to housing doesn’t seem to faze the cheerleaders who have confidently predicted for a 6th straight year that real estate’s recovery has arrived, at least their consistent. Rumors are once again circulating that the state’s AG are close to a settlement with the nation’s big banks regarding the fraudclosure scandal. If you bought a house you can afford and stayed current with the payments or you rent, there’s nothing for you. Further, the supposed settlement doesn’t seem to address the rampant fraud or destruction of property rights the banks engaged in and continue to engage in. Lack of home sales and related mobility is of course leading to increased remodeling activity, though it is a shadow of what it once was. Some 5.3 billion in home equity was taken in the 3rd quarter of 2011 for remodeling and other reasons. A figure more than 90% below the pre bust peak of 83.7 billion in home equity extracted during the 2nd quarter of 2006, the wealth effect in reverse.

Existing home sales increased 5% in December to 4.61 million units annualized. Inventory dropped 9.2% to 2.38 million units or 6.2 month’s supply, total inventory is at a nearly 7 year low as per the NAR. For 2011 total sales increased 1.7% to 4.26 million units as the median price fell 2.5% to $164,500 nationally, condo prices fell 3% over the same period.

Despite an improvement in Chinese GDP during the 4th quarter of last year, overall it continues to slip as do their real estate prices, which fell in 52 of 70 cites as per Bloomberg. Manufacturing has fallen for a 3rd straight month according to HSBC so it appears that a real test for China’s command driven economy is on tap for 2012. I wonder if they’ll manage to pull the proverbial rabbit out of a hat like we did in early 2009 and as the Europeans appear to be doing at present.