Tactical investing - requires distinguishing between presumed responses to both foreseen and unforeseen challenges. In recent weeks the ECB and the Fed spurred new monetary stimulus, appearing ready to prop up the global economy; amidst uncertainty; along with geopolitical tensions again building elsewhere too.

Concurrently, US GDP (adjusted for inventory stocking) was up only .9%; Baltic Dry has been about cut in half; one EU official said the Greek deal is near; while the UK's foreign office (heard late Friday) says Germany's Chancellor Merkel believes Greece is about to default big-time. If all this wasn't so serious; it might be comical to watch the position-swapping about the challenges of our times.

(Meanwhile the United States and its allies are building-up the largest military force seen since the Iraqi invasion; on maritime bases in archipelago islands near the Persian Gulf. Concurrently; Fleet movements suggest three Carrier Battle Groups -Lincoln; Stennis; Enterprise, plus France's Charles Degaulle nuclear Carrier, will 'coincidentally' be in the neighborhood around early March. One might ponder whether that's the drop-dead timeline for Iran to negotiate.)

During this chaotic season, the Fed stoked the market's fire, by implying nearly zero available investor returns; unless one chases asset prices and yield. The extent to which this can be seen has been witnessed; and we suspect (redacted as only fair to share with ingerletter.com members); this phase of a stock market (redacted) has been underway in the midst of the superficial market extension.

Certainly, the Fed's move not only reduced the appetite for mortgages, housing, or loans; but also spurred fears of currency debasing; asset hoarding; and a renewed appetite for risk. In reality, history is replete with such scenarios creating bubbles in the very asset classes investors believe they are finding (perceived) safe harbor. (A great deal more on this subject shared with members next week.)

We conclude that this action is in harmony with our view as to how January could go; without (timing discussion). That does not mean a 'flash crash' or similar will immediately occur; though we do not rule it out. In fact, I outlined a pattern by which the market completes (behavior prospect for the next several months). On that score stay tuned, as there are just too many variables to be more specific.

Daily Actions - observed the other day that Chairman Bernanke flat-out said they were trying to compel investments and asset plays (then later he actually said: "equities"). Well, they did that; and if people have been buying solely for fear of currency losses and/or low yield; that's a pretty weak argument to extend prices meaningfully yet again. (Range of potential risk is addressed next)

To whit; anybody can pick a level or historically previously seen measure; but that will not tell you how low panic can or cannot take prices. Historically these are not predetermined levels; with every new panic creating its own low point. We will do our best to identify the area of a high & later low, at appropriate times.

Prior highlights; charts & new videos follow:

Failure in Davos - 'is not an option'; so publicly a 'kapitulation' won't be allowed to be conveyed; even if the worst-case (simply continuity of the EU complexity) continues. 'Behind-the-scenes' fierce negotiating about Greece is going on now; so while most dismiss the significance of how that's handled; others do not and candidly acknowledge variations of a 'solution' that could still yield a 'contagion'.

I surely desire the EU to sidestep a new crisis due to failed 'Grecian Formulas'; at the same time that even a 'buying of time there' does not take you closer to a 'fiscal rather than just monetary' affirmed central authority in Europe. Yes, plans are closer to being 'gelled'; but it's a process that cannot be quickly instituted; as (at minimum) besides Court's approving it; all 17 EU members will need to. The bottom-line of this is (reserved for ingerletter.com members; please join us.)

Fear of a collapse in Europe; or disintegration of the EU; or simply a worse financial situation than even the U.S. faces; has indirectly benefited America by virtue of 'money coming in' to perceived 'safer' (not safe) harbor in this Country.

This activity contributes as you know, to a false complacency about equity prices as well as currency debasing; which results both in a (we think temporary) drop in the Dollar; blow-off in equities; and even support for US Treasuries. Investors thus lulled into a form of inflation-fear (yield chasing) and hurt previously in other sectors (like real estate and previously equities) tend to dismiss fears (reserved).

Furthermore; it also hurts the sector the Fed thinks they're helping; housing. How in the world they deduce that keeping mortgage rates low will attract buyers is a poor spin on their 'real' objective (to protect our financial system and roll Debt). It is provable by the preceding and current low demand even with 3% mortgages. I see no reason why anything they did would encourage 'fence sitters' to rush out and buy a home (or other property); when they are 'officially' told there really isn't an urgency; at least from the prospect of what it will cost to 'rent' money to do so.

Keep those printing presses running - might be the take-away from today's expansive FOMC statement, and the ensuing 'conference' with the Chairman. (A review of the Fed statement and News Conference provided; on Wednesday.)

We see the purpose a little different that some others; or the 'official' statement; which presumes 'slow growth' and recovery as the primary reason for holding a low 'Funds' rate for essentially the foreseeable future (they say mid 2014 or so).

While the Country is recovering somewhat; households are not adequately yet rebuilding their 'balance sheets', and there is the 'implication' that holding rates low suggests the recovery is a facade covering continued deterioration. Actually that varies (regionally and via sector); but our point is don't assume the Fed has made such statements about low rates just because of levels of growth rates.

Our view is that their key remark was the intention of increasing longer-duration increased focus at Auctions for our paper; thus lowering the debt service costs in the distant future (to do otherwise would be harsher than even intransigence continuing on the part of our Congress). China has already (lots more follows).

Also; the Chairman was disingenuous with his remarks regarding 'keeping up' with inflation, during the low-interest environment. (Explanation follows next.)

Meanwhile Europe is on a tear to capitalize on last year's ECB resignations; at the same time it's less clear that Germany has 'kapitulated' on fiscal restraint; a hallmark of their modern day history. This is either the miracle that keeps wolves away; or it's the prelude to a nightmare on Kurfursterdamm, in the making.

The 'unchaining' of events - seemingly dangerously in-play, has been a main focus of 2012 so far. The idea of a '10 year' moratorium on Greek repayments, just as an example, breeds a brief relief rally extension, but reinforces the reality that someone has to accept losses, as bad debt eventually gets recognized for what it is, and that it doesn't vanish even with limited 'restructuring' of the EU.

Unchaining peripheral Europe (not to mention the United States) from profligate if not irresponsible previous behavior, is necessary for growth to return, or even for rates of return to rise, in order to restore balance to markets, economies; as well as not compel the risk-averse to chase yield in risky attempts to 'keep up'.

This coming May will be the 5th Anniversary of our 'Epic Debacle' warning back in May of 2007 (following a liquidity & credit crunch initial bull-to-bear reversal) in early February of that year. It seems reasonable that 2012 will be the year -2013 at the latest if they manage smoke & mirrors all the way through the Election- all the consequences of mediocre management of the Debt Super-cycle's (more).

Tackling these challenges is essential. The end of the 'party' (Debt Supercycle) is a shift that we foresaw; necessitating 'throwing out the valuation metrics' from the past; though a majority of analysts continue to behave based on old rules (more).

Bottom-line: Europe and the U.S. are going to be forced to deal with all of this; and for this Nation; matters may not conveniently allow politicians to push-off the clean-up until after Elections. That matters have already been pushed-forward is part of the problem; as Budgetary; Deficit; and National Debt issues (none are of course mutually exclusive) continue compounding the hurtles to be overcome.

What's going on now, especially in Europe, are central banks following our Fed lead, and engaging in massive money printing; and trying for even more. In time it becomes impossible to service debt when you do this. What happens then? It becomes a challenge to sell bonds; economies risk collapse; and banks with the huge sovereign paper holdings I noted as the 'real' bailout targets, are at-risk of being (too much shared already; balance for our actual Daily Briefing members).

(Long term charts with support, resistance, or measures; are redacted in this courtesy highlight edition. This weekend's 2nd video will be a live link however.)

MarketCast (audio-video) - remarks note 'global instability, fragility, and chaos'; forecast before this series of events; continue.

Tonight the 2nd (pre-close) video is a 'live' link; just as a oft-requested sample.

Two technical corner' videos tonight:

Daily Briefing (final) MarketCast Video

Daily Briefing (pre-close 'live link') MarketCast Video

In summary -

Thus we have argued that the combination of slower U.S. growth (hence lower valuation metrics put on stocks), combined with reduced demand and forward guidance), would see equities valued on real growth rates as 2012 evolves. This pattern was evolving internally; but may be (at a particularly noted phase) now.

Have a great weekend!