-Executive Summary-

• Markets were flat on just about the lowest volume for the year.
• Several important economic indicators released today point positive… See more below.
• Financial stocks were sold-off today.
• SMC holding the Bank of Ireland (Ticker: IRE) was punched in the nose as the Irish finance minister Mr. Lenihan expressed publicly that the markets DO NOT have confidence in Irish banks and raised the government investment in Allied Irish Banks (AIB) to approx. 93%… see below.  The Bank of Ireland closed down -5.5% on this news.  Is there a silver lining in this terrible news?  See below …
• According to the NYSE … tomorrow the markets are open.  Monday, December 26th the markets will be closed.

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– Markets “At a Glance” –

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

– Market Trends –

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

– Market Perspectives –

For your added perspective, we’ve included these two different views of the broader market –

1. SMC SP-500 ETF Daily Chart (Click to open helpful chart in a separate browser window).

2. SMC SP-500 Weekly Chart (Spanning back through 2007)

– Today’s Highlights –

There was plenty of news today –

1. Initial jobless claims came in as expected at approx. 420,000 and appears to be settling in at the low 400K level.  Believe it or not, this is a positive development for the economy.

2. Consumer sentiment – as measured by the University of Michigan – rose to 74.5 for December. This too is an improvement.

3. Durable goods orders for November posted a drop. However, the drop appeared mostly due to aircraft.  Positive news can be found here too – New orders for non-defense capital goods (excluding aircraft) rose +2.6%.

The markets remained mostly at flat-line for today in spite of the positive nature of the above mentioned data points.

Market leading stocks over the last weeks – particularly financials – pulled back strongly today.  We experienced this with the Stock Market Companion holding – the Bank of Ireland (Ticker: IRE).

– Story-Stock Investing –

Today the financial community was focused quite a bit on the action of Ireland’s finance minister – Mr. Lenihan. Using a court order, he authorized further government investment of 3.7 billion euros (approx. $4.8 billion) into the Allied Irish Banks (Ticker: AIB).  This takes the government ownership of the bank to approx. 93%!

While performing this operation, Mr. Lenihan told the press –

1. The markets don’t have confidence in the Irish banks.

2. This was a last resort measure.

3. The Bank of Ireland and Irish Life and Permanent are still seeking funds from the markets.  If they fail to raise capital, the government will move to increase their funding in those institutions as well.

4.  The Irish taxpayer and the National Pension Reserve Fund – will get a return on AIB “in time”.

5. We (Irish taxpayer) will have to wait for a number of years while the bank is turned around and we will then have a solid investment in it.

The idea that the Irish taxpayer may not lose money on this deal is perhaps what put a bottom in on the Bank of Ireland (IRE) stock at $2.20/share, as it appeared ready to slide further into the abyss.

Allied Irish Banks (AIB) stock closed down below a buck today at 96 cents – down approx. -12%.

The Bank of Ireland (IRE) stock gave up 14 cents and closed today at $2.39/share – down approx. -5.5%.

We were of course disappointed in the large sell-off in the Bank of Ireland today, BUT ENCOURAGED by the strong recovery in the stock following the sell-off.  The volume was high on the sell-off and higher on the recovery.

When a finance minister says publicly that the markets do not have confidence in the country’s banks, it is quite remarkable to see one of those bank stocks withstand that type of pressure and close down a relatively modest -5.5%.   Talk about a torpedo… Can it get much worse than that? …The answer is … Yes – So we are careful.

If the Bank of Ireland can hold $2.20/share  and continue to attract investors at these levels, then indeed there may be a brighter future ahead for the stock.

To us it appears like this –

The Irish government is requiring the Irish banks to come up with more tier one capital than is required by the Basel guidelines.  It’s as if they are saying, “O.K.  Let’s let the market determine the value of your assets.  If you are able to raise investment capital based on your balance sheets, we will back off and have much more confidence in your ability to function and let the time pass that is necessary to see an improvement in asset value.”

Investors appear to be attracted to the Bank of Ireland at these levels… at least for today.  The Bank of Ireland has through Feb. 2011 to raise capital.

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