Wall Street Greek: Morning Coffee: Follow Me

(Stocks in this article: NYSE: SPY, NYSE: DIA, Nasdaq: QQQQ, NYSE: SDS, NYSE: LEH, NYSE: GS, Nasdaq: COST, NYSE: HON, Nasdaq: MATK, Nasdaq: JOSB, NYSE: NVS, NYSE: C, NYSE: DOW)

Last December, most would have said it was daring for me to suggest homebuilding and the financial system would fall into despair. In fact, many did, though that's all been forgotten now. Believe it or not, the consensus was looking for housing recovery early this year, while I was calling for another leg lower. Homebuilder CEOs were still in denial, and their stocks were significantly more expensive. I was even labeled an Armageddon Analyst. Can my views discounted any longer...

Now that we are in what many are screaming is in fact Armageddon, I'm here to lead you through the fire. Wall Street Greek is actually looking for near-term equity rebound, and you will require the same courage many of you mustered up last year, but our position must now take the other side of the table.

I suggest you refrain from your victory lap now and not fall in love with your short positions. Government backing and efforts are adding confidence to markets, whether the consensus sees it yet or not. Remember, there is a herd and they are still sounding the bearish cry. How many times have you quoted those famous words about buying into fear and selling into greed? Now I ask, how are you reacting when faced with fear? It's difficult isn't it... That's why extraordinary profits are had by some.

The Greek believes capital flows should return in favor of equities as tax loss selling runs dry and value is to be had. Why has the investing public forsaken the lessons of the past? The answer lies in human psychology. Kitchen sink write-offs are a norm in this kind of environment, and you should not allow yourself to be frightened into a corner while corporations do what they can now to clean their books for a fresh '08.

Santa is on his way and the January Effect should be extra effective this year, in my view. If Q4 GDP or corporate profits spur the market into panic, Bernanke and Mishkin are well-schooled in the art of sharp rate cut (I'm talking 100 bps if necessary), and you could expect a big move in such a scenario. If the economy holds, then the current of action will be viewed positively and market confidence returns as well. The caveat here is that we are now extra vulnerable to external catalysts like terrorism or geopolitical conflict. But, we should not let fear rule. The economic headline is drifting from the business page to front page news, yet another sign that the end could be near. I'm looking for a short-term move with a high level of expectation; looking further than that is yet difficult.

November Retail Sales Beat - Sales increased 1.2%, ahead of the expected 0.6% increase. Excluding autos, sales rose 1.8%, versus a 0.7% expectation. So, the late start to holiday shopping, while it was early based on the calendar, saved the month. We say late because sales data was soft heading into the holiday. As we suggested in a previous article, unemployment remains low and the holidays are the holidays. People will shop, and retailers will discount if necessary. We have seen earlier and earlier discounting as retailers try to secure the holiday purchase ahead of their competitors. Gasoline prices have been running high, while easing off the peak in recent weeks; gasoline impacts this figure, as it includes the sales of your local pump stations. So, The Greek took solace in the specific data point that excludes gasoline; it showed a rise of 0.6%. Another positive, almost all measured sectors of retail showed improved sales. The consumer is not dead yet.

November Producer Price Index - PPI increased 3.2%, versus 1.6% expected, and Core PPI excluding food and energy, rose 0.4% versus 0.2% seen. A little hot... Steve Liesman of CNBC pointed out the many factors that play roles in PPI impacting consumer prices, where Fed attention is focused for inflation measure. While it's true that a higher PPI does not necessarily imply an increase in CPI this month, it does imply pressure is increasing on future prices. Margins can only tighten so much for retailers to bear, and at some point, no matter how tight competition may be, consumer prices will rise. Net net, there is no way to view a rise in PPI in a positive light. CPI will be closely watched tomorrow.

Unemployment Claims - At 333K, weekly benefits filings improved off last week's level, which also improved from the week before it. The Greek remains uncomfortable with the long-term trend here, however suttle it has thus far proven. I continue to look for consolidation in the retail/restaurant/other consumer sector in '08, which will in turn impact commercial construction as well, in my view. Therefore, we also expect unemployment to continue on the increase. While I'm bullish stocks now, I'm still looking for a recessionary quarter or two, or more depending on what plays out with Iran and how well we mitigate credit concerns.

LIBOR Shows Positive Signs - While the article I have posted for you below focuses on the sticky LIBOR rate, it has eased off recently higher points. The fate of the economy rests significantly on our ability to mitigate credit risk tied to exotic asset backed securities extending beyond mortgages. We cannot allow this disease to spread to other consumer credit markets.