Accusations by Spanish papers that members of the current Spanish government have received bribes is weighing on Europe today. Never mind nothing has been proved; politicians and corruption are now occupying a bigger part of the media talk that economic woes.
That is a problem: Spain is supposed to be marching toward structural reforms that will improve the economy, one of the main reasons the stock market and debt yields have been improving. A major corruption distraction will not help that march.
There's another risk: Risk assets are short-term over-bought, but no one wanted to get ahead of the market ... this could be an excuse to do that and take profits.
And if you're really worried about corruption, why not focus on the fixing of soccer matches! An inquiry by the European anti-crime agency identified 680 suspicious matches from 2008-2011... including coaches, players, and officials — as well as qualifying games for the World Cup!
1) The Great Rotation: Still too early to make the call. There are some encouraging signs that investors are putting more money into stock funds, the main one being the $20 billion or so inflows into stock mutual funds in the last four weeks.
But it's still too early to make the call. While many bond exchange-traded funds are down in January, there are not enormous outflows. And bond yields have not rocketed dramatically.
I'll stick with my original take: It will take a quarter or two of notable declines in bond funds, and notable gains in stock funds, for investors to sit up and take notice.
And as for that $20 billion in inflows in stock mutual funds ... that still has to compare to the $416 billion in OUTFLOWS for the prior four years.
2) Everyone keeps predicting the end of the mall and outlet business, but at least the higher end properties continue to do well. We see it again in Simon Property Group, which reported earnings and revenue above expectations. More importantly, it reported an occupancy rate of 95.3 percent. Average rent per square foot was up 3.4 percent. It also increased the dividend for the sixth straight time, by 4.5 percent to $1.15 a share.
The company provided 2013 guidance funds from operation (FFO, a form of cash flow, the most important metric for REITs) of $8.40 to $8.50 vs. $8.41 consensus estimates, which would imply growth of five percent to six percent.