• Enjoy your evening.

• The market reacts.

The markets have halved their losses on word that Obama and Boehner will meet at 5 p.m. today.

• I view these as investments, not as trades.  

I am bidding $69.50 for Procter & Gamble (PG), $33 for Wells Fargo (WFC), $17.55 for Morgan Stanley (MS), $34.50 for Ocwen Financial (OCN), $88.75 for Berkshire Hathaway class B (BRK.B), and $19.70 for CSX (CSX).

• The S&P Index is now right on my 1415 fair market value cacluation.

• Though the drop is starting to accelerate, I am not rushing buys in here.

Again, not a day to do much. As Rev Shark likes to say, "I dont see the setups yet."

• Nice move in the ProShares UltraShort 20 Year-Plus Treasury ETF (TBT) off of support in the last 30 minutes.

• Here is Miller Tabak's Peter Boockvar's analysis of the auction today.

After the pretty good 10 yr note auction yesterday, the 30 yr bond auction today was on the soft side. The yield of 2.92% was about 3-4 bps above the when issued and the bid to cover of 2.50 is below the previous 12 month average of 2.65. Direct and indirect bidders took 53.9% of the auction which is close to in line with the 12 auction average. Bottom line, the highest yield in 5 1/2 weeks was not enough to bring strong demand for 30 yr paper with no inflation protection and the prospect of a $4T Fed balance sheet in one year. We have had and will further see massive monetary inflation that has manifested itself so far mostly in asset price inflation (not just bonds/stocks but art, gold, comic books, Manhattan high end apartments, etc...). It remains only when and not if before it shows up in consumer prices because the Fed will lag in moping up the monetary excess relative to economic growth. As an example, the Fed is using a 6.5% unemployment rate as a benchmark to reassess policy even though this is historically a lagging indicator. Also, it's not the absolute level of inflation that the Fed should be watching but its relationship to income growth. 2-3% inflation is fine as long as we see at least 2-3% income growth but certainly not if it's rising less than inflation.

• The TBT has fallen to a level that should be near support.

The ProShares UltraShort 20 Year-Plus Treasury ETF (TBT) has fallen by nearly $1 a share from the morning's highs.

I expect that imporatnt tehcnical level -- 1.67% yield on the 10-year U.S. note -- should provide support. 

i would be a buyer of the TBT between $61.50 and $61.75.

• S&P moves U.K. outlook to Negative from Stable.

(No surprise at all with a plan to raise taxes and implement austerity as editor Kamal Khan has written).

• I obviously made a short-term mistake in covering yesterday's SPY Short Rental.

I am about 5% net long now.

• I am adding to my Ford (F) long at $11.33 now.

• Here is a 11 a.m. breadth check.

S&P 500: 236 advancers to 255 decliners.

NYSE: 806 advancers to 1000 decliners.

NASDAQ: 1111 advancers  to 933 decliners.

Volume is 11% LOWER than past 10 day average, 13% LOWER for past 30-day average and 8% LOWER than yesterday for this time of morning.

• A report says changes are coming.

Dealbook is talking about a shake-up of the Yahoo! (YHOO) board.

• Mostly postiive data on the economy this morning.

November retail sales +0.3% compared to est now +4.7%, a big improvement of less than +1.% in the consensus of +0.5% and -0.3% in October. The miss was in lower gasoline prices, so no biggie.

Core retail sales, excluding building materials/gasoline and autos rose by 0.5% in November, ahead of +0.3% expected and flat in October. The three-month annualized change in core retails sales rose to +4.7%, compared to less than 1.5% growth during the summer lull.

As a result, fourth-quarter real consumption should be +2.5%.

Personal consumption is doing better than business spending as refinancings, higher home and stock prices and lower gasoline prices are plusses, but business confidence remains subjed.

Initial jobless claims dropped to 343,000, expectations were at 369,000 and the week-ago number was 372,000. This is the third-consecutive week of declining claims.

Claims data seems to be signalling monthly employment gains of better than 150,000 ahead, that's enough to underpin at least 2% real GDP growth. But those  gains will not likely dent the unemployment rate of 7.9%.

The produce price index declined by 0.8% in November, compared to expectations of a 0.5% decline and a 0.2% October fall. This is the largest drop in six months, centered in energy costs, which declined the most since March 2009. (Year-to-date energy costs are -1.4% and that's a plus for consumption and real incomes).

The core PPI rose by 0.1%, in line. Year-over-year core PPI was +2.2% slowing from 3% pace earlier in 2012.

• A survey of asset managers offers a glimpse of what they expect.

Markets move on news relative to general expectations. With that in mind, what are the consensus fiscal cliff expectations? According to David Bianco, Deutsche Bank's Chief U.S. Equity Strategist, these are the results of the bank's survey of more than 100 large asset managers over the last week on the issue of the fiscal cliff:

Do you expect legislation that mitigates the fiscal cliff to be passed before year's end?

Answer: 64% of the responders expect a deal before year's end.

How much fiscal drag of GDP do you expect in only 2013 (both higher taxes and spending cuts)?

Answer choices: a) 0.5% b) 1.0% c) 1.5% d) over 1.5%

Results: 0.5% (12%), 1.0% (40%), 1.5% (37%), over 1.5% (12%). The weighted average expectation is 1.25% (using 1.75% for over 1.5%). Seventy-seven percent expect between 1% and 1.5%.

How much fiscal drag of GDP do you expect from tax hikes in only 2013 (include payroll tax holiday expiration if expected)?

Answer choices: a) Negligible b) 0.5% c) 1.0% d) over 1.5%

Results: Negligible (12%), 0.5% (38%), 1.0% (40%), over 1.5% (10%). The weighted average expectation is 0.77%, using 0.25% for negligible.

What top dividend tax rate do you expect?

Answer choices: a) 15% b) 20%-25% c) 35%-40% d) 43.4%

Results: 15% (2%), 20%-25% (62%), 35%-40% (29%), 43.4% (8%). The weighted average expectation is 29%. (Deutsche Bank notes that in their previous survey, 85% of respondents expected a dividend tax rate of 25% or less).

How much in total 10-year deficit-reduction commitments do you expect, including sequestration or its replacement?

Answer choices: a) $2 trillion b) $3 trillion c) $4 trillion d) $5 trillion

Results: $2 trillion (44%), $3 trillion (41%), $4 trillion (15%), $5 trillion (1%). The weighted average response is $2.8 trillion.

Other interesting survey conclusions from Deutsche Bank:

• 46% of those that expect a deal by year's end expect overall fiscal drag to exceed 1.0%.
• 53% of those that don't expect a deal by year's end expect fiscal drag to exceed 1.0%.
• 59% of those that expect fiscal drag of 1.0% or more do not expect the dividend tax rate to exceed 25%.

I hope this is helpful in your assessment of expectations.

• SPDR sense is tingling.

I took in my Spyder short rentals last night. I start the day about 5% net long.

• Here is the heavy calendar of economic releases this week:

Economic Calendar

Source: Bloomberg

View Chart »View in New Window »

• The problem is that Gabagool -- aka QE -- is terrible for you in excess.

Let me start out by writing that the Federal Reserve has been forced to undertake the lion's share of the responsibility for keeping the domestic economic recovery on an even keel since the Great Decession of 2008-2009.

This is because our political leaders -- and that includes both the Democrats and the Republicans -- have been singularly inept at addressing the U.S.'s cyclical and secular economic challenges by introducing pro-growth fiscal policy. So we are left with the Federal Reserve to do the yoeman's work -- something about which I have consistently written over the years. 

In that regard, it is somewhat unfair to criticize Ben Bernanke; instead, we should be critical of our leaders in Washington. The Fed chief is trying to hold the fort together as best as he can with the limited tools he possesses. 

This continued with Wednesday's announcement of a fourth round of quantitative easing. 

The problem is that, with each passing installment of QE, the marginal positive impact is lessened and the instruments of monetary policy grow blunter -- and the market's upside response becomes less enthusiastic. 

In reality, more cowbell will not aid the real economy. The Fed's decision Wednesday will have little to no future impact on Apple (AAPL) iPad sales, on auto mobile sales or on business fixed investment and hirings. Nor will it affect holiday sales. 

Many of the challenges facing the domestic economy are secular -- what is needed is political will. Lower interest rates are not what is ailing the U.S. economy.  

Now, to make matters worse, a burgeoning debt load and annual deficit must be addressed, and this with the associated fiscal drag of government spending cuts and tax hikes. 

So the weight of policy lies ever greater on the monetary authorities, who do the best they can with their less-sharp instruments.

And Now, for the Gabagool

At first, four years back, the Federal Reserve delivered delicious portions of liquidity with QE1.

These tasty morsels were delectable, and the markets rallied off of generational lows.

"Who ate all the Gabagool?"-- Tony Soprano, The Sopranos

The menu of easing had been like tasty portions of Gabagool, or Capicola. This is an Italian lunch meat taken alternatively from capo -- head and "collo," the shoulder and neck of a pig.

The problem is that Gabagool is very bad for you in excess, as it is among the saltiest and fattiest of meats. Filled with nitrates, too much Gabagool can cause heart and other health problems. (Just look at the bodies of Tony Soprano and the others above!)

The same holds true for excessive cowbell and four years of easing. The knife loses its sharpness and ultimately its effectiveness. In time it can even corrupt.

Sliced sweet capocollo

Yesterday's Market Action

As I wrote in Columnist Conversation yesterday, the initial 10-handle rally off of the Fed policy move made little sense -- and I shorted it. The move was only modestly more constructive than consensus expectations. 

One can debate the sensibility of economic targeting to monetary policy, as it's fraught with all sorts of statistical issues. However, it really shouldn't impact risk markets. 

The decline quickened when Bernanke told the press conference that monetary policy -- and already-low interest rates -- can't offset the full contractionary effects of the economy if the U.S. goes off the fiscal cliff. This was not a new observation by Bernanke -- it was at least the third time he has mentioned it so far in 2012.

Home on the Range

In all likelihood, the U.S. will now remain against a backdrop of low interest rates and low real economic growth for several years to come.

Fed policy, though extraordinarily easy, can no longer meaningfully impact the real economy.

The risk here is that it will do more harm to good. It stands to damage the savings class and pensioners and, through low interest rates, it's likely to sustain companies and businesses that should be put to rest -- thus producing a zombie economy. It's liable to destroy price discovery in many asset classes with a fake cost of capital and, potentially, move excess liquidity of policy into general inflation in the cost of goods -- and not into the stock market. The latter effect would produce the dreaded Screwflation of the Middle Class I introduced back in 2010.

The later effect produces what I described as the dreaded Screwflation of the Middle Class, a concept I introduced back in an Other Voices Column in Barron's two years ago.

Excessive monetary intervention also suppresses price volatility, anethesizes markets, inhibits natural price discovery and can, at times. force investors into untimely decision making.

The massive expansion of the Fed's balance sheet, moreover, raises other issues down the road -- but we will leave that for future discussions.

A new problem is that, as the fiscal drag of higher taxes and lower spending takes hold, we will no longer be able to depend on any near-term pro-growth fiscal policy. 

We aren't seeing much profit upside, and earnings and profit margins are near cyclical peaks and lack the benefit of monetary and fiscal policy to continually support asset prices. As a result, it is hard to foresee stock prices moving higher over the short run. Price-to-earnings multiples are at around 14x, within 1 point of the five-decade average, so they seem unlikely to creep much higher. Valuations remain challenged by the nontraditional headwind of deleveraging as subpar growth makes the global growth cycle vulnerable to exogenous shocks.

We will probably be in a subpar and uninspiring investment return setting for some time.

Last night the S&P 500 closed at 1428 -- or less than 1% from my "fair market value" calculation.

Nothing that occurred Wednesday has changed my market view that stock prices are muddle-valued over the near term.

That said, even a fairly valued market contains stocks that are materially overvalued or undervalued. In the months ahead, my charge should probably be sided more toward finding those individual equity opportunities, rather than pointing out the obvious broad macroeconomic challenges.

I miss Carmella, Tony, Christopher and Uncle Junior.

The investment backdrop is unexciting -- the next few quarter s will be like watching Sopranos reruns over and over again as we remain home on the range.

Pass the Gabagool!