THEME: CHINA
China stock sales...

Shanggong said yesterday it expects to raise no more than US$50 million from the sale of 100 million B shares to 14 pre-selected overseas institutions, such as FAG of Germany and Shanghai Industrial Asset Management (Hong Kong) Co Ltd.

Shanggong said it will use the proceeds to buy 81.1 percent of Durkopp Adler AG, a German sewing machine manufacturer, and build new workshops using technology obtained from the German company.

Is China going to do reverse takeovers? NYT had a story about a manufacturer setting up in S. Carolina. Also, Haier is looking to set itself up as a global manufacturer of refrigerators.

THEME: EASY FED

``Based on labor market data alone, asserting that an employment recovery has begun would be premature,'' Bernanke said, adding he does expect job growth in the ``next few quarters'' as demand rises and productivity gains start to wane.

Bernanke is the leader in the cheap money campaign. If he needs a few more months of job growth, then it is unlikely that we'll see higher interest rates until we get at least 3 good reports.

THEME: UK INTEREST RATES

Inflation is lower in the U.S. than in either of the two countries. But ``don't forget the differences in the way we measure inflation,'' said Joe Carson, head of global economic research at Alliance Capital Management. ``In the U.K., they don't quality adjust as much as we do. And the RPIX,'' which rose 2.8 percent in the year ended September, ``includes housing prices.''
Substituting house prices for imputed rental values in the U.S. consumer price index would add about 0.8 percentage point to the reported CPI and 1 percentage point to the core CPI, Carson said. The reported year-over-year increases are 2.3 percent and 1.2 percent, respectively.
``We've statistically lowered inflation,'' Carson said.

US CPI is a dubious figure. Quality adjustments and neglecting food & energy & housing... Where is the healthcare inflation? Education? Taxes?

THEME: MUTUAL FUND SCANDAL
TSC:

Because the value of a mutual fund is inherently determined by the fund's holdings, redemptions won't cause a downward spiral, as in Enron shares. But large redemptions -- of which we're already seeing much of in these funds -- certainly take a toll on fund performance.
First, the trading costs of redemptions essentially get passed on to existing shareholders -- not paid by the exiting ones. Second, redemptions often force fund managers to sell holdings they would otherwise like to keep. Such internal churn nearly always increases the tax burden on the fund, and generally disrupts the overall portfolio management.

The mathematics of a "run" on a mutual fund are that the last one out pays the heftiest taxes. Right now, no one is really concerned about this. They are more afraid of "missing out" on the bull market than the fear of getting dumped lots of capital gains taxes, and getting creamed by a falling market due to redemptions. It is important to keep an eye on this...

THEME: CAPITULATION
Robert Walberg:

Momentum: All the major market indices are enjoying strong double-digit gains this year. The number of stocks establishing new 52-week highs each day continues to dwarf the number of stocks setting new lows. Volume figures remain bullish, as we routinely see more volume on up days than on down. The indices continue to hold above their 50- and 200-day moving averages, with both averages trending higher. Why on earth would you want to sell stocks in a market exhibiting this kind of underlying strength?

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