Real quick: Here’s why a recession seems unfathomable right now.

With each bullet point we highlight the key word.

1. Consumer credit is booming.

2. Housing starts are on the rise.

3. Vehicle sales are on the rise.

4. Jobs growth is accelerating.

So you’ve got: Cars, jobs, houses, credit.

‘Nuff said.

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Another day of slow news. U.S. economic data looked positive but negotiations to save Greece continue to drag on.

First, the scoreboard:

Dow: 12,878 pts., +33.07, +0.26%

S&P 500: 1,347 pts., +2.72, +0.20%

NASDAQ: 2,904 pts., +2.09, +0.07%

Now for today’s top stories:

• European markets closed mixed as negotiations dragged on over the terms of the second Greek bailout. The DAX ended down -0.16 percent while the CAC 40 closed up +0.18 percent. The euro hit a 2012 high against the dollar.

• Greek politicians struggled to strike a deal on new austerity measures that the troika has demanded in exchange for the next round of bailout funds. Reports that a draft was nearing approval led to optimism early, however that feeling faded as news surfaced that leaders would meet again tomorrow because they had not yet penned a resolution. Greek PM Lucas Papademos also met with financial sector representatives led by Charles Dallara today to discuss private sector involvement in the bailout.

• U.S. economic data beat expectations across the board today. Most importantly, consumer credit crushed expectations, expanding by $19 billion in December. Analysts only expected an expansion of $7 billion. JOLT job openings also beat consensus, jumping from 3.12 million to 3.38 million in December. Economic sentiment also improved to 49.4 in January from 47.5—almost a positive outlook.

• The 9th Circuit Court struck down Prop 8—a California law which banned gay marriage. The decision did not lift the stay on gay marriages that is currently in place. Journalists are already speculating that the legal battle over the law will continue in the Supreme Court.

• Coca-Cola beat earnings expectations, with EPS coming in at $0.79 versus estimates of $0.77 for the fourth quarter. That was based on significant emerging market growth, with volumes growing 20 percent in India. The brand itself saw growth of 5 percent for the year and 3 percent for the quarter.

• Walt Disney Co. beat earnings expectations but missed revenue estimates, reporting just after the bell. EPS came in at $0.80 versus estimates of $0.70, and revenue amounted to just $10.78 billion in comparison to estimates of $11.19 billion for the first quarter. The company saw a 16 percent drop in studio entertainment revenue in the quarter.

• Right before the close, Scott Thompson was named as the new CEO of Yahoo, and Chairman Roy Bostock will not stand for re-election. Four board members will step down, and two new members have been named to replace them.

• CITI’S BUITER—There’s A 50 Percent Chance Of A Greek Exit From The Eurozone And Here’s How It Would Happen >

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Hedge fund manager and writer Doug Kass just sent out a blast titled SELL EVERYTHING.

Why?

Because Roubini is bullish.

From CNBC:

The perennially negative Nouriel Roubini – nicknamed Dr Doom for his usually critical views – is turning bullish. You read that right, Roubini is betting on additional stock market gains.

“We’re a believer; we’re celebrating. We think the rally has legs,” explains Gina Sanchez, Roubini’s director of equity and allocation strategy.

You’ve been warned.

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It’s hard to think that the economy is going into any kind of recession with numbers like these. For the second straight month we just got a HUGE number on consumer credit

Cnosumer credit expanded by $19 billion in December. That’s far more than the $7 billion that was expected by economists.

Revolving consumer credit (credit cards) grew by $4.1 billion sequentially, and is basically flat from last year again (up barely).

One more point on this: A lot of people think that US consumer have too much debt, and that a big number here is “bad” and we could imagine that being true. But if we’re talking about cycles, and whether the economy is in rebound or recession mode, re-expanding credit is OBVIOUSLY what you want to see.

Read the full announcement here.

This chart from Reuters’ Soctty Barber basically tells it all.

———–

It’s a very slow week economic data-wise, but this is the biggie…

Consumer credit for December comes out at 3:00 PM ET.

Analysts expect $7 billion worth of new credit for the month. That’s down from $20.3 billion in the month before.

Remember, last month REVOLVING consumer credit registered flat year over year growth for the first time since the bust.

We’ll have the number here LIVE.

Here’s that revolving consumer credichart from last month.

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• Apple Might Lose A $1.6 Billion Lawsuit For Using The Word ‘iPad’
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Groupon reports Q4 earnings after the close tomorrow.

Analysts at Morgan Stanley are expecting relatively good news: revenues above estimates, constrained marketing spending, and better than estimated EBITDA.

Morgan Stanley’s analysts think the stock is fairly priced as it currently is.

The gossip is that hedge fund managers with millions to bet don’t feel the same way.

VC Chris Dixon just tweeted that a hedge fund manager he knows looked into shorting Groupon stock ahead of tomorrow’s earnings, but backed off when he found out the interest rate on borrowing Groupon stock was a whopping 40%.

That is super high. It’s an indication that a lot of money has already been bet on Groupon’s stock ticking downward in the days ahead. 

(That doesn’t mean it’s more likely to dip, of course. Sometimes “the crowd” is very wrong.)

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Markets have appeared enchanted by reports coming out of Greece recently that Greek politicians are about to approve a new round of austerity measures and happily ignorant of the fact that negotiations about private sector involvement are still dragging on.

But even if the Greek government were suddenly to reach agreements with both the troika and its private creditors, it appears unlikely that both deals will actually be worth anything.

That’s primarily based on the fact that the debt swap deal officials agree to with the private sector will likely never be implemented, particularly if the European Central Bank doesn’t join in on sharing losses. As it stands participation in the plan will have to be “voluntary” in order not to provoke a credit event.

However, investors will fight tooth and nail not to bear the full brunt of the 70 to 75 percent losses they will likely take under the agreement if they can’t collect on the insurance contracts (credit default swaps) they purchased to hedge against the possibility of a Greek default. Thus there are two probable outcomes:

• EU leaders forcibly prevent a credit event, potentially with a special account for Greece that would essentially would allow Greece to feign the appearance of paying off maturing debts without actually paying them off. In this scenario, the private sector would take a big hit and credit default swaps would not be paid out. This would ruin the CDS industry (at least in Europe) and foster deep distrust for EU leaders.
• EU leaders accept a credit event and let Greece default in a disorderly fashion. This essentially negates the deal that’s happening right now. Theoretically, a disorderly default would result in a deeper cleansing of Greece’s debt burden so the country would not necessarily need all the austerity measures the troika is forcing upon it. However, the consequences of CDS payouts are somewhat vague and its impact could be far-reaching, despite the industry’s small size.

There doesn’t really appear to be a compromise between these two options. True, the ECB could also take a haircut as part of the selective default mentioned in the first scenario, however Greece’s debt burden would still probably be unsustainable even if the central bank took losses.

Even if Greek leaders stomach more austerity and put the country in place to receive much-needed bailout funding, there appears to be no way the debt swap deal will go according to plan.

Thus any Greek “agreement” is ultimately worthless.

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See Also:

• SURPRISE, SURPRISE: It Appears Greece Still Doesn’t Have A Draft Of A Deal
• CITI’S BUITER: There’s A 50% Chance Of A Greek Exit From The Eurozone And Here’s How It Would Happen
• LIVE: Negotiations And Crisis In Greece

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Below is an awesome chart from Credit Suisse’s global investment yearbook.

It shows the firm’s proprietary Global Risk Appetite Index (GRAI) going back to the early 80s.

When it’s high: People are in a state of euphoria and have a huge appetite for risk. When it’s low: Sheer panic, and no risk appetite.

CS doesn’t reveal the exact secret sauce, but it explains it like this:

CS GRAI is the slope of a cross-sectional, weighted, linear regression of a 6-month excess return measure (y-axis) on 12-month price variability (x-axis). This regression is estimated daily using rolling windows of data.

Currently, the returns of 64 country-based assets are used in the calculation. The constituents are broad equity and government bond indexes from developed countries and many of the more important and accessible emerging markets. These assets form a relatively continuous spectrum of risk from safer G3 bond indexes to riskier EM or pe- ripheral European equity indexes. However, their positions along the risk spectrum do shift over time, but the 12-month calculation period ensures this is more gradual than the changes in return measures.

A weighting scheme is applied in the regression based upon the market capitalization and GDP of the countries of the respective assets. Thus the bond and equity indexes from the USA have a greater impact than those of Belgium.

The average observed value of CS GRAI has been around 1, and 1 1⁄2 standard deviations is approximately 4. For convenience we call periods when the CS GRAI is abnormally high (above 5) “euphoria” and abnormally low periods (below minus 3) “panic.”

Anyway, here’s the chart. Perhaps the most surprising thing is that their sentiment measure registered a deeper level of panic last year during the Euro meltdown than during the US financial crisis. That goes a long way in explaining the torrid rally despite the lack of progress in solving anything.

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This editorial is part of our GREAT DEBATE feature ‘What Resource Do We Most Need For Our Future?‘

The current American dependence on oil — foreign and domestic — is staggering: we consume roughly 20 million barrels of the stuff every day, in order to run our cars and heat our homes. 

Click here to see how oil became our primary source of energy >

Though oil has been used for thousands of years — from soaking the arrows of the Persian military to treating George Washington’s frostbite during the Revolutionary War — it had little commercial value in the United States outside of powering kerosene lamps until the mid-1800s. 

But when the Pennsylvania Rock Oil Company of New York struck oil 70 meters down in Titusville, an incredibly valuable American commodity was born.

Today, America must deal with the growing conundrum of whether to commit fully to oil as the nation’s life blood. Though trillions of barrels of oil are ready to be harvested domestically today, we can only use this resource for so long — or we will find ourselves without a viable solution to turn to in the coming centuries. 

Nearly 40% of America’s energy comes from oil, with fossil fuels in general making up 85% of our energy. Transportation is the biggest consumer of petroleum — 71 percent of our oil goes towards powering cars, buses and other public transport.

Source: RITA

But it wasn’t always this way: from the the Model T to furnaces, new inventions powered America’s use of oil until it surpassed coal as the country’s main form of energy in 1950.

The first oil recession occurred with the unveiling of Thomas Edison’s incandescent light bulb, which killed the need for petroleum lamps.

But inventions like Henry Ford’s automobile (which utilized gasoline, a heretofore unused byproduct of petroleum refining) and oil-burning furnaces helped oil become the country’s main energy source. Innovations like the interstate highway system only increased oil’s importance.

Furthermore, wars like World War I and II greatly increased the need — and prices — of oil in the United States.

This increasing reliance on oil was made possible by vast reserves in places like Texas, California and Alaska — but proven oil reserves began falling in 1970, and domestic production fell with it. And as domestic production declined, foreign imports of oil rose dramatically.

Source: EIA

See the rest of the story at Business Insider

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Greek leaders just announced that they will push back a meeting to approve austerity cuts until tomorrow.

There’s some confusion about where exactly they stand on those measures right now.

CNBC first reported that coalitions have a draft accord on the reforms, according to a Bloomberg blast. Markets began to move higher around the time that was announced.

Then Bloomberg followed that announcement with a blast citing a government spokeswoman who said that talks have actually been delayed until tomorrow. Reuters then reported that this postponement has happened because politicians have not yet drafted a final agreement. This would suggest that any agreement is still in the works.

CNBC finally conceded that Greek political leaders postponed a meeting on the bailout package until tomorrow.

It remains unclear what provisions politicians have agreed to so far, however we are unlikely to hear more about any deal or agreement until tomorrow.

Surprise, surprise.

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See Also:

• In Case You Forgot, This Greek Deal Is Probably Worthless
• CITI’S BUITER: There’s A 50% Chance Of A Greek Exit From The Eurozone And Here’s How It Would Happen
• Pressures Mount On Greece: Here’s What’s Ahead Tomorrow

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A lot of tech companies are sitting on mountains of cash.

Apple’s is the biggest — more than $100 billion in cash and marketable securities — and this week Fortune’s Apple reporter Adam Lashinsky (who just wrote an insider’s book on the company) reports that Apple is thinking about paying a dividend.

This would be Tim Cook’s doing — Steve Jobs thought returning cash to shareholders was a failure of imagination. Here’s a passage from Lashinsky’s book, Inside Apple: “He loathed stock buybacks, arguing, with good reason, that they are bribes to investors rather than good uses of capital … such topics were considered off the table with Jobs.”

Jobs may have had a point.

In the tech industry, paying a dividend is akin to admitting you’re no longer a high growth company.

That hasn’t always been the case — HP and Intel have both been paying dividends since the early 1990s, and both companies have shown fine growth since then.

But take a look at the stock performance of the last three big tech companies who decided to draw down their cash to pay a dividend. In each case, the stock price was flat or down before the dividend was declared.

Microsoft announced it would pay a dividend in January 2003 (the small blue Ds represent dividend payments). Before, its stock price had fallen significantly from a peak in 2000. The dividend does not seem to have helped:

Oracle followed suit in April 2009. Here, the dividend may actually have boosted the share price a bit.

Now, take a look at Cisco, which announced dividends last March. Once again, the stock price has been flat (it’s too early to tell if the dividend will help raise it):

Now, look at Apple’s stock performance over the last 10 years:

You can use just about any other metric, too — revenues, profits, cash on hand. In each case, Apple is on a steep growth curve that’s amazing for a company its size. These other three companies are much flatter.

So why would Apple pay a dividend?

It’s certainly not to boost its share price.

Instead, it could be seen as a reward for the most loyal Apple shareholders. So far, the only way investors have made anything from Apple stock is by selling it. Returning cash to shareholders is a way of showing them value for sticking with Apple throughout its spectacular run — and giving them a little more incentive to keep holding.

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