Egyptian Spies Hang Bad Guys

Charts: The major indexes smashed up through resistance levels in big volume, undoing recent technical damage. The broad index finished at 1207, up 1.3%. Leadership has flipped around and is now very good. Next resistance is at 1220.

Fundamentals: The EU and IMF have quit pussyfooting around and are taking a hammer to the Greek debt problem. Yields on Greek, Spanish, and Portuguese debt are dropping.
Cowardly Republicans rolled over on the financial reform filibuster. The bill is now slated for debate. But there is no bill. It is 100% in flux. The GOP is promising the final bill will not hurt car dealers and the really nasty parts will be gutted.

Geopolitics: Egypt’s intelligence agency has caught 26 Hezbollah spies. Four of these bad guys are already being fitted with hangman nooses. It is a virtual certainty that Egyptian intelligence is receiving massive help from the CIA. Other allied Muslim intelligence agencies are being similarly helped, probably with training, high tech devices, and information sharing. So while there is no “central intelligence agency” (note the small caps) linking the 17 American intelligence agencies together, there is such an agency linking and coordinating Muslim intelligence agencies. Ironically, the CIA is well-named after all.
The Pentagon sent a 150-page report on the Afghan war to Congress. Brutally honest, the report shows the Pentagon’s failures and successes and can be summed up this way: the Afghan war is being won, but at a much slower pace than Pres. Obama has promised the American public. The Pentagon calls the global conflict the Long War for a reason. Defense stocks jumped today. The more levered to the LW, the more they jumped; for instance HRS was up 9%, ITT was up 3%, and RTN was up 2%. HRS makes encrypted tactical radios for infantrymen, ITT = night vision goggles, RTN = tracking systems for drones.

Specific Stocks: Growth at a discount stocks trade at a lower multiple than their peers. Dow Chemical (DOW) and DuPont (DD) both reported blowout numbers. DD reported better growth, yet it trades at a much lower multiple than DOW. MMM is the world’s leading diversified manufacturer. Its PE ratio is two percentage points lower than the industry average. The reason: MMM just acquired a big Asian competitor and investors reflexively hate acquisitions. As far as DD vs. DOW, the latter is always making sexy partnership deals in Saudi Arabia, but its blowout numbers came from its boring Basic Plastics division and other bread and butter stuff. In fact, DOW wants to sell its bread and butter stuff to finance the sexy stuff. In all this I am treating growth stocks like value. What about actual value? Goldman Sachs (GS) is trading at a gigantic discount to its peers. If it survives the SEC attack it is a screaming buy.