Thursday, December 31, 2009

Morning Note...

Futures +15bps on this final day of 2009…  Happy New Year!  As expected, not much corporate news on the tape.  In economic news, Jobless Claims fell to 432k vs. the 460k expectation.  Additionally, Continuing Claims were 4.981M vs. 5.1M expected.  Given seasonality, however, the better than expected jobs data is not gaining much traction in terms of improving market sentiment.  Asia was higher overnight.  Europe is slightly higher, although Germany is closed.  Oil +60bps.  Gold +100bps.  USD -37bps.  Here are some of the pertinent numbers for 2009, blatantly stolen from another note:

US stock futures are slightly positive on the last day of the year and are in line for top indexes to post their largest YOY jump since 2003—the Dow Jones, Nasdaq, and S&P 500 posted a 20.2%, 45.3%, and 24.7% YOY gain, respectively, the biggest YOY increase in the last six years. Moving on to Europe, markets remained roughly flat whereas German and Italian markets remained closed, while many others were set to have a shortened trading session. Still, the pan-European Dow Jones posted the strongest yearly gain since 1999 showing a 27.6% YOY increase. Regarding Asia, China was behind copper’s best rally in at least a decade, while Zhou Xiaochuan, China’s central bank governor, assured he will maintain a moderately loose monetary policy during 2010 in order to strengthen the stabilization and recovery of the economy. In the corporate front, American Express and Microsoft were the Dow’s top performers of the year showing gains of 120% and 59.3%, respectively.

Unfortunately, this morning’s true news is geopolitical in nature, as 8 CIA officers were killed by a suicide bomber within an American base in Southeast Afghanistan.  When you consider the Christmas Amsterdam-to-Detroit plane scare, and yesterday’s Times Square scare, doesn’t it feel like the terrorist threat is mounting somewhat?  Something – sadly – for us all to consider as we move toward 2010.  Whether a terrorist attack (which the 13d report – “What I learned This Week” – has been discussing for some time), Iran/Israel, or something else completely unforeseen, expected the unexpected in the geopolitical arena in 2010.  Other themes?  Sovereign risk has been covered and is well-debated.  Stimulus withdrawal and the subsequent fall-out that results…which could mean a bursting of the Chinese real estate bubble (see below for more on that) or a double-dip recession here in the US.  Or how about a massive upward surge in taxes as our current administration allows the Fannie’s and Freddie’s of the world a virtual blank check?  (In other words, if FNM/FRE forgive foreclosed mortgages, then – once again – the “good guy” who has been struggling to make payments all along gets to carry the social burden – in the form of higher taxes – of his neighbor’s inability to pay.)  Will bonds sell-off and interest rates rise and dampen growth in 2010?  What about the US Dollar?  How about PIMCO’s new normal?  Or the outright bullishness from those who believe the worst is past?  (Given everything ahead, it is very interesting to note that a survey of bullish retail investors, AAIIBULL index, versus bearish retail investors, AAIIBEAR index, is at its most bullish levels since 2005.  Hmmmm…)  As always, the market seems to generate many, many more questions than answers…

Looking back, however, I will leave you with two quotes that served investors well during a 70% rally off the March lows and a 25% S&P gain for 2009:  1) discipline trumps conviction and 2) buy other people’s fear and sell their greed…  Wishing you and your families happiness and health in 2010, and Best of Luck in the New Year! 

Brightpoint News

Brightpoint PreMarket (yest close/premkt/% change/volume):

S&P 500 PreMarket (last/% change prior close/volume): 
EXCEED CO LTD    9.00    +4.65%    5000
ABERCROMBIE & FI    36.2100    +2.40%    1750
HALLIBURTON CO    30.36    +1.3 %    8618
INGERSOLL-RAND    36.58    +1.25%    100
AMEREN CORP    28.75    +1.2 %    600
NVIDIA CORP    18.89    +1.18%    5915
CARNIVAL CORP    32.4700    +1.15%    10000
AUTODESK INC    25.80    +1.1 %    700
NEWMONT MINING    48.09    +1.05%    57659
WEATHERFORD INTL    18.30    +1.05%    300

Today’s Trivia:  The stroke of midnight tonight coincides with what rare - the last was 1990, the next is 2028 - celestial event “colorfully” noted by stargazers the world over?  (p.s. in the interest of no one missing out, here is the answer!)

Yesterday's Answer:  According to InCharge Institute, American credit card debt recently reached an all-time high of $8000 per average household.

Best Quotes:   Any of this sound vaguely familiar...?

“Millions of Chinese are pursuing property with a zeal once typical of house-happy Americans. Some Chinese are plunking down wads of cash for homes. Others are taking out mortgages at record levels. Developers are snapping up land for luxury high- rises and villas, and the banks are eagerly funding them. Some local officials are even building towns from scratch in the desert, certain that demand won’t flag. And if families can swing it, they buy two apartments: one to live in, one to flip when prices jump further.
     And jump they have. In Shanghai, prices for high-end real estate were up 54 percent through September, to $500 per square foot. In November alone, housing prices in 70 major cities rose 5.7 percent, while housing starts nationwide rose a staggering 194 percent. The real estate rush is fueling fears of a bubble that could burst later in 2010, devastating homeowners, banks, developers, stock markets, and local governments.
    Although parallels with other bubble markets, the China bubble is not quite so easy to understand. In some places, demand for upper middle class housing is so hot it can’t be satisfied. In others, speculators keep driving up prices for land, luxury apartments, and villas even though local rents are actually dropping because tenants are scarce. What’s clear is that the bubble is inflating at the rich end, while little low- cost housing gets built for middle and low-income Chinese.
     In Beijing’s Chaoyang district, which represents a third of all residential property deals in the capital, homes now sell for an average of almost $300 per square foot. That means a typical 1,000-square-foot apartment costs about 80 times the average annual income of the city’s residents. Koyo Ozeki, an analyst at U.S. investment manager Pimco, estimates that only 10 percent of residential sales in China are for the mass market. Developers find the margins in high-end housing much fatter than returns from building ordinary homes.
     How did this bubble get going? Low interest rates, official encouragement of bank lending, and then Beijing’s half-trillion- dollar stimulus plan all made funds readily available. City and provincial governments have been gladly cooperating with developers: Economists estimate that half of all local government revenue comes from selling state-owned land.
     Chinese consumers, fearing inflation will return and outstrip the tiny interest they earn on their savings, have pursued property ever more aggressively. Companies in the chemical, steel, textile, and shoe industries have started up property divisions too: The chance of a quick return is much higher than in their primary business.”  --BBERG news

Wednesday, December 30, 2009

Morning Note (Tyler)...

Futures -30bps on the back of weaker overseas markets.  Commodities companies are weaker this morning after a couple strong sessions.   Marc Faber, the editor of the Boom, Gloom & Doom report, is on CNBC this morning saying capital preservation will be more important in 2010 and he expects more volatility in equity markets because of that.  He reiterated that there will probably be a stronger USD paired with stronger US equities in the first six months of 2010 because of the flight of capital from emerging markets who may be in worse shape that previously thought.  Expect another slow day; even the ‘talking heads’ on television are running out of things to say today.  Tomorrow could be interesting as it is the last trading day of the year for 2009.    

Bank of America Merrill Lynch ups CNW, Kaufman Bros ups MRVL & NVDA.  Chicago PMI out at 9:45 am this morning.  FDIC wants to share in upside from selling off bank assets according to the WSJ. $32B of 7 year Treasuries auctioned off today.

Asia down overnight.  Europe -50bps on average.  USD +17bps.  Gold -36 bps.  Oil -.14bps. 

Brightpoint News:  ‘Heard on the Street’ says MSFT’s Windows Mobile has seen its global smartphone market share decline from 11.1% earlier this year to 7.9%,

Brightpoint PreMarket (yest close/premkt/% change/volume):
S          3.81      3.7300  51792   -2.10%
MSFT    31.39    31.35    21248   -.13%
MO       19.85    19.93    2450     +.4 %
BTM      29.30    29.58    2300     +.96%
WEN     4.75      4.72      1000     -.63%

S&P 500 PreMarket (last/% change prior close/volume): 
H&R BLOCK INC              22.5000 21.54    -4.27%
TITANIUM METALS         12.3800 11.95    -3.47%
METROPCS COMMUNI     7.7100  7.50      -2.72%
SPRINT NEXTEL CO        3.8100  3.73      -2.1 %
L-3 COMM HLDGS           87.1800 89.00    +2.09%
AETNA INC                    32.8600 32.22    -1.95%
UNITEDHEALTH GRP       30.8500 30.26    -1.91%
REPUBLIC SVCS             28.6500 29.00    +1.9 %
NVIDIA CORP                 18.0200 18.32    +1.66%
AK STEEL HLDG              21.8600 21.50    -1.65%
WELLPOINT INC             58.5700 57.61    -1.64%
US STEEL CORP             54.7100 53.86    -1.55%
DEAN FOODS CO            18.2200 17.95    -1.48%
UNITED PARCEL-B          58.5500 57.7000 -1.45%
MASSEY ENERGY CO       43.0400 42.43    -1.42%
DOW CHEMICAL             28.6400 28.24    -1.4 %
JOHNSON CONTROLS     27.8200 28.17    +1.26%

Today’s Trivia:  According to InCharge Institute, the country's biggest non-profit credit card counseling service, American credit card debt recently reached an all-time high of how much per average household: $2,000, $5,000, or $8,000?

Yesterday's Answer:  CH stands for Confoederatio Helvetica, the Latin version of "Swiss Confederation" derived from the Helvetians, the name of the people inhabiting the land before it became Switzerland (hence the CH-sticker on Swiss cars and Switzerland's top level internet domain .ch)

Best Quotes:   “There are a bunch of sovereign risk stories this morning – the WSJ has an article in its European edition discussing how Eurozone states are “grappling w/sovereign debt risks” while the London Telegraph notes that “Britain’s debt is now a riskier proposition than Italy’s paper”.  The yen dropped to a two-month low versus the dollar as Reuters reported that Standard & Poor’s said Japan’s AA credit rating could be threatened if policies fail to stabilize and gradually reduce the nation’s huge debt burden.  India’s stocks fell, snapping a four-day rally, after Finance Minister Pranab Mukherjee said the nation’s budget deficit, forecast at 6.8 percent of gross domestic product in the year to March 31, can’t be sustained for a long time.” - JPM

Tuesday, December 29, 2009

Morning Note...

Futures +30bps on another quiet holiday morning.  Commodity and mining stocks are higher as a positive “economic growth outlook” is cited.  This morning’s Bloomberg lead story mentions both Barton Biggs (Traxis Partners) and Marc Faber (Gloom Boom & Doom Report) as bullish in 2010, and highlights that they both accurately called the March 2009 low and subsequent rally.  Legg Mason’s Bill Miller is also noted as “being back” after posting a 43% ytd gain (see below for more on this story).  Note the US Treasury plans to sell a record-tying $118B of bonds this week - $42B in 5yr notes and $32B in 7yr notes will be auctioned today and tomorrow, respectively.  Yesterday’s 2yr note auction was less than impressive, drawing the highest yields since September.  Retailers (including JCP and HD) are bid higher this morning after a trade group (Intl Council of Shopping Centers) reported retail sales increased 2.3% during Christmas week.  CaseSchiller Home Price Index year-over-year was in-line, at -7.28%.  Consumer Confidence due at 10am. 

On a quiet morning, here’s a solid quote from ResearchEdge, addressing value-investor Bill Miller’s “return” to Wall Street:

Whether it was my having to endure Larry Kudlow's market call last night on CNBC, or scanning this Bloomberg article on my desk about Legg Mason's Bill Miller making a "comeback" this morning, it's all one and the same. These guys apparently don't have mirrors or a YouTube. They both missed calling the crash. They are both perpetually bullish. They, sadly, are both part of the incompetent old boy club that aids and abets an American culture of recklessly buying high.

I could not make this up if I tried, but this is a direct quote from Bill Miller after the SP500 closed at a year-to-date high of 1127 last night: "There is a lot of upside left." After the most expedited 9 month rally in modern stock market history (+66.7% from the March 9th lows), that's what you get. That advice, and Kudlow calling for a "mini-boom" last night are classic contrarian indicators.

Legg Mason's marketing machine will be the last to remind you, so I'll be the first this morning. Miller lost -55% of his clients' money in 2008, and has been beat by 99% of his peers on a 5 year basis. To his defense, he also remarked that "we positioned the fund for a recovery." Thank God for that proactive plan, Bill.

Whether it's Kudlow, or Miller, or Larry Summers (whose interest rate swap positions that he signed off on in 2006 almost blew up the Harvard Endowment), it's all one and the same folks. As your favorite market savants roll out their "2010 predictions", here's mine: these guys will miss calling out most of the 2010 risk, and swing with the monkeys from the market highs. They do not have a repeatable risk management process to do otherwise. They never have.

AMZN estimates raised at PIPR.  FNM is higher after announcing its mortgage portfolio shrunk.  BHP, RTP higher on sector strength.  NY Post article cautious about bank risks.  Cautious WSJ “Heard on the Street” column about bank auditor consistency and the rising gap between original loan values and the subsequent “fair value.”  CKSW raises guidance.  DBAB ups CTCM.  KBWI ups JEF.  IPSU settles $345M insurance claim.  JPHQ ups CZZ. 

Asia higher overnight.  Europe +50bps on average.  USD -37bps.  Gold flat.  Oil +75bps. 

Brightpoint News

Brightpoint PreMarket (yest close/premkt/% change/volume):

S&P 500 PreMarket (last/% change prior close/volume): 
FANNIE MAE                  1.35      +6.3 %  2989532
FREDDIE MAC                1.68      +5.0 %  1491664
SOUTHWEST AIR           11.72    +2.36% 500
WILLIAMS COS INC        21.75    +2.35% 214
AMERICAN INTERNA       32.13    +2.0 %  47814

Today’s Trivia:  Why is “CH” the official abbreviation for Switzerland as seen on license plates, domain names, etc?  What does it stand for?

Yesterday's Answer:  MexicoGuadalajara, ChinaBeijing, France – Marseille. 

Best Quotes:   “The Terror Attempt And The Shifting Geo-Political Climate – Several things pop up as we review the foiled Detroit plane bombing. The bomber had received both equipment and training in Yemen. The Yemeni al Qaeda took responsibility for fostering the event. Add in that Saudi Arabia has felt threatened by Yemeni rebels. Will there be pressure to strike militarily against Yemen? With troops in Iraq and Afghanistan already strained, how could a third front be managed? We may see an increase in airstrikes but ground forces are unlikely, unless they come from Saudi Arabia. George Friedman’s team over at Stratfor thinks the Christmas attempt was a trial run. Had the improvised bomb been successful, the Yemeni team could just duplicate it and send scores more bombers into the field. Further, if it had exploded and destroyed the plane, we would not know what to watch out for. When Richard Reid’s shoe bomb failed, we were alerted to shoes as an explosive conveyance. Now its personal clothing. So the bomb makers will go back to the drawing boards. They will look for an efficient device and some new place to contain it. Keep your eye on the headlines.”  --Art Cashin, UBS

“THE US$ IS MIXED IN VERY LIGHT TRADING, rising marginally in value relative to the Japanese Yen but falling relative to the Canadian dollar and falling reasonably strongly relative to the Brazilian Real. However, as one would imagine, the trading activities thus far are uncommonly light and the volumes being transacted are uncommonly small. It will be worse tomorrow and even worse Thursday on New Year’s Eve.”  --Dennis Gartman

Monday, December 28, 2009

Morning Note (Tyler)...

Futures +15 bps this morning on the back of stronger overseas markets.  European stocks rose to a 14-month high and Asian shares rose on news that China said its economy grew faster than estimated this year.  Morgan Stanley is out this morning saying that shorting US treasuries will be a great play in 2010.  They forecast the yield on 10-yr notes will climb 40% to 5.5% by year-end 2010.  Barclays’s analyst Dean Maki is also out this morning saying the US will turn in its best performance this upcoming year since 2004.  Don’t be surprised to see some year-end window dressing or some funds trying to get ahead of strong 2010 sentiment this week.  The only major event this week will be the Senate final Healthcare vote on Thursday morning around 7 am.  Dallas Fed Manufacturing comes out at 10 am as well.  The treasury will auction $118 Billion of Treasuries this week (quote section).

It seems most of Wall Street took the day off this morning as the theme of considerably low trading volumes pervades.  I’ve heard more news this morning on Avatar and Sherlock Holmes, than any pertinent financial news (although, I have to be honest- I saw Avatar on I-max 3D and it’s shockingly awesome technology).  Only one upgrade across the street this morning, as Capital One upgrades SLB.  WSJ’s Natural gas prices aren’t likely to rise significantly anytime soon, as evidenced by XTO’s willingness to sell itself to XOM for just a modest premium. The article discusses how low natural gas prices are a positive for the chemical industry, which may be able to regain some of its lost competitive edge in the global market. Lobbying by Wall Street has resulted in watered-down financial regulation of derivatives in the House of Representatives.

Asia mixed overnight.  Europe +75bps on average.  USD -17bps.  Oil +45bps.  Gold +70bps.

Brightpoint News:

Brightpoint PreMarket (yest close/premkt/% change/volume):

S&P 500 PreMarket (last/% change prior close/volume): 
MBIA INC                       4.3300  4.59      +6.0 %
GANNETT CO                 15.6300 16.15    +3.33%
AMERICAN INTERNA       30.1200 30.88    +2.52%
H&R BLOCK INC              21.5900 22.00    +1.9 %
SCANA CORP                 38.4200 39.10    +1.77%
FREEPORT-MCMORAN    81.8100 83.07    +1.54%
COGNIZANT TECH-A       46.2300 46.94    +1.54%
WINDSTREAM CORP       11.4800 11.65    +1.48%
L-3 COMM HLDGS           85.6300 86.80    +1.37%
MEDTRONIC INC             44.1200 44.72    +1.36%
SOUTHWESTRN ENGY     50.6200 51.30    +1.34%
APPLE                           209.040 211.35  +1.11%
DYNEGY INC-A                1.8400  1.82      -1.09%
FLUOR CORP                  45.4000 45.8800 +1.06%
JDS UNIPHASE               8.5100  8.60      +1.06%
MEMC ELEC MATER        13.5700 13.71    +1.03%

Today’s Trivia:  What is the second largest city in each of these countries: a. Mexico b. China c. France?

Yesterday's Answer:  The official name of “The Night before Christmas” is "A Visit From St. Nicholas"

Best Quotes:   The administration sure is learning how to take advantage of the Ritalin addicted, holiday sales overbonanza'ed (1% increase over last year's gruesome December performance surely must be terrific news) public. Not only did Obama hope the whole Fannie/Freddie situation would slip by unnoticed even as he paid the failed public servants over at the nationalized-in-perpetuity GSEs an insane amount of money, but this week the Cottonelle experts over at 1500 Pennsylvania Avenue tried to sneak a $118 billion in coupons and another $57 billion in bills, a total of $175 billion pieces worth of one-ply bidet replacements, for the last weekly auctions of the "noughties"” –Zero Hedge Blog

Thursday, December 24, 2009

Morning Note...

Hmmm… I sense a theme.  Futures are +25bps this morning and the Bloomberg headline exclaims “Stocks Rise Around World on Economic Recovery.”  As I mentioned here yesterday, this is generally code for “all is quiet, there is not much news but it’s as good a headline as any…”  There is some mixed economic data, however, as Durable Goods Orders were slightly worse than expected at +0.2% vs. 0.5%/e.  Initial Jobless Claims were better, at 452k vs. 470k expected; and Continuing Claims were 5.076M vs. 5170M expected.  Obama spoke this morning about the Senate’s passage of the healthcare bill.  The war of words to capture the hearts and minds of Americans is on, however, as Democrats defend the Bill as “an honest effort to reform healthcare” and Republicans are outraged over the “$2.5 trillion cost and subsequent tax raise needed to fund it.”  As expected, voting was strictly across party lines – no one crossed over.  Across the pond, Amherst grad and Greek PM George Papandreou won passage of a 2010 budget aimed at waylaying default fears.  A more detailed plan addressing additional deficit-reduction measures is expected before the EU in January.  Market closes at 1pm today. 

Note that today marks the beginning of the “official” Santa Claus rally period – the last five trading days of the year when a positive bias generally prevails.  Great point from another impressive Amherst alum this morning – CNBC’s Brian Shactman notes that December 24th trading is up 70% of the time…

Looking ahead to 2010, keep an eye on geopolitics…many market pundits focus on Iran & Israel, but here’s a cut and paste from this morning’s news wires.  And remember, Pakistan is a nuclear power, thus instability in that region is slightly more concerning than elsewhere: 

PESHAWAR, Pakistan, Dec. 24, 2009 -- A suicide bomber struck a neighborhood full of government buildings in Pakistan's main northwest city Thursday, killing four people and underscoring that militant groups retain strength despite being under siege by the army. The attack was the second in three days in Peshawar, and the latest in wave of violence that has killed more than 500 people in Pakistan since October. Insurgents are suspected of avenging a U.S.-supported Pakistani army offensive against the Taliban in a northwest tribal region along the Afghan border. The attackers have struck a range of targets, from markets popular with women to security checkpoints. Thursday's blast rocked a busy sector of Peshawar where buildings housing the state-run airline, a public school and a government insurance company were located.

Something else to be mindful of in 2010:  Regulation… According to the NY Times, “the creation and sale of synthetic collateralized debt obligations by firms such as GS, DB, and MS are the subject of scrutiny by Congress, the SEC, and FINRA. These regulatory bodies appear to be investigating whether securities laws or rules of fair dealing were violated by those companies creating and selling the product.” 

Finally, expect the theme of sovereign default to make headlines in 2010, and don’t forget default risk from our own states and municipalities.  (Side note:  Interesting NPR piece this morning on light retail sales actually eating into state revenues, as they collect roughly 10% less sales tax than prior holiday seasons.)  As you read the following, recall that California is the world’s 8th largest economy if considered independently.  Thus if Greece was able to cause such ripples in the world economy (ranked 27th), imagine the effect a major US state default might have, especially when it represents ~13% of US GDP: 

California Governor Arnold Schwarzenegger wants President Barack Obama to help ease large- scale cuts to the most populous U.S. state’s already diminished social programs amid a $21 billion anticipated deficit.  Schwarzenegger, a Republican, plans to ask for relief totaling as much as $8 billion, according to a California official who asked not to be identified because details haven’t been resolved. Instead of seeking one-time stimulus money or a bailout, the state wants the U.S. to reduce mandates and waive rules stipulating minimum expenditures on programs such as indigent health care, the official said.
California has been among the states most affected by the economic recession. It has the lowest credit rating and recorded the nation’s second-highest rate of home foreclosures, trailing only Nevada. Unemployment peaked at 12.5 percent in October amid the loss of 687,700 jobs from the year before, when the jobless figure was 8 percent. Wealth declined as the stock market lost 40 percent of its value in 2008. “The problem is that there are no easy solutions left,” said Jean Ross, executive director of the California Budget Project, a Sacramento-based research group concentrating on issues facing the poor. “Where do you go to cut that doesn’t permanently compromise the level of public services that this state needs to remain economically competitive and to have some semblances of a safety net left for vulnerable populations.” Schwarzenegger and lawmakers worked to close a record $60 billion gap from February through July with $32 billion in spending cuts, $12.5 billion of temporary tax increases, $8 billion of federal stimulus money and more than $6 billion of other one-time fixes.
California’s deficits show how local governments are being forced to chose between raising taxes or cutting more funding for schools, health care and other programs, even as the economy is emerging from the recession that began in December 2007. The nascent recovery has yet to produce any job gains, a drag on states that rely on income and retail sales taxes.

Crane Co. to acquire MRM for $16/share.  SLGN to replace MVL in S&P MidCap 400 Dec 31st

Asia higher overnight, led by +2.6% in Shanghai.  Europe slightly higher as Germany is closed.  USD -25bps.  Oil flat.  Gold +55bps. 

Brightpoint News

Brightpoint PreMarket (yest close/premkt/% change/volume):

S&P 500 PreMarket (last/% change prior close/volume): 
TENET HEALTHCARE       5.74      +3.99%             107383
FANNIE MAE                  1.08      +2.86%             241310
JABIL CIRCUIT                17.49    +2.52%             3400
MICROCHIP TECH           28.38    -2.41%              1000
CITRIX SYSTEMS           42.83    +1.81%             1000
MEMC ELEC MATER        13.48    +1.74%             100
NABORS INDS LTD          23.25    +1.62%             100
NUCOR CORP                 46.80    +1.52%             7387

Today’s Trivia:  What is the real name of the Clement Clarke Moore poem that begins “Twas the Night Before Christmas…?”

Yesterday's Answer:  The Grinch tried to steal Christmas from the Whos of Whoville. 

Best Quotes:  (…best when read aloud…)

‘Twas the night before Christmas, when all through the firm
Not a creature was stirring, not this holiday term.
The stockings were hung in the kitchen high up,
To be used as replacements when we’re down to one cup.

The analysts were nestled all snug in their beds,
While visions of free-cash-flow danced in their heads.
I was dressed in some jeans, and a sharp sweater vest,
(As I’ve said all along, “Fall attire is my best.”)

When across Brickell Bay there arose such a clatter,
I sprang up from trading to see what was the matter.
Away to the window I flew like a flash,
And peered down below toward a rooftop pool splash.

The sunlight reflected off a neighboring condo,
Highlighting the bold scene unfolding below.
When, what to my wondering eyes should appear,
But our team of stock-pickers, and a carton of beer.

With a strange-sounding Brit who was leading the spree,
I knew in a moment it was A-V-D-B.
More rapid than eagles his drink-pours they came,
And he whistled, and shouted, and called people by name!

"Now Martin! now, Weissman! now, Wesley and Todd!
On, Marcelo! On, Nitin! on, the whole Brightpoint squad!
Cast off those knickers and drink like a man!
I know you can’t understand me…it’s all part of the plan!"

As vultures amidst Miami’s buildings will fly,
When they meet with an updraft, mount to the sky.
So across to the pool bar the analysts flew in a throng,
Clearly drawn by the beer…and by Adrian’s thong.

And then, in a twinkling, I heard out in our hall
The hemming and hawing of an analyst’s call.
As I tilted my head, and was turning around,
Into the office they all dropped in with a bound!

Adrian was first, tossing cockney and brew,
Speaking in tongues about implied vols and skew.
Marcelo was next, Shrek toothbrush in his hand,
Cursing in Portuguese about the Brazilian tax plan.

Martin’s eyes twinkled! his dimples how merry!
He sent off an email, typed on his Blackberry.
He spoke of Lockheed and their program to build jets,
(But please no more stories about the damn New York Mets!)

Then there was Weissman, gritting his teeth,
And the smoke it encircled his head like a wreath.
It wasn’t just the Mets that were driving him crazy,
It was Abercrombie & Fitch – retail sales were quite hazy!

Tyler was there, but he was just a bit late,
(He had some issues with vodka on the night before’s date!)
Todd’s net exposures fed his latest report,
Wesley was last…straight in from the airport.

They all spoke not a word, got straight down to their chores,
(Except of course Andrew, who recapped Giants game scores.)
Shrugging off the beer buzz and the pool party’s fun,
They took seats in the fishbowl…there was work to be done!

I got up from my desk, joined the team at the table,
And marveled as I watched our analysis stable.
Buy-Sell-or-Hold, they’ll figure it out,

They’re ahead of the curve, there is little to doubt.
Two-thousand-and-ten will be an exceptional year,
Great things are afoot – there’s good reason to cheer.

I’ll leave you with this, from the warm Florida clime:
"Happy Holidays to all…goodbye to Two-thousand-and-nine!”
And I hope I successfully seared in your brain,
The good tidings ahead:  less loss and more gain!
If that’s not enough, into your mind I have fried,
The words “Adrian” and “thong” nicely set side-by-side…

Wednesday, December 23, 2009

Morning Note...

It’s “déjà vu all over again” as futures are +30bps this morning and the Bloomberg headlines are exactly the same as the past two days:  “Stocks climb in Europe, Asia on Signs Economy Recovering.”  Take it from guys like me who scour Bloomberg news each and every morning – this is what they say when they have nothing else to say…  And for what it’s worth, the always-popular “anecdotal indicators” point toward a very slow day:  traffic on the roads was non-existent (although it is Miami and I’m not sure what the relevance of that is, but there used to be a direct correlation between “subway crowdedness” and “equity volumes” in New York City), and 75% of this morning’s research e-mails are coming in from names I don’t recognize, i.e. back-ups to our normal coverage… There is some economic data this morning:  Personal Income for November was +0.4% vs. +0.5% expected; Personal Spending for November was +0.5% vs. +0.7% expected; the Personal Consumption Expenditure Core Price Index (PCE) was in-line with expectations, +1.4% year-over-year and flat month-over-month.  UofMichigan Consumer Confidence readings are due at 10am today, along with New Home Sales.  In corporate news, technology companies MU (+3% premkt) and RHAT (+7% premkt) beat earnings estimates, while uniform-maker CTAS fell short (-9% premkt).  In other news, an AMR plane from Miami bound for Kingston, Jamaica overshot that runway in a rainstorm and injured roughly 40 people. 

Interesting story this morning about shrinking consumer credit threatening almost $9B in holiday sales stemming from new credit-card legislation: 

Target Corp. and U.S. retailers may lose almost $9 billion in holiday sales as banks rein in lending to cash-strapped consumers before a new credit-card law takes effect…Target Chief Financial Officer Douglas Scovanner says the credit-card legislation is exacerbating a spending slump just as consumers begin to consider more discretionary purchases they would usually buy with credit. Items such as clothing, jewelry and home goods suffered steeper declines during the recession and are among the most profitable sales for retailers. “It will mute the impact of the rebound that would have otherwise occurred,” Scovanner said. “Diminished availability of credit equals diminished spending.”  Reduced lending may shave at least half a percentage point off sales at stores open at least a year once more of the Credit Card Accountability, Responsibility and Disclosure Act goes into effect in February…The act bans so-called universal default, the practice of raising interest rates based on a missed payment with another lender. The rules are already causing lenders to “tighten up,” said Brad Jolson, senior director for risk management solutions at Fair Isaac Corp. FICO, as the company is known, is the Minneapolis-based provider of the credit-scoring formula most widely used by lenders. Available credit to U.S. consumers through cards fell to $3.6 trillion this year from a peak of $4.7 trillion last year, according to a study released in July by TowerGroup, a Needham, Massachusetts-based financial research and advising firm. “We’re scared to death of what this law is going to do,” said Edward Record, CFO at Stage Stores Inc., the Houston-based operator of 759 stores including the Bealls and Peebles chains. “It’s definitely going to hurt consumer spending.”

BERN initiates DG at Outperform.  Collins Stewart positive comments on T.  SUSQ initiates NFLX with positive rating and $70 tgt.  BofAMLCO ups WPI.  BCAP ups SLB.  KBWI ups PNFP.  BofAMLCO cuts IPXL.  Soleil cuts XOM.  WSJ positive article on retailer JWN.  NY Post reports PEP CEO may lose her job, given -7% return since her promotion to CEO vs. +28% for KO in that time.  FPL lowered guidance.  TIBX missed by 1c.  WELA ups GCI, NYT.  GLW raised at THNK.  TWPT ups NEWP.  SNDK upped at THNK.  RIMM suffered a system-wide Blackberry outage last night. 

Asia up overnight.  Europe up roughly 50bps.  USD -23bps.  Oil +50bps.  Gold +5bps. 

Brightpoint News

Brightpoint PreMarket (yest close/premkt/% change/volume):

S&P 500 PreMarket (last/% change prior close/volume): 
CINTAS CORP                26.93    -9.27%  7735
BALL CORP                    54.14    +4.54% 100
EASTMAN KODAK           4.48      +3.7 %  8200
MICRON TECH                9.74      +3.51% 326811
NEW YORK TIMES-A       11.30    +2.45% 1600
YAHOO! INC                   16.35    +2.32% 35522
KB HOME                       14.10    +2.17% 6229
TENET HEALTHCARE       5.43      +2.07% 57365

Today’s Trivia:  Who tried to steal Christmas from the "Whos of Whoville" in the 1966 cartoon based on the Dr. Seuss Story?

Yesterday's Answer:  According to my extensive (ha!) research on Wikipedia, only Ireland, Portugal, San Marino, Vatican City, and Monaco border only one other country.  And yes, the Chunnel connection between UK and France constitutes a border (meaning the UK borders France and Ireland), as does a Danish bridge to Sweden (meaning Denmark borders Germany and Sweden). 

Best Quotes:  “Highlights from Weeden & Co’s program desk, which sees a lot of hedge fund flow:
**We have been net sellers 4 out of the last 5 days. Active accounts have been net buyers while quant's have been sellers. Clients have been moving down the market cap curve. **Consumer Discretionary: We were large net sellers yesterday after 3 days of being dollar neutral or net buyers. Active accounts rotated out of durables and retailers. **Health Care: This was our largest sell skew yesterday and we have been net sellers the last 5 sessions. Quant's have been rotating out of the space. ** Financials: We finished the day as net buyers after 3 consecutive days of being net sellers. Active accounts were buying bank and reit issues.”

“‘New Normal’ Tops 2009 List of Overused Phrases: 2009-12-23 02:00:00.2 GMT
Commentary by Caroline Baum
     Dec. 23 (Bloomberg) -- For journalists, pundits and comedians, the end of the year provides an opportunity to look back, fantasize forward and let the creative juices flow.
     We churn out 10 Best and 10 Worst lists. We reprise the year’s most memorable moments and worst embarrassments. We reflect on famous people and infamous scallywags, current events and eventful currents, the highest highs and lowest lows.
     When I started to think about 2009, it wasn’t events that came to mind but words and phrases: trite, overused words and phrases, such as “new normal,” “unprecedented,” and “exit strategy.”
     One picture may be worth a thousand words, but one word can unleash a year’s worth of memories.

     1. “New normal”
     In May 2009, the folks at PIMCO emerged from their secular outlook forum to codify their forecast for slower growth, increased regulation and a decreased role for the U.S. in the global economy as the “new normal.”
     They weren’t the first. Back in 2001, Warren Buffett and John Bogle warned of a new normal of single-digit stock market returns. A book by that name was published in 2004, spawning a companion Web site (
     As it turns out, the phrase has applications in almost every field: technology (its transformative power); science (American women are getting fatter); medicine (early puberty for girls); management (constant change is the new normal, according to the Harvard Business Review); and higher education (less financial support from state budgets and endowments).
     As a way of describing the U.S. economy, the new normal has merit. ObamaNation is looking at bigger government, more regulation and an aging population commanding more resources.
     Unfortunately, overuse has rendered new normal meaningless.

     2. “Unprecedented”
     If the events of 2008 and policy response were unprecedented, the post-mortems in 2009 drove the point home -- ad nauseam.
     From the collapse in home prices to the government’s co- option of mortgage finance; from the freezing up of financial markets to the failure of big and small firms; from the efforts by the Treasury and Federal Reserve to keep the ship of state afloat to the government’s ownership stake in the private sector: Everything, it seems, was unprecedented.
     The inauguration of the first black president was unprecedented. Barack Obama, hailed as an agent of change, pledged to change the way Washington operates.
     Eleven months into Obama’s presidency, Washington is probably the only entity to eschew the new normal (see No. 1 above) for more of the same.

     3. “Exit Strategy”
     Everyone needs an exit strategy. Just ask Jenny Sanford, wife of the philandering South Carolina governor, and Mrs. Tiger Woods.
     The Fed needs an exit strategy following a period of unprecedented (see No. 2 above) accommodation. Policy makers have enunciated one without a timetable for implementation.
     The central bank plans to whittle down its balance sheet by natural attrition, terminating emergency lending facilities and selling assets or draining reserves on a temporary basis. It can raise the interest rate it pays on reserves to prevent excess credit expansion, an idea that may work better in theory than in practice.
     Unlike the Fed, the U.S. military has a date for leaving Afghanistan and no real exit strategy. President Barack Obama said the U.S. will start the transfer of authority to the Afghans in July 2011. His National Security Adviser, General James Jones, admitted the U.S. will be in the region “for a long time.”
     Or, in Fed parlance, “an extended period.”

     4. “Green Shoots”
     “I do see green shoots,” Fed Chairman Ben Bernanke told CBS’s “60 Minutes” last March, a forecast worthy of Chauncey Gardiner, the child-like sage in Jerzy Kosinski’s “Being There.” (“There will be growth in the spring,” Chance said.)
     Pretty soon everyone was going green. The media sent out reconnaissance teams. Economists incorporated green shoots into their forecasts. It was a veritable garden of foliage sightings.
     The shoots matured and produced blooms in the third quarter. The U.S. economy expanded at a 2.2 percent annualized rate following four consecutive quarterly declines.
     All this flora talk was starting to get to a friend of mine. “If the leaves would just stop falling, I could see the green shoots,” he said.

     5. “Uncertainty”
     Uncertainty gained a new cachet in 2009 and in certain circles, especially those responsible for setting policy. The frequency with which the Fed and European Central Bank use uncertainty to qualify the forecast leads one to believe uncertainty is unique to bad times.
     It isn’t. A little more uncertainty about the degree to which the subprime crisis was “contained” and a little less “irrational exuberance” over condo-flipping, and we might not be in the shape we’re in.

     6. “Historic Opportunity
     Historic opportunities were a dime a dozen this year. Obama seized some of them (embracing Islam with a speech in Cairo), squandered others (refusing to meet with the Dalai Lama before his visit to Beijing) and had to settle for a photo-op in still others (the Copenhagen climate summit).
     The biggest historic opportunity still lies ahead: health- care reform. Obama has been exhorting Senate Democrats to “seize this historic opportunity” (and cement his legacy) by enacting sweeping legislation that expands health-care coverage, creates a new entitlement and does little to address misplaced incentives (third-party payers) or control costs.
     The Senate is expected to pass its health-care bill as soon as tomorrow on a 60-40 party line vote. The House and Senate must then reconcile their different versions.
     The more the American people know, the less they like the idea. This may be one historic opportunity Obama will wish he missed.

     (Caroline Baum, author of “Just What I Said,” is a Bloomberg News columnist. The opinions expressed are her own.)”