Thursday, December 10, 2009

Morning Note...

Futures extend yesterday’s late-afternoon rally and stand at +60bps this morning on European strength (+1% on average) and a relatively flat USD (-10bps).  The Bank of England left rates unchanged at 0.5% (as expected) and there are plenty of headlines concerning Greece, where ten-year bonds reversed course and eased fears of a meltdown and subsequent domino effect.  Two days ago, Greece’s new Prime Minister George Papandreou (Amherst College ’75) claimed there was “zero risk of default.”  Yesterday, investor George Soros made similar comments, and German Chancellor Angela Merkel this morning said the EU has a “common responsibility” to defend stability.  Greek bank stocks are also rallying.  In economic news, October’s Trade Balance was better-than-expected, at -$32.9B vs. -$36.8B/e.  However, Initial Jobless Claims for the week ending December 5th were worse-than-expected, at 474k vs. 455k/e.  On the positive side, Continuing Claims for the week ending November 28th were 5.157M vs.  5.450M expected.  Incidentally, CPI, PPI, and Retail Sales data is due out of China tonight.  In Australia, job gains were six times better-than-expected (+31,200), and interest rate hikes are expected.  Note that we’ll see results of a $13B auction of 30-yr Treasuries at 1pm.  CIT begins trading again after re-emerging from bankruptcy.  GE won a $1.4B contract to supply wind turbines.  C would like to repay $20B in TARP funds and is in advanced talks to raise $15B in an equity offering in order to make the payment.  COST earnings beat by 1c. 

Interesting times in the political arena… Obama accepts the Nobel Peace Prize in Oslo this morning, nine days after authorizing more troops for Afghanistan.  Hmm.  Additionally, the House passed a College Football Bill aimed at establishing a play-off.  I love football as much as the next guy, but really…?  There aren’t more important things going on right now?  When basic entertainment for the masses (like sports) is such a priority, the parallels to Ancient Rome (do yourself a favor and google “bread and circuses”) truly hit home… Note that executives from 12 banks (including C, GS, JPM, WFC, COF, BAC, AXP) will participate in a Dec 14th White House meeting with President Obama to discuss ways to boost-small business lending and the potential overhaul of industry regulations.  Of course, if small business lending does pick up substantially and banks stop sitting on their hordes of cash, the “velocity of money” could increase and might add to inflationary pressures.  As always, it seems we are walking a fine line here…  In other words, “be careful what you wish for.”

GSCO positive EMN.  ALOG misses by 9c.  APC announces new well discovery.  CAZE ups BSY.  CIEN misses by 5c.  AXP estimates raised at BLAIR.  AINV prices 10M share secondary at $9.82.  WU increases dividend and authorizes $1B buyback.  JEFF ups TROW.  OPCO increases BR tgt.  BofAMLCO ups DKS.  ENTR upgrade at OPCO.  GDP upgrade at Robbie Hump.  IT files for secondary.  LULU beats by 1c and guides in-line.  MEE upgrade at JPHQ, downgrade at BMOC.  OXM beats by 14c.  SUSS cut at BofAMLCO.  TITN reports in-line. 

Asia mixed overnight.  Europe roughly 1% higher.  USD -10bps.  Gold +1%.  Oil +50bps. 

Brightpoint News

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

S&P 500 PreMarket (last/% change prior close/volume): 
PALL CORP                    34.15    +8.79%             9374
APARTMENT INVEST      15.45    +5.03%             4889
ANADARKO PETROLE      59.15    +3.57%             116777
CIENA CORP                  12.80    -3.25%              262521
DILLARDS INC-A             17.96    +2.98%             300
MASSEY ENERGY CO       37.80    +2.63%             18961
COGNIZANT TECH-A       45.19    +2.49%             200
TELLABS INC                  5.73      +2.32%             3780
ELI LILLY & CO               35.75    -2.22%              70796
NATL OILWELL VAR        42.55    +2.09%             500

Today’s Trivia:  What do the flags of Dominica, Mexico, Zambia, Kiribati, Fiji, and Egypt have in common?

Yesterday's Answer:  Singapore.   

Best Quotes:  “I agree that Ben Bernanke is completely compromised and Tim "Timmy" Geithner is out of his league and should never have been appointed in the first place.  At the same time they are the two people in Washington that have "inside information." 

During this past week Ben had already said the US economy faces "formidable headwinds" and then yesterday, we learned that the Treasury Secretary notified Congress that he is extending the Troubled Asset Relief Program through October 3, 2010.  Why?  What do they know that I don't? A lot, because they have "inside information!"  I don't have inside information, but I have the RE Macro Models and this is what I do know.....

(1)   The US Dollar is establishing itself a new level of support with the TREND line at 76.41 - The BUCK is BOTTOMING and is still a SAFE HAVEN.
(2)   The Semis are rallying - The SOX is up 11 of the past 12 days - Talk to Rebecca Runkle about this one!
(3)   OIL is falling - It's currently trading at a 2-month low - The reality of supply and demand!
(4)   Gold has fallen just over $100 (9%) in a week - Just a bubble?
(5)   Copper has fallen for six straight days (the longest losing streak in a year) - The reality of supply and demand!
(6)   Financials have underperformed the S&P 500 by 660 basis points over the past three months - This could be trouble!

Seeing the Financials dramatically underperform is unnerving and could be a leading indicator of things to come.  Whether or not Ben and Tim know something that I don't about the health of our financial system, Mr. Market is trying to tell us something.  The Banks are not lending and the FDIC continues to close more doors, while the "son of sub-prime" is going to hit with another wave of defaults in 2010. Ben can't raise rates and the Treasury Secretary is going to need TARP in 2010!    We are in a very bad situation.”

--ResearchEdge Morning Note 

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