Friday, December 11, 2009

Morning Note...

[USD spiking higher as I write, and mkt drifting off the highs – S&P was +70bps when I started and USD was flat…]

Futures are +35bps this morning on global economic growth, as both the US and China post better-than-expected economic data.  According to Bloomberg, “China’s industrial production grew more than economists estimated in November, exports fell the least in 13 months and imports surged, confirming the nation’s role as leader of the world recovery.”  To quantify, factory output was up 19.2% year-over-year (vs. +18.2% expected), exports slid only 1.2%, and imports rose 26.7%.  In the US, Import Prices were higher-than-expected both month-over-month and year-over-year (+1.7% vs. +1.2% expected and +3.7% vs. +2.9% expected, respectively).  While this implies some inflationary creep, Advance Retail Sales at +1.3% (vs. 0.6% expected) are driving bullish sentiment.  On the heels of this morning’s data, the WSJ reports that retailers and consumers are at somewhat of a stalemate – retailers are waiting for consumers to capitulate to higher prices and consumers are still looking for heavy discounts.  On a side note, store theft was up for the first time in six years to 1.5% of total retail sales, or $36.3B, according to the University of Florida’s National Retail Security Survey.  Note that UMichigan Consumer Confidence and Business Inventories are due at 10am.  In corporate news, TWX spun-off AOL.  JPM’s TARP warrant auction prices at $10.75.  No plan yet on C’s potential repayment of TARP.  NSM beat by 6c and issued upside Q3 guidance.  Across the pond, EU leaders continue to say gov’t stimulus will remain in place until economic recovery is “fully secured.”

Chatter regarding US state and municipality bankruptcy is gaining momentum, and may prove to be a corollary of what I think will be a major theme of 2010:  “Sovereign-debt-risk-resulting-from-the-massive-shift-in-debt-burden-from-the-private-sector-to-the-public.”  Yup, that’s a mouthful.  Recall that last week, NY’s Governor Paterson actually held a press conference last week titled “Saving New York State from Insolvency.”  Quipped investor Jim Rogers, “too late.”  Simply google “state budget crises” and strap in for some depressing reading… Interesting news out of Goldman Sachs yesterday, as they attempt to sway public opinion by paying 2009 using five-year-locked-up stock rather than cash.  Public interest in the “Evil Empire” or the “NY Yankees of Wall Street” remains high, and the recent Vanity Fair article by former Goldman employee Bethany McLean is a good read:  

Interesting comment from the BoNY morning note today: 

The U.S. Treasury yield curve is currently at record levels of “steepness” – short term interest rates are very low relative to longer dated maturities.  In fact, there have only been two other periods of similar rate differentials in over a generation – the early 1990s and 2002-2003.  In both of those periods the yield curve accurately signaled future economic expansion, and (coincidentally) a great time to buy U.S. equities.

But wait, didn’t those same periods also coincide with – in hindsight – the massive building of various (dangerous) asset bubbles?  Hmmm. 

CITI ups EW.  DBAB ups BWY.  JPHQ ups NCR.  KAUF ups YHOO.  Soleil ups CLWR.  JEFF cuts MIPI.  JPHQ cuts BRO, CIG.  BERN initiates AOL with OP.  ALV raises guidance.  BA reports dreamliner to make first flight next week.  BCAP ups BHP tgt.  CBK issues upside guidance.  DNDN prices offering at $24.75.  SocGen ups NOK.  YHOO upgrade at KAUF. 

Asia mixed overnight.  Europe trading almost 1% higher on aggregate.  Oil flat.  Gold +70bps.  USD +45bps. 

Brightpoint News

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

S&P 500 PreMarket (last/% change prior close/volume): 
NEW YORK TIMES-A       9.53      +4.96%             2000
GAMESTOP CORP-A        22.15    +4.58%             29833
PALL CORP                    35.56    +4.34%             600
EDISON INTL                  36.73    +3.46%             400
EL PASO CORP               9.57      +2.57%             41758
SAFEWAY INC                21.95    +2.57%             115671
NATL SEMICONDUCT      14.89    -2.55%              37070
LIZ CLAIBORNE               4.79      +2.35%             1000
YAHOO! INC                   15.83    +2.19%             141082
FANNIE MAE                  .9000    -2.17%              8079

Today’s Trivia:  What is our solar system's most volcanically active body?  (hint, there are more than 9 choices…)

Yesterday's Answer:  The flags of Dominica, Mexico, Zambia, Kiribati, Fiji, and Egypt all have birds on them.   

Best Quotes:  “Goldman Sachs Group Inc.’s plan to pay top executives in restricted stock will let the firm defer compensation expenses, reducing what it must report this year after being pilloried for setting aside more than $16 billion for employees.
     The awards will consist of so-called shares-at-risk that start vesting next year and can’t be sold for five years, the New York-based firm said yesterday. Because the expense isn’t recorded until they vest, the firm avoids incurring an immediate cost, said Robert Willens, founder of Robert Willens LLC, which advises investors on accounting and tax rules.
     “That’s just what they needed to make this year look better,” said Willens, a former managing director at Lehman Brothers Holdings Inc. “The first charge won’t be until 2010, so this will definitely reduce their compensation expense. These 30 people make a disproportionate amount of the compensation.”
     Goldman Sachs, which has repaid with interest the $10 billion it received from the Treasury Department last year, was derided for allocating a near-record $16.7 billion to pay employees in the first nine months of 2009 after benefiting from government support. Senator Bernard Sanders, an Independent from Vermont, called the bank’s compensation plans “obscene.”
     The new policy, announced yesterday, will apply to the 30 members of Goldman Sachs’s management committee, including Chairman and Chief Executive Officer Lloyd Blankfein, Chief Financial Officer David Viniar and the leaders of the firm’s global and regional divisions.”

--BBERG news

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