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

No comments:

Post a Comment