Friday, January 29, 2010

"Ode to New York City," politics, picking bad movies, and calorie counts...

Politics -- so I was out of the office the past couple of days attending a conference in NYC.  As a result, while checking into my hotel, I got to catch more of Treasury Secretary Tim Geithner's testimony (on the AIG bailout) than I normally would.  Geithner was getting fried to a crisp (which I admit was kind of fun to watch) and more and more Congressmen were looking forward to their five minutes of "appearing tough on Wall Street."  And honestly, given the ridiculous links between Goldman Sachs as the huge beneficiary of the AIG bailout and Geithner's inner circle of Goldman advisors, the potential "conflict of interest" scandal looked pretty juicy.  (Don't take my word for's the mainstream media recap.)  But right then, Committee Chair Edolphus Towns called the testimony to be over!  Several Congressmen, whose time to question Geithner was forfeited, argued vehemently.  But Towns said time had run over, and that due to time constraints in former Secretary Hank Paulson's schedule, they had to cut short the Geithner portion and get to Paulson.  Many members of the Committee opposed this, and as one eloquently put it, "it's more important to continue questioning the current Treasury Secretary than the former Secretary."  Towns denied the appeal, however, and Geithner was off the hook.  If I had not seen this happen on live TV in front of me, I would not have believed it.  In essence, Towns' response was "we can't make changes to the schedule, and we have to move on, because Paulson has somewhere to be."  Yes, he actually said that.  So Congress was bending to the schedule of Hank Paulson!!  Think about this for a second...the guy is retired...he stepped down as Secretary a year ago...and even if he was now gainfully employed, where the hell else would he truly need to be?  What is more important  - as an American - than being called before Congress to testify before the Representatives of the American people?  You know what I think?  I think the guy had $100k speaking engagement that he needed to get to, and Congress just got steamrolled.  Again.  What a joke.  So the net result was that the Geithner testimony, just when it was building momentum, was cut short so that Paulson could get his over with and not disrupt his schedule.  That's just insane to me, and goes toward 1) what a lack of respect politicians garner today and 2) how the real power guys (like ex-Goldman alum Paulson) walk all over them.  What a shame.  Anyway, we need sports announcers to cover these types of hearings and call this kind of stuff out in real time, so our less-than-attentive American public sees it for what it really is.  Could you imagine how much nonsense would be exposed if we devoted 1/10th of the airtime and effort to covering Congress that we do to covering the NFL and the Superbowl?

Bad movies -- I am starting to figure it out...  The longer the "free preview" is for a particular On Demand movie, the worse that movie is.  I am theorizing that when the cable provider or studio knows a movie is weak, the insecurity causes them to show you more and more in terms of the preview so that you ultimately click that "Buy" button.  There's nothing worse than getting something that looks good, and then soon discovering that you already saw every funny/cute/scary/romantic scene in the damn preview.  [And, in some ways, this theory explains The Hangover... due to a lack of major stars - like we had in Wedding Crashers, for example - the studio was insecure about getting people out to see it.  So they showed us too much, especially the Mike Tyson cameo.  In hindsight, if the previews showed less, I would have been blown away by the The Hangover.  But as it stood, every funny scene was already in the previews.  I am willing to bet the studio would take that back if it could.]  Bottom line - when you are surfing for On Demand choices, if the preview is a little long and a little "all-encompassing," walk away.  Do not buy.  Trust me. 

Calorie counts -- ok, so I already mentioned that I spend the last two days in New York, and I learned that I really, really miss The City.  More on that later, but let me highlight one absolutely awesome development up there... Every deli/restaurant/sandwich shop lists total calories next to each menu item!  This is incredible.  It is a total "game-changer" in terms of helping you make healthy choices at mealtimes.  I loved the ability to cross-reference what I felt like eating with the calorie count, and then compromising on the best tasting and healthiest choice.  For example, my Chicken Curry Salad sandwich at Le Pain Quotidien was 520 that was my lunch, in total, and I loved knowing that.  What a sense of empowerment, what a sense of control over what you eat.  I love it.  I vaguely remember Mayor Bloomberg discussing this when we left New York two years ago, and I was indifferent at the time, but now I'm a believer.  I even ducked into a McDonald's to check, and - yup - they have it too.  A Big Mac is like 540 calories and a Big Mac Meal is something like 1200.  How do you not make healthier choices when the calorie "scoreboard" stares you in the face like that?  So how impactful is it, really?  Well...after 24 hours, I was thoroughly hooked - when I was wandering around the Newark Airport last night, pre-flight, looking for dinner, I was absolutely deflated that the rules did not apply in New Jersey.  It was as if I saw everything with x-ray glasses for 24 hours, and then someone took them away.  Once you cross that "information threshold," you really can't go back.  Meanwhile, I am not holding my breath on this coming to Miami anytime soon. There's a reason this city was named "Fattest in America" last year.  Depressing...

Ode to New York -- this is what I saw, and emailed to my wife Brielle in real time while traveling back to New York... Remember homeless guys singing great songs in train stations?  Remember how everyone knows exactly where they are going?  Remember leaning out and peering down the subway tracks to see if there were headlights indicating the train was finally coming?  Remember when you finally picked up the "surfing" skills necessary to ride a train without touching anything?  Remember knowing exactly which car to get on so as to position yourself right at your exit stairway at your destination station?  Remember that underground smell?  Remember the conductors yelling "step in or get off" as people tried to hold the train doors open?  And for that matter, remember workers with attitude - and this is a critical distinction - not because they are lazy or just jerks (Miami?), but because they have just seen it all and know better?  Remember exiting a train station and having no clue which direction was north, east, west, or south...and then feeling like a true local when you always knew?  Remember a wino/junkie grabbing an empty Snapple bottle from a ledge and then huddling in a corner alcove to pee in it?  (Yes, that happened, 54th Street, 5pm, Jan 27th)  Remember the nutjob on the train or on the street just yelling random stuff at the top of his lungs...and the people just taking it in stride but widening their walking path around him?  (Yes, that was yesterday in Grand Central...he was yelling "Peter, peter, shame on you...[cackle, cackle]...shame on you Peter!" at the top of his lungs.)  Remember how to walk really fast on the sidewalk?  Remember the NY "attitude?"  (This was best exemplified in the NY Post editorial the day of Obama's State of The Union which basically said, "stop whinning about the Bush Administration leaving you a mess - it's yours now...and spare us with the fancy speeches - we've heard it from you before...actions, not words...put your money where your mouth is."  It was awesome...)  New Yorkers reading this will be bored, for sure.  It is part of the everyday fabric of City life.  But when life changes, and then you come back to it, this stuff stands out so much more... It goes without saying, but I'll say it anyway...I miss NYC.

Jay Leno's gay viewers -- ok, amidst all the late night hub-bub, I have a more serious question.  Assuming everyone has seen the flamboyant gay guy on Leno, I am wondering if anyone besides me has a problem with this guy's "shtick."  Seriously, gay is mainstream now...there is no shock value here.  But doesn't he negatively reinforce stereotypes that might offend homosexuals?  How is this guy any different from the 1940's-1960's black maid on Tom & Jerry that was cut for racially derisive reasons?  Isn't there a group of homosexuals that struggle everyday for equal treatment - and to escape prejudicial or narrow-minded thinking - that cringe at this dude?  I mean, I don't find him funny in the least.  I dunno...I just think that if this guy "represented" my lifestyle on prime-time TV, and this was some of the American population's only "interaction" with a homosexual, I would be offended... I'm just sayin'.

Random Stuff -- they called my return flight to Miami "very full"...  Isn't full an absolute?  Can you qualify it with very?  Isn't it like saying "very dead" or "very pregnant?"  Open letter to the guys that wear those skinny, super-tight jeans:  how sweaty are your balls?  And how long does it take you to get into those things?  Do you need help?  Do you have to baby powder your legs or something to slide them on?  Please explain... Hey, since when does reality TV get reported as "news?"  As I was sitting at my gate, CNN actually reported on the previous night's American Idol winners and showed clips.  Huhn?  This is news?  Speaking of which, I watched American Idol for the first time ever last week... I mean, I have heard the names Adam Lambert and Clay Aiken, but probably could not pick them out of a line-up... So here was my take-away as a first-time viewer:  the terrible singers have to be staged, no one can be that unaware (or stupid), can they?  And if not, how can you not be absolutely freaked out by the future of this country?  Holy moly.  Looking back, when they point to the beginning of the end for us - just as Roman scholars mention gladiators and "bread & circuses" as indications of a lazy, uninvolved, restless citizenry of an Empire in decline - future American scholars will surely point to our obsession with reality TV as our version of gladiatorial entertainment... Tyler brought up an interesting point the other day - do cell phones ruin relationships?  The theory is that people are so used to 24-7 access to each other, that one missed phone call, one ignored text, leads to a fight.  Could be some truth there.  But remember the old days when your home phone never rang before 9am or after 9pm unless it was an emergency?  And remember when you had nooo idea who was calling, and you were actually surprised when you picked up?  Ah, the good old days...

That's all for now...

Until next time...All the best, Ben

Morning Note...

Futures surge 70bps higher this morning on a much better than expected Q4 US GDP number.  Even the bears and the cynics - who were expecting a high number from one-time government stimulus injections – have to be impressed with +5.7% vs. the expected +4.7% reading (which marks the fastest pace of expansion in six years).  Personal Consumption (remember that the consumer makes up 2/3rds of GDP) was also better, at +2% vs. +1.8% expected.  Always beware the revision ahead, but for now this number is surprising, and lends some stability to a market fettered with uncertainty.  With this Q4 reading, Obama’s State of the Union, the FOMC decision, and the Bernanke confirmation (no matter how shaky) in the rear view mirror, markets certainly have a lot to digest this weekend.  Action today leading into the weekend could be very telling – markets have obviously felt “heavy” of late, and a “sell the rally” mentality has prevailed.  By 2pm today, we should have some idea as to whether or not that trend will continue.  In other words, with so much of this week’s unknowns now behind us, the market is relatively free to trade “on its own merits” today…so will investors again sell the rally and trim risk into the weekend, or will optimism reign?  There is one caveat to all the positivity around today’s GDP number, however:  Be careful what you wish for.  By that I mean that data that is too good or a surge in job growth next week would add to interest-rate-hike pressures.  And if rates go up, this market will certainly face further headwinds.  To that end, comments from China central banker Zhu Min are making the rounds this morning, causing some concern:

China's deputy central bank chief Zhu Min warned that tighter US monetary policy could spark a sudden outflow of capital from emerging markets, evoking the 1990s Asian financial crisis.  A rapid withdrawal of funds would not only cause volatility in the currency exchange markets, but could also generate currency moves similar to those during the Asian crisis of over a decade ago.  "Capital flows - it's a real risk this year for the economy," Zhu Min told participants at the World Economic Forum's annual meeting in Davos.  Mr Zhu noted that investors are increasingly borrowing the cheap US dollar, and investing the borrowed funds in emerging markets, where interest rates are higher, and therefore generating a better return than saving in the dollars.  This phenomenon called carry trade in the US dollar is a "massive issue today," said Mr Zhu.  "It's bigger than the Japanese yen carry trade 12 years ago," he said.  However, if the United States were to tighten its lax monetary policy, making borrowing more costly, funds could then flow out just as suddenly from emerging markets, back into the US market.  This could cause a collapse in emerging markets' currencies, and spark a repeat of the 1997-1998 Asian financial crisis.  Then, the Japanese yen was cheap and investors were borrowing it and investing in South-east Asian economies, fueling strong growth in the region.  But as exports slumped amid a global demand slowdown, speculators began attacking the South-east Asian currencies, believing that they were overvalued.  Thailand was first to crack and it abandoned its fixed exchange rate and float its currency against the US dollar.  Other currencies followed suit and crashed under crippling debt levels and amid soaring interest rates.  "It's what we learnt from the Asian financial crisis. Because the yen went back to the Tokyo market," said Mr Zhu. "Everyone is concerned about the direction which the capital flow will move. It's an absolute real risk for the year," he said.  He also defended China's stance on the yuan, saying that a stable yuan was crucial.  "It's very important to have a stable yuan particularly in this very volatile market," he said.  Beijing has been under fire for deliberately undervaluing its currency.  However, Mr Zhu said that a stable yuan was "good for China, it's also good for the world."  (London Telegraph)

In corporate news, MSFT is trading 2.5% higher on better than expected earnings.  AMZN (+3%) also reported 13c better and added upside guidance, while HON (-3%) also reported better but trades lower. Finally, toy-maker MAT (+1.5%) is trading higher on earnings.  In other news, concerns over default in Europe continue, moving from Greece to now Spain and Portugal.  A weakening Euro ($1.39, below the key $1.40 level) – down 8% vs. the USD from early December – is symptomatic of those concerns.  Additionally, India moved to increase bank reserve levels to 5.75% from 5%, which is similar in scope to China’s recent actions.  In political news, it’s worth noting that yesterday’s Bernanke confirmation was the “least supportive” of a Fed Chairman since Paul Volcker won an 84-16 vote in 1978.  Politicians continue to amaze, however, and this political science major’s view is that most dissenters enjoyed the wave of “popular revolt” initiated by Senator Jim Bunting (anti-Bernanke all along) to simply log a free (in the sense that they knew it would never be enough to unseat him) “tough on Wall Street” vote aimed at appeasing their constituency.  If one examined the rolls, I would imagine most dissenters were those facing narrowing polls ahead of mid-term elections and those spooked by the recent Scott Brown victory in Massachusetts.  Additionally, this seemed more of an exercise in “showmanship” than anything, in the sense that – if Bernanke was not reconfirmed – any incoming replacement would be even more beholden to Congress (and thus less objective) as a result of the Bernanke vote, thereby achieving the exact reverse of what would have been intended.  Thus there was no way Bernanke was not being reconfirmed. 

JNPR beats by 6c.  PMCS higher on earnings. TSRA trades lower on earnings.  GSCO ups LBTYA. RHI higher on earnings beat.  SNV earnings beat and BERN upgrade. MXIM higher on earnings.  B. Riley & Company ups COHR, Bank of America Merrill Lynch ups BKD, BMO Capital ups MEOH, Deutsche Bank ups ORLY, FBR Capital ups URBN, Goldman Sachs ups WMT, Janney Capital ups SASR, JMP Securities ups MPW, JPMorgan ups CBT, MAN & SNDK, Sandler O’Neil ups ISBC, Thomas Weisel ups CAH, B. Riley & Company cuts NPBC, Barclays Capital cuts TII & TX, FBR Capital cuts FII & UBS, RW Baird cuts ABFS, Wells Fargo cuts KSP.  ALV higher on earnings.  HSBC ups DAI.  CPSI earnings miss.  COHR higher on earnings.  FII misses by 2c.   

Asia lower overnight.  Europe over 1% higher.  Oil +80bps.  Gold -30bps.  USD +40bps. 

Brightpoint News: 

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

S&P 500 PreMarket (last/% change prior close/volume): 
JUNIPER NETWORKS       26.30    +7.39% 345725
AVERY DENNISON           35.35    -7.22%  22200
SANDISK CORP              26.71    -7.19%  359862
FIFTH THIRD BANC         12.71    +3.67% 111803
PACCAR INC                  36.50    +3.6 %  849
HONEYWELL INTL           38.41    -3.54%  137990
CA INC                          23.10    +3.36% 796
TERADYNE INC               9.80      +3.27% 17000
EASTMAN CHEMICAL      58.80    +3.19% 500
INTL GAME TECH            19.40    +3.03% 300

Today’s Trivia:  In this extremely poor city of 10 million people, 60 different languages are spoken, and the Hooghly river flows. Which city is it?

Yesterday's Answer:   2% of US theatre screens are IMAX. 

Best Quotes:  “NEW YORK (Reuters) - A majority of U.S. senators on Thursday voted to confirm Ben Bernanke for a second four-year term at the head of the Federal Reserve.

KEY POINTS: * A total of 70 senators voted to confirm, with 30 voting against. * Bernanke has been credited with steering the U.S. economy through a wrenching financial crisis but is also under fire for policies that set the stage for the turmoil. * He has encountered the stiffest opposition the Senate has put up in the three decades it has voted on nominees to head the U.S. central bank.



"I would breathe a sign of relief that it is over. I really think that a lot of people failed to realize the significance of all the Congressional stonewalling on the Fed's independence and the perception of the Fed's independence, and the complexity that this could have created in the conduct of monetary policy.

"It is something that should not have been this political. The criticism that the Fed is getting is sort of like criticizing the fire department for kicking down the door to save a house that is burning down, saying 'they should not have kicked down that door'.

"I'm glad that it is over and I'm also glad that we have got people like Ben Bernanke that don't just throw up their shoulders and say to heck with it."


"Bernanke gets reconfirmed but also gets a vote of low confidence. The 70-30 split highlights the lack of a cooperative spirit in Washington. Politics has reached new lows with respect to confirming the Fed chairman. This was a low vote of confidence because of the 30 who voted against to abstained. The spread was quite large! Congress appears to be distancing itself from the financial crisis and putting most of the blame on Ben Bernanke and Geithner."


"I think it was expected. You could tell that it was going to happen probably a day ago. I don't think that it will have much effect on the (stock) market.

"I think the market will cycle right past the Bernanke vote and focus on Amazon and Microsoft earnings.

"He's going to take further bashing by the politicians, but I don't think it's going to affect the market."


"This is very good news. It gets rid of probably the biggest worry of all for many investors, particularly foreign investors. They've been worried because they see Congress starting to interfere with the independence of the central bank. And the conclusion they draw, and me too, is, 'There goes the currency, the dollar.' You trust the central bank or you don't. This confirmation takes that that uncertainty away for many."


"We pretty much were figuring by yesterday that he had enough support to get through. It is a good thing because you have a level of uncertainty taken away.

"(In the longer run) he's firmly in the camp of wanting to keep stimulus in place until we have firm signs that the economy isn't going to reverse course. I think it's a good thing for the shorter end of the yield curve and for a steeper yield curve. But I also think he's in the camp that the stimulus will go when he believes recovery is firmly in place."


"The market had already factored in that he was going to be confirmed. The news has been positive since the weekend, of key bi-partisan support. I think he continues his job the same way he's been running the Fed.

"As a personality he doesn't want to get involved in the political arena although in anyway he's been forced to. I think he's inclination is do the best job for the economy as the data warrants. It would have been huge event had it (the confirmation) not happened."


"Paul Volcker got 84 votes when he was voted in for his second term. Alice Rivlin got 57 votes when she was nominated for vice chairman of the Fed. There have been politics in the process before, but this has been the worst electoral showing of any Fed chairman in memory. These things are getting more political so the new normal may be not 90 votes, but 60 or higher."


"I see little reaction on the forex markets after (Ben) Bernanke's confirmation. Despite the hurdles, most expect him to be confirmed. In that sense, it is old news and fully priced in most currency pairs. The surprise, and the impact, would have been much larger if he wasn't approved."


"I don't think it was a big surprise but I think it was a big relief. Markets hate uncertainty and it's nice to get this out of the way. This takes one issue off the table."


"The market priced this in, but there had been some fear of a bad re-run similar to when the TARP was voted down for the first time at the height of the financial crisis. But this time the Administration knew there was discontent and they had a week to prepare."

Thursday, January 28, 2010

Morning Note (Tyler)...

Futures +25 bps despite somewhat worse than expected jobless claims (470k vs 450k expected) and durable goods orders (.3% vs. 2.0% expected).  However economic data was roughly in-line.  Investors are probably more concentrated on yesterday’s FOMC release and the President’s State of the Union address which took a more positive tone than previously thought.  The majority of Wall Street felt that Obama would take this time to vilify our financial system, but he was more constructive in identifying our problems… “One place to start is serious financial reform. Look, I am not interested in punishing banks, I'm interested in protecting our economy.”   Obama also pledged to cut Government spending and put a jobs bill on the forefront of this legislative calendar. The House has already passed a version of a jobs bill and the Senate has to now follow suit. The House measure was a $154 billion bill passed back in December that included billions for infrastructure spending, mass transit, and jobs training. Yesterday, the President proposed tax credits for small businesses and called on the Congress to eliminate capital gains taxes on small business investment. The President also mentioned a proposal to take $30 billion in repaid TARP money to a new program to help community banks lend to small business.

The FOMC release yesterday adopted a slightly more positive tone on the economic front.  In particular, they described growth as “likely to be moderate for a time” rather than “weak for some time.”  However, they made no change in language with respect to rates being “exceptionally low for an extended period.”  Perhaps the most pertinent difference in the FOMC release was that Kansas City Fed President Hoenig dissented to keeping rates exceptionally low, and took a more hawkish stance.  The Fed also decided to wind down the MBS asset purchase program in March, as many thought they would keep it on an “as needed” basis.  The GDP reading is tomorrow morning, which may cause some volatility towards the close today.

Ford beat earnings and is trading up 2.5%. NOK beat and is up 10%. 3M beat and is up 2%. BAC-ML ups NFLX & VIV, Barclay’s ups APC & ITW, Citi ups ROK, Jefferies ups NFLX, JPM ups CME, Merriman ups NFLX, UBS ups CAT, WFC ups AHGP, APA & ARLP, BMO cuts EWBC, Citi cuts SXL, Janney cuts BKC, Jefferies cuts WCRX, JPM cuts KEX, KBW cuts TAYC, MS cuts CNK, WFC cuts CHK.

Asia and Europe are higher about 1% today in a relief rally.  USD flat.  Oil +1%.  Gold +50bps. 

Brightpoint News: 

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

S&P 500 PreMarket (last/% change prior close/volume): 
EASTMAN KODAK           4.7500  5.70      +20.0 %
LSI CORP                       6.0000  5.48      -8.67%
QUALCOMM INC             47.2000 43.12    -8.64%
NABORS INDS LTD          23.5900 25.40    +7.67%
TERADYNE INC               10.2600 10.83    +5.56%
BALL CORP                    50.4500 53.00    +5.05%
LIFE TECHNOLOGIE         48.6900 51.06    +4.87%
SUNTRUST BANKS          24.7000 25.85    +4.66%
MOTOROLA INC             7.4000  7.08      -4.32%
CITRIX SYSTEMS           41.9800 40.21    -4.22%
CARDINAL HEALTH         31.3100 32.60    +4.12%
NICOR INC                     40.6000 39.04    -3.84%
HUNTINGTON BANC        4.8800  5.05      +3.48%
SYMANTEC CORP           18.6100 17.97    -3.44%
BAXTER INTL INC           58.9100 57.00    -3.24%
E*TRADE FINANCIA        1.6500  1.70      +3.03%
ZIONS BANCORP            18.9400 19.50    +2.96%
GENWORTH FINANCI      13.3700 13.75    +2.84%

Today’s Trivia:  Imax was 30% of theater revenue this week, what percentage of theater screens are IMAX?

Yesterday's Answer:   Alexander the Great was a student of Aristotle in 300 B.C.

Best Quotes:  The question lingering on the minds of Americans was what would the Presidents tone be.  For Investors it was how hard would he come after Wall Street and the Financial Industry?  The Financial Responsibility Fee (TARP Tax) was mentioned. “As a result, the markets are now stabilized, and we have recovered most of the money we spent on the banks.  To recover the rest, I have proposed a fee on the biggest banks. I know Wall Street isn't keen on this idea, but if these firms can afford to hand out big bonuses again, they can afford a modest fee to pay back the taxpayers who rescued them in their time of need.”    The positive in there is the President acknowledged in front of the nation that the banks have paid “most” of the money back. The negative is he still considers the Auto industry losses as the banks.” –BTIG Note

Wednesday, January 27, 2010

Morning Note (Tyler)...

Futures flat this morning heading into a busy day around the world.  In the U.S. we hear from the FOMC, where consensus believes a change in rates is unlikely. However, there are more politics afoot as Ben Bernankes’ reconfirmation comes later this week.  It’s well known that politicians are terrible at hitting curve balls, so expect Bernanke and Co. to lob a meatball today at 2:15 pm.  According to Bloomberg radio, the votes are lining up in favor of Bernanke’s 2nd term.  One thing to keep an eye on in the FOMC statement is whether or not the Fed extents the MBS purchase program, which is set to expire in March.  Consensus believes they will use the program on an “as-needed” basis to keep the housing market stable after the sixth straight monthly gain in home prices.

The House Oversight Committee will also take shots at Treasury Secretary Geithner this morning over the AIG situation.  Tonight we will hear the State of the Union Address from President Obama.  Also expect headlines coming from the World economic committee in Davos.  Earnings continue to stream in as well- YHOO (+3%) and BA (+2.5%) beat, CAT missed (down -4.5%).  Also, expect AAPL to reveal its new ‘Tablet’ device today in San Francisco. New Home Sales come out at 10 am.  A lot of moving parts today and it should be interesting to see how it all shakes out.  I’m guessing we won’t have any real market direction until we get the GDP data at the end of the week, until then- stay tuned.

BAC-ML ups ART, FBR ups SASR & VCBI, GS ups AKS, Kaufman Bros up AMZN, KBW ups VPFG, Merriman Curhan Ford ups ZAGG, Rochdale ups BBT, Baird ups DV, UBS ups CBE, BAC-ML cuts ED, HE, VMED & WNS, Citi cuts X, GS cuts BCH, SAN & X, Leerink Swan cuts MCK, UBS cuts CTCM.

Asia and Europe are lower for the sixth straight day.  USD flat.  Oil flat.  Gold -50bps. 

Brightpoint News: 

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

S&P 500 PreMarket (last/% change prior close/volume): 
ROCKWELL AUTOMAT     46.1600 49.50    +7.24% 19216
WHOLE FOODS MKT       27.8000 29.6800 +6.76% 200
ALTERA CORP                21.1900 22.45    +5.95% 296288
GILEAD SCIENCES          44.8700 47.34    +5.5 %  380915
DEVRY INC                     56.1700 59.21    +5.41% 1700
TIME WARNER               44.1600 46.08    +4.35% 3100
MOLEX INC                    20.9000 21.75    +4.07% 700
CATERPILLAR INC           55.8500 53.64    -3.96%  507736
HOST HOTELS & RE       10.9300 10.50    -3.93%  559
MBIA INC                       5.0300  5.22      +3.78% 660
FORD MOTOR CO           11.1900 11.59    +3.57% 1896109
BOEING CO                    57.7100 59.71    +3.47% 130461
BIOGEN IDEC INC            53.0000 51.18    -3.43%  100
AK STEEL HLDG              21.2300 21.92    +3.25% 34130
MCGRAW-HILL COS        34.2300 35.28    +3.07% 490
ANADARKO PETROLE      63.8900 65.83    +3.04% 12469
ALLEGHENY TECH           42.4600 43.72    +2.97% 1520
QLOGIC CORP                18.8900 18.36    -2.81%  1400
YAHOO! INC                   15.9900 16.42    +2.69% 506710

Today’s Trivia:  They were teacher and student, and lived around 300 B.C. in Greece. One was possibly the greatest soldier of ancient times, the other was possibly the greatest thinker. Who were they?

Yesterday's Answer:   At 759 square miles, Jacksonville, FLA is the largest US city in terms of geographic size

Best Quotes:  “Today shapes up to be a very important day. It kicks off with the House Oversight Committee’s hearing on the AIG bailout.  The current and former Treasury Secretaries will be defending themselves from a round of accusations made by Congressional leaders and the TARP Inspector General.  An FOMC meeting will be presided over by a Chairman whose fate hangs in the balance and will be decided in coming days.  The grand finale will be the State of the Union. We are getting ready to retire our copy of Graham & Dodd in favor of Machiavelli’s The Prince.” –BTIG Note

Tuesday, January 26, 2010

Morning Note...

*Please note I will be attending a conference the next two mornings and Tyler will send out a morning note in my place*

Futures -40bps this morning as global concerns over China’s stimulus withdrawal, political uncertainty ahead of tomorrow’s State of The Union, uncertainty over the fate of Fed Chairman Ben Bernanke and Treasury Secretary Tim Geithner, and sovereign wealth concerns (Greece – see quote section below for more, Portugal) all continue to weigh on the broad markets.  Asia was down roughly 2% across the board last night, and Japan’s credit was downgraded by S&P.  Additionally, UK GDP ticked higher, formally signaling an exit from its longest recession on record, but fell short of consensus estimates.  In corporate news, AAPL (Apple) is trading higher premarket after its earnings beat last night (+50% profit, +32% revenues), and TXN (Texas Instruments) is trading lower despite its beat.  VZ (Verizon) trading is mixed after posting earnings and further job cuts, and JNJ (Johnson & Johnson) is lower after its profit dropped ~20%.  OPCO is positive on the banking sector this morning.  In economic news, this morning’s CaseShiller Home Price data was in-line for the most part and has minimally impacted markets.  Later today, we’ll see Consumer Confidence and the November House Price Index at 10am.  In other news, Franklin Templeton’s Mark Mobius is bullish on Brazil (Bloomberg headline:  “Brazil at 25% Discount to Global Stocks Becomes Mobius Favorite”) and BofAMLCO made positive comments on Brazil’s potential in 2010 as well. 

Despite a fair amount of data thus far this week, market volumes – while higher than the 30-day average – have not matched levels from late last week.  It would appear many investors are waiting for resolution on the Bernanke vote, tomorrow’s FOMC decision, and President Obama’s first State of the Union address Wednesday night.  [Others speculate that Geithner is being set up for failure as he testifies on the AIG bailout tomorrow because of the President’s recent interactions with Paul Volcker.]  It will be interesting to see how the President’s “tough talk” on the “Wall Street fat cats” plays out in Thursday market action.  Playing devil’s advocate, could he say anything that causes buyers to rush in?  [According to Bloomberg news, he will call for a three-year freeze on spending for many domestic programs in an effort to reduce the deficit by $10B in 2011.]  Granted, a stellar Q4 GDP number on Friday – along with in-line Durable Goods Orders and Initial Jobless Claims – has the potential to steady markets.  But for the moment, markets continue to feel heavy.  After all, given the uncertainty out there, what’s the rush to step in and buy?  Howard Marks, who is of the best writers out there (not to mention one of the best investor), made a similar point in his most recent letter (dated January 22nd): 

It's clear from the behavior of the markets that something has been goosing investment performance, since the best gains have been seen in the fundamentally riskiest assets. Part of it is general easing of the excessive risk aversion and fear of a year ago, and part is a justified rebound from too-low prices. But certainly near-zero interest rates have played a major part.

In short, I worry that the growth in jobs in the recovery will be slow, and that unemployment and underemployment will remain stubbornly at higher levels than in the past. That doesn't bode well for either the short-term cyclical recovery or the long-term outlook.

My goal in this memo isn't to express a forecast. I know no forecast - and certainly not mine - is likely to be correct. What I do want to do is caution that the considerable risks I see may be less than fully appreciated by those setting asset prices today. The greatest market risks lie in failure of the macro economy to live up to the expectations embodied in today's prices.

The uncertainties discussed above tell me today's distribution of possibilities has a substantial left-hand (i.e., negative) tail, probably greater than at most times in the past. The proper response should be to discount asset prices, allowing a substantial margin for error. Forecasts should be conservative, yield spreads should incorporate ample risk premiums, valuation parameters should be below the long-term norms, and investor behavior should be prudent.

GMO’s Jeremy Grantham’s January 21st letter is also making the rounds:

Grantham reiterated his forecast for “seven lean years” for the economy. He said investors should “under-weight” stocks because the Standard & Poor’s 500 Index, which closed today at 1096.78, is above what he believes to be its fair value of 850. “The real trap here, and a very old one at that, is to be seduced into buying equities because cash is so painful,”  Grantham wrote in his letter. “Equity markets almost always peak when rates are low.”

OLN trades higher on earnings.  Bank of America Merrill Lynch ups DEI, Barclays Capital ups LXK, BMO Capital ups AA, Citi ups AMLN, Credit Suisse ups PLXS, Jefferies ups CSUN, CTXS, SOLF, SPWRA & STP, JPMorgan ups CNH, Oppenheimer ups AMAT, CFR, CMA, HBAN, KEY, PNC, PVTB, SLXP & WAL, Pritchard ups CXPO, Rafferty ups BMC, RW Baird ups CLC & TXN, UBS ups ARD, CLR & CXG, Morgan Stanley cuts PXP, RW Baird cuts TSCO, UBS cuts JCI.  DAL misses by 3c.  EMC beats by 3c.  PLXT beats by 8c.  PRXL beats by 4c.  SHW beats by 19c.  TRV beats by 63c.  VLTR beats by 13c.  VMW beats by 5c.  WFT misses by 9c.  ZION beats by 38c.  ZRAN beats by 4c. 

Asia lower overnight.  Europe slightly lower thus far.  USD +50bps.  Oil -145bps.  Gold -80bps. 

Brightpoint News: 

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

S&P 500 PreMarket (last/% change prior close/volume): 
SHERWIN-WILLIAMS       63.23    +7.31% 185100
WEATHERFORD INTL      16.48    -7.05%  1455422
TELLABS INC                  6.25      +5.93% 729127
US STEEL CORP             53.05    -5.66%  1533716
ZIONS BANCORP            18.85    +5.19% 109966
REGIONS FINANCIA        6.25      -4.58%  307419
TRAVELERS COS IN        50.90    +4.11% 38966
BJ SERVICES CO            21.12    +3.83% 1020
ASHLAND INC                 41.10    +3.71% 10989
LEXMARK INTL-A            26.44    +3.69% 2456
CITRIX SYSTEMS           42.59    +3.5 %  18562
BAKER HUGHES INC        46.11    +3.41% 52625
AMERISOURCEBERGE      28.00    +3.28% 15082
EMC CORP/MASS           17.45    +3.01% 1741467

Today’s Trivia:  At 759 square miles, what is the largest US city in terms of geographic size?

Yesterday's Answer:   Russia and Japan rank #1 and #2 among G8 nation’s suicide rates. 

Best Quotes:   “There have been many reasons put forward for the recent pullback in global markets. We’ve heard that it’s because of Chinese tightening, US regulatory reform, excessive optimism and the distinct absence of bears in the market at the start of the New Year. But Greece has featured very high on the list and is the primary reason for the weakening Euro vs. the USD. Greece has been an issue for the last few months, with a budget deficit running at 12.7% of GDP and the significant financing it will need to shore itself up in 2010. BAML estimate that $30bn of Greek government debt will need to be rolled over between April and June this year alone. As a result, since last August Greece CDS has widened from 100bps to a record high of 350bps last week. Yesterday the Greek government issued debt for the first time since being downgraded by the major rating agencies in December. They sold EUR8bn of debt in the market at a yield some 0.3pps above similar Greek government debt of the same maturity in order to ensure the auction’s success. The deal was well oversubscribed and the Greek CDS fall 9bps to 329. This demonstrated the hunt for yield that investors pursue in the short term but over the medium to long term feedback from our Rates desk suggest that most investors remain cautious. As yesterday proved, Greece can issue debt but coupons are inflated. The higher the cost of refinancing debt becomes, the greater the pressure to be fiscally prudent as interest costs mount. Ultimately, we don’t believe that Greece is likely to default and they will tighten fiscal policy sufficiently to carry them through.”  --BofAMLCO Strategist

“Good Morning - Market is trying to fight, although it appears to be on the ropes.   The over all weakness can be attributed to the reports that the People's Bank of China is indeed pushing ahead with the reserve requirement increase it announced last week.   APPL is back in the green this morning after chopping around post record numbers, maybe the sole reason the market isn’t off more.   The over all psychology of the markets has definitely changed over the past two weeks.   We clearly no longer hurdle landmines with ease.  I expect rallies to be sold, a defensive tact will be in place. The consistent change of policy coming for the government has made market unstable again.   It appears Bernanke will be safe from execution, but do we think Geithner will be spared?  Tomorrow's AIG hearings might seal his fate.  The witch hunt continues.”  --trader note

Monday, January 25, 2010

Morning Note...

Futures 75bps higher this morning as markets took the weekend to digest last week’s -5% three-day plunge.  Overseas, markets are lower in Europe but have been buoyed by a better-than-expected Greek treasury auction (2x oversubscribed; books close at 9:30am EST) and better-than-expected PHG (Philips Electronics) earnings.  [It is worth noting, however, that while demand for Greek debt is surprising many, some desks indicate this demand is not in the form of long-term holders, but rather from those looking to hedge out their long CDS exposures.] Asian markets were weaker overnight.  This morning’s WSJ Heard on the Street column is bearish on COF (Capital One) after recent weakness and forward guidance given loan growth and marketing expense issues ahead.  Also in the WSJ; speculation that many hedge funds bought by banks over the past few years will now be able to buy themselves back at cheaper prices, taking advantage of the Obama’s Administration’s new regulations forcing banks to become sellers. 

Busy week ahead, highlighted by heavy tech earnings (AAPL/TXN/VMW tonight,  ALTR/EMC/VZ/YHOO/GLW Tuesday, LSI/QCOM/SAP/SYMC Wednesday, PMCS/SNDK/MOT/NOK/T/AMZN/JNPR Thursday), Obama’s State of the Union address (Wednesday), Geithner testimony before Congress on the AIG bailout, the FOMC decision (Wednesday), US housing data (Existing Home Sales today at 10am, Case/Schiller Index tomorrow), Initial Jobless Claims (Thursday), US Q4 GDP (Friday; +4.6% is expected), and the Bernanke re-confirmation.  Recall that Bernanke has 6 days left in his term, and the vote continues to be postponed as politically posturing remains.  If a vote is not completed by 1/31, Bernanke will be forced to step down.  Further, chatter surrounding new short-selling regulations continues. 

In general, markets hate “uncertainty,” and that theme continues… Hopefully the week ahead will provide come clarity, either fundamentally or politically….  Goldman’s Global Economist Jim O’Neill has some informal “state of the world” thoughts out this morning:

Washington and US financial conditions…

Which leaves me to this topic. If the "shock " of the UK supertax wasn’t enough, now we have out of the blue ,Tall Paul Volcker's ideas suddenly appearing as US "policy" on banks. There are an enormous number of policy issues raised by this development, such as ; will the proposals ever come to pass, should they be seen in the context of the Massachusetts development, who is running economic and financial policy, etc and plenty more, that I don’t think it is appropriate for me to write about , at least in this kind of format. But the core issue to me, is as follows;

a/ this is a second major, and much bigger "anti current practises" surprise to the financial system since mid December, and at least for me, both have been quite a surprise, and completely at odds with the co-ordinated G20 flavour of much of late 2008 through most of 2009. How many more, such surprises, are coming?

b/ much more importantly than being surprised, what is this going to do to financial conditions? One would have thought policymakers would be eager to avoid an inadvertent tightening of financial conditions, given what happened in 2008 and the whole parallel with the initial recovery from 1929 before you know what………but the style in which both the UK, and now the US policies have appeared suggest that this is not at the forefront of thinking. I guess this latest development at least adds to the probability of our Fed Funds forecast being right, but ….

I have been thinking since the Summer , with some confidence that the upside risks to a US recovery were likely to keep re-appearing, but given both the political and policy events, and with this fresh major degree of uncertainty introduced to the financial markets, upside US risks are increasingly going to relate purely to one area, exports…

Last Friday, I had an interesting debate with an extremely well known bear , for the amusement of some hedge fund clients. If it would have been this morning, I would have found it much tougher to battle him………

AAPL’s tablet launch is expected Thursday.  WMT announced 10,000 job cuts at Sam’s Club.  Barron’s cautious on the airline sector; also cautious on SHLD.  BARD ups ACXM.  FT reports BCS will defer bonuses.  Cramer positive CCOI.  Barron’s positive FRX.  UBSS ups GD.  DBAB ups ICE.  TWPT ups IM.  Barron’s positive INTC.  WEFA ups KSP, ROSE.  CSFB ups RRI.  BofAMLCO ups SAP.  FBRC ups SLB, STI.   Barron’s positive SLE.  BBNT ups SOA.  HSBC ups TIF.  CITI ups TRI.  FBRC cuts RF.  GSCO cuts IGT.  UBSS cuts TSS. 

Asia lower overnight.  Europe slightly lower.  Oil -20bps.   Gold +75bps.  USD flat. 

Brightpoint News: 

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

S&P 500 PreMarket (last/% change prior close/volume): 
ALLERGAN INC               53.41    -9.03%  2544
GANNETT CO                 16.49    +6.94% 8796
COMPUWARE CORP        8.50      +6.12% 375
SARA LEE CORP             12.30    +5.13% 7400
KB HOME                       15.04    +4.81% 8998
AK STEEL HLDG              21.09    +4.46% 121176
MANITOWOC CO            11.97    +3.73% 6656
EXPEDIA INC                  21.00    -3.54%  100
INTL PAPER CO              25.25    +3.36% 9654
DISCOVER FINANCI        13.89    +3.19% 23177
EL PASO CORP               11.19    +3.04% 200

Today’s Trivia:  Bloomberg news story this morning highlights the suicide rate in France, which is actually – according to recent measures - #3 among the G8 nations (France, US, UK, Russia, Germany, Japan, Italy, Canada).  Which nations rank #1 and #2?

Yesterday's Answer:   John Pemberton created the first vat of Coca Cola in Atlanta, Georgia in 1886.

Best Quotes:   “Looks like Bernanke will keep his job, although why in the world the guy would want it is beyond me.   I lose more, and more respect for the political world every day.  Obama gives the State of the Union tomorrow night, I would expect it to be full of bluster.  Futures bouncing form the biggest three day decline since March.  Apple earnings out tonight.   We've seen nothing but sellers into the number, expect to hear VZ added to the tablet, and the IPOD providers.   I think banks can recover post the State of the Union, buy the dip.”  --BofAMLCO trader