Wednesday, February 24, 2010

Morning Note (Tyler)...

Futures flat this morning ahead of Ben Bernanke’s congressional testimony today and tomorrow.  Unemployment will be the main topic that legislators will inquire about- in particular, how Fed policy can assist small to mid-sized businesses who continue to struggle in the current environment.   Regardless of the answer, Congress is sure to throw more money at the problem in the form of complex legislation.  The Senate is scheduled to vote today on a $15 bln bill that gives tax breaks to businesses who hire those that are unemployed for longer than 60 days.  Many market analysts have been speaking lately about how ‘Career Risk’ becomes the ultimate factor in investment decisions.  These types of legislation are merely the political form of career risk, where legislators hope to please there constituents right before the next election season.   Is this really how we want to solve these problems by throwing more money at it and hope it goes away?  Why not try to PRODUCE something where there is DEMAND to create jobs?  Everything is just looking more and more artificial to me.  I know you’ve heard it a thousand times….

The consumer confidence number sent the market into a tailspin yesterday and here is what one of the consumer confidence board member’s said:

Consumer Confidence, which had been improving over the past few months, declined sharply in February. Concerns about current business conditions and the job market pushed the Present Situation Index down to its lowest level in 27 years (Feb. 1983, 17.5). Consumers' short-term outlook also took a turn for the worse, with fewer consumers anticipating an improvement in business conditions and the job market over the next six months. Consumers also remain extremely pessimistic about their income prospects. This combination of earnings and job anxieties is likely to continue to curb spending.

One thing that stuck out to me was the mention of ‘short term outlook’.  As I hear more and more about ‘short term outlook’ in the economy, I can’t help but question where all of the ‘wise-men’ went?  It seems this generation of Americans are constantly looking for that next short-term victory to satiate our animal instincts like some John Steinbeck novel.  From this macro perspective, I’d want to be long the VIX. As any unforeseen negative data like consumer confidence is twice as detrimental as it used to be. 

In other news, Greece is playing a game of “chicken” with its 10-yr bond sale this week.  Citi ups OKS, Credit Suisse ups FPL, MPG, Goldman Sachs ups EOG, Morgan Stanley ups UA, Deutsche Bank cuts STEC, Goldman Sachs cuts APA, Oppenheimer cuts NBL.  Harvard Professor Ken Rogoff says, “China’s economic growth will plunge on a debt fueled bubble”.

Asia down -1% overnight.  Europe mixed.  USD -20bps.  Oil -20bps.  Gold -80bps. 

S&P 500 PreMarket (last/% change prior close/volume): 
H&R BLOCK INC  19.7300 16.48    -16.47%
AUTODESK INC  25.6600 27.39    +6.74%
MILLIPORE CORP            88.8700 91.20    +2.62%
MATTEL INC      21.8000 21.28    -2.39%
GENWORTH FINANCI      15.2600 15.60    +2.23%
COMCAST CORP-A         16.1400 15.80    -2.11%
STATE ST CORP            45.8600 44.90    -2.09%
KB HOME           16.2200 16.55    +2.03%
DENBURY RESOURCE      13.5800 13.85    +1.99%
MBIA INC           4.8100  4.90      +1.87%
FPL GROUP INC  46.8000 47.15    +1.84%
AMERICAN INTERNA       26.7600 27.25    +1.83%
RANGE RESOURCES        50.6300 49.77    -1.7 %
EXPEDITORS INTL          36.9100 37.49    +1.57%
EOG RESOURCES           89.9100 91.28    +1.52%

Today’s Trivia:  What is the strongest muscle in the human body?

Yesterday's Answer:   Handball is the 3rd most popular sport in Germany.

Best Quotes:  “No one… and we truly mean no one… had been expecting these figure to drop this severely, for the other consumer confidence indicators that we pay heed to such as the Acnes weekly figures had been weak, but they had not been “this” week, nor had the monthly figures from the University of Michigan.” -Gartman

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