Morning Note...

Futures are flat to slightly (+5bps) higher this morning on a relatively light news day.  Emerging markets are higher on global economic recovery sentiment, and the euro is up against the USD on news of a bank bailout in Ireland (see more on that below).  Additionally, Greece successfully placed EU5 billion of 7yr notes yesterday, and their first day of trading today will be closely watched.  According to Bloomberg:

Greece’s prospects of raising 35 billion euros ($47 billion) of debt this year to avoid a bailout from the European Union may depend on how investors receive the nation’s seven-year bonds on their first day of trading. Greece’s 5 billion euros of notes fell after the country sold the securities yesterday without offering a yield premium over existing debt. The government got 6 billion euros of orders for the notes, compared with 15 billion euros for the 10-year bonds it issued on March 4, when it offered an extra 32 basis points, bankers involved in the deals said. “The market will be looking to see how this deal performs over the next few days, which is the real test,” said Georg Grodzki, head of credit research at Legal & General Investment Management in London, which oversees more than 300 billion pounds ($449 billion) of assets. “Greece needs to set the stage for its next issue and it won’t be a good signal if the spreads move out on this new seven-year issue.” Prime Minister George Papandreou’s government must raise as much as 10.5 billion euros by the end of May if it’s to avoid re-igniting the budget crisis that prompted the EU to step in with a rescue plan March 25. Yesterday’s sale was Greece’s first since EU leaders drafted the financial safety net. Greece’s Public Debt Management Agency said in January it needs to raise 53 billion euros of bonds in 2010. It has sold 18 billion euros so far.

In corporate news, the WSJ is reporting that AAPL is developing a CDMA phone for summer launch that is compatible with VZ’s network.  AAPL, QCOM, VZ, and S are trading higher pre-market on that news, while RIMM and T are trading lower.  Additionally, instrument company Danaher (DHR) raised Q1 guidance.  Note that earnings season (already?) is set to kick off April 12^th with Alcoa.  CaseShiller Home Price data is due at 9am, and Consumer Confidence is due at 10am.  Recall that in addition to facing month- and quarter-end this week, investors must consider that the Fed’s quantitative easing is due to end March 31^st as well.  According to Bloomberg News, all will be well, as private investors will take over what the Fed has started:  “The Federal Reserve’s completion this week of its program to buy $1.25 trillion in mortgage bonds probably won’t mean significantly higher U.S. home loan rates as investors return to the market, replacing the Fed.”  Whether that is actually true or not remains to be seen… 

In Ireland, the government effectively bailed out troubled banks today, agreeing to back stop toxic real estate loans.  Note that AIB down is 10% this morning on that news.  The guys at Hedgeye posted some thoughts on this topic this morning:

This Irish stock market story gets more interesting by the minute. In the last 48 hours, this country that the short sellers called a PIG in February has started to go down again. For the week-to-date, Irish stocks are flashing what we call a regional negative divergence (underperforming other countries in both the European region), and its doing so on very bad long term news.

The isn't "new" news, per se, but everything has a price. Timing, when the long term TAIL of a "Bad Bank" plan (taking over toxic loans from dysfunctional lenders) like Ireland has imposed on their citizenry can obviously wreak some havoc on your stock portfolio. If you don't invest alongside government-leaked inside information, your best path forward in Ireland is to wake-up every morning and understand when they are going to double down again on government debt.

“Dublin Down” is maybe a cute way of saying what happened yesterday in the Irish banking stocks, but there is nothing cute about this, ladies. Dublin based Allied Irish bank was down -17% yesterday on fears that the unknown is known again. After receiving over 7 Billion Euros in government support, Allied Irish could need as much as another 7.7 Billion Euros ($10.4B dollars) and the Irish government to take as much as a 70% stake in the company...

If you want to wrap all of these massive price moves in Ireland's stock market around your head and consider what could happen to US stocks from here (if indeed the Irish continue to be a lead indicator for global leverage disease coming back into focus), you might want to get yourself a pint.

Regular readers of this note know that I am a big fan of the 2008 book Are We Rome? by fellow Amherst grad Cullen Murphy.  As such, you can imagine my delight at reading this morning’s Bloomberg editorial on that very topic by a guy named Mark Fisher.  The full text is in the quote section below and I would encourage you to read it, but here’s a tease:

Unless the government creates a massive jobs program, cuts spending and taxes, and gains control of the national budget and the balance of payments crises, we should fear for our future.  Unless our fellow Americans relearn the value of hard work, no government plan stands a chance. Once the world realizes that the U.S. is the new Rome, the traditional tenets governing asset correlations will no longer hold, and we can expect a breakdown in traditional stock-bond portfolio theories.  Since paper assets are ultimately shoved down to zero, expect hard assets to benefit -- especially gold, energy and grains -- along with commodity-related equities. The name of the game going forward -- let’s say the next five years -- will be buying ahead of whatever China and other developing nations are trying to accumulate and diversifying away from the U.S.

It actually sounds pretty similar to what I posted in this space from Gloom, Boom & Doom’s Marc Faber yesterday… Regardless, as much as I like reading this stuff and welcome the comparisons to Ancient Rome, it’s worth noting that I have not made a cent on any such related trading strategies to date.  (Unless you count gold, but that’s a permanent P.A. fixture)  As always, the lesson remains:  the market can be wrong for a lot longer than most individuals – and funds, even – can stay solvent…

BofAMLCO ups HL.  JPHQ ups WLK.  BofAMLCO cuts DWA.  BCAP cuts GENZ.  JPHQ cuts BWY.  OPCO cuts TNDM.  Roth cuts GNVC.  OXM beats by 5c.  Geithner makes positive comments about AIG.  WEDC to be acquired by Microsemi for $7/share.  LDK misses by 9c and guides in-line.  DAI denies rumors it may sell Maybach brand.   WSJ reports that TM will license Prius technology to Mazda. 

Asia higher overnight.  Europe mixed but leaning slightly lower.  USD slightly lower.  Oil flat.  Gold -20bps. 

S&P 500 PreMarket 8:30am (last/% change prior close/volume): 

DANAHER CORP             80.90    +4.56% 900

DYNEGY INC-A                1.32      +3.94% 5000

QUALCOMM INC             42.88    +2.68% 71592

VERIZON COMMUNIC      31.18    +2.4 %  571465

WHOLE FOODS MKT       37.00    +2.35% 4510

AMERICAN INTERNA       35.17    +2.09% 43969

APPLE INC                     237.11  +2.03% 280180

WEATHERFORD INTL      15.90    +1.6 %  5550

AT&T INC                      26.10    -1.55%  435080

Today’s Trivia:  What is the tallest statue in the world?

                                                                                                                                                                             

Yesterday's Answer:  Sandy Springs, GA - UPS; Vinings, GA – Home Depot; Purchase, NY - PepsiCo; Issaquah, WA - Costco. 

Best Quotes:  “U.S. Decline, Sloth Look a Lot Like End of Rome: Mark Fisher 2010-03-30 01:00:00.2 GMT

March 30 (Bloomberg) -- Historians cite the late second century as the turning point of the Roman Empire, when the once- proud, feared society began its descent into infamy. As the ruling class was undermined by civil wars and attacks by outsiders, the Romans’ respect for law and social institutions began to erode. In the end, a combination of political and economic mistakes led to the empire’s downfall. The U.S. today is a mirror image of the Roman Empire as it tipped into chaos. Whether we blame our bloated government, a greedy elite or a lethargic population, the similarities between the two foreshadow a gruesome future. The Roman economy grew fat from the plunder of conquered territories and the added productivity offered by new lands. The waning of expansionism didn’t bode well for the empire. While the U.S. ascended quite differently, it also used its position as a superpower to fuel economic expansion. Because the country had the strongest military and economy in the post-World War II era, the U.S. dollar became the de facto global reserve currency, ensuring endless competitive advantages -- which have vanished in the last decade. Americans have become less productive while relying more on social safety-net programs such as Medicare, Medicaid and Social Security -- and now expanded health-care insurance. Worse, like the ancient Romans, a sense of entitlement has replaced the drive and motivation we once championed. With easy access to abundant government handouts, it’s no wonder so many jobless people have stopped looking for work.

Bread and Circuses…  In the fifth century, the Roman political elite began searching for ways to distract its population from the hopelessness at hand. Bread and circuses postponed the ultimate fall. The tactic stopped working when people realized their bread tasted stale and sensed the true scope of the impending disaster. The U.S. government’s version of bread offerings proliferated throughout the fiscal crisis, in which collapse was averted only by a massive financial bailout and an endless supply of paper money, along with the rest of the seemingly endless sustenance being shoved down America’s throat. Meanwhile, the administration hasn’t yet tackled the most pressing issue: job creation. Given the current state of the labor market, American workers can’t possibly provide enough tax revenue to support the government’s swelling debt. Even more unsettling is the government’s inability to fix the financial crisis. After a stream of stimulus programs and bailouts, the Federal Reserve continues to print enormous quantities of dollars and buy the nation’s debt.

California Like Greece…  Many state governments are in even worse shape. With California’s 10-year debt currently yielding about 4.5 percent (municipal debt typically yields less than 10-year Treasuries, which now yield about 3.9 percent), the state poses the same sort of danger to the U.S. that Greece does to the European Union. If the federal government decides to bail out California, what happens when Michigan and New York start demanding the same treatment? The burden of underfunded pension liabilities will cause states’ budget deficits to further balloon. Since defined state benefit plans assume an unrealistic 8 percent rate of return -- zero percent, at best, is more likely -- we can only imagine the catastrophe to come once states have to make good on their obligations. As our society becomes increasingly immobile and sits on the couch doing nothing but surfing the Internet, using iPhones and watching “Jersey Shore,” the hopelessness of the situation becomes clear.

Fear Mounts…  Unless the government creates a massive jobs program, cuts spending and taxes, and gains control of the national budget and the balance of payments crises, we should fear for our future.  Unless our fellow Americans relearn the value of hard work, no government plan stands a chance. Once the world realizes that the U.S. is the new Rome, the traditional tenets governing asset correlations will no longer hold, and we can expect a breakdown in traditional stock-bond portfolio theories.  Since paper assets are ultimately shoved down to zero, expect hard assets to benefit -- especially gold, energy and grains -- along with commodity-related equities. The name of the game going forward -- let’s say the next five years -- will be buying ahead of whatever China and other developing nations are trying to accumulate and diversifying away from the U.S.

The China Factor…  Consider the trading relationship between the U.S. and China. When the U.S. funnels its unfinished products to China, the Asian nation is able to send back manufactured goods -- thanks to its abundant supply of cheap labor -- in return for dollars. While the American people are busy tinkering with their newly manufactured playthings, the Chinese continue to use their new wealth to buy energy and commodity assets. Thus, China and the other developing countries that are amassing dollars, euros and pounds basically play a game of global hot potato, trying to pass the potato -- worthless paper currencies -- to others in exchange for energy, water and valuable food assets. As China continues to thrust its dollars at all things commodity-related, it’s hard not to laugh when hearing President Barack Obama speak about trying to identify “environmentally sound” opportunities in energy.

Meltdown Ahead…  It’s only a matter of time before the mechanism that has allowed the government to sustain its trade deficit for longer than it should have -- similar to the Asian dollar peg of the 1990s -- causes a simultaneous decline in the U.S. currency, asset prices and the economy. Once people begin to realize that their paper currencies, stocks and bonds are all garbage, we can expect a meltdown. Although it may be too early to predict an impending collapse in paper assets and an immediate need to acquire hard assets, it’s clear that we’ve reached a turning point. The ship has begun to sink. As I await a global re-set of asset values and prices, I will continue to monitor the swelling federal and state tax revenue levels, the rising animosity between Main Street and Wall Street and the progress made by commodity-hungry nations as they continue to eat our lunch.  While I continue to hope for the best, it’s far wiser to prepare for the worst.”

(Mark Fisher, author “The Logical Trader,” is the founder of MBF Asset Management LLC. The opinions expressed are his own.)