| Kidder Reports Archive, Thursday, Dec 24 |
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Latest Posts, News & Opinions
Thursday FX closes Euro: 1.4363 vs 1.4330 Dollar-Yen: 91.670 vs 91.639 Euro-Yen: 131.68 vs 131.34 Canadian dollar: 1.0485 vs 1.0481 Aussie dollar: 88.25 vs 87.96 Feb Oil is $77.91, up +$1.34 from vs $76.67 Spot gold is $1,104.45, up from $1,087.10 DJIA closed at 10,520.10 +53.66 +0.51% S&P closed at 1,126.48 +5.89 +0.53% Today's Recap Baltic Dry Index fell -40 to 3,023 Wednesday, its 13th consecutive decline Nikkei closed up +158, better than expected +114 Japan to cut spending plan, may prompt BOJ response Asian markets rallied on expectations China will maintain loose monetary policy Fannie and Freddie CEOs to get up to $6M in pay Divided Senate gave final approval to a $290 billion hike in the federal debt limit Senate passes its version of health care reform by wide margin (60-39) Jobless claims fall -28,000 to 452,000 (470Ke v 480K prior) Continuing claims down -127,000 to 5.08M (5170Ke v 5186K prior) Durable goods rise +0.2% vs 0.5%e; weakness in transportation offsets gains elsewhere Durable goods ex-transport up +2% vs -1.3% prior Natural gas inventories fall 166 bcf, prices lower after report World stocks extended gains to their highest level in almost three weeks
Analysis Abnormal BCA Big Pic CalcRisk CW Econoday EconPic MFGR Mish MS Roubini
The four-week average of weekly unemployment claims decreased this week by 2,750 to 465,250. This is the lowest level since September 2008. Although falling, the level of the 4 week average is still high, suggesting continuing job losses. -Calculated Risk
Barchart Morning Call at 7:46
The minutes of the Nov 19-20 BOJ monetary policy meeting revealed that "many" board members expressed readiness to act against financial market volatility last month, before officials held an emergency meeting to address the surge in the yen to a 14-year high. China's deputy head of its National Bureau of Statistics saying that Q4 economic growth in China will "exceed" the 8.9% pace of Q3, while India's Planning Commission Deputy Chairman said India's economy is "well positioned" to accelerate to 9% growth rate a year.
Bond Market Briefing Bloomberg Bloomberg Tsys SMRA Reuters Spread Dec10 Wrightson
Treasuries are seeing a slight downtick following Initial Claims for 12/19 that came in below consensus. A November Durable Goods Orders increase of +0.2% vs +0.5% consensus may have also contributed to the downward 10-year Note movement. Overall, we note the data hasn't had a big impact on Treasuries. The dollar has rebounded slightly vs the euro, falling through the 1.44 level. Similar action has been seen in the yen; $/JPY is now ~91.60. At the long-end however, 30-yr Bonds are seeing some selling pressure, sending the yield to 4.625%. The 2-10-yr yield spread has narrowed to 283. -Briefing at 8:54
Chart Feature Euro futures low close is 1.4252 Tuesday Monday Dollar index sets a 3-1/2 month high Tuesday
Columnists Asia Times Beat Bloomberg Crane Econ View David Goldman Plessis Pritchard RealClear
Banks Bundled Bad Debt, Issued It and Won - Morgenson & Story, NY Times -Real Clear The excess capacity series (red line) peaked in June of this year, and has been moving downward ever since. If the pattern in the two most recent recessions holds, those in 1990-91 and 2001, the peak in the unemployment rate will come between 16 and 19 months after the peak in excess capacity, i.e. around a year from today (though prior to 1990 the peaks were coincident). -Economic View Gilts sell-off as Britain joins Italy in debt house - The yield on 10-year gilts spiked Wednesday to 3.97pc, 46 basis points higher than costs on French bonds. Britain and France were neck and neck as recently as last month, before Labour’s pre-Budget report raised deep concerns among Chinese, Arab, and Russian investors about the credibility of British state. But what has caught market attention is the narrowing gap with Italian bonds, once mocked as the symbol of an ill-governed nation in thrall to the Dolce Vita. -Pritchard Investors who seek triple-A debt are running out of options. Yet another top-rated class of debt is on the hit list now that Standard & Poor’s may downgrade covered bonds — a type of mortgage-backed security popular in Europe. Soon there will be little AAA debt left outside the world of government and quasi-government debt. That’s putting safety-oriented investors in a bind. \\ S.& P. now gives its top rating to just four American industrial companies: Automatic Data Processing, Exxon Mobil, Johnson & Johnson and Microsoft. -Crane
Commentary Aleph Baseline Hutchinson Kid Dynamite Mauldin Naked Noland Oracle Roseman
My favorite commodities in 2010 include the grains, coffee, cocoa, soybean and palm oil. I also like gold and silver but believe 2010 will be a moderate year for the metals, meaning maybe a 10% to 15% gain. I’m neutral-to-bearish on crude oil but like natural gas. -Roseman Think isolation. Think monetization. Think trapped. Think Catch-22, no remotely viable option. Think motive for propaganda. Think end of the road in a gigantic US Treasury bubble, in the process of discredit. Think last resort of monetization, due to the absence of bidders at US treasury auctions. Think pressure like a vise. The USGovt is in a great big bind and chooses not to discuss it. As European nations ponder the plight of sovereign debt default, the United States compares an order of magnitude worse from deeper insolvency. A default closer to home is considered unthinkable. So was a broad mortgage market breakdown. So was an endless housing decline. So was an insolvent broken banking system. So were consecutive $1 trillion federal deficits. All were forecasted here. -The Oracle Mr. Bernanke’s key audiences – in financial markets – do not find him credible on the central issue of the day, presumably because he is unwilling to condone measures that would ensure today’s massive banks become “small enough to fail.” If potential creditors do not fear losses, they will provide funds on easy terms to our big banks and we will re-run some version of our previous bubble. This is how our financial system works. \\ The Senate will decide soon, but Mr. Bernanke has made his case and the market has already voted. Given his testimony, his written response to Senators’ questions, and the market reaction, we recommend that Mr. Bernanke not be reconfirmed. - Baseline
Commodities List Bloom Energy Kitco Drum Reuters CLG Gold G Soy H Wheat NGG HGG CRB
Corn and soybeans rose for a second day on speculation a weaker dollar and costlier crude oil may lift demand for the crops used for fuel, food and animal feed.
Currencies Bloomberg BBH USD Index Greg Mike Laidi AL Twitter Reuters Spot
The next round of the gold rally will be led by Europe. The broad advantages of a grand currency devaluation will soon come front and center. Greece, Spain, and other nations will realize the benefits of debt conversion and reduction on the back of returned currencies in the Drachma and Peseta. Then comes steady currency devaluation to enable a competitive position. The common Euro serves as a straitjacket for the distressed nations in the South of Europe. They are stuck, and will surely default one by one. The Revived Roman Empire once more proves frustrating, as it has for a millennium. The sequence of events is complicated. A heavy weight will sit atop the Euro currency from European credit failures until important significant events are unfolded and a new Core Euro is launched. At first the core version might simply be the old version with carved off burdensome Southern gristle and fat. - Oracle in Commentary
Foreign Policy Afghan Anti-War Asia Times Cole Debka FP Brief Stratfor Walt Wired
Iran protests spread in heartland -Cole Egypt, Saudis secretly draft Palestinian statehood motion for Security Council -DEBKA The additional 30,000 troops (not to mention the extra 50,000 mercenaries) will add $30 billion to the Afghan war's annual toll. If they manage to kill or capture all of the estimated 100 al-Qaeda fighters in the country, it'll cost us only $300 million a head. And the rest of the billions and billions budgeted for the place can be spent in bribing the Taliban to behave long enough for us to call it victory and come home. -Michaelson in Grumpy Guys
Grumpy Guys Cluster FA GW G's Mess Jesse Kadrosky Michaelson Ticker Martenson Zero
It was 30 years ago this week that the Soviet Union sent the Red Army into Afghanistan, an adventure that lasted ten years and undoubtedly hastened the end of both the Soviet empire and the Soviet Union. A silent moment of remembrance seems in order. -Michaelson in Grumpy Guys
Political AmBlog Beast Drudge 538 Hines Politico P-Animal P-Wire Raw Swamp TruthDig
Senate passes its version of health care reform by wide margin -Hines
South America Merco Ambito AP FT Bloom Independent Economist Strat
The killing of drug cartel chief Arturo Beltran Leyvan will set off a wave of violence throughout Mexico, as survivors strike back at the government and rival cartels seek to expand their territory -Stratfor Mexican Marines managed to kill drug kingpin Arturo Beltran Leyva last week, in a long gun battle that ended up with one marine, Melquisedet Angulo, dead. The drug gang retaliated by killing Angulo's mother, aunt, and siblings. This is what a failed state looks like. - Michaelson in Grumpy Guys Four suspected members of a cartel-aligned hit squad have been arrested in the slaying of the family of a Mexican marine hailed as a hero for dying in a raid that killed a top drug lord. Tabasco state Attorney General Rafael Gonzalez said gunmen from the Zeta gang... AP
Science AlterNet Farmer Discover Global Edge MIT Next New Scientist
Applied Materials Moves Solar Expertise to China - The company says its future is in the Chinese market. -MIT In an economy structured around industrial agriculture, sustaining small farms can be a challenge. 'Slow money' economics could be the answer. -AlterNet
Stock Market Briefing Futia BW Pragmatic Nikkei Schaeffer St Smart 24/7 Wall St Yahoo
The S&P500 has yet to break above 1120, which is the 50% retracement from the Oct 2007 highs to the March 2009 lows. We have been pointing out the 1120 level as an important level for equities since this October 22nd article and it remains a staunch barrier ever since. -Laidi in Currencies Goldman sees very low rates, stronger than expected earnings, strong commodity demand and investor reallocation driving prices higher. Goldman sees no rate changes through 2011 – one of the most accommodative outlooks of any bank we have covered. -Pragmatic The next weekly patterns will be for the next monthly strength period to begin on Wednesday, Dec. 30, and to run through Thursday, January 7. - Street Smart
Bond Market Briefing Bloomberg Bloomberg Tsys SMRA Reuters Wrightson
Thursday close: The 2Y/10Y is steeper by +1.1bp to 283.7; record close is 284.2 on Dec 22 10Y yield is +5.3bp to 3.801% (vs 3.497% on Nov 6) 10yr Tips is +3.4bp is 1.430% 2Y yield is +4.2bp to 0.964% (vs 0.848% on Nov 6) Tips CPI inflation gauge is hotter by +1.9bp to 2.371% - YTD high is 2.374% on Dec 22 * Gauge was 0.135% on Dec 31; decade average is about 2.70% * All-time low is 0.010% on Nov 20; recent low is 1.55% in July * The 2008 high was 2.613%; gauge was 1.94% just before Lehman bankruptcy On Wednesday, the spread between Dec 2010 euribor and eurodollars closed at 31.0, narrower by -22.0 from 53.0 on Dec 11. The Dec 2010 Euribor-Eurodollar spread has been narrowing below its 18-day average (last at 48.6) for most of December. This narrowing of the EU/US interest-rate differential probably means traders are losing faith in 'an extended period' of zero US interest rates. The spread provided an early warning to exit the dollar carry trade.
Currencies Bloomberg Brown Bros USD Index Laidi AL Twitter Reuters Spot
Thursday closes at 13:00 Euro: 1.4363 vs 1.4330 Dollar-Yen: 91.670 vs 91.639 Euro-Yen: 131.68 vs 131.34 Canadian dollar: 1.0485 vs 1.0481 Aussie dollar: 88.25 vs 87.96
Calendar Econoday SMRA Wrightson Barchart Any Date
Monday, 12/28 10:30 Dallas Fed manufacturing survey 13:00 2Y note auction Tuesday 12/29 07:45 Chain Store Survey 08:55 Redbook survey 09:00 Case-Shiller index 10:00 Consumer confidence 13:00 5Y note auction 17:00 ABC Consumer Comfort Index Wednesday, 12/30 07:00 MBA mortgage applications 09:45 Chicago PMI 10:30 Oil inventory data 11:00 KC Fed index 13:00 7Y note auction Thursday, 12/31 08:30 Jobless claims 08:30 Continuing claims 10:00 Milwaukee PMI Recommended early close
Baltic Dry Index - - - Bloomberg - - - Google
The Baltic Dry Index fell -40 to 3,023 Wednesday, its 13th consecutive decline. The BDI is down 1,638 points from its 14-month high on Nov 19 at 4,661. The multi-month low is 2,163 on Sept 25 and its 2008 high was 11,793. The 20 year average is near 2,300.
2Y Yield Spread: Germany Over US - - - Tsys Yields
At 11:08 Tuesday, the spread of Germany 2Y over US 2Y is +31 vs +54 on Dec 7 German Dec 2Y is 1.19%, higher in yield by +3.0bp US Nov 2Y yield is 0.88%, higher in yield by +2.5bp; record low is 0.64% on 17 Dec 08 On Dec 7, Mar euro contract was 1.4815 vs 1.4227 today
Nikkei Forecast- - - Nikkei - - - NKH0 - - - DJH0 - - - NKH vs DJH
The Nikkei is expected to open up +20 Friday in Tokyo. The NK/DJ spread is +109 and trading well above -296, the 21-day average. Accordingly, NKH is quite rich at 405 above to DJH.
Archives and All Links - - - Archives
Keep In Mind
Either currencies or debt markets will blowup in next financial dislocation Public finances of the major Western countries are going to become unmanageable Four troubled giants are on life support and need continuing infusions Banks face huge rollovers of their corporate debt in next few years Consumer spending remains persistly weak Unfavorable conditions in residential real estate Commercial real estate foreclosures will have “catastrophic effects” Continued policy reflation should see trade weighted index fall to fresh lows (BCA) Core inflation is nearly impossible (statistically, anyway) Stocks represent valuable enterprises which are inflation and dollar hedges Either currencies or debt markets will blowup in next financial dislocation -- Dollar, gold and the VIX are likely to produce the biggest gains -- Australian Dollar and Brazilian Real appear particularly overvalued -- China and Hong Kong have ‘dangerous’ bubbles in the real estate market -- Global economy could down dramatically if China slows growth because if inflation Public finances of the major Western countries are going to become unmanageable -- Bond market pressures on the PIIGS: Portugal, Italy, Ireland, Greece and Spain -- Credit-rating agencies are on collision courses with Spain, Portugal and Greece -- Social security systems likely to be raided and social unrest is probable -- Many state/local/provincial/regional governments face a funding crisis Four troubled giants are on life support and need continuing infusions -- AIG, Fannie Mae, Freddie Mac and GMAC are long-term wards of the state -- Total risk they pose to the taxpayer far exceeds that of the big banks Banks face huge rollovers of their corporate debt in next few years -- More bank failures: 140 failures ytd and over 500 banks on so-called problem list -- S&P has warned that nearly all of the world's big banks lack sufficient capital Consumer spending remains persistly weak -- Unemployment likely to move above 10.0% again after Nov drop from 10.2% -- To get a 5% unemployment rate within 7 years, US needs 300,000 new jobs a month -- Gasoline prices are higher than year ago and a cash flow drain on consumers Unfavorable conditions in residential real estate -- Residential investment is best leading indicator; huge overhang of vacant units -- Higher mortgage rates likely when the Fed stops buying GSE MBS on Mar 31 -- Significant increase in Alt-A and Option-ARM mortgage resets in 2010 -- Second wave of defaults likely as a result of resets and strategic defaults -- At least 23% of all homeowners with mortgages are underwater Commercial real estate foreclosures will have “catastrophic effects” * Fitch warns of huge CRE losses for life insurance carriers on mortgages * $1.4 trl in commercial loans are due in next 5 years; much will not be renewed Continued policy reflation should see trade weighted index fall to fresh lows (BCA) -- Yen may become the funding currency to short to fund the carry trade -- Dollar in bear market until Fed signals confidence in growth and hints of exit! -- Capital controls to curb hot money flows if dollar weakens again -- But watch trade deficit -- if it continues to narrow, the dollar may do better Core inflation is nearly impossible (statistically, anyway) -- Owners' equivalent rent is largest single component of the core CPI at 24%. -- Rental vacancies remain high, landlords have virtually no pricing power -- CapU is 71.3%, up from post-war low of 67.6%; but still curbs inflation and wages Stocks represent valuable enterprises which are inflation and dollar hedges -- Inventories and staff are very lean; operating leverage gives earnings much upside -- Dollar devaluation is huge positive for firms with int'l revenues; and visa versa -- Emerging economies with reserves, high productivity growth, low debt are valuable
23 December 9AM
Eurobondonline - Fixed Income - CarryTrade - Eurex - Euribor - EquityIndex - SFE - Ratios EquityIndex We are long ESH0, NQH0, DJH0 We have stop reversals, opposite the trendspotter.We are short Feb Vix CBT we are long ZBH0, ZNH0, ZFH0, ZTH0 We have stop reversals, opposite the trendspotter . we are long TBT and PST Fixed Income ETF's CBTSpreads We have steepners on. ZBH0 - ZTH0 trades 3.03 ; We are short 2 ZBH0/long 7 ZTH0 from 2.97 bp's; ZFH0 - ZTH0 trades 1.02 bp's . We are short 5 ZFH0/long 6 ZTH0 from .96 based on daily moving average cross. Eurex we are short Bund , Bobl , long Schatz & long Gilt .We have stop reversals , opposite the moving averages. Eurex Curve We have steepners on Mar10 Bund/Schatz trades 1.54. We are short 2 Mar0 Bund / long 9 Schatz at 1.335 bp's ;Bobl/Schatz trades .65 bp's; We are short 5 Mar0 BOBL/long 12 Shaz at .53 bp's CarryTrades: Mar10Bond - GEH10 trades 4.37 bp's, We are long 1 ZBH0/short 5 GEH0 from 4.22bp's and will add when there is a moving average cross ZNH0 - GEH0 trades 3.64 We are long 2 ZNH0/short 7 GEH0 at 3.50bp's and will add when there is a moving average cross Mar10CBTSwap - GEH0 trades 5.68 bp's We are long 1 SRH0/short 3 GEH0 at 5.37 bp's and will add when there is a moving average cross Mar10Bund - IH0 Euribor trades 2.61 bp's We exited long 1 Bund/short 3 IZ9 from 2.77 bp's at 2.59. and will reset near 2.75 Mar10Gilt - LH0 Short Sterling trades 3.79 bp's We are long 1 Mar10Gilt/short 5 LH0 from 3.68 bp's and will add when there is a moving average cross Mar10SFE10Yr - GEH0 trades 5.20 bp's We are long 1 SFE10yr/short 2 GEH0 at 5.21 bp's and will add when there is a moving average cross EURO$ We are long GEH1 GEH0 - GEH1 trades 1.36 . We are short GEH0/long GEH1 at 1.36 Euribor We are long IH1 IH0 - IH1 trades 1.12 . We are short IH0/long IH1 at 1.12 Short Sterling We are long LH1. LH0 - LH1 trades 1.64. We are short LH0/long LH1 at 1.64 LU0/LU1 - IU0/IU1 We sell 10 LU0 / buy 10 LU1 at 1.64 and buy 6 IU10/sell 6 IU11 at .91 = .73;Dec 3 we exit at .66.LU10/LU11 Sterling - IU10/IU11 Euribor trades .75 Dec 21 - short 10 LU0 /long 10 LU1 at 1.67, long 6 IU0 /short 6 IU1 at .91 = .76 SFE we are short SFE 10yr, 3yr & IRU0 . We have stop reversals , opposite the moving averages. SFECurve We are long 5 IRH0/short 5 IRZ0
BONDS Briefing USH TYH 5-min 10-min 10Y 2Y/30Y TU/US Bund/TY
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