| Kidder Reports Archive, Thursday, Dec 31 |
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Latest Posts, News & Opinions
Feliz Año Nuevo Today's Recap Archives Jobless claims -22,000 to 432,000, better than expected and best since July 08 Continuing claims declined -57,000 to 4.98 million, also better than expected +24,000 New York Business ISM Index: 59.7 vs. 62.9, 5th straight month of expansion Milwaukee PM smoothed index 52 vs 57 Chicago PMI PMI revised to 58.7 from 60
Analysis Abnormal BCA Big Pic CalcRisk CW Econoday EconPic MFGR Mish MS Roubini
The decline in initial claims is good news, although the 4-week average suggests continuing job losses. Also we have also to be careful because data can be volatile during the holidays. -Calculated Risk Bankers Get $4 Trillion Gift From Barney Frank: David Reilly of Bloomberg - Mish When the Case-Shiller index began increasing in July, 14 of 20 markets were showing an increase. This number steadily increased as time wore on. Case-Shiller reported in August that 18 of 20 cities showed price increases. When Case-Shiller reported in September, 18 of 20 cities showed price increases. Then, last month the number turned down slightly to 17 of 20 markets. This month the number really turned down. Only 10 of 20 markets rose in the data (for sales through September). That is not good. -Credit Writedowns The Fed could announce a federal funds target of 3% but the tsunami of excess reserves now out there swamps any conceivable demand, so the Fed funds rate would be guaranteed to remain stuck at zero. The target would be meaningless. The solution is twofold. First, the Fed can pay interest on those reserves, and if that interest rate is high enough, it will put a floor under the federal funds rate. But that may not be perfect. So, the second solution is to drain or otherwise immobilise those excess reserves so that banks won’t want to, or can’t, lend them in the fed funds market. That’s the purpose of the term deposits, of the long-term reverse repos, and of other Rube Goldberg solutions yet to be dreamed up by Brian Madigan, Brian Sack, and their fellow propeller heads at the Fed. It makes perfect sense for the Fed to figure out today how it will go about raising the fed funds rate eventually, but it doesn’t mean (or at least I hope it doesn’t) that it’s about to do it. -Credit Writedowns in Analysis
Barchart Morning Call at 7:46 EurobondLive
The German stock market was closed today along with most of the Asian stock markets for the New Year's holiday. The main supportive factor for global stocks this morning is the comment by China's central bank governor Zhou Ziaochuan that he will maintain a "moderately loose" monetary policy because 2010 will be "a crucial year in strengthening the stabilization and recovery of the economy and defeating the international financial crisis." Mining companies are being supported today by higher copper and gold prices. Ford Motor is up 3% in European trading this morning on indications that US auto sales improved in December.
Bond Market Briefing Bloomberg Bloomberg Tsys SMRA Reuters Spread Dec10 Wrightson
The Treasury complex was hit rather hard following the stronger than expected claims number, but managed to recover and finish with moderate losses. Speculation that next week's NFP report would finally show job increases was an additional damper to price action and market psychology. The curve was in a flattening trend throughout the abbreviated session. Retail activity was reported as light, with professional and dealers dominatimg the price action. Technicals remain negative as today's down move negated the minorities bottom theory. Current levels are in moderately oversold territory though. The marketplace should return to normal operations next week, with important data and supply announcement awaiting us. -Courtesy of JK
Chart Feature Euro futures closed at 1.4252 on Dec 22, recent low Monday Dollar index closed at 78.25 on Dec 22
The US DOLLAR INDEX could be sending signals similar to those in July 2008, when the bottoming process turned into a full fledged rally that was boosted by massive deleveraging in equities and commodities. The fact that the current USD rally is emerging despote strengthening oil and stocks suggests more powerful USD dvances ahead at the next downleg in equities. We will closely watch horizontal-shaped 100-week MA, currently at 78.90, which proves as the main barrier to the important 81.40 level, currently the 50% retracement of the decline from the March high to the November low. USDJPY has already hit the 93 target projected for Q1, but it's mostly yen weakness that is driving the move rather than USD strength. -Laidi in Currencies
Columnists Asia Times Beat Bloomberg Crane Econ View David Goldman Plessis Pritchard RealClear
Eurozone credit contraction accelerates - Bank loans and the M3 money supply contracted at an accelerating pace in November, raising risk that a lending squeeze will choke region's recovery. -Pritchard Washington Post Joins With Peter Peterson, Ends Pretense of Being a Serious Newspaper -Dean Baker in Beat
Commentary Aleph Baseline Hutchinson Kid Dynamite Mauldin Naked Noland Oracle Roseman
Commodities List Bloom Energy Kitco Drum Reuters CLG Gold G Soy H Wheat NGG HGG CRB
Oil is $79.65 (15:19)
Currencies Bloomberg BBH USD Index Greg Mike Laidi AL Twitter Reuters Spot
2009 Year End FX Closes Euro: 1.4331 Dollar-Yen: 93.071 Euro-Yen: 133.40 Canadian dollar: 1.0462 Aussie dollar: 89.74
Foreign Policy Afghan Anti-War Asia Times Cole Debka FP Brief Stratfor Walt Wired
8 CIA Agents, 5 Canadians Killed in Afghanistan - Anti-War
Grumpy Guys Cluster FA GW G's Mess Jesse Kadrosky Michaelson Ticker Taibbi Zero
We will eventually learn that the US war in Yemen started some time ago. The US and Yemen are now looking for targets in Yemen for air/cruise missile strikes in retaliation for the botched attack on an airliner that al Qaeda in Yemen foolishly claims credit for. There are thought to be as many as 300 al-Qaeda fighters in the country. The morning line is $300 billion and 4 years. Place your bets. Too Big To Flail: The banking reform bill ensures that the next time around the Fed will hand out as much as $4 trillion to failed banks. That's twice what they got this time around, so you know they'll stop taking stupid risks...Michaelson in Grumpy Guys
South America Merco Ambito AP FT Bloom Independent Economist Strat
Uruguayan economy forecasted to grow 4%; peso appreciated 25% in 2009 - Uruguay’s peso achieved a record annual gain as neighboring Brazil’s economic recovery fueled demand for the country’s exports. The peso has jumped 25% this year, (9.4% in the last quarter) its biggest annual advance since the government created it in 1993 to replace the nuevo peso as part of an effort to stem surging inflation. -Merco
Stock Market Briefing Futia BW Pragmatic Nikkei Schaeffer St Smart 24/7 Wall St Yahoo
DJIA closed 2009 at 10,428.05 -120.46 -1.14% S&P closed 2009 at 1,115.10 -11.32 -1.00% Don’t let the flat market of the last three months lull you. Be prepared for high volatility to return very soon. I showed you a few times in recent weeks how Bollinger Bands had narrowed to an unusual degree, an indication that considerable volatility and a big market move in one direction or the other will follow. The ‘monthly strength period’ was due to begin yesterday, and to run through next Thursday, January 7. - Street Smart in Stocks
Bond Market Briefing Bloomberg Bloomberg Tsys SMRA Reuters Spread Dec10 Wrightson
2009 Closes: The 2Y/10Y is flatter by -0.9bp to 269.9 10Y yield is +4.7bp to 3.835% 10yr Tips is +1.4bp is 1.414% 2Y yield is +5.6bp to 1.135% Tips CPI inflation gauge is hotter by +3.3bp to 2.421% - YTD high is 2.447% on Dec 28 * 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 35.5, narrower by -18.5 from 53.0 on Dec 11. The Dec 2010 Euribor-Eurodollar spread has been narrowing below its 18-day average (last at 42.0) 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
2009 Year End Closes Euro: 1.4331 Dollar-Yen: 93.071 Euro-Yen: 133.40 Canadian dollar: 1.0462 Aussie dollar: 89.74
Calendar Econoday SMRA Wrightson Barchart Any Date
Monday, Jan 4, 2010 10:00 ISM factory report 10:00 Construction spending Tuesday, 1/5 07:45 Weekly chain store sales 10:00 Factory orders 10:00 Pending home sales 11:30 4-week bill auction 12:00 Auto sales 17:00 ABC Consumer Comfort Index Wednesday, 1/6 07:00 MBA mortgage applications 08:15 ADP employment report 10:00 ISM non-mfg report 14:00 FOMC minutes Thursday, 1/7 00:00 Monster employment index 08:30 Jobless claims 09:00 Chain store sales 11:00 10-yr TIPS and Tsy note announcements
Baltic Dry Index - - - Bloomberg - - - Google
The Baltic Dry Index fell -18 to 3,005 Thursday, its 14th consecutive decline. BDI is closed for the year. The index range in 2009 was 772 to 4,661. The BDI is down 1,656 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 10:48 Wednesday, the spread of Germany 2Y over US 2Y is +26 vs +54 on Dec 7 German Dec 2Y is 1.34%, higher in yield by +5.3bp US Dec 2Y yld is 1.08%, unchanged On Dec 7, Mar euro contract was 1.4815 vs 1.4292 today
Nikkei Forecast- - - Nikkei - - - NKH0 - - - DJH0 - - - NKH vs DJH
The Nikkei is expected to open up +82 Wednesday in Tokyo. The NK/DJ spread is +247, making NK quite rich at 445 over its 21-day average of -190.
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 545 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 -- The bulk of the Option Arm resets trigger in 2010-2011 -- 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 Six Factors In Play - Mish in Analysis * If there is a spike, it is far more likely earlier in the year than later and we are headed into 2010 currently at 3.84%. Another 75 basis points certainly seems possible with the "hate treasury trade" back in vogue. * Treasuries are in an unseasonably favorable period right now, and that lasts all the way through May. * If there is a chain of favorable data such as a surprise to the upside in GDP for the 4th quarter of 2009 or 1st quarter of 2010, that too can contribute to a spike in yields. But all the way to 5.5%? Sustained? I'll put the odds of that at 15%. * Most analysts seem cock-sure the bottom in the stock is in and we are off to the races. The bottom may be in, but even if so the odds of a hard correction are very high in my opinion. Should that happen, there can easily be another flight to safety trade. * Unemployment is unlikely to dip substantially below 10% in 2010 and could easily rise to 11%+. That would kill a sustained rise in consumer spending, put a damper on earnings, and lead to higher chargeoffs on credit cards. Such events would be favorable for treasuries. * The global recovery can easily falter in the second half of 2010. That too would be favorable for government bonds in general.
BONDS Briefing USH TYH 5-min 10-min 10Y 2Y/30Y TU/US Bund/TY
STOCKS Briefing DJIA NKH0 NK/DJH S&P Nikkei Yahoo DJ Mini USD/FX SpotFX USD Euro Yen Aussie Loonie BL Cur Laidi Twitter BL Cur BBH Barchart OIL GOLD Oil CLG Gold G Soy H Wheat H CRB Metals BL Commodities NGG Energy BOND MARKET Across the Curve Briefing Bonds Bloomberg Tsys SMRA Wrightson COMMODITIES Barchart List Bloomberg Energy Report Kitco Oil Z Gold Z Soy F Copper Z CRB Gas Z CURRENCIES Ashraf Laidi Laidi Twitter Bloomberg Brown Bros Spot FX STOCK MARKET Briefing Carl Futia Pragmatic Capitalist Nikkei Street Smart S&P Chart Yahoo ANALYSIS BCA Big Pic Beat CalcRisk CW Econoday EconPic MFGR Mish MS Oracle COLUMNISTS Asia TImes Bloomberg Crane Econ View David Goldman Pritchard RealClear COMMENTARY Aleph Baseline Hutchinson Mauldin Naked Noland Roseman GRUMPY GUYS Bail Cluster FA GW G's Mess Jesse Kedrosky Michaelson Ticker Martenson Ninja Zero
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