| Kidder Reports Market Digest, Wednesday, February 17 |
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Latest Posts, News & Opinions
Euro is 1.3768 (18:17) Todays Recap - - - Archives ABC Consumer Comfort Index falls -1 to -49 07:00 MBA mortgage prch. index 07:45 Weekly chain store surveys 08:30 CPI revisions 08:30 Housing starts (MS sees 540,000 unit annual rate) 08:30 Import prices 09:15 Industrial production (MS ooks for a 1.1% gain) 09:15 Capacity Utilization (MS see a new 14-month high) 14:00 US budget 14:00 FOMC minutes likely boost dollar due to details on hawkish dissent by Hoenig
Bond Market Briefing Bloomberg Bloomberg Tsys SMRA Reuters Wrightson GEZ0 Spread Dec10
Columnists Asia Times Beat Bloomberg Crane Econ View David Goldman KR List Pritchard RealClear
Currencies Bloomberg BBH Laidi AL Twitter Michalowski Oracle Reuters Spot
Bond Market Briefing Bloomberg Bloomberg Tsys SMRA Reuters Wrightson GEZ0 Spread Dec10
Tuesday Closes: The 2Y/10Y is 285.8, -0.8bp 10Y yield is 3.661%, -3.2bp 10yr Tips is 1.405%, -3.1bp 2Y yield is 0.802%, -2.4bp Tips CPI inflation gauge is 2.255%, -0.2bp * The 2010 high is 2.475% on Jan 8; the 2009 high is 2.447% on Dec 28 * The decade average is about 2.700%; all-time low is 0.010% on Nov 20 * Gauge was 1.414% on Dec 31, 2009 and 0.135% on Dec 31, 2008 * The 2008 high was 2.613%; gauge was 1.94% just before Lehman bankruptcy The Eurodollar EDZ0 closed at 0.965% Friday, putting the yield of Dec Euribor at +32.5bp over the comparable US rate. The spread is narrower than its 18-day average of 43.4bp, a bullish pattern for the dollar vs the euro.
Currencies Bloomberg BBH Laidi AL Twitter Michalowski Oracle Reuters Spot
Tuesday at 15:00 Euro: 1.3756 vs 1.3600 Dollar-Yen: 90.124 vs 89.962 Euro-Yen: 123.98 vs 122.35 Canadian dollar: 1.0445 vs 1.0488 Aussie dollar: 90.11 vs 88.90
Calendar Econoday SMRA Wrightson Barchart Any Date
Wednesday 07:00 MBA mortgage prch. index 07:45 Weekly chain store surveys 08:30 CPI revisions 08:30 Housing starts (MS sees 540,000 unit annual rate) 08:30 Import prices 09:15 Industrial production (MS ooks for a 1.1% gain) 09:15 Capacity Utilization (MS see a new 14-month high) 14:00 US budget Thursday 08:30 PPI (MS sees +0.8% overall in January but only 0.1% ex food and energy) 08:30 Jobless claims 10:00 Leading indicators (should rise 0.3% for 10th gain in a row) 10:00 Philly Fed mfg survey 11:00 30-yr TIPS announcement 11:00 Treasury note announcement Friday 08:30 CPI (MS see a rise 0.3% overall and 0.1% ex food and energy) Monday, 2/22 08:30 Chicago Fed NAI 10:30 Dallas Fed manufacturing survey 13:00 30-yr TIPS auction Tuesday 07:45 Weekly chain store sales survey 09:00 Case-Shiller index 10:00 Consumer confidence 10:00 Richmond Fed 13:00 2Y auction 14:00 Fed discount rate minutes 17:00 ABC Consumer Comfort Index
Baltic Dry Index - - - Bloomberg - - - Google
The Baltic Dry Index fell -5 to 2,566 Monday. Feb 12. The BDI is down from 3,005 at year end and it has fallen more than -40% over the last 12 weeks. The 2009 range was 772 to 4,661 on Nov 19. The 2008 high was 11,793. The 20 year average is near 2,300.
2Y Yield Spread: Germany Over US - - - Tsys Yields
Monday at 10:08; The spread of Germany 2Y over US 2Y is +24 vs +26 Friday German Dec 2Y is 0.97% US Jan 2Y yld is 0.83% On Dec 7, Mar euro contract was 1.4815 and 2Y spread was +54; euro is 1.3650 today MS: The Fed to begin exiting from zero rates during the second half GS: No 2010 Fed hike & probably no hike in 2011
Nikkei Forecast- - - Nikkei - - - NKH0 - - - DJH0 - - - NKH vs DJH
The Nikkei is expected to open up +13 Monday in Tokyo. The NK/DJ spread is -12 points. Accordingly, NKH is trading cheap relative to DJH at -191 below the 21-day average of +179.
Archives and All Links - - - Archives
Keep In Mind
Aleph's Dirty Dozen: 1) China’s mercantilism — loans and currency 2) US Deficits, European Deficits 3) The Eurozone is a mess — Greece, Portugal, Spain, etc. 4) Many entities affiliated the US Government, e.g., FDIC, GSEs, FHA are broke 5) The US Government feels it has to “do something” 6) Residential real estate is still in the tank 7) Commercial real estate — there is too much debt and too little equity 8) State economies are weak 9) The US, UK, and Japan are force feeding liquidity into their economies 10) Yield greed. A bid for risky debt 11) Political deadlock is common, unable to deliver real pain to the populace 12) Europe and Japan face shrinking populations - a big, but hidden pressure Either currencies or debt markets will blowup in the next financial dislocation -- Dollar, gold and the VIX are likely to produce the biggest gains -- Aussie and Brazil overvalued on 12/31 at 89.74 and 1.75228; 90.45 and 1.80225 1/21 -- Inflation is emerging as key economic problem for India and China as growth surges -- China and Hong Kong have ‘dangerous’ bubbles in the real estate market -- Global economy could slow dramatically if China tightens lending due to inflation Public finances of the major Western countries are becoming unmanageable -- Who is going to buy the multiple trillions the G-7 countries want to issue? -- After Fed exits QE, who is going to buy $1 trillion in the US? That is 7% of GDP -- Bond market pressures on the PIIGS: Portugal, Italy, Ireland, Greece and Spain -- Portuguese and Greece economies face a ‘slow death’ as they pay off huge debts -- Credit-rating agencies are on collision courses with Spain, Portugal and Greece -- Danger of sovereign defaults by Dubai, Greece, Ukraine and the UK -- Spain's sovereign risk has increased due to exposure to Venezuela devaluation -- Social security systems are likely to be raided and social unrest is probable -- State, local and regional governments face a major funding crisis by summer -- Severe gaps will be closed via budget cuts or tax increases - especially on corps -- Large pension plans in U.S. have $2 trillion shortfall -- AIG, Fannie Mae, Freddie Mac and GMAC are long-term wards of the state Fifteen bank failures in 2010 vs nine in Jan 2009 and a total of 140 failures in 2009 -- 599 banks on so-called problem list -- Banks face huge rollovers of their corporate debts in next few years -- S&P has warned that nearly all of the world's big banks lack sufficient capital -- JP Morgan reported deep losses on its mortgage and credit card businesses in Q4 -- Banks have not taken write-downs on $150-170 billion of Alt-A expected to default Consumer spending remains persistly weak, jobs are scare and gasoline is expensive -- Consumer credit down record $17.49 billion in latest read; 10th consecutive fall -- Local, state, and federal tax increases of $500 billion are in the pipeline -- Unemployment likely to be 10% or higher (except for a few months of census hiring) -- Persons not in the labor force increased by about 840,000 between Nov and Dec -- To get a 5% unemployment rate within 7 years, US needs 300,000 new jobs a month -- Gasoline at highest level since Oct ‘08 at $2.70; record is $4.11 in summer of '08 -- Every $0.10 move higher takes an extra $14 bln annualized out of consumer pockets Residential investment up for two quarters, but slowed to 5.7% in Q4 from 18.9% in Q3 -- There is a huge overhang of vacant units with more foreclosures in the pipeline -- Leading indicators are NAHB index, housing starts and new home sales -- Higher mortgage rates likely as Fed stops buying GSE MBS; program ends on Mar 31 -- $47 billion collateral to recast from IO to a fully amortizing payment this year -- $130 billion due to recast over next two years; second wave of defaults likely -- At least 23% of all homeowners with mortgages are underwater -- Moody's put $572.7 billion in Alt-A mortgages on watch for possible downgrade -- Alt-A mortgages were granted without borrower showing proof of income or assets 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 unchanged in January -- Owners' equivalent rent is 24% of core CPI and its largest single component -- Rental vacancies remain near 10% and landlords have virtually no pricing power -- Capacity utilization is 72.0%, still low and a curb on both 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 -- Most analysts seem cock-sure the bottom in the stock is in
BONDS Briefing USH TYH 5-min 10-min 10Y 2Y/30Y TU/US Bund/TY
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