Tuesday, May 31, 2005

French Soldier: “You don't frighten us, English pig dogs. Go and boil your bottoms, you sons of a silly person. I blow my nose at you, so-called "Arthur King," you and all your silly English K-nig-hts.”

<>The French voted a much higher-than-expected “NON”, followed by a partial coup d’etat as President Chirac replaced the prime minister with his former chief of staff. The Euro/$ retreated to a 7-month low of $1.2311. Euro region business and consumer confidence fell to multi-year lows. The Yen traded to a six-week low ($108.27), even though Japanese unemployment fell to six-week low and household spending was strong but weaker than expected. Elsewhere, Danica Patrick nearly makes history over the weekend in disproving the theory that men are better drivers than women. At 10am, May Chicago PMI expected 61.4, vs 65.6 last month, and would be the lowest reading since Aug ’04.

Friday, May 27, 2005

How much momentum does this market have? INTC has been up 19 of the past 20 trading sessions. The S&P Relative Strength Indicator (RSI) is currently at the same point as early March, shortly before the S&P’s dropped 75 handles. Short-term resistance is right here at 1200, with the next resistance at 1205, then 1210.

Several economic data points to get through before cleaning out the dead squirrels from the pool, throwing the burgers on the grill, and cracking open a Pabst. At 8:30am, April Personal Income is expected +0.7%, vs +0.5% prior. Personal spending is expected +0.8%, vs +0.6% prior. At 6% year over year, rising income growths are protecting the consumer against higher short-term rates and rising energy prices. In light of the unchanged core April CPI a few weeks ago, the PCE deflator within today's data will be key. The core # is up .3% in 2 out of the last 3 months for the 1st time since 2001. At 10am final U of Mich confidence expecting a rise to 86 from the preliminary 85.3 and vs 87.7 in April. Japanese retail sales better than expected boosting the yen and Japanese stocks. The euro is bouncing ahead of this weekend’s EU vote as much of the negative sentiment has been priced in. French business confidence reported weaker than expected, but expected, given the French. In a reversal in flows, AMG equity inflows of $2.3B into domestic funds with most going into ETFs.

Thursday, May 26, 2005

This is hilarious…

<>Dollar General Corp., which sells food and household items for no more than $20, said fiscal first-quarter earnings fell 4.3 percent as it sold fewer high-profit items. The company said second-quarter profit may also decrease.

Morning Comments... The $/Euro is breaking out to 8 month highs this morning as the leader of France’s ruling party has admitted that Sunday’s referendum on the European constitution will result in a “no” vote, amidst sentiment polls which show 54% voter opposition. Americans have had some voting turmoil of their own the past few days, deciding whether or not to appoint long-haired rocker Bo Bice as the winner of American Idol 2005. It was a perfect irony, Bo lost to the conservative country singer Carrie Underwood, and the EU Constitution will lose to the protectionist, illiberal, and anti-business French.

At 8:30am, Q1 GDP is expected to be revised up to 3.6% from the initial 3.1%, due to the lower-than-expected trade deficit. The deflator expected to remain at 3.3%. Initial Jobless Claims expecting 325k vs 321k last week. Next Friday is the May Payroll report. The yen also lower vs the $ after China's central bank governor sung, “Time, time, time… is on my side… yes it is!” Volume on the NYSE over the past 5 trading days is running 275mm shares below the average for this year.

Wednesday, May 25, 2005

Let’s review a few things we learned over the past week:

  1. The $ has strengthened on continued positive economic data in the US, a declining outlook for the Eurozone and Japan, worries that France and Amsterdam will not sign the Constitution, and the Fed’s tightening of the money supply.
  2. The stronger $ has led to weaker commodity prices.
  3. The decline in commodity prices has eased inflation expectations as the TIPS spread has gone from 2.75% to 2.48% in the past month, which has eased longer term interest rates.
  4. The decline in longer term rates boosted the equities markets, and allowed some bullish strategists to claim that the Fed will be done after the June 30th meeting.
  5. From the minutes yesterday, the Fed is not going to be done anytime soon. Last night, Fed Pres Moskow echoed this sentiment, claiming the Fed has “more ground to cover” with respect to raising rates.
  6. Reality show boxers don’t have strong chins, they have weak punches.
Economic news out of
Europe continues to be poor. German's IFO business confidence # slightly weaker than expected, Italian business confidence fell to 3 1/2 year low and Q1 UK GDP revised down by .1%. Here, Mortgage apps rose 4.3% with refi's up 6.4% and purchases up 2.8%, both following 10% declines in the prior week. April Durable Goods expect a lift from March weakness and New Home Sales are expected to drop from the March record high. I’m pretty confident Tuesday’s failure of the S&P’s to take out 1200 could be the highest price we see for a few months.

Tuesday, May 24, 2005

Morning Comments...

Today’s 2pm release of Minutes of the May 3rd FOMC meeting have extra importance due to the diverging viewpoints on the duration of the rate hikes. Ludicrous (not the rapper) as it might appear, there is a gaggle of economists forecasting the June 30th hike to be the last for 2005 and maybe 2006. On the other hand, our economist, Tony C, thinks the minutes will reveal that the Fed remained ebullient on the long-term economic outlook and thought the “soft patch” would be short and shallow. The equity rally of the past week was predicated on the belief that the Fed will be done soon, even though the December Fed Fund contract is priced for 75bp of hikes by year end. Even if the Fed is finished in June, real rates (Fed Funds – Inflation) will still be around ZERO, while the Fed’s historical target of real rates has been 2.0%. With Friday’s expiration registering as the 2nd lowest volume day of the year, rest assured, the bull camp doesn’t have much gunpowder left.

Overnight, the $ is lower vs the Yen and Euro on interest rate differentials as the 10yr yield approaches 4%. The ZEW (German confidence #) was much weaker than expected, and the OECD cut its ’05 global growth forecast to 2.6% from 2.9%. China said they are getting an earful from US officials pushing for revaluation, “or else”. At 10am April Existing Home Sales expecting little changed with March at 6.9mm.

Monday, May 23, 2005

Talk about mis-allocation of resources... Playboy's Playmate of the Month for May, Fort Lauderdale native Jamie Westenhiser, 23, is ditching her modeling career to take up real estate investing. In the magazine's May issue, Westenhiser poses in her lacy lavender baby doll, wearing nothing else except furry boots, leaning on a computer desk next to a stack of books with titles including "All About Escrow" and "Real Estate Principles." In her "playmate data sheet," she writes that her ambition in life is to have a "successful career in real estate."

Morning Comment... A quiet Monday will ease us into a busy economic calendar, however, most investors will be reaching for their bottle of sunscreen by Thursday. Highlights of the week include Tonight’s “24” season finale, Tuesday’s Minutes of the FOMC meeting and “AI4” finale, Wednesday’s Durable Goods, Thursday’s Revised Q1 GDP data, and Friday’s Income, Spending, PCE Deflator, and start of the Yankees-Red Sox weekend series. Peter Boockvar points out the “importance of the PCE deflator is heightened due to the assumption of the markets that the Fed is almost done raising rates b/c of the unchanged core CPI last week.” After last week’s 331 point rally in the Dow (capped off with Friday’s upside consolidation), the S&P’s stalled exactly at resistance at 1192. New front month contract in Oil is lower after 5 French refineries are back on line after a strike last week. CFTC data on Friday reported net shorts in crude for the 1st time since Dec '04 (the speculators are usually wrong). The $ is higher vs the euro after a new poll in France has a majority rejecting the EU constitution vote on Sunday.

Friday, May 20, 2005

Business lessons I learned from the Apprentice this season:

1. It is nearly impossible to succeed in business if you’re beautiful, but don’t try ruining your good looks with glass shards.

2. Though they might be renovated, rooms-by-the-hour in Seaside Heights, NJ are still skeezy.

3. Innuendos using vegetables are not viable strategies of selling hand soap.

4. Bow ties tend to get past the first few rounds, but there’s a reason why clowns wear them.

5. Chewing tobacco and cussing while dressed in a clown suit in front of little kids is not only completely acceptable, because even producers love a good train wreck.

6. When you refer to your teammates as the “three stooges”, make sure the editors include the footage of the dreaded “eye poke” scene everyone knows you’re just joking.

Feel free to add your own!

And now back to our regularly scheduled programming! Today is double witch and last trading day in the front month oil contract. OPEC Pres promises (fingers crossed) not to change current production levels right now and he’s not concerned about current inventory levels. $ higher vs the euro as French Q1 GDP was 1.7%, weaker than 2.0% forecast. Mkt news says that ECB may leave rates unched all year. Rally in the equity market will eventually lend itself to a stronger economy, which will increase demand for commodities, which will push int rates higher. Yesterday’s upside consolidation portends higher prices, but how much higher is the question. Trump, Sugar Ray, and the Apprentice cast are playing softball today in Staten Island, but you didn’t hear that from me…

Thursday, May 19, 2005

Morning Comments...
What’s the biggest relief this week?

a) The 300+ point rally in the Dow on subsiding inflation and credit derivative fears.

b) The ability to finally take a shower for self-annointed “Jedi Knights” who have been standing in line for 2months, 3days, 10hours, 35minutes, and 53seconds.

Regardless, it would take Yoda’s Jedi-mind tricks to figure out the confused economic picture. Oil and rates have both dropped, but the market has rallied. If the drops are due to concerns about a slowdown in the economy, stock market bulls are likely to wind up carried out by the bounty-hunter Boba Fett. My guess is that oil and rates do not stay down for long as they become a backdrop for a pick-up.

Initial jobless Claims expecting 330k vs 340k last week. At 10am LEI expecting down 0.2%, but never market moving. At 12pm the May Philly Fed survey expecting 17.2 vs 25.3, but beware of the curveball following Monday’s -11 NY Fed Survey. Greenspan (Yoda) speaks at 8:25 on the GSE’s and will likely echo his credit concerns with them. $ higher vs the euro after Q2 euro region economic confidence fell to lowest since Q3 '03. Key levels here in energy space, 200 day Moving Average in crude is $47.60 and gasoline is slightly above its own 200 day MA.

May the force be with you…

Wednesday, May 18, 2005

Morning Comments...


To cause a security to sell at an artificial price. Although investment bankers are permitted to manipulate temporarily the stock they underwrite, most other forms of manipulation are illegal.

According to Treas. Sec. John Snow, the daily process by which China keeps their currency weak to favor their exporters by selling Yuan to buy $’s is NOT “manipulation”, rather, it’s just a “big distortion”. It’s now 17 hours later and I’m still searching for the difference. The bottom line is that Congress (specifically Sens. Clinton and Schumer) are looking for excuses to legislate a trade war (ie- impose a 27.5% tariff on Chinese imports). Tony C thinks this was a smart move (dare I say “manipulative”) by the Treasury to avoid giving more ammo to the protectionists in Congress who are trying to punish China for “unfair trade practices”. The bottom line: the economy has greatly benefited over China’s purchasing of US $’s, which has kept interest rates low and fueled the expansion. Why should we save a few dying industries, such as textile manufacturing, at the expense of tampering with a mechanism that is creating growth in both hemispheres?

April CPI expecting up 0.4% and up 0.2% ex F&F vs 0.6% and 0.4% in March. Yesterday’s PPI was dismissed because of the recent decline in the CRB, however, the CPI is more influenced by the service sector (unit labor costs) and housing (rent equivalent costs). Unit labor costs are up 4 quarters in a row for the 1st time since 1999. ABC confidence fell 2 pts to -18 vs 1 yr average of -10. Those that said economy is getting worse hit highest level since Mar '03. Mortgage apps fell 10.5%, refi's fell 10% and purchases dropped 10.8% after hitting a record high last week. The yen is trading up modestly after Hong Kong set a ceiling on its currency (pegged to $) hinting that they are preparing for China to revalue. Apr Chinese IP stronger than expected.

Tuesday, May 17, 2005

Morning Comments... Which of these retractions will have occurred the quickest? 1. Newsweek’s retraction of their phony Quran flushing story. 2. Chaalie the Bachelor’s “promise” ring. 3. The CRB Index, which is 9% off it’s mid-March highs.

The recent drop in the CRB makes today’s PPI “rose ceremony” less of a possible train wreck than previous months. Expectations are for +0.4% and +0.2% ex food and fuel. On the contrary, tomorrow’s CPI is not immune to the drop in commodity prices as the emphasis is on unit labor costs and housing related prices. Apr Housing Starts expecting 2mm up from 1.84mm in Mar. Apr IP expecting up .2% vs .3% gain in Mar., and the # will be influenced by auto production cutbacks. Capacity Utilization expecting 79.5% would be highest since Dec '00. Japanese Q1 GDP twice what was expected but the deflator was down 1.2% thus zapping all enthusiasm for the strong Q. Japanese stocks down for 7th straight day and the yen also lower. Fed Gov Kohn said rates still have to rise but not sure to what level.

Monday, May 16, 2005

Morning Comment... Economic data is back en vogue this week as the S&P’s attempt to shake off last week’s 2% decline. At 8:30am the May Empire Manu Survey showed a drop of -11.1, way less than expectations, and below the 2 year low of 3.1 last month. The biggest drop was in backlogs which dropped -17.3. Four of the past five months have shown drops in inventories. At 9am, Mar Net Foreign Security Purchases expected $70.0Bln vs $84.5Bln in Feb. The $ rally of late is based on the horse vs pony race of the US economy relative to Europe and Japan. After last week’s narrower-than-expected trade deficit, the 9am # could re-shift the focus from growth prospects to current account deficit problems. At 1pm, NAHB expecting 69 vs 67, after last week’s mort apps purchase component was a record. PPI and CPI tomorrow and Wednesday.

Friday, May 13, 2005

Whole slough of factors for the rally in treasuries...

  1. stronger $
  2. trade deficit and budget deficit data were better than expected (also helping the $)
  3. flight-to-quality trade on constant talk of XYZ hedge fund blow up (supposedly, a hedge fund went directly to the Fed in the 10year auction- something to hide?)
  4. weaker commodities, thus weaker future inflation expectations (the TIPS spread is 253bp from a high of 282bp in March '05)
  5. unsubstantiated rumors that the payroll data will be revised downward

The curve has flattened and the 2s -10s spread is +51bp. It was 220bp a year ago! This is a signal that the market is bracing for financial disruptions, especially considering the strength of Q1 GDP which will be revised upward to the high 3's.

Also, December fed funds futures are priced at 3.75%. With 5 meetings left, that only equates to three 25bp Fed moves, signaling that the Fed will have to pause. While I'm not sure where Fed Funds will be at the end of the year (I don't think there's a softpatch), I'm sure the market overshoots on both the downside and upside! At some point the pullback in commodities and the rally in treasuries reignites demand and the expansion continues. That's why some economists think a pause is actually a good thing...

Morning Comment... The US $ broke to a 7-month high yesterday, as the Fed’s continues to reduce the money supply. Adding to the strength in the $ is a better-than-expected budget deficit, more jobs, and stronger retail sales. The scarcity of $’s is having an effect on the Commodity Index, which has fallen 8% off its highs and now sits at a 3-month low. On top of this, Tony C points out that the Baltic Freight Shipping Index has declined from a peak of 6208 to 3931 currently, which shows demand for commodities has been slowing.

Something I can’t figure out… Goldman said China would revalue on May 18. However, the Chinese Central Bank Govenor said that is "definitely impossible." At 8:30am Mar Business Inventories expecting up .6% would follow the weaker than expected wholesale # on Monday. Import prices expecting up .4% and up 7.4% y/o/y including energy. At 10am preliminary May U of Mich expecting 88.2 vs 87.7 which was lowest since Sept '03. The 1 yr avg is 93.7. AMG equity inflows excluding ETFs were $307mm into domestic, 39% of the total.

Thursday, May 12, 2005

Morning Comments... A picture is worth 1,000 words… As Jimmy Page riffed into Whole Lotta Love, “Stone Cold” John Thain’s expression (4th from the right) shows no love for the music, adding more credence to my theory that he is, indeed, a robot.

Not much love this morning for WMT, as the world’s largest retailer announced they will miss Q2 by 3-7c due to poor weather and higher gasoline prices. However, the same rise in gas prices has a positive effect on the 8:30am release of Apr Advance Retail Sales, expecting +0.7%, the largest rise in 4 months. A spark in new vehicle purchases should also help Retail Sales as auto incentives were back last month! The revisions to prior months could alter the Q1 GDP revision as will tomorrow's business inventory #. Yesterday's lower than expected trade deficit can boost the GDP revision into the high 3% range from the reported 3.1%. Jobless claims expect 325k vs 333k last week. The 1 yr average is running at 335k. The downward trend in oil and upward trend in the $ continues from yesterday. German Q1 GDP was better than expected but Italy unexpectedly fell into a recession with their Q1 #. Overall Q1 GDP for the euro region was in line. DELL reports tonight.

Wednesday, May 11, 2005

Morning Comments... Yesterday’s rumors of a credit derivative loss at a European hedge fund demonstrated the market’s heightened sensitivity (ie leveraged exposure) to financial disruptions. The old adage applies- “where there’s smoke, there’s fire” (unless the smoke is white, then there’s a pope). There was overnight confusion in the currency markets as a Chinese Communist Party-owned newspaper blows smoke somewhere else and report that the central bank will loosen the yuan’s fixed-exchange rate for the first time in a decade, without citing a source. Unfortunately, someone forgot to tell the central bank because they claim they have not received a policy change notice.

Mortgage apps rose by 9.4% with purchases rising to a record high up 9.1%. Refi's rose by 9.8%. The IEA slightly raised its '05 global demand forecast for oil but lowered its estimate for
China. They said oil inventory is too small to ease capacity constraints. The Bk of England cut its '05 growth forecast by a .1% to 2.6% and March French IP was weaker than expected. At 8:30am the March Trade Deficit expecting $61.9B vs $61B in March. Crude will be the main swing factor as it averaged $55 in March vs $49 in Feb. 5 yr note auction this afternoon.

Tuesday, May 10, 2005

Morning Comments... Yesterday’s 38 point Dow rally was on light volume and light news flow. The news that the Yankees won their third straight on the mullet of the Big Unit might have been the most important news of the day. Overnight and overseas, UK retailers said sales fell the most in a decade last month, as home prices rose at the slowest pace in three years. The Bureau of Statistics in China said a stronger Yuan could cut export growth by 2/3 from the ’04 level, strengthening the argument that a revaluation is not imminent. Domestically, the Nat'l Assoc of Independent Businesses April optimism index fell to its lowest level since March '03 at the onset of the Iraqi war, probably due to the rise in energy costs. CSCO, the perennial-penny-beater, reports tonight.

Monday, May 09, 2005

Morning Comments... After a week full of fallen angels and fallen idols, the decline in data this week should prelude the transition into the Memorial Day weekend. At 10am, Mar Wholesale Inventories are estimated +0.7%, a continuation of their uptrend since mid-2002. On Weds, the Trade Deficit will be reported, Thurs Retail Sales, and Friday Import Prices, U of Mich, and Business Inventories. The $ is stronger vs the Yen as China has yet to announce a move on the Yuan after a long holiday. Euro/$ flat- UK and German manufacturing weaker than expected, but euro region retail sales are better. CFTC data on Friday reports smallest net long position in crude since early January, and net shorts in the 10yr Tsy smallest since March 1. Bank of England leaves rates unchanged as expected.

Friday, May 06, 2005

My uncle Greg read Shakespeare’s St. Crispen’s Day Speech from Henry V at my grandfather’s internment. It was delivered before the Battle of Agincourt in 1415 and is considered the finest dramatic display of leadership in the Middle Ages.

<>After King Henry led his English footmen across Northwestern France in an attempt to win back holds in France that had once been in English possession and to claim the French crown through the obscure but powerful Salig Law. The French, aware of the English troops weakening condition after attacks of dysentery, moved between King Henry and Calais, the port he needed to reach in order to return to England. The troops followed Henry’s band along the rivers, blocking their crossing and daring them into a battle they thought they could not win. <>

Morale in the English line as they looked upon the overwhelming force of heavily armoured, highly skilled French knights must have been extremely low. King
Henry, rising to the occasion, spoke words of encouragement that rallied the English troops and carried them to a victory. As a result of the victory the French Princess Catherine was betrothed to Henry V, and France and England were at peace for the remainder of Henry's short life. He perished of dysentery in 1422, but was survived by his son (Henry VI) and was buried at Westminster Abbey, close to the shrine of Edward the Confessor.

Although the speech below is a work of fiction, it is evocative of the spirit with which Henry--and all strong medieval kings--ruled through the strength of their convictions and by force of their personality.

St. Crispen's Day Speech

William Shakespeare, 1599

Enter the KING

WESTMORELAND. O that we now had here
But one ten thousand of those men in England
That do no work to-day!

KING. What's he that wishes so?
My cousin Westmoreland? No, my fair cousin;
If we are mark'd to die, we are enow
To do our country loss; and if to live,
The fewer men, the greater share of honour.
God's will! I pray thee, wish not one man more.
By Jove, I am not covetous for gold,
Nor care I who doth feed upon my cost;
It yearns me not if men my garments wear;
Such outward things dwell not in my desires.
But if it be a sin to covet honour,
I am the most offending soul alive.
No, faith, my coz, wish not a man from England.
God's peace! I would not lose so great an honour
As one man more methinks would share from me
For the best hope I have. O, do not wish one more!
Rather proclaim it, Westmoreland, through my host,
That he which hath no stomach to this fight,
Let him depart; his passport shall be made,
And crowns for convoy put into his purse;
We would not die in that man's company
That fears his fellowship to die with us.
This day is call'd the feast of Crispian.
He that outlives this day, and comes safe home,
Will stand a tip-toe when this day is nam'd,
And rouse him at the name of Crispian.
He that shall live this day, and see old age,
Will yearly on the vigil feast his neighbours,
And say 'To-morrow is Saint Crispian.'
Then will he strip his sleeve and show his scars,
And say 'These wounds I had on Crispian's day.'
Old men forget; yet all shall be forgot,
But he'll remember, with advantages,
What feats he did that day. Then shall our names,
Familiar in his mouth as household words-
Harry the King, Bedford and Exeter,
Warwick and Talbot, Salisbury and Gloucester-
Be in their flowing cups freshly rememb'red.
This story shall the good man teach his son;
And Crispin Crispian shall ne'er go by,
From this day to the ending of the world,
But we in it shall be remembered-
We few, we happy few, we band of brothers;
For he to-day that sheds his blood with me
Shall be my brother; be he ne'er so vile,
This day shall gentle his condition;
And gentlemen in England now-a-bed
Shall think themselves accurs'd they were not here,
And hold their manhoods cheap whiles any speaks
That fought with us upon Saint Crispin's day.

Morning Comments... No, we didn’t receive any late night voice mails from Pat O’Brien. However, after Wednesday’s breakout from the 1137-1167 trading range, yesterday’s F and GM downgrade felt like we were headed back to rehab. Focus this morning shifts to the payroll data as the economy is expected to have created 174k new jobs in April. March payrolls missed by 100k, and the 1-year average is +178k/ month. The foreshadowing of the # has been mixed, as the employment components of the ISM #s fell in April and consumer confidence faltered, but the 4 week average in weekly jobless claims is the lowest since early March. After the recent rally in the bond market, a weaker than expected # will be readily absorbed. Average hourly earnings takes on greater importance in light of yesterday's higher than expected unit labor cost #, expecting up .2% vs .3% in March. The Unemployment rate expected unch at 5.2%. Have a great weekend!

Wednesday, May 04, 2005

Morning Comments... Microsoft Office for Dummies... Greenspan, the 79-year-old writer of the FOMC comments, experienced a “senior moment” yesterday afternoon when he mistakenly omitted the phrase that longer-term inflation expectations are “well contained”. This “inadvertant human error” provided market participants a free look at what would happen if longer-term inflation expectations were not “well contained”- ie lower stocks, lower bonds, stronger $. Although the longer-term prospect for inflation is under control, the short-term prospects are not as manageable. This is apparent in the purposely omitted statement, yet included in March, “The rise in energy prices has not notably fed through to core consumer prices”, after the Core CPI, PPI, and PCE Deflator showed sharp pickups last month. Perhaps the Chairman mistakenly erased both lines and needs a tutorial on Microsoft Word?

Tuesday, May 03, 2005

Greenspan's Spiked Punch... The economy is slowing, yet the Fed is forced to continue raising rates due to inflation concerns, which have “picked up in recent months”. Since money supply remains “accommodative” and the Fed will continue at a “measured” pace, there is no reason to suggest the tapping of the breaks will not continue until the economy reaches a screeching halt and even rolls backwards. This is the hangover that happens after the party when Fed Funds remain at 1% while the economy grows at a 4%+ rate (June ’03 – June ’04). The guy who threw the party and spiked the punch retires early next year. There are 5 Fed meetings left to secure his legacy as an “inflation fighter”. Currently, the December Fed Funds contract is trading at 3.75, suggesting the Fed will move by 25bp in 3 of the next 5 meetings. Whilst, inflation remains ever so present (YoY: GDP Deflator +3.2%, CPI +3.1%, PPI +4.9%). Does he retire with real rates at zero when their historical average is 2% over the rate of inflation? It looks like we’re going from “conundrum” to “quagmire”…

Morning Comments... Seven meetings, seven 25bp rate increases. The pattern continues today as every economist on the street predicts more of the same. The debate is over whether or not the Fed sees the need for the “continued MEASURED pace of tightening”. If the Fed removes the “MEASURED” language from the statement, it provides them the flexibility to respond to changes in the economic environment by slowing down or speeding the rate of increases. Keep in mind that markets don’t like uncertainty. Another question remains to be answered: Do the risks of inflation (YoY: GDP Deflator +3.2%, CPI +3.1%, PPI +4.9%) outweigh the signs of “SOFTPATCH” in the economy (Empire Manu Survey @3.1, 1Q GDP 3.1%, Durable Goods -2.8%)? Talk of a “SOFTPATCH” rallied the 10year in the month of April, as rates went from 4.60 to 4.20. Will the removal of the “MEASURED” language and the looming payroll data on Friday fuel the selloff to send yields back to their late March lows?

Monday, May 02, 2005


Henry Brazell King, of Spring Lake Heights, New Jersey, the father of seventeen children who won the Silver Star in WWII, led the United States Brewers Association (USBA) for more than two decades, and taught at Georgian Court University for the last twenty-two years, died Tuesday, April 26, 2005, after a long illness. King was appointed by President Ronald Reagan to the Presidential Commission on Drunk Driving, won the prestigious George Foster Peabody Award for a radio program he hosted in the 1960’s, and was named a Knight of Malta by Pope Paul VI in 1967 in recognition of his humanitarian and church-related work. He was diagnosed with inoperable cancer one year ago and died less than a month after celebrating his 84 th birthday.

King was born in Philadelphia, PA, on April 2, 1921. He was a direct descendant of John Guild, who arrived in America in 1632. King spent his childhood on Bedloe’s Island, now Liberty Island, where his father, a non-commissioned officer in the US Army, was stationed after WWI. For many years, he traveled each morning by ferry to school in lower Manhattan. King was educated by Christian Brothers, at LaSalle Academy and at Manhattan College, attending on a scholarship provided by the Brothers after the death of King’s father. He attributed all his success in later life to the education and support he received from the Brothers and to his service in the United States Navy.

Notice that will appear in the New York Times and Washington Post.

Death notice for Henry Brazell King, Spring Lake Heights, New Jersey

King, Henry Brazell. Died April 26, 2005, after a long struggle with cancer. Husband of Patricia Poe. Father of seventeen children, thirty -eight grand children and four great grand children. Previously married to the late Ottilie R. Sandrock. WW II Navy veteran awarded the Silver Star for gallantry. Professor, Georgian Court University 1984 -2004; President, Brewers Association of America 1991-1999; President, United States Brewers Association 1962 -1983. Visiting hours will be Thursday from 7 to 9p.m; Friday from 2 to 4 p.m. and 7 to 9p.m. at O’Brien Funeral Home, Wall Township, NJ. Mass of Christian burial will be held 9:30 a.m. Saturday at St. Catherine’s Church, Spring Lake. Memorial donations may be made in Mr. King’s memory to “House Of Friendship Foundation,” 513 Old Mill Road, Spring Lake Heights, NJ 07762.

In 1942, after graduating from Manhattan College, King joined the United States Navy Reserves. During the war he served as the gunnery officer on an amphibious landing craft, the LST 395, and saw repeated action in the South Pacific. In July 1944, an article in “The American Legion Magazine” entitled “LST: Rugged Duty” focused on King and his shipmates. The magazine noted “the crew gives all the credit for their phenomenal shooting to lanky Ensign Henry Brazell King, 22, of New York City. You have to see him in action to know why the crew worships him. Standing on the exposed conning bridge with binoculars and megaphone, he seems to have personal control of every gun on the ship.”

During the battle of Vella Lavella in the British Solomon Islands in August of 1943, the LST 395 was subjected to thirteen bombing attacks and additional strafing from Japanese aircraft. As the gunnery officer, King ran from one gun station to the other, steadying the crew and personally repairing gun jams, exposing himself repeatedly to enemy fire. He was hit several times by spent shrapnel. The LST 395, whose compliment of guns had been enhanced over the months by King’s efforts to “beg, borrow or steal” spare guns from other craft, lost none of its crew during the battles. King was awarded the Silver Star for “conspicuous gallantry and intrepidity in action.”

In his citation, Admiral W.F. Halsey noted that King’s actions were responsible for the downing of seven Japanese airplanes and the damaging and probable downing of several others. “Ensign King’s outstanding control of the inexperienced gunners was responsible for keeping all sectors covered and for maintaining heavy anti-aircraft fire, which prevented any direct hits.” King was awarded also the Purple Heart and 14 combat decorations while serving in the Pacific.

King’s LST carried John F. Kennedy and the crew of PT 109 back to base after the accident which smashed the PT boat in half and left the crew stranded on a remote island in the South Pacific. King, who shared the same rank as Kennedy, gave the future president his bunk for the journey.

After a series of jobs in the food industry, in 1962 King became president of the United States Brewers Association, a trade association representing domestic and foreign brewers, a job he held for the next 22 years. In 2000, the beer industry publication “American Brewer” identified King as one of the 50 most significant figures in brewing over the past millennium, along with Louis Pasteur, William Bass, Adolphus Busch, and St. Hildegarde, among others. The magazine highlighted King’s leadership during a critical moment in the history of the American beer industry, the 1966 discovery of cobalt in beer and its link to deaths in Canada and the United States. Calling King “a voice of reason and unity,” the magazine stated that he “took decisive action to make sure the tragedy was never repeated.”

During the crisis, King created a medical advisory board, informed federal authorities and required all of the country’s major brewers to provide a complete disclosure of their ingredients and brewing process. Some brewers were reluctant to reveal their trade secrets. King informed them that their non-compliance would be reported to the US Bureau of Alcohol, Tobacco and Firearms and that they risked arrest and prosecution. The recalcitrant brewers complied with his request.

A similar situation arose in 1978, when German scientists identified the presence in beer of a chemical compound, nitrosamines, which was linked to cancer. King again called in scientific experts to identify the cause of the compound and led brewers to change their brewing process to eliminate it. The late August Busch, Jr., longtime chairman of Anheuser-Busch, described King’s leadership of USBA by saying: “Henry walked the fine line between competitive brewers as though it was a six lane highway.”

In December of 1944, King married Ottilie Rosina Sandrock of New York, who predeceased him in 1979. Together they raised 15 children during 34 years of marriage. A lifelong Roman Catholic, King and his first wife were among the founders in the 1950s of the Christian Family Movement and the Cana Conference Movement. In recognition of this work and other humanitarian activities, King received papal knighthoods, being named a Knight of Malta and a Knight of the Holy Sepulchre. He and Ottilie traveled to Bogota, Colombia, with Pope Paul VI on his historic visit in 1968.

Following the death of his first wife, King married Patricia Poe in 1980. They have two sons, Andrew, 18, and Timothy, 16, both born in Honduras. King and his wife built and maintain the House of Friendship, five homes for orphaned and abandoned children throughout Honduras. In addition, they built a clinic in Urraco, Honduras, to serve the poor of the region. Annually at Easter-time, the Kings organized a medical mission to Honduras, bringing scores of medical professionals and students, many from the Jersey Shore. In 2001, the Knights of Malta awarded King the Silver Medal “Pro Merito Militensis” for his work for the sick and the poor in Honduras.

King earned a BBA from Manhattan College in Accounting in 1942, a Juris Doctor in Law from New York Law School in 1949 and an MBA in Management from Pace University in 1969. He was awarded an honorary degree in Humane Letters from Mercy College in 1978 and a Certificate of National Security from the Armed Forces Staff College in 1988. “I am largely unimpressed with degrees,” King once wrote, “even my own.”

During his business career prior to heading the USBA, King worked for the United States Trade Mark Association from 1945 to 1952, culminating with his appointment as executive director, working to protect the trademarks and brand names of more than 200 major companies. In 1952, he joined an advertising firm in Boston, John Donnelly and Sons, and two years later became executive vice president of the Cooperative Food Distributors of America in Chicago, representing retail food distributors. Throughout the 1950’s, King held a series of jobs, including Managing Director of the Super Market Institute in Chicago and Grocery Marketing Director at the J. Walter Thompson Advertising Agency in New York. In 1960, he became president of the Quaker City Grocery Company in Philadelphia, where he founded the Shop N Bag chain. Two years later, King became president of the United States Brewers Association.

As president of the USBA, King led a staff of more than 170. He testified on behalf of the beer industry before federal and state legislative bodies, as well as regulatory agencies, developing a close relationship with the Department of Defense, the beer industry’s largest customer. In 1964 and again in 1968, he visited every American military base in the world, dealing with logistical problems in bringing beer to military personnel.

King was a lifelong supporter of trade unions, beginning with his experiences as a teenager in the Association of Catholic Trade Unions in New York. At 19, he taught parliamentary procedure to rank and file members of New York’s textile, hotel, restaurant and retail workers. He was honored in 1967 by unions in the alcoholic beverage industry with their Man in Management Award, and he held Gold Card number two from the Glass Workers Union. Senator Hubert H. Humphrey held card number one.

He was awarded the American Legion “God and Country Award” in 1974, for assisting veterans of the Korean and Vietnam wars in obtaining employment. For several years in the early 1960’s, King moderated a Sunday morning radio program, Family Living, along with actress Arlene Frances, on the NBC Radio Network. The program won the Peabody Award for Excellence in Public Service Broadcasting in 1962.

Following his retirement in 1983, King taught business and management at Georgian Court University for 22 years, until his retirement due to ill health. The university named him professor emeritus at the time. In addition to teaching, from 1991 to 1999, King represented small, microbrewers before Congress and regulatory agencies as president of the Brewers’ Association of America.

Mr. King served on many boards and commissions throughout his life, including the National Council on Alcoholism from 1965 to 1975. 1n 1981, President Ronald Reagan appointed King to the Presidential Commission on Drunk Driving. He also served, during the administrations of Presidents Jimmy Carter and Ronald Reagan, on the White House Trade Association Advisory Committee. He served as a presidential appointee on the Federal Emergency Management Agency (FEMA) National Executive Reserve from 1980 to 1988.

From 1980 for nearly a decade and a half, King was a member of the Board of Governors of the Jersey Shore Medical Center, in Neptune, NJ. For many years he served also on the Board of Lay Advisors of Georgian Court University in Lakewood.

From 1963 to 1978, Mr. King served on the Board of Directors of Keep America Beautiful. His work for the anti-litter organization included the development of public trash receptacles with the ubiquitous “Pitch-In” logo, which spread throughout the United States in the early 1970’s. The logo today is seen on millions of trash receptacles throughout the world. King traveled extensively to help other nations develop anti-litter programs, including “Keep Britain Tidy.”

King was a long-time member of the Spring Lake Volunteer Fire Department, the Spring Lake Golf Club and American Legion post 432 in Spring Lake. He was a Life Member of the Reserve Officers Association of the United States, the Navy League of the United States and the Veterans of Foreign Wars. He was Lt. Instructor with the US Naval Sea Cadet Corps at Naval Weapons Station Earle, Colts Neck, New Jersey. He was a member of St. Catharine’s parish in Spring Lake.

Mr. King had a larger than life personality. He loved people, enjoyed robust debates and found teaching to be one of the great joys of life. In recent years, he was very angry with the leaders of his church, often finding fault with the actions of bishops and others in the hierarchy, but he never lost his faith. He believed in the rule of law and in open and democratic government. He loved Rob Roys, cities, Eggiman’s Tavern, Duke Ziebert’s restaurant in Washington, DC, and above all, the pleasures of good books and the company of his large family and friends.

In addition to his first wife, Ottilie, a son, John predeceased Mr. King, in 2002. He is survived by his wife Patricia; his eleven sons and five daughters: Michael and his wife Susan, Montclair, NJ; Henry, Jr. and Carol, Kensington, MD; Mary and Dr. Robert Jarmon, Spring Lake; Matthew and Maureen, Mamaroneck, NY; Patrick and his fiancee Walsi Crawford, Syracuse, NY; Vincent and Lisa, Cold Spring, NY; Anthony and Debra, Pittsfield, MA; David and Katherine, Holmdel, NJ; Gregory and Peter Sultan, Baltimore, MD; Ottilie and Spiros Droggitis, Bethesda, MD; Robert and Cynthia, Westwood, NJ; Margaret, Washington, DC; Elizabeth and Timothy Wall, Rye, NY; Bibiana and Gregory Hueth, Wall, NJ; and Andrew and Timothy, at home; 38 grandchildren: Mia King; Kevin, Katherine, Eileen and Mary King; Eric, Mark, Michael, Nicholas, Kathleen and Stephanie Jarmon; Jeffrey and Adam King; Ian, Alexander and Alicia King; Courtney, Michael, Shannon and Megan King; Sean, Brian, Stephen and Mary Ellen King; Mary, Christina, Elizabeth, Alexandra and Gregory Droggitis; Nicole Moriarty, Stephanie, Abigail and Matthew King; Brendan, Patrick and Cecilia Wall; Demetria and Shane Hueth; and four great-grandchildren: Chenoa, Hope, Faith and Daniel King; his sister-in-law Cathleen Mullin and his niece Joan Myers of Alexandria, VA.

Visiting hours will be Thursday from 7 to 9 p.m. and Friday from 2 to 4 p.m. and 7 to 9 p.m. at O’Brien Funeral Home, State Highway 35 and New Bedford Road, Wall Township, NJ. A mass of Christian burial will be held St. Catharine’s Church, Spring Lake, on Saturday at 9:30 a.m.

Memorial donations may be made in Mr. King’s memory to “House of Friendship Foundation,” 513 Old Mill Road, Spring Lake Heights, NJ 07762.

Morning Comments... Friday’s 2 point drop in crude continues this morning with another ½ point drop, on concerns of slowing global growth. However, the fall is boosting global stock markets on hopes the world will eventually boost growth if it stays lower. North Korea tested a nuke in the Sea of Japan, and the yen is lower vs the $. Euro region manufacturing fell below 50 for 1st time since Aug ’03, but the euro is little changed vs the $. No new news on the possible Yuan revaluation. At 10am Apr ISM expecting 55 vs 55.2, would be the lowest since July '03. The inventory component will be a focus as it give a nice boost to Q1 GDP. SIA data about in line up 19.4% m/o/m and up 7.2% y/o/y. FOMC announcement tomorrow at 2:15pm.

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