Thursday, June 30, 2005
Morning Comments... Elliot Spitzer, take note. Last week, CNBC’s Maria let the cat out of the bag early on BAC’s $35bln purchase of credit card issuer MBNA. After the second helicopter crashed into the east river which contained a group of Wilmington, DE based MBNA executives, she speculated as to why they are all flying in a helicopter to a meeting in NY. Hmmm…
FOMC announcement today at 2:15pm, and the street expects a 25bp hike to 3.25%. Outside of possibly creating a housing and credit bubble, the Fed’s attempt at transparency appears to have bred complacency amongst investors. Greenie & Co. have diagrammed every play countless times before it happens, inoculating us to the fear of inflation or a sudden move by the Fed. The environment will only serve to make the eventual landing all the more tougher.
At 8:30am, May Personal Income is expected up .3%, running at 7% y/o/y (vs 5% in previous expansions). Personal Spending is expected up .1%. Greenspan's favorite inflation data the PCE deflator is expected up .1% at the core for a 1.7% y/o/y #. On the heels of the weaker than expected NY and Philly Fed #s a few weeks ago, at 10am the June Chicago PMI expecting 54 vs 54.1, the lowest level since June '03. ISM is out tomorrow.
Wednesday, June 29, 2005
Morning Comments... After beating 36 counts of fraud, Dick Scrushy moonwalked out of court. I would note, however, that the prosecutors failed to charge him with “fashion faux pas” for demanding a portrait of himself in every Healthsouth center while he was CEO. Rivaling Tyco’s Dennis Kozlowski’s obnoxious misuse of corporate funds on a $15,000 umbrella stand, Scrushy once erected a statue of himself outside corporate headquarters in Birmingham, AL. This brings up the question- if there are surveillance cameras in 7-11’s where thieves can steal $800 and a slurpee, why aren’t there surveillance cameras in boardrooms where CEO’s can steal $2.7bln?<>Is the housing market exhausted? In light of 10year yields below 4%, weekly mortgage applications fell for the 2nd straight week by 1.1% with refi’s down 1.8% and purchases down 0.4%. At 8:30am the final revision to Q1 GDP expecting 3.7% up from 3.5%. The # is quite dated since we are 2 days away from the end of Q2. Tony C notes that a jump in inventories added about a full % point to Q1 GDP and the draw down should be a drag on Q2. Greenspan lugs the clunky briefcase to the FOMC meeting today, with the rate decision expected tomorrow at 2:15pm. >
Tuesday, June 28, 2005
Monday, June 27, 2005
Friday, June 24, 2005
Morning Comments... “The War of the Worlds” with China continues as CNOOC’s proposed purchase of Unocal has ignited resistance amongst the protectionists (who fear the loss of US jobs) and the “rationalists” (who fear a communist controlled company paying with monopoly money (aka “yuan”)). Philly Roth, our technical guru, says the market can’t take another down day (like yesterday) without disrupting the “fragile” recovery. Traders have a few economic releases to contend with today before we commence the weekly Cannonball Run to the Jersey Shore and the Hamptons. At 8:30am, May Durable Goods expectations are for a gain of 1.5% and up 0.5% ex-trans (vs +1.9% and -0.2% in April). With the May ISM # being the lowest in two years, mostly due to the new orders component, there is risk to the downside. A few months ago, the weaker than expected Durable Goods # started the soft-patch talk. At 10am May New Home Sales (a measure of contract signings) expecting a new record of 1.32mm vs previous record of 1.316mm. Overnight and overseas, the US equity malaise carries on, and global bond markets rally. AMG inflows of almost $1.1bln with 68% going to domestic funds.
Thursday, June 23, 2005
Wednesday, June 22, 2005
No economic data today. >
Tuesday, June 21, 2005
Tuesday, June 14, 2005
Morning Comments... After a rejected EU treaty, declining growth, and record high unemployment, France and Germany finally have something to celebrate as Jacko is found “NOT GUILTY” on all counts of child molestation. Even though the trial has ended, there is an onslaught of economic reports “sharing the bed” today. The May PPI is expected -0.2%, vs +0.6% last month, and the estimate for the core # is +0.2%, vs +0.3% last month. Lower oil prices and a slumping ISM prices paid component are guilty of the lower estimates. At 8:30am, Advance May Retail Sales are expected -0.2% vs a whopping gain of +1.4% in April. Unseasonably cold temps (the average temp in May for Boston was 10 degrees colder than Anchorage, Alaska) were the likely culprit. However, it’s been hotter-than-hades the past week in the Northeast, so any shortfall in summer items will be short lived. $ weaker vs the Yen after the Japanese Finance Minister forecasts a coming yuan revaluation. UK May house price survey hits a 12 year low, and a few years ago it was at record highs before their central bank started raising rates (is this a sign of things to come)? OPEC expected to raise quotas to what they’re currently producing anyway.
In light of the Jacko acquittal, does anyone else find these Thriller lyrics creepy…
You Hear The Door Slam And Realize There's Nowhere Left To Run
You Feel The Cold Hand And Wonder If You'll Ever See The Sun
You Close Your Eyes And Hope That This Is Just
But All The While You Hear The Creature Creepin' Up
You're Out Of Time”
Monday, June 13, 2005
To the “grumpy old men” on the Morgan Stanley board,
Please view my attached idea for the new NBC reality show, “You’re Hired: The Search for the New CEO”. My goal is to re-brand the image of the company (Trump style) with weekly doses of one-hour episodes of praising and promotion, culminating in a weekly firing of a possible candidate by the audience. One of freshly ousted Purcell’s goals was to gain market share amongst the middle class investor, what’s not a better medium than network TV. Taking out 1-page ads in the WSJ is a waste of $ as most readers don’t get past the first page. The strategy worked for Donald and Martha, why can’t it work for you?
Overnight, the $ shows continued strength vs the Euro after ECB Chief Economist Issing hinted the bank may reduce rates for the first time since 2003. $/Yen also higher after Japan’s Q1 GDP grew only 4.9%, vs initial estimate of 5.3%. Oil slightly lower, Arlene causes little disruption to production. CFTC data from Friday showed the first net long in crude since May 10th.
Independence Day fireworks may come early the year with this week’s onslaught of economic data, which begins tomorrow with the May PPI data, and the headline # is expected down after a drop in oil prices in May (which has since been reversed). The May CPI will follow on Wednesday, along with Business Inventories, Empire Manu, Industrial Production, Net Foreign Security Purchases, and the Fed’s Beige Book. On Thursday, the Philly Fed survey, and Friday, the release of the Current Account Balance.
Friday, June 10, 2005
Morning Comments... Just a few economic releases to get through this morning before traders commence the “cannonball run” to the Jersey Shore and the Hamptons. At 8:30am, April Trade Balance is expected -$58.0bln vs the narrower-then-expected -$55bln in March. The March # boosted Q1 GDP estimates and rallied Treasuries on the thought that a weaker $ was leading to a current account adjustment. In the meantime, the $ has strengthened and last month’s data contained the Chinese lunar holiday, so a wider than expected # might be in the cards. May Import Prices are expected -0.4% vs +0.8% in Apr, mainly on the decline in oil (this # is somewhat dated). The IEA cut Q2 oil demand estimates on an expected China simmering, but raised its 2nd half estimates with the net ’05 demand estimate remaining unchanged. INTC slightly lower even after raising Q2 sales to $9.1 - $9.3bln from $8.6 - $9.2bln, but the undisputed chip champ is up 25% since mid-April. The $ is little changed after Apr French IP was weaker than expected. ETFs received 56% of equity inflows of $1.71B. PPI and CPI should provide some early Independence Day fireworks next week.
Thursday, June 09, 2005
Morning Comments... While most of Eastern Europe awaits the Jacko verdict with bated breath, market participants will be holding their collective breaths ahead of the 10am release of Greenspan’s comments. The text of his speech will be released just before he begins his testimony in front of the Joint Economic Committee. There is wide spread belief that the “chief inflation fighter” will echo his name-sake, and that the Fed will continue to raise interest rates until the inflation infection is subdued. The Senators and Representatives will then ask wordy, drawn-out, ostentatious questions related to the 10-year “conundrum”, “froth” in the real estate market, and the tale of twin deficits. The Q&A session will be closely watched as the grace he exhibits in his dodge and parry defense will impact the markets. Currently, Fed Fund futures price in a 100% chance of 50bps by year end, and a 50% chance of 75bps by year end. Outside of “rookie” Fed Member Fisher, every recent Fed member has explicitly stated that the hikes will continue. Jobless claims expecting 333k vs 350k last week.
Tuesday, June 07, 2005
“There’s too many men
Too many people
Making too many problems
And not much love to go round
Can’t you see
This is a land of confusion.”
Monday, June 06, 2005
Friday, June 03, 2005
Morning Comment... Today’s look at the May jobs report carries added importance as yesterday’s 3.3% rise in Q1 Unit Labor Costs was blown off on the belief that future employment growth would be necessary to sustain the current elevated rate. Expectations are for a creation of 175k jobs in May vs 274k created in April. The GS Deriv auction is roughly inline with this estimate. The other expectations: Avg Hourly Earnings (+0.2% vs +0.3% prior), Avg. Weekly Hours (33.8 vs 33.9 prioir). The 10am ISM Non-Manufact is expected 60.0, down from 61.7 last month. $/Euro is slightly weaker after European Services Growth rose at fastest pace in 7 months. $/ Yen also weaker ahead of the payroll data in the US. Oil up almost .50. Mediterranean tanker rates rise for the first time in 3 weeks.
Thursday, June 02, 2005
Wednesday, June 01, 2005
I finally got around to seeing Star Wars Episode III last night and would note that Hayden Christensen may play Darth Vader, but in real life he will soon be playing Mark Hamill, exiled to the dark side of trade shows, cameo appearances, and illicit substances. >
Another day, another cut to the Q2 EU growth forecast as a shrinkage in manufacturing and drop in retail sales will result in only +0.3% growth (+0.4% previously expected). The Euro dropped to an eight-low vs the $ ($1.2232) as politicians are now calling for the ECB to lower rates in the wake of the EU constitution debacle. With CFTC data reporting a record # of Euro shorts already, it will be interesting to see if the $’s rally still has legs. Oil sets a three-week high after pipeline ruptures shut down two RD units in Texas. Mortgage aps -2.8% vs +4.3% last week, and we are still waiting for the surge in new aps with the recent drop in rates. At 10am, May ISM Manufacturing is expecting 52.0 (vs 53.3 prior), and is the number du jour on the recent weakness in NY, Philly, and PMI.