Archive for December, 2009

Iran Shenanigans – a bubble in a simmering pot?

Monday, December 21st, 2009

We get the free weekly briefings from STRATFOR–seems to fit in the budget–and we occasionally see stuff from them in other–generally free–things we read.  They’re pretty sharp on the geopolitical front, but don’t just take my word for it, find out about them by clicking here.

It seems that there is little geopolitical risk priced in to markets if for no other reason than that we’ve been spared major incidents of late–and we have been preoccupied with disappearing companies and 401(k)s.  Although not directly related to geopolitics, we’ve also been spared on the natural disaster front.  2009 has had the fewest natural disasters of any year in the decade (story here.) 

Rumblings in the Mideast + complacency + a still oversold dollar + a carry trade could = trouble.

You might want to think about putting some oil in your portfolio and maybe even some low-yielding Treasuries as insurance policies.  You’ll find ExxonMobil and Chevron among the stocks listed in the post titled “Dividend Aristocrats” (click here).  (more…)

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Bribery in the U.S. Senate sets a new low point

Monday, December 21st, 2009

 I added the underlining below, otherwise it’s all verbatim by and with permission from Cumberland Advisors.

To start things off, here’s a joke that Dennis Gartman included in his eponymous letter of December 22.

What do Rolling Stones concerts, Carnegie Hall, the Super Bowl, the World Cup Final and Senator Ben Nelson of Nebraska have in common?

All are sellouts.

Cumberland Advisors 
614 Landis Avenue Vineland NJ 08360-8007
1-800-257-7013 
http://www.cumber.com

 

Bribery in the U.S. Senate sets a new low point
December 21, 2009

A quick market comment will follow this personal polemic on the abominable behavior we have witnessed this weekend in the United States Senate.  Political bribery has sunk to a new low.  (more…)

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Wkly Recap & Outlk – 12.18.09

Friday, December 18th, 2009

Tower Private Advisors

Below

  • Very abbreviated dispatch

Recent posts

Capital Markets Recap

I’m a bit pressed for time today, so you’ll have to put up with a bit of brevity, which should be quite refreshing.  Here’s a look at the markets as of 3:20 pm.

wro2It’s certainly a mixed bag with an equal number of positive and negative benchmark indexes.  The dollar has been strong this week, again, and that has put pressure on the commodities, especially the barbarous relic, which was John Maynard Keynes’ word for gold.  Notice, though, that crude oil has bucked the trend, thanks to Iran’s incursion into Iraq.  Natural gas is marching to its own beat, however, and might be moving solely for technical reasons.  I’d explain but you’d definitely ask to be removed from our e-mail update list.  It had to be helped, however, by news of ExxonMobil‘s purchase of natural gas producer XTO.

The dollar continues to attract attention from all quarters, so here’s a chart updating its action.  I’ve highlighted, with rectangles, each area of resistance that the dollar has worked through.  The green rectangles have each been overcome.  Here are the resistance areas that have been overcome, in order in which they were taken.

  1. Downtrend line (dotted purple)
  2. 55-day moving average (green line)
  3. 117-day moving average (yellow line)

The dollar is now dealing with the 23.6% Fibonacci retracement, which should be doable.  The next resistance will be at the red 200-day moving average.  If that level is overcome, you can expect the tenor of the discussion to change decidedly, to one where folks start to contemplate the damage of a stronger dollar.  At 80–the same level as the 38.2% retracement–folks might go apoplectic, and north of that I run out of adjectives.

gold

Dennis Gartman, one of the more respected names in the business, if for no other reason than he plays both sides of the fence–no, not that fence–in being both bullish and bearish at the right times, made the case this week that a stronger dollar doesn’t have to spell disaster for stocks.  In fact, the long term correlation with the dollar and stocks is quite positive.  It’s only more recently that they’ve begun to move inversely.  Part of the reason is that, as a low-yielding currency, the dollar is a cheap funding source–by selling it short–for investing in risk assets.  A minor reason might be well . . . miner, in that the falling dollar has made commodities cheaper and that has boosted the prospects of the miners and other commodity-related companies.

The dollar has been getting a lot of attention lately, making a bullish dollar trade seem too easy, especially since it’s one we’ve talked about here for some time.  Still, there is a lot of bearishness on the dollar, as there should be over the correct time frame, which is to say longer term.  In the short term, however, sentiment has gotten too bearish.

As the Next Blow-up post mentioned, and which is now old news, there is risk abroad.  Some of it’s sovereign, as in the case of Greece, some of it geopolitical, as in Iraq.  Regardless of your political leanings or what you think of the government printing press, the dollar and the U.S. are safe havens in times of distress.  When that ceases to be the case then the dollar’s hegemony (there, I finally used that word) will be over.  A flight to safety could send the bears running for their caves.

Top Stories

  • Adobe Systems (ADBE) beat profit estimates by cutting its workforce in a declining sales environment
  • Intel was sued by the U.S. for allegedly using its dominant market share position to “stifle chip competition,” in the words of Bloomberg.
  • Research in Motion announced earnings after the close on Thursday that sent its shares north by 10% today.
  • Oracle also beat the consensus estimate of analysts, and its shares rose by . . . 0.38%.
  • Citigroup fell sharply–by about 15% in three days–because Jim Cramer said to buy it after its share offering was priced lower than expected.
  • The Fed, in the statement that accompanied its decision to do nothing–something that Congress should try–about interest rates, hinted that the economy is improving.
  • Time magazine announced that Ben Bernanke was its man of the year.  The applause was as loud as could be expected from a one-armed man.saab
  • GM announced it will shutter its Saab facilities after the latest talks fell through.  Never had one; always wanted one.  Sigh.
  • Bill Gross, manager of the world’s largest bond fund–make that largest fund (we’ll have more to say about this subject next week.)–raised his cash holdings to the highest level since Lehman Brothers defaulted.  Depending on the relative level, that might really be important, as we understand that PIMCO’s chief investment officer (Mohammed el-Arian), after news of the default, told his wife to get as much cash out of the bank as possible.

This Week

The economic news was, in my estimation, mixed this week.  Producer Price Index rose more than expected in all categories, with the biggest surprise being in the headline monthly change, where prices rose by 1.8%, well above the consensus (0.8%) and the previous month (0.3%).  The Consumer Price Index measures were, however, little changed.

While Housing Starts and Building Permits figures rebounded nicely, the sentiment expressed in the NAHB Housing Market Index suggested that builders aren’t feeling the love, falling, as it did, from 17 to 16, below the consensus of 18. 

The Leading Economic Indicators rose again, from 0.3% to 0.9%, above the consensus of 0.7%.  Someone should have informed the folks in New York, however, as the Empire State Manufacturing index dropped like a rock to 2.55, from 23.51 and well below the consensus forecast of 24.00.  The Philly Fed index rose, however, from 16.7 to 20.4, above the consensus guess of 16.0.  Finally, our guess for Initial Jobless Claims beat the economists, both directionally and by magnitude.  Our mindless model said 491,000, while economists said 465,000.  Survey says . . . 480,000.

Next Week

Reallyrunningoutoftimenow

Tuesday – House Price Index [insert witty comment here]

Wednesday - Personal Income and Spending, University of Michigan Consumer Confidence, New Home Sales [insert witty comment here]

Thursday - Durable Goods Orders, Initial Jobless Claims [insert witty comment here]

Have a great weekend.

Graig Stettner, CFA, CMT  Δ  Vice President & Portfolio Manager  Δ  Tower Private Advisors

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The next blow-up?

Tuesday, December 15th, 2009

blowupWhile the Dubai debacle seems to be blowing over the markets with little ill effect, the goings on in Greece and the possible implications upon the EU appear to be still gathering some steam.  Pictured below is a table of the credit default swaps on sovereign debt.  The cost  of insuring against a Greek default continues to rise (up 12.1% just in the last day), and now Austria appears to be on the rise.  (Austria is one of those countries where the size of the banks dwarfs the economy and those banks are saddled with a lot of mortgage debt).  It’s still about three times more costly to insure against a Greek default than an Austrian debt, but this bears watching.

cds1

 

 

 

 

 

 

 

 

 

 

While Greece (absolute level) and Austria (% change) stand out in this report, it’s important to note that the five wideners are all members of the European Union, and it might be that countries in the EU can’t afford to abide by the EU’s prescription for fiscal discipline.  That potential appears to be weighing mightily on the performance of the Euro, which is shown below, having violated the trendline in place since February.

euro

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Financial Times: 2010 to be challenging

Monday, December 14th, 2009

The Financial Times is one of the world’s best business newspapers, and I’ve read at least three of them, so I’m sort of like Al Gore and the internet, only I didn’t invent business newspapers.  It’s also printed on pink paper.  Most importantly, it features some great analysis, and its website is top notch (click here if, like me, you don’t know where “top notch” comes from.) 

Clicking the video below will take you to the Financial Times’ website.  It’s a three-part (~5 minutes each) interview with Daniel Arbess, manager of the Xerion Hedge Fund.  He says that 2009 was easy–everything went up.  He expects 2010 to be much tougher, and he shares our thinking that while the consumer may be deleveraging, the Federal government is picking up the slack.  It isn’t like you to need to put away sharp objects, but it’s not the happiest thing you’ll read.arbess

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