Good morning. The US market rolled over in the last hour to finish at 903 on the S&P. The BAC issue got done and unbelievably done after a big move in the stock. The passing of new credit card rules were a wake up call to Investors. Another highly profitable line of bank business will not be as profitable going forward. Then the FED let the air out of the tires predicting more unemployment and worse than street expectations for GDP. Greenspan added his 2 cents worth as well.
Canada had kept going merrily along as oil Inventories declined by 2.1mm barrels against the expected 400k decline. Oil rallied another $2 to $62. There was a squib yesterday saying that the C$ correlation to the price of oil was 95%. So while the US$ is going lower because of fears about yet to be sold stimulus bonds and a significant increase in the appetite for investment risk. The price of oil is doubling the impetus on the higher C$. When the C$ collapsed last year it was not only the global economy but it also had a whole lot to do with oil going from $150 to $35.
Thus its small wonder that gold and the shares of gold companies are flying. But a note of real caution. Bullion often is denoted in US$ and so there is an off set. Yesterday the bullion price increase and the rise in the C$ were the exact same percentage for a good part of the day. The Brits have been at this for 300 years and its small wonder that they always try to figure out the currency first.
Can we keep going in all these directions. The combination of a lower VIX with a lower US$ and lower Treasury yields is great but will be toxic when it turns.
One has to wonder how long the US$ weakens. If Euroland starts printing money for stimulus or if the Japanese follow suit. Japan's Q1 GDP decline of 3.5% implies 14% per annum which is stunning for the worlds second largest economy. They will never make it back.
The CRB is at 6 month highs with many commodities still looking like they want to go higher. Again this is a positive for the Canadian market. A sad commentary on changed times is that the International Investors now go to Australia for their large cap Mining investments.
The dash for trash is back. While we felt a pullback was due(and we nailed it) the reason we held back yesterday is because markets rally into long weekends and especially Memorial Day. Thus saying “sell” when you know the odds favour an upward bias is a little silly. Often the market settles back after Memorial Day and waits for more news and that's all we are expecting.
Cramer said that ING bank was a sell as its not as good the other Canadian Banks. He also was selling PetroHawk which is a former favourite in the Haynes Shale.
Gartner research says Rim's market Share is rising and that was more or less confirmed by channel checks that Morgan Keegan published yesterday.
Solar Thursday
A real world comparison of Thin-Film vs. Crystalline is currently taking place at a 1.6 MW solar array in California’s Central Valley. Starting in March it will test which technology provides the best energy production and cost benefit performance over various real world conditions. Early indications are that the output/ DC kW of the thin-film modules are about 10% higher than that of mono-crystalline.
Wacker just raised €400 million to build a poly-silicon plant in Saxony for commissioning in 2011. At that point they will produce 35,500 mt.p.a.
So…………………………………………………..let's go to the sidelines.
UYG US (Bloomberg): Ultra Financials ProShares is an exchange-traded fund incorporated in the USA. The fund seeks daily investment results that correspond to twice (200%) the daily performance of the Dow Jones US Financial Index.
Quote of the Day:
“The fastest way to succeed is to look as if you're playing by somebody else's rules, while quietly playing by your own.”
-Michael Korda
Ed Pennock, CFA, Managing Director
416-369-6921, epennock@dominick.ca
Kris Fisher, Institutional Equity Trading
416-369-6924, kfisher@dominick.ca
416-369-6921, epennock@dominick.ca
Kris Fisher, Institutional Equity Trading
416-369-6924, kfisher@dominick.ca
The above note is prepared by an Institutional Salesperson based on morning meeting comments and general Institutional desk discussion and should not be construed as a research report or a solicitation. For information purposes only. D&D Securities, its clients, and principals may have positions in these securities.
