Morning Call: Tuesday, June 09, 2009
Good morning.
If you just looked at the close it would seem that not much happened. The S&P had been down 1% and closed down less than a point. The strength of the US$ hurt commodities and Gold but a late day program inspired surge in Financials and brought us back. Paul Krugman said the recession may be over in September but for the life of us we can't remember who he is. If he's right then oil too will resume its uptrend, though let's remember that oil is all the way up from $35, so its doubled.
We were asked several times yesterday if we expected a V or a W recovery (not the Mexican car designed in Germany) and we are in a quandary. Stimulus money should have insured a flattish V. However one of Canada's best known economists said over the weekend that the recession was over. Our experience has been that this person is the best contra-indicator in the market and so we've got to say a W.
One creative way for the FED to help the US$ would be to raise money in the Euro and the Yen. The China Central Bank has suggested the Riminbi but that's a currency that is manipulated to “suspect” levels for the benefit of Chinese exporters. Certainly raising money in something other than the US$ would ease the fear of "crowding out".
We talk often about investment themes and we think that the "New Normal" should join Volatility, commodities, and Technology as Themes. We predict that the new normal will see limited growth for the balance of this decade and into the next. Probably 1-2% growth in Euroland and the UK, 2-3% in North America, 0-1% in Japan and the BRIC should manage 5-8% in aggregate. Higher taxes, higher energy costs, higher interest rates and more regulation will act as an effective dampener of the global economy. It will just be tougher to grow!
A sector of Technology we continue to like is the smart phone space. RIM, Apple and Palm have 30% share and growing rapidly in a fast expanding sector. The $99 iPhone will hurt everyone’s margins but valuations will remain high because of the sector growth. It’s probably not a bad time to take some profits in Palm.
The Charts show that the US$ has rallied back to its downtrend line. Stay tuned. The CRB looks like it can pullback to the 850 level. Gold bullion is trading $35 above its 100 day moving average and $80 above the 200 day, which warrants special attention.
The persistent theme is about trading and how it’s driven by momentum.
One creative way for the FED to help the US$ would be to raise money in the Euro and the Yen. The China Central Bank has suggested the Riminbi but that's a currency that is manipulated to “suspect” levels for the benefit of Chinese exporters. Certainly raising money in something other than the US$ would ease the fear of "crowding out".
We talk often about investment themes and we think that the "New Normal" should join Volatility, commodities, and Technology as Themes. We predict that the new normal will see limited growth for the balance of this decade and into the next. Probably 1-2% growth in Euroland and the UK, 2-3% in North America, 0-1% in Japan and the BRIC should manage 5-8% in aggregate. Higher taxes, higher energy costs, higher interest rates and more regulation will act as an effective dampener of the global economy. It will just be tougher to grow!
A sector of Technology we continue to like is the smart phone space. RIM, Apple and Palm have 30% share and growing rapidly in a fast expanding sector. The $99 iPhone will hurt everyone’s margins but valuations will remain high because of the sector growth. It’s probably not a bad time to take some profits in Palm.
The Charts show that the US$ has rallied back to its downtrend line. Stay tuned. The CRB looks like it can pullback to the 850 level. Gold bullion is trading $35 above its 100 day moving average and $80 above the 200 day, which warrants special attention.
The persistent theme is about trading and how it’s driven by momentum.
Nuclear Tuesday
The Ux price is up 50 cents to $50. There were 6 trades totaling 900k lbs. Not bad! We are quite constructive!
So we continue to advise.………………… Invest the money.
So we continue to advise.………………… Invest the money.
EURIBOR (Bloomberg): Euro Interbank Offered Rate is the benchmark rate of the large euro money market that has emerged since 1999. It is sponsored by the European Banking Federation (EBF), which represents the interests of some 5000 European banks and by the Financial Markets Association (ACI). Euribor is the rate at which euro interbank term deposits are offered by one prime bank to another prime bank and is published at 11.00 a.m. CET for spot value (T+2).
Quote of the Day:
Ed Pennock, CFA, Managing Director
416-369-6921, epennock@dominick.ca
Graham Farrell, Institutional Equity Trading
416-369-4208, gfarrell@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.
