Morning Call: Wednesday, June 17, 2009
Good morning.
The expression about easy money having been made seems to apply in Canada, especially to the Resources. The sentiment has shifted and the rush to buy on any weakness has given way to concern for the ongoing rally. The S&P is 40% off its lows and 40% off its highs. A quandry for sure. But the TRP bought deal of 51mm shs @ $31.50 gives one an insight into the market. When the UK came to market with £7B of 25 year bonds, the order book was £16B. The real test will be the CPI today with a decline of 0.9% being consensus. Given the PPI surprise we doubt that will happen but there's no prize at guessing, don't move till you know.
Much is being made of the BRIC purchases of IMF bonds and their chatter of the need for an "alternative currency". Curiously there's not a whisper from the Arabs or OPEC. You would think that they've a lot more at stake and yet silence. Could it be that the new currency is not fiat but is oil? Well we know that can't happen but to a degree it might and the impact on the $C would be far larger than any econometric model would show. Be prepared.
US Housing starts were up 17% and that's a green shoot. We had already written about a significant expected ramp in Q3 Auto Production and that combination is as classic “early cycle” as you can get. If housing has turned then the Banks’ balance sheets will come back. Not all the way back because if the plans to de-risk their profile by disallowing interest expense deductibility becomes realized then it will be a very very long time before the banks regain their former levels of profitability. And that's not to mention how much money they used to make in the CDS market or SIV's etc etc.
We are expecting the RIM numbers and wonder what the market knows. The US analysts have all been upping their targets. Do you think they know? Maybe.
We do expect that the focus on all these FED raises will diminish as we work our way through them and they become more routine. We think it’s reasonable to expect the FED to make another foray into the market to get the longer rates down a tad. It will be somewhat symbolic and he won't stay around too long. At the end of the day they're in the business of selling paper, not buying it.
Much is being made of the BRIC purchases of IMF bonds and their chatter of the need for an "alternative currency". Curiously there's not a whisper from the Arabs or OPEC. You would think that they've a lot more at stake and yet silence. Could it be that the new currency is not fiat but is oil? Well we know that can't happen but to a degree it might and the impact on the $C would be far larger than any econometric model would show. Be prepared.
US Housing starts were up 17% and that's a green shoot. We had already written about a significant expected ramp in Q3 Auto Production and that combination is as classic “early cycle” as you can get. If housing has turned then the Banks’ balance sheets will come back. Not all the way back because if the plans to de-risk their profile by disallowing interest expense deductibility becomes realized then it will be a very very long time before the banks regain their former levels of profitability. And that's not to mention how much money they used to make in the CDS market or SIV's etc etc.
We are expecting the RIM numbers and wonder what the market knows. The US analysts have all been upping their targets. Do you think they know? Maybe.
We do expect that the focus on all these FED raises will diminish as we work our way through them and they become more routine. We think it’s reasonable to expect the FED to make another foray into the market to get the longer rates down a tad. It will be somewhat symbolic and he won't stay around too long. At the end of the day they're in the business of selling paper, not buying it.
It may be best to…………………stay on the sidelines.
QQQQ US (Bloomberg): PowerShares QQQ is an exchange-traded fund incorporated in the USA. The Fund represents undivided ownership interests in the PowerShares QQQ. The Fund’s objective is to provide investment results that generally correspond to the price and yield performance of the component of the Nasdaq 100 Index.
Quote of the Day:
"The four most expensive words in the English language are, 'This time it's different.'"
-- Sir John Templeton
-- Sir John Templeton
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.
