Morning Call: Wednesday, July 8, 2009
As the markets come off hard there's concern everywhere. Stimulus was once a word to rally markets and now it crushes them. That the economy is going to recover slowly should be a given. But the $10 drop in oil spooked the market. We have been surprised by the lack of coverage in North America of the rogue trader at PVM (the largest global agency only oil trading house) in London. The impact had been to drive oil $3 higher on his activities alone and thus when it ended it brought oil down by $6, which turned the momentum and so the price moved down.
Signs of concern in the US are the breaking technical patterns of the Retailers. Add to that credit card and loan delinquencies and you've got a pretty dismal picture. (We've been wrong on Canadian Tire because of this concern). With the leadership from the oil price gone we are looking for a new group and it’s not obvious. Natural gas prices have caused Boone Pickens to cancel his huge Texas wind farm project. "It isn't easy going green."
The new head of commodity trading (CFTC) has "Speculators" firmly in the crosshairs. This will be a new (maybe not so new) theme in coming months. It’s on the front page of the ROB so it must be important. Stay tuned.
While the VIX has settled into the high 20's the Put-Call ratio is running 3 to 1 suggesting that the "tape turbulence" is the onset of more volatile times.
Historically it’s noteworthy that John Meriwether is set to close his new hedge fund JWM. He was the founder of Long Term Capital Management which collapsed a decade ago and almost brought the financial system with them. Their sin was using 30 to 1 leverage. Imagine!!!
Treasury sold $35B 3yr Treasuries at 1.159% and bids received were 2.62 times that amount. Again we suspect that there's more domestic demand than was expected. Every successful auction reduces the risk to the market.
Just be prepared because Cramer had negative comments on RIM.
Earnings season starts today and we are on balance positive so it’s time to…… Invest the money.
Quote of the Day:
The reason why worry kills more people than work is that more people worry than work. --Robert Frost
Graham Farrell, Institutional Equity Trading
416-369-4208, gfarrell@dominick.ca
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.
