Morning Call: Tuesday, April 28, 2009
Good morning. We all know the one about the Bulls, the Bears and the Pigs. Yesterday the pigs had it. Swine flu and pandemic are unlikely to help markets move higher. The comparison to SARS has some positives because at least we have some experience and know how. The bad news is that it will slow the recovery. We also know that there is no chance of containment. The market bought Tamiflu companies and sold off oil stocks, airline, hotels, restaurants and poor old Maple Leaf. Michael McCain did so well during the summer and now this.
However by rights the market should have been way down. It wasn't. Everyone noticed and commented on the resilience. Still 3 to 1 on the downside is a contrast to the persistence of the upward days. The choppiness we fear is here to stay. Between job losses, a huge slowdown in GDP and the bankruptcy of auto makers deemed to big to fail, there's lots of reason for the chop. But so many individual charts have turned. Many have gotten to their 200 day and bounced off. Those are still patterns of moving higher.
About stocks
Deutsche Bank reported a pre tax ROE of 25%. But the excessive gearing prevented any upside.
Rogers will report tomorrow and we expect that they do better than consensus.
We still like BCE.
Abitibi has cut off the chip supply to SKF causing them to talk to their lenders because of default risk. Talk about the chips being down!
Today we expect "Wackie Jackie" to announce a £12B spend on domestic surveillance with the bulk of it going towards "Deep Packet Inspection". She's the UK version of the head of Homeland security. The impetus was the revelation that the Mumbai terrorists used Skype to communicate which is beyond the capability of British surveillance. The Canadian stock that is a global leader in DPI is Sandvine. Stay tuned.
Nat gas prices are a huge concern and have been since our Calgary visit in mid February. However this doesn't seem to have transferred to coal and the dynamic is China. They are building 100 giga watts of coal fired electrical power generation plants each and every year. In 3 years that equals to one USA. Coal stocks that jump to mind are Teck and CPR.
Nuclear Tuesday
Trade tech reported spot up a couple to $44 and term unchanged at $69 UX said that term was down $5 to $65. The Denison long term contract announced yesterday probably did that. Given the moves in the stocks, we wouldn't be surprised by either M&A or straight equity raises.
Worthy of Note
The Waxman-Markey discussion draft, “The American Clean Energy and Security Act of 2009” for those who don’t know is the Green Act for the United States. It outlines the governments plan to address climate change and renewable energy in the U.S. Of particular note is the amount of renewable energy requirements beginning with 6% in 2012 and gradually rising to 25% in 2025. The EIA released a report looking at the impact of this 25% renewable electricity standard as proposed and made two interesting findings. Coal generation will be 8% to 11% below the 2007 reference case, and Natural Gas generation is projected to be 6% to 15% below 2007 reference case. This does not bode well for the long term natural gas prices.
And the EIA report can be found here –
Have not seen a break in the trend…………………………………… 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:
“If you can count your money, you don't have a billion dollars.”
-J. Paul Getty
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.
