Morning Call: Tuesday, May 05, 2009
Good morning. Is this the Warren Buffett rally as he announced that Wells Fargo is doing "fabulous". Golds, gas, copper, and oil all roared but were led by the banks. One is to be forgiven for being irrationally exuberant as oil rises in the face of massive inventories and the banks await their stress tests. There's been so many leaks that you have to wonder if the market will care.
There were break outs above the 200 day MA everywhere: emerging markets, theRussel, Nasdaq and the S&P 500 closed above 900. The offset was a weaker US$ and lower treasuries that are worrying about the upcoming $71B auction of 3-10 -30 year bonds.
The fundamentals for the rally were pending home sales up 3.2% at 84.6 as first time buyers are coming in to take advantage of low house prices and cheap financing. That's affordability! Construction spending was up 0.3% which was a first in 6 months. Citi's Levkovich points out that higher markets will generate a wealth effect and positively impact consumer confidence. (Our words) Seeking Alpha suggests Long term investors pay more attention to what to buy than what to sell. Finally RBC said buy the banks and off they went.
Net net "They're back" and the market feels like running with the bulls in Pampelena. If you don't go with them you will get hurt. Just look at the tech rally that won't quit. However, there’s one worrisome fact. The volume is not confirming with the market rise. But we recognize the costs of trying to get off this train. Everyday you miss costs one's portfolio too much. So you've got to stay on board. May be it’s just a nit that we pick but its must be paid attention to.
So all in all what's happening? We think it’s the flow of funds, the piles of cash coming in and the Stimulus money doing a circuit through the markets before going on to do others things, that has us moving. Another key driver for the markets is that US Libor (overnight) has broken below $1. Stay tuned
Nuclear Thursday
The UX price is up a couple of dollars to $46. The news is that Cameco is back in the market and buying. The papers said China is prowling looking for product. They're hungry to feed their 11 reactors, as well as the ones being built. However it’s also a wake up call for North America's 122 reactors (18 in Canada).
Cameco's buying we think is in order to assure contract coverage, loss avoidance and pure speculation, all of which is good for the U3O8 market. They are in discussions with the Chinese. We have to wonder what it might be saying about MacArthur River or Cigar Lake.
You can't get off the train …………..….………… invest the money.
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:
“It usually takes me more than three weeks to prepare a good impromptu speech.”
-Mark Twain
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.
