Morning Call: Wednesday, May 05, 2009
Good morning. To use a mid century phrase we had lots of the "WOW Factor" yesterday. After those enormous gains we should have expected a profit taking sell off. The S&P held above 900 WOW. Don Lindsay had become to some the Poster Boy for using too much debt to buy (albeit good) assets at the top of the Cycle. Teck raised $4B in debt (50% more than expected) yesterday and effectively ended all solvency risk. WOW. Linamar barely lost money (1 cent) blowing away analyst estimates of a 15 cent loss and the stock rose 40%. Wow. Do you think Linda knows how to run a company?
There's an expectation that Canadian banks will be bought instead of US ones and that pushed the sub-indices through its 200D moving average. That's the best indicator of a long term trend reversal. Bernanke said that housing is near the bottom. That's so important because once we put a floor under housing, the market will figure out the US banks Balance Sheets and know what the valuations should be. The reason the market was so scary is that collectively we feared wholesale insolvency. That's coming to an end.
Bernanke made the obligatory "green shoots" comment and said that the building blocks were in place. Shortfalls in the stress tests (rumours now have 10 of 19 in need) would be met with private capital, BAC may need $34B.
Excess capacity of all economic factors (except capital for now) will keep inflation low. Yes the incipient recovery was still vulnerable but what a difference from when he was on the hill in February.
Lastly the swine flu doesn't seem to be turning out to be such a big deal. The Pandemic media got it wrong. Wow.
The internal improved again as the VIX shrank to 33. Part of the lowered fear are that Monster put buying has bought decent downside protection for some players. Not a bad strategy at all.
The other side of all this optimism come from the CBO which asserts that interest payments on the US debt will double in the next decade. Nice gift for the kids.
The market is at a make of break point.
So we will stay the course and …………..….………… invest the money.
QID US EQUITY (Bloomberg): UltraShort QQQ ProShares is an exchange-traded fund incorporated in the USA. The fund seeks daily investment results that correspond to twice (200%) the inverse (opposite) of the daily performance of the NASDAQ-100 Index.
Quote of the Day:
“Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all.”
-Dale Carengie
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.
