Morning Call: Thursday, May 07, 2009
Good morning. Another thumping day in the markets as the ADP non farm payroll job loss was only 491K compared to a revised March of 708K. The price of oil closed almost at $56 ½ and Natural gas rose which was enough for Toronto to blast through 10K. The S&P closed at 917, also a very fancy number. We've gone from solvency basket case in mid March to a world of green shoots in less than 2 months.
The BNP results were a pleasant surprise while SocGen's miss just goes to show how hard it is for retail to make up for the loss of all that Investment Banking business. Barclays had really good numbers and are determined to rebuild their balance sheet through earnings not issues. Barron's points out that loan delinquencies are dropping off. We read a piece that suggested that if the BAC needs $34B "stress" capital and if that just keeps the ratios flat we should expect them to lose another $100B. That's half of their market cap, so we have to wonder why the stock is so strong? And if it was a group thing, then why isn't Citi doing anything? Generally though, the banking news is good. We see that Mr. Clarke may be going to buy a Florida bank on the cheap. In investment terms, that’scalled averaging down, isn't it?
GM reported $9.66 loss (Consensus was $11) but GMAC may be decided today. GMAC needs $11B and the shareholders, GM and Cerebus, have no interest in putting more money into an enterprise that's probably worth only half that amount. It did seem strange for all those years of rebates, financing deals, etc that the auto companies acted like banks with a car company bolted on to them.
With the rise in commodity prices (oil's up another couple to $58) its small wonder that both the TSX and the Canadian $ are climbing. For the corporate audience we would urge you to take steps to protect your business from the Loonie. Strength in oil leads to more $C strength. We are entering the driving season and the price of oil is still 30% lower than it was when demand was last at these levels.
From the Boxscore the TED spread dropped to 77, now below the level it was when Lehman went bust. Likewise the 3 month Libor is at sub-Lehman levels (96) as are the credit default swaps. The ECB cutting their rate to 1% is helping Europe/ Asia have a very good day. The Brits did nothing.
The results from the university of Toronto asset management are front page news. It’sa real shame and its no comfort to anyone that everybody else lost lots of money too. They are however fortunate to have Ira Gluskin as chairman and Bill Moriaty as CEO. There's no finer investment mind in Canada than Ira and he has humility and good grace to match that. Bill is known to us as well and he was the first amongst equals, greatly admired by his partners, his clients and competitors. Let's hope the powers that be don't decide to act irrationally and in haste. We are all proud of the UofT and want the very best for it.
Global markets are flying as we seem to have collectively done a 180 from total risk aversion to Beta hugging momentum chasers. So we are still on the train. Don't get off.
So we will stay the course and …………..….………… invest the money.
CRB CMDT INDEX (Bloomberg): The Spot Market Price Index is a measure of price movements of 22 sensitive basic commodities whose markets are presumed to be among the first to be influenced by changes in economic conditions. As such, it serves as one early indication of impending changes in business activity. The commodities used are in most cases either raw materials or products close to the initial production stage which, as a result of daily trading in fairly large volume of standardization qualities, are particularly sensitive to factors affecting current and future economic forces and conditions.
Quote of the Day:
“Most of what we call management consists of making it difficult for people to get their work done.”
-Peter Ducker
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.
