Asian stocks lost ground, pushing MSCI Asia Pacific down 0.9% from its one-year high at close yesterday. Taiwan's Taiex led declines, dropping 0.9%, while Japan's Nikkei fell 0.8%. There were also losses in Hong Kong, Korea, Singapore and Thailand, while benchmarks in China and India eked out the mildest of gains. Futures on U.S. indices are trading lower while European markets are being called lower.
Position: None
Equities are having a day of sideways profit-taking; oil and gold are holding support at $70.50 and $995, allowing currency pairs the chance to recoup the Usd losses seen on Tuesday. The overnight session has been one of consolidation with very little in the way of sustainable moves either way on the dollar. Aussie has moved the most in percentage terms, with the yen cross pairs negating the long moves in Usd/Jpy with similar short moves on the major pairs.
In all, a European session of nothing to note; take care, we saw the same thing on Tuesday, just before things exploded into life as gold broke $1,000. It is not clear as to what instigators will come into play on Wednesday, outside of knowing that the economic calendar is clear of red flags until 8:15 a.m. EDT housing start data. U.S. equity futures are lower by an average 0.5%.
Position: Forex
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Jim Cramer
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| Third and 9 out of the Shotgun |
9/9/2009 6:27 AM EDT
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That's Obama's speech tonight on health care. And I don't like third and 9s. I still think the UnitedHealth> (UNH)/Wellpoint (WLP) trade is a good one. It is only the strengthening economy that makes it look less than it really is. People would rather own United Tech (UTX) and Emerson (EMR)...
Position: EMR
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Don Dion
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| Kraft/Cadbury Battle |
9/9/2009 6:36 AM EDT
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Look for Warren Buffett to bring sanity to the Kraft (KFT) hostile bid for Cadbury (CBY). As Kraft's major shareholder, Buffett should advise Kraft management to walk away after their generous bid was rejected by Cadbury's board. No need to overpay and take on massive debt. If this happens, look for KFT to rally and continue to pay its generous dividend.
Position: none
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Jim Cramer
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| Don -- New Gold ETF |
9/9/2009 7:06 AM EDT
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Hey Don, you have been so eloquent on gold ETFs -- can you do something today on the breakdown of the rally in gold and how much you think is ETF? The new ETF that's coming that's written up today makes me feel that more of this rally is ETF than dollar weakness!
Position: none
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Don Dion
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| Impact of Gold and Silver ETFs |
9/9/2009 7:26 AM EDT
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Look for a detailed discussion on my blog this morning.
Position: none
1035.50 = 104 M
1032.50 = 103.70 M/S
1027.75 = 103.25 S
1025.50 = 103 M
1022.50 = 102.70 M
1019.25 = 102.40 M/S
1015.50 = 102 M/S
Position: none
Yesterday's trading was about as uneventful (and boring) as it gets. Trading volumes indicate that many participants either hit the snooze button a few too many times or just stayed at the beach. Regardless of your trading bias, there is little to do but twiddle your thumbs and wait for a break above 1027.75 or below 1019.25; until one of those levels is breached, we are likely to remain in a very tight and choppy range.
The bulls need to defend moderate support at 1025.50 and target strong resistance at 1027.75. If traders are able to push the emini through 1027.75, they should have no trouble running the market to 1032.50 (M/S). The bulls will run into moderate resistance again at 1035.50.
The short side is a very scary place to be when the market is this quiet. If the bears want to stop the current advance, they desperately need to push the emini back through moderate support at 1022.50 and moderate/strong support at 1019.25. A break of 1019.25 give them room to run, but I would expect the bulls to step back in near moderate/strong support at 1015.50.
Position: none
Global equity markets are mixed, with Asian markets lower but European bourses recouping early losses to turn higher on the day. In Asia, stock markets generally gave back some of the week's gains, with the MSCI Asia-Pacific index, which reached a one-year high yesterday, slipping 0.8%. Similarly, the Hang Seng, which has gained for five straight days, fell 1.0% today to record the region's largest loss. Telecom- and commodity-related shares led the move lower amid talk of profit-taking.
European bourses are up modestly on the day and S&P futures have recouped some of their earlier losses. Gold is back below the $1,000 level after failing to retest yesterday's highs and amid reports Canada's Barrick Gold (ABX) will unwind its gold hedges. Oil remains near yesterday's highs ahead of the OPEC meeting today. The OPEC production monitoring committee has recommended that current output quotas should be maintained.
The Fed's Evans speaks at 8:00 a.m. EDT followed by Canadian housing starts at 8:15 a.m. Starts are expected to show further modest improvement, rising to 140,000 in August from 134,200. U.S. crude inventories will be released Thursday rather than today due to the Labor Day holiday. Fisher speaks at 1:55 p.m. followed by the Fed's beige book for the Sept. 21 FOMC meeting at 2 p.m.. The Reserve Bank of New Zealand announces its policy decision at 5 p.m. EDT. President Obama speaks to Congress on health care reform after the close. Signs of fiscal expansion tied to the health care plan are likely to be received poorly by the market.
Position: None
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Tom Graff
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| Asian Buying of Treasuries Overnight |
9/9/2009 8:26 AM EDT
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The Treasury market was higher during the Asian session; supposedly there was strong buying of the two-to-five-year part of the curve. The 10-year was also up a quarter-point at its peak during the session. But apparently U.S. traders weren't of the same mind. The 10-year quickly gave up its gains after 7 a.m. EDT as U.S. traders arrived at their terminals. We're now down one-eighth from yesterday's close and three-eighths from the overnight high.
Today the Treasury will reopen the 10-year with a fresh $20 billion, and tomorrow they'll add $12 billion on to the long bond. Technically, the 10-year looks weak to me, so a weak auction probably has more downside than a strong auction has upside.
Position: None
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Jim Cramer
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| Huge Turn in Europe |
9/9/2009 8:42 AM EDT
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At 4 a.m., all of these markets were down; now they are roaring. I think the S&P futures should be bought, as they should be higher...
Position: none
The PowerShares QQQ (QQQQ) is trading flat after a day of flat trading. This leaves us with neutral momentum this morning and no real predictability as to where we are going and how much we can expect to move. I will be watching for opportunity with any stocks that might sell down more than the average or spike up. Vivus (VVUS) will probably have the best momentum this morning and can prove to be a runner, moving to $12; so far, it has support around 10. If it's going to run, it will sell down minimally at the open then take off.
Position: none
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Jim Cramer
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| Semis and Digitimes |
9/9/2009 8:56 AM EDT
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There had been a story out there that there was slowness at Xilinix (XLNX), Altera (ALTR), Qualcomm (QCOM) -- one that confused a lot of people two weeks ago. It has now been totally refuted, and I believe all the stocks should be bought on the same mobile Internet tsunami. I think XLNX is having a huge quarter based on talks with its CEO from last time on "Mad Money"...
Position: QCOM
Nice call here yesterday on Talbot's (TLB) turn. In the meantime, I am struck by how with all of these retail transactions, Visa (V) hasn't moved at all. More stocks that should be on the move: I would buy the Cree (CREE) deal off mobile Internet, I would buy Xilinx (XLNX) on the same, and the Sandisk (SNDK) call makes a lot of sense, as does F5 Networks (FFIV) because of, again, mobile Internet..
Position: V
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Tom Graff
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| Corporate Bonds Firm |
9/9/2009 9:40 AM EDT
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Credit spreads are firm this morning after a strong rally yesterday. Finance is broadly unchanged although one trader told me that buy inquiry outnumbers sell inquiry 4 to 1. He also commented that he believes more accounts are overweight finance than any other sector. Bank of America (BAC) and American Express (AXP) look like early outperformers, both 7 tighter.
Consumer names are also better this morning: Home Depot (HD) is 2 tighter; Target (TGT) 3 tighter; ABIBB, Coca-Cola (KO) and Pepsi (PEP) all 5 tighter. No early read on Kraft (KFT) yet. The 6.125 18s traded as wide as 165 yesterday after being in the low 140s on Friday. I heard there were mostly cash sellers, but the move wider in CDS was limited by afternoon profit taking. Both Moody's (MCO) and S&P put the company on watch negative, but looks like the transaction as currently envisioned would only result in a 1 notch downgrade.
Position: Long bonds for PEP, KFT, AXP
The business-jet market is still ugly, though it has seen recent signs of stabilization, such as used inventories ticking down again slightly in August. Pricing is still soft, and there's still an abundance of supply.
One thing to put on the radar longer-term, though, is China. Though businesses and individuals there have seen their wealth increase, government restrictions like excessive taxes on buying a private plane and the ability to use airspace have made the Chinese business-jet market impossible. As a result, there were only 87 business jets in China last year.But according to a story in South China Morning Post, some of these restrictions might be easing. David Dixon, a regional vice president for Bombardier, said at the Asian Aerospace International Expo and Congress that the time it took to get a permit for a business jet flight had recently been reduced to a few hours from a week. China is also cutting the tax rate significantly next year.
Put China on your radar as a potential longer-term growth driver of the business-jet market during the next up-cycle, whenever that materializes.
Position: None
I just read an email from a reader who is a car dealer in the Northeast. He said that he has not sold a single new car since the Cash for Clunkers program ended. All we accomplished with that boondoggle was to drag demand forward and kink a few economic stats to the upside. There is not going to be any follow-through and I would hate to be a car salesman right about now. Those folks are going to be lonelier than the Maytag repairman.
The temporary gains in employment and retail activity will quickly disappear. I wonder what they will stimulate next. Personally I am hoping for large rebates on wine and books!
Position: nm
The U.S. Commerce Department is expected to announce its decision regarding oil and gas pipe imports from China later today. U.S. steel workers and U.S. Steel (X) have joined forces with the U.S. affiliate of Russia's second largest steel producer and Wheatland Tube, a Pennsylvania-based steel company to file formal complaints again Chinese steel pipe imports.
U.S. steel pipe imports from China amounted to around $2.8 billion last year, while the increased demand for pipe helped U.S. producers record a $2.4 billion profits in 2008, a threefold increase from 2007. Since then oil prices have tumbled and Chinese imports have fallen, partly because of the fear that the duties the U.S. Commerce Department could impose may be retroactive.
However, China does not like the embarrassment and would prefer a negotiated settlement. Meanwhile, many are concerned that despite the pledges to resist, protectionism is lurking near the surface, nurtured perhaps by the highest unemployment in more than a quarter of a century. Obama, along with the other G20 leaders, has agreed to resist protectionist pressures, and although countervailing duties can be legitimate defenses, given the particulars in these cases, it is not clear retaliatory action won't appear protectionist in spirit.
It behooves the Obama administration to 1) find clearer cases of harm from unfair Chinese trade practices, 2) avoid unilateral action by using the WTO more, and 3) set a high bar for best practices.
Trade seems to always produce frictions and the more the trade the more opportunity for complaints and disputes. That is not a problem. The key lies in conflict resolution. Issues of subsidies and government assistance are bound to be more involved in the period ahead as the official response to the crisis in the U.S. and elsewhere has, of course, seen nearly unprecedented government action in the economy.
Position: None
Thus far, my general thoughts on the presentations at the the Dahlman Rose & Co. Global Transportation Conference is that companies seem cautiously optimistic about the outlook for the sector and don't see what we would consider a full recovery until 2012/2013.
With that said, companies seem well positioned to maintain business until that point, but with limited upside. I will admit that I am rather new to this sector, but the outlook seems to parallel my views for the shipping sector, which seems natural given the sectors linkages. All in all, an uptick in rail would likely coincide with increase demand for shipping.
For real-time updates, please see my Web site.
Position: None
The same pattern as Tuesday emerged in forex trade today, with bursts of activity in inter-related markets spurring volatility in the currency arena. There is a pattern emerging that looks to be taking the onus away from Wall Street trade to be relied upon to generate forex moves, and it seems as though the end of the European vacation period has drawing back in sustainable moves in the 2am - 8am time-frame.That is music to our ears, after three months of dealing with a market that only has the energy and momentum to move in U.S. trade, in a session from 9am to 4pm houses just 16% of global forex order flows, the moves have been sporadic and volatile.The litmus test for Usd values, Usd/Chf. has dropped lower in Wednesday trade, although only managing at this stage to draw Jpy and Eur values into the frame. The earlier declines in Aud, Cad, and Gbp, have left them playing catch-up compared to the other three majors that held a tight range in overnight trade. The Fed's Beige Book will reveal FOMC member thoughts on the U.S. economy, and as such any new positions waiting to get hit may get a boost of momentum at 14:00 EDT. This is a short-dollar market, with trends now aligned after a period of melancholy trade over the summer. The energy has built, and in reality all the major currencies look to require is a quick dip to support, clear out the weak hands, and then to make the moves towards 2008 highs.
Position: Forex
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Howard Simons
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| Protectionism Can Take Many Forms |
9/9/2009 11:22 AM EDT
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Marc's note on oil country tubulars reminded me of what a purchasing mananger for a major oil company told me in 1982: "If I could get away with buying all Japanese pipe, I'd do it. The quality's that much better."
Now it's China shipping the pipe. As Chinese imports have yet to capture the "quality" mindspace Japanese imports did, the issue may simply be one of cost today.
Then the protectionist issue was one where a buyer had a mental quota. Now it is turning toward things such as carbon content and currency rates. Protectionism must be resisted at all costs; these issues such as Boeing-Airbus or our cotton subsidies or sugar quotas are coming up all too frequently.
Position: None
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Don Dion
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| Re: Car Sales |
9/9/2009 11:27 AM EDT
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Our clients who own GMC dealerships are continuing to see activity at their showrooms. The problem they have is lack of inventory and slow payment from the Clunker program. However, cars are on the way from the factories.
Position: fsavx
The rally in Vivus (VVUS) is very familiar. I can recall this stock leaping to the stratosphere back in the '90s, when the company introduced an injection for men with ED. The market was very excited about the potential for the product. Very shortly after the announcement and rally in the stock, Viagra was introduced, and the stock collapsed. The new drug this time is an anti-obesity drug, and the trials are positive, with those using the drug losing more weight than those on placebos.
The participants in the trial were morbidly obese. I am not sure how large that marketplace actually is or if the drug works for the less than morbidly overweight. I suspect the drug will not be quite the hit the market is expecting. I certainly would not chase the stock here.
Position: nm
Not only is the partial contribution of a weaker dollar to the S&P 500 positive, the the rolling three-month correlation of returns between the euro and the S&P 500 is the highest it has been since April. Both markets are being rewarded by cheap money, presuming that money will retain purchasing power when all of this is over.
The industry groups benefiting the most from a stronger euro include oil-related groups, banks, and industrial machinery. Losers are concentrated in the healthcare and consumer staples sectors.
A weaker dollar thus acts as a tax on the American consumer and as a subsidy for the energy (boo!) and Wall Street (hiss!) sectors.
I thought this was supposed to change.
Position: None
Jim, please show me the data that proves your inventory point. I posted an inventory-sales chart on Aug. 31 that I believe is current. It shows inventory as too high relative to current sales. I am trying to understand better the case for inventory building.
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Source: Data from Bureau of Economic Analysis and Defiance Asset Management, LLC. Inventory-sales data thru June 2009. Chart updated 8/28/09. |
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Position: None
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Gary Morrow
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|
New Highs for Skyworks |
9/9/2009 1:00 PM EDT
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Skyworks Solutions (SWKS) is up 2% this morning after opening the day with a powerful upside gap that lifted it to new 52-week highs, its best level since May 2002 and in good position to add to the four-day bull run.
Last Friday, Skyworks broke out of a short-term bullish flag with a 3.8% rally. The day before, the stock surged over 5% on heavy trade, continuing a series of rallies that followed successful tests of 50-day moving average support. Since exploding out of a double-bottom below $4.00 in January, Skyworks has done a great job of holding 50-day support. Brief setbacks in April, May, June and July tested support at the 50-day and responded with a push higher. Last month was no different after the stock suffered its deepest pullback since early February. The lows of this month are repeating this pattern.
| SWKS Daily (Nasdaq)
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TradeStation |
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Considering the size of the recent move, 10% in six days, it's likely the stock will pull back soon. Strong support is in place near $12.50. I am not in the stock but will be a buyer on weakness.
Position: No positions
Here are a few stories and videos from our flagship site that you may have missed:
Position: None
Unfortunately, my sources are seeing the same as Tim M's emailer. Sales are as dead as before the clunkers, and not even 0% for 60 months is helping.
In case you didn't notice, and judging by the trading volume most of you have, the American International Group (AIG) casino is still in full swing. Step up. Place your bets. Spin the wheel.
Position: Long AIG strangle; short of breath and hearing due to a sinur and ear infection...the joys of the summer cold.
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Geoff Johnson
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| Focusing on Insurance, Retail and Tapas |
9/9/2009 1:07 PM EDT
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Still on vacation in Europe until week's end. Been in San Sebastian the past few days and can report that evidence of Spain's bruiser recession is nowhere to be found around town here or in the crowded pintxos (Basque tapas) bars. Although the nice low hotel rates indicate things are not perfect yet.
Before I left I noted that I sold a big chunk of my exposure to financials, mostly in insurance. Last week's brief selloff gave me a chance to buy some of it back cheaper, even as a couple of them got away. However, I've also put some of the cash into retail. Count me in the camp that found the August comps to support my view that by year-end (or very early new year at latest) we should begin to see many retailers comp positive.
I'm OK with the jobs numbers, too. The numbers continue to head toward zero job losses, which is enough to make me happy for now.
Overall, the data keep me bullish -- that is, in a cyclical bull-within-a-secular-bear kind of way. This move has a finite life, but for now I think the economic data stream will continue to support a sideways to upward bias for the market.
I believe we're slowly centimetering our way (hey, I'm in Europe, I can't "inch" -- all metric here) from almost good to actually good news. Should that good news come, I would not be surprised if that will be a signal to get out.
Position: None
So much market mythology involves the evil speculator vs. the virtuous hedger.
Poppycock and balderdash!
Barrick Gold's (ABX) face-plant on its gold hedges demonstrate why. First, an investor in a gold-mining operation probably wants linear (speculative) exposure to gold prices. Second, and related to the above, the decision when and at what price to sell forward transforms the external risk of the market into an internal risk you have chosen the correct price. That decision is, shall we say, a speculation by the hedger.
A producer such as Barrick needs to floor prices by adding a put option-like structure to its natural long exposure and transforming its corporate return with respect to gold prices into a synthetic call option. The minute they add a short call option into the hedge, whether via fixed-price sales, short futures, collaring swaps or something else "cheaper" than the put option alternative, they expose themselves to a $5.6 billion charge to unwind the hedges.
Did any black-hat speculators lose that much for their shareholders? Methinks not.
Position: None
Lunch break: The mood at the Dahlman Rose Global Transportation Conference continues to be that of cautious optimism, with companies hunkering down for what looks to be well below average activity over the next couple years.
But company executives continue to indicate that they are well positioned to take advantage of any eventual upticks in demand, and they say they are ready to delve into new areas of business that are presently under-utilized by the railroad sector, which includes areas such as used car transportation. NSC has thus far made the most optimistic presentation regarding the outlook for the sector.
Please see my Web site for real-time updates.
Position: None
I just got back from running an errand, and I see gas prices are down again. As best as I can tell, they have fallen by about 50 cents a gallon in the past few weeks. I would think that would be beneficial to the consumer.
Maybe that will change with oil's rally of the last few days, but in the meantime, it's good news.
Position: none
I did like the drop in consumer credit this morning. Although some of the decline is from chargeoffs and credit-line reductions, a lot of it is consumers pulling in their horns.
Some of it is forced by the employment situation, but it also appears that people are ignoring the government's siren call to get out there and spend. Excessive spending and credit is how we got here, and it is not the solution. Individual balance sheets need to be repaired, and a reduction in spending is the first step.
Unfortunately, in the short run the drop is terrible for stocks. We are a consumer-led economy, and consumers are continuing to cut back. We had one heck of a party forming the bubble, and after a multi-decade binge, we cannot expect a hangover that goes away in a year or two. It is going to take time to delever and rebuild, and earnings will be pressured as a result.
Position: nm
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Don Dion
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| Steve Jobs - Welcome Back |
9/9/2009 1:41 PM EDT
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Steve Jobs is back on stage. Can only help power AAPL higher. Welcome back.
Position: none
SanDisk (SNDK) is benefiting from a Deutsche Bank bump. Deutsche raised SNDK to buy from hold and lifted its price target to $23 from $16. The good news sparked a powerful gap-higher open that has pushed the stock to new highs for the year. SNDK is now trading above its July peak of $19.00 and is leaving behind very strong support in the process.
I expect the current rally, which began last week after a successful test of 50-day moving average support, to carry the stock up to the new DB target of $23. This is the same area of last September highs and will likely offer quite a bit of resistance. Prior to this target being reached, the $18.40 to $19.00 area will provide solid support for the stock. A low-volume pullback to this area would provide a low-risk buying opportunity.
| SNDK Daily -- Nasdaq
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TradeStation |
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Position: No positions
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Jim Cramer
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| Consumer Spending vs. Consumer Savings |
9/9/2009 2:08 PM EDT
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Tim, as I have written endlessly I cannot disagree with you more on the consumer spend. The retailers budgeted for much less spending than what we have, as have the autos. We will have lower sales but much higher quality. We were in some sort of profitless sales game but not any more. It is good!
Position: now
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Hal Uy
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| Apple Video Camera Ipod. |
9/9/2009 2:17 PM EDT
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Apple (Nasdaq:APPL) announced that it will build in video cameras into the Ipod. This news essentially wipes out Cisco (Nasdaq:CSCO)$590 million purchase of Pure Digital the maker of the flip video back in March.
Position: No positions in stocks mentioned
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Don Dion
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| Consumers Are Awake |
9/9/2009 2:20 PM EDT
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I've called my clients who have retail businesses on Main St., USA. The consumers are back buying but they are demanding good value for their dollars.
Position: FSAVX
I spend less time in a store than a typical smash-and-grab burglar, so I guess I am part of that movement back to "low sales but high-quality" shopping now tout la rage.
But a man's gotta do what a man's gotta do, and I do need a new gym bag along with a few things I don't trust the missus to buy on her usual Revenge of the Honey-Do missions. So what do I get in the mail yesterday but a promotional card from GQ (formerly Gentlemen's Quarterly)magazine promising me not only twelve free issues but - and I am not making this up - a free gym bag.
As my friends of the Gotham persuasion might say, "fuggeddaboutit." I will take my loyalty card for Dick's Sporting Goods and go shopping myself. Low-volume, high-quality and a clear conscience.
Position: None
One word: disaster. Twenty basis points round trip per trade times 50 trades would cost 1,000 basis points per year. Per month? Per week? We need Cramerica to rise up and stop this in its tracks!
Position: none
Differing opinions are what makes markets. The beige book today does not support a consumer is back thesis nor does any of the anecdotal evidence I am seeing. Both of my kids work in the mall and they are reporting that traffic and sales are still down. The beige book indicated reduced consumer spending and delayed discretionary expenditures. The decrease in consumer credit supports my opinion that the consumer is not back in any meaningful way.
Did they budget for reduced sales? I suppose that is possible and the cost cutting and job eliminations of the first half of the year may well support better margins. Personally I doubt it. I think that by the start of the third quarter we will see heavy discounting back in the malls and department stores.
Position: nm
Bob, the consequences of this 'small tax' are huge and when you have a labor union, that has much political capital with the current tax friendly administration, behind it then it isn't just some theoretical discussion we can ignore. I know the tax would put a lot of small traders out of business but apparently these taxing geniuses believe that 'speculation' is a terrible thing that should be discouraged. It isn't just active traders that would be impacted either but they don't seem to get that.
I wrote a petition against a tax back in February when Congressman DeFazio introduced a trader tax bill. We have over 25,000 signatures so far and I will be asking signers to become more vocal should this thing gain further steam.
Position: None
Rev, if a 0.25% tax is going to put traders out of business, maybe they should find another business?
Position: none.
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Tom Graff
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| 10-year Auction |
9/9/2009 3:00 PM EDT
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The 10-year auction was mixed. Pre-auction trading suggested a 3.53% yield, and the actual number was 3.51%. That's good. Plus a nice 2.77x bid/cover is good. However, the 3.53% pre-auction trading level was 5bps off yesterday's close. In other words, we already sold off pretty substantially. The auction was not as bad as feared. Anyway, market has improved substantially post-auction. That would seem to have as much to do with the weakness in stocks as much as anything else.
Position: Long TBT
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Doug Kass
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| My Position Remains the Same |
9/9/2009 3:06 PM EDT
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Kudos to a masterful job by Gary "The Count" Dvorchak in The Edge today!
As for the markets, the bullish pantings and "I must get in" mantra are palpable -- and are at the polar opposite to the depression-like concerns of most investors six months ago. It was then time to buy a generational low.
And now?
My advice? Take 10 deep breaths, consider the economy's emerging challenges to a self-sustained recovery and step up the quality of your portfolio holdings. My contention remains that we have seen the high for the S&P index this year.
Position: n/a
The margins for many trades are extremely thin, and if you do 2,000 trades a year, a .025% tax will have a significant impact. There are a lot of folks who trade for dimes and quarters and do quite well. They provide a vast amount of the market's liquidity and help make it possible to do whatever it is that you do. Put them out of business at your own peril.
What I'd like to see is a study of how much income tax you would lose from active traders if you implement a transaction tax. There are a lot of consequences here that could hurt even those who look down their noses at all those unimportant traders.
Position: None
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Howard Simons
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| That's One for You, Nineteen for Me |
9/9/2009 3:17 PM EDT
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Rev/Bob, this may sound odd coming from me, but a tax on trading is one of those efficient taxes in the sense it will not change behavior significantly. Take a look at your phone or utility bills and tell me how many fewer calls you made or lumens you used because of those very high state, federal and local taxes.
I filled out an IRS schedule, I believe 713, a few years ago to recapture the tax I had been paying to finance the Spanish-American War. Never changed my behavior.
Excise taxes on real estate transactions, professional license fees and the like fall into this category, too. They blend into the background as a cost of doing business. Not that I am for them, but they do not change my behavior.
Many traders, whether they care to admit it or not, do this as much for entertainment purposes as for financial purposes. Check out the taxes at a restaurant, ball game or cultural venue. They are amazingly high. Will a trading tax deter an active trader? Hardly. What about a high-frequency trader? They'll just build the additional cost into the algorithm as arbirageurs have done for eons.
Position: None
Credit continued to rally through out the day. Financials and pharma were strong performers. BAC/C/WFC all 5 tighter, JPM/GE 3 tighter. MS/GS/AXP 7 tighter.In pharma, normally a laggard in a rally, MRK/ROSW/PFE/GSK all 4-5 tighter. ABT/NOVART both 2 tighter.Energy, tech and telecom lagged today with most names unchanged. I think telecom and tech ran out ahead of other sectors the last two days and are just taking a breather. Energy has underperformed for the last few days and is a bit of a head scratcher.
Position: Long GS, JPM, AXP, ABT bonds
I wrote an article for this site several months ago making the case against the trading tax. It would be a disaster, especially for small traders, but also probably for these high speed computer programs unless they were somehow exempted from the tax.
Also, I wanted to mention that I am seeing movement on all sides now in the commercial real estate world. Banks are more actively looking to dump assets and realistic prices, buyers are getting more aggressive, the bid ask spread is narrowing, and borrowers and lenders are getting serious about restructuring or going to war via bankruptcy filings. I view all of this as good news for real estate as an industry, but bad news for commercial real estate values. All of this will drive down property values, but it will increase transaction activity that has been depressed for about the past eighteen months.
Position: none
I also wanted to mention that I think the metals, gold and silver, ran up too much last week. I am bullish long term on gold, but this last spike seems like just a momentum trade to me and should correct this week. I took a small silver short because I think silver in particular ran up way too much last week on all this speculation about gold and alleged Chinese silver buying. My in laws are Chinese. They don't know anyone who buys silver as a precious metal. Chinese buy gold, diamonds, and jade. Silver is not considered a precious metal or store of value by any Chinese who I know despite what some Chinese government official is saying recently. It is just simple common sense. Silver is not worth enough per ounce to be stored efficiently in enough quantity to protect any significant amount of wealth. You would need to fill your whole house with silver for it to be of any signficant value.
Position: none
US equity markets ended up on the day, with DJIA up 0.5% and S&P up 0.8%. Industrials and financials outperformed. European markets rose too, as DJ Euro Stoxx 50 ended up 1.2% on the day. Asian equities are likely to open down today, as Asian ADRs fell during North American trading Wednesday. Nikkei futures are pointing to an up open for Japan. Mexico equities underperformed, falling 0.5% on the day as sentiment was hurt by news of hijacked Aeromexico plane as well as skepticism about fiscal policy.
Looking Ahead:Asia: Japan machine orders; BOK, RBNZ meet; Australia jobs; Malaysia IP Europe/EMEA: Turkey GDP and current account; Sweden and Norway CPI; South Africa IP; BOE meeting Americas: US weekly jobless claims and trade; Canada trade and BOC meeting; Brazil IPCA inflation and central bank minutes; Peru trade and central bank meeting. Fed's Lockhart and Kohn, Treasury's Geithner and Kruger speak.
Position: None
The calendar dominates on Thursday and Friday; just take a look at the list below that affects Australia, the U.K., Canada, U.S., with a mix of employment data, quantative easing programs, interest rate decisions, trade balance, and oil inventories. Ahead of that log-jam it is to be expected that fair value may be hard to find, and as such we will be looking at 21:30 EDT, 02:00 EDT, and again at 07:00 EDT for regional impacts on currency values.After three months of sideways crawl, and disjointed order flows, we finally have a pattern of trade back. We are going to European market based trades, buying/selling the pull-backs to support/resistance, in-line with the overall trend, looking for European markets to take the lead, as per the pattern that has stood us in good stead for thirty years. We will be widening the stops, and decreasing the lot size, so that the U.S. based reversals do not impact good overall set-ups that are looking now to actually break and hold. The summer pattern of break, reverse, consolidate, break, looks to be over.Trade Desk Outlook:Bullish: Long Usd/Chf to possibly regain lost groundBearish: Short Gbp/Usd ahead of the Bank of England Rate DecisionStraddle: Either side of Usd/Jpy, 92.50 and 91.50Overall: Looking for a pull-back on the major currencies, to then sell the dollar from again if global equities are bought at that time. The 4 hour charts are all overbought against the Usd, and all have a short-Usd trend that is building well. The pull-back is however overdue, and will be worth waiting for as it will open up some good sized trade opportunities
Position: Forex
21:30 EDT Aud. Employment Change. Expected -14.3K, Previous 32.2K.
21:30 EDT Aud. Unemployment Rate. Expected 5.9%, Previous 5.8%.
07:00 EDT Gbp. Asset Purchase Facility. Expected 175B, Previous 175B.
07:00 EDT Gbp. Official Bank Rate. Expected 0.50%, Previous 0.50%.
07:00 EDT Gbp. MPC Rate Statement.
08:30 EDT Usd. Trade Balance. Expected -27.1B, Previous -27.1B.
08:30 EDT Usd. Unemployment Claims. Expected 560K, Previous 570K.
08:30 EDT Cad. Trade Balance. Expected -0.1B, Previous -0.1B.
09:00 EDT Cad. Overnight Rate. Expected 0.25%, Previous 0.25%.
09:00 EDT Cad. BOC Rate Statement.
11:00 EDT Usd. Crude Oil Inventories. Expected -1.5M, Previous -0.4M.
Position: Forex
The first of the red flagged calendar releases are in the market, from Australia, and have generated a response that has pushed the Usd higher. The Asian market momentum is thin at this stage in the trading session, and as such a move in Aud/Usd tends to create an automated move across the major pairs. The Unemployment Rate printed at 5.8%, a positive number in itself, but what seemed to allow the market to take some profit off recent aussie gains was the Employment Change registering at -27.1k, instead of the -14.3k that was expected.A miss by 13k jobs lost over the analysts guess, when the Unemployment stayed at the most robust rate of any major economy just confirms the volatility of thin Asian market trade. Contrarian traders will be looking at the overall trend, and wondering at what stage the 'buy-the-dip' play kicks in.With positive global equity (S&P Futures 1033), oil ($71.70), and gold ($995) trade in hand right now, it seems as though it will not be if, but when, the market steps in to buy Aud/Usd. We will watch the price action and will very likely be looking at the long side of this pull-back.
Position: Forex
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