Ignorance Is Bliss-11/23/2009

Re-Blog via Bloomberg:

What is the fate of Quantitative Easing? Today Federal Reserve Bank of St. Louis President James Bullard claimed the Fed should expand on QE past March. “Initially it would do nothing for the economy, but it would give the Fed the option to react to future news as it comes in,” Bullard said.

Additionally he stated, “If the economy came in very weak, let’s say, in 2010, weaker than expected, we would have the option of doing further quantitative easing” through additional asset purchases. “If the economy came in stronger than expected and inflation expectations started to ratchet up a little bit we could maybe sell off some of these assets and remove some of the accommodation from our quantitative easing program.”

Bullard also explained, The FOMC is not averse to hiking interest before unemployment cools, “We know the economy changes over time. Everybody’s got very strong opinions and takes the role very seriously. I don’t think anybody would feel bound just because we behaved.”

Thoughts:

Naturally, I am not sure what message the Fed is trying to convey to open markets. Every FOMC meeting of recent memory has lacked any type of clarity on interest rate policy. Yet Bernanke, Summers, and Geithner remain to back a strong USD.

On top of all this political banter Ron Paul's bill to regulate the Fed appears to have legs. As I have discussed with my partner Alex, The Fed is split. There is no unification. A disjointed front leads to two things: 1. Power Struggle 2. Defeat.

Housing Starts/MBA Applications- 11/18/2009

Housing Starts

Housing starts for the month of October declined 10.6% from September at a seasonally adjusted annual rate of 529,000. Starts are down 30.7% year over year. October was the worst month for housing starts since April.

Many analysts attribute the sudden decline to the delayed extension of the tax break for first time home buyers ($8000).

MBA Applications

In addition, the Mortgage Bankers association announced that applications declined 4.7% for the week ended November 13th.


Poor economic data is ubiquitous at the moment.

Trade Deficit - Affects on Energy and Currencies - 11.13.09

Trade Deficit

"
Highlights
The U.S. international trade deficit in September widened significantly on higher oil imports. But the good news is that the freeze up in global trade appears to be thawing as U.S. export rose significantly. The overall U.S. trade deficit widened to $36.5 billion from a revised $30.7 billion worth of red ink in August. The shortfall was worse than the consensus projection for a $32.5 gap. Exports rose 2.9 percent while imports jumped 5.8 percent. The worsening of the trade deficit was led by a wider petroleum shortfall which came in at $20.5 billion compared to $16.6 billion the previous month. The nonpetroleum gap increased to $25.9 billion from $24.3 billion in August.

The widening in the petroleum deficit was due to both more barrels imported and higher prices. Physical barrels imported increased 6.6 percent in September after dropping 9.4 percent the month before. The price of imported oil rose to $68.17 per barrel from $64.75 in August.

Year-on-year, overall exports rose to minus 13.2 percent from minus 20.6 percent in August while imports improved to down 20.6 percent from minus 28.5 percent the previous month.

Overall, the rise in export appears to be more real than the boost in imports. Imports were up on higher oil prices, more barrels of oil, and more automotive imports from Canada. The gain in autos was to replenish auto inventories after cash-for-clunkers. Non-auto imports were up moderately. But manufacturers are benefitting from a lower dollar and healthy gains were seen in capital goods, autos, and consumer goods. While the headline numbers could weigh on the dollar, the details favor it. Equities should like the boost in exports. "


Summary Taken from here (click here)


I got the follow up later: Need more time to digest the data...

In the mean time post questions if you have any.

-Alex

SPX Morning Update - 11.12.09

The past two days we have see a double test on the 1100 resistance level.

Is this the fail today? Is this the top? Is this a temp reversal just as we saw back in July? Whats the catalyst for financial Armageddon? Commercial Real Estate (CRE), the financials??



Well, the interesting thing is that fundamentally everything is in place for a continued weak dollar. As long as sentiment (ie: the people still believe in the fed) remains we can see higher equity levels via an artificial weak dollar (Fed Policy). Though it seems that the monkeys on capital hill are trying to take away the Fed's street cred "Dodd's Financial reform" <-- click here

How long before this sentiment will disseminate into the populous? Or will some other big wig on capital hill actually back Bernake?


Lots of upside and downside risks...


So what are my thoughts? I'm going to be conservative and err on the side of caution until better trend formations/indicators form.


----

Alexander Lê
Analyze Capital LLC
le.anlzgroup@gmail.com

Jack and The Giant Bean Stalk - 11.12.09

This morning ADP Jobless Claims numbers were a bit better then expected. Jobless claims came in at 502,000 down from the revised 514,000 last week. Economists poled by Bloomberg expected 510,000 claims. What does this really tell the market? Nothing. Let's examine this from a corporate/private sector perspective.

We have seen poor corporate earnings through the second and third quarters of 2009. More then 70% of S&P 500 companies beat estimates, but with cost cutting rather then revenue growth. Take Applied Materials as an example. The company announced it will cut another 1500 jobs or 10-12% of its labor force. This equates to $450M savings in the long run. Coupled with 2009 expense axes of $460M Applied Materials can barely turn a profit. Third quarter net income was 10 cents/per share ($137.9M) on $1.53B of revenue. That equates to a meager profit margin of 9.01% compared to 2008 full year Profit margin of 11.8% . My point: there is no revenue growth or job creation. The only growth is coming from accountants sliding decimal places.

Furthermore, recent M&A activity in the tech sector has guaranteed more job cuts as firms look for cost synergies. H-P announced yesterday it will pony up $2.7B to buy 3com, a maker of switching and routing gear. Oracle bought Sun Micro systems. Dell took Perot Systems off the market. Xerox swallowed ACS. Typically in an acquisition the Acquiror ravages the acquiree and keeps only the most profitable/valuable businesses. Hence, most acquisitions lead to layoffs. Not to mention if the acquisitions go bad (3/4 do), more layoffs will follow.

Undoubtedly, the unemployment/Jobless claim numbers may tell Washington and "Policy Makers" what they wants to hear, but the numbers do not indicate long-term economic growth.



Trade with caution...

Patrick M. Ambrus
Analyze Capital LLC
ambrus.anlzgroup@gmail.com

SPX Lazy Update: 11.10.09

By now you are probably calling me a LAZY arse. Well truth be told there isn't anything I haven't said before for the SPX on this blog or "TLOT (The Lord of Trading)"<-- Click here


The point is I am going to reblog you to Trader Mike's SPX summary which has said everything I already have been saying or have said.


Trade "Mike's SPX Recap" <-- click here


I will re-mention that a bull picture is still in tact and thus risky to be shorting at resistance. Though weak volume on today's move definitely tells me that resistance is going to be pretty strong (unless we get some fundamental trumpers!)

** Side Note **

Also notice how my typical system points to room to 1100 while mikes system is already calling for strong resistance. I typically use MACD in conjunction with RSI while Mike is using the standard Stochastic indicator. Though, Im not saying one is better than the other, but just for you to be aware of the minor differences that can produce different results



----

Alexander Lê
Managing Partner
Analyze Capital LLC
le.anlzgroup@gmail.com

Commercial Realestate Looks Promising

Since the ides of March global equity markets have outperformed like never before. Yet consumer credit, small business loans, and interbank lending remain wedged in a tight pair of skinny-jeans . Perhaps this nugget may help decipher the phenomena. You be the judge.



Patrick M. Ambrus
Analyze Capital LLC
ambrus.anlzgroup@gmail.com