Archive - Dec 10, 2010

Much of Microsoft's new tech is simply best of breed and undeniably cutting edge. It is amazing they don't get more sell side recognition for it. Whether the sell side recognizes it or not though, Windows is likely the future of computing - just as it has been the past.

Send a loud message ...

In China, where according to whisper numbers, inflation is expected to spike by over 5% in the last month, inflation is already surging. However, courtesy of its autocratic regime, China can simply quash any protests over inflation... for now. "Sovereign Man" Simon Black explains the tenuous dynamic between social instability and economic growth in the world's most populous and fastest growing country. As he notes: "The price of a Big Mac is going up in China by 7%. In fact, Chinese state media outlets are reporting that prices for all items at McDonalds fast food restaurants across China are going up by 1/2 to 1 renminbi (RMB), roughly 7.5 to 15 US cents." Let's hope that China does not stop importing the US' biggest export: inflation. Otherwise, our own regime may soon be forced to see just what it means when runaway inflation (ahem, oil) ends up creating just a little popular unrest. And, in the most ironic of boomerang effects, should China start reexporting our own inflation back to us, via increased prices for beads and trinkets, then all bets may just be off.

Following the stronger than expected net exports by China, we now get a better than expected trade deficit from the US, which comes at $38.7 billion, compared to expectations of $43.8 billion, from a prior upward revised -$44.6 billion. As the number is GDP positive, it has pushed the USD higher, which by courtesy of its newfound status as funding currency of risk assets, ends up offsetting any move in stocks higher, further elaborating the paradox that good economic news in the US is stock market neutral at best and negative at worst. Lastly, the question of where all these extra exports are going (more net exports out of the US, EU, China, Australia, and Japan) refuses to be answered by anyone... Perhaps Mars really is bailing out the earth.

November gross trade in China hit a record $283.8 billion, with exports greater than imports by $22.9 billion. This was once again greater than the consensus of $21.2 billion, as the country continues to boost its net exports to the detriment of US politicians who are demanding a pick up in imports from the world, but the US particularly. Oddly enough, Chinese imports from the US hit $9.7 billion in the prior month, a new record, although export to America were $26.5 billion for a net $16.7 billion trade balance as US industries continue to rely exclusively on China and Germany for stockpiling their products, and boosting the inventory component of GDP. As a result of the record trade data, China hiked its RRR for the third time in five weeks: an event largely priced in, and which did not move the markets. The only question out of China is whether the country will hike its official interest rate over the weekend following tonight's inflation data release. And with the Chinese trade surplus out of the way, we are now looking for US trade deficit 8:30 am release which is expected to come at $43.8 billion, following $44 billion in September.

• Asian stock markets were mostly lower Friday, on rate hike fears from China.
• China regulators warn of risk linked to real-estate trusts.
• China's trade surplus sharply narrowed in November to $22.9B from $27.1B in Oct.
• India’s factory output grows 10.8%, fastest pace in three months.
• Italy's Draghi warns of risks in ECB bond buying.
• Oil rises to near $89 in Asia as traders eye OPEC crude output policy at meeting.
• US cos held $1.93 trillion in cash and short-term assets at the end of Q3.

Summary of key events moving the markets today.

Twin deficit day, with import and export prices and consumer confidence sandwiched in between. At 2pm today we get the next POMO schedule, which will likely be larger than the $105 billion purchased in November-December due to a greater amount of MBS prepays. Furthermore, as there is no bond issuance in the next several weeks, the net effect will be a substantial demand squeeze as there is no incremental supply. The Fed will surpass $1 trillion in UST holdings within 10 days.

You know Vesco and Boesky and Keating and Milken,--
Leeson and Mozer and Blankfein and Wiggen,--
But do you recall, the most famous Wall Street gangsta of em all?

RANsquawk European Morning Briefing - Stocks, Bonds, FX – 10/12/10

Retail traders are notoriously wrong at picking market direction/tops and bottoms. Most retail traders very naturally seem to adopt a counter-trend stance and this offers very accurate signals for individuals looking to trade against this group. This daily report is designed to help traders focus their efforts on higher probability pairs.