Archive - Dec 15, 2009 - Story

RANsquawk 15th December US Morning Briefing - Stocks, Bonds, FX etc.

On last week’s Mad Money, game show host Jim Cramer told his acolytes “to pick up [Best Buy] BBY before Tuesday morning’s announcement.” First, trading stocks ahead of earnings is the riskiest aspect of trading. Most professional traders close their positions ahead of earnings and decide what to do after the announcement. The reason for this risk management strategy: guessing earnings is a complete gamble.

[Hawker Beechkraft] announced that it has received cancellation notices from NetJets, Inc. for a significant number of aircraft previously contracted to be delivered over several years beginning in 2011. The impact of the cancellations will be to reduce the Company’s current backlog by approximately $2.6 billion. HBAC has previously disclosed that NetJets, while a considerable source of backlog, was not expected to provide the Company any substantial revenue during 2009 or 2010 and has historically not represented more than 10 percent of the Company’s annual revenue. The cancellations represent approximately 90 percent of the Company’s previously contracted backlog with NetJets. After removing the cancelled NetJets orders from backlog and considering the anticipated sales and order activity for the fourth quarter, backlog is expected to be approximately $3.5 billion at December 31, 2009. The Company continues to expect depressed demand in the near term.

A frequent theme on Zero Hedge is the structural limitation imposed on corporate revenue and profitability absent an overall increase in the currency in circulation, or said otherwise, in the "velocity" of money. If banks do not lend out the money, and the money does not somehow find its way to companies' top lines, there is logically less revenue thus lower EPS (especially with the key layoff rounds already having taken place). We were gratified to see Rosenberg pick up on this theme in his latest "Latkes with Dave" piece. As Rosenberg points out, the banks continuing unwillingness to lend money out will end up transforming not only the political landscape in D.C., but could very easily be the end of the seemingly endless bear market rally.

"Not a whole lot of excitement today as the US stock market is making it increasingly easier for Chinese stocks to out-trade them in terms of daily volume (actually on a good day Chinese stocks trade more volume in $ terms that NY, Tokyo, and London together)." - Nic Lenoir

Now that the market lives and breathes with every Fed decision and transaction, reading tea leaves and juggling cow feces has about the same predictive impact on security outcomes as analyzing fundamentals or technicals. Yet from the perspective of correlations, nothing is as important as the dollar: equities have a -100% correlation to the value of the dollar, which in turn impacts commodities and even interest rates. The dollar is the primary market leading indicator. Which is why we present the key points from the Goldman Sachs "Themes and Ideas for Q1 2010 and Beyond: FX Sales Strats" in which Goldman shares a few thoughts on why in its chartist opinion, and contrary to that voiced by Jim O'Neill and other Goldman strategists, the dollar is headed higher. And possibly much higher.

Just because every credit collapse mushroom cloud has a silver lining. The Obama miracle recovery captured in one simple, easy to remember song.

After posting a minor dip in October, at 9.04%, Capital One's charge off ratio once again resumed its upward climb, hitting 9.60% in November. This number was 9.77% in September so it looks like December data could be even worse as all those newly purchased plasma TVs start demanding payment. The worst data point was the 30 Day+ delinquency rate which was at 5.87%, which compares to 5.38% in September and 5.72% last month. If this number continues growing it is inevitable that the charge-off rate will also spike in the future. Meredith Whitney's greatest fear is slowly coming true.

Another masterpiece in the blistering Santelli-Liesman clash. The Rickster continues questioning the economic comprehension of Comcast's brand new chief economics reporter. That, and of course highlighting the propaganda reporting of said economist who enjoys highlighting good news, and "sweeping any bad news under the rug." When asked "do the bulls want to cry when the numbers don't go their way" Liesman responds appropriately, and hilarity ensues as usual. Some pearls of wisdom from Steve: "Rick, what you need to do is understand Emergency Claims Benefits" to which the retort is: "You don't say anything I find interesting to hear." 

The market rejoices and delights to see the image of Abu Dhabi's merciful hand guided by Sheikh Khalifa bin Zayed Al Nahyan extended to errant cousin Dubai in the form of Sheikh Mohammed bin Rashid Al Maktoum. Once the fingers unclasped a $10 billion cash injection fluttered into outstretched salvation army tins. Bond prices soared. Sighs of relief were heard. Why exactly? $10 billion is a trifle. Also telling is that while the immediate needs of Nakheel PJSC looked something like $4.1 billion, $10 billion was immediately required to keep Dubai from... well who knows what. Dubai isn't struggling. It is totally broke, and $10 billion is a trifle.

• German investor confidence falls for third month, Greece roils markets, CDS spikes from 220 to 247 bps (Bloomberg)
• Producer prices climb more than forecast (Bloomberg)
• Pension fund sues Goldman over pay (Dealbook)
• Clearance sales not good for bottom line shocker: Best Buy lowers Q4 forecast margin, shares drop (Bloomberg)
• Abu Dhabi may demand control after $10 billion Dubai lifeline (Bloomberg)

Cash for Clunkers is long forgotten, and it is now time for another manufacturing stimulus: from 34.6 in September to 24.5 in October to a mere 2.55 most recently. Diffusion data suggested further contraction in margins, evaporation of optimism and an ongoing decline in inventories: the whole 5% of Q4 GDP is becoming a Liesmanian myth.

• Airline loss forecast for 2010 widens to $5.6B on fuel, IATA says.
• Chinese government will target “excessive” growth in property prices in some cities.
• Dubai bonds show more aid needed from Abu Dhabi to repay 2010, 2011 debt.
• German Investor confidence falls as recovery weakens, Greece roils markets.
• Gold futures down $7.90 at $1,115.90 an ounce.
• Major Asian markets decline, Hang Seng falls 1.2% as China developers fall.

RANsquawk 15th December Morning Briefing - Stocks, Bonds, FX etc.