Via UBS Financial Services
Currency Confusion Compresses The Action – The uncertainty about the status (or even existence) of a Greek Rescue Package held the dollar (DXY) in check Tuesday.
That, in turn, left the Troika (oil, gold and stocks) milling about on a short tether. Pundits and reporters tried to fill up the allotted time and space with the usual citations. Some pointed to seemingly upbeat chain store surveys. Other seized on the FOMC minutes. A few tried to find direction in the three year auction.
It was all very interesting and filled up air time. Unfortunately, they had little or nothing to do with what motivated the moves in the markets. Stocks, oil and gold remain almost totally obsessed with the dollar (DXY).
It may be boring. It certainly is frustrating. But it is, what it is. Yawn.
Today’s Calendar – We usually publish the week’s calendar in our Monday Comments. Today, however, is so crammed with potentially market moving events and data. So, here’s a few things to watch:
7:00: MBA Mortgage Applications
9:00: Hearing: Subprime Lending and Securitization and the GSEs
9:30: Business Roundtable CEO Survey
10:00: SEC Meets on Asset-Backed Securities
10:30: Crude Inventories
12:15: Fed's Dudley: Economic Outlook
1:00: Ten Year Treasury Auction
1:30: Fed's Bernanke: Economic Challenges
2:00: Fed's Hoenig: 'What About Zero?'
3:00: Consumer Credit
Employment Picture Offers More Confusion And Conflict – Yesterday, the Bureau of Labor Statistics released its Job Openings and Labor Turnover (JOLTS) report for February. The JOLTS report was not particularly encouraging. The number of job openings did not increase. The number of unemployed people for each job opening did, however, increase to 5.5.
Further, the rate of hiring actually dropped from 4.09 million to 3.96 million. While it was not a terrible report, it held out the risk that the jobs picture remains vulnerable to a possible double dip.
Contrast that with the following TrimTabs assessment published in the Garman Letter this morning:
We estimate that the U.S. economy added 280,000 jobs in March, nearly double the Bureau of Labor Statistics (BLS) estimate of 162,000. The main reason for the discrepancy lies in different cut-off dates. While we use income tax withholdings through the end of March, the BLS establishment survey cut-off date is in mid-March. Growth in withholdings accelerated late last month, so the BLS did not fully capture the surge in employment atthat time. While temporary census hiring drove much of the increase in employment in March, a range of sectors—including temporary staffing, health care, durable goods manufacturing, and retail—posted solid job growth. We expect the economy to keep adding jobs at a healthy pace as long as the U.S. government can keep selling huge amounts of debt at low interest rates.
The economy is clearly recovering, and both the public and private sectors are adding jobs. On the one hand, this positive news draws investors into riskier assets. On the other hand, it makes it more difficult for the government to attract buyers for the massive amount of U.S. Treasuries it needs to sell to fund its deficit spending.
Sharp-eyed readers will note that the JOLTS survey covers February while TrimTabs covers March (and particularly late March). That having been noted, we maintain that the employment picture remains cloudy. Tomorrow’s Initial Claims will be watched carefully.
An Interesting Contention On Marketing Greek Debt – In this morning’s Option Investor, Jim Brown makes an interesting comment on Greece’s attempt to move some of its bonds in the U.S. market. Here’s what he wrote:
If you don't want to bid for U.S. debt you could walk on the wild side and bid on up to $10 billion in Greek debt being sold in the U.S. sometime over the next 2-3 weeks. Morgan Stanley is the likely candidate to sell the debt after a Goldman Sachs effort fell apart from lack of bidders. Greek finance minister George Papaconstantinou will lead a U.S. road show sometime after April 20th in an effort to drum up interest. Greece is trying to sell itself as an emerging market, Balkan country and thus investors will get a higher yield from emerging market debt. I guess that is a good ploy if they can sell it but I think U.S. investors may be a little more intelligent than that. Secondly, if Goldman could not sell the debt I doubt Morgan Stanley can either. Greek 10-year debt yields rose over 7% intraday today.
We had not heard of the earlier Goldman attempt. This could get interesting.
Housing Shaky At Best – CNBC’s Diana Olick had a somewhat scary report on foreclosures yesterday. She suggests a new wave is coming and it may be a whopper. She quotes the Fannie Mae chief as saying that home prices will dip again before hitting a new bottom later this year (the report is on CNBC website). The housing struggle is underscored by this morning’s report on mortgage applications. Applications fell 11% (primarily on re-fis). The report cited a significant jump in mortgage rates last week. Watch the ten year Treasury and stay tuned.
Dennis Gartman – Part II – Yesterday, I had the privilege of attending a Bond Club of New York luncheon where my dear friend, Dennis Gartman spoke. While I am prejudiced, it was a really terrific presentation - earnest, enlightening and entertaining. Unfortunately, tight schedules prevented us from marinating. If you ever hear Dennis is speaking in yourarea, make a special effort to attend. He’s the real deal.
Cocktail Napkin Charting – Same numbers as yesterday. S&P resistance looks like 1192/1195 with support around 1175/1178. Declining number of new highs leaves market vulnerable to possible pullback.
Consensus – Auction likely to be the key. The ten year dictates mortgage rates. Will Fed lose control? Stay very nimble.
Answer - As we noted, the solution is rather elegant and requires no algebra. The bin you are looking for has the 17 ounce weights (one ounce more than a pound) all other weights are exactly 1 pound. So....take 1 from bin 1; two from bin 2, etc., etc. When you place it all on the scale, you read the number of ounces and that's the odd bin. (Example: If it's bin 2, the scale reads 55 pounds 2 ounces.....if bin 4, it's 55 lbs. 4 oz.)
Today’s Question - There are 11 states that border Canada. Without looking at a map, what are they? (Hint: Four start with "M" and 3 with "N".)
AN ENCORE PRESENTATION
On this day in 1788, Gen. Rufus Putnam, on behalf of the Ohio Company of Associates founded the river settlement of Marietta and opened the west. (Now don't start waving your Daniel Boone coonskin cap at me - Boone never wore that cap - he hated them - and Ohio was the gateway to the west --- that's what the French and Indian war was about....so there!!)
At the time, the river near Marietta was so strategic that a few years later, when Aaron Burr hatched his treasonous plot to seize most of the west, his kickoff point was right near Marietta. But Marietta, Putnam and the Ohio Associates really figured in a presidential land deal and accidentally helped change America.
George Washington, who was not yet the president, was wondering how he could increase the value of his new inheritance, Mount Vernon. Sure it sat right on the Potomac but that was only good for scenery. The river was too choppy for boats to navigate that far.
So, Washington talked his cronies (make that Fellow Founding Fathers) into backing a plan to make the Potomac navigable and extend it close to his pal Putnam's intended metropolis on the Ohio. Thus most of American commerce would sail past Mount Vernon and George could sell lemonade to the sailors.
But after they founded the Potomack Co., disputes among the bordering states hampered work. So they called a conference to set up rules on how states should act with each other. It went so well that Alexander Hamilton suggested that they go to Philadelphia, invite all the states, buy some clay pipes and punch...and see what they could agree on. Soon the conference on rivers decided to become the Constitutional Convention and wrote the law of the land. They felt badly that Washington never got his canal so they made him the First President just to keep him busy. With no canal, Marietta never became Chicago but did okay anyway. And tax records failed to show if President Washington ever wrote off his losses on the land deal.
The markets looked a little like they were stuck in the swamp yesterday. Most markets moved about in small circles following the example of the dollar (DXY).