Traders,
We saw some sell pressure enter the market, even after their stellar earnings. S&P rating agency kept their cautionary rating in place on Goldman as concern that growth in the 1st quarter may not be sustainable. Additionally – more talk about the type of accounting continues to come into question on those toxic assets. Goldman sold of 15 points and dragged down the financial sector.
_______________________________
UBS, the rust standard?
While Goldman and Wells Fargo as showing record earnings and revenue (billions) in the first quarter, UBS (Switzerland’s largest bank) is the exact opposite – with losses almost 2 billion (francs) and announcements of another 7,500 job cuts. I heard this morning one analyst say, “Too bad they aren’t allowed to change their accounting standard – they could of made a billion francs!” – Sarcasm aside – UBS did expose itself to the U.S. mortgage market. Additionally they have a little marketing problem with the “tax haven” issue as the bank was forced to give over 100s of names of Americans that had used the Swiss bank to avoid taxes. The bank paid 500 million in fines. With a tarnished reputation, large withdrawals of deposits, and exposure to U.S. toxic assets the story wasn’t pretty.
We saw some sell pressure enter the market, even after their stellar earnings. S&P rating agency kept their cautionary rating in place on Goldman as concern that growth in the 1st quarter may not be sustainable. Additionally – more talk about the type of accounting continues to come into question on those toxic assets. Goldman sold of 15 points and dragged down the financial sector.
_______________________________
UBS, the rust standard?
While Goldman and Wells Fargo as showing record earnings and revenue (billions) in the first quarter, UBS (Switzerland’s largest bank) is the exact opposite – with losses almost 2 billion (francs) and announcements of another 7,500 job cuts. I heard this morning one analyst say, “Too bad they aren’t allowed to change their accounting standard – they could of made a billion francs!” – Sarcasm aside – UBS did expose itself to the U.S. mortgage market. Additionally they have a little marketing problem with the “tax haven” issue as the bank was forced to give over 100s of names of Americans that had used the Swiss bank to avoid taxes. The bank paid 500 million in fines. With a tarnished reputation, large withdrawals of deposits, and exposure to U.S. toxic assets the story wasn’t pretty.It is creating some slight pressure in the financial markets this morning.
_________________________________
No inflation!
Consumer Price Index (CPI) unexpectedly fell in March by .1% (expectation was for a .1% gain). It would seem counter intuitive as the Fed and Treasury print 100s of billions. However, the velocity of money has come to a halt it would seem. Sure they are printing money and banks (and companies) are getting tons of money – but it is NOT going into the system. It’s being back loaded – either stock piled or used to pay down losses.
The irony on the mortgage and loan front is that loan rates have come down (Mortgage rates at 4.7%) – but very few are qualifying for loans. The recent report showed a drop in residential loans of over 11% - not because people didn’t want loans (refi or new purchases) it was that the bank (while offering low rates) is not lending.
Trump was on CNBC this morning making that exact point on the commercial side – sure rates are low, sure the banks are getting funding from the government, but they are not lending – good luck getting a loan. Don’t get me wrong, I don’t think that is a bad thing – they want to make sure the consumer can pay back the loan and/or have REAL equity to guarantee it. However, it DOES stop the velocity of money.
If consumers don’t have jobs, no access to credit, very little money – the math is simple, very little money chasing tons of goods. Companies still need revenue, they still need to move inventory (in some cases excess inventory – just look at the durable goods market). So if consumers don’t have access to the credit lines they traditionally had or they don’t have jobs, companies will have to keep prices the same or even lower them. We have all seen the massive sales at stores, malls, car dealers – they are cutting prices to move goods and generate revenue. Obviously prices are coming down.
However, my take is simple (you may disagree – I am sure many will). We are not seeing inflation because no one has money to spend, but companies still need to sell goods = prices come down. Now I seriously would not be concerned about coming inflation if the Fed/Treasury wasn’t in the massive printing game, but they are. Just think of a big balloon being filled with dollars and it is getting bigger and bigger. When it POPS the flood of money will come, when we recover banks will be loaning money like never before, companies will be able to increase the price of goods as people will have access to credit. Then – inflation will be here as all that money being printed will flood into the system.
I think Buffet was right when he said it is possible we could see inflation worst than the 70s.
Remember, like with all indicators, it is historical data – what we really want to know is how to position ourselves NOW for the future.
This too me is a sign to get your inflation hedge on TODAY and not wait until we are knee deep in it.
_____________________________________________
Intel – ouch!
Intel fell in the aftermarket by 5% as their earnings showed a profit decline of 55% and the forecast is that demand will not recover in the near-term. One quote on Bloomberg was “You can’t buy a computer if you don’t have a job!” - As the CPI shows – computer prices are coming down hard. I was in Best Buy the other day and was surprised how much computer prices have come off. The introduction of the super mini laptops (Asus Eee) at $300 is becoming the rave – small computers for simple tasks to surf the net, check email, word processing (which is what the majority use computers for) is slashing prices.
Chips are becoming a commodity – and just like the cell phone industry we could see prices continue to fall. Great for consumers, sucks for producers. Toss in a weak consumer buying power and Intel is not going to look as strong as in the past.
______________________________________________
Futures Pre-market
INTEL sent the futures down in the aftermarket, the spread is in. Expect ARB traders to buy futures and short the cash which will put pressure on stocks at the opening.
_______________________________________________
Support / Resistance
Numbers didn’t hold – current Resistance or future support is still in the cards!
INDU 7750 / 8000 (We didn’t hold the 8000 line – so I guess it remained resistance. 7750 is the next near-term support area and we may see resistance at 8k if we rally again.)
NDX 1300! (We gapped up last week from 1300 are we going to fill the gap and test 1300?)
SPX 835! (Just like the NDX we gapped up from here – a revisit and head down to 825?)
RUT 450! (We stayed above it – but the futures are pointing to a test at 450 – do we hold?)
==========================
Gold 850+++ (Gold might get hit with the CPI data – for me – if it does – I think a good support is 850.)
Silver 12+++ (Again – 12 is a good support)
OIL 50? (We have been up and down and all around the 50 line in oil. The dollar game is in question which could play a role)
_______________________________________________________
Conclusion
UBS looked like a dog, after Goldman and Wells Fargo – I don’t know what to make of that – but some talk has been circulated that new accounting methods have “simulated” a boost to Goldman and Wells (expectation). So read into it for what you will – we know that UBS didn’t get that advantage and I wonder what their earnings would look like if they DID get it.
The VIX has been pinned at 40 – which seems weird – since statistical volatility has been in the 55 to 60 range.
I think we could see some “profit taking” in the near-term and test some short-term supports, until the next optimistic euphoria enters into the market.
Interesting story in Bloomberg about Lehman holding “Uranium Cake” – enough to build a nuclear bomb as they hold out for the best price. Sounds like an opening chapter in a Clancy novel.
Enjoy: http://www.bloomberg.com/apps/news?pid=20601109&sid=aNJJYNBs1rQA&refer=home
_________________________________
No inflation!
Consumer Price Index (CPI) unexpectedly fell in March by .1% (expectation was for a .1% gain). It would seem counter intuitive as the Fed and Treasury print 100s of billions. However, the velocity of money has come to a halt it would seem. Sure they are printing money and banks (and companies) are getting tons of money – but it is NOT going into the system. It’s being back loaded – either stock piled or used to pay down losses.The irony on the mortgage and loan front is that loan rates have come down (Mortgage rates at 4.7%) – but very few are qualifying for loans. The recent report showed a drop in residential loans of over 11% - not because people didn’t want loans (refi or new purchases) it was that the bank (while offering low rates) is not lending.
Trump was on CNBC this morning making that exact point on the commercial side – sure rates are low, sure the banks are getting funding from the government, but they are not lending – good luck getting a loan. Don’t get me wrong, I don’t think that is a bad thing – they want to make sure the consumer can pay back the loan and/or have REAL equity to guarantee it. However, it DOES stop the velocity of money.
If consumers don’t have jobs, no access to credit, very little money – the math is simple, very little money chasing tons of goods. Companies still need revenue, they still need to move inventory (in some cases excess inventory – just look at the durable goods market). So if consumers don’t have access to the credit lines they traditionally had or they don’t have jobs, companies will have to keep prices the same or even lower them. We have all seen the massive sales at stores, malls, car dealers – they are cutting prices to move goods and generate revenue. Obviously prices are coming down.
However, my take is simple (you may disagree – I am sure many will). We are not seeing inflation because no one has money to spend, but companies still need to sell goods = prices come down. Now I seriously would not be concerned about coming inflation if the Fed/Treasury wasn’t in the massive printing game, but they are. Just think of a big balloon being filled with dollars and it is getting bigger and bigger. When it POPS the flood of money will come, when we recover banks will be loaning money like never before, companies will be able to increase the price of goods as people will have access to credit. Then – inflation will be here as all that money being printed will flood into the system.
I think Buffet was right when he said it is possible we could see inflation worst than the 70s.
Remember, like with all indicators, it is historical data – what we really want to know is how to position ourselves NOW for the future.
This too me is a sign to get your inflation hedge on TODAY and not wait until we are knee deep in it.
_____________________________________________
Intel – ouch!
Intel fell in the aftermarket by 5% as their earnings showed a profit decline of 55% and the forecast is that demand will not recover in the near-term. One quote on Bloomberg was “You can’t buy a computer if you don’t have a job!” - As the CPI shows – computer prices are coming down hard. I was in Best Buy the other day and was surprised how much computer prices have come off. The introduction of the super mini laptops (Asus Eee) at $300 is becoming the rave – small computers for simple tasks to surf the net, check email, word processing (which is what the majority use computers for) is slashing prices.
Chips are becoming a commodity – and just like the cell phone industry we could see prices continue to fall. Great for consumers, sucks for producers. Toss in a weak consumer buying power and Intel is not going to look as strong as in the past.
______________________________________________
Futures Pre-market
INTEL sent the futures down in the aftermarket, the spread is in. Expect ARB traders to buy futures and short the cash which will put pressure on stocks at the opening.
_______________________________________________
Support / Resistance
Numbers didn’t hold – current Resistance or future support is still in the cards!
INDU 7750 / 8000 (We didn’t hold the 8000 line – so I guess it remained resistance. 7750 is the next near-term support area and we may see resistance at 8k if we rally again.)
NDX 1300! (We gapped up last week from 1300 are we going to fill the gap and test 1300?)
SPX 835! (Just like the NDX we gapped up from here – a revisit and head down to 825?)
RUT 450! (We stayed above it – but the futures are pointing to a test at 450 – do we hold?)
==========================
Gold 850+++ (Gold might get hit with the CPI data – for me – if it does – I think a good support is 850.)
Silver 12+++ (Again – 12 is a good support)
OIL 50? (We have been up and down and all around the 50 line in oil. The dollar game is in question which could play a role)
_______________________________________________________
Conclusion
UBS looked like a dog, after Goldman and Wells Fargo – I don’t know what to make of that – but some talk has been circulated that new accounting methods have “simulated” a boost to Goldman and Wells (expectation). So read into it for what you will – we know that UBS didn’t get that advantage and I wonder what their earnings would look like if they DID get it.
The VIX has been pinned at 40 – which seems weird – since statistical volatility has been in the 55 to 60 range.
I think we could see some “profit taking” in the near-term and test some short-term supports, until the next optimistic euphoria enters into the market.
Interesting story in Bloomberg about Lehman holding “Uranium Cake” – enough to build a nuclear bomb as they hold out for the best price. Sounds like an opening chapter in a Clancy novel.Enjoy: http://www.bloomberg.com/apps/news?pid=20601109&sid=aNJJYNBs1rQA&refer=home
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