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Tuesday, November 29, 2022

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Wednesday When Wen Chips In

China is leading the markets this morning.

Word is that Chinese Premier Wen Jiabao may announce new stimulus measures tomorrow, adding to a 4 Trillion yuan ($585 billion) spending plan as the government tries to revive growth in the world’s third-biggest economy.  Wen will announce “a new stimulus package” in his annual address to the nation’s legislature, former statistics bureau head Li Deshui told reporters in Beijing today.  That was enough to send the Shanghai soaring 6.1% with the Hang Seng jumping right to the 2.5% rule, finishing at the high of the day in a bullish move up

Copper futures, which we have been watching closely, went limit up in Shanghai trading, oil jumped back to $42.50 and the Baltic Dry Index hit 2,034, a very far cry from the 700s we were seeing in the Fall. China will spend more on infrastructure and to boost manufacturing in addition to the stimulus package announced in November, Reuters reported today, citing an unidentified official at the country’s top economic planning agency.  Wen’s speech to the legislative meeting, which starts at 9 a.m. tomorrow, will be the equivalent of a U.S. State of the Union address, setting priorities for the year.  Keep in mind that China's GDP is "just" $3.5Tn, a $600Bn stimulus from China's leadership is like a $2.6Tn stimulus bill from us, not the $787Bn Washington is wringing it's hands over.

The Nikkei "only" gained 0.85% on the day but that doesn't really tell the tale as the index jumped 200 points off the bottom (2.8%) as Bank of Japan board member Miyako Suda said today the central bank should signal that it’s prepared to take “bold” measures to counter the recession. Japan’s lower-house of parliament approved a bill that will free up about 5 trillion yen ($50 billion) for economic stimulus.  This kept the dollar from falling below 100 yen, which is a line Japan would really like to avoid crossing again. 

This suits us just fine as the final play of the day, at 3:34 was: "Now is a good point to reload on those SKF plays.  The $170 puts are back to $11 (from $14), the $120 puts are back to $1.45, the $270 calls can be sold for $9.70.  Once again we have an air pocket under the gains, it’s a little tougher into the close like this as there is a risk of a spike up tomorrow so nothing you can’t roll or DD if they move up."  Nonetheless we went into the close slightly bearish (55%) but fortunately we also took our long puts off the table at the bottom and switched to puts that had lower downside deltas as we expected a bounce.

The level of the bounce will be critical today.   We have the ADP Employment Report, which is expected to be awful at 630,000 jobs lost in February but there were so many auto industry layoffs that month that you need to take that number with a grain of salt.  ISM services are expected to be dreadful at 42, oil inventories should show a continued increase in gasoline demand and, at 2pm, we have the Beige Book, the Fed's anecdotal take on the economy through the end of January.  As with yesterday, we're not going to be excited about anything less than a 2.5% gain on the day in our major indexes. 

Keep in mind that we have had just ONE positive market day of more than 1% since Feb 9th – this week marks the 4th straight week of declines that are averaging 100 points a day on the Dow so a 100-point gain is just a blip in the data, not a rally.  Bloomberg has picked up on my premise that the greatest stimulus in the world is not coming from any country but from the declining price of oil, which stands to put $1.7Tn back into consumer pockets this year:

It’s a savings which is approximately three times larger than the entire announced 2009 fiscal stimulus of China and the western economies combined,” Longview's Chris Watling said. “The savings from the fall in the price of oil will go straight into consumers’ and businesses’ pockets, will not be impeded by bureaucracy and WILL happen, unlike parts of the fiscal stimulus, which are likely to be delayed.”  That's $1.7Tn that will go to buy other consumer goods, pay off debts, mayber even get saved

While we do want to believe in rallies, for today at least we will be using this opportunity to roll our new long index puts higher while they are being offered to us cheaply – just in case!  EU markets are coming off the floor with the DAX leading the way, up 2.1% (8:30) but we need them to break through their own 2.5% mark at 3,800 to confirm a good move for the day.  Watching the FTSE yesterday let us know that the US markets weren't going anywhere and 3,600 is our must hold for the day but they've been rejected there already in early trading.  The CAC also hit resistance at 2,650, so a pretty well-defined set of goals for the European markets between now and lunch.

The BOE and ECB step up to the plate with rate announcements tomorrow morning and British PM, Gordon Brown just met with Obama.  That's Hillary meeting with Wen last week and Obama meeting with Japan's Aso at the same time and it seems we have a coordinated global move to move the markets

  • Swiss central-bank officials have in the past few weeks indicated that their next monetary-policy steps could include elements such as buying government bonds to boost the amount of money in the Swiss economy or intervening on the foreign-exchange market to weaken the Swiss franc or stem a rise in its value relative to other currencies.
  • Separately, U.K. Chancellor of the Exchequer Alistair Darling indicated the Bank of England could boost the money supply through the purchase of assets such as government debt as soon as this month. "We've given them the levers," Mr. Darling said Monday, according to an interview published by the Daily Telegraph.
  • ECB governing-council member Christian Noyer said the central bank for the 16 countries using the euro is studying whether to go ahead with plans to release more money in to the economy by unconventional means, saying the ECB is considering all options.

 I've been seeing a lot of bear arguments that have been based on the premise that the S&P earnings are down considerably and, in fact, the S&P as a whole has lost about 56 cents on the quarter.  But if you take out JUST AIG – it turns into a $4.57 profit.  Why then, I ask, should I be dumping my IBM stock because FRE and FNM are dragging down the S&Ps earnings?  IBM earned $3.03 last Q vs. $4.57 for the non-AIG S&P – does that make them worth $15Tn (3/4 of the S&P)?

"There are 3 kinds of lies," Mark Twain wrote over 100 years ago: "lies, damn lies and statistics."  Of late, the media is having a field day with all three of them but we have been trying to focus on the FACTS – which are very hard to get to beneath all the layers of BS.  You can tell me you don't think that a global stimulus package that amounts to close to 20% of the global GDP won't matter but I just can't accept that.  Yes we will have inflation down the road but what we won't have is a 1930's style depression -the global economy does march on.

Have a fun day – we deserve it!

 

 

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Phil:
Stressy day, particularly early, now a good day.
 
see you demain.

stillmoving, sure let me know what you need

Wow … instead of 3 pm selloff we get 3:30 selloff.  Can’t hold anything into the close !
 
Dow drops 115 last 1/2 hour.
 
SKF pumps up $12+ in last 1/2 hour.
 
What a joke !

Boy has my timing been wrong on SKF lately or what ?

Phil: who can trade after hours and we cannot ?

HIG- 
Any intel on them from members?  My dad seems to like them on the long side.  I don;t trade or invest in that space.  Any advice/input would be great
Thanks

I knew I should have trusted those volume spikes in FAS!  They are usually the best indicator of a turning point.  It may not happen within the next 5 mins.. but it usually happens within 15.

Phil, when you say gambling for a gap down tomorrow.. you mean you think we’ll have one, right?

Oil/Eph – Well the current inventories were no good but you can’t stop a good China rally.  With that kind of spread you want to run out the premium, you are covered on both ends so no real harm as it goes up (as long as it stays around $45ish) but keep your eye on the roll ups and don’t let them get away from you.  Actually, you get a better price when it heads down for the call roll because the front-month that’s in the money loses it faster than the call you’re rolling to.
 
It’s been a while since I’ve been confused with a response.  I’m not sure why I’d want to run out the premium on my long calls that I’m looking to roll.    Shouldn’t they decay faster than the Jans that I’m moving to and therefore I’d want to sell them while they still have some premium?   Or am I looking at it completely backwards?   Similarly, when you say it is better to roll out when the underlying is moving against you, was the "it" you referred to premium?
Also I’m not sure what you mean by "keep an on the roll ups and don’t let them get away from you".  I assume you mean that one that is going into bad position (in this case my long put, because I need to spend money on rolling him up), because the one that is going deeping ITM I can always roll for a credit. 

Matt — I think Phil’s gap down comment was on SKF only (financials and broader market will mostly be up). That his consistent with his other messages to let XOM and DRYS ride up some more tomorrow.

thanks ajay.

Leuthold Says Stocks Will Surge, Depression Avoided (Update4)
 

Email | Print | A A A

by Betty Liu and Lynn Thomasson
March 4 (Bloomberg) — Steve Leuthold, whose Grizzly Short Fund returned 74 percent last year betting against U.S. stocks, said now is the time to buy equities because investors are too fearful about the economy.
“These comparisons people make with the Great Depression are totally out of touch with reality, and pretty stupid,” he told Bloomberg Television in an interview today. “We’ve been in much worse, much more panicked and more scary situations in the U.S.”
The economy isn’t as bad as it was in 1974, when stocks began rebounding, said Leuthold, who oversees $3.2 billion at Leuthold Weeden Capital Management in Minneapolis. He predicted the Standard & Poor’s 500 Index will surge to at least 1,000 in 2009, representing a gain of 44 percent from yesterday’s 12-year low of 696.33.
The index rose 2.4 percent to 712.87 today on speculation China will add to a 4 trillion yuan ($585 billion) spending plan and U.S. lawmakers will reach agreement on a plan to stem mortgage defaults.
Because a rally is likely, Leuthold said investors shouldn’t buy his Grizzly Short Fund. It has returned 26 percent in 2009. Short seller Bill Fleckenstein, who warned of the housing bubble in 2005, closed his 13-year-old bear market fund last year because valuations made it “too dangerous” to bet on more losses, he said in a interview last month.
China, Korea, Taiwan
The Leuthold Core Investment Fund, which bets on stock gains, is most concentrated in biotechnology companies, automotive retailers and education providers, Leuthold said. Investors should also buy equities in China, Korea and Taiwan because their economies are growing faster and the Asian banking system hasn’t been battered by subprime loans as badly as U.S. financial institutions, Leuthold said.
The Chinese economy may grow 7.7 percent this year, compared with a 2 percent contraction in the U.S., according to the median economist estimates in a Bloomberg survey. North American financial firms have reported $811.2 billion in credit losses and writedowns tied to mortgage defaults, 27 times more than banks in Asia, according to Bloomberg data collected since the housing slump began in 2007.
“We’re going global,” he said. “Global investing is the way of the future.”
To contact the reporters on this story: Betty Liu in New York at bliu17@bloomberg.net; Lynn Thomasson in New York at lthomasson@bloomberg.net.

Ford in the news – down AH

C – reported a lot of insider buys today.  over 8 million shares.

The after hours crowd is nuts.  Yesterday we were down nearly 1% after hour on the indices, then by the morning the future was up over 1%.  The opposite happened the previous day, after hours were up and the next morning was down.  I like what David Fry said, there is no rational to the movement, so let’s just wait and see.

Phil, Just read your comment on F.  Hope it’s still a gift at 1.68!  Thanks.

 How much do you charge Cramer for his subscription?

China is going to spend all their reserves on trying to prop up their economy. It just isn’t sustainable, the Chinese aren’t Americans they actually have savings. Ive been looking at their tax system and they tax the people to death on income!

Whatever news comes out of China about a stimulus is just a quick commodities trade.

GOOG CEO on CNBC doesn’t sound confident at all, "never seen a global slow down on this scale".

There are significant holdings by sovereign wealth funds in General Electric and General Electric Capital because of its triple-A — the same thing with Berkshire Hathaway (BRKa.N: Quote, Profile, Research) because of its triple-A," Gross said. "Now that the market recognizes that the triple-A, at least in terms of GE, may disappear, there are forced sellings ahead of the downgrade."
Many pension and endowment funds would no longer be able to hold GE debt if it lost the triple-A rating, and a number of mutual funds and pension funds have guidelines that steer money managers away from stocks priced below $10.
 
"You see substantial, hundreds of millions of bonds coming out for sale in order to beat the triple-A downgrade and that, of course, pressures CDS spreads, widens out yields, and it gives a signal to the stock market that something is wrong," Gross said.
 
Credit default swaps, known as CDS, are over-the-contract contracts that bet on whether a company will default on its bonds within a fixed period of time. (Reporting by Richard Leong and Jennifer Ablan; Editing by Leslie Adler)
http://uk.reuters.com/article/marketsNewsUS/idUKN0454348120090304

March 4 (Reuters) – A dividend cut will be a prudent measure for Capital One Financial Corp (COF.N: Quote, Profile, Research), as it will help the bank to preserve capital and reduce the risk of a dilutive capital raise, Credit Suisse said, while resuming the coverage of the bank with a "neutral" rating and a $15 price target.
 
"We believe that capital preservation today is more important and current earnings are unlikely to support the current dividend until at least 2011," analyst Moshe Orenbuch said in a note to clients.
 
Orenbuch said he does not expect Capital One to organically increase its tangible common equity in 2009, given low level of earnings and high dividend payout.
 
He said the bank may fair well under the regulatory stress test, as its year-end assumptions are generally consistent with the regulatory inputs for the test.
 
However, the analyst remains concerned over Capital One’s credit quality, as he expects credit card losses to worsen faster than the industry throughout 2009 as a result of implementation of minimum payment guidelines.
 
Last month, Capital One said defaults on its U.S.-issued credit cards rose as unemployment soared, triggering fears that the bank could slash its dividend and sending its stock down to the lowest level in nearly 13 years.
 
In January, the firm, one of the largest issuers of MasterCard and Visa credit cards, posted disappointing quarterly results and forecast more credit losses in 2009 as debt-burdened American consumers struggle with the highest unemployment rates in 16 years.
 
Shares of Capital One closed at $10.20 Tuesday on the New York Stock Exchange. (Reporting by Adheesha Sarkar in Bangalore; Editing by Anil D’Silva)

Kustomz … who has ever seen a global slowdown of this scale ?
 
Not I ….

GOOG
You don’t say ?
 
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1337350
 
 
I am shocked, SHOCKED to learn that there is gambling going on here ….

Not exactly a right wing critic, correct ?
 
http://www.nytimes.com/2009/03/04/opinion/04dowd.html?_r=1

S&P earnings; Jeremy Siegel (my Finance professor many years ago) sez you should market cap weight the S&P earnings; do that, and the numbers should be less disastrous.
 
What they do know is add up the per share earnings and divide by 500 ( i think ) – that does not seem right.

MKT likely to tank?

Premier Wen Jiabao said China would ramp up its budget deficit to hit the government’s coveted 8 percent growth target but did not make the announcement markets had craved of an increase in its 4 trillion yuan ($585 billion) economic stimulus plan.

Greg Baker / AP

In his annual work report on Thursday to the National People’s Congress, the largely ceremonial parliament, Wen said the 2009 growth goal was realistic despite a deepening global financial crisis.
"It needs to be stressed that in projecting the GDP growth target at 8 percent, we have taken into consideration both our need and ability to sustain development in China," he said. "As long as we adopt the right policies and appropriate measures and implement them effectively, we will be able to achieve this target."
Global markets soared on Wednesday on speculation that Wen would add to the stimulus plan unveiled in November to head off a rise in unemployment that could threaten the social stability prized by the ruling Communist party.
Wen said China’s budget deficit this year — 950 billion yuan — would jump to almost 3 percent of national income from 0.4 percent in 2008. By comparison, the United States is planning for a deficit of 12.3 percent of GDP this year.
Investment spending, covering everything from railways to affordable housing, will double; outlays on health care will rise 38 percent; and spending on the social safety net and employment will go up 22 percent, according to the 2009 budget.
But Wen announced no increase in the 4 trillion yuan price tag of November’s pump-priming package to revive the world’s third-largest economy, which has been hit by a slump in demand for its exports.

Good Morning All & Phil

Asia Markets :    Thursday, March 05, 2009
(The following is from WSJ; please cross check with other sources to confirm.)   

Nikkei Average*                          7433.49     142.53      1.95%
Hang Seng*                              12211.24    -119.91     -0.97%
China: DJ Shanghai*                   253.54          2.41      0.96%
Seoul Composite*                      1058.18        -1.08     -0.10%
Bombay Sensex*                         8197.92   -257.19     -3.04%
Baltic Dry Index                             2084.00       50.00      2.34%

*at Close

Markets Turn Uncertain on China’s Stimulus Silence

Asian stocks wavered Thursday as some markets were disappointed with the lack of any detail to China’s stimulus plans, while the euro fell on expectations the European Central Bank will cut rates to an all-time low later in the day. China’s Premier Wen Jiabao said that China will achieve 8 percent growth this year — a level considered key to maintain employment growth in the country — despite the deepening global economic crisis. Wen did not announce fresh economic stimulus as some investors had hoped.

The Nikkei gained 2 percent, rising for a second day, as hopes for fresh stimulus steps in China and an economic recovery there boosted machineryand shipping firms.

Seoul shares ended a touch lower in volatile trade that saw the main index move in and out of positive territory  after news the Taiwanese government would set up a DRAM company.

Australian shares closed 0.7 percent higher with miners  leading the gains. But the market was disappointed by a lack of fresh stimulus plans in China’s 2009 budget.

Hong Kong shares flitted in and out of positive territory to drop 0.4 percent by midday as investors moved to lock in gains on the previous session’s rally, but a slight recovery in HSBC limited losses on the main index.

Singapore’s Straits Times Index surrender early gains, down 1 percent as players were reluctant to chase prices higher amid lack of new measures from Beijing to shore up China’s growth. Banks and developers led the decline among blue chips.

China’s Shanghai Composite Index pared back earlier gains of as much as 2 percent to trade flat after Prime Minister Wen’s opening speech at National People’s Congress did not make the announcement markets had craved of an increase in its $585 billion economic stimulus plan.

Bombay Stock Exchange’s Sensex ended at 8185.35, down 261.14 points or 3.09 per cent. The index touched an intra-day low of 8166.97 and high of 8535.03. Indian indices ended towards day’s lows on Thursday as traders booked profits in heavyweights from oil&gas and banking space. Weak European markets did little to boost sentiments.

Euro Shares Fall Early; Rate Decisions Eyed

European shares fell in morning trading on Thursday ahead of interest rate decisions in Britain and the euro zone, as banks and oils gave up some of their gains from the previous session.

The FTSEurofirst 300 index of top European shares was down 1.2 percent at 687.99 points. On Wednesday, the index rose 4 percent, snapping a three-day losing run. The STOXX index, a broader measure of European shares, was down 1.2 percent, with banks and oils taking most points off the index.

Standard Chartered was down 1.8 percent after a two-day rally following its results. Banco Santander, Credit Suisse, Deutsche Bank, HSBC, Societe Generale and UBS were 1.2-3.1 percent lower.

Crude oil was down more than 1 percent, below $45 a barrel, and several oil companies fell after gaining on Wednesday. Total, ENI, BP, Royal Dutch Shell and Repsol fell 0.6-1.7 percent.

Both the Bank of England and the European Central Bank will cut rates by 50 basis points, according to Reuters polls. This means the BoE, in a decision being announced at 12 p.m. London time, would halve its base rate to a new record low of 0.5 percent. It may also give detail on a program of quantitative easing — buying assets from banks to help boost lending — in an effort to combat recession. The ECB is set to cut to 1.5 percent at 12:45 p.m. London time.

The FTSEurofirst 300, which hit a record low on Tuesday, is down 17 percent in 2009, having fallen 45 percent in 2008, with investor focus shifting to recession in major economies from the credit crisis.

Across Europe, Britain’s FTSE 100, Germany’s DAX and France’s CAC-40 were 1.3-1.9 percent lower.

Oil Slips Below $45 after 9% Jump, Eyes US Data

Oil eased below $45 on Thursday, after surging nearly 9 percent overnight on government data showing a surprise drop in U.S. crude stockpiles, which could signal recovering demand in the world’s top energy consumer. Prices were also supported by the remarks of China’s Premier Wen Jiabao on Thursday that the No. 2 oil consumer would achieve 8 percent growth this year — a level considered key to maintain employment growth — despite the deepening global recession.

U.S. crude[ 44.02  -1.36  (-3%)] was down, after hitting a morning high of $45.70, while London Brent crude[ 44.93 -1.19 (-2.58%)] fell.

The U.S. Energy Information Association said crude stockpiles declined by 700,000 barrels last week, countering analyst expectations for a 1.2-million-barrel build. Demand for gasoline over the past four weeks also rose 2.2 percent from a year ago. Year-over-year gasoline demand has increased in the last several weeks, possibly indicating the start of a rebound in demand.

Oil prices have traded in a narrow band around $40 since mid-December, pressured by slumping demand from the global economic downturn, but drawing support from expectations OPEC might cut production again when it meets on March 15.

Angola, which currently holds the presidency of the 12-member group, will not advocate further production cuts when the group meets on March 15 in Vienna, OPEC sources said on Wednesday. Ecuador also said it sees no need for more reductions at the next meeting, while other OPEC members have yet to make a decision. But Venezuela, Algeria and Libya have raised the possibility of a further cut.

Euro Softer Before ECB; Dollar Broadly Stronger

The euro softened on Thursday as investors awaited a policy decision by the European Central Bank, which is widely expected to cut interest rates to shore up the ailing euro zone economy. The Bank of England will also meet to set monetary policy, where the focus is on the extent of new steps to boost the monetary base, or so-called quantitative easing. The dollar rose to a fresh four-month high against the yen as investors were concerned about a deteriorating economy and deepening political uncertainty in Japan.

The ECB is widely expected to cut interest rates to an all-time low of 1.5 percent from 2 percent on Thursday and slash its 2009 and 2010 economic forecasts to reflect the rapid pace of deterioration in the euro zone.

The dollar index was up 0.3 percent at 88.721, hovering near three-year highs.
The euro [1.256    -0.0099  (-0.78%)   ] was down against the dollar.
Sterling [ 1.4161    -0.0028  (-0.2%)    ] was steady against the dollar, while the
euro [ 0.8868    -0.0051  (-0.57%)    ] was down versus the UK currency.
The dollar [ 99.45    0.31  (+0.31%)   ] rose to 99.67, its highest in four months, before settling back slightly versus the yen.

In the US, January factory orders, due at 10 a.m. New York time, are expected to fall 3.5 percent, down from a 3.9 percent drop in the previous month. But Friday’s employment report could show job losses accelerated last month, and the unemployment rate surged to a 25-year high. The market consensus is that non-farm payrolls shed about 650,000 jobs in February.

Gold rallies, ends 8-day losing streak

Gold staged a modest bounce on Thursday on bargain hunting after falling for eight straight days to a three-week low.
Gold rose 0.6 percent to $912.70 an ounce by 1 a.m. EST, rebounding after falling on Wednesday as low as $900.95, the lowest since February 10.

Growth in gold-backed exchange-traded funds has also slowed, which traders said underscored falling interest in the metal. The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings remained at a record 1,029.29 metric tons on March 4, unchanged from February 26 when they first hit that level.

No new stimulus from China, well I’m not surprised.

SKF 120 and 150 puts look to take a hit this a.m. with today’s bearish outlook and time-decay.  Roll-em?

Morning all. UK down 2.5%. Waiting interest cut news. No extra from China – not suprised either kustomz. And GM say "The company says that it has "substantial doubt" over its ability to to continue as a going concern." Well what took it so long ? Futures are abysmal -2% on all indexes.

UK cut 0.5% – doesnt seem to mean much these days.

Phil,
  I haven’t pulled the trigger on the RKH trade we talked about (selling puts to cover my mistakes in C, BAC, DRYS) and the RKH has taken a hit down to $37 and change. Would you still recommend the trade or should I roll them individually?

Phil,
could you please explain what you mean when you mention the levels that you watch – 2,5% line on SPX or Russell or NASDAQ and so on.
It will support my understanding about your logic.

Phil:  The Claim:  Honesty and Transparency.  No pork; no earmarks.
Instead we get same old same old Wash Chicago BS

What good does having a planetarium do for earth if an asteroid decides to smash us, other than we can watch our doom ?   LOL !

SKF …. patience might be rewarded on this one …. don’t get panicked by a little gap up. 

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