Friday, July 30th, 2010

Daily Download: Financial and Stock Investing News for 11-5-09

November 5th, 2009 at 5:57 am by CB | No Comments

Good morning, investors and traders! You are reading the Daily Download (”Daily DL”), which includes summaries and links to the day’s selected economic and stock investing news. The Daily DL is maintained by Chain Bridge Investing, which is a financial blog at www.chainbridgeinvesting.com. Chain Bridge Investing is constantly improving and adding new financial and investing content to the website. Please let us know if you have any suggestions.

Upcoming Economic Data for the Day (all times EST)

8:30 AM Jobless Claims

8:30 AM Productivity and Costs

9:00 AM RBC Cash Index

10:30 AM EIA Natural Gas Report

3:00 PM Treasury STRIPS

4:30 PM Fed Balance Sheet

4:30 PM Money Supply

Initial Public Offerings for the Week of November 2 -6, 2009

11-03-09 Aviv REIT – REIT for healthcare properties (”AVI”)

11-04-09 Ancestry.com – Online services for genealogy. (”ACOM”)

11-05-09 Plains Capital – Banking services (”PCB”).

11-05-09 Duoyan Printing – Provides printing equipment (”DYP”)

11-05-09 STR Holdings – Solar power module manufacturer (”STRI”)

Source: WSJ Market Data Group.

For Daily Market Performance Data, Please Visit the Daily Market Sheet

List of Selected Companies with Third-Quarter Earnings for 11-5-09

News

Fed to Keep Rates Low Despite Pickup – The Wall Street Journal

Summary: On Wednesday, the Fed announced that it voted unanimously to keep interest rates low for an extended period of time, but indicated that rates could increase if (1) the unemployment rate begins to decline or (2) expectations of inflation begin to increase. The Fed believes that the economy’s growth is being constrained by: (1) continuing job losses, (2) tighter credit; (3) reduced wealth; and (4) continued business spending reductions. Nevertheless, the Fed noted that the economy appears to be showing signs of improvement through (1) improved consumer spending and (2) increased housing activity. One of the primary reasons the Fed has kept rates low is the large amount of economic slack in the system. Such slack could continue to put downward pressure on inflation even after the recovery. Yet, there has been so much money placed in the financial system that if the Fed is not careful in its maneuvering, then inflation could run rampant and create new financial bubbles.

CB: Nothing new here as the debate between inflation and deflation continues to play out in the economy. The Fed realizes that the U.S. is a fragile economy. Consequently, it does not want to remove stimulus from the system before it must. Again, most of the economic progress the country is experiencing results from the actions of the government and the Fed. Until there is proof that the economic recovery is sustainable without the stimulus, monetary tightening is unlikely. Furthermore, as discussed in other Daily DLs, by not increasing interest rates the Fed helps maintain downward pressure on the U.S. dollar, which is likely to help reduce the trade imbalance and further aid the U.S. recovery.

Job Losses Continue, but Pace Slackens – The Wall Street Journal

Summary: According to the Automatic Data Processing, Inc. report released on Wednesday, private-sector employment declined 203,000 in October and represented the smallest decline in jobs since July 2008. Yet, the decline in jobs was greater than the economists’ consensus estimate of 175,000 jobs, which included government jobs. Furthermore, Challenger, Gray & Christmas reported that employer announced job cuts decreased 16% from September to 55,679, which represented the best results since March 2008. Separately, the Institute for Supply Management’s (“ISM”) nonmanufacturing survey reported that the overall index dropped to 50.6 in October from 50.9 in September. Moreover, the ISM’s employment index declined to 41.1 in October from 44.3 in September primarily due to more layoffs and hiring freezes. Meanwhile, the following service sectors of the economy reported employment increases for October: (1) mining; (2) rental and leasing: and (3) management of companies and support services.

CB: Also, on Wednesday, the Mortgage Banker’s Association reported that for the week ending October 30, 2009 the Market Composite Index (the measure of mortgage loan application volume) and the Refinance Index increased by a seasonally adjusted 8.2% and 14.5% , respectively, from the prior week, while the Purchased Index decreased by a seasonally adjusted 1.2% from the prior week. Meanwhile the average 30-year fixed-interest rate decreased to 4.97% from the 5.04% reported a week earlier.

CB: With unemployment and underemployment continuing to increase from this time last year, one must wonder what forces account for the increase in retail sales that were reported for last week and are estimated for the month of October. Are the retail sales increases primarily driven from the unemployed individuals continuing to spend or greater spending by the employed? Or was last year’s drop in retail sales more a result of panic and less the result of actual employment and credit fundamentals? Since this topic seems to be recurring, perhaps CB will conduct some additional research on this topic.

World Bank Warns East Asia on Asset Prices – Financial Times

Summary: Surging equity and house prices in east Asia have confirmed the World Bank’s concern that asset bubbles are beginning to emerge in these countries. The World Bank further stated that these countries’ central banks may have to begin tightening monetary policy “sooner rather than later.” Moreover, the World Bank believes that the first step of tightening would consist of scaling back on stimulus and government supports , which would then be followed by increases in interest rates. Finally, the World Bank revised its growth estimates upwards for the east Asia and the Pacific region to 6.7% this year, which is up 1.4 percentage points from the bank’s estimate in April. Yet, growth is not expected in all countries as the gross domestic product is expected to continue to contract in Cambodia, Malaysia, and Thailand.

CB: This is the second time in the last two days that east Asia has been warned about potential asset bubbles. On Tuesday, the International Monetary Fund reported similar concerns for east Asia. On the surface, it appears that the bubbles have already formed to an extent. Can these countries tighten without causing the bubbles to crash? If these countries do have bubbles, and these bubbles crash they will have consequences on the rest of the world, especially with the foreign capital inflows these countries have been receiving. Such events will not only cause significant reductions in wealth, but could lead to the U.S. dollar assets being seen as a safe haven again, which could hinder the U.S. recovery as the U.S. gains strength again. There are many uncertainties.

Cuomo Files Intel Antitrust Suit – The New York Times

Summary: On Wednesday, Andrew Cuomo, New York’s attorney general, filed an antitrust lawsuit against Intel claiming that for years the company has used large rebates as well as co-marketing arrangements to prevent computer manufacturers like Dell from switching to A.M.D products. Allegedly Intel threaten to take away these benefits if additional business was done with A.M.D. Furthermore, when computer manufacturers were thinking of switching to A.M.D products, Intel would then help those manufacturers sell their computers at large discounts. As a result, Cuomo claims that by controlling 80% of the chip market Intel had monopoly power and used illegal actions to maintain its power over the market. Consequently, Intel’s actions constrained innovation within the industry and made consumers pay increased prices for computers. The federal antitrust law allows other states and the Federal Trade Commission to file similar lawsuits against Intel. At present, Intel is involved in the following antitrust situations: (1) Intel is currently appealing a $1.45 billion fine by the European Commission for antitrust violations; (2) Intel is the subject of a antitrust lawsuit filed by A.M.D. in Federal District Court; and (3) Intel is the subject of a continuing investigation by the Federal Trade Commission.

U.S. Media Companies Raise Outlook – Financial Times

Summary: According the results of those media companies that have reported their third-quarter financials, the U.S. consumer remains willing to pay for Cable TV, broadband, and movie tickets. Time Warner and Viacom have both increased their operating outlooks for 2009 due to strong film and cable performances. Particularly, cable, which receives revenue from advertising and fees paid by the cable operators, has performed very well. The strength of the cable performance was primarily driven by: (1) moderation in the advertising declines; (2) significant increases in broadband subscribers; and (3) the deployment of TV Everywhere services to attract more subscribers.

Cisco Sees Recovery Gaining Steam – Financial Times

Summary: On Wednesday, John Chambers, the chief executive of Cisco Systems, stated that he is seeing indications of global economic recovery and will begin to increase headcount as well as spending. Furthermore, Cisco has been receiving increased orders,thus prompting the company to shift its focus on future growth. Yet, Chambers stated that not all his customers agree with his view and that public sector spending is recovering at a faster clip than corporate purchases. Separately, Paul Jacobs, the chief executive of Qualcomm, stated that he was very bullish on the growth of the 3G market in 2010 projecting a 20% increase.

Supply Glut and Lower Prices Forecast – Financial Times

Summary: The International Energy Agency (“IEA”) is reporting that global gas markets are no longer a seller’s market, but now a buyer’s market. The shift results from decreasing demand, while new supply continues to build. Furthermore, if countries implement plans to save energy and develop alternative energy plans, then this glut will only increase. The IEA’s draft report expects overcapacity of gas to reach $250 billion cubic meters by 2015, more than four times 2007’s spare capacity. The IEA also states that environmental policies to reduce carbon dioxide emission would cause gas demand to further decrease. Consequently, these developments would most likely continue to put downward pressure on the price of natural gas. Finally, these developments in the gas markets will likely weaken Europe’s dependence on Russia for energy.

Mutual-Fund Streak Hits 33 Weeks – The Wall Street Journal

Summary: The following figures are reported weekly by the Investment Company Institute regarding the flow money amongst various funds for the week ended October 28 (”this week”):

(1) Mutual funds witnessed net inflows for the 33nd consecutive week, with total inflows estimated at $8.93 billion during this week and $346 billion for the whole streak.

(2) The stock funds experienced outflows of $1.47 billion this week, compared to inflows of $1.93 billion in the prior week. However, U.S. stock funds had $2.56 billion of outflows this week, while foreign funds had $1.09 billion of inflows.

(3) Bond funds had estimated inflows of $10.16 billion this week, a decrease from the $11.18 billion inflows from the prior week.

(4) Hybrid funds, funds that invest in both equity and fixed income, had estimated inflows of $239 million this week, a decrease from the $979 million inflows from the prior week.

(5) Money-market funds saw their assets decrease by $29.33 billion this week to a total of $3.312 trillion in assets.

More Links of Note

Has Buffett Overplayed His Hand? – Barron’s

In Praise of ETFs

More Caution on Leveraged ETFs

The Great Contraction of 2008-2009 – Kenneth Rogoff

Major Indicators Remain Mixed, Forecast Weak Recovery – PragCap

Buffett and India See a Dim Dollar Future – Forbes