Jun 13, 2012

Market Finds Support

 JP Morgan’s (JPM) Jamie Dimon will become the first Wall Street executive to testify on Capitol Hill since Lloyd Blankfein of Goldman Sachs (GS) enthralled us with his bravado and arrogance.  Mr. Dimon is expected to tell the US Senate Banking Committee that the bank’s much publicized trading losses were an isolated event.  He will be emphasizing that no client, taxpayer or customer money was impacted by the loss. I wonder whose money that was, maybe Jamie's?

It’s no secret that Germany has been carrying Europe on its financial back.  Now it appears that concerns are starting to appear in the financial markets about Germany’s ability to support the entire continent.  Credit default swaps on German debt, which serve as insurance in the case of default,  have been rising even though yields on that debt are falling.  The rise in CDS prices means insurance to protect against a German default is rising, historically an indicator of investor angst.   The CDS market is thinly traded, so this may be an anomaly, but it is certainly worth monitoring. 

How about some good news?  The Financial Times is reporting that the rapid expansion of shale gas should add 455K jobs in the US by 2015. 

The S&P 500 has shown a high correlation to the Australian dollar.  Both are sitting right on support, a break of which could be ugly.  The support provides some technical justification to begin going risk on once again.  Thanks to Chris Kimble for the chart.

Shanghai Securities News is reporting that the pace of property sales has picked up in several key cities in China.  Lenders have become more aggressive, and reportedly new rules will be implemented that will relax controls on real estate investment. 

After a short hiatus, Europe is back in the news.  Greece has their follow-on election this weekend; Spanish banks got a huge bailout, and  Italy appears to be the next country in the tumbler as they carry roughly 2 trillion euro in debt, a higher level as a percent of GDP than any other developed nation besides Greece and Japan. 

Retail sales for May fell for the second consecutive month on lower employment and weak wage growth.  Sales were down 0.2%, comparable to April’s decline.  Retail sales ex-autos fell by 0.4% vs. expectations of no gain.  The PPI came in at 1.2% vs. expectations of 0.7%, and ex food and energy rose by 2.8% vs. expectations of 2.7%.

Without becoming too esoteric, the Fed releases a quarterly flow of funds report which shows the amount of cash on corporate balance sheets.  Over the past two years the report has shown a big jump in cash levels, but the latest report contained a $500 billion downward adjustment to cash, effectively wiping out the buildup in cash so often cited as a bullish story for the markets.  As a percent of total assets cash levels are at the lowest point in the past 50 years.

Companies, investors and individuals have been filing applications for the new web suffixes being released by Marina del Rey based ICANN, the nonprofit web-management company which monitors domain registration. Over 1900 applications have been filed, including .jpmorgan, .walmart, and .microsoft.  The new suffixes will allow companies to alter the way they market online.  Each application costs $185K.   The new sites may be ready early in 2013.

Need I say more?

Have a great day


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