January 31, 2011
Egypt continues to garner headlines as riots have given rise to concerns about global trade routes traversing through the Suez Canal, utilized by 8% of global shipments. The key product being transport through the canal is oil, and prices have been moving up in response in spite of recent weakness in other global commodities. Egyptian police have pulled back in fear of the rioters, and the airports are packed with Egyptians and non-Egyptians trying to flee the country. The last time Egypt received this much news was when the pyramids were unveiled to the public.
Domestic economic news was positive this morning as personal income for December was reported in line at 0.4%. Personal spending was well above expectations at 0.7% vs. the 0.5% estimate. Equity futures are up slightly this morning after Friday’s sell-off, the largest in six months. The Chicago Purchasing Manager Survey came in at 68.8 vs. expectations of 64.5 The key report this week will be Friday’s jobs report, which is expected to show an increase of 150K in private payroll jobs.
Earnings continue to pour in this week. Exxon reported better than expected revenue and EPS this morning as sales increased by 17%. Illinois Tool Works reported better than expected sales but lower than expected EPS.
Alpha Natural Resources announced it was buying Massey Energy in an effort to consolidate the domestic coal industry and increase production for export. The deal is valued at $8.5 billion.
The NY Times is reporting that inflation in China and the resulting pricing pressure on US retailers could reduce the US trade deficit with China. Container-shipping companies are noting reduced orders from the US.
The IMF put out a warning on the nonfinancial debt ratios in Brazil, China, and India. The notice cited that the levels are approaching those last seen in 1996, just before the emerging-market financial crisis. “Even low-quality businesses are able to borrow large amounts of money because of the rapid flow of capital from developed nations.”
The People’s Bank of China said that QE programs by other central banks would result in too much global liquidity. They also stated that this policy will not address underlying problems and expressed concern over the potential for competitive currency devaluations.
Markets in the Persian Gulf lost $10 billion last night as the political turmoil in Egypt increased selling pressure. The Dubai Financial Market fell over 4%.
Asian markets were down last night, and European markets are up slightly this morning.
Have a great day
Ned
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The Author
- Ned Brines
- Ned presently manages money for Andell Inc, the family office of one of North America’s dynastic families. He also is the founder and CIO of Montelena Asset Management, a California based RIA. Prior to founding MAM, Ned was the manager of the Provident Investment Counsel Small Cap fund. He began his money management career in 1994 at Roger Engemann & Associates where he managed the Aggressive Growth Fund, Focus Growth Fund, and Private Client business. Before entering money management, Ned spent six years as an investment banker, focusing on mergers and acquisitions and corporate restructuring. He has an MBA from the University of Southern California, a BS in Physiology from San Diego State University, and has achieved the Chartered Financial Analyst designation. He is a member of Beta Gamma Sigma, a national honor society, and Beta Theta Pi. He is a frequent speaker and lecturer in the financial community, serves on numerous non-profit boards, and has extensive media experience in television, print and radio. He presently lives in California with his wife and three children.
Recent Speaking Engagment
I will be speaking at the Crossroads Lecture Series March 11, 2011 in Orcas Island, WA. Click here to view a link to the lecture series: http://orcascrossroads.org/
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