November 16, 2011
Equity markets are down this morning after a rocky night in European markets. The ECB has been sporadically buying bonds but comments from the Bank of England helped pressure global markets. BOE Governor Mervyn King said that Britain faces a “markedly weaker” outlook for their economy due to ongoing danger from Europe’s debt crisis. Although difficult to gauge, it appears the ECB has been accounting for 80+% of the Italian debt purchases in recent days. Bonds yields have been rising across Europe.
I mentioned Monday that a slew of economic releases were coming out this week. The table below highlights some of those.
|
| Actual | Consensus | Prior (revision) |
| PPI | 5.9% | 6.3% | 6.9% |
| Core PPI | 2.8% | 2.8% | 2.5% |
| Retail Sales | 0.5% | 0.3% | 1.1% |
| Retail Sales less autos | 0.6% | 0.2% | 0.5% (from 0.6%) |
| Empire Manufacturing | 0.6 | -2.0 | -8.48 |
| Business Inventories | 0.0% | 0.1% | 0.4% (from 0.5%) |
| CPI | 3.5% | 3.7% | 3.9% |
| Core CPE | 2.1% | 2.1% | 2.0% |
| Industrial Production | 0.7% | 0.4% | -0.1% (from 0.2%) |
| Capacity Utilization | 77.8% | 77.6% | 77.3% |
Research in Motion (RIMM) was upgraded from sell to neutral today at Goldman Sachs (GS), with a price target of $18. The analyst, Simona Jankowski, has been negative on the stock since it was over $70 per share in the spring of 2010, and has since fallen over 70%. The iPhone now has a 45% share of the enterprise smartphone market, while the Blackberry’s share has declined to 31%.
Retail sales were up 0.5% in October. Wal-Mart (WMT) posted positive comps for the first time in two years. Target (TGT) reported better than expected earnings this morning, as did Home Depot (HD) yesterday. Abercrombie & Fitch (ANF) missed earnings this morning on weak top line and higher material costs. The stock is down 14% this morning.
A House panel moved to cut executive pay at Fannie Mae (FNM) and Freddie Mac (FRE) after it was reported the top six executives made $35 million in bonuses. These are the same guys who have their hands out right now for additional government assistance. Are you kidding? That’s a nice government job! I wonder if those jobs comes with those cushy government pensions?
Speaking of government agencies with mortgage related problems, it appears the FHA is close crawling to Congress for more backing. I wrote at length about the FHA in 2009 and 2010, criticizing them for extending loans to borrowers with credit ratings in the low 500's and only requiring 3% down payments. Now these shoddy lending standards are coming home to roost. Won't these people ever learn their lessons? Why does their inability to learn continually cost the taxpayer money?
The price of oil has been soaring, and is now back over $100 for first time since July. A cap may be coming as Libya’s oil production is now back to 40% of its capacity before the war broke out. The government is targeting 1.6 million barrels per day by mid-2012.
The Occupy Wall Street crowd was evicted from parks across the country yesterday. In New York, they were allowed to return to Zuccotti park, but without blankets, tents, and sleeping bags. My guess is that when winter strikes, the protesters will be gone, or at least will move south for the winter. Tomorrow they are planning to “shut Wall Street down” at 7:00 EST.
The city of Shanghai was able to successfully sell regional government bonds. Yields on the bonds are presently at levels comparable to Chinese government debt.
US Treasury Secretary Timothy Geithner is calling for short term stimulus, and wants it before the election. “I don’t think we can afford to sit here for 14 months or 12 months and not act to help an economy that is still so weakened.”
The NBA Players Association has sued the owners for antitrust violations. It appears that negotiation is going as well as the Super Committee.
Have a great day
Ned
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