A.L. Waters Capital, LLC

Morning Call

0 CommentsFriday • May 29, 2009 • by alwaters

Morning Call
May 29, 2009

“Wall Street is not a casino. The drinks are free in a casino.”
Vahan Janjigian

The Dow gained back most of its prior day’s losses yesterday with the energy and basic materials sectors leading the way. Solid gains among for our favorites among the drillers should be followed up with another big move today. Diamond Offshore (DO), Union Drilling (UDRL), and Atwood Oceanics (ATW) are poised for another 5% upside, adding to strong gains for the week. We are also seeing signs for movement in the tech sector as well. In particular, chip makers and companies providing support services within the sector will see positive movement in the coming week. Intel (INTC), Qualcomm (QCOM), and Advanced Micro Devices (AMD) are among those that should move today and in the coming week.

Futures have been climbing slowly throughout the morning, suggesting that some buying will continue at the open. In Asia, the indexes all finished higher by modest amounts with China, once again, leading the way with a 1.6% gain on the Hang Seng. Financials were lower once again and the industrial sector added to its gains. European equities are up well over 1% at mid-day with generally mixed performance among sectors. Based on aftermarket trading, it appears the financials may be weak again here in the US today.
Commodities are very strong this morning, with gains across the board. Gold has been gathering momentum; finishing just under $960 yesterday after testing $965 during the day. This morning, gold is up another $12 to reach $975; currently near the highs of the session. Gold will, once again, test the $1000 mark soon. We expect that there may be some retracement along the way, but also believe that gold will hold and surpass that mark this time around.

Today we will have some preliminary GDP numbers and Consumer Sentiment on the economic calendar. A relatively light earnings day will include Tiffany, and the Royal Bank of Canada.

As has been the case lately, there have been several reasons for hope and an equal number of causes for concern. A rosy picture in Japan as industrial production rose by the most in 56 years. Also in India where the economy grew by more than experts predicted. In Europe, however, word is that the Euro-zone inflation rate has fallen to zero which is not a positive sign. Here in the US, there is a growing concern regarding State and County budget shortfalls, municipal bond defaults and, of course, an accelerating pace of small bank failures. Now, if you think the global economy has bottomed out and is beginning a recovery phase, then one could argue that some of the factors are simply lagging indicators. The same has been argued about jobless claims to play down the usefulness of following the weekly numbers. Some economic indicators do, in fact, follow along like a tail following the head. This analogy, however, is only useful if you are absolutely sure that the head is done falling.

Morning Call

0 CommentsThursday • May 28, 2009 • by alwaters

Morning Call
May 28, 2009

“You have to learn the rules of the game.
And then you have to play better than anyone else.” Albert Einstein

Green is good. Gordon Gecko, the infamous character in the movie Wall Street said “Greed is Good”, but you would be ill advised to say that in public these days. Green, on the other hand, is quickly becoming the way to go for investment. As the result of tax incentives and support from government initiatives, green energy is once again a focal point as investors look ahead. Many solar stocks, as an example, made 5-10% gains on an otherwise down day, yesterday. Afterhours activity suggests that this trend may continue today as well. Positions in LDK Solar (LDK), Solarfun Power Holdings (SOLF), Yingli Green Energy (YGE) and First Solar (FSLR) may pause after big gains yesterday, but should perform well over the coming weeks. Energy Conversion Devices (ENER), which offers support systems for alternative energy, also has solid upside potential. Oil remains strong as well.

Futures have held positive this morning but haven’t moved much ahead of an important round of economic news today. Only in China would one find strong movement anywhere in the global markets. The Hang Seng jumped up by over 5% once again despite only minimal movement elsewhere in Asia. Tech and Industrial stocks have been relatively strong in Asia; financials are mixed. In Europe, the major averages are all down by about 1% at mid-day. Volume activity in Europe has been led by the banking sector, with most down by 1% or more.

Commodities are trending lower this morning with exceptions in energy and some metals. Oil faltered briefly early this morning but has since moved to a half Dollar gain and is threatening the $64 mark in early trading. Gold has fluctuated throughout the early morning and is presently down by a small margin at just above $954. Looking at a recent trend line for gold, it would appear that we are at a critical level where gold should begin to tick higher. If by chance gold moves below $950, we could see a more serious pullback. We do, however, expect this line to hold and to see further movement to the upside.

The economic calendar today includes: Initial Jobless Claims, Durable Goods Orders, New Housing Sales, and the EIA Petroleum Status Report. Analysts are expecting Home Sales and Durable Goods Orders to have increased as economic circumstances moderate somewhat. Many are also expecting to see some moderation in Initial Jobless Claims but this is one area where we have continuing concern. We believe that we will see a spike in jobless claims at some point in the near term and remain cautious ahead of this. For earnings news today, we will hear from Big Lots, Costco, Dell, HJ Heinz, Novellus Systems, Novel, and Trina Solar.

One important theme that is certainly creating a stir is the ever changing rules in the financial arena. Regardless of one’s political or economic views, the climate has changed and we are at a monumental point in time much like that of the 1930s. It is as if we are quickly becoming “one nation, under regulatory authority” as the nation’s best and brightest look for ways to assure that we don’t pass this way again, anytime soon. Proposals are leaning toward the creation of a single regulator with oversight of the entire banking industry. We may also see a consolidation phase among some of the various existing authorities as well. Whether this is to be considered a good thing or a bad thing is immaterial at this point. It is more relevant that there is, once again, an air of uncertainty. For the markets to develop a long term perspective, investors will need to know what the landscape looks like on the road ahead. Ambiguity does not sit well on Wall Street. We need to know the facts surrounding all of the regulatory constraints, the changing tax implications, and other factors before a sound mind can make an assumption about the future.