A.L. Waters Capital, LLC

Morning Call

0 CommentsWednesday • March 31, 2010 • by avickery

“You cannot conceive the many without the one.”

Plato

Morning Call
March 31, 2010

Gold Update

Several contradicting factors are affecting gold prices. A slightly weaker Dollar has boosted all commodities this morning and rising economic optimism translates to expectations of higher demand for gold in its industrial capacity. After bottoming below the $1100 mark, we are also seeing a slight effect from short covering. On the other hand, as an investment, rising optimism will take away from gold’s luster as a safe haven. A slight reprieve for the Euro and Pound is unlikely to last for long. As the European currencies fall back again, the Dollar will benefit relatively and may also weaken gold in the latter part of this week.

Hot Stocks

Research In Motion (RIM) will release its latest earnings report today. Analysts expect RIM will have sold 11 million BlackBerry SmartPhones in its latest quarter, which may offset the impact of falling prices and narrower profit margins.
RIM has been offering less expensive devices to compete with Apple’s iPhone and Motorola’s Droid. It is reported, however, that the margin on the cheaper phones may be greater than the high end products. Sales and subscriber growth will also be an important number. This will be a complex report to assess, but positive news could drive shares in RIM higher today.

Public Finance Update

Without as much fanfare as healthcare legislation and other regulatory efforts, President Obama signed a new law yesterday requiring all federally guaranteed student loans to be originated by the federal government. State and nonprofit entities are left wondering what it will mean for their future. The new legislation will eliminate the Federal Family Education Loan, or FFEL, and requires instead, loans to be originated through the Ford Federal Direct Loan program beginning July 1.
The Massachusetts Department of Transportation goes to market today with its first-ever bond issuance, a $274 Million fixed-rate refinancing.
In Connecticut, Democratic leadership are requesting direct talks with Governor Jodi Rell to discuss the $500 Million fiscal 2010 budget deficit.
In Rhode Island, Governor Donald Carcieri announced the appointment of Susanne Greschner to head the Division of Municipal Finance under the Department of Revenue.

Market Outlook

Again, a mixed bag of economic data and other news has investors at the edge of their seat and avoiding commitment. The Dow moved higher by a measly 11 points yesterday and futures indicate, coincidentally, the market will open lower by a similar margin this morning. Both Consumer Confidence and Home Prices ticked higher according to the latest numbers. Both are considered critical indicators for recovery here in the US. The employment situation is, of course, an important factor in sustaining consumer confidence. The numbers have shown some stabilization, but at the current pace it will take a few years to recover the jobs lost at the height of the financial crisis.
The view in Europe is much less rosy. As Greece continues to reign in its debt, the government will also pay about 13 Billion Euros ($17.5 Billion) more in interest on its new debt than it would have if yields had stayed at their pre-crisis levels. This will not make the long term prospects any easier. Meanwhile, reports are saying that Ireland’s banks will need another $43 Billion in new capital to shore up their balance sheets. Speaking before parliament, Finance Minister Brian Lenihan said “Irish banking made appalling lending decisions that will cost the taxpayer dearly for years to come. Our worst fears have been surpassed.”
Stocks in Europe this morning have managed to pull into positive territory; held up by gains for the banking sector. Volume trading has been mostly positive, which is better news than the indexes indicate. The Euro has also strengthened slightly after its recent slide.
In Asia last night, the major indexes all fell just slightly below even. For the most part, industrial shares fared rather well, but the financial sector underperformed the broader market. The Yen also weakened as improving sentiment globally draws away from the Yen’s appeal as a refuge.

Commodities are beginning to move higher this morning following improving sentiment and a slightly weaker Dollar. Oil has managed to creep slowly higher; trading in the mid-$82 range. Gold has also edged higher; adding about $4 to $1109 in the early hours of trading. Both are likely to stay in a tight range today. The Dollar is up against the Yen, but has lost some ground on the Euro and Pound this morning.

The latest economic data due today includes Mortgage Applications and the Purchasing Manager Index. Earnings news will be coming from Acuity Brands, Global Payments, Harry Winston Diamonds, Research In Motion, Rosetta Genomics, Mosaic, and a few others.

Simply put, the markets are due for a correction. It appears that investors have gotten a little too far ahead of themselves based on modest earnings improvement and a better-than-the-worst mentality. If you get up in the morning and there has been no collapse in Greece or as crash in China, then all is well. The fact is that if economic data grows weaker, and sentiment turns sour, equities will prove to be ahead of themselves. If growth continues, the Fed will face tightening, and equities will prove to be ahead of themselves.

The assembled information disseminated in the Morning Call is for information purposes only, and is neither a solicitation to buy nor an offer to sell securities. All assembled information within the Morning Call is subject to change without notice. The assembled information within the Morning Call is based on information believed to be reliable as of the date of the report but no representation, expressed or implied, is made as to its accuracy, completeness or correctness.
Forward Looking Statements:
Information in the Morning Call will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. All readers are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance or portfolio performance is no guarantee of future price appreciation or performance.

Morning Call

0 CommentsTuesday • March 30, 2010 • by avickery

“Powerful indeed is the empire of habit.”

Publilius Syrus

Morning Call
March 30, 2010

Gold Update

Gold has been trading higher on light volume as the Dollar rally begins to lose steam. Sentiment remains essentially neutral and the technical range in the near term is anywhere from $1080 to about $1130 on the upside. Prices are unlikely to reach either end, but rather stay in a much tighter range as investors are distracted by fluctuations on the Dollar and ambiguity in the equity markets.
On the upside, an industry report recently suggested that China’s gold consumption could double in the next decade if its economy continues to grow at a rapid pace and living standards improve. China is the world’s second-largest consumer of gold after India. With investment demand and jewelry consumption expected to continue growing, China could deplete its domestic supply within six years unless it ramps up investment in exploration. China has downplayed interest in increasing its gold reserves recently, but many believe this is a ploy to wait for a market pullback.

Hot Stocks

Keep an eye on LDK Solar (LDK) this morning. LDK will release its latest earnings numbers today and analysts are expecting a turnaround from losses in the last report. LDK, and most of the solar sector, could surprise this year and have a lot of room to move. Shares are presently trading at only half of their 52 week high.

Public Finance Update

President Obama reportedly will announce two appointments to the Treasury Department during the congressional recess, citing “months of Republican obstruction to administration nominees” as the reason for bypassing the Senate.

Subprime-mortgage securities are rising at an accelerating pace as the U.S. begins to encourage reductions to homeowners’ balances, which may lead to fewer foreclosures and a quicker end to the housing slump.
In California, less than three years after completing a private toll highway in San Diego County, the South Bay Expressway finds itself in bankruptcy court. The group cited low traffic levels and ongoing litigation with its primary construction contractor as contributing to its inability to meet its debt-service demands.
In New York State, the Senate passed emergency spending bills to keep the government functioning as it appears unlikely the state will have a new budget approved in time for the start of the new fiscal year on Thursday. Meanwhile, Governor David Paterson signed appropriations for $4.41 Billion of debt service.

Market Outlook

The Dow jumped early in the trading day, yesterday, and held on to finish the day higher by 45 points. This morning futures are running flat and we may stay in that tight range all day. Every sector is trading relatively mixed in the pre-market as ambiguity in the economic outlook has investors bargain hunting rather than committing any sector.
As has been the case, lately, incoming data has been a mixed bag of good and bad news. On the positive side, Consumer Spending in the U.S. increased in February for a fifth straight month. The South Korean central bank said confidence in the manufacturing sector is at its highest level in at least seven years. European sentiment is at its highest in almost two years.
A sobering reminder, however, came from Federal Reserve Bank of Chicago President Charles Evans, who said the U.S. jobless rate is likely to remain higher than 9% through the end of this year. It is also expect to remain above 7% by the end of 2011. Such a prolonged period of high unemployment will make any economic recovery tenuous, at best.
In Asia last night, stocks rose by an average of about 1%. Financial stocks were somewhat mixed, but several technology and industrial shares more than made up for it. In Japan, the statistics bureau showed the country’s jobless rate held in February at the lowest in about a year. This brought the Nikkei to its highest close since October 2008.
After a strong start in Europe this morning, stocks there have since pared their gains and the major indexes are all near even on the session. A majority of the higher volume trades have been to the downside with the banks and several industrial stocks weighing down the greater averages. In Europe, as elsewhere, the economic news has been mixed. A Bank of England report showed that net lending to consumers in the United Kingdom rose higher than expected in February. A separate report from the central bank, however, showed that British mortgage approvals fell to their lowest level in nine months in February.

Commodities are somewhat mixed this morning, with some weakness in energy and industrial metals. Oil is down by only a few cents; still comfortably above the $82 mark. This is close to the upper end of its expected range so we will watch for any signs of retracement. Gold is running flat as well. Prices have swung higher and lower in a $3 range throughout the morning so we will likely see some tightening during the day.
New economic data today includes the Case Shiller Home Price Index and Consumer Sentiment. On the earnings side, we will hear from Cobalt International Energy, Landec, LDK Solar, Sealy, and a few others.

Today’s economic data focuses on the consumer. Of the entire universe of numbers available to economists, consumer sentiment acts as the trump card. If consumers do not join in on economic growth, the train can’t leave without them.

The assembled information disseminated in the Morning Call is for information purposes only, and is neither a solicitation to buy nor an offer to sell securities. All assembled information within the Morning Call is subject to change without notice. The assembled information within the Morning Call is based on information believed to be reliable as of the date of the report but no representation, expressed or implied, is made as to its accuracy, completeness or correctness.
Forward Looking Statements:
Information in the Morning Call will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. All readers are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance or portfolio performance is no guarantee of future price appreciation or performance.

Morning Call

0 CommentsMonday • March 29, 2010 • by avickery

“No man is wise enough by himself.”

Titus Maccius Plautus

Morning Call
March 29, 2010

Gold Update

Gold had been trending along in a tight range as the Dollar enjoyed some relative strength on the back of European woes in Greece and elsewhere. We knew this couldn’t last because there will little else supporting what was a strong rally for the greenback. Now that the Dollar is losing ground, gold has benefitted with some positive movement. We will not see a major uptrend develop because broad economic sentiment is still weak, but gold should make a slow and steady move higher in the coming weeks.

Hot Stocks

It may be a good time to take a look at the drilling companies. Those in a good position will benefit as production and exploration begins to grow. Noble Energy (NE) is able to command a premium over many of its peers; including in deep water which is where the industry trend is heading. Shares have considerable room to move toward their 52 week high and it shouldn’t be long before we see this level.

Public Finance Update

The U.S. and European governments are moving closer to a consensus on taxing large banks to cover the cost of any future bailouts rather than asking taxpayers to foot the bill. The proposals face opposition from banks, which say it will inhibit lending. Sentiment is divided in the US where the Obama administration is said to favor a post-crisis option, while Congress is moving toward a pre-crisis levy to build a reserve fund ahead of any future need.
A debate continues at the Federal Reserve which is considering ongoing stress tests for the banks and public disclosure of results. Some fear that such disclosure, if the test is negative, could create a self-fulfilling crisis if public view of a bank is negative.
Meanwhile, Brian Sack, head of the markets group at the New York Fed, said the financial system can’t operate well without leverage and signaled that he supports the return of a “properly” structured securitization market. The statement comes as lawmakers in Washington fine tune regulatory overhaul and will need to address the securitization market which some blame for the severity of the global financial crisis.
Locally, The Massachusetts Bay Transportation Authority last week appointed Richard Davey as general manager. In Louisiana, Governor Bobby Jindal has ordered state agencies and departments to halt non-essential spending in as the state faces a strong revenue shortfall in fiscal 2010.

Market Outlook

After another flat finish on Friday, some momentum is building to the upside for the Dow. Futures indicate as much as a half-percent gain at the opening bell this morning. Bank shares look like they will lead the way higher today on the back of some positive economic sentiment in the marketplace. Business and Consumer Confidence in Europe came in higher than expected, concerns over the Greek budget crisis have abated somewhat, and more investors are taking comfort in the slowly improving earnings climate.
Stocks in Europe have also turned higher today, by an average of nearly 0.5% on the indexes. Bank shares are somewhat mixed, but technology and several industrial stocks have pulled up the broader market. Although the Euro-Wide sentiment has been stronger, it really breaks down to individual member nations. Confidence levels in Germany are among the highest, but the view is much more pessimistic in Greece, Portugal, Spain, and Italy. Consumer Inflation Expectations have also ticked higher considerably. Greece will enter the market with 7-year bonds; its first issue since the EU and IMF came to terms on support for the member nation.
Stocks were much more mixed in Asia last night, but positive momentum was building by the end of the trading day. The Nikkei fought its way back to even, while the Hang Seng pulled off a gain of nearly 1%. A wide range of stocks moved higher on strong volume, including bank shares, technology and industrial companies.
Commodities have begun to rally as economic optimism increases. Oil has risen steadily and added nearly 1% in early trading; well above the $80 mark once again. Gold sold lower last night but has begun trending higher once again; gaining $4 to $1110 this morning. A lower Dollar has helped the gold trade today, as the greenback finds itself down against the major currencies.

The economic calendar today includes Personal Income and Consumption Expenditure figures. On the earnings side, we will hear from Apollo Group, Cal-Maine Foods, Universal Power Group, and just a few others.

The assembled information disseminated in the Morning Call is for information purposes only, and is neither a solicitation to buy nor an offer to sell securities. All assembled information within the Morning Call is subject to change without notice. The assembled information within the Morning Call is based on information believed to be reliable as of the date of the report but no representation, expressed or implied, is made as to its accuracy, completeness or correctness.
Forward Looking Statements:
Information in the Morning Call will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. All readers are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance or portfolio performance is no guarantee of future price appreciation or performance.