A.L. Waters Capital, LLC

Morning Call

0 CommentsMonday • March 8, 2010 • by alwaters

“The falling drops will, at last, wear the stone.”
Lucretius

Morning Call
March 8, 2010

Gold Update
Gold is benefitting from a Weaker Dollar this morning; rising by more than a Dollar at $1136. We do not expect to see much movement for most of today, but the fundamentals are in place for a possible sudden jump tonight or in early trading tomorrow. Barring any major developments in the global economic landscape, gold could reach $115o in the short term.

Hot Stocks

Losing “only” 36,000 jobs and the unemployment rate holding steady at 9.7% was taken positively by the markets, but we don’t think this will last. As such, oil’s rally above $80 may also be short lived. This may be an opportunity to short oil through an ETF such as ProShares Ultra-short Oil fund (DUG). Oil will probably have a strong summer, but for now is overpriced.

Public Finance Update

At least one Senator, Iowa Republican Charles Grassley, is standing out against the bond provisions in the jobs bill that just passed the house last week. The bill would allow issuers of certain tax-credit bonds to receive direct-payment subsidies as opposed to receiving that subsidy in the form of tax credits provided to investors. Grassley argues that the legislation would boost profits for Wall Street underwriters.

Interesting changes occurring in Michigan, where an executive order issued by Governor Jennifer Granholm last week, would abolish its 10 bond-issuing authorities and consolidate them into one newly created Michigan Finance Authority.
New York Governor David Paterson last week appointed an acting director of the Independent Authorities Budget Office, which was created by the Public Authorities Act of 2009.

Market Outlook

The Dow finished the week strong; gaining 122 points on Friday. With little new economic data scheduled today, and a mixed bag of news globally, futures are running flat this morning. Otherwise, the scenario is somewhat familiar, with the Dollar lower against its peers and commodities rising.
A better than expected jobless report in the US, some positive trade numbers in Japan, and a pledge of support from French President Nicolas Sarkozy to Greece has all added to investor optimism.
Stocks in Asia rose to a six week high, as positive earnings news from the likes of Sony and Nissan Motor Company bolstered confidence. All of the major indexes across Asia gained an average of 2%; supported equally by banks, technology, and industrial stocks.
Stocks are modestly higher in Europe this morning where French President Sarkozy said the European community is ready to rescue Greece if it fails to meet its budget slashing targets. Sarkozy went so far as to say that he believes that Greece is “under attack” by speculators. This runs contrary to the tone set by German Chancellor Angela Merkel, who played down the likelihood of a bail-out. Thus far, it is the financial sector that is driving the European markets; offset slightly by weakness in technology stocks.

Commodities are gaining momentum in the early hours; running contrary to the Dollar, which finds itself lower against the Pound, Euro, and Yen this morning. Oil has jumped more than 1% in early trading to reach above $82. Somewhat positive economic sentiment is driving oil at this point, but we remain cautious as to how long t hat will last. Gold also continues to trend slowly upward; adding almost $2 at $1136. We may see some consolidation today for gold followed by a tick higher later today or early tomorrow.

Data watchers will have a short reprieve this morning, as the economic calendar is essentially void of new information. Earnings news, however, will be coming from H&R Block, Microvision, ModusLink, Yingli Green Energy Holdings, and a few others.

Dubai World, the state-owned holding company in talks to renegotiate about $26 Billion of debt, will ask banks for permission to delay loan repayments when it presents a plan to creditors this month, according to reports. While so many eyes have been peeled on Greece, we mustn’t forget Dubai or several other hot spots of sovereign debt that threaten to send ripples through the global economy.

Posted in: Morning Call: Daily Analysis of the Global Markets and Economy

Tagged with: bonds, gold, oil, stocks