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Morning Notes For August 10th 2010 at Trader’s Narrative

Morning Notes For August 10th 2010

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The following is a guest post by a buy-side analyst working in a US asset management firm. The author’s comments are in italics. I welcome your feedback in the comments:

  • Republicans have a 49% to 43% lead over Democrats among registered voters in Gallup’s generic ballot for Congress for the week of Aug. 2-8, the second straight week in which Republicans have held an edge in projected voting. – Gallup

congressional elections Aug 2010

  • Pentagon to cut thousands of jobs, defense secretary says - Defense Secretary Robert M. Gates said Monday that the Pentagon will cut thousands of jobs, including a substantial chunk of its private contractors and a major military command based in Norfolk, as part of an ongoing effort to streamline its operations and to stave off political pressure to slash defense spending in the years ahead. – WP
  • On August 8, a South Korean fishing boat was seized by North Korea for allegedly violating the sea border off the peninsula’s east coast. This conflict came amid already increased tensions due to South Korea’s joint military exercises with the U.S. In an August 4 interview, a military source told the Chosun Ilbo that North Korea had moved some SA-5 missiles from Hwanghae Province to areas near the DMZ, a move “aimed at preventing South Korean fighters from launching precision strikes on strategic targets in the North” during an emergency. – RGE Monitor
  • In June, German exports recorded renewed robust expansion, rising 3.8% month over month. Export volumes now stand at €86.5 billion, their highest level since October 2008. The strong recovery of exports is underpinning the dynamic economic upswing that started to materialize in H1 2010. On an annual level, exports rose a staggering 28.5%. While the strong momentum in export growth is likely to continue during the summer months, leading indicators such as the PMI suggest a looming slowdown ahead at the end the turn of 2010-11. – RGE Monitor
  • On the China front, Trade Surplus came in wider than expected and property prices continued to rise (up 10.3% YoY), raising worries price gains are still too large and may invite further regulatory clampdown. The China numbers are causing concerns for two reasons: 1) imports fell short of expectations, raising fears that Chinese domestic demand is trending down; 2) the wider surplus could raise pressure from the US for the country to become more aggressive w/its stronger yuan.
  • Recession a significant probability sometime within the next two years (although not likely in the next few months); new research published by the San Francisco Fed – “LEI forecast trends indicate that the macroeconomic outlook is likely to deteriorate progressively starting sometime next summer, even if the data suggest that a renewed recession is unlikely over the next several months” – SF Fed
  • Warren Buffett shortened the duration of bonds held by his Berkshire Hathaway Inc. after warning that deficit spending may force inflation higher. – Bloomberg
  • Labor Force Participation Drop to 1985 level called “Worrying” – Bloomberg

labor force participation Aug 2010

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