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Morning Notes For August 16th 2010 at Trader’s Narrative




Morning Notes For August 16th 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:

  • Washington slow on stimulus spending – while a good portion of the stimulus package has been spent already (transfer payments and tax breaks), the infrastructure component (~$230B) has been slower to see disbursements (just $66B has been paid out already) – WSJ
  • China GDP surpasses Japan – China surpassed Japan as the world’s second largest economy last quarter, capping the nation’s three-decade rise from Communist isolation to emerging superpower. - Mr. O’Neill of Goldman Sachs (the man who coined the term BRICs) forecasts china will surpass US GDP in 2023, on July 10 at 10:23 AM.
  • US Economic Growth – Economic growth concerns returning to US economy after being centered on Europe for the past few months. A sharp widening in the U.S. trade deficit has forced economists to revise down Q2 GDP estimates. Reuters
  • Treasuries – some indications that the recent buying has been forced or mechanical, related to mortgage-related hedging; PIMCO recently disclosed that it cut its US government holdings in its flagship Total Return fund in July from 63% to 54% Barron’s (recall last week that the FT reported how HFs have become much more active participants in the treasury market)
  • Average US credit score has surged to 704 in July, a level it hasn’t been at since 1998; consumers continue to shun debt of all kinds as the savings rate rises and balance sheets are repaired – CNBC
  • Former Federal Reserve Chairman Alan Greenspan spoke on Bloomberg Television’s “Conversations With Judy Woodruff” in an interview airing today. Some excerpts: “An ever-increasing part of the American economy in the last year or so has moved under the aegis of government. And because it is very difficult to forecast what the actions of government is going to be, that creates an attitude on the part of the business community,which is retrenchment, and you can see it everywhere. “Banks are not lending freely, and the reason they are not lending freely is they do not believe they are going to get their money back.”
  • On Friday, serial dissenter Tom Hoenig of the Kansas City Fed expanded on his objections to near‐zero interest rates, but he failed to acknowledge the slowdown in economic growth since April. It’s hard to argue with the logic of gradually returning the fed funds rate to normal levels as the economy reaccelerates in the expansion, but the rest of the Fed apparently wants to wait until the economy is actually reaccelerating. – FTN Financial
  • Gen. David H. Petraeus says the U.S. strategy to win the nearly nine-year-old war in Afghanistan is “fundamentally sound.” In a wide-ranging, hour-long interview with The Washington Post, he said he sees incipient signs of progress in parts of the volatile south, in new initiatives to create community defense forces and in nascent steps to reintegrate low‐level insurgents who want to stop fighting. - WP
  • Nearly one year after Edward M. Kennedy’s death, prominent Democrats in Washington and Massachusetts are promoting his widow as the party’s best shot at winning back the Senate seat he held for nearly five decades. But the prospect of Vicki Kennedy’s candidacy - an idea she has seemed bat down - is fast becoming a source of family tension. – WP

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One Response to “Morning Notes For August 16th 2010”  

  1. 1 Matthew

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    Q3 surely?

    “A sharp widening in the U.S. trade deficit has forced economists to revise down Q2 GDP estimates. “

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