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Morning Notes For July 21st 2010 at Trader’s Narrative

Morning Notes For July 21st 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. Please provide feedback in the comments:

  • The Senate broke a months-long stalemate Tuesday over a plan to restore emergency jobless benefits to millions of people who have been out of work for more than six months, voting to advance the measure over Republican objections that it would add $34 billion to the nation’s bloated budget deficit. - WaPo
  • Barack Obama averaged 47.3% job approval during his sixth quarter in office, spanning April 20-July 19. That is a new low quarterly rating for Obama, and ranks in the bottom half of sixth quarter approval ratings of other elected presidents. – Gallup
  • 6 in 10 Americans who have not yet retired don’t think they will get Social Security benefits when they retire, more pessimistic than at any time since Gallup began asking the question in 1989. More than half of retired Americans say their existing SS benefits will eventually be cut. – Gallup – in the long run this may put upward pressure on savings rates.
  • Germany’s debt auction failed to attract enough bids to complete the auction for the second time. This is being interpreted positive by the market as German debt is the “safe haven” in Europe and taken together w/the numerous successful sovereign auctions completed yesterday (i.e. Greece, Ireland and Spain), shows a willingness to move into risk assets.
  • European Bank Stress tests are moving along (results expected to be released Friday although there have been media reports that major banks in Europe have “passed”). ECB officials have taken to defending the credibility of the exercise w/Nowotny saying the tests are “strict and serious” and more details are being reported on Bloomberg.

Bloomberg Europe Banks and Financial Services Index
Europe Banks and Financial Services Index Jul 2010

  • US housing market – cautious WSJ article – “housing market stumbles” – says the housing recovery appears to be stalling out again

Housing Starts (monthly data since 1980):
housing starts since 1980 Jul 2010

  • Financial regulation reform already reverberating - Standard & Poor’s, Moody’s Investors Service and Fitch Ratings are all refusing to allow their ratings to be used in documentation for new bond sales. The announcement is “creating havoc” in bond markets (WSJ)
  • Hedge funds – the big get bigger - Investors continued to add new capital to hedge funds in the second quarter of 2010, with net inflows totaling $9.5 billion. However, nearly all of the new capital went to the largest funds, those with more than $5 billion under management. CNBC
  • Fed – yet another article talking about options the Fed may pursue if the economy truly “double dips” – the NYT says Bernanke during his testimony today and tomorrow will say there are options left for the Fed to pursue, but that such a course of action isn’t necessary at the moment
  • North Korea – South Korea says chances of “sudden change” in the North are high – Reuters
  • Deepwater rigs exodus hasn’t happened – Despite the call for a new deepwater drilling ban, 31 of the 33 rigs that were operating when the Deepwater Horizon explosion occurred still remain in the Gulf. While at least one other rig could move soon, many analysts predict only about one fourth to one third of the rigs will end up leaving and that many of those will be replaced. WSJ

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