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Morning Notes For July 29th 2010 at Trader’s Narrative




Morning Notes For July 29th 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 Fed’s Beige Book yesterday showed a further slowdown in most of the 12 Fed districts in July from the survey conducted in early June. Growth is stable or growing in all districts, but there are few areas of strength and no indication the slowdown which began in May is ending, despite the fact that two of the factors which are thought to have contributed to the economy’s stall – Euro sovereign debt and oil spill – are significantly improved in the past several weeks. – FTN Financial
  • Last night, EU economic confidence rose to a two-year high as worries about the debt crisis continue to abate. But in the UK, home values fell in July thanks to a sales slump linked to fears of a looming austerity budget and a possible double-dip recession. UK government pay rose just 0.3% in the three months through June, the least since records were first kept in the early 1960s, as pay was frozen for about half of them. Even slower pay growth is expected as the government implements the deepest spending cuts since WWII, according to Bloomberg News. A sales tax increase in Spain caused the CPI to rise to a two-year high. (In the US, taxes are not counted in the CPI because they tend to discourage spending and are ultimately deflationary.) – FTN Financial
  • FT oped this morning – “Bernanke must end era of ultra-low rates” – FT
  • California – the state declared a state of emergency over its finances on Wed; pressure is rising on lawmakers to complete a budget that needs to fill a $19B shortfall; tens of thousands of state employees will start taking three days off per month in Aug – Reuters
  • Bill Gross/PIMCO’s latest (this was published Wed morning). Says falling population growth + aging of current population will only exacerbate the “New Normal” (deleveraging, reregulation, deglobalization)
  • Technicals - from Krauss this morning: Short term Bulls maintain the agenda above 1098-1100 (we closed at 1106)
  • Economist David Rosenberg and investor Marc Faber have bet a bottle of scotch whisky on whether US 10-year Treasury yields can go lower than 2 percent.

US Generic Ten Year Government Yields
US 10 year bond Jul 2010

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