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Morning Notes For October 22nd 2010 at Trader’s Narrative

Morning Notes For October 22nd 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:

  • On the Sovereign front, CDS spreads for Ireland widened ~20bps after the Irish governmentt launched a debt exchange for Anglo Irish’s debts while Greece widened ~11 basis points after the country’s general government deficit was published for August and showed an increase to 14.2 billion Euros from July’s 12.2 billion.
  • Wall Street dividend constraints are eased – Wall St. bank executives say that regulators have softened their stance on buybacks and dividend increases. This could pave the way for some banks to start returning cash to shareholders. GS is close to securing regulatory approval to repay the Buffett $5B preferred stock stake. FT
  • Time for some fresh US bank stress tests says the NYT – the article argues that US banks should be stress tested to see the extent of the damage that may come from the foreclosure crisis. NYT
  • Fed’s Hoenig warns of dangers from excessive liquidity – says it can lead to “very bad outcomes” - “Monetary policy is about an environment that’s supposed to be stable,” Hoenig said yesterday at an economic forum in Albuquerque, New Mexico. “When you try to use it in a way that floods the market with liquidity, you can in fact get very bad outcomes,” including financial instability that leads to increased joblessness. Bloomberg
  • Geithner publishes letter to counterparts ahead of the weekend meeting in South Korea; Geithner urged his global colleagues to “commit to refrain from exchange rate policies designed to achieve competitive advantage by either weakening their currency or preventing appreciation of an undervalued currency”; Geithner didn’t signal out any country in particular. – WSJ
  • The challenge facing China - Cooling is welcome, but domestic demand must rise. Beijing has much more to do to meet the even greater challenge of rebalancing its economy. – FT
  • Earnings takeaways this week - The top takeaways this week include higher input (commodity) costs, consumers spending in restrained fashion, and a strengthening industrial base. Possible “headwinds” were mentioned by Domino’s Pizza and Illinois Tool Works. Harley-Davidson warned of a sidelined consumer, while Apple managed to sell iPods, iPads and Macs in great volumes in spite of weak consumer fundamentals. Tractor Supply Corp. sees traffic pretty much the same as it has been over the past three quarters, and Parker-Hannifin experienced exceptionally strong order growth. – Bloomberg
  • Not a whole lot today. Have a nice weekend.

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