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Morning Notes For September 28th 2010 at Trader’s Narrative

Morning Notes For September 28th 2010

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 you feedback in the comments:

  • During the late September visit by Russian officials and Russian energy companies to China, the two countries hope to secure a long-delayed natural gas supply contract. Such an agreement has been stalled due to pricing issues, as well as the fact that China would like a dedicated pipeline rather than just part of Gazprom’s grid. During the visit, Russian and Chinese officials will also inaugurate a China-Russia pipeline extension, which will deliver some of the 300,000 barrels of oil per day Russia has promised China. – Roubini Global Economics
  • International Air Transport Association (IATA) announced international scheduled traffic results for August indicating year-on-year increases of a 6.4% for passenger and 19.6% for cargo. “The rapid improvements in demand that we saw earlier this year are behind us. The slowdown of demand in August is consistent with our forecast for a tougher end to 2010 as government stimulus monies run out without having generated significant improvements in employment. The bounce from re-stocking is over. We do not yet see the strong consumer confidence needed to sustain the expansion with spending,” said Giovanni Bisignani, IATA’s Director General and CEO. – International Air Transport Association
  • The leading indicators for the euro area point to a deceleration in the economy. The rise of the two-year swap rate for the monetary union since the beginning of September would suggest that the market has yet to price in the slowdown. The expectations component of the German ZEW survey, a leading indicator of growth three quarters ahead, is signaling a sharp slowdown of the economic expansion by the middle of next year. The expectations component of the German ZEW survey, a leading indicator of growth three quarters ahead, is signaling a sharp slowdown of the economic expansion by the middle of next year. – expectations indicators are not infallible and are prone to be noisy. Note the ‘expected’ slowdown in early 2000’s, which didn’t happen.

ZEW expectations Sep 2010

  • Ken Fisher, the billionaire CEO of Fisher Investments Inc., said the next decade will be as good for investors as the 1990s. – Bloomberg
  • The Argument Against Structural Unemployment - The notion that structural issues are behind continued high unemployment in the U.S. has been promoted by some, including Federal Reserve Bank of Minneapolis President Narayana Kocherlakota. This view isn’t universal; for instance, Paul Krugman wrote in the New York Times yesterday, “Don’t bother asking for evidence that justifies this bleak view. There isn’t any.” Krugman cited the paper “Reasons for Skepticism about Structural Unemployment,” from the Economic Policy Institute, as support. – EPI/Bloomberg – let me know if you want this paper.

Additions to Payrolls during economic recoveries
payroll additions during economic recoveries Sep 2010
The last three recessions have seen payrolls added back at a slower pace, so-called “jobless recoveries.”

  • Trade wars - There continues to be a lot of focus on global protectionism and FX (a remark from a Brazilian official Mon about the world being in the midst of an “FX war” was a big focus point yesterday afternoon while China imposed large tariffs on US chicken imports); the House will be voting this week on legislation that would give Congress the ability to retaliate against alleged FX manipulators. A Bloomberg article discussed how US businesses fear Chinese retaliation over the FX legislation while Reuters says US business fear a “downward spiral” in China trade. – JP Morgan
  • Rahm Emanuel may decide on whether to run for the mayor of Chicago as soon as this week; could announce as early as Oct 1; he is likely to wind up running and leaving the White House. If Emanuel leaves, Obama’s senior adviser Pete Rouse is expected to temporarily replace him. Bloomberg/Politico
  • Facebook: Shares in the company (which trade on an obscure secondary market) have reached ~$76, which values the company at ~$33B
  • RIMM: Research in Motion displayed their tablet device yesterday, the Blackberry PlayBook, though a specific price wasn’t given (the company said it would be near the low end of other tablets). The tablet will be offered in the US early next year and in other counties in Q2. – RIMM/Reuters/Bloomberg

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