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Morning Notes For September 7th 2010 at Trader’s Narrative




Morning Notes For September 7th 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:

  • While the August employment report surprised consensus on the upside, revisions to previous data showed that the labor market developments in July were significantly better than previously estimated. This implies that labor market conditions actually worsened in August. The pace of job creation remains well below the levels needed to keep the unemployment rate from rising. Meanwhile, an improvement in hourly wages and a decline in the duration of unemployment stand out as positive developments. – RGE Monitor
  • Beijing -A Chinese official defended the country’s trade record Monday as a top economic adviser to President Barack Obama (Larry Summers) visited Beijing amid renewed pressure by American lawmakers over Chinese currency controls. – WP
  • European stocks are about 1% lower this morning in reaction to a WSJ story claiming European banks did not report all their holdings of sovereign debt during the bank stress tests. The paper says it is impossible to know how much the banks understated their holdings, but it singles out Barclay’s and Credit Agricole as having understated their holdings “significantly.” – FTN Financial – euro area financials are not reacting too negative on this report

Bloomberg Europe Banks & Financial Services Index (BEBANKS Index)
Europe Banks and Financial Services Index Sep 2010

  • President Obama is pushing hard for a second stimulus which will include $50 billion in infrastructure spending on highways, railroads and runways as well as an up-to-date air traffic control system and tax cuts for business. The tax cuts will allow companies to write-off 100% of the depreciation for investment in plant and equipment through 2011 and an expansion of the research and experimentation tax credit to $50bn. But the WSJ says business lobbyists say their clients would prefer to keep income tax rates from rising. The President announced the stimulus in a combative speech in which he bashed Republicans for blocking his agenda, but the NYT says Democrats are wary of stimulus as the public is convinced the first $787 billion round was a waste of money. The President proposed the spending initiatives should be paid for with a new tax on oil and gas companies. – FTN Financial
  • What Food Stamps Say About The Economy - Over 13 percent of the U.S. population — 41.3 million people — are receiving food stamps, with an average of 533,000 having been added every month over the past year. To qualify for food stamps, a household’s net monthly income can’t exceed $1,526, or $18,312 annualized, which is the government identified poverty line.

food stamp usage Sep 2010

Two economists we follow…
bruce kasman chris low bond opinions.png
…current yield on the ten year: 2.641%. Below is a chart of 10 year yields going back to 1980:
10 year bond yield long term chart Sep 2010

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