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The Financials Pit Review
For the week of July 26th, 2010
By PitGuru Frank LaMantia
Reports that the middle class is declining should be an eye opener to Wall St. Those who put money into the system from buying cars, houses, or vacations are struggling. If you break it down further this means less taxes for the government as many are still losing their jobs. 61% of Americans are living pay check to pay check and 31% have no retirement accounts. The retirement age, although not raised yet, is a topic that has people concerned. People are looking to work longer because of the 2008 crash. Some lost their entire retirement savings and now have to work another 10-15 years to make ends meet. People who are desperate will work for wages much lower than those with higher standards. Those who have higher education looking for jobs have resorted to working in the service industry. The only problem is people may work for lower wages compared to those with an education. To sum this up, consumers want to pay their rent and put food on the table. Let’s call this weathering the storm and not necessarily trying to find a career. (1)
The Euro has traded at 1.2937 and the U.S. Dollar Index has traded at 82.31. (2) Should this concern Americans? The reversal of the dollar VS the Euro should be something to watch. Follow this trend closely as this could be showing money being pumped into the system in Europe. Also, this may indirectly show the U.S. may be having issues with high debt.
Earnings seem to have less of an effect on the market than it has in the past. Eyes are focused more on the economic data that is coming in and less on how companies are doing. There are companies that have low debt and high cash reserves. These could be diamonds in the rough as some of these companies remain hidden due to the overwhelming stagnation of this market.
2. http://www.cnbc.com/id/15839178/site/14081545/
References
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The Financials Pit Review
For the week of July 19th, 2010
By PitGuru Frank LaMantia
JD Power has released their annual survey of investor satisfaction with brokerage firms. Full service brokerages that one might expect to have pulled ahead in ratings were down. BOA/Merrill, Morgan Stanley/Smith Barney, and Wells Fargo came up on the short side of the list. The overall top 3 firms that measured investor’s perception of the advisers, performance of investments, and accounting fees was Edward Jones, Royal Bank of Canada’s RBC Wealth Management, and LBL Financial. An increasing proportion of the 4,460 investors who took the survey said they believed their investment firm was driven more by profit concerns than focused on the customer. (1)
Friday could be a market-mover simply because the stress announcements for over 91 banks in Europe will be announced. This will hopefully show weak spots and give vulnerable banks the opportunity to raise capital. These tests are being taken to show Asian wealth funds that European savings banks are not risky business, and also show that investors are confident. (2) Are these tests being done for the right reasons? It seems as though it is for money rather than the safety of consumers!
Corporate earnings used to be cut and dry where positive earnings helped the stock market move in an upward direction. Economic reports have put a solemn mood on earnings before the season even started. A year ago many polled said a double recession was impossible. Now it is in the financial news as a main topic each day. The housing market still seems to be a thorn in the consumer’s side. Sideways trading, little to no growth, and possibly a double recession could be what is in store for the future. (3)
The S&P traded up 4 points to 1065 the DOW traded at 10089 up 30 points in premarket trading. (4) Some may consider this trader pessimistic or even doom and gloom but if this market stagnates at this juncture a sell off could be in the midst. Many times in this situation the market gains momentum to give itself a cushion just in case bad news is announced.
3) http://www.cnbc.com/id/38284301
4) http://www.cnbc.com/id/17689937/site/14081545/
References
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The Financials Pit Review
For the week of July 12th, 2010
By PitGuru Frank LaMantia
The next few weeks are pivotal for Wall St as earnings are set to make an impact on what direction the market goes. Tonight Alcoa (AA) will announce its earnings and is the stock that typically shows how earnings will go. There is a slow cautious feeling on the floor as traders wait for statistics. A question to ask is does the market trend upward the week before earnings season? The past few earnings seasons it seems as though a cushion was laid down like a shock absorber. The DOW jumped 5% last week and has shown resilience at the 10,000 level for a few months. However the DOW is still down 9% from the highs of last April. (1)
A report was announced showing that 25.5% or 43.4 million people have a credit rating below 599. This might be the most frustrating time for mortgage brokers that have the business but no way of getting the loans to go through. This could be another sign of a weakening housing market. A credit score of 680 is helpful in many situations and may be the cut off point for many Americans. (2)
It is wise to be cautious in earnings season especially for day traders. One needs to act short term but think long term. Questions to think about over the next few weeks for the long term: Is U.S. debt going to creep up and bite Americans like Greece or Spain? Could the housing market crumble again? How about the short term? Could earnings season point the market into a runaway bull? Could the U.S. bring confidence back to consumers? Look for correlations to try and predict future events. Obviously past results are not indicative of future results but it is nice to have a measurement when doing an analysis for the future.
References
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The Learn About Futures Insider for July 15, 2010 : Treasury Notes
Treasury notes are debt obligations issued by the US Treasury. They are often viewed as a way to speculate in or hedge against future interest rate changes and are globally valued markets to use when trying to manage risk of the same.
2-year Treasury Notes
Contract Size: One U.S. Treasury note having a face value at maturity of $200,000.
Price Quote & Tick Size: Points ($2,000) and quarters of 1/32 of a point. For example, 109-16 represents 109 16/32, 109-162 represents 109 16.25/32, 109-165 represents 109 16.5/32, and 109-167 represents 109 16.75/32. Par is on the basis of 100 points. Minimum tick size is one-quarter of one thirty-second (1/32) of one point ($15.625, rounded up to the nearest cent per contract), including intermonth spreads.
Contract Months: March, June, September, December
Trading Specs: Trades open outcry and Globex (electronic) per the following schedule: Electronic: SUN - FRI: 5:30 p.m. - 4:00 p.m. Central Time Open Auction: MON - FRI: 7:20 a.m. - 2:00 p.m. Central Time
Daily Price Limit: None as of publishing date, but it is wise to consult the exchange.
Trading Symbols: TU, ZT
Past performance is not indicative of future results. chart courtesy of Gecko Software\
5-year Treasury Notes
Contract Size: One U.S. Treasury note having a face value at maturity of $100,000.
Price Quote & Tick Size: Points ($1,000) and quarters of 1/32 of a point. For example, 119-16 represents 119 16/32, 119-162 represents 119 16.25/32, 119-165 represents 119 16.5/32, and 119-167 represents 119 16.75/32. Par is on the basis of 100 points. Minimum tick size is one-quarter of one thirty-second (1/32) of one point ($7.8125, rounded up to the nearest cent per contract), including intermonth spreads.
Contract Months: March, June, September, December
Trading Specs: Trades open outcry and Globex (electronic) per the following schedule: Electronic: SUN - FRI: 5:30 p.m. - 4:00 p.m. Central Time Open Auction: MON - FRI: 7:20 a.m. - 2:00 p.m. Central Time
Daily Price Limit: None as of publishing date, but it is wise to consult the exchange.
Trading Symbols: FV, ZF
Past performance is not indicative of future results.
chart courtesy of Gecko Software
10-year Treasury Notes
Contract Size: One U.S. Treasury note having a face value at maturity of $100,000.
Price Quote & Tick Size: Points ($1,000) and halves of 1/32 of a point. For example, 126-16 represents 126 16/32 and 126-165 represents 126 16.5/32. Par is on the basis of 100 points.; minimum tick size is one-half of one thirty-second (1/32) of one point ($15.625, rounded up to the nearest cent per contract), except for intermonth spreads, where the minimum price fluctuation shall be one-quarter of one thirty-second of one point ($7.8125 per contract).
Contract Months: March, June, September, December
Trading Specs: Trades open outcry and Globex (electronic) per the following schedule: Electronic: SUN - FRI: 5:30 p.m. - 4:00 p.m. Central Time Open Auction: MON - FRI: 7:20 a.m. - 2:00 p.m. Central Time
Daily Price Limit: None as of publishing date, but it is wise to consult the exchange.
Trading Symbols: TY, ZN
Past performance is not indicative of future results.
chart courtesy of Gecko Software
The United States Treasury has been responsible for federal finances for over two hundred years. The means through which it takes on debt are securities sold both domestically and to foreign investors. Treasury notes are issued in terms of 2, 3, 5, 7, and 10 years. Auctions for notes are held every month and a tentative schedule of upcoming auctions may be viewed online.
When discussing Treasury notes, the term "yield" comes into focus regularly. When the note is purchased at par, the yield is equal to the interest rate. Usually, if the price of the note goes down, the yield goes up while a higher price reduces yield.
Yield curves may also be important and are often cited in analysis of economic conditions. These are constructed from the yields for various maturities placed on a graph. A "normal" yield curve is one in which longer-term yields are higher than shorter-term. This is usually ascribed to the perception of higher risk or rising rates for longer term investments. An "inverted" yield curve has the opposite structure, with shorter-term yields higher than longer-term. This may often be associated with falling or anticipated fall in interest rates. Flat yield curves may also be present if a forecast of little difference exists between the yield rates for different maturities.
It is important to note that the futures contract delivery date is not associated with the maturity date of the Treasury note.
Other than speculator participation within futures markets, Treasury note contracts may also be used for hedging a portfolio of non-US government securities or other interest rate risk. They are also used in trades intended to capitalize on changes in the yield curve.
Interest rates or the forecasted changes in interest rates can have a profound effect on the futures price of Treasury notes. Daily Treasury yield curve rates are available on the US Treasury's official website. Inflation or the possibility of inflation may also influence prices. The commonly watched factors which may affect trade include economic reports or events. This may include the following:
Retail Sales Unemployment Claims Personal Income PPI CPI New Home Sales FOMC Meetings & Member commentaries
During the recent global recessionary period, there has been some discussion about China's concerns over the safety of their assets in terms of their US holdings. These kinds of discussions may also impact futures prices.
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Disclaimer: There is a substantial risk of loss in futures trading and it is not suitable for all investors. Losses can exceed your account size and/or margin requirements. Commodities trading can be extremely risky and is not for everyone. Some trading strategies have unlimited risk. Educate yourself on the risks and rewards of such investing prior to trading. Futures Press Inc., the publisher, and/or its affiliates, staff or anyone associated with Futures Press, Inc. or www.learnaboutfutures.com, do not guarantee profits or pre-determined loss points, and are not held monetarily responsible for the trading losses of others (subscribers or otherwise). Past results are by no means indicative of potential future returns. Fundamental factors, seasonal and weather trends, and current events may have already been factored into the markets. Options DO NOT necessarily move lock step with the underlying futures contract. Information provided is compiled by sources believed to be reliable. Futures Press, Inc., and/or its principals, assume no responsibility for any errors or omissions as the information may not be complete or events may have been cancelled or rescheduled. Any copy, reprint, broadcast or distribution of this report of any kind is prohibited without the expressed written consent of Futures Press, Inc.
Reference
The Energies Pit Review
For the week of August 2nd, 2010 By PitGuru Daniel Cronin
The energy sector reflected almost the exact same as the week of Jul 19th despite declining inventory levels as crude prices rose to above $79.00 after falling below $76. The range has been stuck between $76.00- $79.60 and I think it looks as if this market is poised to test $80 as the S&P has been +12 points already on the Sunday night session. It was interesting to see crude rally after having a build in inventories of more than +7 million on the Wednesday number, but the Euro/USD lead a charge back to over $1.3080 and kept the oil price higher. WTI spreads are still well bid for in the front with Sep/Oct trading -44. Dec10/Dec11 got hit to -410 but I think I need to be a buyer of that spread down there as I see a snap back to above -350 in order. Gasoline and heating oil have been relatively in line with the price of crude as the heat and gas cracks haven't moved much in the past few days. I would look for crude to touch $80, but this time I see the price heading higher to $82.50 as the equity and Euro are too strong right now to be sellers.
Like I stated last week with the natty gas market, a powerful surge above $4.75 will lead to a $5.00 price and this is exactly where I believe I see this market is heading as natty trades in the mid $4.95 level right now as inventory reports came out positive last week. I think $5.00 will most certainly be reached in the beginning of the week with flat price trying to get to $5.15.
James' Mound Report For the Week Ending August 29th, 2010 : Financial
Stocks appear stuck in a relative mid-range but this is likely just the calm before another storm. Look for put spread buying opportunities on bounce days. Target shorts between current levels and 1084 on the S&P. Bonds should selloff during a week of calm heading into the employment report on Friday. The Friday report could be epic as the buildup to the employment outlook, recent surprises and shocking prior month revisions all setup massive volatility for the stock market, bonds and currencies. The kicker is the holiday weekend it falls on, a major trader vacation weekend that could cause a big Friday and Tuesday reaction in the financial sector. Until then I expect bond prices to retrace to 130 or so. The dollar remains bullish in the near term, pressuring the euro and pound in the process. The Canadian dollar might catch a bounce here, and if it does I would look to short at 97. The Aussie recovered well after the election concerns of last weekend and I suspect there is bullish momentum that could push the market to 9150, at which point I would recommend shorting it. The Bank of Japan eased monetary policy this evening in an effort to limit the yen’s runaway move agains the dollar. This is all part of the show as they have little choice but to intervene as Japan is an export driven economy. I fully anticipate that Japan will undergo major economic changes over the next two years and a strong yen will be the catalyst. If they continue to try and ntervene it will net out to be bullish because the BOJ will show their inability to sustain control over this runaway currency, and if they are just ‘talking the market down’ it will comeback with vengeance – either way I recommend buying the dip as the yen remains bullish, offering a quick recovery from the Friday pullback. This is likely the last real pullback before a short covering rally ensues that could be historic. I continue to stand by my forecast that:
The Japanese Yen futures will hit 140 before 80 or I will quit writing the Weekend Commodities Review…forever.
The Financials Pit Review For the week of September 13th, 2010
By PitGuru Frank LaMantia
A report today showed that banks do not have to make adjustments until 2019 on the amount of money they have to hold, which is used just in case there are large losses. The credit card industry, mortgages, and other loans will also see unique changes. Shouldn’t this be done in a year or less? Loans may be more stringent and this may cause more harm than good for the consumer. The reserves will be 8.5% of the balance sheet to meet the requirements. (1)
News of growth in China and bank reform has given the market a boost this morning. This may shift trades from treasuries back into stocks. In the past 2 weeks the market has risen with hefty gains and seems to have the same attitude today. The bank stocks may gain steam today as companies have time to adjust. The Street takes this banking news as positive because there is a less of a chance that banks can topple the economy, like they did over the past few years. (2)
The S&P was up 9.7 to 1113.80 and the DOW was up 78 points to 10471.00. The S&P can go higher if it goes past 1117.00 as there is resistance at this level. This level is important, especially when economic data comes in. 1030.00 level could be the next target.
1 http://finance.yahoo.com/news/Banks-get-years-to-adjust-to-apf-721299853.html?x=0&sec=topStories&pos=1&asset=&ccode= 2 http://finance.yahoo.com/news/Futures-surge-on-banking-apf-3664843146.html?x=0&sec=topStories&pos=4&asset=&ccode= 3 http://www.cnbc.com/id/17689937/site/14081545/
The Financials Pit Review
For the week of September 20th, 2010
By PitGuru Frank LaMantia
The market is waiting for the Federal Reserve meeting in the latter part of the week. The argument is: should the government keep buying toxic assets to help with the recovery? It is expected that the Fed may keep rates as is and give some support to the current market. This is an opportunity for officials to ask where the market is headed. It is important to listen to the language that will be announced. (1)
Last year investment banks had one of their best years. This year it may difficult for them to duplicate results. Volume is supposedly down significantly and some analysts are speculating that 2010 forecast for profits may be lower. New stock offering are down 15% and bond issuances is down 25% from last year. Goldman and Citigroup will not be allowed to have sole proprietary desks due to Congress’ new regulation. Financial firms hired employees because of a stellar 2009 but now have more mouths to feed. This could also cause lower profits. (2)
The S&P was up slightly 1.50 points to 1122.50 while the DOW was up 16 points to 10558.00. The market is looking for some sort of positive language from the President today. His job as President is to keep Americans calm and to give some support to the markets.
1 http://finance.yahoo.com/news/Stock-futures-rise-as-rb-2602224325.html?x=0&sec=topStories&pos=main&asset=&ccode= 2 http://www.cnbc.com/id/39263333 3 http://www.cnbc.com/id/17689937/site/14081545/
References
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James' Mound Weekend Commodity Review for Sep 19th
Financials
Stocks are up against critical resistance and I suspect an impressive price plunge in the stock market is coming within the next two weeks. Bonds have supported on a trend line and are avoidable as the impending bear move in the stock market offers more opportunity than playing upside in bond prices. In fact I would be inclined to spread short the mini S&P500 against a short 30 year T-bond. The dollar is a strong buy as it approaches recent support. The euro and pound are sells, along with the Aussie and Canadian dollar. Last week the Japanese government intervened on the yen, hitting the market with about a 400 point plunge. This is when a bull run in the yen can truly get underway. It can often take an intervention to truly release a market. When the intervention came last week analysts and traders did the “I knew that was going to happen” bit, and that shows that the market had certain participants or non-participants that avoided full bull plays as they feared this action by Japan. Therefore it is only after such an intervention that those shorts have no more reason to be bearish the market, and the bulls have little more to fear. However, if the government can show the fortitude to continue to defend 121 on the yen then it could get interesting. Given the momentum in the yen, the history behind Japan’s interventions and the tendency for the yen to be a beneficiary when the U.S. stock market declines, it is likely that the yen will run thru 121 and then really get moving. This is the opportunity to buy the dip and I continue to stand by my forecast that:
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The Weekend Commodities Review
A Market Review and Opinion Report By Head Analyst James Mound
For the Week Ending September 19th, 2010
Financials
Stocks are up against critical resistance and I suspect an impressive price plunge in the stock market is coming within the next two weeks. Bonds have supported on a trend line and are avoidable as the impending bear move in the stock market offers more opportunity than playing upside in bond prices. In fact I would be inclined to spread short the mini S&P500 against a short 30 year T-bond. The dollar is a strong buy as it approaches recent support. The euro and pound are sells, along with the Aussie and Canadian dollar. Last week the Japanese government intervened on the yen, hitting the market with about a 400 point plunge. This is when a bull run in the yen can truly get underway. It can often take an intervention to truly release a market. When the intervention came last week analysts and traders did the “I knew that was going to happen” bit, and that shows that the market had certain participants or non-participants that avoided full bull plays as they feared this action by Japan. Therefore it is only after such an intervention that those shorts have no more reason to be bearish the market, and the bulls have little more to fear. However, if the government can show the fortitude to continue to defend 121 on the yen then it could get interesting. Given the momentum in the yen, the history behind Japan’s interventions and the tendency for the yen to be a beneficiary when the U.S. stock market declines, it is likely that the yen will run thru 121 and then really get moving. This is the opportunity to buy the dip and I continue to stand by my forecast that:
The Japanese Yen futures will hit 140 before 80 or I will quit writing the Weekend Commodities Review…forever.
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The Financials Pit Review
For the week of September 27th, 2010
By PitGuru Frank LaMantia
There is no important economic announcement today so attention has been diverted to corporate takeovers and mergers. Unileaver NV bought Alberto Culver and Southwest is willing to buy AirTran holdings. Wal-Mart is proposing Massmart and South African distributor as well. Economists believe that takeovers are a good sign of an economic recovery because companies are using their cash reserves. Thursday looks like a busy day with weekly jobless claims and a final look at GDP for the second quarter. (1)
The Euro seems to be falling again as European banks need more cash reserves to keep traders and consumers minds at ease. Structurally Europe may need work in order for confidence to be gained. Currently it is trading at 1.33475 down 0.1. (2)
The question is if the market shows inflation does this show that money is being moved around the economy appropriately? Some may think that inflation is a bad thing but in essence velocity or the speed at which money moves may play a part in the recovery.
References
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The Weekend Commodities Review
A Market Review and Opinion Report By Head Analyst James Mound
For the Week Ending September 26th, 2010
Financials
The stock market has penetrated previous price resistance and looks to be breaking out – but don’t buy into it for a second! On a technical level the S&P had previously supported at 1132, which is 34 points above the prior low and gives some insight into the ‘stretch’ the new high will likely go beyond the previous high. That puts the resistance area between current prices and 1161. I recommend selling the S&P here with futures or put spreads. Bonds, on the other hand, reacted logically to the FOMC meeting statement that left interest rates unchanged and made numerous points that suggested long term low interest rates as well as critical issues facing the U.S. economy. Premium collection opportunities exist in bonds but the threat of a severe selloff in stocks makes the put side worth selling and the call side worth avoiding. I anticipate a strong rally in the dollar to begin this week and last through much of October. This week’s Mound Trade Signals report will reveal my trade recommendation in the euro to play this forecast. The Canadian remains a short. The yen intervention does not appear to have legs to it, and a break back through 121 could spark a massive short covering rally once the market realizes the intervention has come and gone with no net impact. This is the opportunity to buy the dip and I continue to stand by my forecast that:
The Japanese Yen futures will hit 140 before 80 or I will quit writing the Weekend Commodities Review…forever.
References
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The Financials Pit Review
For the week of October 4th, 2010
By PitGuru Frank LaMantia
Traders will be looking at economic data that will be announced toward the end of the week. August factory orders and home sales that are pending could set the tone for the rest of the work week. Factory orders are expected to fall while pending home sales are expected to have grown. The level at which they have grown might be too low to move the markets. Corporate news is driving today’s market due to Sanofi-Aventis’ hostile takeover of Genzyme. This is by no means a little deal either as $18.5 million is being offered. Also, in Europe UBS and Credit Suisse are being told they must hold more in reserves to meet international standards. A 0.4% decline in factory orders is expected due to a decline in aircraft orders. Also, the NAR National Association of Realtors Index will rise to 81.4 in August from July number of 79.4. (1)
News of terror warnings should not be a surprise in Europe as the bombing in London was not that long ago. Americans are being told to stay alert abroad which could hinder the European markets. Some may have been looking forward to a vacation and might have changed their reservations. It is rare to see something happen after a warning has been issued. Many of may feel it is many times after the fact that any information is given. This traders lives life as he normally would.
Foreclosures and job losses seem to be a non-issue but may come back to haunt the market. Please keep vigilant in seeing this factor when trading as many are jumping on the band-wagon of bullish behavior. Sluggish growth is being mentioned by economists each day.
References
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The Weekend Commodities Review
A Market Review and Opinion Report By Head Analyst James Mound
For the Week Ending October 3rd, 2010
Financials
Stocks pushed higher on strong economic data, but overall the market appears to set to top below 1161.75 and that reversal could come in a very vertical decline. I expect the S&P to drop at least 100 points in the near term, perhaps just 30 days or less. Bonds have congested and are not worthy of a position despite the anticipated decline in the S&P. The dollar is the play this month, with a move to 83 expected during October and the potential for a full reversal to a long term bullish trend on a break above 84.
On a technical level the dollar is likely to bottom out in the next couple of days and fill the monthly consolidation pattern that I see developing. The euro, pound, Aussie and Canadian should all see strong declines. The yen rallied to erase the intervention move, as anticipated. Now it is a matter of whether or not the BOJ is going to step in again or just let this puppy run to 125 straight away! I continue to stand by my forecast that:
The Japanese Yen futures will hit 140 before 80 or I will quit writing the Weekend Commodities Review…forever.
References
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The Financials Pit Review
For the week of October 11th, 2010
By PitGuru Frank LaMantia
The Federal Reserve announced that it will be buying more toxic assets in the month of November. This is positive news for Wall Street as the economy moves forward toward recovery. Shouldn’t these derivatives be halted in all firms? The leverage that is used could hurt Wall Street firms in the near future.
Those that are returning to the workforce are being asked to multitask; meaning some may be asked to do the work of three for the pay of one individual. This also means that a worker has to have more than one skill set. The requirements for employees are rising so that companies can fit the right people for the job. Stress levels and burnout could rise significantly for today’s employee. (1)
What do you think about the foreclosure freeze? Obviously Bank of America wants to make sure all of its I’s are dotted and T’s are crossed. Apparently, the company is going over all foreclosure paperwork to make sure business was transacted properly on the company’s part. Justifying each mortgage will be mundane but is very responsible. There is an abundance of foreclosures that should be going forward but are also halted. (2)
The week ahead looks like some economic data could propel the market as initial jobless claims and PPI will be reported on Thursday. CPI and retail sales will be reported on Friday. Business inventories and the Michigan Sentiments will also be announced on Friday making Thursday and Friday important to tune into the Gurus and the news. Economic data is expected to be in-line with economists’ forecasts but this of course rarely happens. (3)
3 http://biz.yahoo.com/c/e.html
References
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The Financials Pit Review
For the week of October 18th, 2010
By PitGuru Frank LaMantia
Citigroup earned $2.15 billion compared to a loss of $3.24 billion last year at this time. It is still owned by the government but shares are being sold back slowly. Currently the government owns about 12% of the company and wants to be free of the company by year end 2011. Bad loans are down 30% for the past quarter to $7.66 billion which could mean consumers may be getting control of personal finances. (1)
This trader mentioned that buyout and mergers may jump this quarter. Not every company is struggling and when one company falls another takes its place. Survival of the fittest has been how Wall Street worked over the past 100 years. But since 2007 government aid, bailouts, and the too big to fail attitude has changed this motto. Northeast Utilities is purchasing New England Energy for $4 billion in stock and St Jude Medical is buying AGA Medical Holdings for $20.80 per share. The company is also taking over $220 million of debt but is taking over a rival company. (2) (3)
Industrial production was announced down -0.2% and was forecasted to be up 0.1%. Capacity Utilization came in as expected at 74.7%. Tuesday housing starts and building permits are both forecast to come in at 550k. On Wednesday Mortgage Applications which came in at 14.6% at the last announcement will be released; along with Crude Inventories. Many will be looking at Thursday’s initial jobless claims which are forecast to be 450k. Also leading indicators will be released and expected to be around 0.3%. (4)
Apple will be announcing earnings after the close which could propel the market overnight. IBM is also a name that one should be watching to see if the markets will take kindly to the numbers. This week earnings and language used by the Fed could give a more clear direction on where this market is headed. Obviously, the market is stagnant at technical levels previously discussed.
1 http://finance.yahoo.com/news/Citigroup-earns-215-billion-apf-1301075638.html?x=0&sec=topStories&pos=main&asset=&ccode= 2 http://www.cnbc.com/id/39718420 3 http://www.cnbc.com/id/39719414 4 http://biz.yahoo.com/c/e.html
References
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The Weekend Commodities Review
A Market Review and Opinion Report By Head Analyst James Mound
For the Week Ending October 17th, 2010
Financials
Stocks are currently in an extreme overbought condition and lacks volatility or volume during this rally to indicate that it will sustain this move. I anticipate a selloff and in this week’s Mound Trade Signals service I will be issuing a trade recommendation to play this forecast. Bonds remain weak and I recommend a deep out of the money put with loads of time on it. The dollar rallied above monthly trend line support and appears to have made a bull turn, although a quick test of last week’s low is not out of the question. Regardless, I expect a dollar rally to at least 83. The Japanese yen remains a strong buy as the intervention did little to thwart the overwhelming global demand for this currency on the move. I continue to stand by my forecast that:
The Canadian dollar and Aussie dollar both made attempts at par against the U.S. dollar, but turned bearish with strong selling expected in both markets this week. Puts remain great play in the Canadian December option chain and I recommend straight puts to capitalize on the anticipated selloff. The euro and pound are strong sells.
Reference
Link Weekly Review MoundReport
The Financials Review
For the week of October 25th, 2010
By Frank LaMantia
The Fed is starting to look at mortgage companies and the procedures they used on foreclosures. The practices that have been used are expected to be determining if there are weaknesses in the system. The goal is to see if those weaknesses have led to improper foreclosures. (1) The big question is who tipped off the banks about this? Why would the banks halt foreclosures out of nowhere? Banks do have relationships with the Fed so it could be possible that they were given the heads up to get paperwork in order.
The G-20 met and came to an agreement not to devalue their currencies to raise exports. China has been on the radar as a country that has manipulates its currency to make exports work in their favor. This may raise the GDP artificially for the countries that decide to play in these sorts of currency games. (2) Does the U.S. win or lose in these types of tactics? The U.S. will purchase more products from countries than it exports. Not only does China purchase most of country’s debt but much of what they do sell. One could surmise that China has too much control over the financial situation in the States. The dollar has dropped at such a fast rate and has many concerned. A reversal could happen before the New Year so please keep an eye fixed on it! The DOW was up over 50 points while S&P was over 9 points in pre-market trading. The S&P is up to 1192.00 and has showed resilience as the DOW is up to 11,200 as both have moved through technical levels. (3)
Companies that have large revenue streams typically strip down the company and give structural integrity. For long-term portfolios one should be looking for these companies to lead the way toward growth. Earnings are still running the show this week and fueling the momentum of the market.
3 http://www.cnbc.com/id/17689937/site/14081545/
References
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The Financials Review
For the week of November 1st, 2010
By Frank LaMantia
Personal spending slowed to 0.2% for the month of September which is under the gains of 0.5% for July and August. Incomes have fallen 0.1% as well which is a change from the 0.4% rise in August. There is a battle between the Democrats and Republicans on whether benefits will be extended; due to the fact that extended benefits will expire towards the end of November. The economy is still fragile and the Federal Reserve Board is looking to stimulate the economy by purchasing treasury bonds. (1) This is a little off considering Bernanke was thinking of raising rates. Buying back treasuries is done for the simple reason of lowering rates and initiating economic productivity.
A report today mentioned that home prices could fall 8% into the third quarter in 2011. A staggering number of homes could be repossessed this year, nearly a million of them. According to Morgan Stanley, around 3.1 million mortgages are not being paid on time. (2)
The markets keep shrugging off bad news as the DOW was up 53 points to 11066 and the S&P was up 6 points to 1179.00. The market seems to be leaving itself a cushion for the holiday season. Retailers are putting themselves out there earlier than last year to increase sales. Let’s get down to brass tacks for a minute! Will retail spending really do anything significant? Temporary jobs and a short increase in sales? Long-term there are many issues that have to be fixed and this holiday season, even if it is positive, may not really do anything to assist the consumer. (3)
1 http://finance.yahoo.com/news/September-consumer-spending-apf-1623769852.html?x=0&.v=6&sec=topStories&pos=main&asset=&ccode= 2 http://finance.yahoo.com/news/US-home-prices-expected-to-cnnm-28872967.html?x=0&sec=topStories&pos=2&asset=&ccode= 3 http://www.cnbc.com/id/17689937/site/14081545/
References
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The Financials Review for November 8th, 2010
By Frank LaMantia
There is no economic data being announced this morning, and traders may evaluate the market and the rally that has transpired over the past few weeks. A bond buying program and positive earnings helped fuel this rally. The Fed plans to buy back over $600 billion in Treasury bonds over the next 6-8 months, which may directly lower interest rates. In short, this process could help create more spending by consumers. This morning Chrysler announced it will be raising its forecast even after losing over $84 million dollars for the third quarter. Fiat SpA managed Chrysler since it left bankruptcy last year. The company wants to announce an IPO in 2011. Consumer spending is a focus this week as retailers will announce earnings. Keep an eye out for Wednesday as Kohls, JC Penny, The Gap, and Macys start to announce their numbers. Thursday, the G20 will meet in Korea to discuss the dollar and the issues that have occurred with the Yuan. The United States in the spotlight due to the $600 billion buyback program. Some leaders of the G20 feel this will create bubbles in other countries. (1)
It is good to have a day with no data because this allows experts to try to analyze the trends and come up with an outlook for the rest of the quarter. Hopefully, the announcement of multiple Black Fridays will show that people are spending. The malls were packed in the Tri-State area more so then in the past weeks. The question is, will the markup be enough to earn retailers profits?
This trader thought the bond market was going to collapse last year but it did not. With the buy-back of treasuries this topic has actually become a hot one overseas. It is a possibility that a bubble is forming and it could cause serious consequences.
The Financials Review
For the week of November 15th, 2010
By Frank LaMantia
Retail sales came in higher for the month of October, showing a 1.2% increase. It was expected to be around half of what was announced today. Auto sales were the major contributor to the inflated number. If the auto number was taken out, sales rose 0.4%. The good news is auto sales have risen for four straight months. Growth is obviously a positive thing but when it comes to GDP the numbers are 50% lower than is needed to support growth. The past 2 quarters have averaged out to about 1.85% which 3.6% or higher is needed for the consumer, the economy, and the markets to be stable or show growth and the most important thing is an increase in employment. A warm October was blamed for a lack of traffic to big retailers and malls this past month. Hardware showed an increase of 1.9% while gas also grew by 0.9% showing an increase of prices at gas stations. (1)
Greenspan mentioned that the more countries go into a deficit, the more chance there is for a bond crisis. This trader has speculated about this for the past 2 years and believes this to be true as well. However, shouldn’t Greenspan stay retired and stop talking to the public? This certainly undermines Bernanke and a conversation should be held about this. The consumer does not need more fuel added to the fire. He might be right but let the current Board do their job.
Inflation is a concern and could be creeping into the markets unnoticed. Remember not everything in economics can be monitored the same way from year to year. Gas and food prices seem to be rising and prices at large retailers also seem to be on an upward move. Hopefully, the Fed addresses this shortly with a .25 of a point rise in interest rates. China needs to be monitored more closely as well this week as concerns about inflation has already hit their markets.
References
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MoundReport for November 14th, 2010
Financials
Stocks began their slide, just above the highs set in April, and is at the beginning of what I anticipate will be a volatile selloff that continues throughout this week. Bonds remain choppy and long term puts are recommended to hedge a short term bear play on the S&P. The dollar supported near critical trend line support and has some bullish momentum with weakness in the euro expected in coming weeks. I anticipate an end of the year run in the dollar to 83, which should push the euro near 130. Sells are recommended on the Canadian and Australian dollar. The yen remains a long term buy, with bull call spreads recommended on dips. I continue to stand by my forecast that:
The Japanese Yen futures will hit 140 before 80 or I will quit writing the Weekend Commodities Review…forever.
Reference
Link Weekly Review MoundReport
The Financials Review
For the week of November 22nd, 2010
By Frank LaMantia
This weekend Ireland officially asked for a bailout said to be over 90 billion dollars. The UK has also offered support of over 7 billion. There are a few reasons why this bailout may not work. The amount might not be enough to take care of the debt. Experts believe that 100 billion or more may be enough, the bailout shows that there might be a more systemic problem and that this bailout is being used to prevent panic. (1) There are a few countries that are facing the same economic woes.
Spain and Portugal seem to be on the same path which could send the Euro into a defensive position. The Euro has had steady gains and the last thing that is needed is panic. Supposedly there are around 20 countries at risk of default. This is something that earnings, positive housing numbers, or better than expected job reports may not be able to deter. (2) Countries defaulting are an issue and hopefully the IMF has a solution. Banks are facing more stringent capital requirements.
The Basel III requirements is making the top banks in the United States raise up to $150 billion in reserves. The Barclays report showed that the top 6 banks have a 90% shortfall in the banking system. Meaning they have a greater chance of running into banking issues than others and need larger capital requirements. (3) Inflation and or deflation - that is the question.
Concerns over the government buy back of treasuries are still being debated. The buyback program was created to combat deflation and try to stimulate growth and infuse some capital. Some believe this could bring rapid inflation into the picture. GDP is set to grow at 2.7% rather than 2.6% but the fact that consumer prices are rising shows that there could still be some serious issues heading into this retail heavy 4th quarter.
The S&P 500 was down about 4 points to 1195 and the DOW was down slightly 30 points to 11151. The holiday week could cause some to sell out of positions as concerns and fears seem to be in the air this morning. A lack of volume and sales need to be closely monitored over the next few trading days. (5)
1 http://www.businessinsider.com/why-the-irish-bailout-will-fail-2010-11
2 http://www.businessinsider.com/19-countries-most-likely-to-default-2010-10#13-iceland-7
4 http://www.cnbc.com/id/40311724
5 http://www.cnbc.com/id/17689937/site/14081545/
References
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Pitguru's Financials Review for Nov 29, 2010
By Frank LaMantia
Retail sales seem to be strong as the holiday season began the end of last week. Online spending is up over 14% from Thanksgiving through Saturday. Investors have been timid with spending since the recession. Consumers being the driving force of the economy could also be the factor that helps the economy break out of its stagnation. The government may not want to count on the consumer to spend when jobs are not being created and salaries are being lowered or capped. Retail sales numbers will show if consumers are spending but this will have to wait until after the holidays. (1)
Stocks seem to be down today as Ireland prepares to accept over $90 billion in rescue loans. There are few European countries that may follow such as Portugal and Spain which may keep investors more cautious over the next few weeks. A few economic reports this week will keep traders on their toes. Tuesday consumer confidence numbers and manufacturing data will be announced. Also, just as important Friday the Labor Department will announce November’s employment numbers. (2) It is known that jobs are added during the holidays but how many? Temporary jobs may not have an impact on the markets.
The dollar seems to be reacting well as mentioned a few weeks ago. Once the dollar hit its low 74-75 area it bounced due to a few factors such as a sell-off in the stock market and a falling Euro due to an increase of debt in Eurozone. The US. Dollar Index is up 0.574 to 80.931 which is positive news as concerns have been growing over its value. (3)
1 http://finance.yahoo.com/news/Stock-futures-fall-on-apf-783212264.html?x=0&sec=topStories&pos=main&asset=&ccode= 2 http://finance.yahoo.com/news/Stock-futures-fall-on-apf-783212264.html?x=0&sec=topStories&pos=main&asset=&ccode= 3 http://www.cnbc.com/id/15839178/site/14081545/
Reference:
The Financials Review for Dec 6th, 2010
By Frank LaMantia
Concerns about debt issues overseas seem to be applying pressure on the market place. Major European indices are currently down while the Nikkei fell 0.11%. The Euro is down to $1.33 and yield prices on Spanish bonds are growing, which might be an indicator to future issues. The higher yields go and spreads widen the more likely fear may have set in Spain. The main concern is the size of the bailout for Eurozone. There is uncertainty if it will grow or not which could keep the market surpassed unless other economic data is announced. Bernanke mentioned that there is room for more quantitative easing beyond the $600 billion that has been imposed. He also mentioned he is not worried about inflation and that he can increase rates in literally 15 minutes. This trader has a question for Mr. Bernanke! What if inflation goes unnoticed due to new regulation or overconfidence? Typically one does not make assumptions in economics or take past results and make assumptions. It was also mentioned that employment would take 4-5 years to grow at a steady rate. Municipal bonds are being closely watched as deficits grow and bonds come due. For example, the NJ Turnpike Authority is bringing $1.5 billion to the market. (1)
Tuesday consumer credit will be announced which the market expects to be down -2.3 billion. On Wednesday mortgage applications and crude inventories may catch some attention during the day. Applications were down -16.5% at last announcement and crude inventories was 1.07 million. Thursday initial, continuing jobless claims and whole sale inventories will be announced. Initial claims are expected to come in around 430,000 and continuing claims to be 4,250,000. Wholesale inventories are expected to come in around 0.8%. Friday the 10th should be a busy day as trade balance numbers, imports & exports, Michigan Sentiment, and the Treasury budget will be announced. The trade balance is set to be down 44.5 billion while exports to be up 0.7%, and exports to also be up 0.3%. Michigan Sentiment is predicted to be up slightly from last announcement 0.9% to 72.5%. The Treasury budget is expected to grow 13.7 billion bringing the number down to around – 134.0 billion. (2)
1 http://finance.yahoo.com/tech-ticker/10-things-you-need-to-know-before-the-opening-bell-535684.html?tickers=AOL,EWP,MMM,SPY,PFE&sec=topStories&pos=8&asset=&ccode= 2 http://biz.yahoo.com/c/e.html
References:
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The Financials Pit Review for the week of January 10th, 2011
By Frank LaMantia
In emerging markets today it seems as though China had a surplus of $13 billion which points to exports not selling as fast. It was expected that the surplus would be over $20 billion. Spain and Portugal are seeing yields rise over debt concerns and the ECB has decided to buy this debt to keep yields down. The question is does the market have this priced in? The stock market has been doing well despite debt issues and with the threat of a currency war. A currency war may be likely because countries want their exports to be cheaper to buyers. The lower the currency is the more probable it is that other countries will buy more products. There will be new stress tests by the US government for large U.S. banks and one of the topics on the block is letting banks buy back their own stock. This should be allowed as it shows confidence by the banks and allows for stock bonuses to be given out. (1)
This week will be packed with economic data. Tuesday wholesale inventories will be announced and that number is expected to be 0.9% and was 1.9% when it was last announced. Wednesday the 12th exports and imports will be announced and were 0.8% with no expectations available to compare. Crude inventories were down -4.16 million at last announcement and may be down this round as well. The Treasury budget on Wednesday is expected to be $-80 billion and was down $-91 billion when last announced. On Thursday the 13th initial jobless claims are expected to be 415k up 6k from last week. Friday the 14th also seems to be a pretty busy day with PPI being forecasted to be around 0.8% and Core PPI to be 0.1%. All of the data is important this week but most will be concerned with the retail sales report which is expected to be 0.7% and could be as high as 1.0%. A number that should be watched is business inventories which are expected to be 0.8%. (2)
The S&P is down -5 points to 1262.50 in the premarket while the DOW is down -34.76 to 11585 as debt concerns are still not going away. Some believe that banks will be stronger as the government becomes more involved in creating regulations. (3)
2 http://biz.yahoo.com/c/e.html
3 http://www.cnbc.com/id/17689937/site/14081545/
References
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The Financials Review For the week of January 24th, 2011
By Frank LaManti
The S&P had a notable 7 week run which came to a halt last week. It is flat at 1280.00 in the premarket as investors weigh earnings numbers. The DOW however had its 8th week with gains which is the longest streak since the March run of 2010. Technical analysts see this bullish behavior going through the second quarter while others see a pullback. There is no economic data expected to be announced today but there are high profile names delivering earnings such as McDonalds (MCD), American Express (AXP), and Bellwethers Texas Instruments (TXN). Halliburton (HAL) did announce a fourth quarter profit which affected the stock with a 1% rise. It was also announced over the weekend that RockTenn Co (RKT) is buying rival Smurfit-Stone Container Corp (SSCC) for $3.5 billion. SSCC rose over 21% before the bell. (1)
On Tuesday the 25th Case-Shiller is coming and is forecast to be down -1.0%, Consumer Confidence is expected to grow 1.0% from last announcement, and FHFH Housing Price Index will be announced which was 0.7 at prior announcement. On Wednesday the 26th the MBA Mortgage Purchase, New Home Sales, Cruse Inventories, and FOMC Rate Decision will be important to watch. Home sales are expected to drop 20k to 280k. The Fed rate is expected to stay unchanged at 0.25%. On Thursday the 27th Initial Claims are supposed to drop 10k to 400k while Durable Goods to stay the same at 1.5%. Pending Home Sales are expected to be down over -2.0%. Friday the 28th the GDP is forecast to come in higher than the last announcement up 0.8% to 3.4% and could set the tone for the end of the week. (2)
The Fed. announcement may not be too exciting but the language that will be used may be a market mover. If they decide to talk about raising interest rates over the next few months this would show inflation concerns. Food prices are rising as well as gas at the pumps for the consumer. The current economic condition is still an issue for many so rising prices could affect the Consumer Confidence number. Though it is expected to rise at this week’s announcement it can change dramatically as price move upward.
2 http://biz.yahoo.com/c/e.html
References
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The Financials Review For the week of February 7th, 2011
By Frank LaMantia
This week is a slow week in economic data but this does not mean the reports we do have are irrelevant. Danaher announced that they will be buying Beckman Coulter for 6.8 billion or $83.50 a share. Recalls and other internal problems have caused some issues over the past. (1) Berkshire Hathaway bought the rest of Wesco Financial worth over $547 million. Buffett wanted to acquire the 19.9% his company did not own. Berkshire currently operates over 80 businesses and has a market value of over $200 billion. (2) This data should create a positive start which is needed due to unrest in Egypt. Hopefully, there will be no issues in the Suez Canal because that would create a bearish market. Most of the world’s oil does travel through it and costs may rise if ships can’t take that route.
Today consumer credit will be announced at 3 pm EST and is expected to be $2.5 billion which is an increase from $1.3 billion. On Wednesday the MBA Mortgage Purchase Index comes out. It was 11.3% at last announcement. On Thursday initial claims are forecast to be down by 5k to 410k. Continuing claims are projected to be 3900k and were 3925k at last announcement. On Friday the Treasury budget, trade balance, and the Michigan Sentiment will be announced. Sentiment reading was 74.2 and is expected to rise to 75.5. (1)
1 http://www.cnbc.com/id/41455238
2 http://www.cnbc.com/id/41456457
3 http://biz.yahoo.com/c/e.html
References
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The Financials Review For the week of March 7th, 2011
By Frank LaMantia
The situation in Libya has escalated and with it so has oil. The death toll is estimated to be between 1,000 and 2,000. Other members of oil producing countries pledged to sell more barrels to the U.S. to make up for the lack of production in Libya. Geithner announced that the U.S. is read to tap into the oil reserves if it is needed. The Treasury Secretary also mentioned that the rally is drive solely by speculation. (1) Over 1 million people need aid and of course the U.S. is there to help. I would like to see if the other Arab nations are so eager to help their neighbors.
Today at 3:00 PM Eastern Time Consumer Credit will be announced and is expected to be $3.3 billion. Wed. March 9th The Mortgage Index which was -6.5% at last announcement. Wholesale Inventories are expected to be 1.0% which would be the same as the last announcement. Crude inventories could be a head turner. Both will be announced after 10:00 AM Eastern Time. Thursday March 10th Initial Claims is expected to be 382k and was 368k when last announced. The Trade Balance is expected to be -$41.5 billion and was down -$40.6 billion last time. Friday March 11th retail sales will be announced at 8:30 AM Eastern Time and that number is expected to be 1.0% which is higher than the 0.3% prior. At 9:55 AM Eastern Time the Michigan Sentiment is expected to be 76.5 which is lower than the 77.5 at the last announcement. Around the same time Business Inventories are expected to be the same 0.8%. (2)
The S&P is trading near 1326.00 in premarket trading and may see pressure as overseas markets waiver. The 25 point range that has been seen over the past few weeks is tiring but might be around for a little bit longer. The low 1300’s to around 1330.00 has been the norm. It seems like every time 1330.00 is reached it sells-off. If a bullish sentiment creeps in the next level of resistance could be 1346.00 when looking at the charts. (3)
2 http://biz.yahoo.com/c/e.html
3 http://www.cnbc.com/id/17689937/site/14081545/
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The Financials Pit Review For the week of March 21st, 2011
By Frank LaMantia
The market appears to be reacting positively to the military action in Libya which may help stabilize the situation in the Middle East. The nuclear power plant in Fukushima has smoke coming out at reactor 2 & 4. Water pumps have been connected to keep the reactors from overheating. Radiation is more than expected and has been found in the food supply. Estimates for the cost of the earthquake and tsunami could reach $250 billion. Warren Buffet said that there could be a buying opportunity in Japan as the country starts to rebuild. (1)
AT&T is trying to buy T-Mobile for $39 billion which would take Verizon off the number one position. This would add over 34 million customers to its 96 million current subscribers. Regulators might reject the merger if the deal is not in the best interest of the consumer and or the economy. When does a company care about the consumer when trying to purchase another company? Typically, they are driven to compete with other companies. (2) OptionsXpress is being bought out by Charles Schwab and is valued at $1 billion. OptionsExpress has over 385,200 client accounts and over $8.1 billion in assets. The deal is expected to be accomplished in the third quarter. (3)
The S&P was up over 14 points to 1288.00 while the DOW was up 112 points to 11,911. This trader mentioned the psychological level of 12,000 on the DOW and that traders would like to see it at this level for the near future. I see a new trading range for the S&P which is 1265.00-1300.00. (4)
1 http://www.cnbc.com/id/42187082
2 http://www.cnbc.com/id/42186180
4 http://money.cnn.com/data/premarket/index.html
References
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The Financials Pit Review For the week of April 25th, 2011
By Frank LaMantia
Violence in the Middle East and Africa could affect the stock market today as oil rises. Saudi Arabia announced that production will not be raised which may keep oil at current levels or higher. One million barrels of oil are still not making to production because of the unrest in Libya. Oil is up over 23%, unrest has spread to Algeria, Bahrain, Oman, Iran, and Syria. Also, let’s not forgot thousands have died that could be tied to oil. (1)
New home sales will be announced at 10:00 a.m. Eastern Time. The market is expecting 280k which would be rise from the 250k at the prior announcement. Tomorrow the Case-Shiller 20-city Index and consumer confidence will be announced. Towards the end of the week GDP numbers and continuing jobless claims could move the markets. (2) Kimberly-Clark earned $350 million down from the $ 384 million last year. The company is blaming a rise in material costs and believes costs will rise from $450 million to $550 million by the end of 2011. The company makes Huggies and Kleenex and believes oil based materials and pulp may rise even higher. (3)
2 http://biz.yahoo.com/c/e.html
3 http://www.cnbc.com/id/42745847
References
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The Financials Pit Review For the week of May 9th, 2011
By Frank LaMantia
Commodities seem to be done selling off for the time being as move higher in the early part of the day. A concern about the global recovery also seems to be easing. Japan is going to shut down its thirds largest nuclear power plant which is called the Hamaoka plant 120 miles southwest of Tokyo. Chuba Electric Power Co. is down over 14% after the prime minister announced the closing. Almost 26,000 people have been killed or not found and the nuclear plants are still leaking radiation. Experts believe that in the next 30 years the area were Hamaoka lies could see an earthquake of 8.0 or higher. Some of the statistics these experts are giving are up near an 87% this could happen in the time frame given. (1)
McDonalds saw revenue rise over 6% because of McCafe drink and breakfast items. Restaurants that have been opened for at least 13 months showed an increase of 4%. Overseas numbers were slightly better with a 6.5% increase. (2) Hertz is offering Dollar Thrifty $2.1 billion so that it can get in front Avis Budget. Avis has issues getting clearance for regulatory bidding to try and be Hertz. The last bid was $1.2 billion in April of last year by Hertz who sees the value in the company. Dollar Thrifty raised its profit outlook and might wait for Avis to get its clearance so the real bidding can start. Hertz wants to be involved in the non-airport market which has a market value of over $10 billion. (3) HSBC announced that profits fell 14% from a year ago. $440 million is being set aside to compensate customers in the UK who were sold insurance an unethical fashion. HSBC made a profit of $4.9 billion which is down from the $5.7 billion the company made last year. The company plans to restructure and lessen its presence in the 87 countries it presently resides in. (4)
This might be an opportunity to pick up a few points today, depending on how traders react after the open. The commodity sell-off could spark a small sell off in stocks which is what this trader is concerned about. It is important to watch the volume and the amount of sell orders that are being placed compared to the averages.
3 http://www.cnbc.com/id/42954285
4 http://www.cnbc.com/id/42930929
References
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The Financials Pit Review For the week of May 16th, 2011
By Frank LaMantia
Lower growth and higher inflation could cause more selling this week. When lower estimates came out about GDP traders already have been selling commodities, so stock positions were the next to go. Where else could traders go? Well, they went to the dollar, treasuries, and gold. Does this mean momentum will keep the market selling? Not necessarily, but traders should watch the debt ceiling issue the U.S. has and the debt problems overseas. The housing market is in a double dip but this trader is not convinced that the housing market ever really recovered.
Nasdaq OMX Group Inc and IntercontinentalExchange announced that they will be withdrawing their bid for the NYSE Euronext. The withdrawal is because they felt the approval would not go through. Deutsche Boerse AG supposedly still wants to buy the NYSE Euronext for $10.2 billion. (1) BP is looking to a buyout of TNK, which is Russia’s third largest oil producer. A $27 billion offer was rejected last month and some believe the offer may be over $30 billion. (2) Research in Motion announced a recall of over 1k Playbook tablets which have a flawed operating system. Supposedly, these devices never made it to consumers and the faulty batch is being fixed. The shipment was sold to Staples Inc. and RIM hopes it can help the company turn itself around. (3) Lowe’s did not meet estimates on profit and blames a slow spring season. High precipitation and cold weather across part of the country also hurt the company. Both Home Depot and Lowe’s did well last year because of first-time homebuyer credits and cash for appliances programs. (4)
Please stay tuned for government coming to a deal on the budget. This could move the market later today. If the ceiling is not raised some fear that the 2008-2009 market crash could look like a walk in the park.
4 http://www.cnbc.com/id/43044363
References
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The Financials Pit Review For the week of May 23rd, 2011
By Frank LaMantia
Europe’s debt crisis and economic surveys have placed a bearish sentiment on the market today. Greece will have to restructure its debt. Spain and Italy are now in the spotlight and bailouts could be offered in the near future. Italy’s debt outlook may be lowered which has Ireland and Portugal worried. Spain is also in the cross-hairs as Europe seems to be losing steam on its overall economic recovery. (1)
Sony expects to have an annual loss of $3.2 billion because of the earthquake and tsunami. Manufacturing was down before the earthquake and only grew worse once the tragedy struck. Identity thefts also hurt Sony. They had to spend $170 million to cover identity theft insurance for customers. Flat screen sales have not produced and are expected to stay in the red for the near future. (2)
Short sellers have been rumored to want to short the options of LinkedIn, when they are brought to market tomorrow. But this could be a ploy to move the stock lower and then the buyers come in at a later date and take the stock up. Really, who would announce that! Ok, so the stock goes down over the next 20 days to the mid $50s but remember that some funds likely have the power to move the stock back up. (3)
3 http://www.cnbc.com/id/43131560
References
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The Financials Pit Review For the week of June 6th, 2011
By Frank LaMantia
The S&P is close to its April lows giving some the notion that the economy could be slowing down. The next support levels are 1294 and below that 1249 as potentially lower demand for stocks becomes apparent. Steve Jobs from Apple will be present at the company’s meeting in San Francisco today - he has been on medical leave for a few months. JP Morgan cut Lowes from overweight to neutral because of low home prices and low job growth. Goldman Sachs may release papers that would counter the Senate committee report. The report said that Goldman misled clients about mortgage backed securities. (1)
There is still fear of sovereign debt issues in Europe and some feel that the worst is still to come. Large tax increases may have to be implemented as a last ditch effort to save some countries. This makes it seem like there may not be enough money to go around. Analysts believe that Europe could be starting their financial crisis and that this could spread, directly affecting the United States. The sentiment seems to be that the dollar could rise while commodities slide. Whether this will happen is a guess but traders try and never do that. (2) The USD Index is up 0.04 to 73.82 while the euro is down -0.0008 to 1.462. A bearish feel is still in the air and this may contribute to short-selling over the next few days.
2 http://www.cnbc.com/id/43290545
References
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The Financials Pit Review For the week of June 13th, 2011
By Frank LaMantia
World stocks have sold off as concerns grow. The S&P as mentioned before has two potential support levels, one which has already been reached. The next support level is the 1245.00 area which could be reached as mounting concern over sovereign debt and U.S. deficit continues. HSBC is trying to sell-off its credit card business of over $33 billion, to slash costs and to slowly phase out of its retail banking. (1)
The Federal Reserve will be phasing out of its government bond purchases, after its last buy of $50 billion. June 30th will be the last day and the financial sector will receive just a small portion of the $100 billion it has been receiving from the Fed. The money that has been pumped into the system to prevent a depression or another recession will hopefully have been enough. Some expect bonds, stocks, gold, and the euro to fall after the government stops the program. (2)
Honeywell International has agreed to buy EMS Technologies for $491 million which will help them track cargo wirelessly. The offer is approximately 13 times earnings of EMS' 2010 earnings before interest and taxes. (3) Wendy's is selling a major stake in Arby's to Roark Capital Group. Roark will pay $130 million to own an 81.5% stake. (4)
1 http://www.cnbc.com/id/43376200
2 http://www.cnbc.com/id/43356436
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The Financials Pit Review For the week of June 20th, 2011
By Frank LaMantia
Stocks are down due to a delay in loans to Greece and now news that Italy's credit rating may be downgraded, which may lead to selling risky assets. Euro zone ministers want Athens to introduce austerity measures before $17 billion in emergency loans is given. The deadline is the middle of July before Greece would default.
Ford announced that it is going to spend $1 billion to create a new line of vehicles for its Lincoln line. GE came to a deal with labor unions that covers over 15,000 workers for four years. (1) PNC is going to buy Royal Bank of Canada for $3.45 billion. This will add 420 branches of which most are in the Southwest and is a $112 million discount of the book value. PNC might give RBC $1 billion in stock and give the rest in cash. (2)
Where are the markets headed today? Sell orders are likely coming in on the S&P. It seems as though the US dollar and treasuries are being looked to for safety but this does not mean the market won't bounce up and down over the summer. It is rare that the market moves straight or straight down for a long period of time, especially in a time with so many question marks. Companies appear to be cash rich because of layoffs and cuts in expenditures since 2008. This has given some big names an opportunity to buy struggling companies.
2.http://www.cnbc.com/id/43458689
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The Financials Pit Review For the week of June 27th, 2011
By Frank LaMantia
Consumers are not spending which could be a sign that gas prices have deeply affected the economy. Spending was unchanged for May and when it is adjusted for inflation it shows a drop of 0.1%. Incomes rose 0.3% but when adjusted for inflation the increase was 0.1%. Essentially, this means incomes have been flat since the beginning of 2011. (1) George Soros thinks that the euro will not be used in the near future and that a plan B should be created in case the immediate plan does not work. He thinks the euro is flawed due to the fact that it is not backed by a joined treasury or a political union. (2) There are estimates being thrown around of losses that might come to fruition if the United States loses its triple A rating. Investors that buy U.S. debt could lose over $100 billion if Standard & Poor's and other rating agencies drop the rating. The date that is being given is Aug. 2 which is the day before the U.S. has to raise the debt ceiling. (3) If Capitol Hill comes to an agreement the market could turn bullish however, if there is no decision fear could set in rather fast. This trader thinks a rally will happen this week which would create a cushion if this agreement does not take place.
2. http://www.cnbc.com/id/43545002
3. http://www.cnbc.com/id/43542776
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The Financials Pit Review For the week of July 11th, 2011
By Frank LaMantia
The stock market is down 1% in the premarket due to the same old issue that has not gone away. The market may slip further as more negative news could be a concern. The debt crisis in Europe is something this trader said could spread and the fear of spread is being discussed today. There are also rumors that the European Union may be discussing a selective default for Greece. Let's not forget about Portugal and Italy because both are having financial issues. This could weigh heavily on the financial sector today. On Friday the jobs data was negative and the budget deal failed on Sunday adding more fuel to the fire. China is once again showing signs of inflation and there could be another interest hike in the near future. Alcoa will be kicking off earnings today and could help the market come back a tad later today. (1) A number that is shocking was announced this morning. Out of every $10 that Americans put into the bank, $2 was from jobless benefits. Some states have been hit hard since 2008. Residents that live in Florida, Michigan, Ohio, and Arizona have been hit hard by the downturn in the market. It is estimated that over $37 billion will be spent in 2011 to compensate those without jobs. (2) Bernanke will be speaking soon, and most likely he will try and calm the masses down. A bombardment of questions by Congress is also likely as politicians look for a quick fix to the economic problem.
2 http://www.cnbc.com/id/43710397
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The Financials Pit Review For the week of July 20th, 2011
By Frank LaMantia
Moody's suggested that the U.S remove the debt ceiling altogether so that bond holders do not have an issue in the near future. Basically in a few years it may have to be lifted again and then the same fiasco could start all over again. This what the government calls periodic uncertainty. (1) The U.S. is one of the few countries who still have a debt ceiling which in this trader's opinion acts like a stop sign. Today Gannett, Charles Schwab, and Hasbro will announce earnings. Hasbro is expected to do well because of Transformer action figures. After the bell today IBM will announce its earnings. Over 100 companies that belong to the S&P 500 are ready to announce their earning this week. (2) Halliburton announced a 54% rise in quarterly profits and that drilling looks bullish for the near future. Oil prices being as high as they are has prompted oil companies to invest billions to develop oil fields. Halliburton is working shale fields and has benefits from developing in places that are hard for its competitors to reach. Second quarter profit rose to $739 million from $480 million at this juncture last year. Revenue rose 35% to $5.9 billion and was expected to be $5.71 billion. (3)
This week earnings and the U.S. debt ceiling issues should take center stage. Please do not forget about the euro crisis because it seems as though attention has been diverted. The swings in the market can be made stronger from overseas.
3 http://www.cnbc.com/id/43792119
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The Financials Pit Review For the week of July 25th, 2011
By Frank LaMantia
Again, the top news is the debt ceiling issue. Congress will be bickering over tax hikes, take breaks, and slashing the budget. The one thing both Democrats and Republicans can agree on is that a budget deficit and long term plan is needed to keep the United States from being downgraded in the future. For the short term, the debt ceiling has a date of August 2 and the ceiling supposedly needs to be raised or Standard & Poor's will downgrade the U.S. debt from AAA. What happens if China does not get paid? Waiting until the deadline may not be the smartest thing and it shows a weakness in the egos of our government officials. The market is selling off in the premarket today, the S&P down over 11 points and the Dow is down 100 points. The chance of default in this trader's opinion is low and the market should bounce back quickly by midweek. Is August 2 the real deadline? How do we know?
Netflix is not sharing as much information as in the past, which has Wall Street concerned. The company announced that in 2012 it will not report gross subscriber additions and subscriber costs. This has analysts concerned because at this point it is difficult to see how much growth is left in the company. CBS believes its revenue will increase because of its content deal with Netflix. The company also said that it may have a deal with Amazon on content in the near future. (1) TD Ameritrade is thinking about purchasing rival E*Trade Financial, which does not mean the company will take an offer. Citadel, the online company's biggest shareholder, has insisted that it look to sell its business. (2)
2 http://www.cnbc.com/id/43878373
References
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The Financials Pit Review For the week of August 1st, 2011
By Frank LaMantia
A deal has been reached in Washington and it looks like a $2.1 trillion increase in the debt ceiling has been implemented. Also, a 10 year 1 trillion deficit reduction between defense and non-defense spending will help lower the overall deficit.
In December another vote about $1.5 trillion in cuts could occur. Typically, this causes downward pressure on interest rates which in turn could push bonds down as investors look for risk in the market. (1)
HSBC will be cutting 30,000 jobs worldwide by 2013 and could sell up to 50% of its retail bank branches. The company has over 296,000 people worldwide but is still hiring in Brazil and Mexico because of their growth rate. (2)
The big question is the debt ceiling a small fix or is it just a Band-Aid? This trader does not think the government can stop spending. The United States is known for its efforts in which they spend money to help other countries in need. Are they going to just say no when a dictator loses their mind? Are they going to say no when another tsunami or earthquake hits? The country might have to have cuts on every level of government and not just cherry pick the places where it might not hurt the most. Raising taxes on those that spend could just make things worse. The United States' rating can be cut even though a path has been built. Is the country's reputation tarnished?
Peabody and ArcelorMittal came with a hostile takeover bid of $4.7 billion for Macarthur Coal. Macarthur is taking the offer to shareholders and thinks it is an attractive offer. (3) Do not overlook the U.S. Dollar Index which could make a comeback to the 76 level. Currently, it is up 0.03 to 73.77 and its 52 week high was 83.56 and reached its low on May 4 at 72.70. (4)
2 http://finance.yahoo.com/news/HSBC-to-cut-30000-jobs-in-apf-876858475.html
3 http://www.cnbc.com/id/43967289
4 http://data.cnbc.com/quotes/.DXY
References
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The Financials Pit Review For the week of August 8th, 2011
By Frank LaMantia
In the past, countries that have been downgraded typically show a sell-off in their stock market. As most aware the U.S. rating has fallen from AAA to AA- and for those that do not know this AAA rating has been around since its inception in 1917. Wealthy investors, institutional investors, and those who work on the street in business were likely ahead of change rather than behind. Meaning, they could have been more likely to have sold positions over the past few weeks. Mom and pop accounts may just be waking up now to sell the market. One might think the worst in this type of environment but remember this is also when those on top of the food chain could be looking to buy in. They could be looking for bargains and opportunities. The issues go further than just the United States. Do not forget the debt issues are a global problem and seem to be getting worse. Also, it wise to not forget that the derivative market has still not hit with its losses. The issue is that the brightest minds still do not know how badly leverage those vehicles were stretched.
PIMCO, Warren Buffet, and Geithner agree that countries like China may seek sovereign debt from other countries. China might not take all of their money out but they could spread it around to other countries. This means less money being placed in the United States system. (1) Hedge funds seem to be putting money in cash which one may assume that wealthy investors could be doing the same thing. People do not want to relive the 2008 sell-off hoping for a comeback. (2)
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The Financials Pit Review For the week of August 15th, 2011
By Frank LaMantia
New York manufacturing data has fallen for the third straight month. The premarket was barely affected by this but the data should not be overlooked. Volatility is the game that traders seem to be playing and it could stay like this for the near future. The government keeps low rates dangling in front of consumers but this may not be enough to invoke confidence. The questions one should be asking are, will Germany be a driving force in helping the European nations? If Germany helps Italy do they have enough to help others?
Motorola Mobility Holdings Inc. is being bought by Google for $12.5 billion in cash and could be Google's biggest purchase. The price would be $40 per share, which is 63% premium to the closing price on Friday. Motorola has struggled because it has competed with Apple's smartphone. Motorola as many already know has products based off of the Android model. (1) Lowes reported weaker sales for the second quarter due to consumers spending less money on renovations. (2)Warren Buffet thinks that billionaires should be taxed more. He believes that lawmakers coddle the superrich and that they have enough money. Buffett paid 17.4 in taxes and that typical tax burden ranges from 33%-41%. (3) Sure, what does he care! He is 80 years old and may only be taxed for another decade or so. Taxing billionaires may not solve the world's problems.
2 http://www.cnbc.com/id/44108578
3 http://www.cnbc.com/id/44142272
References
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The Financials Pit Review For the week of August 22nd, 2011
By Frank LaMantia
The start of the week looks like it may be higher as utilities, pharmaceuticals, and telecommunication sectors lead the way. Some feel the losses over the last few weeks could have been too extreme and traders with money might be testing the market. The Federal Reserve will be making announcement on Friday so one would expect Bernanke to give some sort of guidance. If the Fed. announces a new stimulus plan this could boost the market for the short term. The lack of confidence may be part of the issue that is suppressing the market and bringing the bears out. Libyan rebels are moving closer to overthrowing the government which has also given the market a little boost this morning. Qadaffi's sons have been captured which shows the current administration is on its last leg. (1) Lowe's announced that it may buy back up to $5 billion worth of stock but the program will have no expiration date. Also, the company said it may implement a regular quarterly dividend of .14 cents. Lowe's has a slow second quarter and blamed bad weather and a cutback in spending by consumers. (2)
Let's talk about confidence. There seems to still be a lack of confidence in Europe's bank and debt issues, this has not gone away. The consumer may be sitting on the sidelines in cash while the wealthy individual dabbles in the stock market. The question is whether or not today's rally will be short lived. This trader believes that it is and that caution should be used at this juncture. The S&P still has support at levels in the low 1100s and can be reached in one day of negative press.
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The Financials Pit Review For the week of August 29th, 2011
By Frank LaMantia
The East Coast did take a wallop this weekend but the exchanges are expected to run on regular schedule. Dick Grasso was on CNBC this weekend and mentioned that the electronic portions of the exchanges are working. He said commuters might have issues but the markets should have no issues opening. Estimates on Irene's path of destruction could be close to $2 billion. I have to say, I disagree and think the estimates are too low.
Consumer spending rose 0.8% in July which is the biggest increase in over 5 months. This could give the market a bullish lift as fears of a recession start to ease. Over 70% of spending is done from the consumer which spawns economic activity. The increase was due to purchases of durable goods such as automobiles and appliances. (1)
What is the market hoping for? The market wants to see more bond buy backs from the Fed or as the financial world knows it, quantitative easing. Ok, yes this would artificially help the economy but, will it help get rid of the other issues? No, debt is still an issue overseas, housing still stinks, and job are not being created. This could be a short lived rally.
Could the dollar go up if gold keeps selling off? It is a possibility and something that should be watched. Some economists think the $1,600 mark on gold is the area where US dollar buying might take place. (2)
1 http://finance.yahoo.com/news/Consumers-spending-rebounds-apf-1701587266.html?x=0&sec=topStories&pos=3&asset=&ccode= 2 http://www.cnbc.com/id/44310840
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The Financials Pit Review For the week of September 12th, 2011
By Frank LaMantia
French banks are under pressure due to a possible downgrade in their credit ratings. Moody's could downgrade several banks which could drag down overseas trading as well as the stocks domestically. Also, on top of this, Greece's debt issue is apparently not going away. This trader has mentioned this over the past 6 months. Countries are expecting a bailout, but how can the world bailout multiple countries? (1)Wall Street tends to look at what is now rather then look at what could happen. Also, Wall Street looks at one problem at a time and not issues from the past. The issues in the U.S have not gone away and yet France and Greece are in the forefront.
Obama is sending in his $447 billion job bill today and is traveling across the country to support it by speaking to lawmakers. Tax cuts could be extended for a year, SS taxes paid could be reduced to 3.1%, and tax credit for those that hire. (2) McGraw Hill is planning to cut costs and break up into two companies. One will be for publishing and the other will be the Standard & Poor's ratings business. The publishing section is looking for a new CEO.(3) Those with money could take a chance and buy sovereign debt of the countries that could default. Wall Street titans are the ones that can take risk to expand their empires. Just like in the financial crisis of 2008, investors found opportunity. When people run the other way, traders look to explore. Being ahead of change is where most might try to make money, not behind it.
1. http://finance.yahoo.com/news/Stock-futures-slump-heavily-rb-3432993814.html
2. http://finance.yahoo.com/news/Obama-sending-477-billion-apf-336304616.html
3. http://www.cnbc.com/id/44484186
References
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The Financials Pit Review For the week of September 26th, 2011
By Frank LaMantia
The word that bothers this trader this morning is hope. This word is being thrown around which should not sit well with investors. The stock market may open higher on hopes that policymakers are putting new plans together to help with the debt crisis. The hope that Greece does not default is where the focus lies. (1) If a person is resting their families future on hope then one needs to take another look at how they formulate wealth.
Geithner seems concerned and believes that the U.S. is still fragile from the recession of 2008. He also thinks that if European nations default that the U.S. could have serious problems. Geithner also brought up that the U.S. will cut the deficit by 3 trillion in over 10 years. (2)
Honestly, who cares about 3 trillion! This country spends more than 1 trillion a year. How about the U.S spends half of that and cuts 5-7 trillion. Maybe a flat tax for everyone so the people that have created success do not feel like they are bailing everyone else out?
The USD Index is down -0.19 to 78.31 and the Euro is down-0.0034 to 1.3473. The Euro may fall further but some may leave the dollar and buy stocks. A short term burst in the dollar does not mean it will keep going. The level of 1.2750 might be possible over the next few weeks. Some believe a bull rally could come over the next few months and are positioning Europe and keeping cash available if this occurs.
1. http://finance.yahoo.com/news/Futures-signal-mixed-opening-rb-3483326699.html
2. http://finance.yahoo.com/news/Geithner-sounds-alarm-on-cnnm-3774138806.html
References
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The Financials Pit Review For the week of October 3rd, 2011
By Frank LaMantia
Greece announcing it will not meet its deficit target this year has sent the markets into the red in the premarket. This may create new doubts over another bailout. European banks are seeing heavy losses because of fears that default could be near. Private investors that holds bonds may have to absorb heavier losses then was agreed to in July. As most know this kind of news affects Italian and Spanish bonds, making yields rise. (1) Since the U.S. government is slow to help those out of work, Starbucks has decided to launch a fund that could stimulate job growth. It will be called the "Create Jobs for the USA" fund and it will be partnering with the Opportunity Finance Network. Starbucks does not want to wait for Washington and believes that small businesses need access to credit. Every $5 donated may create up to $35 that may be helpful to a small business. The foundation will be created with $5 million donated by Starbucks. (2) Fitch downgraded its growth forecasts for major economies and expects emerging markets to slow down. Euro growth is expected to be zero until the first quarter of 2012. Again, a long-lasting solution has not been found for Europe, leaving a question market for traders. (3)
3) http://www.cnbc.com/id/44753635
References
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Weekend Financials Review for Oct 2, 2011
By James Mound
Stock volatility is expanding and is a strong indicator of a breakdown move ahead. The employment report on Friday could be the catalyst the market needs to fail miserably and I would be weary of long holdings into that report. Bonds appeared to have topped, but this may be temporary if another wave of stock market selling is ahead. The dollar remains a strong buy, anticipating a breakout move through 80 on the index in short order. Look to buy dips in the dollar or sell rallies in the euro currency. The Canadian and Australian dollars are strong cycle-changing shorts. The Japanese yen remains an impressive bull market, holding onto gains despite strength in the dollar. I continue to stand by my forecast that: The Japanese Yen futures will hit 140 before it hits 80 or I will quit writing the Weekend Commodities Review...forever.
The Financials Review For the week of October 10, 2011
By Frank LaMantia
Banks seem to be leaving more money overnight with the European Central Bank rather than lend it to each other. Fear that banks could suffer large losses because of Greek default and possibly other nations has banks thinking twice. Dexia banks has been bailed out by Belgium, France, and Luxembourg. The stock is trading below $1 this morning. (1) AT&T said it has received over 200,000 preorders for the new Apple iPhone, Yahoo is looking to take the company private, and Superior Energy has agreed to purchase Complete Production for $2.7 billion. (2) Earnings are what Wall Street will be focused on for the next few weeks. Alcoa kicks off the start on Tuesday which is trading below $10. JP Morgan and Pepsi should be announcing their earnings towards the end of the week. (3) Consumers seem to be struggling due to salaries being cut. Some are doing two jobs for a lower salary. Who could blame them as healthcare, fuel costs, and food prices stay in territories that hinder the consumers' pockets? The S&P is up 18 points in the premarket on what news? (4) It is scary that these things happen because it shows the market is bullish and could break out even higher. Obviously, this trader thinks the market is not worthy of being this high. Banks are up due to the Drexion bailout but are they delaying the inevitable? Europe is up and this has crossed-over the U.S. markets. This could change quickly so please be alert today.
1.http://finance.yahoo.com/news/Banks-parking-more-cash-with-apf-4128206917.html
2.http://finance.yahoo.com/news/Stocks-to-Watch-Complete-tsmf-3656090375.html
3.http://www.cnbc.com/id/15906175/
4.http://www.cnbc.com/id/17689937/site/14081545/
References:
The Financials Review For the week of October 17, 2011
By Frank LaMantia
For the past few weeks, stocks have been up on hope which in this trader's books does not constitute reason enough for a rally. Today, the market is down but could turn green due to Citibank's higher third quarter profits. The bank showed a $2.2 billion in revenues and does not need as much to cover bad loans. Well Fargo showed a 22% gain in profits but did have a decrease in revenue. The protest on Wall Street, Times Square, and Zuccotti Park has funding of over $300,000 and they have supplies. (1) This is also spreading to other countries. In Rome protesters caused millions in damage to property. Some have good intentions but when masses of people congregate it just takes one to spark a riot.
Kinder Morgan has agreed to buy El Paso Corp. for $21.2 billion which would create the largest pipeline of natural gas in the United States. Barclays PLC has offered to lend Kinder Morgan the funding it needs to transact the purchase. It is estimated to be around $11.5 billion in cash.(2) The euro is down against the dollar as a resolution is postponed until the Oct. 23 summit. The euro is down 0.7% to $1.3790 and was high as $1.3917. It was up 3.8% last week. (3) Earnings and the euro crisis could send the market in either direction quickly so one must be ready to act.
1) http://finance.yahoo.com/blogs/daniel-gross/morning-reading-ows-rome-114746359.html
References:
The Financials Review For the week of October 24, 2011
By Frank LaMantia
Some experts think the U.S. may see another downgrade in its rating. This could bring the bears running to sell in the near future. The market has had a nice rally over the past few weeks even though the risk of Europe's default has risen. It is funny that there was a summit this weekend and yet there is no talk of the results but that leaders are half-way there. The plan was to have bond holders take losses and China is supportive that Europe will find a way to solve the problem. If they are supportive, maybe China could buy a chunk of it.
Eyes may be on Netflix's third quarter earnings because of the price increase and attempt to split up the companies video subscription service. The company could have lost over 600,000 U.S. subscribers from June through September. This could be half of their subscribers. Over $9 billion in shared wealth is estimated to have been lost due to the stock dropping over 60%. (1) Cigna is set to acquire HealthSpring for $3.8 billion and will pay a 37% premium from the stocks close of $40.16 on Friday. Cigna is getting bridge financing from Morgan Stanley. The purchase is to build up its Cignas Medicare Advantage business.(2) Caterpillar reported its third quarter earnings and showed an increase of over 40% from last year. Revenue rose to 41% from 15.7 billion and this even included the companies buy of Bucyrus International, a mining company. Some are saying that the earnings from CAT show that a recession might be unlikely. (3)
1) http://finance.yahoo.com/news/Ahead-of-the-Bell-Netflix-to-apf-6643143.html
2) http://www.cnbc.com/id/45014509
3) http://www.thestreet.com/story/11285928/1/caterpillars-earnings-show-no-recession-is-on-the-way.html
References:
The Financials Review For the week of October 31, 2011
By Frank LaMantia
MF Global seems to be on its last leg as the Federal Reserve suspended any business that the company can perform. Shares have been halted and Interactive Brokers may bid in a supervised auction. MF Global may see Chapter 11 bankruptcy after investing in European bonds that back sovereign debt. (1) New rules caused Credit Suisse to cut 1,000 jobs in its investment banking unit. In July the bank mentioned it was planning to cut over 2,000 jobs. There are plans to cut the dividend and cut assets that are risky by $100 million, to reduce the chance of a future financial crisis. (2) After the close today Anadarko Petroleum and Herbalife will announce earnings. Anadarko has found profits in Mozambique and could surprise the industry in the distant future. Herbalife is said to be beating its competitor Avon. (3) There is negative vibe to the markets this morning as Japan intervenes to help the Yen and that Europe may have red tape to clear for austerity measures. Also, HomeServe cannot make outgoing calls after being accused of mis-selling products. A retraining program has been implemented so that staff can provide better information to clients when it comes to products and pricing. (4)
1) http://finance.yahoo.com/news/Report-MF-Global-to-seek-Ch-apf-590521534.html
2) http://finance.yahoo.com/news/Credit-Suisse-to-cut-1000-rb-702668909.html
3) http://www.cnbc.com/id/45077472
4) http://www.cnbc.com/id/45100161
References:
The Financials Review For the week of November 7, 2011
By Frank LaMantia
Italy is seeing negative press this morning as the crisis takes aim at them. Italian bonds have reached their highest since 1997. The Prime Minister, Silvio Berlusconi, has until tomorrow to win over members of parliament that are undecided and to stop party rebels from taking down the current government. (1) Asian markets were down and the U.S. and European markets are down in the premarket. Greek prime minister Papandreou is looking to form a new national unity government which could carry Greece through elections and help pass austerity measures. Papademos is expected to be the new prime minister in the near future. Data coming out of Germany is showing that it is not the most stable country in Europe. In September industrial production fell 1% and for the month of October it fell 2.7%. Today, the consumer credit report for the month of September will be announced and is expected to be $5 billion. Berkshire had $1.59 billion in losses in derivative positions which showed a drop in net earnings to $2.29 billion. BP's agreement to sell its $7.1 billion stake in Argentinean Pan American Energy to China's CNOOC Ltd. has failed. Atlas Energy will announce earnings today and is expected to earn .04 cents a share and MFA Financials is expected to post 0.25 a cents a share. (2)
Some financial people believe in the system and everything it stands for. This trader wants to support this system but feels if Europe collapses that it could cause a calamity that this world has not seen since the Great Depression. Companies seem to be reducing short and long positions. This could mean that companies are stocking up on cash.
1. http://finance.yahoo.com/news/Futures-drop-on-Italy-euro-rb-2978933370.html
2. http://finance.yahoo.com/news/10-Things-You-Need-To-Know-siliconalley-1086745987.html
References:
The Financials Review For the week of November 14, 2011
By Frank LaMantia
Bank of America and other banks have been shying away from charging debit card fees. The problem is new fees are emerging for replacing lost debit cards, depositing money on mobile phone, wire transfers, etc. Consumers have been angry over charges on their accounts so banks are going a different route. (1) Italy's bond yields new highs which has the financial world awe-struck. The 5 year Italian bond is up to 6.2% from 5.3% in October. Last week bonds topped 7% in which experts said, Italy could not pay. (2)
The current crisis is being compared to pre-World War Two which in this trader's mind is comparing it to the Great Depression. The tone has changed over the past 2 weeks both in the United States and abroad. The market swings have been based on news and not earnings or charts. MF Global being dismantled has also placed a burden on the market's shoulders.
Obama seems to be getting fed up with China's currency actions. But what is really behind this tension? Well, for starters both China and Russia still trade with Iran while we have sanctions against them. Are they helping them build nuclear weapons?
Lowes reported better than expected earnings and even raised its full year future outlook. Hurricane Irene helped with this quarter's profits as consumers went to the do-it-yourself store to repair their homes. Net income fell to $225 million from $404 million but sales rose 2.3% to $11.85 billion. It was expected that Lowes would bring in $11.69 billion. Lowes is shutting down some if its stores because the housing market and a weak economy has dampened profits over the past 4 years. (3)
1) http://www.cnbc.com/id/45286104
2) http://www.cnbc.com/id/45283751
3) http://www.cnbc.com/id/45285259
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The Financials Review For the week of November 21, 2011
By Frank LaMantia
Last week saw stocks finish flat and looking somewhat bored. Europe continued to lose momentum due to a lack of buying. The S&P was somewhat limited due to its resistance of 1225 and did hit a weekly low around 1210. Those that are watching saw the tech sector fall 4%. Volume below 1 billion, expirations of monthly options, and a lack of economic data and corporate news did not help the market break out of its funk. Today, existing home sales for October will be announced at 10:00 eastern time. This is expected to come in at 4.85 million. Tuesday, the second estimate for GDP is forecasted to come in at 2.5%, which would be no change from the first estimate. On Wednesday there will be initial claims, durable orders, the Michigan sentiment, and crude inventories. Initial claims are expected to drop to grow by 3k to 391k from 388k prior. Durable orders are expected to drop by -1.0% for October from its last announcement which was 0.6%. Michigan sentiment is expected to be 64.2. (1)
Recent data shows that the economy is on the mend, however, Europe’s financial crisis may threaten it. The index for leading economic indicators grew by 0.9% in October, its best move since February. This is the 6th straight increase which predicts economic activity and takes into account interest rates, permits for construction, money supply growth, unemployment, hours worked, etc. (2) Spain’s jobless rate has grown to 21 % and the government seems to breaking apart. This is trend that seems to be the norm as Greece and Italy have both replaced governments with technocrats. Bond yields are still moving upwards near levels seen in Greece. (3) In the US, the supposed super committee who said they would have a plan to reduce the nation's deficit announced they have failed to put together a plan to reduce the $1.2 trillion they had promised. This committee has been going over this plan for 3 months and has let politics get in the way. The committee is made up of 6 Republicans and 6 Democrats. (4)
1. http://www.thestreet.com/markets/
2. http://finance.yahoo.com/news/rise-economic-gauge-suggests-brighter-214837005.html
3. http://www.cnbc.com/id/45378387
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The Financials Review For the week of December 12, 2011
By Frank LaMantia
Apparently, there is a lack of enthusiasm for stocks today due to investor worries about the new pact in Europe. The new fiscal policy calls for a bailout fund in 2012 that will cost $267 billion for countries in crisis, and this money would be given to the IMF emergency fund. This plan does not help cut existing debt issues. (1) Can anyone show me a difference between now and a few weeks ago? Come on already - there was no concrete evidence suggesting that anything the euro leaders were doing would stick! It is pretty hard to fix decades of bad decisions in a few months. China is having their annual meeting to discuss inflation and to try and support growth. The weakened recovery here in the U.S. and the current crisis in Europe seems to be adding a little pressure for China to rebalance their economy on internal demand rather than exports. (2) Intel announced that there has been a hard drive shortage and that 4th quarter revenues may be below expectations because of it. Also in finance news today, people close to Corzine at MF Global mentioned that Corzine thought he could create a mini Goldman Sachs when he took over MF Global. The West Coast protesters seem to be trying to shut down ports in California so that Wall Street firms look elsewhere to grow. Do they realize that this potentially hurts the economy that they are trying to protect?
1. http://finance.yahoo.com/news/markets-fall-mood-darkens-over-114848235.html
2. http://finance.yahoo.com/news/china-opens-annual-economy-planning-043330287.html
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The Financials Review For the week of December 19, 2011
By Frank LaMantia
Stocks are up in the premarket due to European officials discussing a draft of a new fiscal policy which could be applied in January. Europe also agreed to put up over $150 million euros to the IMF to give more support to the Euro zone.
Prince Alwaleed Bin Talal, Saudi Prince, has placed a $300 million stake in Twitter which some feel is better than the recent IPOs. Also in the news today BI-LO , private operator of supermarkets, agreed to purchase Winn-Dixie Stores for over $560 million in cash. This is not much of a surprise because of the rise in food prices over the past few years. Obviously gas prices rising created transportation costs to rise and goods followed. This caused consumers to not buy as many groceries and to pick staple foods or those good that would last longer on the shelves.
In focus this week: What would happen if the Eurozone broke up? Some feel inflation could ensue and that economic pain may still be an issue. Others feel that a depression may set in causing a train reaction around the globe. Who knows, maybe a depression and large inflation occurs because the Eurozone is trying to throw billions at the problem without actually fixing the problem. The one thing that traders are likely worried about this morning is the death of North Korea’s dictator, Kim Jong Il.(1) (2)
1) http://finance.yahoo.com/news/stock-index-futures-signal-early-100935032.html
2) http://www.cnbc.com/id/45722282
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