Andrew Busch

Quiz Time!

Which of the following has helped make stock prices go up over the last two weeks?

1. Positive economic data
2. Positive bank earnings comments
3. Ben Bernanke: no failure of major bank
4. Fed QE program
5. Tsy Toxic asset plan details
6. Positive housing sales and prices
7. ? on suspending MtM and reinstalling uptick rule.
8. Bonus claw back bill stalling.
9. Soaring mortgage applications
10. Stalling of Obama budget
11. All of the above

Answer below….

With better than expected US mortgage applications, US durable goods, and an ECB member saying they can cut rates further, the greenback is stronger against most major currencies. The US dollar index is up .19 points at 84.05. Overnight Libor rates are mixed with spreads wide showing problems with credit: US is at .2875% v .226%, EU is at .87625% v .8675%, UK .60125% v .62%. The 3mth Libor to 3mth OIS spreads or LOIS are lower: US is at 98 v 100, EU is at 85 v 85, UK is 127 v 130. The 1yr OIS are US at .381% v .364%, EU .83% v .831%, and UK at .57%v .572%.

Global equity markets are mixed with the S&P 500 up 4 pts. With the Fed beginning to buy US Treasury securities, Tsy yields are higher with the US 10 yr note yield at 2.72% with the 2yr note at .89% with the spread at 183. The TED spread is at 103 and the VIX at 42.93. Commodity markets are softer with crude leading the way at $52.72, nat. gas is at $4.26, and home heating oil is at $1.47. Gold is at $925 and silver is at $13.23. Wheat is at 5.31 and corn is at 3.90.

Obama Media Fatigue?: Last night, US President Barack Obama gave another prime time press conference. He mainly focused on the economy and the budget, but got his growth numbers in the out years wrong. I think this has been an interesting media campaign to push his budget polices forward. Using main stream outlets like ESPN, Jay Leno, 60 Minutes, the Obama media team has attempted to reach it’s middle class target audience and get them to push their representatives in Congress. So far, it hasn’t hurt him in the polls, but Congress is growing restive over the massive spending his budget entails.

I think the President risks media overexposure. Already, this was showing up last night as the reporters were increasing aggressive follow-up questions to him. They especially questioned his logic on massive increases in spending and therefore debt and how that would be pushed down to the nations children to pay. Keep an eye on this going forward as Obama’s approval ratings inevitably drop…..

US Economic Data: Our Jennifer Lee writes, “U.S. durable goods orders unexpectedly rose in February. That’s right folks, they rose! The headline 3.4% increase brought to an abrupt halt six consecutive monthly declines. Yes, January’s 4.5% drop was revised down sharply (to -7.3%) so the February advance didn’t erase the start of the year dive, but this is a step in the right direction. Even excluding transportation, durable orders were higher (+3.9%) for the first time since last July. Glancing at the table below, it looks like the weak spots were in communications, nondefense aircraft/parts (Boeing), and primary metals….The Bottom Line: First we saw a number of positive developments coming from the housing sector over the past week. We’ve also seen more positive developments from the consumer side, with real spending higher. Add this to the list. Let’s hope that we will see growth before the end of this year.”

My Spin: Coupled with Japan announcing a trade surplus for the first time in four months is providing some positive data that economies are coming back from the depths. Don’t get crazy, but we needed to show some signs of life!

The Answer to today’s quiz is 11: Over the last 2 weeks, could we have gotten a better string of “good news” for economy and equities? Granted, the AIG situation was a side story to these 10 good things that have been happening. I would offer this as well: the financial system will not fail. This is the lesson from the turbulence and uncertainty from the fall. Industry leaders, regulators, Fed, and Treasury all pulled together and pulled us back from the abyss. From here, it’s a question of how much time will it take to recover. We know the process for banks to write-down/sell assets, raise capital, and shrink balance sheets will take longer than expected. We know the process for the housing market to stop building, work down inventories, and see prices stabilize will take longer than expected. We know that the process for the economy to recover will take longer than expected. We don’t know when all of these will occur, but it’s been a great two weeks.

Going forward to extend this rally, we’ll need to see the massive amount of cash that’s been on the sidelines come back into the market. In other words, we’re trying to decide if the veil of uncertainty has been lifted and confidence returned. I believe for the next quarter, this have been achieved. The earnings numbers for Q1 and the guidance companies give will be critical for extending the equity rally into Q2. We’ve already had the explosive rally in equities and the sell off in the buck. From here, it’ll range and grind more on this trend.

Tags: budget, China, obama, stock market, US dollar

This entry was posted on Wednesday, March 25th, 2009 at 7:24 am and is filed under Front Page. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.