Traders,
Yesterday it was fairly entertaining to watch the
Congressional testimony (or grilling) of Geithner. Clearly, AIG and the banks
received preferential treatment and Geithner brought "passing the buck" to a
fine art. It was also the only time I have seen bi-partisanship in a long time
- both Democrats and Republicans grilled him. While I am not a fan of Kucinich,
he asked the most pointed and well informed question - in which Goldman was
already in a legal battle for the $2.9 billion - clearly pointing it out to
Geithner, who seemed (or acted) unaware. How could he be unaware and if so, he
failed in his due diligence. Of course if you believe Geithner, before Nov 24th
while head of the NY Fed he was not making decisions and after Nov 24th
he was informed but also no longer making decisions. At some point I was
wondering what does running the NY Fed do - looks like nothing. If you missed
it, I suggest you find some of the coverage on the internet. It's pretty
shameful.
Last night was Obama's State of the Union address and it seems that he is
regearing his focus to the economy and jobs, a little late as his approval
rating would indicate and the banking (chummy) relationship has been his
albatross. State of the Unions, by any president or party, is really a
confidence boosting speech to help drive up approval ratings - nothing more.
They have always reminded me a nothing more than a political pep rally. That's
fine - but I think people are really wanting to see "Change" and so far it's
just more of the same. The post commentary (if we remove the politics) seems
that is still more uncertainty as to HOW he is going to create jobs. Businesses
are still wondering about policies, legislation, and taxes. In Davos the talk
(behind closed doors) has been for the most part the concern of how U.S.
policies may affect global trade. Are we to expect more protectionist and
tariff type policies - like Obama's tariff on China that almost broke out into
a trade war. What policies will he levy at the bank and financial markets. So
far the consensus has been he has made jobs the number one priority - no
problem - the question is WHAT is he going to do and HOW is it going to affect
the business and the economy (and global economy)?
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| FORD
floors it!
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As I mentioned in the past, I have always been a Ford fan
(GT-40 that dominated LeMans in the 60s, Carroll Shelby's Cobra 427, Mustang).
It was nice to see at least ONE of the U.S. automotive companies didn't go with
handout to the government. Ford stayed off the radar, cut costs, managed
inventory, and buckled down. Meanwhile GM and Chrysler went bust and were taken
over by the government - (still struggling). Ford was able to leap frog over
them and no one even noticed. Then Ford was handed another gift just before
earnings, the world's number one automaker (Toyota) had a massive recall,
shutdown of production, and shutdown of sales. That is helping boost current
Ford sales and image.
Ford's crowning achievement was to post a $2.7 billion profit, after record
losses and the CEO said they expect to actually see full-year profits in 2010,
rather than earlier expected 2011. Ford clearly has difficulty going forward,
as all industry does with the current economic difficulty, however they seem to
be managing the difficult road well.
Stock is up slightly in the pre-market.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aZM9jw3TdUjo&pos=1
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| Economic Data
recovery?
|
Jobless claims were pretty much as expected, weekly claims
fell 8,000 to 470,000, the 4-week moving average climbed to 456,250 from
446,750. Continuing claims fell by 57,000 to 4.6 million, but does not include
the number of Americans receiving extended benefits or those that fell off the
rolls.
Durable goods (excluding transportation) climbed .9% last month, more than
anticipated. Total orders increased .3%, which is less than forecast. It does
reflect that companies seems to be SLOWLY coming out of their hidey-holes to
spend money. It is a cautious increase, as they continue to see unemployment
still high as well as home prices fall / foreclosures continue. It's all about
managing inventory and forecasting revenue (sales).
FOMC (Federal Open Market Committee) declared that the U.S. economy is in
"recovery" and upgraded its outlook and said that it will wind down the $1.25
trillion program to purchase mortgage-backed securities. The pledged to keep
the bench market lending rate in a range of zero to .25% for "an extended
period".
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| Futures Pre-market
Where's the action! |
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The futures are up in the pre-market, and there seems
to be a little relief about the economy after Obama's speech last night. |
| Support / Resistance
Going higher or lower? |
INDU 10,250 (We are close to that 10,250 level after it look
like we were slipping down to the 10,000 level. Earnings this morning look
fairly good - especially Ford - futures are pointing to a stronger opening.)
NDX 1800 (We are above that 1800 line and still seeing a
little strength, watch the overweight's like Apple - which will drive this
index.)
SPX 1100 (We climbed a little yesterday, but still short of
the 1100 area. Futures look like we could get above it at the opening.)
RUT 600 (Still strongly above this support area.)
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| Conclusion
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Apple's release was stealing attention away from more
political issues - it was a busy day (State of the Union, FOMC, Congressional
grilling of Geithner and Paulson) - however the market seem to pause in its
recent decline. Maybe Apple stole some of the thunder. Bernanke,
according to the polls, has the votes to be confirmed - yet there maybe some
continual dissension among both parties.
Earnings have been a mix of news, in many cased beating estimates, but lowering
or offering cautious guidance going forward. Ford was unique in that it was
raising expectation - but they are also operating from a position of strength
as their domestic rivals GM and Chrysler are shells of their former self and
now Toyota is in a mess of billion dollar proportions.
Obama promised more changes and he certainly can raise people's hope. However,
we all wait to see what those policies will be and how they will not only
affect the economic conditions for the man on main street, but how it will also
affect the markets. Concern of punitive legislation and higher taxes is in the
back of everyone's mine and with Democrats calling for another stimulus package
to create jobs - we begin to wonder where the money is going to come
from. Deficits and Debt are expected to expand again this year, the
question is at what point do the people realize that we (government, business,
and citizens) are all in this together. Rather than making it Us vs. Them.
No doubt, we all agree with Obama, that we need jobs and a sound economy to see
future growth - the question is how do we get there and what are the best
policies to do so?
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| Author |
| Michael Williams has 20 years experience as a institututional floor broker and options market maker. He is a partner in both Silexx Financial Systems (a trading software company) and Kinetic Strategic Group (a private investment firm). He co-authored the book "Fundamentals of the Options Market" a McGraw-Hill text and has lectured throughout the country on Options, Risk Management, and Volatility. | |
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