The Banking and Strategy Initiative

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It’s Monday Again: McDonalds’ improves Comp Sales, Janet Yellen testimony twice over (The week ahead: Feb 10 – Feb 14, 2014, US Economy & Markets) US:MCD, US:LOW, US:GS, US:JPM

with Warren Buffett

with Warren Buffett (Photo credit: Wikipedia)

The Yuan and Yen are both about to turn back the clock again, stopping currency appreciation in China and Japan after a big clip, especially unwanted for Japan. Japan sold more than $1.8 B USD in Bonds this month as reported on the weekendand the Yen finally turned south after a 102 peak and a 6 score on the Yuan. China’s anti corruption drive is still striking fear in emigrating bureaucrats, this time rushing to Canada, as President Xi Jinping settles in, this year of the horse

Meanwhile McDonalds continued its streak of earning Global growth, Europe and Asia letting it report 1.2% for the month offsetting the 3.3% Comparable same store sales decline in the US in the snow. Energy MLPs are still waiting for the uptick in Gas to convert into real investment in US Dollar in more drilling and distribution equipment as output increases. Meanwhile one does suspect the Gasolene prices, as opposed to Nat Gas futures riding a steep north cliff, will start coming south once the retail pump increases are done with later this month.

Yields are up at 2.67% levels on the US 10 Y bond as the Euro and the USD continue strongly though no longer at the expense of Emerging market currencies and EEM flows have also turned green. Fed Chairman Janet Yellen faces the Senate for the first time after her confirmation on Thursday and tomorrow she appears before the House Financial Services committee to present the Annual Monetary policy in her biannual testimony(semiannual) before the House Committee. Taper plans are strict and yes with participation rates also up in the faux jobs report for the second time in three months, Fed is going to be happy keeping ot the calendar, accelerating the Taper again next month when they meet.

We are not presenting any earnings this Monday (not even LOWE’S) but the juicy month end data has also slipped away leaving the US happy and bustling about the better recovery prospects after a 3% clip in 2013 with European markets still positive despite teh inevitabkle wait for the data to present  a north vs south skew and PIGS deficits keeping bond investors on an edge at unimaginable lows for Spanish debt with Electronic clearing making it easier for traders to manage liquidity and diversity of opinion in the bond markets under check. One meaningful disposition from OTC derivatives was to allow I Banks like SocGen and Credit Suisse to sell options that represented a diversity of opinion in the markets.

Average pay at Goldman Sachs (Reuters Insiders crunchtime) remained near $400,000 after cuts while JP Morgan average pay is also near $250,000 while the Bonus caps get locked inat the end of 2013 bonus calculations in Europe esp London

Readers are welcome to post their opinions of the new serial expose by the Financial Times author Dan McCrum as he winds eloquent about the 20 Yr PUTs on a worst of basket indices options on Global equities (US equities) back in 2005/07 which helped him fund another $20 Bln investments for Berkshire Hathaway. I for one liked the idea, especially as Lehman made a $16 mln as the counterparty buying the options off Warren Buffett, which he will likely make up as the years go by. I for one also agree with the Bloomberg response on that, and one has to read both to form an opinion in these halcyon days of Behavioral Finance (the context set by an author, definitely qualifies as framing in Bhvrl Fin terms, as measured by Kahneman or Noble prize winner Bob Schiller

Last week retailers reported weak comp sales after the snow storms kept coming and increased heating bills but the Consumer credit report next day showed a $13 Bln jump in Holiday spending on Credit with $5 Bln increase in Card spending well left alone for the rest of the year in 2013 and that is saying something indeed. The next Household wealth report is due in Marchg talent leaving with their increases in bonus pool and a search for the third component in fixed and variable salaries as retail and investment bank salaries level off

European Banks like Barclays and Deutsche sommit to Job cuts as the efficiency at Deutsche reaches an all time high of 90% showing 90% of its Income are out in Operating costs including more pay cuts. Barclays in the meantime is simultaneously battlin

Markets opened lower on Monday and while the JOLTs data would be reported at the same time as the new Fed Chairman speaks, markets are likely to inch back in the eternal wait for spring after a strong results season. Nokia in the meantime hit off with HTC , letting it up 5% in trading in Europe, GMCR is still toasting the Coke deal and a couple pof very good performances were left unappreciated on earnings day including Amazon, Starbucks and Linkedin. We again reiterate our BUY on Pfizer on its great pipeline as competitors like Merck(Europe), Sanofi(Europe) and Eli Lilly can only try to catch up, the patent cliff running well into 2014 for them

Bank of America on the other hand could well settle at $16 levels though it looks like profittaking caught the stock after a heady 4 weeks in 2014. Einhorn looks to be in trouble in Green Mountain as shorts remain above 20% of the float in the coffee company but the stock has been rising since the news of the deal broke last week and Call of Duty and FIFA/NFL help their gaming stocks plough the field but Puerto rico was downgraded by S&P and Moodys even as investors are back in droves with new issuance further from here mandatory to avoid another downgrade from BB+/Ba2(Moodys) As Puerto Rico raised $2 B and Illinois raised another $1 B and spreads improved, it remains to be seen how much investor interest is left after such big pickups in the market Illinois raised its GO debt at spreads of 130 bps better than US federal debt CDS with a single A rating and better than the state of Illinois debt

Europe and Asia had a record Monday with China and Japan up 2% as the Jobs report remains afflicted with a high January estimate always proven wrong and is unlikely to give the markets any serious worry lines.

Chain store sales data is due tomorrow, the Time Warner deal is still on, News Corp made a improved profit on cost cuts while Core retail sales are due Thursday and Trade PPI inflation is reported on Friday morning with the Industrial Production data before the open Import and Export Prices will again score a nought (-0.1%) and nought (0.1%)  while improvement in Capacity will not likely mean much in the Industrial production data either but that is just the seasonal low tides. Last week’s Trade deficit aside, the Treasury Budget is 41% ahead of the previous year in Deficits but the good news in December may mean no new surplus in January data reported midweek.

Bitcoin is old news, Apple has ISS playing angel as iCahn recedes but there could be another Julia around the corner before Groundhog day is out. JP Morgan started the day hoping to duck the continuing silent denial in bank trades but has joined the others in a small red scratch at the stroke of 10. Swiss Bank, UBS is likely to get some real positives as it continues leading regulators to its corrupt core in investigation after investigation. Disbney record breaking animation release Frozen continues strong with late openings in the New Year in China and Japan.

 

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