Sunday, March 14, 2010

BAGAKOAA March 14, 2010 The week ahead beware of the Fed


 March 14, 2010 The week ahead beware of the Fed

Before I get into the Fed stuff and the week ahead, I wanted to let you know that a little side bar in Baron’s mentioned that the editor in chief had won a business journalism award. As most of you know there is a little bit of a frustrated writer in me so the side bar got my attention.

I started reading some of the articles by Randall W. Forsyth and I have to say he is a great writer, who apparently researches the hell out of topics and gets to the point. I encourage you to read his “Up and Downs on Wall Street” Column on line. Good stuff. In this weeks Baron’s he writes a great article about how the Chinese could take the thunder out of any Fed announcement on Tuesday by doing more tightening of their own. Keep in mind the Chinese has been tightening for two months. Remember I mentioned they increased their banks’ reserve requirements so the banks can not over extend. That is one way to make money more expensive, just by making more scarce. The big slap your face way is an interest rate increase. Anyway if you want to be well informed about macroeconomic current events, read some of Forsyth’s stuff.

OK, I already mentioned the Fed is announcing strategy on Tuesday. While almost no one expects an increase in the prime, the market will be looking to forward looking statements by the Chair, Bernanke. Be on the look out for indications that they are going to increase the interest rate on paid in reserves, as this will be one way to exit the bail out strategy of the last 18 months. There are a few people saying we might see a quarter point on the prime, but I don’t think so. Time will tell.

Although not a big event look for more positive growth in the Empire Mfg Survey report on Monday. It should be a precursor for the Industrial Production report later in the day on Monday. I am surprised to find all consensus figures are flat. 0 Growth is expected in production. Perhaps everyone is playing the weather factor, but I think it will be up and a nice little positive bump for the market on Monday. My gut was telling me this and I had the advantage of spending 20 hours on I-15 in California and I noticed how many trucks were on the road and riding low. (Riding low means they were heavy, north bound and south bound.) Riding low means to me the same thing as full bags leaving the mall. Production and consumption is taking place.

Housing starts also report on Tuesday morning. The results will hit the market at the opening. The consensus is 565 thousand units. I don’t think they will be that high and it is a good thing. The last thing real estate needs right now is a bigger inventory of homes. My guess is, DRUM ROLL. . . 535 thousand units.

I am staying on the contrarian role with the Producers Price index. The consensus is flat to a minus .2%. I am looking for an increase. Here is my reasoning. Who is the largest retailer in the world? WMT, that’s right Walmart. Remember that they are getting squeezed because of aggressive pricing and flat but not decreasing costs. In their quarterly report they indicated that their aggressive holiday pricing hurt margins. So what do you do if you are Walmart knowing you can’t squeeze your vendors any more. You increase prices. So watch the PPI on Wednesday and the CPI on Thursday for subtle but measurable increases in prices.

Now for the earnings coming out next week. First off if you want to know one of the most complete lists of earnings reports about to be released, go to Yahoo Finance. Here is the link:

It not only shows you the list of earnings call, but provides the link where you can listen to the live or archived earnings calls. They are cool to listen to, but again I have no life. I will not kid you and tell you I have all of the earnings figured out for next week, but here are a couple for Monday if you want to get up early and make a buck or two at the openings. Of the 400 or so stocks due to report on Monday here are my thoughts on a few.

William Sanoma is looking to more than double last years earning quarter on quarter. The street guess is 73 cents and they need to do that to get their PE back down from orbit. Their PE is about 42 which is rich, but I think 73 cents is doable and breakable. Look for 75 and a nice bump in the stock maybe to 26.25 by the end of trading.

COMS, 3COM is an 8.00 stock selling for 7.75. Yawn. 8 cents a share is the number do I hear 8 looking for nine, 8 looking for nine, will anybody bid eight. Good call, I am saying 5 cents a share. 3Com is not sexy or exciting. They just got a nice but questionable contract out of Australia. Yawn!

OK I am tired, but want to leave you with one more cool tool. In Play is a Real Time minute by minute news service by Yahoo. It is one of the first services that really tells you what is going on as soon as it becomes available. Last week I checked out a couple of breaking stories and In Play had the clock beat by minutes. Here is how I would use it for you fluffy casino monkey day traders. Got to In Play at about 4:30 am. No I do not have a life and quit saying that. Go there at 4:30, read some of the posting and look for an opening play. This is day trading at its best. You will make money and you will loose money but it’s more interesting and rewarding than the Lotto. Do your homework before any trade.

In closing, PLEASE be sure you have your stops in place by Monday night west coast time. If China or the Fed do anything whacky, it could be a 10-15% correction OUCH!

Salve Lucrum


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