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At the open...4-26-11

Equity Markets…Asian markets were lower in overnight trading as Australia remains closed for Easter Holiday…European indices are higher in the morning session and domestic futures are indicating a more or less flat opening in the US…

Earnings – decent slate of earnings with about 8% of the S&P 500 reporting today…so far this morning, Ford Motor leads the way with announced earnings 25% higher than the consensus expectation (also sales were 7.6% higher than estimated)…

News –

• Petrobras (PBR) continues to maintain gasoline prices at 2009 levels under Brazilian government mandate as the government struggles to control inflation…unfortunately for them, price controls have never worked.
• Guess what...the 2010 Greek budget deficit was revised UP to 10.5% of GDP from the 9.4% targeted by the Greek authorities. While better than the 15.4% of GDP in 2009 it remains unsustainable and represents another setback to the government’s plan to work its way out of the hole. Here’s an idea of how bad it is in Greece…the state controlled pension fund originally reported a €900 million surplus then they later reported a €500 million deficit. The current set of austerity plans calls for additional cuts to offset the wider than anticipated 2010 deficit…of course, following their stellar prognostication track record why wouldn’t people believe the authorities when they say that there is no reason for a Greek debt restructuring. As you may expect, spreads are wider in the PIIGS…
• The FOMC concludes their meeting tomorrow (announcement at 14:15)…most expect that short term rates will remain unchanged and that we’ll get the “…extended period of time” lingo…the thought process here remains that while commodity inflation is raging across the world, there will be substitution behavior on the part of consumers as they spend more disposable income on food and energy it leaves less to spend elsewhere…just as banks have reported paltry loan growth but higher credit card usage, this will likely slow unless wages start to grow which is unlikely unless there’s an increase in demand that outstrips the current productive capacity…which by the way remains in the mid-70’s. Once again, it’s hard to see sustained inflation without wage push.
• Banks are selling credit card receivables backed debt again and investors are snapping up the higher yielding debt…
• Spread rally and renewed demand for bank debt has saved the LBO companies some $425 mm so far this year via refinanced loans and debt

Oil markets – crude is slightly lower across the board this morning but domestic gasoline prices still hover around $4/gallon on average and prices above $5/gallon have been seen in some cities across the country…upheaval in the MENA continues…

• In economic releases today we get more housing price data from Case/Shillar and the Richmond Fed index (looking for a reading of 20)…all eyes/ears are tuned for tomorrow at 14:15 as the FOMC will announce its rate decision…the next meeting will not be until June 23rd

Phillip Pennell, CFA
Turnberry Capital Management
(203) 861-2708 (Direct)
(203) 861-2700 (Trading)
(203) 917-2255 (Mobile)

The contents of this posting do not constitute recommendations to buy or sell specific securities. Any individual wishing to buy or sell securities for their investment account or that of others should consult with their investment advisor prior to entering into any securities related transaction

Today is: June 29, 2017 - 3:42am
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