D&D Note (5-29-2012)
The next US jobs report (for May) will determine just about everything for the FED. Next FOMC meeting is in the third week of June – same time as the Greek elections. Could we see QE3, another LTRO, further RRR reduction in China? Simply put investors will have a glimpse into the crystal ball over the next month. The window for central bank action is June.
What the global markets need is some sort of coordinated easing by the major central banks. Although getting a meaningful QE out of the FED is not as likely as seeing further easing from China. And probably least likely is having Euro bonds, more likely is some sort of European equivalent to the FDIC to backstop Euro banks. Although the coming data, and elections will determine the likelihood of global fiscal stimulus.
To the surprise of many investors the American index futures where positive throughout the 3-day weekend and stayed green into today’s trading session. Much of the positive action through the weekend was on the headline that the Greek pro-bailout party is ahead in latest polling.
Although back to reality is that Spanish banks might not really have the Tier-1 capital ratio that was once thought, on the back of Bankia needing an additional 19 billion Euro’s to recapitalize.
Facebook (FB) continued its “re-valuation” slide in stock price falling 9.62% to close at $28.84 a share. When looking at the company on a PEG ratio basis it would tell you the company has further to fall before finding a bottom. If FB had a PEG of 1 the stock price would be around $19. If you where generous enough to give it the same PEG as IBM (IBM) at 1.3 then it would be valued at $26 a share.
In crazier FB news… now there are talks of instead of tackling mobile advertising the company is looking at an actual phone… yes talks about possibly buying Research in Motion (RIMM). Really? D&D would ask investors to think just how many Facebook users have a blackberry opposed to an iPhone or Android? RIMM was halted in after hours today and then resumed falling 13% and is looking more an more like another Palm.
In a recent report of Hedge Fund top holdings, Apple (AAPL) continues to be THE top holding. Today the stock rallied 1.77% and closed at $572.27. If the company can hold a close in the $575-580 range the bull case is fully reopened.
The DOW (INDU) gained 1.01% to close at 12,580.69. The Nasdaq (COMP) gained 1.18% to close at 2,870.99. And the S&P 500 (SPX) rose 1.11% to close at 1,332.42. Don’t be surprised to see some profit taking in tomorrow’s session.
Oil is finding a floor perhaps around $90 a barrel. Today black gold fell 10 cents to settle at $90.76 a barrel. If Greece does leave the Eurozone we could see a lot of pressure on WTI and BRENT seeing both continue their slide and breaking through a few re-tracements. More likely is limited downside to $85 WTI and $100 BRENT.
Gold fell $20.02 to close at $1,552.80 an ounce.
The 10-Year Note saw further buying today pushing the yield back down near the record low. Currently the yield is now 1.72% and the only thing more stupid than buying treasuries is loading up on Facebook right now.
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