FT Alphaville » US Markets Live transcript 18 Mar 2011

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US Markets Live transcript 18 Mar 2011

Posted by Cardiff Garcia on Mar 18 13:59.

Markets Live chat transcript for the chat ending at 15:01 on 18 Mar 2011. Participants in this chat were: Cardiff Garcia John McDermott thereformedbroker Neil Hume, FT

Gooooood morning Rabble

Good morning all

Cardiff

Btw

Breaking news: Helen Thomas (M&A correspondent) tells me I’m bottom of the FT’s March Madness pool

Despite my in-depth knowledge of netball

And I did a thorough analysis of all the numbers: both average GPAs and SAT scores

Could be your lack of knowledge, but more likely

It’s a Lex stitch up

Knew it

Anyways: quick explanation for those new to the show — if you’re reading this, and you’re not us, you’re the Rabble on the Right

In a location sense, we’re not assuming anything politics-wise

Obviously

And we’re not in the habit of insulting our readers

only ourselves

That should be our new mantra

Speaking of which, Welshy, let’s get right to what’s going on and introduce our guest

yes

Right then, we’ve got a great co-host today

Josh Brown is VP of Fusion Analytics, and author of The Reformed Broker

And besides dashing good looks and wise insight, he has something else in common with FT Alphaville

He too was snubbed in Time Magazine’s recent list of the 25 greatest blogs

Anyways, Nothing Josh writes here should ever be considered to be advice, research or an invitation to buy or sell any securities

Josh, you’ve been disclaimered, though I’m sure you’ll find another way to get yourself in trouble

Say hello

Good morning everyone!

Welcome to US Markets Live

Will be a lot like UK Markets Live

but with way less Ricky Gervais references

except the native hosts don’t know anything, onoly the guest

Will it now

and about 15 pounds chubbier

sorry

just dropped in to say hello

let’s start with Apple straight away

and make sure no on needed a zap

Warning to rude and abusive commenters – your ability to comment will be terminated immediately and permanently, without warning. Henceforth, FTAlphaville has instituted a One Strike and You Are Out policy. We’ve had enough. We are going to clean up these pixels once and for all.

Neil Hume in the house–couldn’t resist supervising the kids, couldja

let me know if they do

itching to use it again

right, apple, what’s happening?

This morning Apple has been downgraded

again?

for the second time this week

Royal Bank of Scotland is out with some interesting comments on Apple (NASDAQ:AAPL) saying their supply suggest that Apple might reduce its 2011 iPad forecast to suppliers to c.35m units from 40m-45m units. Although a cut in Apple’s forecast would be negative for sentiment toward the supply chain, RBS does not see a material impact on earnings.

that’s from Notable Calls

JB – it’s RBS

Yup

we are done with the long name

This is na similar bear case as was laid out by JMP a few days ago

Lots of analysis also saying it’s the most vulnerable tech company to Japan supply shortages

Honey Monster at right points to some chatter about Steve Jobs stepping down

what do we think – how many points is that worth to the stock if the chatter turns out to be true?

Apple down 2.75 on the day so far

Steve Jobs rumours are getting Castro-like

Nasdaq only up about half what the Dow is percentage wise – feels fade-y

how about the indices — any big movers?

in fact, why don’t we take a look at how indices have done since japan broke last week

Breaking RTRS – CVC set to buy Kabel BW for 2.95 bln eur – sources CVC.UL KBWHL.UL LBTYA.O

hardest hit sectors over the last 5 days since the earthquake

CONSUMER GOODS DOWN 6.1%

FINANCIAL SERVICES DOWN 5.9%

INDUSTRIALS DOWN 5.3%

@TB

From a Citi note of March 16

End-demand exposure to Japan is relatively low outside of AAPL where Japan accounts for 8-10% of total op income

Japanese would buy more Apple products if only they were sold in vending machines

What about energy?

energy sector down 4.5% since Japan

but still up about 6% on the year – even after losing half the year’s gains in 5 days

ouch

what’s the message there — straight-up oil story, headline news from MENA?

on energy

if there’s one thing I’ve learned, its that Quaddafi is a man of his word

the cease fire will probably be real

Friday, March 18, 2011 9:33:19 AM RTRS – REBEL SOURCES SAY GADDAFI’S FORCES FIRE ROCKETS AT WESTERN TOWNS OF ZINTAN, MISRATA, AL ARABIYA SAYS, NOT CLEAR IF AFTER LIBYA DECLARES CEASEFIRE

what’s happening in oil?

Some cease fire

any movement, or still flat?

oil is flat to slightly off

any theories as to why that would be?

The yen intervention and its affect on the dollar is likely keeping a lid on oil

On the yen intervention

Great stuff over on AV

And an interesting-ish take from CS

Interestingly, daily positioning data from the Tokyo Financial Exchange show that Japanese margin traders have reacted to the events of the past week by increasing their short-JPY positions against most currencies (Exhibits 3 and 4). In particular, we note that positions are high against the AUD and the USD. The increase in JPY shorts accentuates the risk of additional FX turbulence, in the light of the intervention. In fact, if authorities were to fail to prevent JPY from appreciating further, we would expect the unwind of short positions to add downside pressure on USDJPY.

Today’s intervention should support the recycling of Japan’s current account surplus. We show below that Japanese margin traders have so far responded to the ongoing disaster by sharply increasing their yen shorts. Official support for USDJPY will likely give these positions greater confidence. Note also that the Japanese authorities have been at pains to stress that Japanese institutions are not repatriating funds to Japan. To say that there is no repatriation is almost certainly too extreme, but the 1995 experience does not suggest repatriation will be large. Our colleagues in Japan tell us that they are not seeing large-scale repatriation or plans for this, and we believe that hedge ratios today are much higher than in 1995.

Hang on, Josh is buzzing in my ear about the Cisco dividend

6 cents per share, which will be paid to shareholders starting on April 20

Might be the Cisco connection

the buzzing that is

Cisco is now open for business for a new class of investor

hat dividend can only grow from here

Yup, from S&P

While future dividends will be subject to board approval, assuming this amount is recurring would result in a 1.4% dividend yield, at the mid-point of the company’s previously targeted 1% to 2% yield.

We like that CSCO is increasing its commitment to enhancing shareholder value and putting some of its large $40B cash stockpile and strong free cash flow generation to better use.

$40B!!

Cash

Cisco’s 1.4% dividend vs 0% in my checking account

hmmmm

@TB

and the only risk I have is that Alcatel might get its act together to compete

or that Juniper will grow up

News room chatter last night — annual slaughter, surprised it wasn’t more

no wonder CSCO appears to have bottomed

Josh — what did you just tell me?

KKR’s treasurer just resigned

so much for Henry Kravis and his “deep, deep bench”

Bloomberg reports he is going to a rival firm

Is that a March Madness link?

ask Lex

@ritholtz

good question @ritholtz, we call it RAW

RAW is market chatter – information that has not been formally tested through traditional journalistic channels (PRs etc). The story might be complete rubbish, but if we believe there is some substance to it we will say so. Either way, Reader Beware.

Looks like the NY Mets will end up bought by a finance type

MLB has approved at least three potential bidding groups for the Mets. The groups include one led by the team of Goldman Sachs’ David Heller and Apollo’s Marc Spilker, and another including Steve Starker, co-founder of the global-trading firm BTIG and Ken Dichter, the co-founder of Marquis Jet as potential New York Mets owners.

That’s from the New York Post

No mention of Stevie Cohen this time

Why can’t Cisco use their $40 billion on the Mets

or russian former mafiosos?

right then, quick market roundup

Nasdaq fading, almost flat

Dow up less than 100

S&P up .64%, fading too

minus oil charging higher and with Tech not participating, the fade is asserting itself

Stealing this lift from the boss

RTRS-FRIDAY STATEMENT REGARDING STATUS OF JAPANESE EARTHQUAKE AND IMPACT ON NISSAN AMERICAS OPERATIONS
14:31 18Mar11 RTRS-NISSAN NORTH AMERICA – NISSAN DIVISION REARWARD DAYS’ SUPPLY STANDS AT 47
14:31 18Mar11 RTRS-NISSAN NORTH AMERICA – SUPPLY CHAIN IS BEING CONTINUOUSLY ASSESSED
14:31 18Mar11 RTRS-NISSAN NORTH AMERICA – INFINITI DIVISION REARWARD DAYS’ SUPPLY STANDS AT 49
14:31 18Mar11 RTRS-NISSAN NORTH AMERICA – MANUFACTURING OPERATIONS PLAN TO FOLLOW A NORMAL PRODUCTION SCHEDULE FOR AT LEAST THE NEXT SEVEN DAYS
14:32 18Mar11 RTRS-NISSAN NORTH AMERICA – DOES NOT ANTICIPATE ANY NEAR-TERM IMPACT ON SALES OR VEHICLE AVAILABILITY FROM JAPAN EARTHQUAKE

Yen hovering around 81.14

Some commentary just now from Barcap on this

While the effectiveness of the intervention remains to be seen, in our view the G7 delivered a strong message and action, and did not undershoot expectations. As JPY appreciation since the earthquake has been largely attributable to the market speculation over the repatriation of funds by Japanese insurance companies and retail investors, and not necessarily to the actual repatriation flows, joint G7 intervention is likely to have a meaningful impact in discouraging speculative JPY purchases. However, general risk aversion, currently driven by the unstable situation at Japan’s damaged nuclear power plant and ongoing tension in the Middle East, tends to strengthen the JPY. In order to ease the upward pressure on the JPY, a resolution of the nuclear plant’s problems and an easing of tensions in the Middle East are required. The key level to be watched for the USD/JPY might be 83.30, the high just after the earthquake.

here’s the g7 upshot – the NY Fed is now rockin and rollin officially

from the AP

The New York Federal Reserve Bank is confirming that it has intervened in currency markets for the first time in more than a decade.

ah, should have addeed the word “explicitly” there

When was the last time?

the last time the NY Fed intervened in the currency markets

was in 2000

to help support the brand new Euro currency’s launch

at least “officially”

Ah, the good old days, full of hope

and that brings us to the Newe York Times paywall

where to begin…

(Obviously)

yes, as smoothe a segue as i’ve seen, anyways

the good news for us business newshounds is that DealBook will continue to scrape the NYT business section for us

kind of like holding out a free sample tray in front of the cash register line

I’m not a pig, I’ll just have the sample

in the meantime, links to the NYT from blogs like Alphaville and The Reformed Broker will still be free

(John and I suppressing urge to laugh, comment, etc…)

so start with your favorite bloggers and you’ll hardly notice

rant over?

fine advice

what’s next?

btw, some commentary on gold in light of recent events from GS, fresh in our inbox

We expect gold prices to rally toward our 3-month price target of $1480/toz, and continue to recommend a long gold trade
While the protests and threat to oil supplies in the Middle East and North Africa drove COMEX gold prices to a new record high of $1437/toz on March 2, the events in Japan have paradoxically sent gold prices back below $1400/toz despite the ongoing decline in US 10-year TIPS yields. Given the decline in US real interest rates, we see the recent retracement in gold prices as offering a good buying opportunity, and maintain our long gold trading recommendation as we expect gold to rally to our 3-month price target of $1480/toz.

We expect gold to rally following the recent events, but the PGM outlook is increasingly tied to the speed of Japan’s recovery
The sell-off in PGM prices accelerated after the Japanese earthquake, with platinum prices down 5% and palladium prices down 9% this week. While PGM prices softened with the rise in oil prices accompanying the MENA events, the recent declines reflect the potential loss of autocatalyst demand from idled automobile manufacturing in Japan. Not only does Japan account for 12.6% of global automobile production, it also accounts for a large share of global industrial PGM consumption: 16.4% for platinum and 18.1% for palladium in 2010.

Josh thinks gold is a $1500 story; John, any thoughts on silver, while we’re here?

I liked this take

Silver has sharply outperformed not just base metals, but also its sister-metal gold’, track the Global Commodities team, ‘since the economic upturn… an advantage silver has is that it is only 2.5% of the price of gold, and so it has a broader appeal across populations such as those of the politically troubled MENA nations… silver also has an added positive over gold in terms of its rapidly expanding use across applications in electronics, solar panels, water purification, batteries, plasma screens, etc… problem is, much of this looks priced in… with the gold/silver ratio having fallen to its lowest level in many years… we think silver could be vulnerable to a near-term reversal in its sharp price rise despite its positive fundamentals… however, we expect that during the rest of H1 ‘11 silver will hold above the recent lows that it reached in February 2011’.Double_Link_Arrow_Small.gif

we think silver could be vulnerable to a near-term reversal in its sharp price rise despite its positive fundamentals… however, we expect that during the rest of H1 ‘11 silver will hold above the recent lows that it reached in February

from Citi

so be careful out there

Josh – your take?

the rationale on silver is both the higher gold consensus and that the early 1980′s nominal highs ($50) will be kissed at some point…

but even at the nominal silver highs from 30 years ago of $50 or so, you’re still looking at inflation-adjusted highs of $130

Josh, want to take on the question from paver

uestion for JB How does weakening the yen affect the Japanese need to obtain what I guess are the significant commodities necessary for rebuilding? How much does it offset the need for competitive exports?

@Paver – at its heart, this appears to be a timber story

the name that keeps coming up as the commodity rebuilding play seems to be WY – Weyerhaueser

a timber giant with a name I deplore having to spell in public

RTRS – YEMEN PRESIDENT SALEH SAYS NATIONAL DEFENCE COUNCIL DECLARES STATE OF EMERGENCY IN YEMEN=3

Thanks Josh, and Barcap have a note on what this might mean for liquified natgas

In the short term, the loss of thermal generation facilities is likely to result in a drop of LNG demand; however, the longer- term gains for substitute fuels from the nuclear outages should greatly exceed this amount. To replace fully the current shut-in nuclear capacity with a mix of fossil fuels similar to the one observed in the aftermath of the Kashiwazaki-Kariwa shut down, we estimate an increase of 0.8 Bcf/d for LNG consumption. That figure could obviously grow quickly if other nuclear installations were required to be upgraded. Earlier we had anticipated the global LNG markets to be oversupplied, with supply growth potential of 2.4 Bcf/d while demand was on track to increase by just 1.5 Bcf/d. A 0.8 Bcf/d boost to Japanese consumption relative to our prior estimates would bring global LNG demand growth in line with what the planned supply additions can accommodate. At this time, we do not expect a supply shortfall, but the incremental purchases should strengthen spot LNG prices. The US might experience a small 0.5-0.6 Bcf/d loss of LNG imports versus recent levels of 1.3 Bcf/d, just 2% of supply. But this alone will not tighten US markets, although it could reduce, somewhat, the need for gas to displace coal. European markets could see a more significant impact, as LNG accounted for 18.5% of UK gas supplies in 2010.

(Which rubber stamps an increasingly violent situation)

LANC looks to be a food-related story…dont know the name well…ripping with no news out

they had an institutional roadshow this week

apparently they told the story well

Not sure how related this is, but here’s Citi on the food component of yesterday’s cpi

In February, food at home prices increased sequentially for the second consecutive month, as year-over-year food at home prices increased +285 bps in February (vs. +214 bps in January). The increase in February was the largest since March 2009. February marked the 10th consecutive month of rising food at home prices. Food retailers also seem to be proving that they can pass a portion of the price increases through, as SWY noted on its 4Q10 EPS call that retail prices have increased approx. +50 to 70 bps YOY. In addition, KR said on its 4Q10 EPS conference call that inflation could be a modest tailwind in 2011, much like it was in 2009.

All 10 primary categories in the CPI food at home index experienced price increases YOY. Meat (+7.7%) and seafood (+6.0%) experienced the greatest price increases, while the remaining categories also increased YOY including: eggs +3.4%, milk +3.3%, fresh fruit and vegetables +3.0%, poultry +2.1%, cheese and related products +1.8%, sugars and sweets +0.8%, and cereals and bakery +1.5%. Processed fruits and vegetables’ prices turned positive for the first time in 15 months (+0.8%).

@Rain – when was the last no-fly zone?

@Tom Brakke what was the q?

Hey Tom

it was about your 1% post from October ~ when will they finally listen to you and how will assets react?

They will not raise rates anytime soon apparently

My take is that asset prices would sell off immediately

and then get acclimated

and recover

more importantly – there would be a psychological shift that the recovery is complete

and that if you’re going to borrow and invest, the time is now

“fake it til you make it”

Another question from the rabble

Marx:
@JB. Since the nuclear incident in Japan, the share price of the uranium producers have come down significantly. Do you have a view as to the medium/long term prospect of the these companies.

@Marx I don’t like their prospects at all. The price of UX will rebound as there are 400 OPERATING reactors worldwide

But (big BUT)

the hundreds of proposals from China, India, US sites will now be slower in coming or not at all

so I am using any bounce in UX commodity strength to lighten up, not buying dips anymore

So, given that we’re talked about gold

which was banned last week

yes, i forgot to give myself a yellow card for that

we’ll let josh finish with the other banned subject

Let’s go out on a ridiculous note

last week AND FOREVER

Charlie Sheen will make $7 million in one month from his “Charlie Sheen LIVE: My Violent Torpedo of Truth” tour, according to a new report.

The former “Two and a Half Men” star is set to perform on 21 dates and will receive 85 percent of the profits — making his cut around $250,000 to $275,000 for each 75-minute show, sources told the website. Tour promoter Live Nation will get the remaining 15 percent,

since there is some (“some”) corporate angle

What exactly will he be doing during this “show”

seriously, reprising Bud Fox monologues?

chainsmoking?

mixing metaphors?

I am a violent torpedo is market obsession

Chaz decided it’s a town for the losers– he’s pulling outta here to win

OK, charlie sheen now a banned topic again

sorry

yellow card for Josh, and withdrawn again

btw, an actual comment from yesterday’s post

Until you get some pom pom girls on USA ML, I will never be beaten into submission to participate

Ok, since we’re at risk

Of turning this into Markets Live – Hollywood edition

let’s wrap it up

yeah, time to go

Huge thanks to Josh for his time and thoughts

thanks for having me everyone

really enjoyed the chat

TRB-crest Out

And for the rabble for continuing to put up with this experiment, stick with us

yes, please

Bye everyone

Have a great weekend

Checking out, see you next week

This entry was posted by Cardiff Garcia on Friday, March 18th, 2011 at 13:59 and is filed under Uncategorized. Edit this entry.

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US Markets Live transcript 18 Mar 2011

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