For years, investors have been playing the “weak-dollar” trade in diversifying by placing more dollars into commodities such as gold, into non-dollar currencies, and foreign stock markets, i.e. Brazil. With a near 10% employment number upon the U.S., market participants are convinced (particularly after recent statements by Chairman Bernanke) that monetary policy will remain loose thus allowing plentiful capital dollar liquidity to flood the markets. Indeed, in a CNBC interview I recently saw, the world’s biggest bond trader, Bill Gross, noted that low interest rates weakening the currency is part of the grand plan because one way for a nation to lessen one’s debt burden is to devalue its currency. As commodities and equities markets have rallied, corporations have played the ‘weak dollar’ game big-time in borrowing dollars to expand their foreign businesses. The same thing was one in Britain in the 1960’s as the pound declined in value and their world dominance ended with British capital and jobs exiting overseas as their currency fell in value. Many people believe that manufacturing jobs will return state-side, but capital outflows tend to overwhelm the uptick in jobs over time- ask people in Mexico in the 1990’s or Russia under Yeltsin while noting that nations like China with a stable currency have had an influx of capital and jobs. In a stat culled from a recent piece by noted economist David Malpass, I was stunned to read the following statistic: in euro terms, the S&P hit a high of 1700 in early 2000 yet stands today –almost 10 years later- at 700! Put another way, U.S. real per capita GDP is down 25% in that time while Germany’s is up 4%. Thus, with a vast majority of the market capitalization of U.S. Stocks held by, well, Americans, the dollar devaluation has sparked a huge drop-off in the U.S. share of global wealth. It is beyond my limited scope much less intelligence to propose a solution here although it seems that a strong dollar policy is needed rather than the weak dollar tenet in place. For day traders, this is definitely a macro piece, but be aware that the themes touched on here will become active conversation topics in coming months and years. Yesterday, the markets moved in near lock-step with the dollar's performance against the Euro and indeed, futures were adversely affected this morning by a weak Euro. Thus, continue to watch the dollar’s performance day-in day-out as it will begin to affect day trading much less your long-term investments as well.
Markets in Asia were hit overnight with Hong Kong down 1 3/4%. In Europe, the bourses are down 1 to 1 1/2% across the board. Overnight, Lloyd's and the Royal Bank of Scotland
all received a massive bailout putting pressure on the Euro due to an infusion of Euro paper into the system. This in turn put pressure on the futures. However, Berkshire
Hathaway's announced purchase of Burlington Northern (BNI) sparked a nice rally in the futures (although they are still down at this writing). For today, watch for
the dollar moves against the Euro as that will be a major catalyst should such a move become exaggerated. Otherwise, focus on the slew of news out there from the mergers to the
earnings flow and trade those stocks accordingly.
Watch list:
11032009Eriklist%20%282%29.zip
Reiterating-Please understand that if the ideas do not get to the hoped for set-ups cited below, more often than not, one should not blindly trade the symbol next to said idea. If the whole story is not there -If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified.If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-
Good- The following stocks have good news and/or a strong technical pattern
BDK- being bought out by SWK for 1.275 shares of BDK stock
APC- decent earnings
CAR- great earnings
HLF- great earnings
DDRX- to be acquired by PEET for 26- 17.33 in cash and 8.67 in PEET stock; watch other coffee stocks such as GMCR
PLX- closed near a high on a rumor it is to be acquired by Pfizer
JAH- featured on "Mad Money" last night
TXRH- solid earnings
CTSH- good earnings
UNP, NSC, CSX, CNI- among the railroads which will move in sympathy with the BNI takeover today today
JNJ- announced restructuring
USEG_ positive oil well news
MA- good earnings; V may move in sympathy
RL- good earnings
CVC- decent earnings
Bad-The following stocks have bad news and/or a weak technical pattern
CHK- beat earnings estimates, but missed revenue guidance
SM- lukewarm earnings
SVR- bad earnings
CRK- poor earnings
FST- poor earnings
GTXI- closed near a low after the FDA required the company to submit more paperwork
LDK- closed near a low after a contract from a major customer was terminated
PALM- closed near a low
KND- terrbile earnings outlook
ENR- poor earnings
RTI- poor earnings
DBD- poor earnings
RCL- bad earnings outlook
RDC- poor earnings
Earnings:
TUES NOV 3 BEFORE
ABC ACOR ADM
AMT ANR BLC
CAM CHD COL
CTSH CVC DAN
DNR EMR ENR
FCH GET HCP
HNT ICE JOE
JRCC LPX MA
MHS MRO MVL
OSK PKD PQ
RCL RDC RL
RTI SFY STE
TEVA THC VNO
XCO XEC
TUES NOV 3 AFTER
CBL CCI CNW
CRL DLB DRIV
DVA ESS EXPD
FSP HIG INT
JKHY KFT MWA
MYGN OEH OIS
OKE PBI PXD
QSFT SGY STEC
TRLG UNM VVUS
Good luck today.Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner
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