D&D Securities "The Morning Call"

One of the better market bloggers I know isn’t a blogger at all. He does all of the work but shares his daily fare only with his clients. His name is Ed Pennock and he’s a very experienced institutional salesman at an investment banking firm called D&D Securities. Each morning he does a very insightful email blast to his client base. I’ve started to lobby him to put these morning comments into blog format, maybe 3 or 5 hours or so after his own clients have received them and had the chance to distill their thoughts and react to his advice and guidance.

Now that he thinks people might want to dip their toes into the water, I thought I’d share it all with you. If you agree that he should join us in the blogosphere, add a comment to this post if you don’t mind. Easier than starting an online petition ;-).

“Good morning. The unemployment number on Friday had different (positive and negative) interpretations. We know that it hit consensus and was well below some alarmist whisper numbers. Looking at the percentage of jobs lost, we are at 1982 levels and three quarters of the way to 1958 and half of 1945. The unemployment at 8.1% looks bad but not yet horrific until you add the discouraged workers to that and get almost 15%. The market didn’t seem to react and in the end the DOW was up and the TSX was down 30 points. Agriculture stocks lost ground but the price of oil helped energy stocks do well in Toronto.

Maudlin wrote a “must read” piece over the weekend. In an example he bought a residential mortgage backed security (RMBS) for 60 cents. That would mean that to lose money there would have to be an 80% foreclosure rate with a resultant 50% loss before you lose money. However, lets say because of cheap money that 50% of the mortgagees refinanced you would get a big capital gain and a yield to maturity north of 10%.

The banks have written off $700B in mark-to-market but they are not real losses yet. The rules dictate that they raise more equity and the taxpayers pay them to sell.

The expectation/ rumour is that OPEC will cut production for a 4th time. One measure of the market is that the Ural (Russian) to Brent shows the Russian oil trading at a 7 month high. Newspapers in Toronto wrote about all the oil being stored in Tankers. The amount mentioned is 80mm bbls which is one day’s consumption.

This morning the news is that the Brits are taking over 70% plus of Lloyds. This is because the rights issue looks like it failed. Another scary precedent which is pounding overseas markets (has Tokyo at 25 year lows) and the next bank being rumoured to go is Barclays PLC. Stay tuned.

It could be the time again to invest the money…………………………….in resources.

Quotes of the Day:
“Middle age is when your age starts to show around your middle.”

– Bob Hope”

MRM