D&D Securities Morning Call

A bunch of things about this morning’s D&D Securities Company blast caught my eye:

The Banks led the market higher. -Simple English and the simple concept that for markets to go higher, we need the banks to work. Here they are! Apart from the wobble in the last 2 years, the way to outperform in Canada has been to overweight the banks (for decades). The knock from the analysts is again that a big chunk of the profit gain is trading revenue. What is that? It’s the energy trading and hedging desk, the Forex desk, the Bondies trading to make room for all this government debt, those Algo guys and the ETF’s. We think that this level of activity is here to stay and so this is the new normal. Since the crash of 08/09, the world has changed – though we are not yet entirely sure how. More Trading activity is one thing we are sure about though. We aren’t going back to those quiet, sedate old days. It’s quite generational.

Treasury sold $28B 7yr notes at 3.092% and the bid to cover was higher than the last lot. We continue to believe there’s enough interest out there to keep these auctions going successfully. One consequence is that the US$ looks like the pressure is off for a while and its short term rally can continue. That’s showing up in the price of Gold which seems range bound between $935 and $960. However, this action of higher lows and lower highs is coiling gold up for a big move. The targets would be $850 on the downside and a breakout to $1050 on the upside. We would bet it goes up and that oil and the C$ also follow. -Another warning for the Corporate clients to start preparing their businesses for the C$ at par. By implication, the US$ will resume its long term decline, and a sense of that is in how the DOW seems to be getting traction.

In the broader markets, Japan’s CPI was down 2.2%. And we all know where D&D stands on that. The Whisper that iPhone will invade the Middle Kingdom is sending those shares higher. That’s almost as big a deal as the US launch. -Really a sign of the times. Lastly, FDIC is clearly having funding problems as 81 banks have been closed this year and there’s another 400 odd in trouble. The trial balloon of letting Private Equity invest makes sense and seems to be flying ok. Just pity those poor banks who screwed up and have to be “rescued” by private equity.

Cramer is saying to buy the dips and to buy oil, copper, financial services, and technology. Looks like you could have almost enough fun to hurt yourself…

…Invest the money.

MRM