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Five Things You Need to Know: Market-Moving Watch List, ChinEx Centurion Card?, [This Space Available for Advertising], Copper, Starbucks Closer to Opening New Starbucks in Starbucks


What you need to know (and what it means)!


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Market-Moving Watch List

While today is a relatively quiet day in terms of market-moving economic data, things get hot and heavy beginning tomorrow. Five potentially market-moving datapoints you need to be aware of this week and where to find them:

2. ChinEx Centurion Card?

The People's Bank of China is considering issuing a "loans card'' to corporate borrowers to tighten lending approvals and help curb lending, according to Bloomberg.

  • Wary of potential bad loans and easy access to credit, Central bank governor Zhou Xiaochuan is trying to cap loans, which rose 15.2 percent to 22.1 trillion yuan ($2.81 trillion) at the end of October.
  • China has spent $400 billion, or 18 percent of the nation's 2005 gross domestic products, to bail out banks since 1998.
  • Chinese banks issued 17 billion yuan of new loans last month net of redemptions, down from 26.4 billion yuan a year earlier, Bloomberg said.
  • Under the proposed rules, corporate borrowers must apply for the one-year cards before loans can be obtained from the country's financial lenders, the central bank said.
  • Companies are banned from leasing or lending the cards to other borrowers, and the central bank will cancel the card in the event of the borrower's bankruptcy or insolvency.
  • Bottom line: China's version of the Amex Centurion Card.

3. [This Space Available for Advertising]

The National Association of Realtors, the trade group that represents realtors, recently unleashed a $40 million public awareness* campaign. Not to be outdone, the National Association of Home Builders in Washington, D.C., is serving up some "public awareness" of its own.

  • According to the Palm Beach Post, the National Association of Home Builders in Washington, D.C., is making a package of ready-to-use ads available to its members for free.
  • The package includes sample letters to the editor, op-ed pieces and newspaper columns.
  • According to the Palm Beach Post, a press release says, "Housing economists are predicting that the current adjustment period in housing from the unsustainable high levels of the past few years will be relatively short-lived, bottoming out by the middle of next year and leaving many markets with an insufficient supply of new homes."
  • This spate of "public awareness" campaigns from the NAR and NAHB is admirable.
  • But where were they back before the boom began?
  • Also, if the NAR is spending $40 million to make the public aware that "It's a great time to buy a home," can we count on them to spend a little bit to tell us that "It's a horrible time to buy a home" or will we need to figure that out on our own?
  • Anyway, all these helpful "public awareness" campaigns from realtor and builder groups caused us to wonder what exactly is the difference between a public awareness campaign and an advertising campaign?
  • Can you distinguish between the advertising campaigns and public awareness campaigns below?

Is it Public Awareness or Advertisement? Ask yourself, "Who benefits?".

1) U.S. Department of Forestry: "Only You Can Prevent Forest Fires."
2) Coca-Cola: "It's the Real Thing."
3) National Association of Realtors: "It's a great time to buy or sell a home."
4) U.S. Government: "Just Say No to Drugs."
5) National Ad Council/Keep America Beautiful: "People Start Pollution. People can stop it."

People Start Dis-ingenuousness. People can stop it.

4. Copper

2) : "."3) 4) : "." 5) :

Copper is often said to be "the metal with a PhD in Economics." If that's the case, Dr. Copper has some bad news about the economy.

  • Almost two months ago, Minyanville Professor Greg Weldon noted the collapse in forward spreads related to Copper.
  • "Copper's spreads are in free fall, and this spread has completely wiped out all of its HUGE $200+ per tonne backwardation and has collapsed into contango."
  • Backwardation? Contango? What on earth does that mean?
  • Backwardation is when the price of a commodity is lower in the distant delivery months than in the near delivery months.
  • Contango is basically the opposite of backwardation and occurs when the distant delivery prices exceed spot market prices.
  • Contango is normal for non-perishable commodities and should usually equal the "cost of carry."
  • The cost of carry includes what it costs to warehouse the commodity and interest that would have been paid on the money tied up in the commodity if it were invested in short-term Treasuries.
  • Uh, ok, but what does that mean to someone who doesn't care much about the price of copper?
  • When commodity's futures contracts are in the abnormal situation called "backwardation", with contracts that are closer to expiration trading higher than contracts farther away from expiration, it typically means there are supply deficiencies in the spot (or physical) market.
  • What Professor Weldon noted back in September is that the collapse of copper spreads into contango suggested an amply supplied copper market for the first time since the fourth quarter of 2003.
  • Now, copper is at a critical juncture tehcnically, with Professor Bennet Sedacca suggesting there is a bubble in the good economic doctor's price chart similar to the Nasdaq bubble of the late 90s.

Copper Bubble like Nasdaq 2000 Bubble?

5. Starbucks Closer to Opening New Starbucks in Starbucks

Starbucks is opening its second store inside Macy's Herald Square New York City Flagship store today, according to the New York Post, edging closer to the day it opens a Starbucks coffee shop inside an existing Starbucks coffee shop.

  • "While you may think there is a Starbucks on every corner, get over it, because there's now going to be two Starbucks on many corners," Marshal Cohen, chief retail analyst for market research firm NPD Group, told the New York Post.
  • The second Macy's location for Starbucks replaces a Barnie's Coffee & Tea Co., a chain based in Orlando, Fla., which sold more than half its estimated 100 stores to Starbucks last spring, the Post said.
  • The second Macy's location marks the first time Starbucks has opened up two stores under the same retailer's roof.
  • The new location is three times as large as the first Macy's Starbucks, which opened in 2002.
  • The new location gives Starbucks customers a choice of enjoying a Starbucks coffee overlooking mens accessories or ladies sportswear.
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