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Five Things You Need to Know for Friday


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


Five things you need to know to stay ahead of the pack on Wall Street.

1. What'd you call me?

Very soon the Treasury Department will sit down and decide whether to brand China a "currency manipulator." Although Treasury evaluates this status on a biannual basis, why does it suddenly seem so new? And what in the world does it mean to be labeled a "currency manipulator"?

  • After more than a year of speculation, last July China finally announced it would change its currency regime to calculate the renminbi (RMB) against a basket of currencies.
  • Previously the RMB had been pegged to the US dollar since 1994 in a tight band.
  • The currencies in the basket are mostly made up of China's largest trading partners: U.S. Japan, Euro Zone and S. Korea.
  • The move was China's initial step toward a true market-based exchange rate.
  • The issue of the "currency manipulator" designation is visited by U.S. Treasury Dept. twice yearly, in October and April.
  • The move by China to ease the dollar peg avoided the designation of "currency manipulator" last October.
  • What is the "currency manipulator" designation?
  • Basically, it is a formal designation that paves the way for sanctions.
  • Although the process sounds like a group of people just sit in a room and then vote yay or nay on the label, it was actually conceived as a way to formally evaluate a country's currency practices.
  • There are strict conditions that must be met to clarify that a country is engaged in a "protracted large-scale intervention in one direction in the exchange market."
  • Yesterday , NY Fed President Timothy Geithner indicated that the Fed believes China's dollar trades have the potential to be inflationary.

2. Jobs

Not that one, the other one, as in work, employment.

  • U.S. non-farm payrolls increased by a better-than-expected 243,000 in February, the Labor Department said.
  • Bloomberg survey was looking for 210,000 jobs added.
  • The jobless rate ticked back to 4.8% in February from a five-year low of 4.7% in January.
  • The number of unemployed people rose by 153,000 to 7.2 million.
  • The blizzard in the Northeast led many economists to trim their projections ahead of the data.
  • February data has the highest standard error vs. economist forecasts of all monthly reports.
  • Internals of the report will grease everyone's wheels, bulls and bears alike. Imagine that.

3. Fed's Flow of Funds Report

U.S. household net worth rose to a record in the fourth quarter but consumers took on more debt. Meanwhile, companies continued to pile up cash, Federal Reserve figures showed.

  • Household net worth rose to a record $52.1 trillion in the fourth quarter from $50.96 trillion in the third quarter thanks to rising property values.
  • Debt/net worth ratios for the household sector edged up from 21.9% in Q3 to 22.1% in Q4 to stand at a record high.
  • According to David Rosenberg at Merrill Lynch, the classic household debt/income ratio hit a new all-time high of 129% from 128.3% in Q3 and 120% a year ago. This metric first crossed the 100% barrier in the fourth quarter in 2000 and has managed to do something that has never been done before, which is to rise nearly 30 percentage points over a five-year time span.
  • What took 15 years to accomplish (from 1985 to 2000), and over 30 years prior to that, we did in the grand total of five years, in what has been the most pronounced credit-financed consumer spending spree of all time.
  • Meanwhile, U.S. companies continued to earn more money than they spent on plants and equipment in the fourth quarter.
  • This suggests they certainly have the means to incest in coming months. The question is, do they have the desire?
  • Bulls are pointing to high corporate cash levels as evidence the economy can continue to grow even if consumers cut back on spending.
  • Bears point to corporate cash levels as evidence companies are becoming more risk averse.

4. Robert Iger, the Anaheim Steamroller

Today, Disney CEO Robert Iger faces shareholders for the first time since taking over in October from longtime CEO Michael Eisner.

  • Although no fireworks are expected, at least relative to the Eisner years, a number of issues will be touched on, including Disney's recent purchase of Pixar Animation Studios (PIXR) and possibly the choice of a new chairman to replace George Mitchell who was scheduled to retire at the end of last year but agreed to stay on to smooth Iger's transition.
  • Pixar CEO Steve Jobs will become a member of Disney's board only after the deal closes later this year.
  • Former board member Roy Disney, who resigned in 2003 to protest Eisner's tenure, is scheduled to attend the meeting.
  • Disney was named director emeritus after Iger reportedly reached out to him after taking over.
  • (By the way, an "Emeritus" is defined as one retired from professional life but who retains an honorary title, typically at the rank of the last office held. Just in case somebody wondered.)
  • Disney's stock price has risen 18 percent since Iger took over.

Igor, not Iger

5. Take us to your leader!

One of Saturn's moons, Enceladus, is spewing out a giant plume of water vapor, NASA scientists reported yesterday afternoon in the Journal of Science.

  • The findings suggest that Enceladus could have a liquid ocean under its icy surface which in theory could sustain primitive life.
  • You mean extraterrestrial life!? We're doomed!
  • Not so fast, scientists have long known that many of Saturn's moons have water.
  • Several of Saturn's moons have been found to have evidence of liquid water and the chemical elements needed to make life, including Europa.
  • Well, that's boring news. Thanks.
  • Not so fast, again! "We cannot discount the possibility that Enceladus might be life's distant outpost," wrote Jeffrey Kargel of the University of Arizona at Tucson.

Minyanville Choose Your Preferred Alien Contest (results announced at the end of the day)!

Send answers here.

Do you hope scientists find that life on Enceladus most closely resembles:

Alien One


Alien Two

No positions in stocks mentioned.

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