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Five Things You Need to Know for Thursday

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

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

1. Give it Up, Ultra-Loose

Today the Bank of Japan took its first steps toward concluding its "ultra-loose," or "super-loose," or more formally, its quantitative easing policy.

  • The shift ends five years of "quantitative easing."
  • The BoJ adopted a quantitative easing policy to fight a deflationary spiral and support a debt-burdened financial system.
  • The BofJ's initial steps toward ending its ultra-loose policy will be accomplished by shifting to a policy of targeting the overnight call rate.
  • The bank said it would take some time to bring the massive levels of liquidity it has provided down to levels consistent with keeping the overnight rate near zero.
  • Keep in mind, however, that although the BoJ is ending quantitative easing, the bank expects interest rates to remain effectively at zero for some time.
  • The bank said it would continue to make outright purchases of government bonds of Y1,200 bln.
  • More importantly,. the BofJ has introduced the concept of inflation targeting, setting a range of 0-2% over the next 1-2 years.
  • The Nikkei 225 rose 2.6 per cent.


2. For Whom the Payrolls, and Trade Gaps

The most closely watched economic data of the day is already in, the U.S. trade deficit and U.S. payrolls for February.

  • The trade deficit hit another record in January, widening by 5.3% to $68.51 billion.
  • The shortfall with China increased to $17.91 billion, but the deficit with Japan narrowed to $6.45 billion.
  • Initial jobless claims rose by 8,000 to a seasonally-adjusted 303,000 for the week ending March 4; the highest reading since January 7.


3. Alas poor commodities, we thought we knew ye

As the Bank of Japan prepares to eventually try and raise interest rates (months down the road from now, the BofJ insisted) commodities have struggled. Is this a simply pause following a six-year run that has seen commodities (as measured by the Reuters-Jefferies CRB Index) rise by 55%?

  • This week, the CRB Index is down 4%. Since February 1, it is down 7.8%.
  • According to Reuters and others, commodities prices have fallen recently because of the following (take your pick):
    - Rising U.S. dollar
    - Expectations for more interest rate hikes in Europe, the U.S. and possibly Japan
    - Lower crude oil prices
    - The end of commodities index fund flow
    - Avian flu, which has choked demand for agricultural sector commodities
    - Mild U.S. weather spurring lack of demand for energy-related commodities


4. Port Authority?

Lawmakers took their first steps yesterday toward killing the Dubai Ports World acquisition of a number of major U.S. ports. Meanwhile, the President has promised to veto any bill that tries to undermine the takeover.

  • Yesterday, the House Appropriations Committee voted 62 to 2 to approve an amendment intended to unwind the U.S. portion of Dubai Ports World's $6.8 billion purchase of London-based Peninsular & Oriental Steam Navigation Co.
  • The takeover, previously cleared by the Bush administration, formally closed yesterday.
  • In the Senate, New York Democrat Charles Schumer yesterday offered a similar amendment.
  • Meanwhile, according to the Financial Times, private equity groups have approached DP World about buying the US operations.
  • Industry observers said logical candidates included Blackstone and Macquarie, the Australian bank.


5.
Echo (echo) Bubble (bubble)

If any consumer product can accurately be said to have epitomized up the late 90s "bubble years" excesses, it is the Furby.1

  • A Furby is an electronic toy and a pet rolled into one.
  • Hasbro Tiger Electronics first unveiled Furby on Oct. 5, 1998.
  • In 1998 and 1999, riots were spawned by a shortage of Furbies relative to high demand.
  • The Furby interactive toy begins speaking only Furbish, but gradually learns English as it interacts with a child.
  • On Feb. 2, 2005, Hasbro announced, "One of the best-selling toys ever, with 40 million pieces sold globally, is back!''
  • The creatures are available in white, black and white, gray and pink, and brown and pink.
  • Most Furbies sell for about $39.99 and are available at Wal-Mart, Toys 'R' Us, Target, Kmart, Shopko, Kohl's and other stores.

1. Ok, maybe the Furby didn't exactly "epitomize" the bubble years, but it's 9:30 a.m. and we're struggling for five things here!

No positions in stocks mentioned.

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