Monday Morning Quarterback: As The World Turns!
Get set for a month to remember.
"World hold on, instead of messing with our future, open up inside. World hold on, wonder you will have to answer to the children of the sky" --Bob Sinclair
Following three weeks of solid gains, the world opened for business with our collective feet held to the fire. Europe is trading two to three percent lower, Japan and Hong Kong got clipped for a finski and U.S. futures are being beaten like a
Settle down and buck up, Minyans, as there will be no shortage of market moving news in the weeks ahead with this particular five-session set leading the way. In no particular order as we compartmentalize the catalysts:
We've been eyeing performance anxiety as a viable upside catalyst for the last three weeks as the only thing worse than losing money, in the eyes of fund managers, is underperforming their benchmark. Traditionally-or, since Eliot Spitzer roamed the stock sidelines-games people play abate in the day before the final tally, in this case last Friday.
Watch vehicles used as bang for the buck exposure-potentially high beta plays such as Apple (AAPL), Google (GOOG), Baidu (BIDU) and Research in Motion (RIMM)-for signs of unwind in the days ahead.
Hedge Fund Redemptions
While quarter-end lends itself to reactive rationalization and chasing both ways (buyers higher, sellers lower), we should keep close tabs on hedge fund redemptions starting tomorrow. Why? Many funds typically require 30 to 60 days notice on withdrawals and as Bernie Madoff rocked the world in December, March 31st is the first quarterly exit offered to many investors in the space.
Minyans know the drill. On one side, there is orderly debt destruction that will pave the way towards peaceful globalization. On the other, isolationism and protectionism could split the world into so many pieces of a pie.
President Barack Obama asked world leaders to "deliver a strong message of unity" for the sake of the global economy but over the last few days, European leaders have pushed back on calls for further stimulus. A unified front from the leaders of the free world will be paramount for perception and by extension reality.
The U.S. continues to unleash programs and policies aimed at absorbing the massive capacity across the societal and corporate spectrum. While encouraging debt is running in the wrong direction-the destruction of debt is the only true medicine-we must respect the power of a cornered animal.
The recent FASB proposal to tweak mark-to-market accounting will be voted on during the April 2nd board meeting, just in time for the banks' first-quarter earnings season. Later in the month, the Treasury will unveil particulars of the PPIP (week of April 13th) and the results of the bank stress tests (week of April 20th).
The Not-So-Easy E's
Not to be forgotten as we edge ahead are the three E's of April, namely earnings, economics and expiration.
First quarter earnings will begin in earnest next week and given the lack of visibility offered by much of corporate into the fourth quarter, all eyes and ears will be on alert for forward-looking guidance. In that vein, we should note that JP Morgan (JPM) and Bank America (BAC) suggested on Friday that March was a relative downtick versus the prior two months.
On the economic front, Clarence Beeks will check this Friday to deliver the payroll data, which will likely show the third straight loss of 600,000 jobs. There's little doubt that the economy continues to deteriorate but please remember that the stock market is a forward-looking discounting mechanism when those numbers hit the tape.
Finally, circle April 16th on your calendars as it's yet another expiration and I bring that up for two reasons. First, expirations always exacerbate volatility in the sessions prior to the option funerals and second, the government likes to announce game-changing regulations in front of expiration for maximum shock value.
Lots to focus on, that's for sure, so lemme get this to ye faithful and hop the fence to the Buzz to sniff out shekels as we together walk the journey.
Good luck Minyans, and let's make this week a positive part of our process.
In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.
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