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Before The Bell: China Steamin' Ahead; Fannie Joins Freddie


China's inflation accelerated the quickest pace in 11 years. Fannie and Freddie are preserving capital. Futures are up.


Morning Perspective: China Steamin' Ahead

Bloomberg reports China's consumer prices rose 6.9% in November from a year earlier after climbing 6.5% in October. The inflation rate marked the quickest pace in 11 years. In the first 11 months of this year, the trade surplus reached a record $238 billion. Analysts believe this trade surplus, along with surging food and energy costs, are what is contributing to the overheating economy. Professor Bennet Sedacca mentions China in Buyouts, Bifurcation, Bailouts, And Bankruptcy.

From the Bull Pen: Professor Sedacca said energy companies are doing well because China has turned into a legitimate developing nation rather than an emerging market. Those who agree and believe such stocks will continue that trend may look to Exxon Mobil (XOM) for a play; short term sell-stops below $89.89.

From the Bear Cave: Those who believe the Chinese government will act to cool the economy may play the downside in iShares China 25 Index (FXI); buy-stops above $197.50 (downtrend from October high).

Fannie Joins Freddie

Freddie Mac (FRE) said that it will reduce the number of delinquent loans it purchases from investors of mortgage securities. The move will preserve capital by avoiding the large, immediate losses realized when Freddie buys these types of loans. Following the move Fannie Mae (FNM) announced it will implement the same strategy. Last week, Professor Mike Shedlock wrote about these companies in Little Hope For Hope Now Alliance.

From the Bull Pen: Investors believing the worst-case-scenario is already priced in for these companies may play the upside in FRE and FNM, sell-stops below $34.26 and $36.55 respectively.

From the Bear Cave: Professor Shedlock was skeptical on these companies given last week's "Paulson Plan." Those still bearish on Fannie and Freddie may play the downside with buy-stops above recent highs ($39.48 and $35.04 respectively).

Click on Minyanville's Stocks To Watch for more company-specific ideas.

Quick Check Around the World

Asian trading closed with the Hang Seng +2.55%, Nikkei +0.76%, Sensex +1.81%, Taiwan +0.47% and Shanghai +0.25%.

A quick check across the pond finds the CAC -0.44%, DAX -0.16%, FTSE -0.41%, ATX -0.33%, Swiss Mkt. -0.32% and Stockholm -0.39%.

A Look At Commodities

Crude oil is up this morning 0.82 to 88.68. Gold is lower -1.0 to 812.00. Silver is down -0.03 to 14.82, and copper is down -5.6 to 303.65.

As of 8:30 AM, S&P futures are up by +1.80 points, and Nasdaq futures are higher by 5.00 points.

On the Radar


10:00 Wholesale Inventories: 0.5%
2:15 FOMC Policy Statement

Click here for the full trading radar.

Have a great day, Minyans! Good luck!

No positions in stocks mentioned.

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