Fed is fighting the wrong war

Fed is likely to do QE again to fight the potential deflation. But in reality, there is no deflation in U.S. It is likely to monetize the debt and shake the confidence in U.S. currency. The QE may temporary force money to riskier assets and create some bubbles on the way.

I am cautious on the market, especially Canadian market. I would buy HXD (shorting TSX) @11.65.

Canadian Banks

Bank of Montreal missed estimates yesterday while CIBC exceeded the expectation. My sense is the banks are entering a more difficult period. Low trading volume, flat yield curve, very little IPO activities and low sales of mutual funds are some of the negatives for the banks. I will expect RY trade to 47, BMO around 52, and TD close to 62.

order in for BAC , CSCO and others

The market is going to sell off today. It is getting into the lower range in U.S. I would like to put some money into the market

I will put in order for 300 BAC @12.65 and 200 CSCO @20.3.

In Canada, I will put order in for 200 TCK.B @32.50, 300 BPO @14.6 and 300 TA @ 20.3

margin problem

The food prices are up, import prices are up and most commodity prices are up. All these present a serious problem for corporations, which is margin squeeze. The weak economy can not bear the price increase so the companies have to absorb the input prices inflation. On the other hand, the relative strong global growth will keep commodity and other import prices on a slow upward trends.

The Potash news has pushed TSX to the high end of its trading range. I will look for opportunity to short it. Canadian banks will have a slow profit growth quarter.

bad move for intel

Intel is spending 7.7. billion for Mcafee which I considered a unwise move for the following reason.

1. The computer security business is in decline. There is not much growth for MCaffe for the last couple of years.
2. The Price Intel is paying (3.3Xrevenue) is way too high.
3. It is a distraction for Intel and it may divert its resources for make next generation mobile chips
4. The purchase get intel into competition with software companies which is not very wise.

potash

POT rejected the offer from BHP. My sense is the final offer would be around 150-160 U$. But there is risk around. If commodity price collapses, then the deal may fall apart.

The market is excited by the takeover news. I expected more to come. On the other hand, the economy is slowing down. The earning revision would be on the downside.

Is 2008 going to be repeated?

The market is scared that 2008 is going to be repeated. I do not see that happening. The simple reason is credits are widely available to s&p companies. Junk bond yields are at all time lows and corporations are raising money in bond market to increase their cash levels. I do see share buybacks and M&A will put a floor on the stock market. I will slowly to buy on the weakness.