Wednesday, March 17, 2010

The Globaliser 17 March 2010 [Citigroup Global Markets] $TLT

On… the outlook for US rates, beware the Norwegian ‘disease’, Dubai’s rebound, corporate America’s cash coffers, the surge in scrap steel, a new pulp price peak, up go euro paper prices, China’s paper packaging hikes, a US glass packaging buy, tracking motion in the ocean, shipping’s supply risks, the rebound in US cruises, US footwear’s nice pick-up, Europe’s insurance value-trap, Amex is still a top pick, plus tough in Aussie telcos:
Economics and Currencies The outlook for US rates

‘The FOMC today left its interest rate guidance intact’, confirms Economist Robert DiClemente, ‘continuing to anchor the short end of the yield curve… along with a slightly rosier assessment of the outlook and plans to bring credit easing essentially to a close this month, the announcement met all of our expectations… looking ahead, we think conditions are evolving toward a change in forwardlooking language sometime in the next couple of meetings… and, to go one step further and signal a rate hike, we suspect members will need to be comfortable inflation is bottoming or will stop slowing’.
Beware the Norwegian ‘disease’

‘Norway is apparently a very ‘sick country’, muses Economist Tina Mortensen, ‘for its labour market shows 11% of the working-age population is engaged in either sickness/disability schemes or in the early retirement programme and nearly
20% receive a health-related benefit or has retired… only Sweden within the OECD has sickness absence rates comparable to these… although ‘push’ factors (“Dutch disease”-related crowding out of manufacturing amid oil exploitation) are at play
here, ‘pull’ factors seem to dominate (ie. generous sickness benefits)… costly for Norway… but with substantial income from oil, Norway should be able to fund its ‘sick’ population for many decades without jeopardising fiscal sustainability

Top Down Analysis

‘Dubai has bounced c10% so far in March’, calculates Strategist Hasnain Malik, ‘perhaps optimism on sovereign risks elsewhere globally has helped… Dubai's substantial underperformance vs other MENA markets since the Nov09 DW standstill announcement certainly suggests expectations are low… what now?... despite its lower P/E, we still need to see signs of: 1) a clear plan on overall debt refinancing, 2) less duplication in Abu Dhabi's non-oil development plan, 3) resurgence in off-plan real estate, before we’d turn bullish on Dubai vs other MENA markets… and reason, within Dubai, we prefer stocks with potential for recurring, cash inflow and existing international growth… like DPW, Emaar, Aramex’.

The Globaliser - 17 March 2010

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