D&D Securities - blog

D&D Securities Company

The Morning Call:  Monday, August 31, 2009

 The US markets responded to the fall in consumer confidence (Michigan/Reuters) to 65.7 from 66 in July. That was despite the Commerce department saying that consumer spending was up 0.2% (read: Cash for Clunkers). We expect the focus this week will be on the jobless number this Friday which is expected to climb to 250K from the 247K in July. (Not our forecast.)

 The Business Press is full of articles on why to sell in September. The evidence is all there historically and it’s been written up so many times that it should be in the market. A strategy of selling some Calls might be safe and appropriate. Call premiums are taxed as ordinary income, we believe.

So we are looking at bullion and wondering. The resistance is at $975 and what a change in sentiment a breakout would bring. Coincidently the US$ would fall after yet another large auction. The other side is a rise in the C$ - it’s all about commodities and the trade. Japan’s July Industrial production was up 1.9% (expected 1.6%), rebounding from an awful 2008 where GDP fell 5.7%.

 An interesting read we had is that 10% of American households account for 40% of the spending (consumption) in the US economy. This group has only 25% of their assets in real estate. So, for them the big stock market rally off the March Bottom really has had a “wealth effect”.  The other 90% of the population has 50% of their wealth in real estate.  This is a new cut at numbers that we were already aware of. A small percentage of the US population does a disproportionate amount of the spending. It’s the same globally. So take a rich person to lunch.

 We think they will.

 …Invest the money.

Quote of the Day:

“If writers were good businessmen, they’d have too much sense to be writers.”
Irvin S. Cobb

Ed Pennock, CFA, Managing Director
416-369-6921, epennock@dominick.ca

Graham Farrell, Institutional Equity Trading
416-369-4208, gfarrell@dominick.ca

Gordon Wright, Institutional Equity Trading

416-369-6924, gwright@dominick.ca

The above note is prepared by an Institutional Salesperson based on morning meeting comments and general Institutional desk discussion and should not be construed as a research report or a solicitation. For information purposes only. D&D Securities, its clients, and principals may have positions in these securities.