Weekly Market Digest

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General Motors IPO looks good on day one…

(BloombergGeneral Motors Co., which went bankrupt last year after almost a century on the New York Stock Exchange, advanced in its return to public trading following an initial public offering that raised more than $20 billion.

GM gained 3.6 percent to $34.19 today, after climbing 9.1 percent in the first hour of trading. Its owners, including the Treasury, sold $15.8 billion of common shares at $33 each in the second-largest U.S. IPO on record. The automaker’s $4.35 billion offering of preferred shares and an overallotment option may boost the total to $23.1 billion, more than the $22.1 billion raised by Beijing-based Agricultural Bank of China Ltd. in the biggest IPO of common stock in history.

…but slips on day two

(ZeroHedge)  GM is now officially threatening to break the IPO price, less than 24 hours after breaking for trade yesterday. The stock had dropped to as low as $33.11 before a spurt of buying by DMM GETCO pushed it higher. The question of whether the HFT firm can internalize what has become an onslaught of selling is open. We can only hope GETCO has sufficient redundancy to absorb the massive volume, which at last check was 36 million shares and jumping: it appears GM will once again dominate NYSE volume.

Bernanke Steps Up Stimulus Defense, Turns Tables on China

(Bloomberg) Federal Reserve Chairman Ben S. Bernanke defended his monetary stimulus to fellow central bankers, saying it will aid the world economy, and made some of his strongest criticism of China’s weak-currency policy.

Hanging on a thread….

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-- The Investment Company Institute reported the 28th sequential outflow from domestic equity mutual funds.  That brings the total YTD mutual fund redemptions in excess of $86 billion.  Mutual fund managers must be hanging on a thread.  The outflows mean that they have no cash reserves and will likely be selling their best (most liquid) holdings.

Will the Long Bond get a second chance?

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Treasury 30-year bonds rose before the acquisition of as much as $2.5 billion of the debt by the Federal Reserve as part of its plan to accelerate economic growth and avoid deflation.  Thirty-year bonds outperformed 10-year securities for the second week as the Fed gets set to acquire debt maturing from August 2028 to November 2040, the first purchases of longer- dated Treasuries in the round of quantitative easing launched Nov. 12.

Majority of traders still positive about gold

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--Twelve of 19 traders, investors and analysts surveyed by Bloomberg, or 63 percent, said the metal will gain next week. Four predicted lower prices and three were neutral. Gold futures for December delivery were down 1.1 percent for this week at $1,351 an ounce at 11 a.m. yesterday on the Comex in New York. Futures reached a record $1,424.30 on Nov. 9.

Japan’s Stocks look to the U.S. for strength

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-- Japanese stock indexes rose for the third straight week after reports indicated the U.S. recovery is accelerating, boosting the outlook for the global economy.

The Nikkei 225 Stock Average rose 0.1 percent to 10,022.39 in Tokyo, the highest close since June 22. About eight stocks retreated for every seven that climbed. For the week, the Nikkei has increased 3.1 percent, while the Topix is up 2.7 percent.

Marc Faber: "China And The US Are On A Collision Course"

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--(Marc Faber interview) "Inflation is a dangerous situation everywhere in the world. I think in general that Consumer Price Indices published by China and the US do not reflect the real cost of living that households in these countries have. In Emerging Economies it is worse in the sense that if you have a per capita income of $1000 per year, food accounts for 50% of our expenditures... Even if China tightened, interest rates are still far below the true rate of inflation, and I spoke to a lot of people in China - my view is that inflation in China is running at 10% per annum."

Bernanke defends QE2

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-- In a speech delivered at a conference at the European Central Bank, Bernanke defended the Fed’s latest bond buying program, saying “the best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in the context of price stability in the United States.” Read more on Bernanke’s speech

How FDR became the President we know today...

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-- Progressives are disappointed that - contrary to the hype - Obama is no FDR.  But FDR himself wasn't who we think of as FDR until he was forced by protests, strikes and other forms of civil disobedience.

Without a national crisis—economic destitution and rebellion—it is not likely the Roosevelt Administration would have instituted the bold reforms that it did.

Retail Gasoline Prices Are Higher Across the Country

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--The Energy Information Agency weekly report states, “The U.S. average retail price for a gallon of gasoline was higher for the third consecutive week, increasing almost 3 cents from last week to $2.89 per gallon, $0.26 per gallon higher than last year at this time. The East Coast saw the largest price increase in the country, with gasoline six cents higher than last week.”

Natural Gas Prices Rise on Higher Demand

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-- The U.S. Energy Information Administration reports, “Prices generally traced out a u-shaped pattern over the past week, presumably as expectations for colder weather failed to materialize early on but were revived again by fresh forecasts for colder temperatures.  However, a backdrop of plump storage and the absence of significantly colder weather continued to place some downward pressure on prices in all regions, resulting in week-on-week declines.”

Art Cashin Asks If Fed Will Buy Muni Bonds Next

(ZeroHedgeDoes Jerry Brown Have Bernanke’s Phone Number? – A reader of these Comments picked up on our re-examination of Mr. Bernanke’s 2002 speech on how to fight deflation. We noted that Mr. B had suggested that the Fed had the power to buy foreign bonds if it chose to do so.

The gentleman pointed out that Bernanke also suggested that the Fed could even buy the bonds of municipalities or public corporations.  Given that the recent bond offering by California appears to have been given the cold shoulder by the public, might they turn to the Fed?

As Alice might say – things just get curiouser and curiouser.

More on Munis from Mish

(Mish)  A full year of municipal bond gains went up in smoke in the past two weeks. Worse yet, it's highly likely more blood is coming as issuance soars amid decreased demand from investors. A Moody's downgrade of Philadelphia, a complete mess in California, and a looming city bankruptcy in Michigan all weigh on the sector.

In Hong Kong $1.8 Million Gets You 400 Sq. Feet

(ZeroHedge)  For those who wrongly believe that the biggest real estate bubble in the world is in Manhattan, the following may come as a surprise: according to Dylan Grice, in central Hong Kong, a 400 sq. foot property recently sold for HK$14MM, or about $1.8 million: an insane $4,500 per square foot. And that's just the beginning. Yet, as we have started to speculate recently, is this precisely the goal of Ben Bernanke - to create pockets of silly inflation within China so that the country is eventually forced to unpeg the CNY? If so, this is a huge gamble, as the bulk of the country still has far more slack than America ever can.

With An Imminent Irish Bailout Looming, One Politician Opposes US Participation In The Latest European Rescue

(ZeroHedge)  As the US, due to its key role as primary supporter of the various IMF rescue facilities, is already intimately involved in the Greek bailout (not to mention that the US Central Bank will soon again reprise its role as key lender of dollars, once the Irish crisis flares up again next week), there are those who are already calling to prevent the US from participating in yet another European bailout (second of many). The first person to have voiced this objection is Washington Congresswoman Cathy McMorris Rogers, who in a just issued press release notes that she had warned the administration in April that a blank check for Europe would cause a “gathering storm." She is, of course, right. She will, of course, be ignored.

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