Tuesday Morning

Posted on by zman

 


Eco Data Watch:

  • GDP 3Q Revision: revised to 2.8% vs a 2.8% forecast, down from the initial 3.5%,
  • Corporate profits up 10.6% quarterly,
  • Consumer spending up 2.9%,
  • Consumer confidence forecast 45.5, at 10 am EST,
  • FOMC minutes due out at 2 pm EST

 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today - Bakken acreage, ATW
  5. Odds & Ends

Holdings Watch:

  • $10KP II:

    • $10,000
    • 61% Cash
    • The Current Holdings Tab Is Updated.
  • Yesterday's Trades:

    • WLL – Added (3) December $60 calls (WLLL) for $3.80 with the stock at 61.90. I also hold some $65 strikes here. WLL – Added another contract, tiptoeing in, of the December $60 calls for $2.90 with the stock at 60.80.

    • HK – Added (5) December $22 calls (HKLS) for $1.10 with the stock at 21.70.

    • WLT – Added (5) December $80 Calls (WLTLP) for $1.30 with the stock at $72 and moving fairly well. The name remains cheapish on forward earnings and appears poised for a break out to my layman’s technical eye.

    • WLT – Added (2) WLT $70 December calls (WLTLN) for $4.50 with the stock at $70.90.

    • NFX – Added (10) December $45 calls (NFXLI) for $1.15 with the stock at 42.70, up with the group and a broker upgrade. This name had the largest upgrade in terms of CFPS and EBITDA estimates since October in the Orange Charts today. They have catalyst potential in the form of more Granite Wash wells to be released around year end, but in general, just buying a cheap name after a recent pullback.

 

 

 


Commodity Watch

Crude oil inched up 9 cents to close at $77.56 yesterday. Despite an attempt to break above $80 early in the day on the back of dollar weakness and equity market crude is still range bound. This morning crude is trading off a quarter.

  • Early Read On Oil Inventories: (from the Bloomberg Survey)
    • Crude: UP 1.77 MM barrels
    • Gasoline: UP 0.6 MM barrels
    • Distillate: UP 0.5 MM barrels
  • Analyst Watch: Oil Use To Outpace Oil Demand in 2010. According to a Reuters poll:

 "poll of 10 top oil-tracking analysts and organisations, oil demand is predicted to rise by 1.3 million barrels per day next year to 85.9 million bpd. At the same time, the rise in production from outside Opec and output of natural gas liquids from Opec members is seen rising by just 800,000 bpd in total." Goldman and BofA are up at 86.4 and 86.7 mm bopd respectively.

Natural gas moved up $0.05 to close at $4.47 yesterday, it's 3rd sequential gain. Blame cooler weather forecasts for that. This morning gas is trading off a dime.

  • Imports Watch: Up 1.3 Bcfgpd from last week and down 0.3 Bcfgpd from last year.

    • Canada: big jump to 7.8 Bcfgpd, looks a bit fishy since the trend has been lower and firmly planted in the low 6 Bcfgpd range. Still off 0.7 Bcfgpd from last year.
    • LNG: 1.1 Bcfgpd, down from 1.5 Bcfgpd last week and up 0.4 Bcfgpd from last year. Still no big jump in the numbers underway.  A big rally in volumes here was a key tenant of the gas bears reason for bearishness all year long.
  • Early Read On Natural Gas Inventories:

Crack Spread Update


Key Takeaways: Good to have almost entirely skipped messing with this space this year. Will keep you posted.


 


Stuff We Care About Today

The preceding chart goes along with the Orange Charts will be added to the E&P tab for future reference.

ATW Reports Solid Fiscal 4Q09 Results

The 3Q09 Numbers:

  • Revenue of $131 mm vs $128 mm expected
  • EPS of $0.75 vs $0.69 expected

Conference Call: Today, 11 am EST

Nutshell: As usual, the company saves the trouble of using extra words in their press release...there is absolutely no color beyond the essentials. Look for them to give an update on the call regarding progress of construction on their two newbuild rigs and on negotations on 2 of their out of work vessels.

Odds & Ends

Analyst Watch:

  • HK - Howard Weil starts as Focus Stock with $40 target. So some other people are noticing the slide as well.

Added For BOP:

132 thoughts on “Tuesday Morning”

  1. Regarding Cap & Trade ~ “the air knows no borders” from CEO of CAT. Basically saying passing something in the U.S. without global support is meaningless and harmful.

  2. Good morning. SMH out with their updated model on EXXI’s acqnt. They assume a 50/50 combo of equity/debt to finance the Misui acreage acqtn. They have not changed their $4 PT (which is based on 3.3x CY2010 TEV/EBITDA), but they increased the 2010 NAV to $8.77 and CFPS to $1.40 and EPS to $0.12.

    Here’s the question… at what multiple of CFPS should a little GoM squirt like EXXI trade at???

  3. (typos…. accqnt = acqtn = shorthand for acquisition… Misui = Mitsui) just got typing too fast

  5. TechTrader is 65/35 SHORT for the trade that works best today.

    HeadTrader is abstaining from predicting before mrkt open… no volume to drive it, so he is waiting to see if any anomolies occur.

  6. BOP – do you get Howard Weil research, took HK to Focus today?

    Will tack the Gulf of Mexico shelf players list of multiples to the bottom of the post in about 15 minutes.

  7. z — thanks. So, 2x 1.40 = $2.80… and 3x 1.40 = $4.20.

    Sounds pretty good to me. And all this is ignoring the deep stuff, which can’t hurt at this point (money is already spent) and could help (if one of the two wells discovers something… a low probability outcome, of course).

  8. Morning Blast from SMH —

    Energy XXI (EXXI, $2.20, Accumulate, PT $4) Purchases Partner Interests. EXXI announced its intent to acquire certain Gulf of Mexico shelf oil and natural gas interests from MitEnergy Upstream LLC, a subsidiary of Mitsui & Co., Ltd. (MITSY, $257.70, Not Rated) for $283 million, or $12.30/boe on a proved basis. EXXI is buying non-operated interests in the same group of properties it purchased from Pogo Producing Company in June 2007. The properties include 30 fields currently producing 8,000 net boepd, about 77% of which is oil and 80% of which is already operated by Energy XXI. Upon the completion of pipeline repairs damaged by 2008 hurricanes, net production is expected to reach 10,000 boepd. Pro forma, 2P reserves should increase to 93 Mmboe with oil expected to make up 67% of current production and 76% classified as proved developed The transaction is expected to close by year end and is likely to be funded through a combination of new equity, cash on hand and bank debt. We are maintaining our Accumulate rating and price target of $4.

  11. Thanks BOP

    The Shelf Player CF multiples table has been updated and added to the bottom of the post. Those are Street estimates and I’d note, they’ve come down in the week and a half since I last updated them (blame natural gas price updates and the quarterly results in some cases). When I say 2 to 3x for a 2010 multiple note that right now everything is around 2x and could go to 3x with a little favorable market action. This is well below the multiples for their onshore cousins, largely due to the generally low reserve/production treadmill nature of the Shelf.

  12. z — well, that makes sense, then. Part of what EXXI wants to do with a capital raise (in addition to the Mitsui acqtn) is to buy other cheap stuff on the shelf. EXXI is already in 30 fields in the area… so, would add barrels and CF but (presumably) not a lot more G&A.

    Buy cheap, sell rich. If you don’t do the former, you can’t do the latter. Thanks!

  13. PackMan — glad someone sees the humor in my stuff. I’m not as funny as z… but I try to keep myself amused. 🙂

  15. BOP – right, so at $21 I guess the Focus stock equates to their Screaming Buy.

    Thanks, got the HW piece a couple of times over now. You guys are great.

  16. HW commenting that HK has 20 wells drilled in the EFS so far (um, try 35 guys). It undermines your Streed Cred if you are out of date in your initiation piece.

  19. Packman – I’m just tiptoeing right now. Weil is a pretty strong player in Energy, surprised at the opening yawn on their initiation of coverage, reading to see if there is anything new in the piece, have my doubts after a few opening paragraph missteps.

  20. Crude off a buck on a tiny move in the dollar and (insert a reason here, holiday light trading?).

    Skimmed through the HK piece. Weil highlights the recent weakness in the shares as being their plan to outspend 2010 cash flow by $1B, then goes on to say it won’t be a big deal. Given the undrawn $1.2 B revolver, the $150 mm cash at 3q09, the $326mm received after the end of the quarter from the sale of the Permian, and planned asset sales of the midstream and non core fields that should bring in I’d estimate between $900 mm and $1.2 B.

    Stock moving with group, could care less about the HW initiation so far.

  23. Re 21: Every body has different red flags. For example, I will not own a stock that management has repriced their options. I know some people will not buy a stock where the CFO leaves the company. They might return to that stock in the future, but for the present they say “better safe than sorry”, and “there is also another bus coming along later.”

  25. BSJ – agreed.

    Oil down 2.3% on no news (unless you count more sabotage in Iraq). It fell out of the recent trading range. Should have support at $75 (now at 75.75)

  26. And BSJ – some people don’t like hearing asset sales are part of the plan to fund capex. Even if the sales are not necessary to fund it.

  29. Jivey – yeah, same WLL and WLT. Sort of meaningless trading here, could be a bottom, could be just noise for these names. I probably won’t trade much if at all rest of week. Just reading.

    S&P minute chart all over the place.

  30. I bought a little WLT common at 68.5…seems to have some support around 67.3 on the half hour chart going back to early Nov.l

  32. Tom – None, it’s only down for a few days as I understand it. They’re going to have to take it down indefinitely and get some support from other NE players (like SUN) to support HO prices which in turn would support Crude prices. If you meant Aruba, that’s down and on the block for sale?

  35. Valero Energy Corp. (VLO) announced Friday that it is shutting down its Delaware City, Del., refinery permanently due to poor economics. On Thursday, the company’s Texas City, TX, plant reported flaring due to a snag at boilers in complex 4 and restarted one of three modules that were shut earlier in the week for repairs.

  36. Bob – I don’t remember seeing that, thanks. They talked about it on the 3Q call as a possibility. That would mean more imported gasoline and some distillates could come ashore at better prices. NY Harbor spreads did nothing last week so I still think it will take others joining in to really improve the situation.

  39. Macquarie just upped EXXI PT from $3.60 to $4.75.

    Maybe they are bucking for a position on the 2ndary issuance team… but, still nice to see.

  40. BEXP in the penalty box. If it stays down here (low $10s and maybe $9s) through the beginning of next I’ll be in for a quick trade. 3 more wells to announce before year end.

  41. Thanks BOP, had noticed it bumping up. I still say more people will feel comfortable piling in higher in a name like this.

  43. Does anybody know if there is a site which allows you to construct a graph showing market cap as well as the share price ?
    I am also interested in adding to my position in HK but would like to have some idea of the effect of the dilution over the last couple of years.
    Over here in Europe we have some stocks eg Rio Tinto which is approaching its Market cap peak of 2008 however, the stock is under half its all time high. I just dont want to buy HK unless I feel I am picking it up “cheap”
    Thanks in advance.

  44. EXXI has put itself into a fairly unusual situation… for lack of a better term, I call it a Virtuous Spiral (as opposed to a Death Spiral, when a toxic financing is announced). It is a situation where the stock price that has momentum to the UP side, with the announcement of a new deal. Because the acqtn is accretive (to a greater or lesser extent, will remain to be seen), the stock begins to move UP on the 2ndary announcement. However, the more the stock moves up, the less stock will have to be issued to pay for the properties (or the more the excess money raised can be used for other accretive acqtns). So, there is sort of a melt-up situation that gets put into play.

    Don’t see this very often. But it’s fun when it happens.

  45. WLT – back to the shocking volatility we saw around earnings. This is China worry related as is oil. It seems to crop up whenever someone needs a headline for a story on a day when the dollar is up. Big volume down near the lows on the day.

  46. Morning all.

    I think its all noise between 1094 and 1113. If we can break above the latter then I think 1130 – 40 should be fairly plain sailing.

    There is a minor cycle low due today and then one again tomorrow but my own thoughts are that no way they let this sell off big ahead of Friday – heck they need the feel good factor to get people out there spending. So I actually favor upside.

    That said I can see a ton of things that spell trouble, divergences everywhere, awful volume etc etc.

    If we sell off then there is support at the 1070 area.

  47. Morning Nicky – thanks much for the levels. I am seeing a lot of concerned stories over crude and it did take out the recent range low this morning on the China fear syndrome. Any thoughts on levels there? We have had the possibility of a large build in crude looming for about 6 weeks now due to low imports that just never seem to bounce back.

  52. Choices – No because I had to take a phone call, am about to queue up the replay and will let ya know. Stock has flatlined since.

  58. ZLT Portfolio Trade:

    EXXI – Added common at $2.37, small to start, see comments in yesterday’s post and more details from me in the Wednesday post.

  59. Nifkin – I’ve been avoiding the group almost all year. There is news out, probably a broker note that I don’t get. I will not be touching that particular name in the space on the long side.

  60. z — thanks for considering EXXI. If you own a little bit, I know you will be MOST HELPFUL in following it. GLTA!

  61. BOP – I like John Schiller. I like the concept. I’m not wild about the balance sheet. I’ll add more when I get wild about it.

  63. and it wasn’t until they made some progress on the BS that i was even interested in looking at it… so, agreed.

  64. Choices – hearing nothing on this ATW call that makes me want to own it this week. I’ll wait for a pullback (famous last words for me on this name) and then buy for the long term. I may kill off some of my GMXR common position as I feel that once is a bit redundant now with the extra HK common I took last week, and swap it into ATW for long term appreciation.

  65. BOP – wild referred to the balance sheet. Should have said “more comfortable with the massive debt and huge quarterly interest payment they face”

  66. z — and that is exactly how i understood “wild.” But highly-leveraged companies in an upswing and generating FCF are beautiful things. You get a rocket booster on the equity. That said, they crash much harder and faster in a downturn too. But, agreed, EXXI’s balance sheet is not for the faint of heart.

  67. Re EXXI – I think I said mid $2s yesterday before it slows and gets concerned about the amount of dilution. More EXXI – Saw report assuming 50% equity for this new deal but I got the impression it will be more than that in the deal, with management pointing out they could issue 400 mm shares before and can now issue more than that. Sounds like 100% is definitely on the table and that it will be at a minimum a 50% equity deal. Still working my own back of envelop cash flow model up with 75% and 100% of deal price issuance.

  69. BOP – ATW’s Gulf of Mexico jack up comments.

    Having more discussions,
    more bidding, depending on rig type
    certainly moving in the right direction
    signs are encouraging.

  70. Bossman – I’m on vacation until Thursday but I just read your comment yesterday about Canadian equities. I’ll make a list later in the week as I’m only keeping half an eye on things right now.

  72. z — i think you have to assume 100% equity-financed. I don’t think it’s a good use of their revolver, to finance the acqtn. It might be a good back-stop. But, that is not what revolvers are used for, typically.

    That said, if they do 100% equity, then they will have dry (debt) power to do more (accretive) acqtns. Like you said, the Shelf is CHEAP right now. Buy when cheap, sell when rich. Rinse and repeat!

  73. EXI — by the way, this was a home-run, slam-dunk for those 10% bonds. Congrats to all who played that issue.

  74. z — thanks for the jack-up comments! Helps to have more eyes on the topic. Appreciate the assist.

  75. ATW Call – listening again, missed a few things. In a nutshell:

    Everything is on track on timing for delivery of rigs 10 and 11, the high end floaters that will drive longer term earnings growth.

    Things are improving in the jack up market and they are in the higher end of the market in terms of rig capabilities. Continuing to build backlog in jack ups.

    Sounds like something is in the works for 2010 for their idle Southern Cross rig.

    Balance sheet is not going to get over encumbered as they complete construction of those two rigs, most capex is coming out of cash flow on those and for rest of the fleet’s maintenance.

  77. Watching the refiners drift lower, noticing some are approaching support. VLO at new recent low, is about 50 cents from its cycle low in July, at about $15.50. If you go back to the absolute low this will be in the range of $15 which is has approached 3x now since the stock sank from $75 in 2007. Interesting chart on the weekly. Any of you TA types have a thought? Sort of tempted to try and bottom fish them.

  78. NFX and WLL trying to work higher.

    WLT all over the place, was down $2+, now off 34 cents, go figure.

    HK up 5 cents, double go figure.

    NG up 3 cents, which would be its 4th up day in a row.

  80. Oil may be in a triangle in which case this leg down may end in this vicinity or maybe a bit closer to the 75 support area.

  81. #44 – mnt – i think baseline does that kind of charting. I don’t use a Bloomberg as much as i used to but i am sure it could do it as well.

  86. WLL through yesterday’s high.

    WLT going green.

    Bored, anybody got anything interesting besides EXXI for the morning post or do you just want the Thanksgiving stuffing recipe?

  87. Z – over 7m shares for HK today and big volume in the $21 and $23 calls for Dec.

    One man’s folly is another man’s gain.

  91. Packman – this market just keeps luring bears and bulls in alike with the head fakes. Bears have got to be just bummed out at this point.

    MNT – I can chart a lot of things on my Thomson One, like EPS, CFPS, short interest… don’t see mkt cap. Do you want me to ask, bet they can do it and I can send to you?

  95. Suddenly having a much better day. S&P positive now, NFX, WLL, HK moving well now and WLT back into green land. Like someone flipped a switch. Volumes light at WLL but the others are strong.

  98. Jivey – very tough business that day trading stuff. I can’t make it work consistently. With names like that it seems the only way to really win in that regard is to a) not do it or b) by it after a gut wrenching whacking of the stock has taken it back to the 50 day or 200 day and held. I like them as a stock holding (and I have none at present) and as a fairly quick trader in options. I bought it wrong yesterday but I think with an ok market it goes quite a bit higher in a hurry. Little washouts like this with even quicker recoveries will inspire the hot money guys to remember it.

    Wine pick: Cake Bread Syrah, a red that drinks well with bird, 2007 goes for about $25.

  100. Thanks Z and 1520sbroad, I am currently looking into whether esignal can do it. Typically, one of those annoying situations when trying to “overthink” something, the stock starts to launch higher. I decided to take some 24 calls and continue with the analysis over the next few hours.

  101. Z: Not too concerned about NE the 8 rigs will be a 5% revenue event. Stock already down 10%. Could be posturing since Pemex knows their production is declining. Thats why you need to be a good poker player if you own rigs. NE gross margins higher than ATW.

  105. Terranova back to negative short term on oil. So if oil is down he is negative, if up, he is saying you gotta be a buyer. His main reason for being cautious on oil seems to be that people sold it today.

  106. Checked in with HeadTrader… he was snooooooozing. I told him to “go back to sleep.” And tomorrow will be even slower.

  107. Afternoon BOP, never understood the full day prior to Thanksgiving thing, should be a half day at most with Friday off. Well, this guy is taking Friday off.

  108. ha! you SAY you are going to take the day off… but, will you really? I think you run this site 24/7… and never sleep. It’s impressive, by the way.

  111. Doing something I rarely do, clicking through all the names in my marketwatch. A lot of charts look like HK: including FST, BBG,

    best looking chart from a “it’s held up pretty well perspective” is PXD. This is the real company list and the not the single digit midget crowd.

  114. Jivey – yeah, surprisingly, some fund or a few of them are doing some shopping today. Forget the chart, that stock is still on the cheap side, see multiples in today’s post and especially in yesterday’s post with the comment WLL saw one of the biggest upgrades to the 2010 numbers of anyone in the group I track.

  118. Z – 92 … yep

    WLL – nice move since Friday (was below 60).

    BEXP – should we buy down here or wait ?

    HK …. nice rocket recovery. There is a lot one can learn from that intraday chart. In hindsight of course.

    Maybe post it tonite on my bloggie if I have time.

    Was out most of afternoon; did make some tip money on HK at least.

  119. DJ Officer FOX Sells 11,824 Of ENERGY XXI (BERMUDA) LTD >EXXI

    Tue Nov 24 17:01:00 2009
    EST

    SOURCE: Form 4

    ISSUER: ENERGY XXI (BERMUDA) LTD
    SYMBOL: EXXI

    FILER: FOX RICK D
    TITLE: Officer

    DATE TRANSACTION SHARES PRICE VALUE
    11/24/09 Sale 11,824 $2.39 $28,219

    OWNERSHIP: 29,977 (Direct)

  120. HAL looks pricey, even after the afterhours haircut, no ?

    First call at 28 c for Q. Now will be cut to 26 or less. Say 1.04 annualized.

    That’s a 30 PE ? What should it be ? 15 ? 20 ? Any thoughts.

  121. Pack – HAL 12x to 15x on a forward multiple vs SLB at 20x is generally fair in my book. Historically, SLB can trade at a pretty hefty premium.

  122. Z … are you saying HAL’s forward E = $2.00 – $2.50 EPS ?

    The only forward I see at the moment is next Q at now 0.26 or less, so that’s a lot of E to make up.

    Or should HAL be a $15 stock ?

  123. isle — thanks for posting. That is somewhat irritating… and a little confusing. Can an officer transact in shares, ahead of an offering?? I didn’t think so… but… ???

  124. Pack – out of the office at the moment but …

    HAL EPS:
    2009 1.30
    2010 1.42 now at 21x

    Should a lower $20s stock but that’s just my opinion and the multiple will be higher on the upswing of a recovery…just not really seeing much of a recovery for them yet.

    SLB EPS
    2009 $2.72
    2010 $2.82 or 23x … that’s more reasonable and again, if we are talking a return of pricing power (and we are seeing some but not a lot) you could see 25 to 30x on the forward number for these guys…just think it is early.

  125. BOP – I’m sure he got permission, deal size not yet decided and he did wait for the press release on Monday so I’d bet he’s fine. Unless the guy just absolutely needed the cash, I don’t see why he blew out now as it does look bad. Generally CEO’s frown on that kind of pre deal dealing as you know. Could also be he’s about to get a grant of a similar amount in the year end allocation so his net position stays the same. I would have told him to keep it zipped.

  127. Pack – Realize that I’m not saying that, I think it is a trading vehicle, long and short with excellent (very narrow) spreads. When “they” like the Oil Service names they have gone to HAL hard pointing to the valuation gap to SLB (which it has Always historically had). When “they” abandon ship on the OIH, HAL has often lagged the move downward (after all, it’s cheap to SLB, remember, lol). I’ve had puts to my chagrin off and on this year. Made more on the fewer times I bought calls after a group swoon. Lost money on the SLB each instance I had calls there this year, did better in 2008 with them. When things do look to be turning for Service, I’ll be long one or both from time to time. Lastly, of late, I’m seeing a number of analysts new to the game with Holds on SLB and Buys on HAL. I can only assume it is again the lower valuation and the greater leverage to a natural gas price recovery in NAM (I think it helps HAL a bit more than SLB but that’s probably arguable by some).

  128. #126 — yeah… i woulda told him to keep it zipped too. bad form, if nothing else. If i was a large shareholder, i’d be on the phone tomorrow, letting them know what i think. I’m sure (and I hope) that is what is going to happen tomorrow. That is just plain wrong.

  129. Bedtime Market Strategist —

    Slow Motion

    It was slow all around in pre-holiday trading despite a plethora of data. Even the Dollar traded tightly, muting a notable catalyst that has been influencing activity. We would like to point out two technical moves of note. The 10 Year Treasury future has broken out above resistance at the 120 level (see chart). Crude futures have broken down below the important $77 support level that defined the lower end of the trading range for the past 6 weeks (see chart). As we noted last night, the strength throughout the Treasury curve makes sense due to the notable amount of de-risking that has occurred going into year end and the amount of reserves building up on bank balance sheets. The move in Crude is likely a sign that the weak Dollar bid is losing its influence and the commodity is decoupling from the relationship with other assets. As the S&P 500 continues to hang in near its highs and Gold posted another new closing high, Crude’s relative weakness is a problem for the commodity.

    Undercapitalization of a Different Sort

    In today’s pre-holiday environment, even Shanghai’s 3.5% drop overnight went seemingly unnoticed. The selling pressure was related to the banks’ submission of capital raising plans to regulators. It is believed the plans included share offerings. In the United States, people worry about banks being undercapitalized because of real estate losses, in China, the concerns come from the opposite direction. At the government’s behest, Chinese banks have aggressively extended credit throughout 2009. The loan growth has been so aggressive that many banks are believed to be undercapitalized. Bloomberg reported the banking system needs to raise somewhere between $44 and $54 Billion to maintain capital adequacy ratios of approximately 12%. It is interesting that there are two different ways to get to the same problem. The irony is that banks were the best performing sector in Shanghai (-2.8%).

    Release the Doves

    The FOMC minutes from earlier in the month did not provide any new clarity on the Fed’s asset purchase program. Nonetheless, the extremely dovish tone of the minutes, to the point of almost being downbeat, sets the stage for keeping the liquidity spout accessible. While there was not much new, there are a few points worth noting. The minutes noted that, “But with labor market conditions somewhat weaker than anticipated, earlier declines in wealth still weighing on household balance sheets, and measures of consumer sentiment relatively low, the staff did not take much signal from the recent unexpected strength in spending and output. Indeed, the staff boosted its projection for the unemployment rate over the next several years.“ That contrasts with the September minutes which projected the “…unemployment rate moving down to about 9 1/4 percent by the end of 2010 and then falling to about 8 percent by the end of 2011.” While it is typically uncommon for the FOMC to reveal staff projections at all, a reversal of course omitting new projections is a minor red flag that will need to be monitored. There was also a great deal of focus on the level of slack expected in the economy for the next two years, indicating that the FOMC has little concern about inflation with the exception of expectations becoming unanchored. There were a couple of positives that the minutes highlighted. “On the other hand, consumer spending on items other than autos had been stronger than expected, which might be signaling more underlying momentum in the recovery and some chance that the step-up in spending would be sustained going forward. In addition, growth abroad had exceeded expectations for some time, potentially providing more support to U.S. exports and domestic growth than anticipated.” All in all, it was a dovish report highlighting why the FOMC chose to keep the “exceptional and extended” language.

  130. Just saw another filing by Lawrence Stewart, VP of Investor Relations, who BOUGHT 2000 shares today……….probably wants to have a good story for the calls tomorrow re Mr. Fox’s antics :-)))

  131. Isle – yeah, he’s definitely trying to send a message, note he owns a lot more 237K after this than the other guy.

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