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Dallas, TX
November 17, 2009, 08:00 EST |
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Dr. Joe Duarte's Market I.Q. |
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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China To Build Wind Turbine Plants In U.S.
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What's Hot Today: |
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U.S. stock index futures were pointing to a flat opening
on Tuesday morning. Global markets were mixed overnight. Wall Street is
now looking at the S & P delivering a fairly convincing close above
1100. Yet, the overall market is not participating with the same vigor
that it did a few months ago. This is clearly something to think about
in an options expiration week.
Today's Economic Calendar:
- ICSC-Goldman Store Sales 7:45 AM ET
- Producer Price Index 8:30 AM ET
- Redbook 8:55 AM ET
- Treasury International Capital 9:00 AM ET
- Industrial Production 9:15 AM ET
- 4-Week Bill Auction 11:30 AM ET
- 52-Week Bill Auction 11:30 AM ET
- Housing Market Index 1:00 PM ET
News For Thought
UN's IAEA thinks Iran could be lying about nuclear program. In what seems
to be a shocking revelation "The United Nations' nuclear watchdog is concerned
that Iran's belated revelation of a new uranium enrichment site may mean it is
hiding further nuclear activity, an agency report said Monday. The report said
Iran had told the International Atomic Energy Agency that it had begun building
the plant within a bunker beneath a mountain near the holy city of Qom in 2007,
but the IAEA had evidence the project had begun in 2002." Reuters reported.
More trouble lies ahead for U.S. Postal Service. According to The Washington
Post: "The U.S. Postal Service posted a $3.8 billion net loss during its fiscal
year that ended in September, despite $6 billion in cost-cutting moves. Total
mail volume for 2009 fell by 25.6 billion pieces, or almost 13 percent, a steep
decline resulting from the national economic downturn and continued migration
of communications to the Internet. Despite cutting the equivalent of 65,000 full-time
employees through buyouts and attrition, slashing transportation costs and $4
billion in financial relief provided by Congress, the Postal Service still lost
$1 billion more than it did in 2008. Worse, the Postal Service already expects
2010 mail volume will drop by another 11 billion pieces."
GM to pay back loans to U.S. government. GM wants to pay back $6.7 billion
worth of loans to the U.S. government, and wants to do it early. That's nice
but it still leaves some $43.4 billion worth of GM stock in the hands of the
U.S. Treasury department. That means that the monicker Government motors still
stands. And GM continues to lose money. Here are more details: "Despite the heightened
pace of its repayments of loans, the government maintains a 61 percent stake
in the company, an issue that could hang over the Obama administration’s and
lawmakers’ heads until the middle of 2010, the earliest point at which the new
GM is expected to make an initial public offering." The Hill.com reported.
Taking New York 23 concession back. According to The Hill.com: "Conservative
Party candidate Doug Hoffman has "unconceded" in New York's special House election
after reports that the vote margin between him and Rep. Bill Owens (D) has narrowed.
Hoffman conceded the race on Election Night after learning he trailed Owens by
5,335 votes. But the Syracuse Post-Standard reported last week that the margin
had shrunk to 3,026 votes after recanvassing." Here's more: "Officials in the
upstate New York district are still counting over 10,000 absentee ballots, which
also had Republican nominee Dede Scozzafava's name on them. Scozzafava dropped
out of the race three days before election day citing poor fundraising and polling
returns. She then backed Owens."
It could happen. And if it does, life gets very interesting for the House of
Representatives.
How would it work out if Hoffman is proven to be the winner? "Owens was sworn
into Congress on Nov. 6, just before Democrats voted on the healthcare reform
bill on Saturday. Should Hoffman come away with more votes, a highly unlikely
possibility, Owens would have to be removed from office, according to the House
Clerk. Hoffman would have to take over 65 percent of the absentee ballots in
order to eclipse Owens."
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China To Build Wind Turbine Plants In U.S.
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The More Things Change
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U.S. companies continue to pinch pennies and owe the
government billions in bailout loans, giving foreign firms an opportunity to
develop or expand U.S. positions.
In what can only be a reminder of the 1980s when Japanese capital bought huge
chunks of U.S. real estate during the savings and loan crisis, China is starting
to move into the U.S. And while past endeavors such as buying into U.S. oil companies
have been rebuffed, in the new America, green talks. The difference is that Japan's
investments in the U.S. didn't all pan out so well. Remember Rockefeller Center?
Yet, this time may be different, as other foreign countries, such as China, have
a time frame defined in centuries, not years. According to Reuters: "China's
A-Power Energy Generation Systems has signed a cooperation agreement with equity
firm U.S. Renewable Energy Group (US-REG) to build a plant in the United States
to supply wind energy turbines to renewable energy projects in North and South
America." To be sure, it's unclear as to what North and South America means,
but according to the wire service "The joint announcement in Washington late
on Monday came three weeks after A-Power said it planned a $1.5 billion wind
farm project in West Texas along with U.S. companies."
The plant is expected to produce 1100 turbines per year which is enough to power
330,000 homes and will employ 1000 people as well as create construction jobs.
According to the report, the plant will rely on American parts for "many" of
its components. This follows an October 29 announcement in which "Shenyang Power
Group (SPG) and US-REG announced plans to develop a $1.5 billion, 600MW wind
farm on about 36,000 acres in Texas, for which A-Power has been designated as
the turbine supplier. A-Power is a shareholder of SPG."
Still, there are the inevitable hoops to jump through as "the construction of
the assembly and production plant is subject to signing of definitive agreements
between the parties, as well as various government approvals."
There is more to this story, though. According to The Dallas Morning News, the
plant that was announced on October 29 is being built with U.S. stimulus money
while "All of the wind turbines (and much of the remaining investment capital)
would come from China." In other words, the U.S. government is paying China to
build wind farms in the U.S.
Indeed, as the Morning News reports: "There would be perhaps 330 jobs created
in Texas. Most would be temporary construction jobs. Meanwhile, thousands of
Chinese workers in the northeastern industrial city Shenyang would build the
labor-intensive turbines." In fact, the nebulous reporting by Reuters is fleshed
out by the story in The Dallas Morning News, which points out that "Most of the
wind energy projects seeking money under the American Recovery and Reinvestment
Act rely on foreign-made turbines. Even the industry we have here at home, led
by GE, is looking abroad. GE's technology will power the gearboxes of the turbines
for the U.S. Renewable Energy Group. The gearboxes will be made in China."
And, yes, there is more. According to the Morning News: "U.S. companies emerging
from the financial shocks of the last year haven't started investing in American
factory jobs. Richard Fisher, president of the Federal Reserve Bank of Dallas,
told an Austin audience last week that the company CEOs he speaks with are more
interested in investing abroad."
In other words, little has changed, America is once again outsourcing its latest
potential growth market to foreign countries. The problem with this scheme is
that this time American tax payers are footing the bill. And what makes this
worse is that if current trends remain in place, American taxpayers are going
to face a higher bill in order to fund foreign projects in the U.S.
Conclusion
The U.S. is clearly in a delicate position and foreign governments and investors
are clearly demanding some retribution. The logic is fairly clear. The subprime
mortgage crisis started in America. And right or wrong, despite the fact that
foreign investors didn't have to buy bad U.S. paper and did, the ramifications
of the crisis were felt all around the world.
China is the largest holder of U.S. treasury paper, and thus has Mr. Obama in
a difficult position, which is why Chinese companies are getting into the U.S.
wind market in a big way and the taxpayers are funding it. After all, China is
funding the U.S. budget deficit with its treasury purchases.
What it means is that like it or not, China is now a major part of the U.S. economy,
and not just via the sale of manufactured goods to the U.S.
What folks are missing, though, is that a major tenet of Sun Tzu's "The Art of
War" is this one: "For to win one hundred victories in one hundred battles is
not the acme of skill. To subdue the enemy without fighting is the acme of skill."
Indeed, the more things change, the more they stay the same.
Know when to sell and how to make money when the market falls. Get a detailed
trading plan in your pocket. Read Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for
All Seasons. Also Available As Kindle Books. |
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Market Moves - Stock Of The Day
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Hewlett Packard (NYSE: HPQ) Breaks New Ground As Goldman Sachs (NYSE: GS) Stalls
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There may be
a sector rotation under way as Hewlett Packard (NYSE: HPQ)
made a new high on 11-16, while Goldman Sachs (NYSE: GS)
barely moved.
Chart Courtesy of StockCharts.com
Perma-bear on the financial sector Meredith Whitney railed
against the current rally in stocks on Monday, during a
CNBC interview, and the market rally stalled, at least
momentarily.
That's no shock, given the fact that Whitney called the subprime mortgage crisis
and its effects to a T, and has been fairly good on her calls since then.
So it's not the call, but what was left after the remarks that matter. And what
we got was money moving into HPQ at the expense of market bellwether Goldman
Sachs.
That's worrisome, given Goldman's standing in the eyes of traders. When Goldman
flails, the market often fails. And the fact that the current advance is getting
less and less broad as each day goes by doesn't help us get out that "bad feeling" mode.
So what happened on Monday? A prominent analyst made negative remarks. The market
flinched and seemd to recover. Yet, under the hood, the financial sector is clearly
struggling while money is going elsewhere.
Is this a sector rotation? Maybe, yes, maybe no. It could also be the start of
a 1999 style blowoff in the technology sector. We'll have to watch this carefully.
We are neither recommeding the sale or the purchase of HPQ or GS. The purpose
of this article is to educate subscribers as to the presence of an interesting
trend in the market. Dr. Duarte does not own or short shares of HPQ or GS.
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Technical
Look at the Market |
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S & P 500 Finally Moves Above 1100
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The S & P
500 rallied above 1100 on 11-6. Taken on its own merits,
this is a bullish development. What happens next, thouugh,
is more important.
The 1100 area has been formidable resistance, having served as a ceiling for
stock prices since October. That the index finally moved above it is great. What's
not so great is that the Russell 2000 index of small stocks is still nowhere
close to breaking above its key resistance point at 625 and that the breakout
in the Nasdaq Composite was less convincing than the action on the Dow Industrials
and the Nasdaq 100.
So what have the bulls achieved? They have made a new high on the S & P 500.
Is this good? Sure, if you own the stocks in the S & P 500, many of which
are also in the Dow Jones Industrial average and the Nasdaq 100 indexes.
Our point is that market breadth, which measures the health of the overall stock
market is still not in peak form. That means that fewer stocks are participating
in the rally than they were a few months ago.
The market can function like this for a while. But at some point, especially
if things get even worse in the rank and file stocks, there will probably be
some kind of correction.
Sector and individual stock selection is the most important aspect of trading
this market.
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
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