The Luck of the Irish Strikes DC

Today's Irish Coffee

A little luck of the Irish touched the Obama Administration today, leading some of the President's most important legislation toward the other end of the rainbow.

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The Luck of the Irish

The luck of the Irish struck Washington DC today, as the Obama Administration got its "Hire Bill" passed, and health care looks to be readied by Saturday. The rest of this report covers economic releases, including the Producer Price Index and Mortgage Activity Reports, and important news out of the auto industry.

Washington Drivers

Senate Okays Jobs Bill

The Senate passed a bill intended toward job creation on a bipartisan 68-29 vote. Employers who hire from the unemployment pool will be exempt from paying the 6.2% Social Security payroll tax for those employees through the close of the year. If these newly hired employees stick with the company for a full year, the government will also issue a $1,000 credit to the helpful companies. The bill will likely be signed into law and should help spur stubborn hiring, especially for companies that have been holding off on hiring while waiting on this bill. "The Hire Bill" also provides about $20 billion for highway infrastructure projects, which is something I think all drivers agree is desperately needed now. Finally, there are provisions in the bill that encourage small businesses to invest in growth. I think it's a good move in the exact right direction, and continue to support the Administration's focused efforts to restart American industry and employment.

Health Care by Saturday?

Democrats are reportedly moving toward a rarely used parliamentary action that could enable the passage of a health care bill before the President leaves for Asia. The measure would allow the House to make fixes to the Senate bill, and pass it in the process. Republicans are of course charging foul play, but it seems some concessions will be necessary for the bill to pass anyway.

"We, the uninsured, are looking forward to having health care, and we thank you in Congress who are pushing for it."

Some of the House Democrats like Dennis Kucinich, who has stated that the bill does not go far enough, are being wooed to help the bill through now. At this point, a loss on health care could prove a death blow to the Obama Administration's chances in 2012, and that's something no Democrat will trade his position on health care for. Kucinich is now on board after joining the President on an Air Force One flight to Ohio to discuss the subject. We, the uninsured, are looking forward to having health care, and we thank you in Congress who are pushing for it.

Economic Data

PPI Index

The Producer Price Index (PPI) headlined the economic report slate this morning. February's report showed producer prices fell 0.6%, versus economists' expectations for a 0.2% decline. Headline PPI was mostly driven by a 2.9% decrease in energy prices. Drivers should be enthused, as the gasoline index fell 7.4% in February. Foods prices increased for the fifth straight month though, rising 0.4% in February. Core PPI, which excludes the volatile changes in food and energy, rose just 0.1%, following a 0.3% increase in January. That's a rate the Federal Reserve can digest, and that fits nicely with its position stated in yesterday's FOMC Policy Statement.

Mortgage Activity

The Mortgage Bankers Association reported on weekly mortgage activity this morning. The MBA's Market Composite Index slipped 1.9% last week, driven by a 2.3% drop in the Purchase Index and 1.7% Refinance Index fall. Contracted fixed rates on both 15-year and 30-year fixed rate mortgages decreased slightly, to 4.24% (from 4.32%) and 4.91% (5.01%), respectively. Changes in rates were therefore not the cause of the decline, and neither did the housing tax credit help activity. We cannot blame the weakness on the recent huge rainstorm either, as it had not moved into the densely populated Northeast by the close of the measured period. Maybe this last week's data then displays a harsh reality...

Oil Market News

OPEC convened for an "ordinary" meeting today in Vienna. The conference produced affirmation from OPEC on production quotas and its global demand outlook. We found these next few paragraphs from OPEC's release most critical:

"The Conference reviewed recent oil market developments, in particular supply/demand projections, as well as the outlook for 2010, and noted that, while the global economy is clearly rebounding from the late 2008 and early 2009 recession, with continued positive signals coming from the manufacturing and services sectors, serious threats remain.

Downside risks include:

1. Mounting and potentially unsustainable public debt in the most advanced economies
2. A degrading fiscal position which might lead OECD governments to tighten fiscal and monetary policy, despite rising unemployment
3. Weak demand
4. Persistent global imbalances
5. Rising protectionism

The Conference further noted with concern that, although world oil demand is projected to increase marginally during the year, this rise will be more than offset by the expected increase in non-OPEC supply, meaning that 2010 is likely to witness a decline in the demand for OPEC crude oil for the third consecutive year. The persistently high OECD stock levels (estimated to currently stand at 59-61 days of forward cover i.e. well above their five-year average) indicate that there has been a contra-seasonal stock build in the first quarter 2010 and the overhang in terms of forward cover is expected to continue throughout the year."

I would look toward China for a culprit in the "non-seasonal stock build" described above. With a confrontation with Iran looming, I think it is likely that China is smartly stocking ahead of it. China appears to be building stocks across commodities in fact, perhaps due to concern for a renewed commodity price boom on its burgeoning domestic demand.

Corporate News Drivers

General Motors

General Motors' CFO Chris Liddell said GM has a "reasonable chance" to post a profit in 2010. Liddell also offered the possibility of a GM IPO later this year. GM has some $50 billion in government financing to cover and a 60% government stake to unravel. However, there appears to be little government incentive to rush GM into an IPO too soon. Since Congressmen may not make up the smartest investors' pool, you can't count on that patience holding forever, especially given government budget troubles. That's good news for folks who might like to place a bet on the new GM sometime soon.

Honda Motors

Honda Motors (NYSE: HMC) announced its entry into Toyota's (NYSE: TM) recall hell. Honda declared it would need to bring back over 400K cars, including 344K Odyssey minivans and 68K Element SUVs from the 2007-2008 model years. The problem is apparently a receding brake pedal that moves closer to the floor with time. Clearly, if the brake pedal hits the floor before the brakes are fully engaged, that could be morbid. Honda is surprisingly only down fractionally at this hour; looks like there's still time to short toward the lower $30s. This is good news for Ford (NYSE: F), now the best man standing in the US domestic market. I do not think Ford and GM could have engineered these developments any better than they occurred. Hmmm...

Earnings Reports

The day's corporate earnings releases include 3Com (Nasdaq: COMS), A.C. Moore Arts & Crafts (Nasdaq: ACMR), Abraxas Petroleum (Nasdaq: AXAS), Actuant (NYSE: ATU), American Electric (Nasdaq: AETI), American Independence (Nasdaq: AMIC), BioDelivery Sciences (Nasdaq: BDSI), Blonder Tongue (AMEX: BDR), Cadiz (Nasdaq: CDZI), Central Virginia Bankshares (Nasdaq: CVBK), China Sky One Medical (Nasdaq: CSKI), ChipMOS TECHNOLOGIES (Nasdaq: IMOS), CLARCOR (NYSE: CLC), Clark Holdings (AMEX: GLA), Community Central Bank (Nasdaq: CCBD), Compania Cervecerias Unidas (NYSE: CCU), Corriente Res (AMEX: ETQ), Crimson Exploration (Nasdaq: CXPO), Cycle Country Accessories (AMEX: ATC), Dara Biosciences (Nasdaq: DARA), Dune Energy (AMEX: DNE), Ecology and Environment (Nasdaq: EEI), Empire Resorts (Nasdaq: NYNY), Environmental Power (Nasdaq: EPG), Gainsco (AMEX: GAN), Guess (NYSE: GES), Harbor BioSciences (Nasdaq: HRBR), Herman Miller (Nasdaq: MLHR), Hollywood Media (Nasdaq: HOLL), IHS Inc. (NYSE: IHS), Interleukin Genetics (AMEX: ILI), Interstate Hotels & Resorts (NYSE: IHR), Ivanhoe Energy (Nasdaq: IVAN), Keryx Biopharmaceuticals (Nasdaq: KERX), Kohlberg Capital (Nasdaq: KCAP), Ladenburg Thalmann (AMEX: LTS), Luby's, Inc. (NYSE: LUB), Mines Management (AMEX: MGN), Nevada Gold & Casinos (AMEX: UWN), New Dragon Asia (AMEX: NWD), Nike (NYSE: NKE), Northwest Pipe (Nasdaq: NWPX), Oak Ridge Financial (Nasdaq: BKOR), Optical Cable (Nasdaq: OCCF), Ore Pharmaceuticals (Nasdaq: ORXE), Patrick Industries (Nasdaq: PATK), Preformed Line Products (Nasdaq: PLPC), Puda Coal (AMEX: PUDA), Quadramed Corp. (Nasdaq: QDHC), Raser Technologies (NYSE: RZ), Schiff Nutrition International (NYSE: WNI), Somanetics Corporation (Nasdaq: SMTS), STR Holdings (Nasdaq: STRI), Sunesis Pharmaceuticals (Nasdaq: SNSS), Supertel Hospitality (Nasdaq: SPPR), Synergetics USA (Nasdaq: SURG), TIERONE Bank (Nasdaq: TONE), Tootsie Roll (NYSE: TR), Towerstream (Nasdaq: TWER), Tsakos Energy Navigation (NYSE: TNP), U.S. Gold (AMEX: UXG), Vermont Pure (AMEX: VPS), WPCS International (Nasdaq: WPCS) and ZST Digital Networks (Nasdaq: ZSTN).


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