What's in a number?

 

Close vs. exactly

 

Last night the family was sitting around watching American Idol.  It’s a simple concept…people sing…other people vote…somebody wins.  It’s good clean family entertainment.  My son is just getting a feel for this whole interactive voting deal and he’s interested in casting a vote.  So he calls the number on the screen expecting to be prompted to vote on his favorite singer.

 

I was busy rigging up some fishing reels while he was making his call to vote so I wasn’t paying 100% attention…but I hear enough in the background that I know something went wrong.

 

I hear him tell his momma “Uh…I think something’s not right.”  About the time I turn around he’s handing the phone to his momma…and from the look on momma’s face when she gets on the phone I have no doubt that something is wrong.  While I’ve never seen that particular look on her face I have seen looks from the same “family of looks” that she uses when something ain’t right. 

 

It turns out he missed the actual phone number by one digit…and rather than getting prompted to vote for his favorite singer he got a recording of a woman who was prompting him to call a much more controversial number where he could “party” with her and she’d presumably charge him by the minute.  Thankfully 11 year old boys aren’t terribly interested in phone-call-partying with adult women or I might have had some unexpected charges on the bill this month. 

 

It was a typical move by a sleazy marketing company…get a number that is a common mis-dial of a very popular number so you increase your hit count.  I can’t fault them for the tactic but it highlights the importance of getting the number exactly right…versus getting close. 

 

This morning Jobless Claims got “close” to the survey numbers but didn’t get it exactly.  Continuing Claims were expected to post a 3.75 million level…the actual number was 3.771 million.  Initial Jobless Claims also missed the mark by posting a 397,000 figure vs. an expectation of 376,000.  Missing the number on the high side didn’t sit well with the market today. 

 

Treasuries are trading higher in price on this morning’s data and are heading toward the low end of the recent range.  The 10-year Treasury is currently yielding 3.42%.  The domestic stock indices are down as well.  The Dow is off over 220 points and just fell through the 12,000 level.  Interestingly enough…oil is off $2.50 to trade at $101.90.  That is down from its recent high of $105.44.

 

The irony in all of this is that the day that PIMCO’s Bill Gross says Treasury yields may be too low to sustain interest in them…and he sells all he owns…Treasuries begin a two day rally that pushes yields even lower.  There is clearly still plenty of appetite for US Treasuries on the planet.  For what it’s worth PIMCO still owns Treasuries…they are just very short.  They essentially went to cash and if you’re in cash that means money markets, and money market funds are stuffed to the gills with short Treasuries.

 

Tomorrow we get some additional economic data in the form of Retail Sales, Michigan Confidence, and Business Inventories.   

 

TGIF?

 

Tomorrow is Friday (and the official Day of Rage in Saudi Arabia).  As I’m studying this market and trying to keep up with all of the moving parts I always like to step back and look at the big picture.  Sometimes a more big-picture look can help things jump out at you.  As I was looking at this big picture a subtle trend became evident.  This trend has been developing over the last several weeks.  The unrest in Libya began about three weeks ago.  Each week since then we’ve had a trading pattern where the 10-year Treasury sees its lowest daily yield on Friday each week.  Below are the high and low weekly yields on the 10-year Treasury.

 

Wednesday 23 Feb. saw a 3.49% yield…by Friday 25 Feb. it was at a 3.42%

 

Thursday 03 Mar. saw a 3.585 yield…by the close on Friday 04 Mar. it was at a 3.49%

 

Tuesday 08 Mar. saw a 3.56% yield…today is Thursday and we’re down to a 3.43%

 

Tomorrow is Friday and this trend looks likely to continue as the unrest in the Middle East continues to be a flashpoint.  What does this mean?  It means that if you expect this trend to hold and you’re in the market to buy then you may want to wait until next week…and if you’re selling then Friday is your friend as long as the unrest continues.

 

Day of Rage

 

I’m not terribly angry about anything so I’m not participating in tomorrow’s Day of Rage.  Not wanting to be left out of the festivities though I’ve scheduled my own event.  I call it a Day of Fishing.  I will be out tomorrow, floating around on a lake where I can ponder all things fishing and many things economic…but because I am a high-tech-redneck I will still be available if you need anything. 

 

If you have any questions or if there is anything I can be doing for you just let me know.

 

Regards,

 

Steve Scaramastro, SVP

800-311-0707