Enjoy St. Patrick’s day – whether blue or green
The chase by Frances Horodelski:

Blue – not green. According to those who know, St. Patrick’s blue is applied to shades of blue associated with Saint Patrick and Ireland dating back to the 1780s. While green is now the usual national colour of Ireland, St. Patrick’s blue can still be found in symbols of both the state and the island. Enjoy St. Patrick’s day – blue or green – while listening to a little Black Velvet Band (…her eyes they shone like diamonds…”)

Yesterday’s market green was a day early perhaps with new highs in equity markets in Germany, France and Italy and big bounces in New York and Toronto. Today’s action might be characterized as a little blue with red in most markets (except Asia). Byron Wein, noted former Morgan Stanley strategist and now an advisor at Blackstone, notes that markets act better when people are worried, not euphoric. Well, certainly there is enough to worry about (and the CNN fear/greed index is running down to fear currently at 41 versus twice that a few weeks ago). Oil remains a pressure point however trading at about $43 on the April contract. The U.S. dollar modestly lower and below 100 on the DXY-index.

Always good to hear an analysis that isn’t wishy-washy (and there are many of those). Here’s one from a rates and macro analyst at Mint Partners in London regarding tomorrow’s Fed meeting:

“We expect the "NEW FED" to be hawkish tomorrow. We expect the FOMC members to upgrade its economic assessment. We expect Yellen to deliver a surprise and announce that ALL future FOMC meetings will be followed by a press conference. Markets will re-price FED hike risks, especially near-term contracts. Equities might incorrectly sell-off on a more hawkish FED. This will deliver an excellent buying opportunity. We expect US stocks to deliver another double digit gain in 2015, as well as 2016, just like equities have done in 2012, 2013 and 2014.”

Items of note include a report from RBC yesterday on Encana showing 63% of its 2015 gas production is hedged at $4.29/mcf versus current $2.77 level while about 37% of its oil production is hedged at $62.80. Who else is hedged and how does that ameliorate the pain? S&P’s credit group yesterday highlighted in a report their concerns about credit ratings in particular for regional U.S. banks with energy exposure based on their new $50 2015 target for WTI (had been $65) and $3.50 for gas (had been $3.75). The rating trends for U.S. companies involved in energy are distinctively negatively biased – and well below trend. The report notes that downgrades in the sector have risen sharply recently with 14 downgrades so far in Q1 and are running at their highest level since Q2 2009. In a companion report, S&P highlights regional bank exposure (Wyoming and Texas receive 14% and 11%, respectively of their GDP from energy related businesses). The headline: “We expect the impact of falling oil prices on large U.S. and Canadian banks will be manageable.” The analysts seem to be channelling Canadian bank CEOs!

In the news – Bombardier getting a contract from a new low budget Malaysian airline, the Parliamentary Budget Office will be releasing a report at 9 am on the family tax credit (that is estimated to cost the government roughly $2 billion per year), Germany ZEW survey showing assessment of the country’s current and future situation rising, in the U.S. traders are awaiting housing starts and building permits. Note that the Citi economic surprise index in Europe has been running at a cycle high of 61.80 recently although recent data points have cut the index almost in half to 39.6. On the other hand, economic data in the U.S. has been surprisingly weak (relative to expectations) with the cumulative index at a 2 and a half year low at -63.8. It is election day in Israel. Merkel and Draghi are chatting today and Iranian talks worry oil investors. Joe Mimram is stepping down as head of Joe Fresh. Finally, a report that notes that all (ALL) of the future cash flows of the German 10-year bond are now reflected in the price – can you say stupid!

Earnings today include Alimentation Couche-Tard and Transcontinental (before the open) and Adobe and Oracle after the close. I’ll be watching oil and coffee (both down 19% on a year to date basis), Alibaba which has been raised to buy at Stifel (stock is down 20% year to date), GM which Morgan Stanley has re-established coverage with a sell and Twitter which is a buy at Brean Capital ($61 target). Join us on BNN today for my interview with Morgan Creek CIO Mark Yusko where he talks about possible 2014 surprises, the miserable places in the world to invest and the philosophy of price being a liar. Otherwise we’ll be talking solar, oil, capital expenditures and markets. Looking forward to seeing you.