On or off the fence?
The chase by Frances Horodelski:

There's only one thing I never did and wish I had done: climbed over a fence. - Queen Mary

Some days there is just nothing to say. Alcoa is out (numbers slightly better on the bottom line and slightly weaker on top, outlook in-line), Scotia is having its annual general meeting today and Goldcorp is having an analyst day. The CAPP energy conference continues. Joe Oliver is meeting with economists as he works on his budget. Markets are up overseas with the exception of the Shanghai which is down modestly after recent gains. The Nikkei made a new high last night. Oil is rebounding from yesterday’s inventory induced drop. Natural gas inventories are out today. U.S. equity futures are in the red (maybe as a less dovish Fed sinks in). Every day markets pundits try to explain market reaction to an economic data and they seem to get the connections wrong. The dollar is strong and bonds are weak or stocks are up, bonds are up and dollar is up or gold is up, oil is up, dollar is up and bonds are up? – all explained by some comment by a Fed official that is dovish or bearish. They can’t all be right? Or can they? Or maybe they are just on the fence…

On the fence – that is where the Fed might be or at least more on the fence about a June hike than many thought according to RBC’s analysis of yesterday’s minutes where “several” of the Fed members think the data and outlook warrant beginning normalization at the June meeting while others are worried about energy and the dollar.

On the fence – that is where individual investors are according to the Association of Individual Investors. While the bulls have dropped to levels where a bounce can occur in stocks (28.7%), bearish sentiment hasn’t risen enough and the neutral camp is almost at half of those surveyed (47.15). The Investors Intelligence reading on bullish sentiment has been declining but still above 50% (50.4%).

On the fence – no longer. These stocks are receiving buy upgrades today – Cameco at Canaccord with $23 target; Aurico Gold at Canaccord with $4.75 target; AstraZeneca a new buy from Redburn while JP Morgan cuts PulteGroup to sell, BMO does the same on Cliffs Natural (CLF) and Vale (VALE) while Credit Suisse reduced BHP to underperform.

Climbing the fence – natural gas. Not price but inventories as we are now entering the shoulder season from heating to cooling (heating is substantially more significant) and today’s inventory should see a modest build (11 bcf) as total inventories are currently running in line with the five year average.

Jumping off the fence – soon and painfully – the bond market. It is out there – don’t say you weren’t warned. It hasn’t happened yet, but it will as they say “end badly”. First, we have Jamie Dimon this morning talking about last year’s flash crash in the bond market was just a warning shot. Daily, the trading desks talk about a dirth of liquidity (on Tuesday in the space of an hour, the long U.S. treasury bond dropped a point in the blink of an eye with no explanation – equivalent to about 180 Dow points). There is some $5 trillion worth of bonds trading globally with zero or less yield. Mexico is issuing 100 year bonds in Euros. I’ve always been told bond traders are smarter than equity traders (they know the price of basis point after all). So here is the math from a bond guy: if a current bond yields zero at a price of $100 and rates rise to, say 4.5% (the average bond yield before the financial crisis), the price of that bond drops to … $64.08 for a loss (quick or painfully slow) of 36% - with no coupon to keep you going. Ouch. Ouch and Ouch again. This discussion all prompted by Switzerland coming to market as the first Sovereign with a 10 year issue with a negative rate of 0.21% although it does have a bit of a coupon – 1.5%. (HT Bill Blain, Mint Partners)

That’s it for today.

And this from Johnny Cash (speaking of fences): How well I have learned that there is no fence to sit on between heaven and hell. There is a deep, wide gulf, a chasm, and in that chasm is no place for any man.

Every morning Business Day Host Frances Horodelski writes a "chase note" to BNN's editorial staff listing the stories and events that willbe in the spotlight that day.