Fisher Capital Management News: Commodity Markets 2010

The performance of the commodity markets remains very impressive. Speculative activity is a major factor, and supply shortages, often the result of adverse weather conditions, are also providing considerable support; but there is clearly a view amongst both traders and investors that the general level of prices is too low, and that they will move higher. Over the longer-term that view is likely to prove to be justified. Commodity markets have been extremely volatile over the past month, rising strongly in the early part of the period, but falling back sharply towards month-end concerns about the effects of the austerity measures being introduced in Europe, and indications of a continuing slowdown in China, have combined to increase fears but for most of the past month traders and investors apparently decided that the gloom was overdone; and commodity prices also benefited from some “safe haven” buying by investment funds.

Base metal prices are still ending the month higher overall, but below recent levels, with the further sharp rise in the tin price as the outstanding feature; and food prices have also moved higher, with the continuing surge in wheat prices as the outstanding feature of these markets, to provide further support for the view that the era of cheap food is coming to an end. The gold price has also improved, as investors have sought “safe havens in the present storm”; but oil prices have fallen back.

Base metal prices are closing higher again over the past month. Zinc and tin prices still ended sharply higher, but overall improvements elsewhere were fairly modest.

Chinese demand remains a critical factor in these markets. It is this demand that has been the main driving force over recent months, and that has pushed iron ore prices to record levels and enabled other metal prices to recover from the lows of the recent recession.

Soft commodity markets have provided a mixed performance over the past month, but prices are generally higher. The exceptions have been the cocoa price, which has continued to fall as weather conditions in the Ivory Coast have improved, crop estimates have been pushed higher, and the effects of the technical squeeze created by the decision by Armajaro, the London-based hedge fund, to take delivery of around 7% of the world’s annual cocoa bean production last month, have eased; and soya-bean prices are also basically unchanged over the month. But elsewhere there has been a sharp rise in Arabica coffee prices, and a further improvement in the sugar price.

However the main interest over the month has been in the wheat market, after the massive price gains, and also in other grain markets. The most significant events during the month were the decision by the Russian authorities to ban the export of wheat and other grains until year-end because of the drought that has devastated crops and caused widespread fires across the country; and to ask other neighbouring countries to take similar action.

It is not yet clear how they will respond; but the action has already created widespread concern.

Russia was the world’s third largest wheat exporter last year, sending 18.3 million tons abroad, and so the decision to ban exports for the rest of the year has had a dramatic effect on prices. Attempts have been made to limit the price gains, with the US Department of Agriculture in particular indicating that US stockpiles of wheat are close to 30 million tons and at a 23 year high, and the UN Food and Agriculture Organisation insisting that global stocks are more than adequate to cope with the shortfall, even if other neighbouring countries join the Russian ban.

But these countries were expected to supply around one quarter of total global wheat exports this year, and so the panic conditions in the markets have not been significantly eased. Evidence of significant purchases of US grain by China for the first time in a decade have also added to the concerns about the availability of global supplies, and made it even more difficult to assess the full consequences of the Russian decision; but it seems unlikely that the surge in the prices of wheat and other grains in over.

After rising sharply in late-July and early-August, oil prices have subsequently fallen back towards the $70 per barrel level. There have been warnings from the International Energy Agency that “the short- term global economic outlook is highly uncertain, presenting significant downside risks to future oil demand growth”; there has been a cautious view of future oil demand from OPEC; and also a report from the US Department of Energy that US stockpiles of crude oil and refined products have risen to their highest levels since weekly records began in 1990. Much will depend on future demand in the US and in China; but the fundamentals do not seem to point to an early and sustained improvement in prices unless there is a serious deterioration in political conditions in the Middle East.

The swing in sentiment towards a more cautious view of global economic prospects, and the renewed concerns about sovereign debt defaults in Europe, have provided further encouragement for investors to seek “safe havens” in the present uncertain situation, and this has led to a significant rally in the gold price over the past month.

The dollar has recovered well from weakness earlier in the month, and so the fear of dollar weakness has not been a factor pushing the gold price higher this month. The evidence that the sovereign debt crisis is far from being resolved, and the indications of increased Chinese buying of gold, have all helped to push the price higher. The latest strength may well lead to a further period of profit-taking; but given the present international situation, it would be unwise to assume that the improving trend in precious metal prices is over.

Fisher Capital Management Korea is a leading global financial institution holding extensive relationships with financial institutions, institutional investors and corporations across the world. As a full service company Fisher Capital Management Korea provides a full range of investment banking services including advanced risk management, corporate strategy and structure, plus raising capital through debt and equity markets. With this as our backbone we continue to provide a client service second to none.

World Trade 2010: Fisher Capital Management

One of the more encouraging developments has been the rapid recovery in the level of world trade. The recession in 2009 had a dramatic effect, and the volume of world exports dropped by around 12%.

But largely because large parts of the global economy, and especially China and other countries in South East Asia, were relatively unaffected by the recession, the rebound in trading volumes had been very impressive. There is already talk of reviving the Doha round of trade liberalisation talks that collapsed in 2008. However it will be necessary for relations between the US and China to improve substantially before any real progress can be made, and present disagreements suggest that progress will only be possible at a very slow pace, even if the global economic recovery remains on track.

Major Equity Markets

Sentiment in the equity markets has been steady over the past month. Markets in Europe have been unable to resist downward pressure. The Japanese market is also lower; but there has been resistance amongst the emerging markets in South East Asia that are supported by more favourable economic conditions.

The Chinese authorities are obviously determined to prevent their economy from overheating. The global recovery will therefore only proceed at a very slow pace, and there may well be setbacks along the way, although a move into a “double-dip” recession still seems unlikely. There is also an increased danger of a sovereign debt default by Greece, and possibly even by Ireland. But the swing in sentiment should not go too far. So long as monetary policy remains supportive, the global economic recovery is likely to continue, and this will eventually produce a sustainable improvement in equity prices. Patience will therefore be the most important requirement amongst investors until some of the uncertainties have been resolved.

The Fed is in a very difficult position. The statement after its latest OMC meeting was cautious about economic prospects, conceding that “the pace of recovery in output and in employment has slowed in recent months” and was likely to be “more modest” than anticipated in the near-term. But monetary policy was left basically unchanged at the meeting, perhaps because of the “unusual uncertainty” about prospects, and this caused some disappointment. However there is little doubt that further monetary easing will be introduced if the position continues to deteriorate, because the bank’s main priority is to try to maintain some momentum in the economy. And fiscal policy is also likely to remain supportive, despite the massive size of the existing deficit. Congress has been reluctant to authorise additional spending programmes; but there is intense political pressure ahead of the elections in November, and further programmes seem likely

Fisher Capital Management Korea is a leading global financial institution holding extensive relationships with financial institutions, institutional investors and corporations across the world. As a full service company Fisher Capital Management Korea provides a full range of investment banking services including advanced risk management, corporate strategy and structure, plus raising capital through debt and equity markets. With this as our backbone we continue to provide a client service second to none.

Fisher Capital Management - Japan Elects a New Premier Part 1

Fisher Capital Management Eight and a half months after riding the Democratic Party of Japan’s

(DPJ) historic lower house victory into office, Prime Minister Yukio

Hatoyama announced his resignation, having haphazardly frittered

away a chest brimming with political capital.

Major newspapers said that Hatoyama was resigning mainly for

two reasons: his failure to keep his promise to relocate the functions

of US Marine Corps Air Station Futenma, Okinawa, out of Okinawa

Prefecture, and a political funding scandal that included his mother’s

provision of some ¥1.26 billion to him over years.

Following Hatoyama’s resignation, Minister of Finance Naoto Kan

was elected as the new Prime Minister, the fifth in four years.

At his inaugural press conference Kan proposed a comprehensive

reconstruction of the economy, public finance, and social security

as his priority, in addition to reforming public administration, and

conducting responsible diplomatic and defence policy.

Fisher Capital Management Report- Japan Elects a New Premier Part 1: The biggest question surrounding the once-popular new government

is whether Kan can really turn over a new leaf for the DPJ. In his

first policy speech to the Diet as prime minister, Kan sought to set

his administration apart from the previous one by vowing to build

“a strong economy, strong finances and strong social welfare”.

Kan stressed the need to jolt Japan out of its currently weak state,

which he attributed to “anaemic economic growth, ballooning

public debt and dwindling public trust in the viability of Japan's

social security system”.

Observers and practitioners believe that the government is unlikely

to announce any significant new policy initiatives, as Kan was

already one of the main architects behind the previous

administration’s economic policy, although some changes have just

been announced in the DPJ election manifesto for the Upper House

election. For instance it drops the promise of doubling monthly

child allowances to ¥26000 next year.

“I hope to carry over the torch of rebuilding Japan passed on to

me by Hatoyama”, he observed at a press conference after his

election. Alan Feldman, chief economist at Morgan Stanley in Japan,

says that “although Kan’s initial speech did include some new

elements, the main message was continuity with Hatoyama’s

economic policies. Investors are likely to welcome the innovations,

but to remain sceptical of the overall philosophy”.

However, economists believe Kan will face a mountain of challenges

both at home and abroad in the near future. First, he needs to

rebuild that political capital ahead of the upper house elections.

Public support for the DPJ has recovered sharply after his

appointment suggesting that voters have, for now, forgiven the

ruling Democrats for the previous leaders’ policy mistakes.

But it remains to be seen whether the initial popularity of the Kan

administration will translate into a strong performance, and whether

Kan will ultimately be given a strong enough mandate to push

through difficult policy decisions.

Major newspaper polls give Prime Minister approval ratings of

between 60 and 70 percent; but such ratings can be very fickle.

The election will be an uphill battle for the DPJ. The DPJ is without

one of its coalition partners, the Social Democratic Party who left

the ruling camp over Hatoyama’s failure to remove the US base

from Okinawa, as demanded by its leader, Mizuho Fukushima.

The two parties that remain, the DPJ and the People’s New Party,

hold 122 of the upper house’s 242 seats, the slimmest majority

possible. Should the coalition lose that majority in the coming

election, it would mean a split Diet — its majority would only

remain in the lower house. And that would make passing bills

extremely difficult.

Fisher Capital Management Report- Japan Elects a New Premier Part 1: Kan will have plenty on the economic front too. In terms of fiscal

policy, as a former Finance minister he has turned into a fiscal

conservative, having been a champion of funnelling revenue from

higher taxes toward government spending in order to achieve

economic growth. “Economic growth, fiscal reconstruction and

social welfar

Fisher Capital Management News: Equity Markets

Equity Markets: All the major equity markets, and most of the emerging markets, Are stable over the past month. There had been expectations that the Fed might introduce further quantitative easing measures at its recent OMC meeting, and this provided some support for the markets in the early part of the month; but it made only very modest.

Government Bond Markets: The major government bond markets have made further significant gains over the past month, despite the funding pressures resulting form huge fiscal deficits, and the renewed concerns about debt defaults.

Short-term interest rates have remained low, and monetary policy has been supportive; but it has been the enhanced “safe haven” status of these markets that has provided most of the momentum, as investors have sought “shelter from the current storm”. However the moves have surprised most commentators, and this has led to warnings about “bond bubbles” that will not be sustained.

Financial Markets: Sentiment in the financial markets has deteriorated. Signs of slowdown in the Chinese economy, have produced a much more cautious view of prospects for the rest of this year and in 2011; and there have been renewed fears about banking problems in Europe, and the likelihood of sovereign debt defaults. There have also been further indications of the conflicting views of central banks about the most appropriate response to the current problems.

Currency Markets: Uncertainty has been the main feature of the currency markets over the past month. The dollar has recovered from earlier weakness after the Fed made only very modest changes in its monetary policy at the latest OMC meeting, and is ending the period basically unchanged; sterling has weakened slightly against the dollar but is higher against the euro; and the euro has also fallen back against most other currencies as the fears about sovereign debt defaults in Europe have increased.

But the feature of the currency markets over the month has been the sharp appreciation of the yen because of its enhanced “safe haven” status. The move is obviously an unwelcome development for the Japanese authorities, and there has been considerable speculation about intervention by the Bank of Japan to reverse it; but there has been no action so far.

Short-Term Rates: There have been no changes in short-term rates in the major financial centres this month. Commodity markets have followed the trend in the other markets, improving in the early part of the period, but falling back towards month-end. The main features have been the continued strength of wheat prices after the Russian decision to suspend wheat and grain exports, and the sharp fall in oil prices.

Fisher Capital Management Korea is a leading global financial institution holding extensive relationships with financial institutions, institutional investors and corporations across the world. As a full service company Fisher Capital Management Korea provides a full range of investment banking services including advanced risk management, corporate strategy and structure, plus raising capital through debt and equity markets. With this as our backbone we continue to provide a client service second to none.

New Commercial Boilers Presented - Triad Boiler Room Systems by Fisher Capital

Fisher Capital on Boiler Room Equipment, Inc: Triad Boiler Systems creates distinctively tough small-footprint hot water boilers, steam boilers, and radiant heating systems.

All of our boilers use 12 gauge firetubes in compact vessels that suit through very small doorways! Inputs range up to 2,000,000 BTU's. Create a highly efficient system with millions of BTU's by sequencing a string of these modular vessels.

TRIAD's commercial boilers and industrial grade Hot Water Heating, Domestic Hot Water, and Steam boilers are used in a wide variety of applications. Our commercial boilers are used at schools, universities, apartments, hospitals, office buildings, retirement communities, and churches. Industrial uses have included bakeries, smelting operations, food processing, quenching systems, and various heating applications for manufacturing. Triads’ modular boilers and radiant heating systems can be natural gas fired, oil fired, or dual fuel fired. For simplicity of operation and maintenance, all controls on our boilers are well known, off-the-shelf products. There area no proprietary parts on these boilers! This simplicity of operation is part of our philosophy, and an important reason why our customers return to us again and again.

TRIAD has been manufacturing high-quality boilers since 1926, and developed the modular boiler concept with primary/secondary piping, receiving a patent for it in 1967. We put this experience, knowledge, and expertise into every boiler.

We believe in quality - it is the overriding characteristic driving our company. This is why we manufacture extremely rugged, well-designed hot water and steam boilers that can provide decades of dependable service. We welcome your inquiries.

Benefits of Modularity

TRIAD's elegantly simple design maintains consistent water volume where heat is required.

•             Boilers are activated sequentially, drawing water from the main loop into the next hot water boiler until the heating need is meet.

•             firing boilers remaining isolated, so no heated water circulates through cold boilers.

•             During most of the year the unfired boilers provide additional backup.

•             Outdoor temperatures and loop water temperatures are constantly monitored.

Fisher Capital on Boiler Room Equipment, Inc: The efficiency of this design is most apparent during warmer months, when a conventional hydronic heating or steam boiler could still be operating at full capacity.

Primary-Secondary Piping - TRIAD integrates modularity with a single pipe primary-secondary system. TRIAD was the first company to employ a Primary-Secondary concept. It operates with two loops, (i) the primary loop, or building main loop, and (ii) smaller secondary loops off of each hot water boiler, which supply heated water to the primary loop.

Upon a call for heat, the boiler pump begins pushing the return water into the boiler and out through the secondary loop, supplying this hot water up into the primary loop (the main header), where it mixes with the cooler return water from the main loop of the building.

•             Supply and return water are blended, avoiding the need for expensive and unreliable mixing valves commonly used in two pipe systems.

•             The secondary loop isolates each hot water boiler, resulting in a very efficient system that minimizes thermal shock.

Control Panel

TRIAD Boilers can be sequenced by the use of our control panel that provides many attractive features:

•             Temperature set-back when less heat is required, such as nights and weekends.

•             Adjustments for latent heat, to take advantage of hot boiler water that retains heat after the burner shuts down.

•             Outdoor reset based on atmospheric temperatures.

•             Monitoring of return water temperatures to maintain accurate heating output.

It is also very easy to sequence our boilers using the panel of any other major manufacturer.

Packaged Product - Fisher Capital on Boiler Room Equipment, Inc: All TRIAD hot water boilers and steam boilers are fully assembled, packaged products, which offer several advantages over boilers that must be assembled at the jobsite

•             Onsite labor costs are minimized.

•             Quality control is higher at the factory than at the jobsite

•             The ease of installation of a packaged boiler allows for quicker start up.

Benefits of Steel Boilers

Easy to Clean - To maintain boiler efficiency, heating surfaces must be kept clean and free of combustion by-products. All TRIAD heating surfaces, especially the firetubes, are easy to access. It is impossible to clean all the heating surfaces of a cast iron boiler, and what can be reached is difficult to clean.

TRIAD also makes it easy to maintain clean water surfaces. The cleaning of the interior of a cast iron boiler is a major undertaking, and even then only the vertical surfaces can be cleaned. The inability to clean the horizontal surfaces can have a significant impact on operating efficiency.

Easy to Repair - Because of their steel construction, TRIAD hot water and steam boilers can be repaired in the field with minimal disruption. A leak can be permanently welded or the tubes re-rolled with little difficulty. It is impossible to permanently weld a cracked cast iron boiler section or a leaking copper fin-tube boiler. The firetubes are easily accessed through the top and through the firedoor.

Fast Water Circulation - Poor circulation of water within the typical cast iron boiler is very common due to their design limits, while TRIAD's steel hot water boilers provide for faster circulation.

Fisher Capital Equipment Update - Market slams Fisher and Paykel on profit Warning

The share market has come down hard on Fisher & Paykel Appliances - with its shares falling 40 per cent after the company issued a profit warning today.

The whiteware manufacturer's shares, which were worth $2.94 this time last year and worth $1 on Friday, went into free fall and are currently trading at just 60 cents, a 40 cent fall.

Earlier today the company said it expected a net profit of $25 million to $30m, down up to 54 per cent on last year.

Due to the deterioration in the New Zealand dollar, Fisher & Paykel Appliances' total bank debt grew $122 from March last year to $512m at the end of January. It was predicted to be $570m by the end of March.

It is now looking at reviewing its capital structure and alternative sources of capital.

Fisher Capital Equipment Update - Market slams Fisher and Paykel on profit Warning - The market was very concerned the company had to come back with a capital raising, which was unexpected, said Hamilton, Hindin, Greene director Grant Williamson.

The home appliance market had dropped off in all areas Fisher & Paykel exported to and there did not appear to be too many signs of a turnaround in world housing at the moment, he said.

"I think investors are starting to say; how long is it going to be before conditions change for the company? I think that's the biggest concern."

Williamson said Fisher & Paykel Appliances' wares were sold into most new homes but when very few new homes being built it would have a serious effect on their sales.

A 40 per cent drop in share value was a big hit for the share price to take but that was the general state of the market.

"If any company disappoints the market then the market is very harsh on their share price and we have certainly seen that this morning with Fisher & Paykel Appliances."

The company announced it would not proceed with a capital note issue and was looking an alternative source of capital.

The directors were considering the merits of issuing equity, including to a cornerstone investor.

Williamson said he did not believe a capital notes raising would have been particularly well received.

He did not see any short term bounce in the price until there was clarification around the structure of equity raising. That was expected to be announced in early March.

"At the moment there's still a fair degree of selling in the market place, around the 60c level."- NZPA

 

Fisher Capital Management - Japan Elects a New Premier Part 2

Fisher Capital Management Eight and a half months after riding the Democratic Party of Japan’s

(DPJ) historic lower house victory into office, Prime Minister Yukio

Hatoyama announced his resignation, having haphazardly frittered

away a chest brimming with political capital.

Major newspapers said that Hatoyama was resigning mainly for

two reasons: his failure to keep his promise to relocate the functions

of US Marine Corps Air Station Futenma, Okinawa, out of Okinawa

Prefecture, and a political funding scandal that included his mother’s

provision of some ¥1.26 billion to him over years.

Fisher Capital Management - Japan Elects a New Premier Part 2: Instead of deregulation and lower corporate taxes, he envisions

increased employment and consumption through focused

government spending in nursing, medicine and other social welfare

fields. But some economists expressed doubts; they say there is no

guarantee that the positive effect of government spending can

steadily outpace the negative effects of tax hikes.

Kan seems to be open to the idea of raising Japan’s consumption

tax from its current level of 5%, though the approach of the upperhouse

election on July and concerns over a political backlash suggest

caution will be the government’s modus operandi.

“Any rise in the consumption tax rate must be offset by lower levies

on daily goods as well as refunds for low-income households”, he

recently said. But he also hopes to reduce corporate taxes from the

current 40% rate to around 25%, in line with other major countries.

In the foreign exchange market, Kan has earned a reputation as a

weak-yen advocate. “The business community says that a yen in

the mid-90s against the dollar is appropriate, so it would be better

if it weakens a bit further”, he said in January, shortly after becoming

finance minister.

Fisher Capital Management - Japan Elects a New Premier Part 2: Market observers believe that Kan still supports a weaker yen and

that the Japanese currency could depreciate against the US dollar.

Regarding monetary policy, Kan is generally considered an advocate

of inflation-targeting and quantitative easing. As finance minister,

he has put some political pressure on the Bank of Japan (BOJ) to

fight deflation more aggressively, he nudged the BOJ to double a

special bank lending program introduced in December. The bond

market believes Kan is a wise choice to manage the sustainability

of Japan’s government debt.

The DPJ had promised to unveil a long-term plan to improve public

finances. However, “postponement is likely because of the current

political churn, and any real ‘meat’ in the plan will probably not

be disclosed until after the Upper House election” … says Flemming

Nielsen, senior analyst at Danske research.

Kan is a self-made man, ascending into politics after years toiling

in citizen movements and he has a reputation as a quick learner

and a pragmatic politician, with sharp elbows and an aversion to

any criticism.

The country he now leads is facing dire long-term problems that

beg for strong leadership, including a staggering level of public

debt, a stagnant economy, and an ageing population. He has a few

weeks to fix the impression left by nine months of incompetent DPJ

governance.

If he fails, the party will be routed in the elections for the Diet’s

upper house.