Currency Report

Hello everyone. Before I start, I would like to express a big thanks to everyone at the KFG for having elected the Minister to the E-Board. I look forward to helping swell the ranks of the club by bringing in some new friends to make money with us.

Anyways, on with the report.

The U.S. economy reported strong corporate earnings and had relatively good rallies in the stock market. However, existing home sales have gone into a correction from spillover from the sub-prime sector and the refusal of home owners to lower their prices. Rising gas prices have lowered consumer confidence to an 8 month low. This may make it all the more real that a rate cut is on the way. The one hope that may provide good news is the durable goods report, which may be higher due to weaker USD valuation, while better weather could help increase home sales. The dollar is stronger versus the Yen, Canadian Dollar and Pound but weaker against the New Zealand Dollar, Euro, Swiss Franc and Australian dollar.

The Euro, contrary to the dollar is higher, trading now at the 1.36 level on the back of a weaker US dollar. Though there is a decline in Eurozone industrial orders, it did not enter in as a factor, as investors are expecting a strong German IFO report. The indicators of the German IFO, such as the the German ZEW and the Belgium business confidence indicator surprised to the upside, signalling that a strong IFO is on the way. Even though oil is climbing, interest rates are going up and the overall strength of the Euro, confidence remains relatively high. The outlook for the rate hike is still on track for June.

In Switzerland, there is still a good story to tell about their economy, though it is relatively mixed. The UBS consumption indicator increased from 2.031 to 2.131. There was a deterioration in the trade balance though. The central bank is ready to intervene if there is a change in the stability however, the outlook is good enough to have a rate increase in June as well, just like the Euro.

In Britain, your friendly central bankers are fighting with inflation. Demand and growth are very high and it has pushed inflation to the point where a rate hike may come as early as this month. Data was mixed as net borrowing and public finance figures are up in the face of lower retail sales. Industrial production is still good though there was also deterioration in trade balance.

The Yen fell against the Euro, US Dollar and the Franc despite stronger inflation. Yen paired currencies, such as the USD/JPY are moving in step with the Dow Jones. A lot of positive data is expected for the Yen, with the trade balance report coming out this evening. The weakness of the Yen should make strong for exports.

Commodity currencies are weaker due to lower gold and oil prices. Australian consumer prices went up .1% lower than the expected .6%. In Canada, indicators increased by .4%, less than the .5% and rates still remained at 4.25%. Comments from the central bank were more hawkish on inflation than before, but were to no avail. Australian and Canadian markets will be closed for ANZAC day. The next event will most likely be on Wednesday when the New Zealand Central Bank announces the interest rate decision.

Here ends the currency report...

This is the Minister signing off.

Tech Report

MY SENTIMENT
I'm feeling neutral about techs, and only somewhat bullish about the market.

TECHS
When I generate ideas on techs, I look at the following: IBM, MSFT, AAPL, DELL, HPQ, NVDA, INTC, SUNW. This provides me with some generalities. And yes, I know I could throw some more on there, but i just need a general trend in order to build an general idea about the sector. That said, I think any gains we are seeing in tech as of now are because of excellent earnings reporting in Q1. But overall most companies, meaning like 492 of the S&P 500 are reporting sluggish growth, and lower multiples because the economy is tapering. The other 8 - mainly bulge banks - are the ones reporting record highs or high expectation surpassing earnings. Right now I'm convinced that Private Equity, Venture Capital, and M&A deals are fueling the corporate environment. So where does that leave techs, not unscathed, but definitely not full participants. I think techs are going to be in line with general trends. Techs have matured, and the companies, valuations, and technology itself. Web 2.0 is a driving force in innovation. Mature companies like Intel, Apple, Oracle, IBM, etc... are still solid foundations. So no longer will techs sway as widely as the did at the millenium, but I don't think you are going to see huge leaps in bounds at least until the end of 2007, if not into 2008. The market corrected some a month ago, and now its time for the economy to "correct" if you will...or the market economy to clear...i don't think we'll see great things until after some of these issues have weeded themselves out. And that's my view on tech.

Road to Wall Street Seminar

Tonight Rich and I will present the Road to Wall Street seminar that we've been working on. The event will be podcasted by Kogod. We will meet in our regular room (Ward 4) at our regular time (8:15pm). Pizza and soda will be served. Try and think of some questions before and during the presentation, because it will be most beneficial if everyone gets a chance to share their experiences. I look forward to seeing everyone tonight!

Currency Report

Here it is, the moment you have been waiting for...The one and only Currency Report!

The big focus for the US dollar is in carry trades. It is so much so that US data was ignored by investors. This helped to pust the Euro/USD to a high of 1.3667. Very little is known as to how far these upward moves may extend, however, the carry moves are the focus as the U.S. economic data does little to sway the Federal Reserve's interest rate policy. Higher inflation shown from this data prompts them to increase rates while the pressures from a sagging housing market stays their hand. Retail sales were higher, however the underlying condition of the increase in oil prices drove gas station receipts up. The Empire State manufacturing survey also showed some improvement, as the manufacturing sector struggles to improve. Treasury International Capital flow data reported softer demand for securities, down from $98.8 billion to $58.1 billion, due to the February stock market sell-off and concerns about the subprime sector. It may not have been as bad, however, as the UK, Japan and China are big buyers of the securities. The NAHB housing report also dropped from 36 to 33, increasing concerns about the housing industry. Consumer prices, housing starts, building permits and industrial production will be released in the coming week. They are expected to be conflicting with consumer prices accelerating due to increasing oil, while housing and industrial production are expected to decrease. The reports should keep the reserve steady on the interest rates.

The euro continues to climb higher, boosted by strong economic data and from positive comments from the ECB. The markets demand is focused on the countries that favor an interest rate hike. Overnight, consumer prices were up by .7%, more than the market expected, and the French business sentiment climbed 2 points to 112. ECB members Weber and Quaden were optimistic about the condition of the economy, prompting one of the members to increase the GDP prediction for Germany and another to state that an interest rate is very likely. The German and ZEW survey are expected to come soon. The consensus forecast is expected to increase due to upside surprises in growth and a rally in the stock market. Realistically, due to the strong Euro and the increase in interest rates, the results may come in to the downside.

The Swiss National Bank President Roth signalled that he would be increasing rates this year. With a low unemployment rate and great exports due to its weak currency, he indicated that the Swiss National Bank must be vigilant. The Franc has not moved much after this due to pressure from the carry trades in the EUR/CHF though as mentioned before, further gains could be limited.

The Pound has been up for the 5th day consistently due to the stronger than expected rise in consumer prices. The pound is expected to be one of the more important currencies as investors wait for the minutes of the monetary policy meeting which they expect to have a more hawkish voting record. This may call for an interest rate increase coming in May or June. The growth of consumer prices as a core and headline number increased faster than was expected in March. Housing market reports show similar increases in home prices, and may also show an increase in consumer prices as well. All that is needed to see the pound get to 2.00 against the US. Dollar is for the employment market to become hotter and for an increase in consumer spending late in this week.

Stronger Japanese production has done little to strengthen the yen, extending to new lows against the Euro after the G7 meeting. Currently, the Japanese are enjoying the benefits of a weak yen (more exports) and may not take any action to strengthen it. Positive economic data and increased earnings for exporters such as Toyota may be on the way.

Even thought the Canadian and New Zealand Dollars were up, there appears to be a turn coming up in the Australian Dollar. Oil prices are down while gold is up. The Canadian Dollar is finally starting to show improvement comensurate with the good performance of its underlying economy. New Zealand Dollars are being accumulated ahead of the Consumer Price Index report, which is expected to be positive after the dip in the fourth quarter. This will raise speculation whether the New Zealand central bank will raise interest rates. The rally in the Australian dollar is simply becoming exhausted. Movement in this currency is dependent on the demand for the carry trades.

Ra Ra RRRREITS Report

Residential

The Commerce Department reported housing starts rose .8% in March, to an annual pace of 1.52 million-a large drop from February’s 7.6% increase although much larger than analysts had expected. Building permits increased as well to an annual rate of 1.54 million in March from 1.53 million in February. Analysts, however, believe the industry is still tenuous and will not show signs of bottoming for months. In morning trading, Toll Brothers Inc.’s shares rose 1.6%, KB Home shares rose 3.6%, Beazer Homes USA Inc. shares rose 2.7% and Lennar Corp. shares rose 2.4%.

Commercial

Maguire Properties Inc. is selling five office properties in Orange County properties to Bixby Land Co. for about $345 million. The properties are from the Equity Office Properties portfolio which it bought from Blackstone Group.

Leaders in Price Performance (Intraday)
CORP OFFICE PPTY TR [ofc]
+2.42%
BRANDYWINE REALTY TR [bdn]
+2.04%
MACK-CALI REALTY CP [cli]
+1.64%
BIOMED REALTY TRUST [bmr]
+1.42%
BOSTON PPTYS INC [bxp]
+1.42%
LIBERTY PROPERTIES [lry]
+1.32%
MAGUIRE PROPERTIES [mpg]
+1.30%
ALEXANDRIA RL EST EQ [are]
+1.27%
HRPT PROPERTIES [hrp]
+1.12%
MISSION WEST PTY NEW [msw]
+0.76%

Laggards in Price Performance (Intraday)
REPUBLIC PROPERTY TR [rpb] -0.86%

International Sector Report

Both international indices in our portfolio have returned to the black, with EWS now up 5.81% and VWO up 2.78%.

Some interesting news out of Singapore this week:

- KKR is buying out MMI, a technology firm that makes parts for computer hard-drive manufacturers. Share prices for MMI went down because KKR did not price it as highly as stockholders expected. KKR did not get heavily involved in Asia until 2005, but it has closed 5 deals since then, including one other in Singapore.

- All of the Asian markets popped on Monday in response to positive US jobs data because more Americans with jobs usually creates a better market for Asian goods

- Thailand’s economic minister called for greater cooperation between ASEAN nations (Singapore is an ASEAN country) because the current influx of capital is similar to the trend before the Southeast Asian collapse in the 1990’s. Cooperation should involve a common reserve pool that can withstand currency and liquidity shocks.

Tech Report

Nothing really interesting to report.

Interesting however, is that Nvidia Director sold about 130,000 shares this past week. He cashed out too, double the option exercise price.

Microsoft is warning of 4 security holes in its new OS, while it beats back piracy in China.

Dell is still unsurprisingly delinquent in its filings.

Hard drive manufacturer, Seagate, is warning on its Q3 revenues.

In general, tech is fine although a bit flat. I don't see modest returns until closer to Q3 and Q4.

Consumer Goods Sector Report

Last week at the meeting we briefly discussed TIF, there were some concerns and a few of you thought we should drop it. Well, the overwhelming analyst opinion is still buy or hold, there is only one 'reduce.' So, I still support keeping it in the portfolio. Tiffany also announces, along with Hermes, that they will be opening a location on Wall Street. There has been a recent movement to bring more residential and retail use to the area.

In Toyota news there is expected to be a management "shake up" this summer. The only notable change is that Executive Vice President Yoshi Inaba will be leaving the company to become the Chief Executive of Central Japan International Airport Co. There is a question of who will be promoted his place but Jim Press, president of Toyota North America, might be the man. In trading the stock is was up today.

Cherokee-- Last week the company signed an international licensing deal for their brand with Comercial Mexicana, a premiere Mexican retailer. The retailer said that "Cherokee is one of the only true global family lifestyle brands that cover a wide range of product categories and will add significant growth and profit to our apparel and non-foods business. It will be one of our key initiatives as we continue to grow our market share throughout Mexico." Good for them, and us because Cherokee is up (but not significantly).

Rivetting REITS Report

Commerical:

Maguire Properties Inc. has agreed to sell two office buildings in San Diego area for more than $298 million. The buildings are the Pacific Center is a 438,960 square foot office property in Mission Valley and Wateridge Plaza, 268,957 square foot office property in Sorrento Mesa. The sale is expected to close next quarter (bizjournals.com).

The deal is part of the company's strategy to raise equity for an acquisition of a part of the Los Angeles and Orange County EOP portfolio. The company also hopes to reduce debt.

Manhattan remains one of the strongest commercial real estate markets. Manhattan's office rents reached record highs during the first quarter of 2007. The drop in leasing was more than offset by limited supply and increasing demand. All areas of Manhattan have expereinced strong real estate markets. Average asking rent for Manhattan office space reached a record $53.43 per square foot, up 6% from last quarter. In Midtown, the largest commercial real estate market in Manhattan, rents rose an average $62.89 per square foot, up 27% from last year, and 7% from last quarter. In Downtown, rents rose to an average of $40.55 per square foot from $34.97 in the first quarter of 2006.

World Financial Center, owned by Brookfield, is the most expensive downtown real estate valued at an average $67.56. Lehman's subleased 400,000 square feet at 1271 Avenue of the Americas. Seven World Trade Center, the first building of the World Trade Center to be rebuilt, is already 2/3 leased.

Despite such high prices and demand, Manhattan is still on ly the world's ninth most expensive office market. It falls behind Mumbai, Dublin, Moscow, Milan, London, Tokyo, Hong Kong, and Paris (in ascending order).

~Jesse

Currency Report

My name is Ian Bellamy and I approve this message.

USD: The European market is closed for Easter Monday. This has resulted in a lack of volatility in the market, as Europe, or more specifically, London, is where the largest amount of foreign exchange is dealt. While the US dollar did rally some due to the US trade bias towards the USD, it is believed that investors are holding off any aggressive positions until the Europeans have their say tomorrow. The magical situation today was the decrease in the price of oil. Iran's move to move to industrial scale uranium enrichment was shrugged off by traders today. The decrease in oil bodes well, as it relieves some of the pressure from the Federal Reserve concerning inflation. The rally to the six week high in the stock market also has given good news to the dollar, in light of a tightening labor market and a housing industry that holds steady through the subprime mortgage woes. Keep an eye out for the minutes of the Federal Reserve President's speeches as they may reveal some important information. President Mishkin, one of the speakers will talk about "Monetary Policy and the Dual Mandate" while the other two speakers, presidents Fisher and Plosser, will elucidate on "Credibility and Commitment." There is no major data to report other than the rhetoric from the Reserve.

EUR: As mentioned before, European markets remained closed for Easter Monday observance, however, they are touted as the biggest upcoming event risk. Focus is being put on the European Central Bank's monetary policy meeting coming on Thursday. While still on track to raise interest rates, it is not expected for this meeting to be the one that does it, as one was just done last month. Comments from President Trichet have been given much scrutiny, as during the months he has introduced and left out the magic words "strong vigilance" from his speeches. These bode well for interest rate hikes, no doubt. If this happens not to be used during the meeting, then June may very well be the month of the rate hike, at the latest.

GBP: Since the Bank of England left the interest rates unchanged, the pound has faltered slightly versus the US dollar and Euro and has continued this way for 3 days. The markets here were also closed for Easter Monday celebrations. There is not much economic data to be released here, so it may continue to fall until something comes up. Tomorrow comes the release of the retail sales rates; in which an increase may bring some pep back to the pound.

JPY: The economy continues to suffer from lower prices and deflation as consumer price figures come in lower from May 2006. A break higher in the Nikkei index has helped the Yen gain some ground over the pound, euro and franc, but not against the US and New Zealand Dollars. The weakness a part of the belief that the Bank of Japan will not go against the carry trades. It may be impossible to have a rate hike in the future, especially since deflation and decreasing retail sales are now problematic.

Commodity Currencies: Commodity currencies appear to be overextended, even with the rise of the Australian Dollar today. Both the Australian and New Zealand Dollars have hit resistance and may be unable to break it. In the case that it does not, it is possible they may test critical supports in the future. As gold and oil have been falling, the Canadian Dollar, which is heavily linked to oil and the other commodity currences have suffered some weakness.

And so has spoken The Minister.

Political Intelligence for Investors

Hey all – I haven't posted here in awhile and for those of you who have lost a few brain cells to the “drink” since last year I was the Tech Sector leader in 2005/2006. I meant to do this earlier but usually a nap or cookie gets in the way - I come across quite a bit of interesting information/news at my job that if analyzed correctly could be invested on. I tried to list some companies at the end of each summary that may benefit/lose out based on the legislation/political happenings but keep in mind there may be other companies out there that I don’t mention that will benefit/lose out.

Korean FTA: Over the weekend the US signed a formal Free Trade Agreement with Korea – this is the largest Free Trade Agreement since NAFTA (valued at around $70 billion). Some winners out of this agreement would be the auto-industry (US automakers sold a very small 4,200 vehicles there last year), entertainment industry (there was a quota on American made movies and television shows), and some of the agriculture industry (citrus products). Some of the big losers are the beef industry who did not get any concessions on when they might be able to sell in the Korean market again (they have been shut out for awhile on fears that American beef may have mad-cow). The rice industry also did not get any concessions and will not be able to import into Korea (will hurt CA rice growers). That being said I give this deal a 50-50 shot of passing congress (given Congressional rules the deal has to be voted on before July 1st) – and if it does look for a side-letter on beef (i.e. concession on beef) by the Koreans before it passes.

Companies that may benefit:
General Motors
Ford
Disney
Sunkist
Planters (nut company)
Disney
Electronic Arts

Immigration Reform: A bill will be on the president’s desk to sign by the end of the year, the question is will he sign it. The president has said he supports "comprehensive immigration reform" which many immigration hard-liners take to mean amnesty for all illegal immigrants here. The hard-line immigration activists want illegal immigrants to leave the country and then apply for citizenship. The other plan (which the Dems and President support) would be to allow the illegal’s already here to pay a fine and be granted citizenship or some sort of permanent residency to work – essentially giving the illegal immigrants amnesty. My guess is the "amnesty" plan will win out – not sure on the details.

So what does that mean for you investors – most of the talk surrounding the Immigration Reform bill has been around what to do with the ~12 million illegal’s already here but there are other big concerns such as a proposed border fence and skilled worker reform. H-1B visas will be reformed (the quota for 2007 was filled in 1 day) which Bill Gates and many businesses want to see raised so they can hire skilled workers and bring them here to the US .

The other question is what will congress do to secure the border – and how much are they going to spend doing it? If we built a fence along the 2,219 mile border and manned it that would cost billions of dollars – mostly going to government contractors. Lockheed has already spent $15 million developing a "Secure Border Center" where they are "researching ways" to secure the border – they are essentially hoping to land the lucrative contract of building this fence. The other "cheaper answer" would be a virtual fence which would be a combination of aerial drones, sensors, satellites, cameras, and other newfangled technologies working in unison. The building of an actual wall will probably be awarded to a large defense contractor and be worth billions (i.e. a major news/stock price increase event when it is announced) for the company and if successful could lead to other business from countries like Israel. The second option of a “virtual fence” would probably be headed up by a large defense contractor but with lots of small sub-contracts to small defense and security companies who manufacture all of the drones, sensors, satellites, cameras, telecom equipment. When I say small sub-contractors small could mean a $10-$100 million contract to a publicly traded company with sales of $20-$50 mil so winning one of these contracts could be a huge win.

I would also note that if some sort of amnesty is not given to the 12 million immigrants and many of them are returned to their country of origin look for retail and restaurant outlets to see diminishing returns as many of them count on cheap labor to keep costs down. While there are people out there who would dispute this fact the National Restaurant Association has come out and said they need comprehensive immigration reform (i.e. some sort of amnesty to keep the workers here) to stay competitive – so if they say they need it I tend to believe them at least in this case.

Companies that may benefit:
Lockheed
Northrop Grumman
Boeing
Small “security firm” startups/defense contractors

Companies that may lose if a variation of “amnesty” is not granted:
McDonalds
Burger King
Taco Bell
Home Depot
Casinos – especially Harrah’s as they run many of the Indian casinos in the southwest
Hotels

War with Iran: Crude oil prices reacted strongly to the British hostage crisis and that is a good indicator to what might happen to energy prices if a war with Iran were to really happen – to be honest I don’t think many people realize how close we were to a war with Iran. While experts don’t agree on when Iran will actually have the capability to build a bomb most do agree that the time to strike is not after they get it but before. The Bush administration and the current Israeli government will not tolerate an Iranian bomb and will do something about it even despite the world uproar that might come if they decide to attack unilaterally. In my opinion it is not if the US or Israel (or both) decide to take out Iran's nuclear capability it is when. The only real question is how Iran will react to being attacked. Many believe they will respond by mining the strait of Hormuz (70% of all middle eastern oil travels through that strait) with the doomsday predictions of launching a dirty bomb at Israel which will certainly start a regional war with the US committing its forces that are already in the region. The companies that may benefit from a bombing/war with Iran are military contractors and energy companies. If we attack Iran then we will continue to burn billions of dollars a week on keeping a 130K+ man army and TWO carrier battle groups in the Middle East instead of drawing down our forces. What many people don’t realize is that despite partisan rhetoric the President is the President and congress does not really have the power (or the guts) to completely cut off funding to the Iraq war or a possible Iranian war.

Companies that may benefit:
Exxon
BP
Yukos Oil
Citgo
Halliburton (market might have already priced this in – although stock price seems low)
Lockheed
Aramark
Any number of energy companies or smaller military contractors


If this kind of political information analyzed through a business lens is useful let me know and I will continue to post periodically as well as track the bills related to the topics above to see when they might pass congress and be signed by the President. If there is a specific piece of legislation you find interesting I can more information on that as well.

Tech Report - 4/3/07

Tech stocks rallied a bit today off of low oil and some improved housing data for existing house sales. Nvidia was still stiffled. Nothing really new to report on tech. I'd like people to focus some attention towards the NY Stock Exchange Inc. (NYX) I know it's a bit expensive, but it is a stock that I'm bullish on, not to mention its is a good stock that you won't have to worry about its cash flow variance. You have to pay to be traded on the exchange, go figure! I will hold off on a proposal for now though.

Financials

Greetings KFG

The market is booming on this gorgeous Tuesday! National Assoc of Realitors came out today with better than expected figures on home sales which got our sector moving. Combined with a surprise upgrade (Neutral to Buy) by Goldman Sachs -- MER is up over 3%. I continue to be ultra-bullish on this holding and see as a good competitor on all playing fields: IBD, Asset Mgmt, Trading. It is not the best in either of them per se, but its success everywhere is helpful and will keep it trading up in the current market.

I feel as we should sell our holding in Citigroup and take a position in something more aggressive. Citi has done extreemely well for us the past 4 years, but its current cost-cutting program (read: last post), along with its role as a big 3 commercial bank as opposed to an inv bank (lower margin, int rate sensitivity in consumer mkt), I feel we should get out of it. The outlook for the sector as a whole is not that great, and while we continue to look for opportunities, the money shouldnt sit in cash.

Consumer Goods Sector Report

Major news for auto manufacturers is the March sales report. For Toyota, the March sales showed the foreign auto company is closer than ever to edging Ford out of its #2 spot for auto sales. Sales of the Puris doubled and sales also increased for the company's Lexus bran. Toyota's total car sales jumed 11% from a year ago. Meanwhile Ford and DiamlerChrystler sales fell around 5% each.

Tiffany's 10K was released on March 30th. For 2006 sales increased 11% tp $2.6 billion, but net earnings of $254 million were about equal to 2005.

No new news for Cherkee, the stock is up today .

In news regarding the whole consumer goods sector, The consumer confidence index for March came out on the 27th, it was down to 108 from 112.5. This drop in confidence can be attributed to the higher gas prices and lower stock prices that prevailed at the time of the survey, in early March. Generally, as long as the job market is strong there won't be a huge drop in consumer confidence--if they feel secure with jobs they'll keep shopping. Still, some forcast this index to continue dropping.

Healthcare

Biogen is up today. At midday it is trading at 44.78. Looking at the trends however, the stock's performance has not been improving since we originally were questioning the decision to hold on to it in January. We originally bought it at around 32.00 per share and now its up close to 45. I think based on trends and looking at its performance, it is time to consider looking for another higher growing investment in the healthcare sector. Currently it is our only position in this industry and maybe we should consider diversifying ourselves by either selling off a portion of our holdings or using the money through other liquidations we can purchase more. I am still looking into Bayer AG (BAY) as a good potential investment. Hopefully a proposal will be ready for next week.

Healthcare

Biogen is up today. At midday it is trading at 44.78. Looking at the trends however, the stock's performance has not been improving since we originally were questioning the decision to hold on to it in January. We originally bought it at around 32.00 per share and now its up close to 45. I think based on trends and looking at its performance, it is time to consider looking for another higher growing investment in the healthcare sector. Currently it is our only position in this industry and maybe we should consider diversifying ourselves by either selling off a portion of our holdings or using the money through other liquidations we can purchase more. I am still looking into Bayer AG (BAY) as a good potential investment. Hopefully a proposal will be ready for next week.

Currency Report

Hey ya'll it is the minister here to inform you on the currencies.

The US dollar is still under pressure from many economic factors. While trading relatively sedately, the dollar lowered slightly among the currencies. The ISM Manufacturing release left traders confused as it slipped more than expected to 50.9. Further investigation showed a decline in new orders and on the employment side. The prices paid figure has increased to 65.5, on the increasing metal and fuel prices, especially oil which traded over $65/bbl. The Federal Reserve is now in a precarious position; it must decide to lower rates and decrease pressure on business and consumers or increase rates and lower inflation. The hawkish rhetoric of the Reserve has been unheeded, and it is surmised that the rates will be held steady to gauge how monetary policy will affect the economy. However, rising prices may help persuade our fellow reservists to tighten it up a little.

The Euro continues to trade higher and has tested the 1.34 level against the US Dollar. PMI manufacturing has slid slightly from 55.6 to 55.4 in the prior month while Germany, France and Italy suffered similar declines. Even thought the index remains above expansionary levels, the high exchange rate and increasing energy costs have begun to affect demand and production. Rising inflation may persuade the ECB to raise rates to 4.00, or another 25 basis points. In light of the new French presidency elections, some candidates fear having such a strong currency and look to take steps to devalue it. This may cause pressure to stop the tightening but as far as it is, the Euro still remains a good buy.

The British pound ran contrary to the bearish manufacturing data due to interest rate hike speculation. Currently it trades above 1.97 to the US Dollar. The purchasing manager's index came with a sharper decrease to 54.4, less than the expected 55.1 and below the previous month's 55.4, indicating a slowdown. Though bearish for the economy, the increase in equity withdrawals to 14.6 billion pounds boosted sentiment that consumer spending may increase even with rising property values. Speculation followed futures contracts, which have priced 2 rate hikes within the year. The report helped in supporting a surprise rate hike ahead of this week's meeting and hightening notions of carry trades.

The Yen was mostly range traded within thirty points for most of the New York session. The Tankan business survey came back lower, showing a decline in sentiment from its 2 year high. Notions of a global slowdown negatively affecting the export sector contributed to the drop to 23 from 25. The capex however rose 2.9%, higher than the expected 1.7%. Even though it is lower that the 12.4% in the previous report, the fact that it increased means that business investment is still strong as companies continue to meet demand. This is the only factor keeping traders Yen bullish, as the investment may trickle into higher wages and cause inflation. Until this occurs, the currency remains flat heading into the London session.

The Australian dollar made out well today, having reached .8110 and trading higher during the New York session. The Canadian dollar, however, was slightly lower due to profit taking and stalled crude oil prices. Contributing to the momentum in the Australian dollar was the retail sales figure coming in at a higher than expected .9 instead of .4 as expected, making it the longest expansinon run, according to the Bureau of Statistics. The figure was supported also by home-building permits which have had their biggest monthly jump since the tail end of '03. Inflation is at 3.5% in the near term and may fuel the fire for a rate hike.

Q1 Industry Returns from WSJ

Quarterly Industry Group Performance

For the First Quarter 2007

Industry groups, based on classifications in the Dow Jones Wilshire Index, are ranked by percentage gains or losses for the first quarter of 2007. The Dow Jones Wilshire Index is a capitalization-weighted index with a base number of 1000 on December 31, 1991. Component issues include companies traded on the New York Stock Exchange and American Stock Exchange, as well as issues traded on the Nasdaq National Market System. A comma-separated file (csv) containing this list of industry groups is available from the link below. Download Industry Group Performance Data GROUP LAST CHANGE % CHG Tires 805.77 219.39 +37.41 Steel 3,878.55 755.14 +24.18 General Mining 1,498.65 217.35 +16.96 Nonferrous Metals 6,724.48 859.03 +14.65 Travel & Tourism 1,397.01 169.30 +13.79 Aluminum 4,351.58 511.60 +13.32 Marine Transportation 3,116.88 361.88 +13.14 Trucking 3,129.34 359.18 +12.97 Platinum & Precious Metals 1,796.35 183.68 +11.39 Auto Parts 2,259.84 219.03 +10.73 Commercial Vehicles & Trucks 8,857.84 829.74 +10.34 Specialized Consumer Services 3,995.35 351.28 +9.64 Electricity 2,201.17 191.57 +9.53 Railroads 4,382.61 355.77 +8.83 Exploration & Production 5,978.13 463.28 +8.40 Medical Supplies 6,334.42 487.19 +8.33 Farming & Fishing 10,193.54 763.40 +8.10 Drug Retailers 6,371.40 470.88 +7.98 Chemicals, Commodity 2,339.87 165.83 +7.63 Industrial Machinery 4,166.27 288.14 +7.43 Containers & Packaging 2,616.79 177.80 +7.29 Toys 4,396.47 295.97 +7.22 Fixed Line Telecommunications 1,365.51 89.16 +6.99 Pipelines 4,338.00 280.16 +6.90 Heavy Construction 4,477.38 284.93 +6.80 Oil Equipment & Services 5,582.54 323.09 +6.14 Clothing & Accessories 2,457.96 139.01 +5.99 Building Materials & Fixtures 3,320.14 171.95 +5.46 Coal 3,597.24 183.66 +5.38 Brewers 3,279.73 163.12 +5.23 Forestry 3,096.96 152.97 +5.20 Aerospace 6,350.70 308.34 +5.10 Health Care Providers 4,691.53 223.35 +5.00 Internet 1,996.24 94.81 +4.99 Paper 1,722.00 81.63 +4.98 Food Retailers & Wholesalers 2,326.24 109.01 +4.92 Broadline Retailers 3,272.51 147.76 +4.73 Defense 5,305.26 233.37 +4.60 Personal Products 3,905.97 171.69 +4.60 Multiutilities 1,563.32 67.37 +4.50 Business Support Services 1,051.91 44.60 +4.43 Durable Household Products 1,905.96 79.46 +4.35 Footwear 4,458.07 172.31 +4.02 Hotels 3,550.33 137.08 +4.02 Industrial Suppliers 2,317.65 86.68 +3.89 Furnishings 3,186.45 117.76 +3.84 Chemicals, Specialty 3,268.37 120.62 +3.83 Food Products 2,488.25 90.09 +3.76 Specialty Retailers 2,679.88 92.68 +3.58 Electrical Components & Equipment 2,285.57 74.69 +3.38 Water 4,718.76 153.36 +3.36 Life Insurance 5,337.53 166.99 +3.23 Asset Managers 8,008.90 247.84 +3.19 Real Estate Holding & Development 4,564.13 137.90 +3.12 Gas Distribution 1,711.54 51.62 +3.11 Apparel Retailers 3,571.78 106.46 +3.07 Mobile Telecommunications 3,763.65 103.17 +2.82 Tobacco 2,990.36 72.11 +2.47 Electronic Equipment 2,911.27 57.11 +2.00 Transportation Services 2,988.85 51.75 +1.76 Real Estate Investment Trusts 3,066.82 37.51 +1.24 Media Agencies 4,696.76 52.39 +1.13 Financial Administration 3,859.16 33.02 +0.86 Soft Drinks 3,080.19 25.31 +0.83 Medical Equipment 5,664.53 42.22 +0.75 Gambling 8,474.60 -1.08 -0.01 Insurance Brokers 2,525.75 -2.94 -0.12 Business Train. & Employment Agencies 6,902.70 -19.04 -0.28 Telecommunications Equipment 6,361.82 -25.22 -0.39 Computer Hardware 5,048.76 -23.55 -0.46 Restaurants & Bars 5,562.76 -26.12 -0.47 Pharmaceuticals 2,345.57 -11.94 -0.51 Computer Services 4,072.01 -23.61 -0.58 Integrated Oil & Gas 4,799.91 -45.64 -0.94 Waste & Disposal Services 1,091.88 -11.44 -1.04 Nondurable Household Products 5,438.94 -61.79 -1.12 Recreational Services 3,345.39 -39.03 -1.15 Semiconductors 9,630.70 -124.73 -1.28 Broadcasting & Entertainment 3,757.53 -49.67 -1.30 Reinsurance 5,848.98 -77.25 -1.30 Consumer Electronics 16,508.52 -247.20 -1.48 Publishing 3,755.34 -56.79 -1.49 Software 6,319.04 -123.52 -1.92 Electronic Office Equipment 1,803.19 -37.66 -2.05 Diversified Industrials 4,087.44 -102.72 -2.45 Property & Casualty Insurance 4,415.94 -127.86 -2.81 Delivery Services 8,343.55 -287.14 -3.33 Investment Services 9,152.89 -327.25 -3.45 Biotechnology 3,019.31 -118.82 -3.79 Recreational Products 875.13 -36.25 -3.98 Banks 6,336.64 -272.59 -4.12 Full Line Insurance 5,466.18 -272.20 -4.74 Automobiles 2,437.50 -127.25 -4.96 Home Improvement Retailers 7,023.38 -380.51 -5.14 Airlines 1,312.20 -93.26 -6.64 Consumer Finance 6,427.94 -485.24 -7.02 Specialty Finance 8,615.35 -700.56 -7.52 Gold Mining 1,435.58 -121.01 -7.77 Mortgage Finance 4,327.66 -587.78 -11.96 Distillers & Vintners 4,481.58 -798.52 -15.12 Home Construction 6,024.07 -1,392.88 -18.78