Trader Talk

We Are 'Investing for Infinity'


S&P 500 futures popped about 5 points as both Initial and Continuing Jobless Claims were better than expected.


1) We need a REALLY long duration bond: "One could say we are investing for infinity." Norwegian Finance Minister Sigbjoern Johnsen, in an interview with Bloomberg, describing why he is buying Greek debt. Greek two-year debt fell below 10 percent (!!) for the first time since mid-August. Come to think of it, almost ALL Greek debt is near 10 percent.

2) McDonald's falls 2 percent after its 4.7 percent rise in global same-store sales last month was below expectations. Although the fast food giant's U.S. and Asia comps (up 4.6 percent and up 7.8 percent, respectively) were slightly better than the Street's forecasts, Europe comps lagged and disappointed (up just 2.2 percent).

Still, McDonald's shares have been hovering at historic high levels for much of the past 3 weeks, and with a gain of 22 percent so far in 2010, its stock is the 3rd best performing on the Dow this year.

3) Men's Wearhouse rises 5 percent after reporting stronger-than-expected Q2 earnings ($0.83 vs. $0.77 consensus). Same-store sales rose 1.2 percent as margins improved thanks to lower costs and more moderate promotional selling.

Looking ahead, earnings for the current quarter are seen between $0.40 and $0.47 - mostly above the current consensus of $0.40.

4) 3M announced the acquisition of Arizant, the maker of warming products to help patients avoid hypothermia during surgeries. The Dow component will pay $810 million in cash for the purchase, which is expected to close in the fourth quarter.

Corporate debt deluge continues. Unum , Goodrich , Teck Resources , Vale , Hewlett-Packard among many companies pricing debt last night.

Who's buying all this debt? The companies who most need yield, even if it's tiny: insurance companies and pension funds, banks, corporate treasurer's, and even individuals.

How long will this continue? "As long as the FED and the administration keep signaling easy money, support for the banking system, slow growth, and a willingness to intervene if the economy weakens further people feel rates will stay low and this is the best place to generate relatively safe yield & returns," one bond trader told me this morning.

What's the risks? 1) a sudden spike in inflation or expectations for higher rates, 2) a series of stronger economic statistics, 3) a surge toward high-yield investments from lower-yielding Treasuries or corporates, 4) a surge in municipal or corporate defaults

Many companies have also issued high-yield debt—look at the yield! Duquesne Light , for example, priced a $300 million 10-year offering at 384 basis over comparable 10 year Treasurys—that means a yield of about 6.5 percent! 6.5 percent for a high yield 10-year note? Traders tell me that deal would have priced over 8 percent

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