Ed’s Daily Notes for July 9th   Leave a comment

Bloomberg: Fed Watcher’s Guide To FOMC Minutes

The big news today:

Here’s what to look for when the Federal Reserve releases minutes from the Federal Open Market Committee’s June 17-18 meeting at 2 p.m. today in Washington.

— Lift-off timing: Any indication of how close the Fed is to its first interest-rate increase since 2006 is “the most important question” the minutes could answer, said Guy Berger, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut. The minutes could reveal a growing sentiment that Fed officials “feel like they are moving toward the lift-off date faster than they previously anticipated,” even if they “haven’t quite reached a consensus on it yet,” he said.

— Updated FOMC forecasts for unemployment, inflation, and the federal funds rate released in June “suggest that there are certainly people, relative to where they were three or six months ago, who are more optimistic about the recovery,” Berger said.

— The question is whether the views of hawkish FOMC members, who would rather see rates rise sooner, are “gaining much traction within the committee,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, and a former economist at the Federal Reserve Bank of Richmond.

The markets may be a little tepid this morning in anticipation of the FOMC minutes.

New York Times: Samsung Foresees a Decline in Profit

To me, the bellwether for earnings season is Samsung, which typically issues earnings estimates right at the start of earnings season. The news this quarter is not good:

Samsung, which is based in South Korea, on Tuesday published a financial earnings preview that forecast a profit of about 7.2 trillion won, or $7.1 billion, for the three months that ended in June.

While that is still a substantial chunk of money, the overall profit represents a decline of 24 percent from the same period a year ago. The profit forecast also missed analysts’ expectations of about 8 trillion won.

The problem:

Growth of the overall smartphone market has slowed over the last year, largely because many people who want a smartphone already have one. Smartphones with nice screens and high-quality cameras are commonplace, and people may be feeling less compelled to upgrade as frequently, analysts say.

But Samsung, which offers a range of phones at various prices, is feeling pressure from all sides of the market. In the high end, it faces stiff competition from Apple, whose iPhone sales have recently accelerated thanks to a new partnership with China Mobile, the largest phone carrier in the world.

And in the low end and midtier phone markets, Samsung is facing intense competition from emerging Asian phone makers like Lenovo, ZTE, Xiaomi and Huawei.

If you want to know why the Nasdaq, of the three U.S. indexes, took the biggest hit yesterday, look no further than this story. While I won’t call this the death knell of the mobile internet industry, I will say it is probably a good idea to expect lower growth rates going forward, especially in the hardware part of the industry.

The Jerusalem Post: Hamas rockets reach Jerusalem and Tel Aviv

We get yet another Palestinian attack on Israel. The main thing to watch with this is what Israel does. As long as this confrontation remains between Israel and Palestine, it shouldn’t have much of an impact on world markets. On the other hand, if Israel uses this as an excuse to launch a preemptive attack on Palestine’s weapon suppliers (Syria? Iran?), this could have a chilling effect on markets.

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