BETWEEN THE HEDGES

Late-Night Headlines
Bloomberg:

- Best Buy Co.(BBY), the world’s largest electronics retailer, is using its “Geek Squad” computer- repair workers to remotely fix technical problems in a test that started about six months ago. About two dozen employees work at home rather than providing services in stores or driving to customers’ houses, said Derek Krueger, manager of operations for the new remote- support unit. Krueger said he plans to add about 18 more in the next month and may expand the range of services to TV and home- theater support.

- India’s government proposed reducing corporate tax rates to a record low while broadening the tax base to fund an expanding budget deficit in the biggest change to tax laws in almost five decades. Finance Minister Pranab Mukherjee proposes to lower tax rates for companies including Reliance Industries Ltd., the nation’s biggest by market value, to 25 percent from about 30 percent, according to a statement in New Delhi. Taxes on equities trading in Asia’s second-biggest emerging market may be abolished.

- Princeton University Economist and New York Times columnist Paul Krugman bought an apartment on Manhattan’s Upper West Side for $1.7 million. It was on the market for more than a year. “It’s quite possible, though not certain, that retrospectively, we’ll say that the recession ended in July or August, maybe September,” Krugman said in an interview from Kuala Lumpur. “My guess is that we’ve bottomed out now, that August was probably the trough month.” Krugman said he thinks Manhattan prices will continue to decline. “Yes, I do expect New York prices might fall some more, but we need a place. And I came into some money,” he said.

- Australia’s Senate rejected the government’s climate-change legislation, forcing Prime Minister Kevin Rudd to amend the bill or call an early election. Senators voted 42 to 30 against the law, which included plans for a carbon trading system similar to one used in Europe. Australia, the world’s biggest coal exporter, was proposing to reduce greenhouse gases by between 5 percent and 15 percent of 2000 levels in the next decade.

- China, the world’s largest market for cellular phones, may have as many as 240 million users of the so-called third generation mobile devices, said the minister of industry and information technology Li Yizhong. “The next three years will be the golden age of China’s 3G industry,” Li said today. “Based on our calculations, an initial 45 billion yuan of investments may lead to 1 trillion yuan in aggregate investments by the industry and its suppliers.”

Wall Street Journal:

- The Securities and Exchange Commission's scrutiny of so-called flash orders is extending to options exchanges, where some say the practice is more common than on stock exchanges. Flash orders give traders on some exchanges a sneak peek at market activity, a practice that critics say leads to lower transparency and gives certain traders an advantage over others.

- The House of Representatives is likely to propose a temporary, one-year measure to prevent repeal of the estate tax, as time is running short for a bipartisan group of senators to agree on a permanent rate by the end of this year. Democrats are determined not to see the estate tax repealed, which according to tax cuts passed under President George W. Bush will happen on Jan. 1, if Congress doesn't act by the end of the year. The House will likely propose to scrap the one-year repeal and instead extend 2009 estate-tax rates for another year, according to congressional aides. At current levels, the first $3.5 million of estate wealth is exempt from the tax. Above that amount, wealth is taxed at a 45% rate.

- Some of the nation's biggest food and agriculture companies are planning to release a flurry of studies in coming weeks that scrutinize the potential impact of climate-change legislation, warning that it could lead to higher food prices. A group of agriculture giants including Cargill Inc., along with meat company Tyson Foods Inc. and food maker General Mills Inc., is concerned the companies might bear a disproportionate share of the costs of such legislation, according to a memo reviewed by The Wall Street Journal. Other members of the food coalition include the Grocery Manufacturers Association, the National Turkey Federation, the American Meat Institute and the American Frozen Food Institute. The coalition, which formed informally about two months ago, is becoming more active after concluding that member companies didn't win enough concessions in the House climate legislation, industry lobbyists said. The Senate is expected to take up its own climate bill when senators return from recess next month. The letter said Congress "must take extreme care to avoid adverse impacts on food security, prices, safety, and accessibility to necessary consumer products." The letter also criticized the House bill for failing to provide transitional assistance to "low-income households struggling with rising food prices."

- Cap-and-Trade’s Unlikely Critics: Its Creators. Economists Behind Original Concept Question the System's Large-Scale Usefulness, and Recommend Emissions Taxes Instead.

- Washington topped off the tank of "cash for clunkers" money just in time before it ran dry last week. But would-be car buyers could have to pay up to get some of the most popular vehicles eligible for the program unless car makers order up more production.

MarketWatch.com:
- Toyota Motor Corp. (TM) will launch a hybrid car that is cheaper and more fuel-efficient than its Prius model as early as 2011, the Yomiuri Shimbun reported Thursday.

- The tablet PC could be Apple’s next big thing. Industry analysts who follow Apple say it's all but certain a tablet version of the Mac will be on the market by early 2010, if not sooner. The potential benefit to Apple could end up being billions of dollars of new sales. Piper Jaffray analyst Gene Munster said recently that he had discussions with an Asian component supplier which said it had received orders for a touch screen device that needed to be filled by the end of the year. Munster believes that's evidence Apple will launch a new tablet PC in early 2010. "We expect the tablet hardware to be similar to an iPod touch, but larger and we expect the key differentiator of the device to be its software," Munster said, adding that the software could resemble a version of the Mac operating system used in the iPhone, and also provide access to the iPhone's popular App Store. Munster estimates that an Apple tablet device will probably cost around $600, placing it between the highest-end iPod touch at $399 and the MacBook, which starts at $999. At $600, Munster calculates that sales of 2 million Mac tablets could add $1.2 billion to Apple's sales next year. Shaw Wu, of Kaufman Bros., said Apple may have seen the need to get into the netbook, or tablet market, before it's too late. Wu said sources with Asian computer manufacturers said Apple has been buying up touch screens in various sizes ranging from 4 inches to 10- and 12-inch models to determine what form factor would work best in a Mac tablet.

CNBC.com:
- Yesterday the financials were dragging the market down, and today the sector was one of the most lucrative movers. Names like JPMorgan(JPM), Citigroup(C) and Goldman Sachs(GS) experiencing multiple percentage point upswings and ended the day with the positive news that Hedge Fund titan John Paulson bought up 168 million Bank of America(BAC) shares. "This is a huge turnaround story," says Karen Finerman, "Everything went wrong here... and then everything started to turn. The potential profitability here is enormous. I like Bank of America, I think we're early in the turnaround story." Finerman herself is long both BAC common shares and preferred shares, and notes that Paulson's move gives a large vote of confidence. "The financial sector will still have the steep yield curve working in their favor," says Joe Terranova, "the capital markets are clearly improving right now... I think everything lines up well in the financial sector for a potential return to normalized earnings. Now that Bank of America is back on the rise, keep in mind that mutual funds are under-invested in this name." After the Bank of America news, what other names are likely to rise? Karen Finerman suggests Wells Fargo(WFC), noting that it is also a big bank and has acted very similar to BAC throughout the crisis. Guy Adami sees the best plays being the downstream plays like Piper Jaffray(PJC), Raymond James(RJF) and Jefferies(JEF) are the names he likes. Pete Najarian suggests keeping an eye on regional banks if the commercial industry begins on the mend.

- The market for luxury homes isn’t as bad as it appears, Robert Toll, CEO of Toll Brothers(TOL) told CNBC. “I guess the luxury end isn’t dead as it’s been observed to be," Toll said in a taped interview. "The information from today is more indicative than anecdotal...It could be that this market follows the fortunes of the general public that’s invested—the stock market is going up.” “We’re almost back to a normal cancellation rate and the reason is, you’re seeing a different kind of buyer,” he said. “The cancellations come out of people who were speculators in the market…that’s been supplanted pretty strongly by buyers who were for real.” In terms of the economic situation, Toll said the economy bottomed 2 to 3 months ago, indicating that the homebuilders market is going to be better both in short and long-term.

Business Week:
- In these brutal economic times, one huge hit has been kiosk retailer Redbox, which offers $1-per-day DVD rentals. That's great news for consumers and even better news for Coinstar (CSTR), which last year bought control of the rapidly expanding Redbox. Until lately, Coinstar was better known for coin-counting machines that swap change for redeemable vouchers. Viewed as a recession play by investors, Coinstar's stock is up more than 80% this year.

Lloyd’s List:

- FREIGHT rates are finally heading in an upwards direction on the world’s two biggest trade routes as container lines keep capacity under tight control. Spot rates for cargo moving eastbound across the Pacific have risen sharply over the past week, while recent modest gains in the Asia-Europe trades are holding.

Forbes:

- History is littered with examples of major economic and financial crises in countries that have engaged in profligate public spending. These sad experiences should be raising red flags in the U.S. Public finances suggest that the country could very well be on the path to either a destructive burst of inflation or an outright government debt default.

Gartner:

- Worldwide mobile phone sales totalled 286.1 million units in the second quarter of 2009, a 6.1 per cent decrease from the second quarter of 2008, according to Gartner, Inc. Smartphone sales surpassed 40 million units, a 27 per cent increase from the same period last year, representing the fastest-growing segment of the mobile-devices market. Apple's expansion into a larger number of countries in the past year has produced a clear effect on sales volumes, as have the recent price adjustments on the 8GB 3G iPhone. Sales of 5.4 million units in the second quarter of 2009 indicated a 509 per cent growth in shipments and helped Apple maintain the No. 3 position in the smartphone market, where it has stayed since the third quarter of 2008. Apple brought its much-anticipated new device — the iPhone 3G S — to market at the end of the second quarter of 2009, but its full potential will only start to show in the sales figures in the second half of 2009.

Politico:

- Out on the health care firing line, senators and members of Congress continued to get battered by constituents angry over President Barack Obama’s reform plan Wednesday — with voters raising questions about everything from assisted suicide to coverage for illegal immigrants.

Rasmussen:

- Forty-two percent (42%) of Pennsylvania voters favor the health care reform plan proposed by President Obama and congressional Democrats. The latest Rasmussen Reports survey of voters in the state finds that 53% are opposed. But the intensity is clearly with those who are opposed to the plan. Just 21% of Keystone State voters Strongly Favor the plan while 41% are Strongly Opposed.

AMM.com:

- Nucor Corp.(NUE), citing a combination of strengthening demand and the need to recoup rising input costs, is attempting to increase transaction prices on carbon steel plate products by $40 per ton. And buyer sources see no reason the increase won't stick.

StreetInsider.com:

- John Paulson's Paulson & Co. Inc. hedge fund released its 13F for the quarter ended June 30, 2009. Paulson's new 168M share stake in BofA (NYSE: BAC) is sure to make waves. In addition Paulson's fund bought a number of other bank stocks during the quarter. Highlights:

Sky News:

- Lockerbie bomber Abdelbaset Ali Mohmed al Megrahi is set to be released on compassionate grounds due to his terminal cancer. Megrahi was sentenced to life in prison for blowing up a Pan Am airliner over the Scottish town of Lockerbie as it flew from London to New York on December 18, 1988. All 259 people on board were killed, as well as 11 people on the ground. Libya has repeatedly called for Megrahi's release - most recently at a meeting between Gordon Brown and Libyan leader Muammar Gaddafi last month.

Reuters:

- JetBlue Airways(JBLU) is offering a $599 one-month pass for unlimited travel on Wednesday in a bid to get more passengers airborne and jump-start a sluggish summer for the airline industry. The pass, valid until August 21, allows holders to visit any of the airline's 56 destinations. The pass is valid between September 8 and October 8 this year with no blackout dates and with every available seat up for grabs. People can book flights up to three days before they want to travel. If they cancel or change their reservations less than three days before the flight, they are subject to a $100 fee. To buy the pass, customers must enroll in JetBlue's loyalty program, TrueBlue.

- The Federal Reserve said on Wednesday the U.S. economy was showing signs of leveling out two years after the onset of the deepest financial crisis in decades and it moved to phase out one emergency measure. The U.S. central bank also kept its benchmark short-term interest rate steady near zero and said it would likely stay there for an extended period to guide the way to recovery. The Fed made its clearest statement to date that it sees the recession nearing an end and that shattered financial markets are healing.

- Copper prices added to robust closing levels in Wednesday's after-hours trade as an encouraging U.S. Federal Reserve statement prompted buyers to take prices back near session highs. U.S. copper futures for delivery in September HGU9 surpassed closing levels at $2.8235 a lb on the New York Mercantile Exchange's

COMEX division, advancing 9.10 cents, or 3.33 percent, to $2.8275 a lb in late dealings.

Financial Times:

- Chinese companies account for more than half of the world’s initial public offerings this year as a recovery in share prices helped boost momentum in Hong Kong from March and Beijing lifted a ban on new listings on the mainland in June. There have been 30 new listings by Chinese companies in mainland China and in Hong Kong in 2009 to date, raising a total $13.7bn, or 51 per cent of global IPO volume, Dealogic estimates.

Alibaba.com:

- As the exclusive distributor of iPhones, China Unicom has 5 million units ready for the first batch to go on sale in September, a source said Tuesday. A well-informed source said China Unicom paid Apple(AAPL) 10 billion yuan for 5 million WCDMA standard iPhones with unit price of 2,000 yuan. According to Toni Sacconaghi, an analyst from Sanford C Bernstein, in the original profit model, Apple would share 20 percent to 30 percent of the profit dividends with its distributors, so Apple's profit share amounts to 32 percent, while its sales share only account for 8 percent. Apple made compromises in the China market because of its great demand and intense competition, but Apple can still make profits from each unit from 1,000 yuan and 1,100 yuan. Yu added that every employee at China Unicom is excited about the potential profits the iPhone may bring since 5 million iPhones means 5 million new customers for China Unicom, leading to profits from cell phone fees three to four times higher.

Late Buy/Sell Recommendations
Citigroup:

- Downgraded (DHI) to Sell, target $10.

- Reiterated Buy on (GOOG), target $580. We continue to view the (GOOG) risk-reward as highly favorable. Our checks with almost all of the leading Search Engine Marketing firms suggest that QTD Spend, Volume & CPC trends are at least in-line with Q2 trends and in select cases improving. In particular, Search’s biggest vertical (Retail) is showing lift. The biggest takeaway from our participation in this week’s Search Engine Strategy conference is San Jose, CA, is the snowballing momentum for Mobile Search. Advertisers are seeing 10x increase in click-thrus via Mobile devices. Mobile Search activity is ramping fast this Smartphone Summer, and ad dollars are following. With all major eCommerce companies having now reported Q2 results, we believe their collective outlook for H2 marketing spending is Clearly Positive for ‘Net Advertising, both Search & Display. Vs. 3% Y/Y marketing spend growth in H1, H2 could see 20% growth. Google just released a Web Developer Preview of its next-gen Search Engine, codenamed Caffeine. Our initial tests indicate a select, but material increases in Index Size and Speed over Google’s current Search results. What One Wedding Video Says About YouTube’s Potential – 19MM views later, the user-generated “JK Wedding” video is still showing strong viral growth & likely generating revenue And profits for Google, given related Advertising and Music Purchases links and our analysis of YT’s infrastructure costs. Seems like GOOG’s biggest loss-leader is turning profitable. GOOG Long Thesis – 1) The worst of macro & fx headwinds are now behind GOOG. 2) CPCs – GOOG’s most important cyclical driver – have turned. 3) Paid click growth is stable. 4) Slowing Capex/Personnel costs & discretionary discipline practically guarantee margin expansion. 5) EPS quality has improved. 6) Mobile momentum building & 7) YouTube growing profitably! All means GOOG’s Y/Y op inc growth will accelerate from H1’s 18%.

- Reiterated Buy on (TYC), boosted target to $37.

Thomas Weisel:

- Rated (POT) Overweight, target $110.

- Rated (MOS) Overweight, target $58.

- Rated (AGU) Underweight, target $46

Night Trading
Asian Indices are +.50% to +1.75% on average.

Asia Ex-Japan Inv Grade CDS Index -2.1%.
S&P 500 futures +.26%.
NASDAQ 100 futures +.15%.

Morning Preview

BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Asian Financial News

European Financial News

Latin American Financial News

MarketWatch Pre-market Commentary

TradeTheNews Morning Report

Briefing.com In Play

SeekingAlpha Market Currents

Briefing.com Bond Ticker

US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/EPS Estimate
- (URBN)/.26

- (RGLD)/.14

- (WW)/.70

- (DPS)/.50

- (WMT)/.845

- (KSS)/.74

- (RRGB)/.37

- (JWN)/.48

- (AAP)/.02

- (DV)/.50

- (EL)/.20

- (ADSK)/.18

- (BGG)/-.03

Economic Releases

8:30 am EST

- Advance Retail Sales for July are estimated to rise .8% versus a .6% gain in June.

- Retail Sales Less Autos for July are estimated to rise .1% versus a .3% gain in June.

- The Import Price Index for July is estimated to fall .5% versus a 3.2% gain in June.

- Initial Jobless Claims for last week are estimated to fall to 545K versus 550K the prior week.

- Continuing Claims are estimated to fall to 6300K versus 6310K prior.

10:00 am EST

- Business Inventories for June are estimated to fall .9% versus a 1.0% decline in May.

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly EIA natural gas inventory report, (ERIC) investor relations forum, (ATV) general meeting, CanaccordAdams Growth Conference, UBS Engineering & Construction Conference, (MF) shareholders meeting, (MDCI) shareholders meeting, (RHT) shareholders meeting and the (QSII) shareholders meeting could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and financial shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

BETWEEN THE HEDGES

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Thursday, August 13, 2009

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Wednesday, August 12, 2009

Thursday Watch

Stocks Finish Sharply Higher, Boosted by Homebuilding, Networking, Steel, I-Banking, Insurance and Airline Shares