Bloomberg:
- Crude oil is falling another .64 in NY after OPEC agreed to maintain production targets at a meeting in Vienna.
- Baghdad deaths from bomb attacks have fallen 30 percent since a security crackdown by the U.S.-led coalition and Iraqi forces began last month.
- Former Fed Chairman Greenspan said he expects the fallout from subprime mortgage defaults to spread if home prices decline, however he sees no signs of that at this time. He also said that a 10% gain in home prices would cure the entire subprime problem. Finally, he said he sees no negative effects on consumer spending from subprime problems.
- Bear Stearns(BSC), the biggest US underwriter of mortgage bonds, said first-quarter profit rose 8% as higher revenue from trading derivatives and debt of troubled companies overcame a slowing market for home loans.
- General Electric’s(GE) commercial-finance division agreed to buy PHH Corp.(PHH) for $1.8 billion and then sell the company’s mortgage unit to Blackstone Group LP.
- Cisco Systems(CSCO) agreed to buy WebEx Communications(WEBX), the largest provider of Internet teleconferencing services, for $3.2 billion to counter Microsoft’s(MSFT) expansion in the market.
- Stocks will weather a surge in US subprime loan defaults because earnings growth and a robust labor market are enough to sustain the world’s largest economy, according to Credit Suisse Group.
- Hepatitis infections in the US fell to the lowest incidence on record, reducing the threat from a leading cause of liver cancer, as vaccines prevented more disease.
- Intercontinental Exchange(ICE) made an unsolicited $9.9 billion bid for the Chicago Board of Trade(BOT), to bock a purchase by Chicago Mercantile Exchange Holdings(CME).
- Brazil, the world’s biggest maker of ethanol from sugarcane juice, may begin commercial production of the fuel from the tropical plant’s cellulose within 5 years, an executive at Dedini SA said.
- Copper prices in NY jumped the most in eight months as China’s industrial production exceeded estimates and US jobless claims fell.
Wall Street Journal:
- Average Americans will pay for Democratic budget proposals that raise taxes on families and business, New Hampshire Senator Judd Gregg and Iowa Senator Chuck Grassley wrote. The proposal wouldn’t extend policies and the lowest-income households would pay 33% more in taxes, they said. The $1,000 per child tax credit would be cut in half and the standard deduction for married couples reduced by $1,700, Grassley and Gregg write. The result would mean 45 million households with two children would pay $3,000 more in taxes per year, something that would amount to the equivalent of a 5% pay cut. The rise would slow the economy, damp investment and employment, and weaken the beneficial impact that the capital gains tax rate has had on investments.
Gulf News:
- Krispy Kreme Doughnuts(KKD) is opening its first store in the United Arab Emirates tomorrow as part of a plan to have 100 outlets in the Middle East.
Lloyd’s List:
- Qatar Petroleum needs $35 billion of investment over three years, mostly for its liquefied natural gas expansion plans.
Thursday, March 15, 2007
PPI Rises, Jobless Claims Fall, Manufacturing Activity Muted, Intl. Demand for US Assets Strong
- The Producer Price Index for February rose 1.3% versus estimates of a .5% gain and a -.6% decline in January.
- The PPI Ex Food & Energy for February rose .4% versus estimates of a .2% gain and a .2% increase in January.
- Initial Jobless Claims fell to 318K versus estimates of 328K and 330K the prior week.
- Continuing Claims rose to 2576K versus estimates of 2538K and 2528K prior.
- Empire Manufacturing for March fell to 1.9 versus estimates of 17.5 and a reading of 24.4 in February.
- Net Long-term TIC Flows for January rose to $97.4 billion versus estimates of $70.0 billion and $14.7 billion in December.
- The Philly Fed for March fell to .
- The PPI Ex Food & Energy for February rose .4% versus estimates of a .2% gain and a .2% increase in January.
- Initial Jobless Claims fell to 318K versus estimates of 328K and 330K the prior week.
- Continuing Claims rose to 2576K versus estimates of 2538K and 2528K prior.
- Empire Manufacturing for March fell to 1.9 versus estimates of 17.5 and a reading of 24.4 in February.
- Net Long-term TIC Flows for January rose to $97.4 billion versus estimates of $70.0 billion and $14.7 billion in December.
- The Philly Fed for March fell to .
BOTTOM LINE: Prices paid to US producers rose in February by the most in three months, Bloomberg reported. This morning's "hot" PPI was only 2.5% year-over-year vs. the 20-year average of 2.3%. The PPI is highly correlated with the CRB Index. This index has since weakened from February. Energy prices rose 3.5% last month after falling 4.6% the prior month. Prices of cigarettes surged 4.6%, the most since 2001. Prices for passenger cars fell 1.2% versus a .1% decline the prior month. I continue to believe inflation fears have peaked for this cycle. I expect the PPI to decelerate next month.
The number of US workers filing first-time applications for state jobless benefits fell last week to the lowest level in more than a month, signaling the labor market remains healthy, Bloomberg reported. The four-week moving average fell to 329,250 versus 339,500 the prior week. Wage growth, substantially above inflation, and low unemployment will continue to boost consumer spending, according to economists. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, rose to 2% versus 1.9% the prior week. I continue to believe the job market will remain healthy without generating substantial unit labor cost increases over the intermediate-term.
Manufacturing in NY state grew this month at a slower than expected pace, Bloomberg reported. The new orders component of the index fell to 3.1 versus 18.9 the prior month. The expectations component of the index fell to 35.2 versus 38.5 the prior month. The prices paid component rose to 30.2 versus 26.9 the prior month. This gauge is volatile historically and I expect a rebound next month.
Foreign investment in American securities rebounded in January, led by gains in purchases of corporate bonds and stocks, Bloomberg said. The US remained one of the world’s fastest-growing developed economies in the fourth-quarter and the country’s equity markets gained, helping to boost foreign demand for US assets. Private international investors bought $102.7 billion of long-term securities in January. Japan, the largest foreign owner of US Treasury securities, raised its holdings by $4.5 billion. Caribbean banking centers, which analysts link to hedge funds, sold a net $5.1 billion. I continue to believe demand for US assets by international investors will remain strong over the intermediate-term as economic growth accelerates back to average levels, stocks rise and the US dollar firms.
Manufacturing in the Philly region grew less than economists’ expected as companies reduced inventories, Bloomberg reported. The inventory component of the index fell to -3.7 from -1.9 the prior month. The prices paid component rose to 21.8 versus 15.8 the prior month. The new orders index rose to 1.9 versus .5 the prior month. The expectations component fell to 17.4 versus 20.3 the prior month. I continue to believe manufacturing will rebound modestly later this year on inventory rebuilding, stabilizing construction and rising auto production.
Wednesday, March 14, 2007
Thursday Watch
Late-Night Headlines
Bloomberg:
- Britain, China, France, Russia and the US reached tentative agreement today to increase pressure on Iran to halt uranium enrichment by tightening United Nations sanctions, Russian and US diplomats said.
- Palestinian leaders completed negotiations for a national unity government after the leaders of the Hamas and Fatah movements agreed on a candidate for interior minister, Prime Minister Ismael Hania said.
- Khalid Sheikh Mohammed admitted responsibility for planning the Sept.11 attacks and a host of other terrorist activities, according to a transcript of a hearing released by the US Defense Department. The al-Qaeda leader, captured in 2003, admitted responsibility for a long list of other actual or planned operations in addition to the Sept. 11 attacks, according to the transcript. They include the 1993 World Trade Center bombing, an attack on a nightclub in Bali, Indonesia, and planned attacks on buildings in NY, Chicago, California and Washington State.
- Toyota Motor(TM), whose Prius is the world’s best-selling gasoline-electric car, may also offer hybrids able to run on fuel that’s mostly ethanol. A flex-fuel hybrid would expand Toyota’s offerings of models that aren’t powered exclusively by gasoline. Toyota and Honda Motor are the only large automakers in the US that don’t sell vehicles able to run on E85, a fuel that’s 85% ethanol and 15% gasoline. Toyota said in January it would sell a flex-fuel version of its Tundra pickup truck able to run on E85 within 2 years.
- John Richels, president of Devon Energy Corp.(DVN) sees the potential for the company to double its oil reserves.
- Chiquita Brands Intl.(CQB), owner of the namesake banana brand, was charged with doing business with a terrorist group in Colombia, in violation of federal law.
- Hewlett-Packard(HPQ) shareholders rejected a plan that would have given investors more say over who sits on the board, leaving the decision in the hands of CEO Mark Hurd and current directors.
- Prices for luxury homes in London rose last month at the fastest annual rate in 28 years, cementing the British capital’s position as the most expensive city in the world for prime residential real estate.
- China, the world’s biggest producer of steel, boosted production of the alloy 23% in the first two months of the year.
Dow Jones:
- Sharp Corp. said price declines for liquid-crystal display televisions will probably slow this year, citing Hans Kleis, CEO of the company’s European unit.
Financial Times:
- Ensus Plc, a UK biofuels company, has raised $174.3 million from private equity firms Carlyle Group and Riverstone Holdings to build an ethanol plan in north east England, citing CEO Alwyn Hughes.
al-Hayat:
- OPEC will not assign a ceiling for the oil production of Angola, its newest member, when its meets tomorrow. The African nation, which joined OPEC in January, will be given the right to produce at maximum capacity until further notice.
China Business News:
- The People’s Bank of China may force medium-sized and smaller banks to buy “special” central bank bills to help curb loans. In a so-called window guidance meeting this week, the central bank said it will use bill issues and increases in required reserves to restrain bank lending and stem inflation.
Late Buy/Sell Recommendations
Citigroup:
- Farm economics are improving significantly. Farmers are likely to go from breakeven results last year to $190 - $230/acre profits this year. Farm real estate prices have jumped significantly. Today in Iowa, we are seeing farm prices of $5,000 per acre vs. last year’s $3,500 - $4,000 per acre. Five years ago it was $3,000.
Night Trading
Asian Indices are +1.25% to +1.5% on average.
S&P 500 indicated +.16%.
NASDAQ 100 indicated +.34%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Conference Calendar
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/EPS Estimate
- (ARO)/.98
- (BSC)/3.77
- (BONT)/4.59
- (PLCE)/1.78
- (GLBC)/-1.32
- (LGND)/1.69
- (PSUN)/.39
- (ROST)/.66
- (TEK)/.37
- (TRLG)/.22
- (WGO)/.25
Upcoming Splits
- (CBE) 2-for-1
- (JEC) 2-for-1
Economic Releases
8:30 am EST
- The Producer Price Index for February is estimated to rise .5% versus a -.6% decline in January.
- The PPI Ex Food & Energy for February is estimated to rise .2% versus a .2% increase in January.
- Initial Jobless Claims for last week are estimated at 328K versus 328K the prior week.
- Continuing Claims are estimated to rise to 2540K versus 2526K prior.
- Empire Manufacturing for March is estimated to fall to 17.5 versus 24.4 in February.
9:00 am EST
- Net Long-term Tic Flows for January are estimated to rise to $70.0 billion versus $15.6 billion in December.
12:00 pm EST
- Philly Fed for March is estimated to rise to 4.0 versus .6 in February.
Bloomberg:
- Britain, China, France, Russia and the US reached tentative agreement today to increase pressure on Iran to halt uranium enrichment by tightening United Nations sanctions, Russian and US diplomats said.
- Palestinian leaders completed negotiations for a national unity government after the leaders of the Hamas and Fatah movements agreed on a candidate for interior minister, Prime Minister Ismael Hania said.
- Khalid Sheikh Mohammed admitted responsibility for planning the Sept.11 attacks and a host of other terrorist activities, according to a transcript of a hearing released by the US Defense Department. The al-Qaeda leader, captured in 2003, admitted responsibility for a long list of other actual or planned operations in addition to the Sept. 11 attacks, according to the transcript. They include the 1993 World Trade Center bombing, an attack on a nightclub in Bali, Indonesia, and planned attacks on buildings in NY, Chicago, California and Washington State.
- Toyota Motor(TM), whose Prius is the world’s best-selling gasoline-electric car, may also offer hybrids able to run on fuel that’s mostly ethanol. A flex-fuel hybrid would expand Toyota’s offerings of models that aren’t powered exclusively by gasoline. Toyota and Honda Motor are the only large automakers in the US that don’t sell vehicles able to run on E85, a fuel that’s 85% ethanol and 15% gasoline. Toyota said in January it would sell a flex-fuel version of its Tundra pickup truck able to run on E85 within 2 years.
- John Richels, president of Devon Energy Corp.(DVN) sees the potential for the company to double its oil reserves.
- Chiquita Brands Intl.(CQB), owner of the namesake banana brand, was charged with doing business with a terrorist group in Colombia, in violation of federal law.
- Hewlett-Packard(HPQ) shareholders rejected a plan that would have given investors more say over who sits on the board, leaving the decision in the hands of CEO Mark Hurd and current directors.
- Prices for luxury homes in London rose last month at the fastest annual rate in 28 years, cementing the British capital’s position as the most expensive city in the world for prime residential real estate.
- China, the world’s biggest producer of steel, boosted production of the alloy 23% in the first two months of the year.
Dow Jones:
- Sharp Corp. said price declines for liquid-crystal display televisions will probably slow this year, citing Hans Kleis, CEO of the company’s European unit.
Financial Times:
- Ensus Plc, a UK biofuels company, has raised $174.3 million from private equity firms Carlyle Group and Riverstone Holdings to build an ethanol plan in north east England, citing CEO Alwyn Hughes.
al-Hayat:
- OPEC will not assign a ceiling for the oil production of Angola, its newest member, when its meets tomorrow. The African nation, which joined OPEC in January, will be given the right to produce at maximum capacity until further notice.
China Business News:
- The People’s Bank of China may force medium-sized and smaller banks to buy “special” central bank bills to help curb loans. In a so-called window guidance meeting this week, the central bank said it will use bill issues and increases in required reserves to restrain bank lending and stem inflation.
Late Buy/Sell Recommendations
Citigroup:
- Farm economics are improving significantly. Farmers are likely to go from breakeven results last year to $190 - $230/acre profits this year. Farm real estate prices have jumped significantly. Today in Iowa, we are seeing farm prices of $5,000 per acre vs. last year’s $3,500 - $4,000 per acre. Five years ago it was $3,000.
Night Trading
Asian Indices are +1.25% to +1.5% on average.
S&P 500 indicated +.16%.
NASDAQ 100 indicated +.34%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Conference Calendar
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/EPS Estimate
- (ARO)/.98
- (BSC)/3.77
- (BONT)/4.59
- (PLCE)/1.78
- (GLBC)/-1.32
- (LGND)/1.69
- (PSUN)/.39
- (ROST)/.66
- (TEK)/.37
- (TRLG)/.22
- (WGO)/.25
Upcoming Splits
- (CBE) 2-for-1
- (JEC) 2-for-1
Economic Releases
8:30 am EST
- The Producer Price Index for February is estimated to rise .5% versus a -.6% decline in January.
- The PPI Ex Food & Energy for February is estimated to rise .2% versus a .2% increase in January.
- Initial Jobless Claims for last week are estimated at 328K versus 328K the prior week.
- Continuing Claims are estimated to rise to 2540K versus 2526K prior.
- Empire Manufacturing for March is estimated to fall to 17.5 versus 24.4 in February.
9:00 am EST
- Net Long-term Tic Flows for January are estimated to rise to $70.0 billion versus $15.6 billion in December.
12:00 pm EST
- Philly Fed for March is estimated to rise to 4.0 versus .6 in February.
BOTTOM LINE: Asian indices are higher, boosted by automaker and technology shares in the region. I expect US equities to open modestly higher and to maintain gains into the afternoon. The Portfolio is 75% net long heading into the day.
Stocks Finish at Session Highs After Large Intraday Reversal
Indices
S&P 500 1,387.17 +.67%
DJIA 12,133.40 +.48%
NASDAQ 2,371.74 +.90%
Russell 2000 775.68 +.85%
Wilshire 5000 13,992.14 +.61%
Russell 1000 Growth 548.33 +.65%
Russell 1000 Value 798.15 +.57%
Morgan Stanley Consumer 684.61 +.25%
Morgan Stanley Cyclical 929.71 +.45%
Morgan Stanley Technology 553.44 +1.09%
Transports 4,716.03 -.22%
Utilities 476.60 +.58%
MSCI Emerging Markets 110.02 -.69%
Sentiment/Internals
Total Put/Call 1.64 +17.14%
NYSE Arms .68 -75.81%
Volatility(VIX) 17.27 -4.74%
ISE Sentiment 100.00 +5.26%
Futures Spot Prices
Crude Oil 58.25 +.55%
Reformulated Gasoline 191.95 -.64%
Natural Gas 7.09 +2.95%
Heating Oil 170.68 +.98%
Gold 645.60 -.59%
Base Metals 239.82 -1.12%
Copper 285.20 +.97%
Economy
10-year US Treasury Yield 4.53% +4 basis points
US Dollar 83.64 -.08%
CRB Index 304.06 -.15%
Leading Sectors
Homebuilders +1.94%
Steel +1.92%
Networking +1.67%
Lagging Sectors
HMOs -.32%
Airlines -.70%
Retail -.89%
Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play
Afternoon Recommendations
AG Edwards:
- Rated (MEDX) and (STEC) Buy.
AG Edwards:
- Rated (RCRC) Buy, target $48.
Afternoon/Evening Headlines
Bloomberg:
- US banks and homebuilders carried stocks to their second gain this week after Lehman Brothers(LEH) said bad home loans won’t curtail earnings.
- Lehman Brothers(LEH), the second-biggest US underwriter of mortgage-backed bonds, said risks posed by rising home-loan delinquencies are “well contained” and will have little effect on the firm’s earnings.
- Mexico’s President Felipe Calderon won a pledge from President Bush to push for a US immigration bill after a meeting that Calderon said may signal a new stage in the two countries’ relations.
- The US Senate began debate on legislation that calls for US troops to withdraw from Iraq.
- Hedge funds must ensure independent oversight of their investment valuations to prevent managers inflating the returns that determine their pay, regulators said, opening a new line of scrutiny on the funds.
- The Carlyle Group announced the private equity firm, along with a group of investors, is to invest $240 million in Companhia Nacional de Acucar e Alcool. CNAA is a joint venture between sugar and ethanol producer Santa Elisa and Global Foods Holdings.
- Quadrangle Group LLC, a private-equity firm focused on communications and media investments, is eyeing acquisitions of phone and cable-operating companies, co-founder Steven Rattner said.
Reuters:
- The IMF predicts global growth will slow to 4.9% this year from 5.3% last year, citing draft forecasts due for publication next month.
Nikkei English News:
- Japan is expected to report Friday that the nation’s index of coincident economic indicators fell in January to 45%, the first drop in 10 months below 50%. A reading above 50% indicates economic expansion, while a figure below 50 indicates contraction.
S&P 500 1,387.17 +.67%
DJIA 12,133.40 +.48%
NASDAQ 2,371.74 +.90%
Russell 2000 775.68 +.85%
Wilshire 5000 13,992.14 +.61%
Russell 1000 Growth 548.33 +.65%
Russell 1000 Value 798.15 +.57%
Morgan Stanley Consumer 684.61 +.25%
Morgan Stanley Cyclical 929.71 +.45%
Morgan Stanley Technology 553.44 +1.09%
Transports 4,716.03 -.22%
Utilities 476.60 +.58%
MSCI Emerging Markets 110.02 -.69%
Sentiment/Internals
Total Put/Call 1.64 +17.14%
NYSE Arms .68 -75.81%
Volatility(VIX) 17.27 -4.74%
ISE Sentiment 100.00 +5.26%
Futures Spot Prices
Crude Oil 58.25 +.55%
Reformulated Gasoline 191.95 -.64%
Natural Gas 7.09 +2.95%
Heating Oil 170.68 +.98%
Gold 645.60 -.59%
Base Metals 239.82 -1.12%
Copper 285.20 +.97%
Economy
10-year US Treasury Yield 4.53% +4 basis points
US Dollar 83.64 -.08%
CRB Index 304.06 -.15%
Leading Sectors
Homebuilders +1.94%
Steel +1.92%
Networking +1.67%
Lagging Sectors
HMOs -.32%
Airlines -.70%
Retail -.89%
Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play
Afternoon Recommendations
AG Edwards:
- Rated (MEDX) and (STEC) Buy.
AG Edwards:
- Rated (RCRC) Buy, target $48.
Afternoon/Evening Headlines
Bloomberg:
- US banks and homebuilders carried stocks to their second gain this week after Lehman Brothers(LEH) said bad home loans won’t curtail earnings.
- Lehman Brothers(LEH), the second-biggest US underwriter of mortgage-backed bonds, said risks posed by rising home-loan delinquencies are “well contained” and will have little effect on the firm’s earnings.
- Mexico’s President Felipe Calderon won a pledge from President Bush to push for a US immigration bill after a meeting that Calderon said may signal a new stage in the two countries’ relations.
- The US Senate began debate on legislation that calls for US troops to withdraw from Iraq.
- Hedge funds must ensure independent oversight of their investment valuations to prevent managers inflating the returns that determine their pay, regulators said, opening a new line of scrutiny on the funds.
- The Carlyle Group announced the private equity firm, along with a group of investors, is to invest $240 million in Companhia Nacional de Acucar e Alcool. CNAA is a joint venture between sugar and ethanol producer Santa Elisa and Global Foods Holdings.
- Quadrangle Group LLC, a private-equity firm focused on communications and media investments, is eyeing acquisitions of phone and cable-operating companies, co-founder Steven Rattner said.
Reuters:
- The IMF predicts global growth will slow to 4.9% this year from 5.3% last year, citing draft forecasts due for publication next month.
Nikkei English News:
- Japan is expected to report Friday that the nation’s index of coincident economic indicators fell in January to 45%, the first drop in 10 months below 50%. A reading above 50% indicates economic expansion, while a figure below 50 indicates contraction.
BOTTOM LINE: The Portfolio finished higher today on gains in my Computer longs, Internet longs, Semi longs, Biotech longs and Telecom longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was positive today as the advance/decline line finished higher, almost every sector rose and volume was above average. Measures of investor anxiety were elevated once again into the close. Today's overall market action was very bullish as the major averages reversed early losses sharply on heavy volume. Many market leading stocks finished near session highs. Tech stocks did especially well today. Even at the lows, many tech leaders were just barely down and some were even higher. The fact that the Broker/Dealer Index finished 1.34% higher, near session highs is also a big positive. Oil is only $0.23 higher despite the reversal in stocks. Some believe that when refiners come back online it will result in more demand for oil and thus, higher prices. I see the opposite as gasoline has been propping up oil and U.S. oil inventories are still at multiyear highs. As more gasoline is produced and inventories surge, I expect even more downward pressure on oil. Nikkei futures are indicating a flat open in Japan. I would like to see emerging markets stabilize tonight before shifting market exposure further.
Stocks Higher into Final Hour on Heavy Volume Reversal
BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Telecom longs, Biotech longs and Semi longs. I added to my (IWM)/(QQQQ) hedges and covered them today, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is heavy. Remember last year during the significant June/July market bottom we were told by the permabears that we had begun another bear market or resumed the secular downtrend that they believed still existed. During that period, the chief concern was the conflict between Hezbollah and Israel. Take a look at this chart from Google Trends of the blow-off top in the use of the word Hezbollah. The peak came on July 17, one day before the U.S. stock market bottomed on July 18 and began ripping higher for months. Currently, subprime mortgages are investors' chief concern. Now look at the chart of the word "subprime." Maybe this time will be different, but if the word "subpime" were a stock, I would begin shorting it very soon. The CBOE total put/call is currently 1.75. It hit 1.88 earlier today, which is a very elevated level. To put that in perspective, it only exceeded this level once during the entire 2000-2003 market meltdown, which was one of the worst in U.S. history. I sense, once again, that investors have priced in the worst-case scenario rather than the most likely scenerio for U.S. stocks. This has been a hallmark characteristic of the current “negativity bubble.” I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, less concern over the I-Banking sector and short-covering.
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