BETWEEN THE HEDGES

Thursday, July 12, 2007

Friday Watch

Posted by Gary .....at 8:06 PM

Late-Night Headlines
Bloomberg:
- Federal Realty Investment Trust(FRT) shares had the biggest rise in more than 13 years on a report the developer and manager of shopping centers may be a takeover target.
- Shares of Samsung Electronics, Asia’s largest maker of chips, mobile phones and flat screens, rose after a newspaper reported billionaire investor Carl Icahn may be planning a hostile bid.
- Amaranth Advisors LLC, the hedge fund that collapsed in September after losing $6.6 billion on energy trades, and JPMorgan Chase(JPM) were sued by a natural gas trader who accused the fund of market manipulation.
- Third Point LLC, the activist hedge fund firm run by Daniel Loeb that oversees more than $5 billion, bought a 7.2% stake in Atmel Corp.(ATML).
- Energizer Holdings(ENR) agreed to acquire Playtex Products for about $1.2 billion in cash, adding consumer products such as the Banana Boat sunscreen line.
- Democratic presidential candidate Barrack Obama supports legislation to raise the tax rate for publicly traded private-equity and hedge funds, an aide said today.
- Issuance of subprime mortgage securities fell 41% last quarter from a year earlier to $74 billion, while sales of so-called Alt A home-loans bonds fell 2.7% to $100.9 billion, newsletter Inside MBS & ABS said.
- General Electric(GE) plans to sell its three-year-old US subprime mortgage unit, the company said in an e-mail to employees.
- Roche Holding AG signaled it may raise its $3 billion hostile takeover bid for US diagnostics maker Ventana Medical Systems(VMSI) after the offer was rejected yesterday.
- The House of Representatives voted to require the withdrawal of US troops from Iraq, defying President Bush’s veto threat and his request today for time to allow the new war strategy to succeed.

Wall Street Journal:
- Nordstrom Inc.(JWN) is close to selling its Faconnable line to M! Group for more than $200 million.

Reuters:
- Intercontinental Exchange(ICE), an electronic energy market which lost a bidding war this week to buy the Chicago Board of Trade(BOT), is open to acquiring another exchange or becoming a takeover target itself, citing Chairman Jeffrey Sprecher.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (BKD), target raised to $65.
- Reiterated Buy on (PAYX), target raised to $50.

Business Week:
- Zoltek Companies’(ZOLT) profit will rise because of demand for the carbon-fiber components it makes for wind turbines. Michael Carboy of Signal Hill Capital Group expects profit to reach .72 a share in 2007 and $1.60 in 2008, up from 13 cents in 2006.
- Ziopharm Oncology(ZIOP) is trying to get approval to treat cancer with organic arsenic, and its shares could rise fourfold in the process. Griffin Securities’ Chrystyna Bedrij rates the stock a “buy” and said the stock could rise to $20 a share within a year based on the company’s trials on its arsenic drug.
- Arbitron Inc.(ARB) shares could rise 40% if the NY-based provider of radio and audience ratings uses its free cash flow to buy back shares, citing Mark Boyar, president of Boyar Asset Management.

Night Trading
Asian Indices are +.75% to +1.50% on average.
S&P 500 indicated +.03%.
NASDAQ 100 indicated +.07%.

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Earnings of Note
Company/EPS Estimate
- (GE)/.52

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Import Price Index for June is estimated to rise .7% versus a .9% gain in May.
- Advance Retail Sales for June are estimated to fall .1% versus a 1.4% increase in May.
- Retail Sales Less Autos for June are estimated to rise .2% versus a 1.3% gain in May.

10:00 am EST
- The Preliminary Univ. of Mich. Consumer Confidence reading for July is estimated to rise to 86.0 versus a reading of 85.3 in June.
- Business Inventories for May are estimated to rise .3% versus a .4% gain in April.

Other Potential Market Movers
- The BMO Capital Markets Media/Comm./Tech Conference could also impact trading today.

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

DJIA Soars 284 Points to New Record on More Economic Optimism, Short-Covering, Buyout Activity

Posted by Gary .....at 4:29 PM

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In Play

Stocks Soaring into Final Hour on More Economic Optimism, Buyout Activity, Short-Covering

Posted by Gary .....at 3:13 PM

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Software longs, Retail longs, I-Banking longs and Semi longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is very positive today as the advance/decline line is substantially higher, every sector is rising and volume is above average. Reuters is reporting today that Apple's (AAPL) largest German retailer is getting 1,000 inquiries per day about buying the new iPhone. Back when the initial announcement was made concerning the iPhone, with the stock around $80-$90 per share, several of the many bearish pundits said the phone wouldn't sell overseas. Since then, I have read quite a few reports that may suggest otherwise. It is critical not to forget that this is Apple's first stab at a new major product in the massive telecommunications market. Due to the superiority of the operating system vs. the competition, I suspect that Apple will be able to keep new versions of the phone at much higher price points for much longer than analysts expect. I still think it is very possible that Apple will eventually dominate the handset market like no other company in history. As much as it sounds impossible, I continue to believe even the most optimistic analysts are underestimating the future overall financial prospects for the company. It remains my second largest-long stock position behind Google (GOOG). The Yale School of Management Crash Confidence Index is showing the individual is currently the most concerned about a stock market crash since November 2002, right near the trough of one of the worst bear markets in U.S. history and the record-setting low for the index going back to 1989. This extreme pessimism corresponds with the recent parabolic rise in short interest and is symptomatic of the current U.S. "negativity bubble," which is laying the groundwork for the beginning of the "mother of all short-covering rallies." I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, more economic optimism, buyout speculation and short-covering.

Today's Headlines

Posted by Gary .....at 3:02 PM

Bloomberg:
- Rio Tinto Group(RTP) agreed to buy Alcan Inc.(AL) for $38.1 billion, overwhelming a hostile bid by Alcoa Inc.(AA).
- Gasoline futures fell for a second day after a report that BP Plc(BP) began starting up a unit at its Whiting, Indiana, refinery.
- Natural gas futures in NY are falling after an EIA report showed inventories rose more than estimates as demand waned and moderate weather reduced electricity needs for cooling. Supplies are on pace to exceed record highs later this year.
- The yen fell to a record low against the euro as rallying global stocks signaled investors were taking on risky bets, including so-called carry trades.
- Merck(MRK) may pay as much as $1.1 billion to Ariad Pharmaceuticals for a late-stage treatment for cancer.
- India’s industrial production growth slowed for a second month in May as the highest interest rates in five years crimped demand and currency gains weakened exports.
- Wal-Mart Stores(WMT) said June sales at US stores open at least a year rose 2.4% versus estimates of a .8% gain despite high gas prices and housing problems.
- Nintendo said its top-selling Wii video-game console may be in short supply this holiday season in the US as the bulk of sales concentrates at the end of the year.
- Activist investor William Ackman has accumulated a stake of more than 5% in Target Corp.(TGT), the second-biggest US discount retailer, a person with direct knowledge of his plans said.
- Economists raised forecasts for US second-quarter growth to 3.6% from 3.2% after this morning’s trade report showed US exports hit another record high.

Wall Street Journal:
- Nokia Oyj(NOK) will put a Skype Internet phone service link on one of its phones for the first time.
- US railroad shares have risen more than 20% this year as investors have joined Warren Buffett, Carl Icahn and hedge funds such as Atticus Capital LLC and Jana Partners LLC on the train.

NY Times:
- President Bush’s report to Congress on Iraq security will show progress on almost half the 18 benchmarks set by US lawmakers. There have been declines in civilian casualties and deaths from car and truck bombs, the report says. The White House report will say improvements are still needed in the performance of Iraq’s security forces and government.
- United Parcel Service Inc.(UPS) is spending more than $1 billion a year on research to find faster ways of delivery.

National Post:
- BP Plc(BP), Europe’s second-largest oil company, recognized Canada’s oil sands for the first time in its annual tally of reserves. Acknowledgement that the oil sands hold 163.5 billion barrels of undeveloped reserves in BP’s Statistical Review of World Energy report is a change from the past, when it ignored Alberta’s oil deposits, citing Mark Finley, BP’s head of energy analysis.

AP:
- Google Inc.(GOOG) plans to integrate different Web sites to provide mapping information for gas prices, home prices and other applications.

Tagesspiegel:
- Apple Inc.’s(AAPL) iPhone has attracted more than 1,000 enquiries a day in Germany, months before the combination music player and mobile phone is slated to go on sale in the country.

Challenges:
- Airbus SAS Chief Executive Officer Louis Gallois said every 10 cent gain in the euro against the dollar costs his company $1.38 billion.

Trade Deficit at Estimates as Exports Hit Another Record, Job Market Still Healthy

Posted by Gary .....at 11:23 AM

-The Trade Deficit for May came in at -$60.0B versus estimates of -$60.0B and -%58.7B in April.

- Initial Jobless Claims for last week fell to 308K versus estimates of 315K and 320K the prior week.

BOTTOM LINE: The US trade deficit widened in May as a jump in imported oil costs outpaced record exports, Bloomberg reported. Record US exports were boosted by strong civilian aircraft sales and stronger electrical equipment sales. Imports of industrial supplies, which include crude oil, jumped by $2.4 billion to $52.6 billion, reflecting record purchases from OPEC. I continue to believe the trade deficit will improve modestly over the intermediate-term as lower commodity prices more than offset faster US growth coupled with decelerating global growth.

First-time claims for jobless benefits fell more than forecast last week to the lowest in almost two months, adding to evidence that the labor market is holding up going into the second half of the year, Bloomberg reported. The four-week moving-average of claims dropped to 317,750 from 319,250 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, held steady at 1.9%. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.