Economic Releases

- None of note

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Tuesday Watch

Late-Night Headlines
Bloomberg:
- World wheat stockpiles will probably rise for the first time in four years in 2008-2009 because of increased plantings, which may help push down prices, said Etsuo Kitahara, executive director of the International Grains Council.
- Zinc futures on the Shanghai Futures Exchange fell the maximum daily limit after a sharp decline in international prices.

Wall Street Journal:
- Economy Moves To Fore as Issue For 2008 Voters.
- Paulson Asks Congress To Act on Loan Crisis.
- Chavez Suffers Major Setback. Venezuelan President Hugo Chavez’s defeat in a referendum on changing the country’s constitution will energize the nation’s opposition, but the leader is likely to continue his quest to remain in power and turn the country into a bastion of what he calls 21^st-century socialism.

NY Times:
- A Lurid Aftermath to a Hedge Fund Manager’s Fast Life.

MarketWatch.com:
- China’s Dirty Mix of Pollution and Profit. World-leading economic growth is causing pollution on an epic scale, Thomas Kostigen writes from China.

BusinessWeek.com:
- Verizon(VZ) Embraces Google’s(GOOG) Android. How Verizon Wireless learned to stop worrying and love open access. Step one: Realizing it’s a way to add low-cost customers.
- Hot Growth: The Chips Have It. Four of the top 10 companies in our annual Hot Tech Growth 75 are involved in the manufacture of semiconductors. What’s behind their banner year?
- The Virtues of Virtualization. S&P says spending on virtualization software and services is likely to skyrocket.

CNNMoney.com:
- Don’t count Pfizer(PFE) out.

CNBC.com:
- Fed May Cut Interest Rates A Full Point: Citi Economist.
- IBM to Accelerate $1 Billion Stock Buyback.

USA Today.com:
- Internet to top radio in ad spending, forecaster says.
- Pump prices could fall as oil wavers.

Reuters:
- Countrywide Financial(CFC) CEO Mozilo said on Monday he doesn’t expect the largest US mortgage lender to file for bankruptcy protection, saying “elements are certainly no there.”
- Retailers should report improved monthly sales on Thursday helped by November’s cooler weather and the Thanksgiving holiday shopping weekend.
- Top-20 selling vehicles in US through November.
- US Treasury Secretary Henry Paulson said on Monday he hoped a plan to spare homeowners facing mortgage-rate spikes would be ready by week’s end and expressed faith the economy would dodge recession despite the deep housing slump.

Canadian Press:
- Iran ordered Canada’s ambassador to leave the country, Canadian Foreign Affairs Minister Maxime Bernier said.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.50% to +50% on average.
S&P 500 futures -.12%.
NASDAQ 100 futures -.06%.

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Earnings of Note
Company/EPS Estimate
- (SAFM)/1.57
- (AZO)/1.91
- (SGR)/.44
- (LAYN)/.56
- (AVAV)/.22
- (CPRT)/.38
- (CHS)/.10
- (PSS)/.36
- (WIND)/.05
- (GES)/.57
- (NX)/.98

Upcoming Splits
- (RSTI) 2-for-1
- (CAM) 2-for-1

Economic Releases
- None of note

Other Potential Market Movers
- The weekly retail sales reports, (NOK) capital market day, (TXRH) analyst meeting, (ARBA) financial analyst day, (MDU) analyst meeting, (IFX) analyst meeting, Caylon Securities Airline Conference, BMO Capital Markets Healthcare Conference, Banc of America Credit Conference, Citigroup Basic Material Conference, Bear Stearns Real Estate Conference, UBS Global Media Conference could also impact trading today.

BOTTOM LINE: Asian indices are mixed as gains in technology shares are offsetting losses in mining stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish Lower on Profit-takinga and Bounce in Oil

Indices
S&P 500 1,472.42 -.59%
DJIA 13,314.57 -.43%
NASDAQ 2,637.13 -.90%
Russell 2000 759.97 -1.02%
Wilshire 5000 14,784.40 -.57%
Russell 1000 Growth 611.21 -.59%
Russell 1000 Value 801.55 -.52%
Morgan Stanley Consumer 749.83 -.59%
Morgan Stanley Cyclical 985.49 -.69%
Morgan Stanley Technology 612.12 -.70%
Transports 4,622.17 -.84%
Utilities 537.52 +.99%
MSCI Emerging Markets 153.61 -.03%

Sentiment/Internals
Total Put/Call .83 -22.43%
NYSE Arms 1.35 +61.98%
Volatility(VIX) 23.61 +3.24%
ISE Sentiment 137.0 +42.71%

Futures Spot Prices
Crude Oil $89.76 +1.18%
Reformulated Gasoline 226.35 +1.47%
Natural Gas 7.26 -.59%
Heating Oil 252.75 +.50%
Gold 797.70 +1.09%
Base Metals 222.33 -1.16%
Copper 306.15 -3.86%

Economy
10-year US Treasury Yield 3.85% -9 basis points
US Dollar 75.96 -.25%
CRB Index 339.92 +.02%

Leading Sectors
Oil Service +1.16%
Utilities +.99%
Construction +.80%

Lagging Sectors
Coal -1.89%
Airlines -2.05%
Oil Tankers -3.49%

Evening Review
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Afternoon Recommendations
Merrill Lynch:
- Upgraded (PHM) to Neutral from Sell.

Pacific Crest:
- Reiterated Buy on (RIMM), sees no slowdown in enterprise business.

Afternoon/Evening Headlines
Bloomberg:
- US airline flights with chronic delays fell for the second consecutive month after regulators threatened to fine carriers that didn’t adjust schedules.
- Federal Reserve Bank of San Francisco President Janet Yellen said financial conditions and consumer spending have deteriorated more than she expected in the past month, signaling she supports cutting interest rates next week.
- Transocean Inc.(RIG) plans to sell $8.5 billion of corporate bonds and convertible debt to help repay a bridge loan used to finance its purchase of rival GlobalSantaFe Corp. The stock fell 3% in after-hours trading.

Silicon Alley Insider:
- News Corp.’s(NWS/A) 20^th Century Fox studio is talking with Apple(AAPL) about selling its movies through iTunes.

TimesOnline:
- Hedge funds are set to record their worst monthly investment performance since near the turn of the millennium, despite widespread predictions that the industry is booming and heading for stellar full-year profits.

Nikkei English News:
- EBay Inc(EBAY) and Yahoo Japan Corp. may announce a cross-listing partnership as soon as this week.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Internet longs, Computer longs and Retail longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors fell and volume was about average. Measures of investor anxiety were slightly above average into the close. Today's overall market action was mildly bearish. The main negative today was the relative weakness in some market-leading stocks. However, I wouldn’t read too much into this yet, considering most were up more than the market from their recent lows. The sharp decline in the 10-year yield gives the Fed much more leeway, in my opinion, to cut the benchmark fed funds rate by 50 basis points at next week’s meeting. Given recent Fed rhetoric and the decline in yields, I believe the odds of a 50 basis point cut should be higher than the 40% chance fed fund futures currently imply.

Stocks Lower into Final Hour on Profit-taking, Bounce in Oil

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Medical longs, Software longs and Semi longs. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is negative today as the advance/decline line is lower, sector performance is mostly negative and volume is around average. Investor anxiety is slightly above average. Today’s overall market action is mildly bearish. Given recent gains, a mild down day on only average volume isn’t too surprising. Insider activity remains exceptionally bullish. According to Bloomberg, LTD($12,815,920), PBY($5,655,972), MMR($5,636,862), EPB($4,504,000), EQY($3,266,476), SUSS($2,926,300), UTR($2,795,094), PRVT($2,194,250), BKD($2,189,058), ORNG($1,848,582), DDS($1,751,940), PCX($1,683,562), RES($1,617,140), FBP($1,514,434), FL($1,427,243), EXBX($1,377,000), CAH($1,149,970), MCHX($1,117,000), IRC($1,102,561) and WRI($1,042,784) are companies with significant insider buying over the last week. The investment grade credit default swap index is down 9.2% over the last week, while the speculative grade credit default swap index is 5.1% lower over that period, which is a big positive. As well, the JPMorgan Emerging Market Bond Index is 1.3% higher over the last week and the Bear Stearns High Yield Index is 1.1% higher over that period. Fed fund futures now imply a 40% chance of a 50 basis point rate cut and a 60% chance for a 25 basis point cut at the upcoming meeting. I expect US stocks to trade mixed into the close from current levels as profit-taking offsets short-covering.

Today's Headlines

Bloomberg:
- US Treasury Secretary Henry Paulson said the government and banks will “soon” announce a plan to keep subprime mortgage borrowers “with steady incomes and relatively clean payment histories” from losing their homes.
- Fannie Mae’s(FNM) business of guaranteeing mortgage bonds is going “gangbusters,” CEO Daniel Mudd said today.
- William Ackman, the hedge fund manager who’s been shorting MBIA Inc.(MBI) shares since 2002, said the bond insurer could be bankrupt by February. On Wall Street, his nonstop assault on MBIA is highly controversial, and a number of people speak of him with distaste. Their central point is that MBIA is in a business that depends on the market’s confidence in its ability to insure bonds and that Mr. Ackman’s attacks are an effort to undermine that confidence. MBIA insists that the holding company has only $80 million in corporate debt and $500 million in cash and that it is completely healthy. It says that his bankruptcy prediction “reflects a fundamental misunderstanding of MBIA’s capital structure and financial statements.” When Mr. Ackman used the word bankruptcy, he is tossing gasoline on a fire.
- Agrium Inc., North America’s third-largest fertilizer producer, agreed to buy UAP Holding Corp.(UAPH) for $2.16 billion to double its US retail outlets as demand for crop-protection products rises.
- Crude oil is falling another $.32/bbl. as investment fund speculation continues to subside ahead of OPEC’s December 5^th meeting.
- Google Inc.(GOOG) may bid to lose when the US government auctions off wireless airwaves next month.
- Dollar Bears Poised for Reversal as Deficits Shrink. At a time when everyone from billionaire investors such as Warren Buffett and Bill Gross to celebrities want nothing to do with the dollar, a growing number of strategists say the stage is being set for rally in 2008.
- Venezuelan President Hugo Chavez suffered his first electoral loss in nine years as voters turned down his plan to revamp the nation’s constitution and tighten his grip on power.
- Iran suspended its nuclear weapons program in 2003 and probably hadn’t restarted it as of mid-2007, according to a new report form the US intelligence community.
- Ford Motor(F) said its domestic sales of cars and trucks rose .4% in November, ending 12 straight months of decline.

Wall Street Journal:
- US Presidential candidate Rudy Giuliani said he supports cutting taxes and curbing federal spending in a way that would make government more efficient.
- Li Ka-shing, the billionaire chairman of Hutchinson Whampoa Ltd., may buy a $60 million stake in social-networking site Facebook Inc.

NY Times:
- Small Merchants Gain Large Presence on Web.
- High-Priced Comic Books in Fashion.

USAToday.com:
- US customs officers will begin scanning all 10 fingerprints of foreign visitors under a Homeland Security initiative to identify terrorists, criminals and illegal immigrants.

CNBC.com:
- Warren Buffett’s Berkshire Hathaway bought $2.1 billion of TXU Corp. high-yielding bonds from Goldman Sachs Group.