BETWEEN THE HEDGES

Wednesday, December 26, 2007

Thursday Watch

Posted by Gary .....at 11:15 PM

Late-Night Headlines
Bloomberg:
- The yuan rose the most since China ended a fixed exchange rate to the dollar in 2005 as the central bank sought to curb inflation.
- Amazon.com Says 2007 Holiday Season Is ‘Best Ever.’

Wall Street Journal:
- Congress Adds $10 Billion In Earmarks to 2008 Budget.
- ‘Long-Short’ Funds Labor to Thrive.

NY Times:
- Las Vegas Wins Big. Revenues on the Vegas strip are rising, even as rival casinos struggle.
- Inside Apple(AAPL) Stores, a Certain Aura Enchants the Faithful.

MarketWatch.com:
- Apple(AAPL) driven to record by strong iPhone, Mac sales.

BusinessWeek.com:
- Semiconductors: Healthy M&A Prospects. S&P says some recent deals show that chip companies are finding attractive prices and ways to improve by combining.
- The founder of Rembrandt Venture Partners offers predictions for next year and advice for entrepreneurs seeking funding.

CNNMoney.com:
- Hiring in ’08: Slower but steady gains.

IBD:
- Social Networking Has Taken Off With Users, Investors Swelling.

Forbes.com:
- Asset-management firm Davis Selected Advisers seems to be calling a bottom in the US financial services market. On Wednesday, it said it had acquired a 5.1% stake in MBIA(MBI), the world’s largest bond insurer, just two days after it pumped $1.2 billion into Merrill Lynch(MER).
- Unprecedented losses at Bear Stearns(BSC) couldn’t shake Joseph Lewis’s interest in the troubled brokerage. The British billionaire is still buying shares even after the company’s abysmal fourth quarter.

USA Today.com:
- Publicity over Ford Flex gains muscle with leisurely test drives.

Reuters:
- Buffet bets on America with latest purchase.

Financial Times:
- Apple Inc.(AAPL) and News Corp.’s(NWS/A) Twentieth Century Fox will start a service that lets consumers download films and rent them for a limited time.

Late Buy/Sell Recommendations
Citigroup:
- 8 Plausible and Interesting 2008 Outcomes: 1) The Republicans hold on to the White House – essentially, divided government remains the desire of the American people. 2) Oil prices fall to $70-75/bbl. alongside slower growth in the US and Europe, as well as Asia. 3) The US dollar strengthens to 1.25 vs. the Euro as the ECB finally cuts rates, while the trade deficit continues to decline. 4) Best performing sector in the S&P 500 is Financials. 5) The Chinese equity bubble bursts as pressures grow to rein in inflation, pollution, corruption, misallocation of resources along with trade protectionism threats forcing a more significant revaluation of the Yuan/Dollar peg. 6) Iran backs off its aggressive nuclear program as economic pressures force a change in priorities, especially as the US and neighboring countries begin negotiating with the government over Iraq and other local issues. 7) A carbon credit cap is imposed with carbon credit trading beginning, providing a new area for investors to seek profits and investment banks to trade. 8) Hedge fund consolidation picks up in earnest, with poor performance becoming the catalyst for change.

- 8 Questions We Are Not Hearing?: 1)Where should I consider buying real estate? General agreement is that prices are headed lower but no sense of where “value” is? 2) Doesn’t the yield curve steepness mean anything anymore for Financial sector earnings? 3) Why aren’t energy companies earning more with oil near $100/bbl. 4) Whatever happened to the problems of under-funded pension programs that were supposed to be the undoing of US public companies? 5) Why doesn’t the fact that 95% or more of equity mutual fund flows going to international funds in the past few years worry more people about a new stock investing craze outside the US? 6) Why has money continued to flow into hedge funds when their returns have been mediocre? 7) Whatever happened to the avian flu pandemic fears that dominated the investment mindset a couple of years ago? Are there such global fears dominating investors that may similarly fade away from public consciousness? 8) Why does anyone try to predict what price oil has to reach to end consumer spending when every benchmark in the past five years has been wrong?

Night Trading
Asian Indices are unch. to +1.25% on average.
S&P 500 futures -.17%.
NASDAQ 100 futures -.12%.

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Earnings of Note
Company/EPS Estimate
- (LUB)/.07
- (CBK)/.28
- (ACIW)/.33

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

Economic Releases
8:30 am EST
- Durable Goods Orders for November are estimated to rise 2.0% versus a .2% decline in October.
- Durables Ex Transports for November are estimated to rise .5% versus a .4% decline in October.
- Initial Jobless Claims for this week are estimated to fall to 340K versus 346K the prior week.
- Continuing Claims are estimated to fall to 2645K versus 2646K prior.

10:00 am EST
- Consumer Confidence for December is estimated to fall to 86.5 versus 87.3 in November.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of -1,625,000 barrels versus a -7,586,000 barrel decline the prior week. Gasoline supplies are expected to rise by 1,550,000 barrels versus a 2,980,000 barrel increase the prior week. Distillate inventories are estimated to fall by -900,000 barrels versus a -2,158,000 barrel decrease the prior week. Finally, Refinery Utilization is estimated to rise by .7% versus a -.92% decline the prior week.

Other Potential Market Movers
- The weekly MBA mortgage applications report could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology shares and commodity stocks 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.

Stocks Finish Higher, Led by Technology, Steel and Energy Shares

Posted by Gary .....at 4:33 PM

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In Play

Stocks Mostly Higher into Final Hour, Led by Small-caps

Posted by Gary .....at 3:40 PM

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Semi longs, Software longs and Medical longs. I added (SIGM) long and took a small profit in my (BRCM) long today, thus leaving the Portfolio 100% net long. The overall tone of the market is positive today as the advance/decline line is higher, most sectors are rising and volume is light. Investor anxiety is above average. Today’s overall market action is mildly bullish. The ten-year yield is rising another 7 basis points and copper is rising again on less economic pessimism. Small-cap shares, especially small-cap “growth” stocks, are again leading the way. The TED spread is dropping another basis point today to 151 basis points, which is down 70 basis points in 10 days. It is also down 89 basis points from its August high, which is a big positive and a sign of diminishing credit market angst. Financials are mixed with I-Banks slightly higher and Banks lower. The NYSE Arms and total put/call have been above average all day. Given recent gains and how light volume has been today, it is impressive that the bears weren’t able to make any headway. One of my longs that I disclosed early in the year, American Superconductor(AMSC), is hitting another new high today, likely due to its exposure to the increasing use of wind energy in China. The stock is now up 232% for the year and I see further meaningful gains in the shares next year. I expect US stocks to trade mixed into the close from current levels as profit-taking and higher energy prices offset diminishing credit market angst, less economic pessimism, seasonal strength and short-covering.

Today's Headlines

Posted by Gary .....at 1:56 PM

Bloomberg:
- Buy the bond insurers. If you look past the headlines, and the accompanying hysteria, maybe things are about to look up. The stocks of Ambac Financial(ABK) and MBIA Inc.(MBI) are showing up on some securities firms’ lists of buy recommendations.
- The US will avoid a recession next year as a “stable” job market keeps Americans spending, said Bear Stearns(BSC) Chief Investment Strategist Jonathan Golub.
- Michael Klein, the owner of California hedge-fund firm Pacificor LLC, his teenage daughter, Talia, and a pilot died after their private plane crashed near Panama’s tallest mountain, a colleague said.
- Billionaire investor Joseph Lewis raised his stake in Bear Stearns(BSC) for the second time this month as the fifth-largest US securities firm’s stock fell 11% in December.
- Davis Selected Advisers disclosed a 5.1% stake in MBIA Inc.(MBI).
- Crude oil is rising $1.63/bbl. in NY on year-end mark-ups by investment funds and speculation that tomorrow may show a US inventory decline.
- Toyota Motor(TM) and Honda Motor(HMC), Japan’s two largest automakers, increased production in November on higher overseas demand.
- Goldman(GS) Buys Building in NYC for $1.15 Billion.
- The US dollar is poised to end a two-year slide against the euro in 2008 as government-backed funds in Asia and the Middle East purchase US assets, currency strategists say.

Wall Street Journal:
- Videogames Expand A Popular New Phase Of Full-Body Playing. If you gave or got videogames as gifts yesterday, you may have noticed something very different about how some of the hottest ones are played these days.
- Merrill Lynch(MER) may sell additional stock following the sale of stakes to Temasek Holdings Pte. and Davis Selected Advisors LP. Merrill didn’t structure the stake sales to conform with any writedown.

NY Times:
- India’s Letter Writers Give Way to Cell Phones.
- NYC’s Amsterdam Avenue Becomes New Shopping Corridor.

CNBC:
- SLM Corp.(SLM), the largest US college-loan company, is trying to sell shares to an investor to cover the cost of investments related to a stock-buyback program.

USA Today:
- Only 7% of US employers plan to trim their full-time permanent staff during the first quarter of 2008, while 29% plan to add employees. 60% plan to maintain current levels of employment, according to an online survey by Harris Interactive.

Newsweek:
- Housing Optimism. Why the year in real estate wasn’t all bad news.

CNNMoney.com:
- Gift card booty: $60 billion left to spend. Don’t write off the 2007 holiday shopping season just yet. Consumers are set to cash in $60 billion worth of gift cards in the next seven days, experts say.

engadget:
- RIM developing angled Blackberry keyboard?

International Herald Tribune:
- “China gives top priority to developing renewable energy,” the cabinet’s press office said today in a 44-page report.

Fars:
- Russia plans to sell to Iran advanced surface-to-air missiles, citing Iranian Defense Minister Mostafa Mohammad-Najjar.