BETWEEN THE HEDGES

Tuesday, January 15, 2008

Wednesday Watch

Posted by Gary .....at 11:07 PM

Late-Night Headlines
Bloomberg:
- House Financial Services Committee Chairman Barney Frank said Democrats are likely to reach an agreement with President Bush on an economic stimulus plan that may be passed early this year.
- The risk of Citigroup Inc.(C) defaulting fell after the biggest US bank wrote down the value of subprime mortgage investments by $18 billion, less than some analysts had anticipated. Credit-default swaps on NY-based Citigroup fell 2 basis points to 83 basis points.
- Stacy Smith, chief financial officer of Intel Corp.(INTC) sees no slowdown in computer business. (video)

Wall Street Journal:
- Toxic Factories Take Toll On China’s Labor Force.
- Romney Wins Michigan Primary After Tight Contest With McCain.
- John Paulson Bet Big on Drop in Housing Values; Greenspan Gets a New Gig, Soros Does Lunch.

MarketWatch.com:
- Rising oil prices meet silence on the campaign trail.
- Three Wall Street firms cut ratings across energy sector.

CNBC:
- Bank of America(BAC) said on Tuesday it would eliminate 650 corporate and investment banking jobs and sell its equity prime brokerage business.

NY Times:
- Bloomberg Hires Quadrangle to Manage His Wealth.

SmartMoney.com:
- Luxury Stocks at a Discount.
- Apple’s(AAPL) slim new laptop promises to pump up Mac sales.

Late Buy/Sell Recommendations
Citigroup:
- Upgraded (TIN) to Buy, target $26.
- Reiterated Buy on (MER), target $75.

Night Trading
Asian Indices are -3.0% to -2.0% on average.
S&P 500 futures -.65%.
NASDAQ 100 futures -1.56%.

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Earnings of Note
Company/EPS Estimate
- (AMR)/-.76
- (PGR)/.33
- (JPM)/.92
- (WFC)/.40
- (KMP)/.45
- (CLC)/.51
- (FIG)/.20

Upcoming Splits
- (STAN) 2-for-1

Economic Releases
8:30 am EST
- The Consumer Price Index for December is estimated to rise .2% versus a .8% gain in November.
- The CPI Ex Food & Energy for December is estimated to rise .2% versus a .3% gain in November.

9:00 am EST
- Net Long-term TIC Flows for November are estimated to fall to $50.0B versus $114.0B in October.

9:15 am EST
- Industrial Production for December is estimated to fall .2% versus a .3% gain in November.
- Capacity Utilization for December is estimated to fall to 81.2% versus 81.5% in November.

1:00 pm EST
- The NAHB Housing Market Index for January is estimated at 19.0 versus 19.0 in December.

2:00 pm EST
- Fed’s Beige Book

Other Potential Market Movers
- The weekly MBA Mortgage Applications report, weekly EIA energy inventory report, Cowen Consumer Conference and Goldman Sachs Energy Conference could also impact trading today.

BOTTOM LINE: Asian indices are sharply lower, weighed down by technology and financial 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 Near Session Lows on Rising Economic Worries

Posted by Gary .....at 4:13 PM

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In Play

Stocks Sharply Lower into Final Hour on Weakness in Homebuilders, Financials, Energy

Posted by Gary .....at 3:25 PM

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Internet longs, Computer longs, Semi longs, Retail longs and Medical longs. I added IWM/QQQQ hedges, was stopped out of my (UA) long and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The overall tone of the market is very negative today as the advance/decline line is substantially lower, almost every sector is declining and volume is above average. Investor anxiety is high. Today’s overall market action is very bearish. It is a big negative that the most beaten up and heavily shorted sectors with the most bad news already priced in are today’s worst performers. The fact that Alan Greenspan is going to work with the hedge fund that has arguably benefited more than any other from the destruction in housing likely means even more vocal and negative commentary from the former Fed chairman. The market’s biggest problem, in my opinion, is a lack of confidence in the future. Unfortunately, due to the explosion in popularity of low correlation/negative correlation investment funds and all the businesses that cater to them, there has never been a time in US history when this many market participants actually want to see a recession and bear market. This is the main reason for the deafeningly pessimistic rhetoric, in my opinion. The TED spread, a meaningful gauge of credit market angst, is dropping another 5 basis points today to 85 basis points. The TED spread is down 139 basis points in just over one month and is at its lowest level since August of last year. It appears as though a much larger positive catalyst than IBM’s report is needed to shake investors free the current malaise. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain hunting, diminishing credit angst and lower energy prices.

Today's Headlines

Posted by Gary .....at 2:24 PM

Bloomberg:
- Crude oil is falling almost $3/bbl. after Saudi Arabia’s oil minister said OPEC is ready to increases production and on worries over global demand.
- Hedge-fund inflows declined by 33% in the fourth quarter as subprime-mortgage losses caused some investors to delay new deposits, according to data compiled by Hedge Fund Research Inc.
- Apple Inc.(AAPL) introduced a slim portable computer, an online movie-rental service and a revamped TV device as the maker of the iPod and iPhone seeks to extend a sales surge driven by new products.
- New Jersey’s pension fund will put $700 million into Citigroup Inc.(C) and Merrill Lynch(MER), the only US state retirement system to join investors in the Middle East and Asia in providing $21 billion to two to the biggest financial firms burned by mortgage-related losses.
- Soros Fund Management, the hedge-fund firm founded by billionaire George Soros, named BlackRock Inc. co-founder Keith Anderson as CIO, a post vacant since Soros’s son Robert stepped aside in July.
- A slump in the Baltic Dry Index, a measure of how much it costs to ship commodities, may herald a rally in the US dollar, according to Charles Diebel, head of European rates strategy at Nomura Intl. Plc in London.
- Saudi Oil Minister Ali al-Naimi said OPEC will raise supply if justified by increased demand when making its next output decision on Feb. 1.

Wall Street Journal:
- The US government should make strengthening the US dollar a priority, to boost liquidity, cut oil prices and fuel economic growth, said David Malpass, Bear Stearns Cos.’ chief economist. Leaving dollar policy to the marketplace is unwise because currency values often go to extremes and aren’t based on economic fundamentals, he said. The US president, the chairman of the Federal Reserve or the Treasury Secretary could do much to make a strong dollar happen by saying that the government wants one, Malpass said.

NY Times:
- Zynga Game Network Builds Online Games With MySpace.

AP:
- President Bush urged OPEC nations Tuesday to put more oil on world markets and warned that soaring prices could cause an economic slowdown in the US to intensify.

Reuters:
- Hedge fund manager John Paulson, who earned billions of dollars last year by betting against the housing market, said on Tuesday that former Federal Reserve board chairman Alan Greenspan will advise him.

Reforma:
- Mexico’s mining production will jump 20% to $11 billion in 2008 on record metal prices.

Iran Daily:
- Iran’s Darkhovin oilfield’s output has doubled, reaching 100,000 barrels a day.

Bear Radar

Posted by Gary .....at 1:49 PM

Style Underperformer:

Large-cap Value (-1.91%)

Sector Underperformers:

Homebuilders (-4.24%), Oil Service (-4.09%) and I-Banks (-3.56%)

Stocks Falling on Unusual Volume:

EDU, MRX, FIC, WSM, HAR, MTN, PXD, SCOR, HIBB, GIVEN, CERN, FCTR, BPFH, COGO, GEOY, ZRAN, NILE, CONN, TTES, PTR, C, CHL and SNP