BETWEEN THE HEDGES

Late-Night Headlines
Bloomberg:
- Yields on agency mortgage securities relative to US Treasuries narrowed as the Federal Reserve’s plan to temporarily swap as much as $200 billion of government debt for mortgage bonds eased concern that a liquidity and capital crunch will continue to roil debt markets.
- The S&P 500 gained 3.7% on Tuesday, the most since October 2002.
- Mark Mobius , who oversees $47 billion in emerging-market equities as executive chairman of Templeton Asset Management, sees ‘lots of opportunities’ in financials. (video)
- Richard DeKasser, chief economist at National City Corp., says Fed’s moves will help avoid recession. (video)
- Investments in solar power, wind energy, bio-fuels, and fuel cells surged 40% last year to $77.3 billion and will more than triple in the next decade, according to industry group Clean Edge. Revenue from alternatives to oil, coal and other fossil fuels will reach $254.5 billion by 2017. Installations of wind turbines, which last year reached a record 20,000 megawatts worth $30.1 billion, will jump to $83.4 billion in 2017, Clean Edge said. Solar, with almost 3,000 megawatts installed last year, will more than triple to a $74 billion market by 2017.
- Juniper Networks(JNPR), expanding beyond telephone equipment, expects 2008 sales of corporate networking products to approach $1 billion for the first time, CEO Kriens said.
- General Electric(GE) CEO Jeffrey Immelt bought more stock and is telling investors that GE should outperform the S&P 500 this year in a “challenging” environment. GE rose the most in five years amid a surge in the broader US stock markets.
- Australian consumer confidence plunged to the lowest level in almost 15 years after the central bank raised interest rates and as share markets tumbled on concern global economic growth is slowing.
- Caterpillar Inc.(CAT), the world’s largest maker of bulldozers and excavators, raised its sales forecast for 2010 by 20% to $60 billion, exceeding analysts’ estimates. Caterpillar stock rose in late trading.

Wall Street Journal:
- Fed Offers Lifeline for Spurned Debt. New Tack on Bonds Tied to Mortgages Sends Dow Up 3.6%. The offer amounts to a surgical strike at one of the most worrisome new developments in the global credit crunch: a wave of investor selling of mortgage-linked securities that is driving up mortgage interest rates.
- Obama Wins in Mississippi; Contest Moves to Pennsylvania.
- Spitzer Resists Calls to Resign. Lawyers Play Down Severity of Offense; Bank’s Red Flag.

MarketWatch.com:
- What will Fed try next to slay credit-crunch dragon? Holding mortgage-backed securities on its balance sheet seen possible.
- Large-cap growth fund manager points to Monsanto(MON), Genentech(DNA), Aflac(AFL).
- Obama: Won’t Accept VP Offer. (video)

CNBC.com:
- The US economy could start to see a recovery as soon as April, a senior US Treasury official told CNBC Europe.
- Securities and Exchange Commission Chairman Christopher Cox said Tuesday that the SEC’s agreement with the Commodity Futures Trading Commission brings the two regulatory bodies closer to integrating their responsibilities.

IBD:
- Buckle(BKE) Bucks Retail Trend, Beats Analysts’ Estimates.

CNNMoney.com:
- Why McCain has the best health-care plan. His is the only one of the candidate proposals that has a chance of getting medical costs under control.

Reuters:
- Google Inc.(GOOG) won approval on Tuesday from the European Commission of its planned acquisition of DoubleClick Inc. and promptly closed the deal, sending its stock 6% higher.
- Sovereign wealth fund assets may soon surpass total official foreign reserves held by central banks and become the main vehicle for capital investment, a Morgan Stanley economist said.
- Bear Stearns(BSC) shares recover late Tuesday.
- Banks-led futures exchange to be called ELX.

Financial Times:
- If Nato fails, so too does Europe on Security. Europe risks being left without an effective security organization.

Dong-a Ilbo:
- North Korea is moving toward limiting the power of its military and cutting the number of state personnel. The North Korean regime is changing its “military first” policy, under the direction of its leader Kim Jong Il, who ordered a 30% reduction in the number of personnel in the military, government and communist state’s political party. North Korea has been working with the US, South Korea, China, Japan and Russia to dismantle its nuclear program in return for energy and economic assistance, security guarantees and normalized relations wit the US and Japan.

Xinhua:
- China to Probe Government, Companies’ Energy Use.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (DKS), target $37.
- Reiterated Buy on (NKE), target $78.
- Maintained Buy on (STLD), raised estimates and target to $75.

Night Trading
Asian Indices are +1.25% to +2.50% on average.
S&P 500 futures -.05%.
NASDAQ 100 futures -.04%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- (GLBC)/-.69
- (JAS)/1.09
- (MW)/.17
- (TRK)/.65
- (AEO)/.66
- (JASO)/.12
- (SIGM)/.81
- (GYMB)/.95
- (HOTT)/.26
- (TLB)/-.25
- (SIE)/.62

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Monthly Budget Deficit for February is estimated to widen to -$170.0 billion versus -$120.0 billion in January.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil build of 1,675,000 barrels versus a -3,056,000 barrel drawdown the prior week. Gasoline supplies are expected to rise by 100,000 barrels versus a 1,657,000 barrel increase the prior week. Distillate inventories are estimated to fall by -2,000,000 barrels versus a -2,327,000 decline the prior week. Finally, Refinery Utilization is expected to rise by .05% versus a 1.23% increase the prior week.

Other Potential Market Movers
- The weekly MBA Mortgage Applications report, (CRXL) investor day, (COP) analyst meeting, (FRE) analyst meeting, (MDU) analyst meeting, (CRA) analyst meeting, (ABI) analyst meeting, (HK) analyst meeting, Bear Stearns Media Conference, Bank of America Consumer Conference, Lehman High Yield Loan Conference and Deutsche Bank Hospitality & Gaming Conference could also impact trading today.

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

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs, Alternative Energy longs, Gaming longs and Medical longs. I covered some of my (IWM)/(QQQQ) hedges and some of my (EEM) short today, thus leaving the Portfolio 75% net long. The overall tone of the market is very bullish as the advance/decline line is substantially higher, almost every sector is rising and volume is heavy. Investor anxiety is above-average despite large gains in the averages. Today’s overall market action is very bullish. The VIX is falling to 27.5, but remains high. The ISE Sentiment Index is a very low 66.0 and the total put/call is a high 1.17 again today. Finally, the NYSE Arms is a below average .61. The TED spread is falling 17 basis points to 141 basis points and the 10-year swap spread is falling 1.70 basis points to 78.25 basis points over Treasuries. The 3-month T-bill yield is jumping 13 basis points to 1.46%, which is also a big positive. The G-7 Currency Volatility Index is falling 3.5% to 11.2. We are seeing the first meaningful decline in credit market angst today in quite some time. Moreover, the US dollar is rising on the news, which is a major positive. The (XLF) is trading near session highs, rising 4.7%. Bear Stearns(BSC) is actually 1.7% higher now, after this morning’s sharp sell-off. Given the massive short positions in many stocks, historic bearish investor sentiment, very bullish corporate insider sentiment, large cash position at many funds and today’s meaningful decline in credit market angst, I suspect this rally has legs. Google(GOOG) received EU approval today for its DoubleClick acquisition and is almost 6% higher for the day. I continue to believe the recent sell-off was way overdone and the stock will trade substantially higher by year-end. Nikkei futures indicate an +300 open in Japan and DAX futures indicate an +60 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting and diminishing credit market angst.

BETWEEN THE HEDGES

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Wednesday, March 12, 2008

Bull Radar

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Tuesday, March 11, 2008

Wednesday Watch

Stocks Finish Sharply Higher, Boosted by Homebuilding, REIT, I-Banking, Bank, Steel and Construction Shares

Stocks Soaring into Final Hour on Diminishing Credit Market Angst, Short-Covering, Bargain-Hunting