BETWEEN THE HEDGES

Monday, March 17, 2008

Tuesday Watch

Posted by Gary .....at 11:38 PM

Late-Night Headlines
Bloomberg:
- Yields on agency mortgage-backed securities relative to US Treasuries tumbled to the lowest in a month after the Fed cut the rate on direct loans to banks and granted securities firms access to the borrowing. The difference in yields on the Bloomberg index for Fannie Mae’s(FNM) current-coupon, 30-year fixed-rate mortgage bonds and 10-year government notes narrowed about 24 basis points to 174 basis points, or 63 basis points less than the 22-year high reached two weeks ago. The spread helps determine the interest rate on new prime home mortgages of $417,000 or less.
- China’s tightened monetary policy is “good” to help curb inflation and more adjustments will be made at “appropriate” times, central bank governor Zhou Xiaochuan said.
- JPMorgan Chase(JPM) will move its investment bank into the headquarters of Bear Stearns Cos., and is reviewing its plans to build a tower at the World Trade Center site.
- The Florida Democratic Party scrapped plans to hold a second presidential primary, according to a statement by party chairwoman Karen Thurman.
- South Korea’s government and the central bank are “concerned” about the decline of the won and will act if necessary, Deputy Finance Minister ShinJe Yoon said. South Korea’s won declined by the most since August 198 yesterday after increasing credit-market losses prompted investors to sell the nation’s stocks and bonds.
- The cost of default protection in Japan and Australia declined on speculation the Federal Reserve’s willingness to help rescue Bear Stearns(BSC) will preserve financial institutions’ access to funding. “In the US we can see a kind of safety net,” said Mana Nakazora, chief credit analyst at JPMorgan Securities Japan Co. in Tokyo. “We don’t need to worry about a shortage of liquidity in the financial sector and that is a good and positive message for investors.” The Markit iTraxx Japan index fell 17 basis points to 223 basis points and Australia’s benchmark declined 11.5 basis points to 196.5.

Wall Street Journal:
- Abu Dhabi pledged it won’t make investments for political purposes and outlined its investing philosophy in a three-page letter sent to US Treasury Secretary Henry Paulson, the World Bank and other organizations last week.
- Baidu’s(BIDU) Big Plans May Bear Fruit If It Can Overcome Obstacles.
- Indian technology and outsourcing giant Tata Consultancy Services is expanding in the US with a new operation that in three years will employ 1,000 workers.
- Intel Corp.(INTC) gave new details of plans to introduce chips that pack four, six, eight or more electronic brains on a piece of silicon to boost calculating performance.

MarketWatch.com:
- Are job cuts death knell for America’s newspapers? Some try to move faster online, others just cut as industry near an abyss.

CNBC.com:
- The Reuters Jeffries CRB Index, which tracks 19 commodities futures, fell about 5%, its sharpest single-day slide in almost 40 years.

NY Times:
- Economix: Worth a Lot, but Are Hedge Funds Worth It?
- By entering the online-game sector, media companies can attract advertising, including from food companies which have agreed to limit the nature and volume of television ads aimed at children.

BusinessWeek.com:
- China: It’s Not Just Tibet. Unrest in Tibet and Xinjiang illustrates the failure of Beijing’s attempt to drive development in its western regions.

Reuters:
- Crisis tests Bernanke; most see him up to task.
- US GSEs near deal to issue stock, get capital. Fannie Mae(FNM) and Freddie Mac(FRE) are near a deal that would increase their ability to ease tight credit by broadening their ability to buy mortgages being shunned by other investors, sources said.

Daily Telegraph:
- Joseph Lewis, a billionaire UK investor who has a 9.4% stake in Bear Stearns(BSC), the second-largest holding in the NY investment bank, may try to block JPMorgan’s(JPM) $236 million takeover.

Late Buy/Sell Recommendations
Citigroup:
- Upgraded (GMR) to Buy, target $25.
- Upgraded (TK) to Buy, target $45.

Night Trading
Asian Indices are -1.0% to -.25% on average.
S&P 500 futures +.19%.
NASDAQ 100 futures +.25%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (GME)/1.12
- (FDS)/.60
- (LEH)/.72
- (GS)/2.58
- (DRI)/.82
- (ADBE)/.45
- (FMCN)/.49

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Producer Price Index for February is estimated to rise .4% versus a 1.0% gain in January.
- The PPI Ex Food & Energy for February is estimated to rise .2% versus a .4% gain in January.
- Housing Starts for February are estimated to fall to 995K versus 1012K in January.
- Building Permits for February are estimated to fall to 1020K versus 1061K in January.

2:15 pm EST
- The FOMC is expected to lower the benchmark fed funds rate by 75 basis points to 2.25%.

Other Potential Market Movers
- The weekly retail sales reports, UBS Specialty Chemicals Conference, JPMorgan Aviation/Transportation Conference, Lehman Brothers Healthcare Conference, Citigroup Small/Mid-cap Emerging Growth Conference, Cowen Healthcare Conference and Morgan Stanley Global Automotive Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and consumer 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 Mostly Lower, Weighed Down by I-Banking, Construction, Commodity Shares

Posted by Gary .....at 4:18 PM

Evening Review
Market Summary
Top 20 Biz Stories
Today’s Movers
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Real-Time Stock Bid/Ask
After-hours Stock Quote
After-hours Stock Chart
In Play

Stocks Cutting Losses into Final Hour on Rebound in Financials, Lower Energy Prices

Posted by Gary .....at 3:53 PM

BOTTOM LINE: The Portfolio is slightly lower into the final hour as losses in my Internet longs, Medical longs and Gaming longs more than offset gains in my Computer longs, Software longs and Commodity shorts. I added to my (IWM)/(QQQQ) hedges and added to my (EEM) short this morning then covered those trades, thus leaving the Portfolio 75% net long. The overall tone of the market is bearish as the advance/decline line is lower, most sectors are declining and volume is above-average. Investor anxiety is high. Today’s overall market action is very bullish given the news and action in overseas markets. The VIX hit a very high 35.6. The ISE Sentiment Index hit a depressed 70.0 and the total put/call hit an elevated 1.71 today. Finally, the NYSE Arms has been around average most of the day. The 10-year swap spread is falling to 63.25 basis points over Treasuries, down from a high of 92.75 seven days ago. After hitting 193 basis points this morning, the TED spread is now 158 basis points. Nikkei futures indicate an +123 open in Japan and DAX futures indicate an +100 open in Germany tomorrow. I expect US stocks to trade modestly lower into the close from current levels on financial sector and economic worries.

Today's Headlines

Posted by Gary .....at 2:28 PM

Bloomberg:
- JPMorgan Chase(JPM) surged in NY trading after striking a deal backed by the Federal Reserve to buy Bear Stearns(BSC).
- Crude oil, copper and coffee led the biggest decline in commodities since 2001 on speculation that a US recession will stall demand for raw materials and end the recent ‘buying orgy.’
- Abby Joseph Cohen, among the most bullish investment strategists on Wall Street this year, will stop making S&P 500 Index forecasts for Goldman Sachs Group(GS).
- Hillary Clinton said that if elected, she would pull armed private contractors from that country as well as US troops.
- President Bush sought to reassure Americans as stocks and the dollar tumbled, saying he’s prepared to act “decisively” if needed.
- Lehman’s Fuld Says Liquidity Concern ‘Off the Table.’
- Commodities are heading for their biggest one-day decline since at least 1956. The Reuters/Jeffries CRB Index is down 4.9%.

CNBC:
- US financial regulators should seek a suspension of mark-to-market accounting of “exotic securities,” and Bear Stearns(BSC) “did not have to go out of business,” Forbes Inc. CEO Steve Forbes said. “Take a time out, don’t realize a loss until the loss actually happens,” Forbes told CNBC. “Right now, we’re just guessing, and when you’re guessing in a panic environment, disaster takes over,” he said.
- WL Ross & Co. LLC Chairman Wilbur Ross told CNBC that his company is buying H&R Block’s(HRB) mortgage loan servicing unit for $1.1 billion because it will be a “profitable and cash-generative business.” The purchase will create the second-largest US subprime servicing portfolio.

Portfolio.com:
- Murdoch May Force New York Times(NYT) Sales, Raines Says.

Morningstar.com:
- Shell: Set To Become One Of World’s Largest Wind Generators In ’09.

MiamiHerald.com:
- The next bubble: lawsuits.

Kauppalehti Vip Special Edition:
- European Central Bank council member Erkki Liikanen said slowing economic growth in Europe will damp inflation.

Market News International:
- The European Central Bank is increasingly concerned about the euro’s appreciation against the dollar and policy makers will express their worry more aggressively if the currency rises above $1.60, citing central bank officials. Another official said the ECB will press US authorities to act on their expressed preference for a strong dollar.

Valor Economico:
- Brazil’s economy may decelerate should a “severe” global economic growth slowdown lead to a “strong” decline in commodities’ prices, Anoop Singh, director for the Western Hemisphere at the IMF, said.

Bear Radar

Posted by Gary .....at 1:42 PM

Style Underperformer:

Mid-cap Growth -4.13%

Sector Underperformers:

I-Banks (-15.4%), Coal (-7.7%) and Construction (-6.8%)

Stocks Falling on Unusual Volume:

LEH, GFIG, BPFH, IBN, LNG, FCSX, IBKR, FMCN, ERIC, OXPS, SI, NMX, TPX, FDS, TTC, IBN and DPM