BETWEEN THE HEDGES

Late-Night Headlines
Bloomberg:
- Copper in Shanghai headed for its biggest weekly loss in almost two months as buyers in China, the world’s largest user, shied away from physical purchases because of high international prices.
- China’s producer-price inflation accelerates to the highest level in more than three years on rising energy, commodity and labor costs. Factory-gate prices rose 8.1% in April from a year earlier. China is trying to cool inflation while avoiding an economic slump as global demand fades.
- China will maintain a tight monetary policy to cool price increases and prevent economic overheating, Vice Premier Wang Qishan said.
- Google Inc.(GOOG), owner of the most popular Internet search engine, said it could arrange a partnership with rival Yahoo!(YHOO) in a way that would ease regulators’ antitrust concerns.
- Barack Obama Says He May Be Able to Claim Nomination on May 20.
- Australia’s central bank raised its forecasts for inflation this year and in 2009 after surging food, gasoline and housing costs drove up consumer prices more than expected in the first quarter. The bank also trimmed its outlook for economic growth amid “evidence that demand has slowed, but it will take time for this to have a substantial impact on inflation.”
- South Korea’s won headed for its biggest weekly decline in two months as the central bank signaled it wants a weaker currency to help spur economic growth.
- The US House of Representatives approved legislation to let the government insure up to $300 billion in mortgages to help homeowners avert foreclosure, after the White House said the measure would force taxpayers to bear excessive risk.
- President Bush will veto the farm bill proposed by congressional agriculture leaders because it exceeds spending guidelines and offers no “real reform,” Agriculture Secretary Ed Schafer said. “At a time of record farm income, Congress decided to further increase subsidy rates, qualify more people for taxpayer support and move programs toward more government control,” Schafer said.
- American International Group(AIG) plans to raise $12.5 billion after posting its second straight record quarterly loss, sending the shares down 7.7%.
- Vietnam’s economic growth rate may decline to 6.6% this year, citing a report from the Central Institute for Economic Management. The institute also forecast an inflation rate of 16.7% to 22.3% in 2008. Vietnam’s Deputy Prime Minister said last month the government would reduce the 2008 economic growth target to 7% from a previous forecast of as much as 9%.

Wall Street Journal:
- McCain Sets Stage for Fall Run. Senator Stakes Out Positions and Fills Campaign Coffers.

MarketWatch.com:
- The decline of the investment boutiques. Hard times have befallen those banks, offering specialized services for institutions, according to David Weidner.

IBD:
- Retail Sales In April Top Views Despite Drags On Consumer.

Forbes.com:
- Big Money Bearish But Insiders Bullish.

Morningstar:
- Emerging market hedge funds attracted nearly $600 million of new fund flows during the first quarter, Hedge Fund Research said. In spite of the market volatility, the total number of funds investing in emerging markets increased during the quarter, to over 1,050 from 1,020 in the fourth quarter. “ A combination of factors including expectations for slower developed market growth in the near term, a weaker US dollar, and persistent strength in commodities have continued to drive interest in emerging markets focused hedge funds,” the company’s president Kenneth Heinz said. Emerging Asian markets represented the weakest area of hedge fund performance in the first quarter, with the HFRI Emerging Markets: Asia ex-Japan Index falling over 12%.

Denver Business Journal:
- Danish wind turbine manufacturer Vestas Wind Systems said Thursday it will expand its already large investment in Colorado with the addition of a nearly $250 million manufacturing plant to build the steel towers that hold up the wind turbines. The company, in its first-quarter earnings report, said Thursday it had "resolved to build the world's largest tower factory in Colorado."

Reuters:
- Google Inc.(GOOG) expects to launch new products for its YouTube Web video service in the next few months and sees reason for closer cooperation with Yahoo(YHOO), Google CEO Schmidt said.

Financial Times:
- US hedge funds are responding to the continuing uncertainty of the investment outlook by taking a cautious “wait and see” attitude, scaling back on big directional bets and sitting on large cash balances, according to investors.
- Citigroup(C) will on Friday identify as much as $400bn in non-core assets that could be sold as part of plans to reduce costs and restore profit growth to double-digit rates.

Globeandmail.com:
- Francis Koenig’s AdultVest to be honored among 35 of the world’s most elite hedge fund managers. AdultVest, Inc., the Beverly Hills-based investment bank, which concentrates its practice exclusively on adult industry investments, mergers, and acquisitions, announced today it had been selected by Alternative Investment News and Institutional Investor Magazine as one of four funds nominated for the “Hedge Fund Launch of the Year” award.

Centre for Energy:
- The inclusion of ethanol and biodiesel in Canada’s fuel supplies is close to becoming law. The bill would require a 5% ethanol inclusion in all gasoline and 2% biodiesel in diesel by 2010.

Xinhua:
- China’s death toll from hand, foot and mouth disease rose to 32 children, after an eight-month-old girl died in Guangzhou on May 5 and a boy died in Liuzhou a day later. The disease has now infected 24,934 children as of Thursday.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (GLBC), target $25.
- Reiterated Buy on (TXT), target $69.

CSFB:
- Reiterated Outperform on (EQIX), target $135.

Night Trading
Asian Indices are -1.75% to unch. on average.
S&P 500 futures -.32%.
NASDAQ 100 futures -.20%.

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
- (BID)/-.10
- (SUP)/.09
- (CCOI)/-.18
- (SUG)/.61

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Trade Deficit for March is estimated to shrink to -$61.0B versus -$62.3B in February.

Other Potential Market Movers
- The (TXN) analyst meeting, (C) investor presentation and JPMorgan Dental Equipment/Supplies Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by automaker and technology shares in the region. I expect US equities to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Alternative Energy longs, Computer longs, Biotech longs, Gaming longs and Software longs. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is neutral as the advance/decline line is about even, sector performance is mixed and volume is about average. Investor anxiety is slightly above average. Today’s overall market action is neutral. The VIX is falling 1.1%, but remains above average at 19.5. The ISE Sentiment Index is a below average 138.0 and the total put/call is about average at .90. Finally, the NYSE Arms has been running above average most of the day and is currently 1.30. The rise in oil to another record remains a large negative. The financials ETF(XLF) has a -.9 correlation with the United States Oil Fund(USO) and is dropping another 1.7% today. I still don’t expect the S&P 500 to break meaningfully above its 200-day moving-average until oil reverses lower. This will likely come on another US dollar surge and evidence of slowing overseas demand. On the positive side, the fact that financials are down as much as they are and oil is hitting another record, yet the major averages are hanging in is impressive. The 10-year swap spread is falling to 58.75 basis points over Treasuries, which is at the low end of its trading range. One of my longs, American Superconductor(AMSC), reported strong results this morning and boosted guidance. The stock is soaring 28.3% to $31.62, which is near its all time high of $32.74 hit in December of last year. I have been long the stock since $12/share and still see tremendous upside in the shares from current levels. I will use any meaningful weakness as a buying opportunity. Nikkei futures indicate a -33 open in Japan and DAX futures indicate a +15 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, record energy prices and profit-taking.

BETWEEN THE HEDGES

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Friday, May 09, 2008

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