BETWEEN THE HEDGES

Late-Night Headlines
Bloomberg:
- General David Petraeus gave senators an upbeat picture of developments in Iraq, saying the level of violence has fallen to the lowest since 2004 and that more US troop reductions are likely later this year.
- Nickel fell to the lowest in almost two years in London as a surplus over the past year discouraged buying. “You have a lack of interest in the metal after stainless-steel mills have been cutting output,” Leon Westgate, a metals analyst at Standard Bank Group, said. Aluminum gained for a third consecutive day, despite a 4.5% surge in inventories to a four-year high.
- French Finance Minister Christine Lagarde said she wants policy makers to seek a stronger US dollar and Chinese yuan against the euro.
- Singapore’s economy expanded less than initially estimated in the first quarter, adding to concerns growth may ease in the coming months as global demand weakens and inflation accelerates.
- S&P 400 MidCap constituent Intuitive Surgical(ISRG) will replace Bear Stearns(BSC) in the S&P 500.
- American International Group(AIG) had its rating on senior unsecured debt and that of several subsidiaries cut one level by Moody’s Investors Service.

CNBC.com:
- Wind-Power Industry Set To Tap Capital Markets.

In The Money:
- Is Oil A Bubble?

Economist.com:
- Jean-Claude Trichet this week gave warning about the mistakes of the 1970s, when inflation was let loose at huge cost to growth. Policymakers in emerging economies are the ones who should most take heed. In countries such as China, India, Indonesia and Saudi Arabia even the often dodgy official statistics show prices have risen by 8-10% over the past year; in Russia the rate is over 14%; in Argentina the true figure is 23% and in Venezuela it is 29%.

Reuters:
- Short interest on the NYSE rose another 2.3% through mid-May to 16,000,000,000 shares. National City(NCC), Countrywide Financial(CFC), Lehman Brothers(LEH) and Ambac Financial(ABK) all saw large increases in short interest in their shares.

Financial Times:
- Strong growth continued in credit derivatives markets in the second half of last year in spite of the upheaval in financial markets, which led to a near trebling in the gross value of such contracts as rates spiked.
- Bill Gross, the manager of the world’s biggest bond fund, has switched gears to make a big bet on mortgage debt, almost tripling his holding of it to more than 60% of the fund.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (GME), target $66.

Morgan Stanley:
- Emerging economy currencies will come under pressure versus the US dollar and euro as record oil prices force governments to cut fuel subsidies, wrote strategists at Morgan Stanley. Energy subsidies in emerging market economies have prevented global oil demand destruction, exaggerated inflation in the developed world and understated inflation in the developing world, wrote London-based Stephen Jen and Luca Bindelli in a note to clients. “As these subsidies are rolled back, these distortions will unwind,” they wrote. The net effect of reducing energy subsidies, according to the strategists, will be “stagflationary” for emerging economies.

Night Trading
Asian Indices are -.75% to +.25% on average.
S&P 500 futures +.09%.
NASDAQ 100 futures +.10%.

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Earnings of Note
Company/EPS Estimate
- (REDF)/.04
- (SKIL)/.05

Upcoming Splits
- (SU) 2-for-1

Economic Releases
10:00 am EST
- Existing Home Sales for April are estimated to fall to 4.85M versus 4.93M in March.

Other Potential Market Movers
- None

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity shares 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.

BETWEEN THE HEDGES

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