BETWEEN THE HEDGES

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Alternative Energy longs and Software longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The tone of the market is very negative as the advance/decline line is substantially lower, most sectors are falling and volume is above average. Investor anxiety is high. Today’s overall market action is bearish. The VIX is rising 7.1% and is now high at 25.3. The ISE Sentiment Index is below average at 112.0 and the total put/call is above average at 1.01. Finally, the NYSE Arms has been running high most of the day and is currently 1.68. The Euro Financial Sector Credit Default Swap Index is down .95% today to 95.29 basis points. This index is up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. . However, the TED spread is rising 5.96% to .98. Due to recent market volatility, I am unable to blog as much as normal. Sorry for the inconvenience. Nikkei futures indicate a -56 open in Japan and DAX futures indicate an +16 open in Germany tomorrow. I expect US stocks to trade modestly lower into the close from current levels on surging oil, record short-selling and rising global growth worries.

Late-Night Headlines
Bloomberg:
- President Bush prodded Congress to finish work on legislation to deal with the crisis in the housing market when lawmakers return from recess. ``We're now approaching a year since the president called on Congress to pass housing legislation -- it was August 31st of last year,'' administration spokesman Tony Fratto said. ``Every day that we wait, the problem gets worse, more people go into foreclosure.''
- Apollo Group Inc.(APOL), the largest for- profit provider of college degrees, beat analysts' estimates for earnings in the fiscal third quarter as the number of students increased, sending shares up 16.7% in extended trading.
- Australians’ confidence about the future has slumped to the lowest in two decades as oil prices reached a record and interest rates rose to a 12-year high, a Newspoll survey said.
- US retailers’ debt was upgraded to “neutral” from “underperform” by Credit Suisse Group AG. “Weak expectations for retailers’ sales and net income growth for the next few months are already priced” into the extra yield demanded by investors for their bonds and credit-default swaps, analysts Ee Lin See and Lauren Taylor wrote.
- New Zealand’s oil and condensate reserves jumped 53% last year, buoyed by the development of the nation’s offshore Tui oil field and completion of Royal Dutch Shell Plc’s Pohokura project.
- Suzuki Motor Corp., Japan’s second-largest minicar maker, fell 4.9% in Tokyo after sales growth in India, its biggest market, slowed. Sales at Maruti Suzuki India Ltd., the company’s Indian unit, rose 2.2% in June compared with a 16% gain in May. Suzuki, which sells half of the cars in India, gets 37% of operating income from Asia, excluding Japan. “Yesterday’s sales figures raised serious concerns about India’s car market and Suzuki,” said Koji Endo, a senior analyst at CSFB in Tokyo. “Everyone had expected that the Indian market will grow at a pace of 20 or 30%, but higher interest rates, inflation and oil prices are hurting the market and investors are speculating this will hit Suzuki.”
- General Motors(GM), Toyota Motor(TM) and Ford(F) said June sales plunged as consumers turned away from gas-guzzling trucks and found small cars in short supply. The results demonstrate the rapid shift in buyers’ preferences toward cars while $4-a-galllon gasoline has caught automakers flatfooted, said analyst Alan Baum.
- Democratic presidential candidate Barack Obama said he would spend at least $500 million a year to promote community aid programs run by faith-based groups.
- Republican John McCain arrived in Colombia today at the start of a Latin American trip to emphasize his support for free trade and President Alvaro Uribe’s fight against drug trafficking.
- Australian retail sales rose in May at the fastest pace in six months, sending the currency higher on speculation the central bank will boost borrowing costs again this year.

Wall Street Journal:
- Oil-Rich Persian Gulf Drivers Take Vanity Tags to a Whole New Level. With oil near record highs, the Persian Gulf is awash in cash, stimulating a return to some very conspicuous consumption.
- US Should Lift Brazil Ethanol Tariff, Lugar Says.
- Iran's foreign minister expressed optimism that negotiations could begin with the international community over Tehran's nuclear program, saying that his government is "carefully examining" a package of economic incentives offered last month by the U.S. and its negotiating partners and that Iran would respond "within weeks." Iran's top diplomat, Manouchehr Mottaki, steered away from Tehran's long-held negotiating position on its nuclear program by refusing to rule out the possibility that Iran might freeze its uranium-enrichment work while negotiations took place.

Forbes.com:
- AT&T(T) Is iPhone Ready.

CNNMoney.com:
- Mac market share sets record.

Pension & Investments:
- Hedge fund execs get networking site. Pointwalk Solutions Network launched a professional forum for hedge fund COOs.

Silicon Alley Insider:
- AOL Staff Told Unit Is for Sale.

Vanity Fair:
- Clinton Clung to Hopes for Victory Until End.

greentechmedia:
- Greentech Investments Jump 60%, UN Reports. The report says investors planted $148 billion into solar, wind and other renewable energy projects in 2007.

Reuters:
- Merrill Lynch(MER) would plan to keep its strategic relationship with BlackRock(BLK) whether or not the bank were to sell its stake in the asset management company.

Financial Times:
- China seeks to muzzle quake victim parents. Chinese security forces are putting pressure on angry parents to abandon demands for a full investigation into why so many schools collapsed in the May earthquake in Sichuan province and have rounded up human rights workers in the earthquake-ravaged region.
- Lehman speculation blamed on short-sellers. Shares in Lehman Brothers (LEH) , battered in recent days by rumors of an emergency sale, stabilized on Tuesday after several analysts said what Lehman executives have been saying privately for days: that the rumors are completely bogus. The problem for Lehman is that similar rumors circulated about Bear Stearns (BSC) in the weeks leading to the investment bank's collapse and emergency sale to JPMorgan Chase. Those rumors, mainly that the bank had run out of cash, were also untrue until they became a self-fulfilling prophecy. People close to Lehman say the bank is now convinced that it is the target of an orchestrated campaign by short-sellers attempting to force it into sharing the same fate as befell Bear. And executives at the bank are deeply frustrated that regulators have not moved more aggressively - and publicly - to investigate who is behind the latest rumors and make clear that those who are will be punished severely. Both the prominence and implausibility of the Barclays rumor have further convinced Lehman that it is the target of a short-selling conspiracy. "This rumor is so relentless and so ridiculous that it suggests serious manipulation," said one person close to the bank. Another suggested regulators should say publicly that they are conducting sweeps of hedge funds to determine if they are spreading Lehman rumors. Dick Bove, analyst at Ladenburg Thalmann, said the Barclays rumor "ranks right up there with the moon is made of green cheese". However, Mr Bove noted, "in a financial market characterized by panic and hysteria, no one checks anything. Rather sell and ask questions later."
- A dispute between UBS (UBS) and a hedge fund that sold it protection on a complicated mortgage security highlights why banks are still having a hard time figuring out the total amount by which they will have to write down such debt.

South China Morning Post:
- Sales of new homes in Shanghai plunge 50%.

Edge Financial Daily:
- Malaysia’s central bank Governor Zeti Akhtar Aziz said inflation in June may have accelerated to 6% to 7% after the government raised fuel prices. Bank Negara Malaysia will take action in the event of generalized prices increases, Zeti said.

The National:
- Iraq attracts hedge funds. The latest to enter the country is Northern Gulf Partners, a New York-based investment group that is launching a new hedge fund in the next three weeks, which will be followed by a private equity fund and other direct investments in the coming months. The fund will focus on investments in companies traded on the Iraq Stock Exchange (ISX) and other firms operating in Iraq that are traded on the international markets. It will also invest in local bonds, debt investments and some bank deposits. “Our idea is that the ISX could very well grow by five or 10 times within five years,” said Will Corbett, vice president of Northern Gulf Partners. “In the next few years, things will be a lot more stable. Former state-owned enterprises are becoming privatized. The need for investment presents pretty incredible opportunities.” Gross domestic product in Iraq is expected to grow between eight and 12 per cent in 2008, according to data from the International Monetary Fund. The inflation rate is stabilizing, while the number of troops dying in combat is at a four-year low. And the Iraqi government yesterday started the international bidding process to develop eight oil fields and two gas fields, a move described as the beginning of foreign investment in the country’s petrochemical industry. Trading volume on the ISX will likely rise 100% this year. Trading grew by 250% from 2006 to 2007. An electronic system created by Nasdaq is also expected to launch in the coming months.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (ONNN), target $14.

Morgan Stanley:
- Reiterated Overweight on (NUVA), raised target to $53.

Night Trading
Asian Indices are -1.0% to +.75% on average.
S&P 500 futures -.12%.
NASDAQ 100 futures -.16%.

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

Earnings of Note
Company/EPS Estimate
- (FDO)/.40
- (AYI)/.98

Upcoming Splits
- (PDO) 5-for-4

Economic Releases
8:15 am EST
- The ADP Employment Change for June is estimated at -20K versus +40K in May.

10:00 am EST:
- Factory Orders for May are estimated to rise .5% versus a 1.1% gain in April.

10:30 am EST:
- Bloomberg consensus estimates call for a weekly crude oil inventory drawdown of -700,000 barrels versus an 803,000 barrel build the prior week. Gasoline supplies are estimated to rise by 500,000 barrels versus a -153,000 barrel decline the prior week. Distillate inventories are expected to rise by 1,500,000 barrels versus a 2,823,000 barrel increase the prior week. Finally, Refinery Utilization is estimated to rise by .6% versus a -.72% decline the prior week.

Other Potential Market Movers
- The weekly MBA Mortgage Applications report and Challenger Job Cuts report could also impact trading today.

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

BETWEEN THE HEDGES

Top Menu

Wednesday, July 02, 2008

Stocks Sharply Lower into Final Hour on Surging Oil, Rising Global Growth Worries

Today's Headlines

Bear Radar

Bull Radar

Links of Interest

Tuesday, July 01, 2008

Wednesday Watch