BETWEEN THE HEDGES

Late-Night Headlines
Bloomberg:
- Dennnis Gartman, an economist and editor of the Gartman Letter says commodity prices could fall more on a further rise in the US dollar. (very good video)
- Ambac Financial Group Inc.(ABK), the world's second-biggest bond insurer, received approval from Wisconsin regulators to begin offering municipal bond insurance through a newly created insurer called Connie Lee. The shares jumped 12.3% in after-hours trading.
- The U.S. would likely retain its top AAA credit rating even if the government was forced to provide direct assistance to mortgage lenders Fannie Mae(FNM) and Freddie Mac(FRE), according to Standard & Poor's.
- Insured losses from Hurricane Gustav, which lashed the Louisiana coast yesterday, may not be as high as the first damage estimates indicated, according to firms that specialize in predicting catastrophes.
- Steelmakers including Nucor Corp.(NUE), the largest U.S.-based producer, fell in New York after ArcelorMittal said it will cut South African steel prices, raising concern prices will drop in North America as well. Hot-rolled steel sheet, the benchmark product used in cars and appliances, fell to an average $1,047 a ton in August, from $1,068 in July, Purchasing magazine said in an Aug. 29 report. Most steel mills had expected prices of $1,080 for the month, Purchasing said.
- Gold fell the most in three weeks as a plunge in energy costs and a strengthening dollar curbed demand for the precious metal as a hedge against inflation. ``The huge drop in crude is fueling the dollar rally and the sell-off in foreign currencies and precious metals.'' Crude-oil futures touched $105.46 today, down 28 percent from the $147.27 record set July 11. ``Don't stand in the dollar's way,'' said Ralph Preston, futures analyst at Heritage West Futures Inc. in San Diego. ``Don't fight the market, go with the trend. The dollar is really powerful now. We've got more pressure coming to the metals.''
- Platinum has dropped 39 percent from a record $2,308.80 on March 4. ``It looks like the bear trend might finally be establishing a foothold, and there should be more on the downside for the entire complex,'' said Miguel Perez-Santalla, a sales vice president at Heraeus Precious Metals Management in New York.
- The euro traded near a seven-month low against the US dollar before a report that may show European retail sales declined in July from a year earlier. ``The euro and pound will continue to be sold against the dollar,'' said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co. Ltd., a unit of Japan's largest brokerage. ``The outlook for European economies has deteriorated a lot in a very short time span. It's only natural to speculate about when officials will have to lower rates.''
- Australia's economic expansion slowed in the second quarter to the weakest pace in two years as consumers reduced spending, reinforcing the central bank's decision to cut interest rates for the first time since 2001.
- Shangri-La Asia Ltd., the region's biggest luxury-hotel operator, may book fewer rooms this year as rising airfares and a slumping world economy hurt tourism.

Wall Street Journal:
- Google(GOOG) Redefines Web Browser. Chrome Offers New Way To Surf Net, as Microsoft(MSFT) Beefs Up Internet Explorer.
- Dell Inc.(DELL) will soon introduce a mini-notebook computer, people familiar with the matter said, entering into a fast-growing market for inexpensive, no-frills portables that offer Internet capabilities at low prices. One person familiar with the matter said the new device will likely sell for less than $400.
- Investors' concerns about a slowing global economy are trumping their worries about the troubled financial system. The result is a reversal of the dynamic that held for much of this year: Commodity prices now are dropping, while the dollar and stocks of companies hit by the credit crunch are rebounding.
- The International Monetary Fund brokered what it called a "preliminary agreement" with the world's largest sovereign-wealth funds in which they agreed to follow principles for commercial investment.

MarketWatch.com:
- The Republican National Convention came back in full force Tuesday night with a schedule full of politics and praise for Sen. John McCain.
- Ospraie Management LP is shutting its flagship commodity hedge fund after it lost almost 40% this year, according to a letter the firm sent to investors Tuesday. Ospriae Fund Ltd., which had roughly $2.8 billion in assets at the start of August, is one of the largest commodity hedge funds in the world. It's down 38.59% so far this year, mainly because of a sharp drop in its holdings of energy, mining and resource stocks during a six-week period, the letter said. The firm, one of the most influential in commodities markets, still manages more than $4 billion in assets, including $1.2 billion in a special opportunities fund. Lehman Brothers Holdings Inc. (LEH) owns 20% of Ospraie Management, and Credit Suisse Group bought a smaller stake in the firm earlier this decade. Ospraie said that it will suspend all redemptions and sell all the fund's remaining positions to return money to all the investors over time.
- Apple Inc.(AAPL) may unveil the latest additions to its line of iPod digital media players at an event next week -- in time for the holiday shopping season.

CNNMoney.com:
- Things seem to be heating up again for the iPhone in China, according to several press accounts early Tuesday.

IBD:
- Natus Medical(BABY): Acquisitions Turn Up Volume On Newborn Hearing Test Company.

Inquirer.net:
- One-time Democratic vice presidential pick Joseph Lieberman Tuesday rebuked his former party's White House nominee Barack Obama over Iraq from a prime soapbox at the Republican convention.

Financial Times:
- OECD slashes forecasts for UK and eurozone.

TimesOnline:
- Korean Development Bank sets sights on Lehman Brothers(LEH).

International Herald Tribune:
- Syrian President Bashar Assad said Tuesday that indirect negotiations with Israel have brought "the possibility of peace," though the two countries still have quite a way to go toward that goal.

Japan Today:
- Sales of new imported vehicles in Japan plunged about 40% in August for the fourth straight monthly decline, affected by high gasoline prices and an economic slowdown in the country, industry sources said Tuesday. Sales excluding Japanese-brand vehicles built overseas fell nearly 30%, the sources said.

Nikkei English News:
- Itochu Property Development Ltd. will sell homes later this year that have outdoor power outlets for recharging electric vehicles.

BusinessTimesOnline:
- Netherlands-based Detroit Electric Ltd is in talks with Proton Holdings Bhd and two other carmakers to launch electric cars in Malaysia by 2009.

Chinamining.org
- Gold production in China rose 5.2% in the first seven months, citing the China Gold Assoc. Bullion output climbed to 152.5 metric tons in the period.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (GOOG), target $610.

Night Trading
Asian Indices are -1.25% to +1.0% on average.
S&P 500 futures -.07%.
NASDAQ 100 futures unch.

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
- (SPLS)/.21
- (JOYG)/.88
- (UNFI)/.30
- (HOV)/-2.06
- (HRB)/-.35
- (GES)/.49

Economic Releases
10:00 am EST
- Factory Orders for July are estimated to rise 1.0% versus a 1.7% gain in June.

2:00 pm EST
- The Fed’s Beige Book

Afternoon:
- Total Vehicle Sales for August are estimated to rise to 13.0M versus 12.5M in July.

Upcoming Splits
- (ISYS) 2-for-1
- (ATVID) 2-for-1

Other Potential Market Movers
- The Fed’s Rosengren speaking, weekly retail sales reports, weekly MBA mortgage applications report, Challenger Job Cuts report, Kaufman Brothers Investor Conference, Keefe Bruyette Woods Insurance Conference, Citigroup Tech Conference, Lehman Consumer Conference, Thomas Weisel Healthcare Conference, Goldman Sachs Retail Conference and Morgan Keegan Equity Conference could also impact trading today.

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 100% net long heading into the day.

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Gaming longs, Retail longs, Software longs, Medical longs and Commodity/Emerging Market shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is mildly higher, sector performance is mostly positive and volume is about average. Investor anxiety is high. Today’s overall market action is mildly bearish. The VIX is rising 3.4% and is still above-average at 21.33. The ISE Sentiment Index is very low at 92.0 and the total put/call is above average at .97. Finally, the NYSE Arms has been running high most of the day, hitting a peak of 1.26, and is currently 1.03. The Euro Financial Sector Credit Default Swap Index is falling 1.48% today to 89.17 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. The North American Investment Grade Credit Default Swap Index is -1.01% to 141.48 basis points. The TED spread is rising 3.07% to 1.13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is plunging 9 basis points to 2.05%, which is down 58 basis points in about seven weeks and at the lowest level since November 2003. I suspect the market made its lows for the day just now, however I plan to add hedges into the close on any further meaningful deterioration in the broad market. I still think the decline in commodities, rise in the US dollar and rise in financials is leaving many hedges funds under severe stress, resulting in reduced risk appetite across the board. Nikkei futures indicate an +111 open in Japan and DAX futures indicate a -25 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, falling commodity prices, less financial sector pessimism and bargain-hunting.

BETWEEN THE HEDGES

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Wednesday, September 03, 2008

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Tuesday, September 02, 2008

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Stocks Finish Lower, Weighed Down by Commodity and Construction Shares

Stocks Mixed into Final Hour as Plunging Commodity Prices Offset Global Growth Concerns

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