Tuesday's Brew (Oct 31)

Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful. At 9:30 AM we will discover whether the market is going to bring a trick or treat this Halloween, but equity futures across the board are higher this morning ahead of the release of the consumer confidence index for October.

OVERSEAS NEWS & MARKETS

The Hang Seng and NIKKEI 225 indices were both up fractionally overnight. The FTSE 100 and DAX indices have extended the global cheer in early trading, as activity has been mostly news-driven by corporate earnings reports.

Global security and stability should strengthen from news that North Korea has agreed to return to six-party talks. However, we question China's motive. We wonder if China expects some payback for bringing North Korea to the table and seemingly calming the Sea of Japan. Perhaps China hopes to receive support in the U.N., as the global community efforts to sanction China's critical energy supplier, Iran. If so, this gift it has provided to the world may be a Trojan horse. Therefore, this security may be a false one.

ECONOMIC NEWS & DATA

Yesterday's consumer spending data came in about in line, but there remains a slew of economic pitfalls to overcome this week. Later this morning, the Conference Board's release of the consumer-confidence index for October will show just how afraid the consumer has become, or if he has remained brave. There is still concern that housing weakness might spread to consumer confidence and spending eventually. Economists surveyed by Bloomberg expect the reading to measure 108.0. The reading for September was 104.5.

Also today, the Labor Department will release the employment-cost index for the third quarter. Finally, in a reading we view less important, the Chicago purchasing managers will issue their report on U.S. manufacturing in October. Economist consensus expects a reading of 58.0, while September measured at 62.1.

COMMODITY MARKETS

Yesterday provided the steepest one-day decline in crude oil prices in over a year, as traders speculated that a warmer weather forecast for the near-term might carry through the greater of winter. This would impact demand, and likely fill inventory excess while cutting into pricing. Rumors surfaced that OPEC might consider a further production cut at its December 14th meeting, but prices were unaffected.

Iran remains on the burner, and we expect rhetoric and reaction from its government to exacerbate oil price volatility as the U.S. and its allies seek sanctions against the nuclear hopeful. Thus, we believe that near-term pricing weakness should swing back to strength before forming a long-term trend.

Uranium prices spiked as key producer, Cameco Corp., said a flood at a new mine in Canada will delay initial shipments by at least a year. Uranium serves as fuel for nuclear reactors. Approximately 16% of the world's electricity was generated by nuclear source in 2005, according to the World Nuclear Association, and it is expected to increase. A significant amount of new reactors are being built now and are planned for future construction.

STOCK NEWS

Scheduled to report earnings on Tuesday are Procter & Gamble, Valero Energy, Marathon Oil, Automatic Data Processing, Archer Daniels Midland, Loews Corp., PNC Financial Services Group, Entergy Corp., EOG Resources, Vornado Realty Trust, Qwest Communications and American Electric.

We hope you enjoyed "Today's Morning Coffee" and wish you a good day trading. Stay in touch with Wall Street Greek during the day, as we are likely to provide more "Speculative Trade" ideas during this busy earnings season. We are also preparing an in-depth research report, to be offered to subscribers soon, within a section of the site we intend to call "Stock of the Month."

(disclosure)

The Greek's Week Ahead - Oct 30

"The Greek's Week Ahead" is designed to help you prepare for the market moving events of the week so you and your portfolio are not caught off guard. Whether it helps you to prepare strategy or just raise your awareness of important factors that may move markets, we hope you find it useful.

We believe an economic term will be reintroduced into the lexicon of investors this week. Stagflation! And welcome, just in time for Halloween, appropriately dressed to scare investors out of stocks. Ah yes, the dreaded combination of economic stagnation and inflation; perhaps the Fed's worst fear, as it could handcuff their ability to maintain economic stability. And worst of all, it might make the economy vulnerable to the worst case scenario, depression.…

Fear not trick or treaters, as this is not yet a significant risk. The Fed believes the economy will pick up steam soon, while inflation will weaken. Still, economic indicators of consumer strength this week will perhaps give investors some reason to imply whether the weakness in the housing market has spread enough to impact the consumer's ability to spend, a truly terrifying consequence. If the consumer tightens his belt, the American economy and the earnings of corporate America will be damaged, and that means stock prices too would be at risk.

On Monday, some very important economic data will help the markets decide which direction to head. The September readings on personal income and spending will be released. August data showed personal income rose by 0.3%, and Bloomberg's survey of economists shows consensus expectations for September at 0.3% growth as well. August personal consumption data showed a 0.1% increase, and September is forecast at 0.2%. If personal spending is below consensus, stocks could take a dive, in our opinion, as the market would relate housing weakness to personal spending, and fear degradation.

Fresh from last week's FOMC meeting, two Fed Presidents will be let loose to horrify the masses. Jekyll like perhaps, Dallas Fed Chief Richard Fisher, will give an address entitled "An Update on the Status of the Economy" to the New York Association for Business Economics. Mr. Hyde, or let's call him Jeffrey Lacker, Richmond Fed Chief and lone dissenter against a rate pause and supporter of a quarter point increase, will howl in the night or day on Monday as well.

Reporting earnings on Monday, Verizon Communications, Metlife Inc., Simon Property Group, Sysco Corporation, FPL Group Inc. and Clear Channel Communications.

Tuesday officially ushers in the gouls of Halloween. While candy sales may peak, the Conference Board's release of the consumer-confidence index for October will show just how afraid the consumer has become. Economists surveyed by Bloomberg expect the reading to measure 108.0. The reading for September was 104.5. On the same day, the Labor Department will release the employment-cost index for the third quarter. A reading we view less important, the Chicago purchasing managers will issue their report on U.S. manufacturing in October. Economist consensus expects a reading of 58.0, while September measured at 62.1.

Scheduled to report earnings on Tuesday are Procter & Gamble, Valero Energy, Marathon Oil, Automatic Data Processing, Archer Daniels Midland, Loews Corp., PNC Financial Services Group, Entergy Corp., EOG Resources, Vornado Realty Trust, Qwest Communications and American Electric.

Wednesday welcomes in the month of November and the celebration of the fall harvest. We might get a sign of whether it will be a season of Thanksgiving or not with the Institute of Supply Management's release of its manufacturing index for October. Economists are looking for a reading of 53.0, compared to September's reading of 52.9. Also, September construction spending will be released on Wednesday. Economists expect the data to show no growth, versus an increase of 0.3% growth in August.

In Singapore, EMTA, a trade association hosts a forum on recent economic and political developments in emerging markets. Finally, Fed Chairman Ben Bernanke will keynote the Opportunity Finance Network conference in Washington, D.C.

Reporting earnings on Wednesday are Time Warner, Prudential Financial, Devon Energy, Dominion Resources, Newmont Mining, Allergan Inc., and Marsh & Mclennan.

Thursday, Challenger, Gray & Christmas, the global outplacement consultancy, will release its monthly report on planned job cuts announced in October. September cuts climbed 54%. Also, September factory orders will be announced and Q3 productivity change.

Reporting earnings on Thursday are Qualcomm, CVS Corp., Transocean Inc., Caremark Rx Inc., CBS Corp., Becton Dickinson, Electronic Arts, and International Paper.

On Friday, the unemployment rate for October will be announced and is expected to measure 4.6%, as it was in September. October non-farm payroll is expected to grow by 125,000 jobs, versus 51,000 in September. Also, the Institute for Supply Management will release its non-manufacturing index, a better barometer of the health of the American economy than manufacturing.

Reporting earnings on Friday are Duke Energy and Medco Health Solutions. We hope this helps you better prepare for the week ahead. Look for "Today's Morning Coffee" on Tuesday, for your pre-market warm up of the day.

Friday's Brew - Oct 27

Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful. Equity futures are down in early activity, on lower than expected GDP data.

OVERSEAS MARKETS

Stocks ended lower in Japan, Hong Kong and Australia. In Hong Kong, it appears everybody sold stock to buy into new IPO in China's top mainland lender, Industrial & Commercial Bank of China. The stock soared 15 percent in its first trading day following a record US$19 billion initial public offering. Stocks in Europe and the U.K. were mixed and indecisive, with the DAX up fractionally, while the FTSE 100 was down fractionally.

ECONOMIC DATA & NEWS

Economic news provided a scary finish to the week, appropriate enough for the Halloween season. The Commerce Department reported third-quarter gross domestic product, showing U.S. economic growth at 1.6%, below the 2.6% pace set in Q2 and under the economists' consensus expectation of 2.0%. It was in fact the slowest growth rate in more than three years.

The decrease was driven by the sharpest homebuilding decline in 15 years.

You can look at this data in two ways, like most economic data... One, okay, so the Fed might be done raising rates now and if inflation shows some decrease in future data, we may be nearing a Fed rate cut sooner than later. Or two, the housing sector is shaking the economy, and what if we fall into recession. As we pointed out in previous postings, we expect the equity markets to trade choppy in a sideways pattern until the debate, "recession versus soft landing", is won.

Also today, the University of Michigan will release its reading on consumer sentiment. Minneapolis Fed head Gary Stern will address the 43rd annual meeting of the Missouri Valley Economic Association. Finally, the Wharton School will host its 9th annual Wharton Investment Management Conference in Philadelphia.

COMMODITIES

Crude oil is at about $60.50 and gold is trading around $597.60. Crude is somewhat inactive as traders await remaining OPEC members to confirm production cuts with their customers. No surprises expected here, and the market will watch Iran and the U.N. for further news going into the weekend. With Russia defying the U.N. on sanctions against Iran, you might expect oil prices to decline, but this only pushes Israel one step closer to action, supported by the U.S. We expect oil and gold to strengthen some in the near term. Nickel is down roughly 5% today.

STOCK NEWS

Microsoft (MSFT) posted quarterly EPS of $0.35, versus consensus of $0.31, however, revenue guidance was below expectations, confusing the shares in pre-market. MSFT shares opened up 1%. Intuitive Surgical (ISRG) posted quarterly EPS of $0.45, versus consensus of $0.41. Revenues rose 57%, and we believe in coming quarters, EPS growth should be less burdened by tough comparables that do not reflect necessary expense structure increases. As EPS growth begins to reflect revenue growth, we believe the PEG ratio will increase to a level more compatible with a company exhibiting the kind of high growth that ISRG has. Price performance should rise higher at least in concert, in our opinion. We hope you enjoyed "Today's Morning Coffee" and we wish you a good day trading. Be sure the read "The Greek's Week Ahead" on Sunday night or Monday morning, and stay tuned for the next "Speculative Trade."

(disclosure)

Speculative Trade - Intuitive Surgical (ISRG)

Today's speculative trade is related to Intuitive Surgical and the catalyst is its earnings report, which is scheduled for after the close today. Like with Websense earlier this week, we are confident the shares will be volatile after the news, and we have a long bias, so we will employ a strangle options strategy with more capital employed long versus short.

Last quarter, high flying Intuitive told the market that it could expect its expense structure to once again be heavy this quarter, and it did not provide a stellar report like in prior quarters. The shares subsequently fell sharply. This is a fast growing medical instruments company that makes the da Vinci Robotic Surgery System. It is gaining in usage because it is minimally invasive and requires less recovery time and less hospital stay, and has proven effective, something insurance companies like. It's gaining strong penetration in prostatectomy, hysterectomy and bariatric surgery. It's uses are in no way limited to those areas. It has a significant first-mover advantage in robotic surgery.

The company applies the Gillette razor/blade model, so to speak, with the system requiring parts and maintenance. We believe that due to last quarter's relatively weak result (only exceeding estimates by $0.04), the shares are poised to exceed expectations this time around. The shares trade at 46X the consensus EPS estimate for 2007 of $2.42. EPS growth is estimated at 42%, so the PEG is 1.1 based on those numbers. Long term growth is projected at a conservative 35%. Again, this is a case where past performance indicates that estimates are likely understated, so it appears to be an attractively valued high growth stock.

We invested approximately 80% of our capital long and 20% short, with the hope that if we are wrong, we can recover some capital. The options are priced for their extreme volatility, so a significant move is necessary to make money. However, ISRG seems to be capable of those kinds of moves around earnings time. We took interest in the Nov 120 Calls and Nov 90 Puts. Our strategic goal would make the Puts worthless, while returning significant gain from the Call options, if all goes to plan. Last quarter, the stock moved dramatically lower, ahead of the EPS report, so we are enthused to see the shares moving higher ahead of today's report. Volume picked up sharply after midday. Read into that as you like, but we view it positively. (disclosure)

Note: VCA Antech (WOOF) - Buy

WOOF shares have broken their 200 day moving average, which has proven to be a good time to buy the shares in the past (see our link). Further proof that the press release is being misunderstood by the market, TheStreet.com wrote this, "Animal health care provider VCA Antech said its third-quarter earnings rose 21.1% from the year-ago period, but was hit after it lowered its guidance." Note, TheStreet is wrong, WOOF raised its guidance by 2 cents. Unfortunately, investors have been fooled so far today by illusion and this creates a buying opportunity. Hopefully management or analysts can clear up the confusion somehow. The 200 day trend line seems to indicate the shares could bounce. (disclosure)

Thursday's Brew - Oct 26

Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful. Equity futures are up across the board, as the market looks to extend the rally after the pause decision by the Fed supported by less than hawkish commentary. We would start looking at semiconductor stocks now that have already reported this quarter's results.

OVERSEAS NEWS & MARKET ACTIVITY

The Hang Seng was up over 1% while the NIKKEI was up about 0.7%, aided by the positive news out of the FOMC meeting. The cheer spread to Europe, with the DAX up about a half a percent and indices up across the board throughout Europe.

ECONOMIC NEWS & DATA

Thursday, the government releases September data on orders for durable goods. Also, the latest data on new home sales will be released. However, the information seems to pose no threat to move markets, as it follows the FOMC. New York Fed President Timothy Geithner will speak at a conference on the Japanese economy at the Columbia Business School Center. He is expected to address central banking in the global economy. Finally, the WTO is expected to approve Vietnam's entry.

COMMODITY NEWS & DATA

Oil shot higher yesterday, for no other reason than Iran again intensifying the heat on the global scene. We have heard many different reasons from talking heads on the news wires and business television, but make no mistake, the move coincides with new rhetoric from the Persian nation. As we stated previously, oil prices cannot drop convincingly until the Iranian issue is resolved.

STOCK NEWS

Headlining the earnings reporting day will be NII Holdings (formerly Nextel), which is seen by the consensus as making $0.41 a share. VCA Antech (WOOF) posted EPS $0.02 ahead of analysts' consensus and raised its full year guidance by two cents, in its conservative fashion. The shares traded lower after hours, as we believe the market incorrectly interpreted the guidance as implying a weak Q4, since the raised guidance still falls a penny below consensus. VCA Antech does not concern itself with the views of analysts; it merely sets reachable goals and then goes out and executes in a stellar fashion, providing value adding gains for shareholders, in our opinion. Our impression from the Q3 report and conference call were that the fourth quarter was running up to stellar trend, and we expect the company to meet or exceed estimates next quarter as usual, and exceed its guidance by a greater degree.

We believe the FOMC meeting has provided impetus for semiconductor and semi-equipment names to take flight. But we warn investors to be selective. Avoid names that are anticipated to report earnings in the next two weeks and which have EPS estimate momentum implying a negative trend, or which have disappointed recently. I would focus on names that have either reported so so quarters already, or are set to report so so quarters two weeks out. The company specific disappointment can ruin the cyclical run. We note that we closed out the long end of our strangle option position in Websense (WBSN) yesterday. We will provide an update later today on this and a new name for investment, so stay tuned. We hope you enjoyed "Today's Morning Coffee" and wish you a good day trading. (disclosure)

Speculative Trade - VCA Antech (WOOF) - Update

WOOF had great execution in Q3. Solid revenue growth, especially same-store and lab revenue growth, indicating the usual healthy business. WOOF had nice margin expansion, return on capital improvement and shareholder value creation, in our opinion. So, why is the stock down you ask...

Unfortunately, we believe the guidance is being misunderstood by the market, which is mostly made up of investors who are not closely familiar with WOOF. This is not the first time this has happened, so it's particularly frustrating that the market does not get it. WOOF is a perennial UPOD or master of "Under Promising, Over Delivering", to quote Cramer. Unfortunately, in raising its guidance by 2 cents, WOOF presented guidance that is 1 cent below consensus of $1.15 for the year, and implies a weak Q4. Q4 is apparently not running any differently than the stellar trend that has persisted through the years, and we strongly believe WOOF will earn $1.16 to $1.17 for the year. Unfortunately, it was completely misunderstood after hours.

Hopefully some analysts will get on the horn and point this out, but if they have "hold" or lower recommendations on the stock, you should not expect them to. Those guys are waiting for the stock to get cheaper to upgrade it. Analysts with "buys" on the stock should be pounding the table this morning!

On the conference call, I brought it up to bring attention to it, decipher it for the confused market and clear up the confusion and concern of the market. This is an attractive stock relative to quality, growth and valuation. Hopefully, by sometime this morning the market will get that the guidance is actually positive news, as was the performance this quarter. If the stock opens lower, it presents a wonderful arbitrage buying opportunity, as you can benefit from the difference created by this guidance, which we believe will prove conservative as usual. This is a lesson that no matter how confident you are in a company, it doesn't hurt to hedge a little. This is one of my favorite stocks to own over the next 3 to 5 years. My best to you WOOF owners. (disclosure)

Speculative Trade - VCA Antech (WOOF)

Today's "Speculative Trade" is VCA Antech (WOOF). We have a higher level of confidence going into the WOOF earnings report than we did going into the Websense and PetMed Express reports. So, we are going into it with naked calls.

We waited on the Fed today and an anticipated decline in the shares heading into the report, due to valuation, lack of analyst support and the stock's rise within the last five days. We took half of our position in the Nov 35 Calls at $1.20 (down from the $1.25 close of Tuesday) and the other half at $1.20, just before close. I had some left over cash and applied that to some Dec 40 Calls at $0.35. Buying the November options is extremely risky, because if things go in the other direction than your bet, you have very little time before expiration to make up the loss. It can get bloody! Therefore, I must remind you to read my disclosure.

VCA Antech is a name I once followed as an analyst, and represents my favorite kind of name. It's the good company that is also a good stock; believe it or not, this is not always the case. WOOF has a business model I seek out and have benefited from on several occasions. It is a gnategory killer! It's competition is fragmented and consists mostly of small veterinary hospitals owning one or two locations.

Peter Lynch wrote, and I paid close attention, when you compete against mom and pops, you can grow. It's the Home Depot and WalMart story all over again, just in a smaller market. However, it's still a viable market. As home ownership has increased, pet ownership has benefited as well. Over 63% of American households have a pet, most of which are dogs and cats. Approximately $18 billion is spent yearly on animal healthcare services.

As these companies grow by acquiring small shops and through de novo means, they gain economies of scale. They become the most important purchaser to their suppliers. They write the biggest check to suppliers, and advantage from that. WOOF does not just have leverage with suppliers, but with customers also. It is capable of building brand awareness. It can advertise and bring clients to its hospitals, where the competition is only known by the very local community. It can offer greater breadth and quality of service, and we believe WOOF is doing so. In fact, WOOF has the largest lab network for pets in the country, and this business is benefiting from increasing testing, and will eventually benefit from more complicated tests. People spend money on their pets, a member of the American family. Also, WOOF's business does not get complicated by third-party payers like the human health care market.

WOOF does not appear cheap at first glance. It trades at 25.6X the 2007 EPS consensus estimate of $1.33. But look closer! WOOF has a track record of beating estimates, so that number is likely understated. Meanwhile, this year's likely understated growth is seen at 22%. Recent growth has been strong, so the PEG ratio is not as scary to us as it appears to wary analysts. We have not run a DCF model on it for awhile, but it always projected well, even after delevering the company a bit. So, there it is, WOOF WOOF!

Wednesday's Brew - Oct 25

Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful. All eyes are on the Fed today, as clammy hands await the news. The big question of the day is will they hike or will they continue the pause. A great majority of economists (all 106 surveyed by Bloomberg) expect the Fed pause to continue today.

Whether they hike or not, we expect very hawkish commentary regarding inflation in the near future to provide further warning to equity markets that a hike is not out of the question considering recently lofty Core PPI and Core CPI data. Remember, the Fed did itself tell us it would be data dependent going forward. Adding to the pressure, with recent housing data mixed, the Fed may be less cautious about hiking rates just a bit more should inflationary red flags persist.

Trading on the CBOT moved its implied expectations forward for a Fed rate cut, from March to August, but equity markets seem to have implied a more positive outlook. Dow futures are indicating a higher open this morning, while the S&P 500 indicates lower and NASDAQ is undecided. If the direction equities take a strong position today in the AM, we believe a reversal is likely after the Fed decision at 2:15 EDT. If stocks rise ahead of a Fed pause, they should become concerned with future hike possibility. If they slide lower on inflationary concern, a Fed pause would add support. Neutral activity will likely be impacted by the Fed's statement more than the rate decision, and when the minutes of the meeting are posted later on down the road, we anticipate markets will be even more wary.

OVERSEAS MARKETS & NEWS

The NIKKEI 225 Index fell 0.48% ahead of earnings reports, while the Hang Seng Index held steady Wednesday. The FTSE 100 Index was up about 0.39%, on mining stock strength versus bank weakness. Analysts overseas have pointed toward the deterioration of merger premium for U.K. banks, as foreign interest seems to have slowed near-term. Shares across Europe are higher this morning. We anticipate European shares to be undecided today, as they await direction from the American Federal Reserve.

ECONOMIC DATA & NEWS

Outside of the previously discussed FOMC meeting and rate decision, the National Association of Realtors will report September existing home sales data at 10 a.m. The market will compare the data with new home sales strength shown last week versus the weakness seen in new permits. We expect the data to show a further slowing of the pace of sales. Last month, the report showed the first year-over-year decline in the price of a home in 11 years. Also on tap for Wednesday, the Treasury will sell $14 billion of five-year notes.

COMMODITY MARKETS

Copper is down for the fourth day in a row, as supply rose to its highest level in six weeks. Nickel is down 1.1% on inventory growth as well. Gold futures are trading just slightly lower while crude oil is up about a half of a percentage point. Natural gas futures are down approximately 1.4%.

The U.S. Energy Department report at 10:30 AM EDT is expected to show crude oil supplies increased 3 million barrels last week, based on the median estimate from a Bloomberg News survey of 15 analysts. Recent readings showed that U.S. oil stockpiles held more than the five-year average. The market continues to weigh supply and demand along side the threat of Iranian, Venezuelan and Nigerian spurred supply disruption potential. With prices down nearly 25% from the peak, they have appeared to steady of late. Clearly, the trading range has shifted lower. Our view is that data and news will continue to sway prices from $55 to $65, until a definitive resolution to the Iranian issue is found.

STOCKS IN THE NEWS

ImClone Systems (IMCL) appointed Carl Icahn as its new Chairman, and posted quarterly EPS results of $0.65, compared to $0.45 consensus as compiled by Thomson Financial. However, IMCL shares were down about 1.4% in pre-market activity. General Motors (GM) shares were down about 1.9% in early trading, as GM posted quarterly EPS of $0.93 excluding charges, versus consensus estimate of $0.49 before charges. The decline in stock price might be related to a decrease in GM's global market share to 13.9% during the quarter, from 14.4% .

Websense Inc. (WBSN) was up after hours Tuesday, as it exceeded estimates for revenue, billings and EPS. EPS results for the quarter were $0.25 excluding stock-based compensation, versus a consensus estimate of $0.23 excluding stock-based compensation. Amazon.com Inc. (AMZN) shares were up 14% after hours Tuesday, after posting quarterly EPS of $0.05, compared to analyst consensus of $0.03.

We gave you "Speculative Trade" ideas in PETS and WBSN over the past few days, and we anticipate another today, so stay tuned. We hope you enjoyed "Today's Morning Coffee" and wish you a good day trading. (disclosure)

Speculative Buy - Websense (WBSN)

Well, first we are sorry this will prove useless to you, due to the time of publishing. We were researching off-site today and did not return in time to publish our idea for the day. We took a short term long position in WBSN, and partially hedged it, applying a strangle option strategy with the view that the earnings report would bring volatility. Our strangle is biased long, as we anticipate WBSN will execute well, either meeting or exceeding estimates, but if we are wrong, we expect our hedge could return our invested capital.

We took our short position yesterday, as we anticipated WBSN's run since its last report, along with the FOMC meeting and lack of analyst support for the shares, would send them lower heading into the report. We invested 1/3 of our long position in Nov 20 Puts at a price of $0.15. These are very illiquid securities, and that could hurt our ability to protect ourselves. The price increased 30% today, to $0.20, but we would likely not have been able to sell at that price. Today we took a long position in WBSN, buying Nov 25 Calls at $0.50, down from $0.65 or the closing price of yesterday. The Nov 25s touched a low of $0.40 today.

WBSN is due to report earnings within minutes and the conference call is at 4:30. The company has been going through an operational turnaround, and has lost the support of analysts, who point toward competition threatening the company. However, we note that the shares trade at 21X '07 consensus estimate of $1.10, while growth this year is seen at 23%. Growth is forecast to decrease significantly next year, but the company has managed to beat estimates quarter after quarter. We think this is a case where analysts are underestimating a market leader's ability to transition and to compete. We were right last quarter, but the shares are a bit more expensive this time around, so we hedged ourselves a bit. (See our disclosure at the Wall Street Greek website.)

Tuesday's Brew - Oct 24

Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful. Stock futures are down across the board today, as we expect stocks to be pressured ahead of the two-day Federal Open Market Committee meeting, which begins today.

OVERSEAS

The NIKKEI 225 average of Japanese shares slipped fractionally 0.05%, while the Hang Seng Index rose 0.35% overnight. In Japan, a cell phone price war kicked off by Softbank Corp. impacted rival KDDI Corporation's shares. In Dow fashion, the NIKKEI is flirting with superficial resistance around the 17,000 round number level. After the close, in action that could impact U.S. semiconductor chip makers, Elpida Memory Inc., the world's fifth-largest DRAM chip maker, said it swung to a quarterly profit that beat market expectations.

Stocks in the U.K. and Europe were lower across the board this morning, as the American Fed seems to be spoiling parties worldwide. The FTSE 100 and DAX indices were both down ever so slightly, while the IBEX 35 was down the most, slipping 0.38%. Europe's fall is the first in three days, and is likely being driven by mining companies as BHP Bilton, the world's largest metal producer, posted lower production. Copper and gold prices are also weakening of late, as North Korean tensions weaken and as inflation concerns have faded some. We expect the Fed to reignite that fire over the next couple days, supporting precious metals.

ECONOMIC NEWS & EVENTS

On Tuesday, the FOMC, the policy making arm of the Federal Reserve, begins its closely watched two-day meeting to discuss interest rates. Last week's inflation-measuring data is likely to bring out hawkish comments from Fed officials, but most economists expect rates to be held in check as a result of the meeting. There seems to be a small possibility of a Fed rate hike of 25 basis points, but this would be a shock to equity markets and send equities down-spiraling. In between meetings, regional Fed chiefs have not been shy about their concern regarding inflation, so that could be viewed as forewarning of a rate hike. Be prepared for that possibility, as we expect it would have a lasting impact on equities over the coming month.

The Treasury will sell $20 billion of two-year notes Tuesday. Across the pond, the European Union Affairs Minister and World Trade Organization head will hold a news conference.

GEOPOLITICAL NEWS & EVENTS

The fasting month of Ramadan ends on the Muslim holiday of Eid al-fitr, depending upon the appearance of the new moon. Hopefully one of the bloodiest periods since the invasion of Iraq will come to an end in concert. China is backing off statements that North Korea apologized for its nuclear test, perhaps appeasing the sensitive North Korean government's pride. It appears China is now impacting the North in a positive way, but we expect covert activity will continue with brash remarks limited.

Welcome back Iran into the spotlight. Just when we thought you were a fading trend, President Ahmadinejad reminds us he is atop the rock charts and here to stay. Today, opening the show for Mahmoud, the Supreme Leader, Ayatollah Ali Khamenei told worshipers to beware U.S. and Israeli plots to divide Arab nations. He is clearly concerned about the forming of a coalition of the willing, pre-Iraq style, since it is clear China and Russia will oppose any U.N. military effort against Iran. President Ahmadinejad yesterday stated that Iran has improved its nuclear effort ten-fold in the past year. He also vowed his nation would not retreat "an inch" over its nuclear program.

COMMODITIES

With the tension building in Iran, we believe you can expect near-term stabilization in gold and crude oil prices. We anticipate the Fed will also impact capital flow from equities back into commodities and commodity sensitive shares, with at minimum, hawkish inflationary commentary, and at maximum, a rate increase this week. Clearly, this would be extremely negative for stocks or at least mildly negative in the near-term on commentary alone. The Fed has the ability to drive capital back to where it came, commodities, if it is loud or aggressive in its commentary or action.

STOCKS

The utility sector has been a clear beneficiary of commodity price reduction, as margins have likely expanded with unhedged portions of cost decreasing, while rates charged remain stable or rising. Beware a possible short-term reversal for the sector, should commodity prices rebound. As long as inaction persists, however, commodities could remain limited on the upside and a downward trend could continue; utilities continue to benefit in this scenario.

On the earnings front, Altria Group Inc. and Bellsouth Corp. are scheduled to report. DuPont (DD) reported today and looks set to open higher after posting EPS before one-time items, of $0.49 versus $0.33, $0.04 ahead of analyst consensus (by Thompson Financial). Results were impressive as they occurred despite higher raw material costs. DD was up about 1.8% in pre-market activity. Lockheed Martin (LMT) earned $1.46 a share, handily beating consensus of $1.24, and raised guidance this morning to $5.60-$5.80 for fiscal 2007. Analyst consensus measured $5.66. LMT shares were up about 1.9% in the pre-market. We hope you enjoyed your "Morning Coffee", and wish you a good day trading. Keep your eye out again today for a potential "Speculative Trade" idea, similar to our post on Friday.

Speculative Buy - PETS (Update)

Congratulations to investors who ventured capital into our idea from Friday. We suggested a speculative idea for the short-term trade was PetMed Express (PETS). We indicated the Monday morning EPS release could be a catalyst for an attractively valued stock. We invested ourselves in the Nov 12.50 Call options, and we closed out our position today. The last trade on the calls on Friday was at $0.50 a contract and today was $0.90. PETS stock itself rose 11.5% today. We believe the short-term opportunity is over now, and if investors intend to hold it longer, a better idea might be holding the shares rather than options. (disclosure)

Regarding the EPS report itself, it was not all that good. Revenues were impacted for the second quarter in a row by the strategic decision of management to reduce less profitable sales to wholesale clients. Wholesale revenues were down approximately $1 million from the prior year period result. We view this as a long-term value added decision, allowing the company to apply capital toward more profitable investment opportunity in the retail market. New customer additions were relatively weak for the second quarter in a row, when compared to the prior year period. Reorder growth rate was down on a sequential quarter basis. We really could not find a lot of positives in the report, and we even felt like we could manage PETS better than its current management seems to be doing. That's besides the point.

So, why did PETS rise today? Reuters called us and asked the same question, and here's what we told them. Heading into the report, the stock had been beaten down partly on a Barron's article about one of the early participants in the company, his lawsuit against PetMed Express, and his personal background. These are all non-operating issues and should not hold weight over time, as long as there are good people managing the company now. However, investors do not like risk, and a new one had appeared. So, when the company reported no new surprisingly bad news today, we believe the stock was poised to benefit from that alone. No news was in fact good news. The value of PETS going into the report was about 19X FY 07 (Mar) consensus estimates and 15X FY 08. This contrasted with 21.5% anticipated long-term growth, referring to Yahoo's & Thompson Financial's work on analysts' consensus estimates. We view that PEG ratio or P/E to growth comparison attractive for investment. PETS also beat estimates by a penny a share, but that estimate had decreased by a penny over the 7 days prior to the report, according to Yahoo! and ThompsonFN again.

The good news for long-term investors is that after March, wholesale revenue impact should be gone from the comparable numbers, and revenue growth will rely more on reorder sales and new client sales. Also, as the mid-term elections pass, the cost of advertising should decrease, benefiting PETS' margins. PetMed is building a cash store and we would like to see it use it to acquire a smaller competitor at the right price or to repurchase shares and invest in advertising and customer retention. However, that is a question shareholders should pose. We are cashed out.

We hope to provide you some more "Speculative Buys" later this week, so stay tuned.(disclosure)

The Greek's Week Ahead - Oct 23

"The Greek's Week Ahead" is designed to help you prepare for the market moving events of the week so you and your portfolio are not caught off guard. Whether it helps you to prepare strategy or just raise your awareness of important factors that may move markets, we hope you find it useful. Driving equity markets this week, we will find a stew of information including a flood of earnings from corporate America, a two-day Federal Open Market Committee Meeting and further economic data.

Monday starts out quiet, with a keen eye on oil. Crude was defiant last Friday after OPEC agreed to a production cut of 1.2 million barrels a day, 20% greater than expectations. North Korea eased off its aggressive stance, and news wires carried stories expressing the North's regret for the reaction of the world. Signs point toward a decreased likelihood of a second test, but we believe that is more likely a strategic decision than a move toward disarmament. Iran remains in the spotlight, and sent a message last week that it would respond to U.N. sanctions in a negative manner. We can expect Iran to once again restrict inspections and possibly consider exiting the NPT. We expect continued sideways movement from the global community and the Persian state until Israel is prepared to act on its own.

On Monday, the Treasury Department will conduct an auction of $7 billion of re-opened Treasury Inflation Protection Securities (TIPS). We expect the market to show anxiety ahead of the FOMC meeting Tuesday. On the corporate earnings calendar, AT&T, Amgen, Ethan Allen Interiors Inc., Ford Motor Company, Halliburton, Netflix and Texas Instruments are among the slew of companies scheduled to report on Monday.

Finally, for the angry mob of Enron victims, former Chief Executive Officer, Jeffrey Skilling faces the knife. He will be sentenced on 19 counts of fraud, conspiracy, insider trading and lying to auditors. However, he's fairing better than Ken Lay...

On Tuesday, the FOMC, the policy making arm of the Federal Reserve, begins its closely watched two-day meeting to discuss interest rates. Last week's inflation-measuring data is likely to bring out hawkish comments from Fed officials, but most economists expect rates to be held in check as a result of the meeting. There seems to be a small possibility of a Fed rate hike of 25 basis points, but this would be a shock to equity markets and send equities down-spiraling. In between meetings, regional Fed chiefs have not been shy about their concern regarding inflation, so that could be viewed as forewarning of a rate hike. Be prepared for that possibility, as we expect it would have a lasting impact on equities over the coming month.

The Treasury will sell $20 billion of two-year notes Tuesday. Across the pond, the European Union Affairs Minister and World Trade Organization head will hold a news conference. The fasting month of Ramadan ends on the Muslim holiday of Eid al-fitr, depending upon the appearance of the new moon. On the earnings front, Altria Group Inc. and Bellsouth Corp. are scheduled to report.

Wednesday brings September existing home sales data, and the market will compare it with new home sales strength shown last week versus the weakness seen in new permits, which may be an indicator that home sales will slow further in the future. Wednesday poses FOMC threat to rates, should the Fed decide to stray from the neutral stance. Also, the Treasury will sell $14 billion of five-year notes on Wednesday.

Thursday, the government releases September data on orders for durable goods. Also, the latest data on new home sales will be released. However, the information seems to pose no threat to move markets, as it follows the FOMC. Headlining the earnings reporting day will be NII Holdings (formerly Nextel), which is seen by the consensus as making $0.41 a share.

New York Fed President Timothy Geithner will speak at a conference on the Japanese economy at the Columbia Business School Center. He is expected to address central banking in the global economy. Finanlly, the WTO is expected to approve Vietnam's entry.

Economic news will hopefully not provide a scary finish to the week. On Friday, the Commerce Department will report third-quarter gross domestic product and the University of Michigan will release its reading on consumer sentiment. Also, Minneapolis Fed head Gary Stern will address the 43rd annual meeting of the Missouri Valley Economic Association.

Finally, the Wharton School will host its 9th annual Wharton Investment Management Conference in Philadelphia. We hope you enjoyed your weekly planner, and look forward to having coffee with you tomorrow, with our publishing of "Today's Morning Coffee."(disclosure)

Speculative Buy - PetMed Express Inc. (PETS)

We have a speculative idea for interested parties, Petmed Express (PETS). We remind you that these types of investments are extremely risky, and our opinion is just that, an opinion and not a recommendation. Any action you take, is your decision and you bear all related risk. This investment may not be appropriate for you and you should consult your financial advisor before acting.

That said, we have been following this company for a while and like its position heading into its EPS report this Monday morning. The company is the largest player in the pet pharmaceutical retail sales market. It competes mainly with veterinarians, and we believe has about half of the online business of pet pharmaceuticals, which make up approximately 9% of the overall market.

Revenue growth has been strong over its short life, and margins have been expanding. We are not going to get into the validity of the business here in too much detail, but perhaps another time. The market closes in a half hour, and we want to provide you with our thoughts on the trade. Investing in the stock over the long term, we view as a good idea, but we are talking about the short short trade now.

There are some red flags to consider. The consensus estimate came down a penny this past week, and one analyst downgraded the stock to market outperform from buy in September. However, the analyst does not seem to have a good bead on the stock, having initiated his buy recommendation not far from the peak. We believe he has become nervous or is being pressured by a superior. We have seen this in our own experience, and it is truly a shame for investors.

Another red flag was exposed last quarter. The cost of acquiring new clients through advertising increased last quarter, and new customer additions did not grow over the prior year period. It's possible that rising ad costs due to the coming elections could draw some narrow-minded analyst focus on Monday, and they could miss the big picture. However, the company is generating strong repeat business with a focus there. Also, the company has made the strategic decision to stop sales to wholesale customers, and margins have improved as a result. Economic value is likely being added through investment in generating new retail business, and removing focus from the less profitable wholesale opportunity.

Why we like it going into the EPS report. Valuation and a solid EPS history. The stock was recently beaten down on a Barron's article concerning a lawsuit and the personal history of one of the company's founders who is no longer involved with the company. This is a nonoperating issue and should hold no weight. We like the stock's price movement since the end of the quarter, and we suspect the more recent price movement downward is reflective of concern going into the report. Our bet and risk is that it is unwarranted and we are looking for a positive report.

We expect solid cash generation to allow the debt-free PETS to eventually control options related dilution and even impact EPS if it so chooses through the investment in its own shares. We have noticed some big buys during the past couple days when the stock has reached specific points, but it is likely investment from institutions.

Let's talk valuation. Currently, at $11.36, the stock trades at a P/E multiple of 19X its $0.60 fiscal 2007 (Mar) estimate. EPS growth is estimated at 20% in FY 07 and 23% for FY 08. EPS growth for this quarter is seen at 18%, to reach $0.13. Keep in mind, it was $0.14 just a week ago, and we believe the decrease is the result of a nervous analyst, and not whispers from the company down to analysts. Only five analysts are listed as following the stock, but its rise to the $20 area in recent times was supported by increasing institutional ownership. That has steadied now. The stock trades at 15X FY 08 (Mar). According to Yahoo's compilation, the stock has a history of meeting or exceeding estimates. We view it as a sweet stock at a sweet time in terms of valuation. The catalyst is the earnings report, and owners are highly levered to it over the short term. The November $12.50 Call recently rose due to demand and weak open interest, from $0.35 to $0.50 in two days prior to the report, so on neutral news, there is some premium that could be lost. However, we believe that a positive report, perhaps a $0.02 to $0.05 beating of the consensus estimate, could recharge lift in this stock and bring attractive returns to shareholders and call option contract holders. Our best to you!

(disclosure)

Friday's Brew - Oct 20

Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful. Dow and S&P 500 futures are down this AM with a weak EPS report from Caterpillar, while the NASDAQ is lower despite Google's strong results. Likely driving the market past the first half hour's trading, investors should begin to grow concerned about the Fed Open Market Committee meeting next week, and the possibility of a Fed rate hike.

OVERSEAS

The NIKKEI 225 and Hang Seng Indices both rose nearly 1% Friday, likely boosted by news that North Korea was not preparing a second nuclear test. According to South Korea's Yonhap news agency, North Korean leader Kim Jong-il told a visiting Chinese envoy that Pyongyang planned no further nuclear tests. Of course, North Korea's word is more than suspect, but its respect for China is not. The FTSE 100 and the DAX Indices across the pond were paring early gains, driven by U.S. futures weakness.

ECONOMIC CALENDAR

The schedule takes a break today, after a very busy week. However, we expect markets to begin looking ahead to next week's FOMC meeting and the possibility of a surprising rate hike. A rate hike surprise could be just the pill to remind the market of Octobers of the past, and we suspect would severely deflate markets. The concern alone should weaken stocks heading into the meeting.

So, why raise the red flag? This week's Core PPI numbers are not to be ignored, and data to follow will be closely watched for direction. Both the Core PPI and Core CPI came in above or at the top of the perceived Fed comfort range of 1-2%. The Core CPI numbers are expected by some and by this publisher to increase from this week's in line result. This is why we warn investors not to get too excited too early, as we expect sideways trading patterns to persist for a short while longer. The existing data is not decisive enough to drive the Fed to reverse course toward expansionary efforts, and that is what will eventually drive equities. If the Fed does surprise with a hike versus the expected continued pause, the downward trend would likely carry through for weeks of despair, and we believe this would position investors well for entry into early cyclicals like semiconductor and semi-equipment names. We will tell you when we like them, do not worry.

COMMODITIES

Perhaps the Saudis are readers of Wall Street Greek, as in previous issues we wrote that OPEC would need to surprise the market with a greater than expect production cut if it wanted to impact the price of oil. Low and behold, OPEC decided yesterday to cut production by 1.2 million barrels a day, compared to 1 million previously discussed. There remains some question of the will of the cartel members to obey their stated quotas, but we believe overall this news is effective enough to support the crude price.

Gold should benefit over the medium term from capital outflow out of equities for both safe-haven concerns and as an alternative investment to equities. Acting against the gold price today, North Korea has reduced the pressure and global concern. Over the medium term, however, we expect the North to react irrationally to the boarding of its vessels by the Japanese and Americans.

GEOPOLITICAL SCENE

Outside of what we have already discussed, Vladimir Putin meets today in Finland with European Union member nations, with energy expected to headline the schedule.

STOCKS

Google Google Google!!! Wow, Google was up 7.5% in pre-market activity, as it posted stellar EPS results overnight. Google (GOOG) posted EPS of $2.36, compared to prior year period results of $1.32, and exceeded the consensus estimate by $0.20. Citigroup raised its target price for GOOG to $600. However, Caterpillar put the fire out a bit this morning with a less than stellar result. Merck exceeded consensus by a penny on flat revenues. We hope you enjoyed "Today's Morning Coffee" and wish you a good day trading. Stay tuned to the site, as we may publish a stock specific idea later in the day. (disclosure)

Thursday's Brew - Oct 19

Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful. Stock futures are mixed today with the NASDAQ and S&P 500 indices lower and Dow futures up a bit.

OVERSEAS

Indices across Asia were mostly lower, as North Korean tensions continue to weigh. The North appears to be preparing for a second test of a nuclear device to validate their efforts after the first test fizzled. Rhetoric from George W. Bush was especially hard this morning, as he spelled out how the U.S. would react to nuclear proliferation, saying their would be "grave consequences" for deliver of weaponry or technology to Iran or Al Qaeda. The NIKKEI 225 Index slipped fractionally, driven partly by sharp falls in select technology shares. The FTSE 100 and the DAX indices were both up just slightly this morning.

ECONOMIC DATA
On tap for Thursday, the Labor Department released its recent data on weekly U.S. jobless claims. Claims were 10,000 lower than expectations, coming in at 299,000, providing more positive news for the market heading into next week's Fed meeting. The number of Americans filing first-time claims for unemployment benefits was the lowest level in almost three months.

Today, the Conference Board, a private research group, will post its composite index of leading indicators for September. The index represents a gauge of future economic activity, and is expected to measure 0.3%. With all the information becoming available this week, the market will weigh one against another in an attempt to gauge what the Fed will do with rates the following week, but more importantly, it will feel out the depth of economic slowdown and date of arrival of recovery.

Also on Thursday, The Federal Reserve Bank of Philadelphia will report on its business-conditions index for October, a measure of the region's manufacturing sector's health. In September, an unexpected contraction of 0.4 sparked rallies in stocks and bonds. An expansion of 7.0 points is expected this period, according to Bloomberg.

COMMODITIES

Gold is down approximately $1.70 today, giving back some recent gains as the market weighs the extent of safe-haven necessity and inflation concern in U.S. markets. One analyst speculates gold may trade lower post the Philly Fed data. "Gold may trade lower as the dollar gains; the market is watching for the FOMC meeting,'' said Bernard Sin, chief trader at Geneva-based MKS Finance, one of Switzerland's four gold refiners. There is some concern that U.S. market expansion could raise the dollar and impact gold. However, we feel any short short-term weakness could provide opportunity to purchase gold for a tense medium term in the geopolitical scheme of things.

Crude is slightly higher today, as OPEC's emergency meeting in Qatar begins. Iran yesterday threatened repercussions to any U.N. sanctions. The Persian nation said it could disallow inspectors again, and we speculate it could even pull out of the NPT. See our discussion yesterday about Israeli preparations for war.

STOCKS

Reporting earnings today, look for Google, Coca Cola and Baxter International highlight the schedule. Apple Computer and eBay both reported solid EPS results, but warned on future outlook. Citigroup also reported better than expected results. We hope you enjoyed "Today's Morning Coffee" and we wish you a good day trading. (disclosure)

Wednesday's Brew - Oct 18

Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful. Equity futures are sharply higher this morning across the board, as the Consumer Price Index was in line with consensus estimates. There was concern built into the market that CPI might provide verification of an excessive inflationary environment indicated by the PPI yesterday. Today's results should provide some relief to equities in the short term. However, CPI may lag PPI and today's news was not a surprising positive either. After August's numbers were released, the equity markets began a substantial rise as investors speculated Fed rate reductions might be on the horizon. Now, with that foundation somewhat undermined by the Core PPI, stocks should have a more difficult time climbing higher with conviction.

We reiterate our view that a sideways trading pattern is most likely for a couple more months, until it becomes clear whether the economy is headed for recession or soft landing, and whether inflation is under control. We continue to recommend some allocation into gold shares for medium term investors, but we have sold out of our short-term based investment in gold. The sector could see some weakness in the very near term, based on the CPI number, at least until North Korea tests another nuclear device or tests the resolve of the global community otherwise.
OVERSEAS

Britain's FTSE 100 index was up 0.3 percent by midday on Wednesday, headed by commodity-dependent stocks as the market recovered from yesterday's biggest one-day fall in 17 trading sessions. Bank of England minutes seemed to indicate another UK rate rise was probable for November. The Nikkei average ended 0.25 percent higher on Wednesday after a pause in U.S. market rising trend led the Nikkei average down to start the day.

ECONOMIC NEWS

The government released its Consumer Price Index, providing relief to concerned equity markets. Yesterday's PPI data indicated the core PPI, excluding volatile food and energy prices, rose 0.6%, higher than the expected 0.2%. Though Core CPI should lag PPI movement, but also could benefit from lower energy prices, it was in line with consensus, indicating a rise of 0.2%. In August, both overall and core CPI rose 0.2 percent.

On Wednesday, the Mortgage Bankers Association will report on its most recent refinancing index. Its previous report showed strong refinancing activity that we speculated was driven by mortgage bankers pushing variable rate loan holders into fixed rate mortgages. Also, the National Association of Home Builders released its index for sales of new, single-family homes for October. Bloomberg's poll saw consensus at 1.64 million, down from 1.67 million in August. Actual housing starts surpassed expectations, reaching 1.77 million. However, markets this morning look focused on new permits data. The pace of building permits fell, measuring at an annual pace of 1.62 million in September, compared to the 1.73 million rate in August. Economists expected this sign of builder confidence in the market to slow to only a 1.72 million rate. It's possible that the housing construction sector may begin to influence employment in a more meaningful way if housing firms reduce the rate of construction to meet market demand reduction.

COMMODITIES

A day ahead of the emergency meeting of OPEC in Qatar, with inventory data on tap for today, oil started lower. The Energy Department will provide its weekly update on U.S. crude-oil, distillate and gasoline stocks at 10:30 AM. Today, the market is focused on recently strong inventory data, indicating supply levels are adequate. As the news passes, the market is likely to look toward tomorrow's beginning of the emergency OPEC meeting. We expect oil to trade in a tight range near-term. Over the medium term, Iran should again take the spotlight, as the U.N. moves towards sanctions. Iran's response is likely to be more refined than Korea. However, rhetoric from Israel should begin to take the spotlight, as it appears to be preparing for an attack on Iran's facilities. (see geopolitical discussion below)

GEOPOLITICAL SPOTLIGHT

Korea appears poised to follow up its recent fizzle of a nuclear test with a bigger and better bomb. Japanese and South Korean intelligence indicates similar preparations to the first test now taking place in the North. Yesterday, North Korea held a large torch lit rally of defiance. The true test here will be the first time a North Korean vessel is intercepted at sea, and North Korea's response to this "act of war."

Above we mentioned Israel's preparations for action against Iran. Though our associate's site www.ERISfile.com goes into more detail about this topic, we have paid attention to it here as well as it poses threat to equities. We theorize that Israel's invasion of Lebanon was more likely an effort to weaken and test Hezbollah's abilities than an effort to rescue a kidnapped soldier. Israel is currently preparing a large scale effort into Gaza that it states would be to "combat missile capabilities" within the occupied territory. Clearly, an attack on Iran could spur the Iranian backed fronts led by Hamas and Hezbollah into action, and one might theorize that Israel's attack on Iran has already begun through its actions on Hezbollah and Hamas. Assuming this is in fact reality, then an Israeli attack on Iran seems more likely than unlikely, and equity and commodity markets are not pricing it as such.

STOCKS

The earnings scene remains hot on Wednesday, with reports from Abbott Laboratories, Aztar, eBay, JP Morgan Chase, Apple Computer and AMR Corp. SIGA Technologies (SIGA) announced that its SIGA-246 is the first drug ever to demonstrate 100% protection against human smallpox virus in a primate trial. It was effective in monkeys treated both before infection and 24 hours after infection. SIGA shares were up approximately 155% in early trading. IBM posted Q3 EPS of $1.45, compared to prior year period results of $0.94, exceeding consensus estimates of $1.35. IBM shares were up about 5% in early trading. JP Morgan Chase & Co. posted Q4 EPS of $0.92, beating prior year results and analyst expectations for $0.86 a share. However, JPM shares were down roughly 2% in early trading, as it warned that Q4 investment banking did not appear to be as strong as Q3. Although we exited our short-term investment in Yamana Gold (AUY) this morning, we continue to favor gold shares and AUY over the medium and long-term horizons. We hope you enjoyed "Today's Morning Coffee" and wish you a good day trading. (disclosure)

Tuesday's Brew - Oct 17

Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful. Stock futures are broadly lower after news of the Producer Price Index indicating inflation concern is not likely to ease at the Fed. Also, markets are pressured today by the intensifying situation around North Korea. Please also see our weekly update, "The Greek's Week Ahead," for the market moving calendar for Tuesday.

OVERSEAS

The NIKKEI reversed Monday's move, falling 0.49% on Tuesday. Clearly, concerns about North Korea are weighing on the Japanese market. North Korea yesterday broke its silence, declaring that the newly passed sanctions upon it could not be construed as anything less than a declaration of war. In a statement issued by the North's Foreign Ministry, the North said it "wants peace but is not afraid of war" and that it would "deal merciless blows" against anyone who violates its sovereignty. Keeping pressure intense, Japan and South Korea point toward evidence that the Stalinist state is preparing a second nuclear test. With this kind of tense environment in place, we view it unlikely for neighboring markets like Japan, South Korea and China to sustain any upward momentum.

Britain's FTSE 100 index slipped as well, ending a six-day rising trend. The index was impacted by banks, down on concern about the growing likelihood of higher interest rates and lack of foreign bidders, whose interest has recently supported the sector.

COMMODITIES
Oil is rising, topping the $60 a barrel mark as tensions intensify in North Korea, and the EU appears prepared to sanction Iran. OPEC is scheduled to have an emergency meeting in Qatar on October 19th, where it is expected to nail down the details of its 1 million barrel per day production cut. The 8:30 AM released Producer Price Index also raised a red flag that inflation remains a concern (see below for further economic details). In this kind of environment, precious metals remain a solid investment. We continue to favor gold shares.

GEOPOLITICAL CONCERNS
As we expected, North Korea has responded to sanctions in a less than favorable manner, raising the possibility of armed conflict in the Korean Peninsula. China's fears are being highlighted by the North, as it threatens merciless response to attacks on its sovereignty. We assume that this means that any boarding of North Korean vessels at sea by Japanese or American warships will lead to military conflict. We fully expect North Korean vessels to prove the aggressor versus Japanese fishing ships and other commercial ships, once Korean vessels are "threatened". Tensions appear set to rise, not decline, as a result of the sanctions. North Korea is in fact becoming a cornered dog with quite a bite. We expect a second nuclear test before year end, and we expect the North to expedite its nuclear weapons production effort as well as its covert sales through Chinese black market routes.

ECONOMIC & OTHER MARKET MOVING NEWS
The government reported the producer-price index for September this morning, a key measure of inflation. The overall PPI fell 1.3%. Economists polled by Reuters forecast that the overall PPI would fall 0.6 percent in September (a Bloomberg poll showed consensus at 0.7% decline). At first brush, this data looks like a positive for the market and indicative of light inflation, however, it is reflective of decreases in energy prices.

Economists expected the core PPI, excluding volatile food and energy prices, to be up 0.2 percent. The core PPI rose 0.6%, the highest rise since January 2005. In August, overall PPI rose 0.1 percent and core PPI fell 0.4 percent, and that gave lift to markets. Today's news poses the potential of severely deflating that rise, especially if tomorrow's CPI numbers coincide.

Later Tuesday, The Johnson Redbook retail sales index will help the market gauge consumer spending strength. Likely less important, the government will release its latest data on U.S. industrial production and capacity utilization. Bloomberg consensus shows expectations for a 0.1% drop for industrial production and a 82.2% measure for capacity utilization. This measure's importance is diminished because of service sector dominance in the U.S. economy.

The Treasury will report foreign purchases and sales of U.S. assets in August. This measure may increasingly be valuable in measuring the world's confidence in the future of America. Heading the Fed's tour, Governor Susan Bies will be participating in the Economic Outlook strategy session before the American Bankers Association's Forum.

STOCKS
On the earnings front, Intel, Johnson & Johnson, Office Depot, IBM, Motorola and Yahoo! are scheduled to report. Yahoo! shares have not kept up pace with other large-cap Internet shares of late, and have an opportunity to make up the lost ground if they can report a positive outlook. At $24.42 YHOO shares are well off their 52 week high of $43.66, but recently weak revenue guidance raise the red flag.

Merrill Lynch (MER) reported results of $2 a share Tuesday, destroying estimates, as the company benefited from the closing of its merger between Merrill Lynch Investment Managers and BlackRock. Merrill shares were down slightly, versus a larger decline for the market, due to inflation concerns.

We believe markets had previously been inflated by the news of August inflation weakness, and now that September is showing a returning inflation threat, with the Core PPI posting the highest rise since January 2005, the market could be threatened. If CPI numbers also show inflation hanging around, we expect major deflation to stocks' P/E multiples and price collapse. In turn, the dollar should weaken and gold should rise.

We continue to strongly favor gold shares here, and suggest investors take advantage of the trader panic that had sent gold shares lower on the opening today. Among our favorites is Yamana Gold (AUY), a company that will soon benefit from a copper production revenue stream complementing its gold production efforts. Note that Yamana is unhedged to gold prices, and will move dramatically with the price of the commodity. Earnings are expected to increase significantly in '07, and the P/E on the $0.97 estimate for '07 is 9X. This compares to industry players of similar size: Meridian Gold (MDN) 21X; Rangold Resources (GOLD) 22X; Agnico-Eagle Mines (AEM) 25X; and larger firms with slower growth potential Barrick Gold (ABX) 15X; and Newmont Mining (NEM) 20X. There is a real opportunity to take position in a sector likely to attract capital due to inflation and safe-haven reasons. There is even greater reason to take position in an undervalued stock in that sector in Yamana Gold (AUY). We hope you enjoyed "Today's Morning Coffee" and wish you a good day trading. See our disclosure at the Wall Street Greek site.

Monday's Brew - Oct 16

Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful. Please see our weekly update, "The Greek's Week Ahead," for the market moving calendar for Monday.

OVERSEAS
European shares reached a five-year peak on Monday, while the yen rose after Russia said it had started buying the Japanese currency for its foreign reserves. The Nikkei average rose almost 1 percent to a five-month closing high. Russian confidence in the Japanese currency could imply a comfort level that the North Korean nuclear crisis is not a mushrooming concern. China has already begun inspecting trucks crossing its border, supporting the new U.N. resolution. However, the markets will likely closely watch North Korea's response to the new choking measures. We suspect it may respond harshly to the boarding of its ships, especially by the Japanese or Americans. It has already issued hard-line rhetoric, threatening physical response and announcing that the sanctions were effectively a declaration of war. Control of the situation rests in the hands of China and Russia.

ECONOMIC & OTHER MARKET MOVING NEWS
A Federal Reserve report today showed manufacturing in New York state unexpectedly accelerated this month, as costs of energy and raw materials eased and shipments increased. The Fed Bank of New York's general economic index rose to 22.9, from 13.8 in September. The New York Fed's index was expected to fall to 11.2, according to the median forecast of economists surveyed by Bloomberg News. The shipments index increased to 22.5 from 20.6. Inventories increased to 2.5 from minus 4. Manufacturing costs declined as the index of prices paid for raw materials decreased to 30.8, the lowest since March 2005, from 41 in September. An index of manufacturing employment rose to 19.4, from 12.5 in September. The New York Fed's gauge of new orders declined to 11.8 this month from 14 in September. However, the index measuring the outlook for six months from now fell to 30.2 from 35.2.

STOCKS
Oshkosh Truck (OSK) said it will acquire JLG Industries (JLG) for about $3 billion in cash, a 34 percent premium for the company based on Friday's closing price. Wachovia Corp. (WB), the fourth largest U.S. bank, said on Monday that third-quarter profit rose 13 percent on stronger loan demand, but revenue fell short of forecasts as lending margins declined. Wachovia shares were down about 2%. Commerce Bancorp (CBH) reported EPS fell to 41 cents from 45 cents, in line with estimates. Commerce shares were down roughly 1.2% in early trading.

We again refer you to "The Greek's Week Ahead" for the information you need to know for today's trade. We hope you enjoyed "Today's Morning Coffee" and wish you a great day trading.

The Greek's Week Ahead (Oct 16 06)

"The Greek's Week Ahead" is designed to help you prepare for the market moving events of the week so you and your portfolio are not caught off guard. Whether it helps you to prepare strategy or just raise your awareness of important factors that may move markets, we hope you find it useful. This week is not short of market moving information in the least. The economic schedule and earnings calendar are both heavy this week. A dozen of the 30 stocks that make up the Dow index are scheduled to report.

The week starts off quiet on Monday, with the brightest lights on the radar screen coming from speeches of several Fed representatives. Fed Chairman Ben Bernanke will address the American Bankers' Association Forum in Phoenix, via satellite from Washington. Fed Presidents William Poole and Janet Yellen will deliver speeches as well. On the earnings front, Mattel, Eaton and Marshall & Ilsley will report. The most powerful impact to the market is more likely to be delivered by the news from OPEC, which has scheduled an emergency meeting for October 19th in Qatar. Venezuela and Iran are playing the devil's advocate, as they both would like to see prices higher, adding pressure to the U.S., but they are skeptical of losing market share to countries like Saudi Arabia, which is believed to be producing above formal quota. The 11 members will meet to work out the details of a planned 1 million barrel per day cut in order to provide clarity to the market. We suspect that the reduction will not impact prices on a "news basis" alone, as it is well understood at this point. OPEC would do well by surprising the market with a greater than expected production cut, but that seems unlikely. Even so, a floor may be supported by the reduction and clarity provided. Crude prices touched a new low at $57 and change last week before rallying on Friday.

On Tuesday, the news flow will kick it up a notch. First and foremost, on the economic front, the government reports the producer-price index for September, a key measure of inflation, at 8:30 EDT. Economists polled by Reuters forecast that the overall PPI fell 0.6 percent in September (a Bloomberg poll showed consensus at 0.7% decline), while they see the core PPI, excluding volatile food and energy prices, up 0.2 percent. In August, overall PPI rose 0.1 percent and core PPI fell 0.4 percent. Also on Tuesday, The Johnson Redbook retail sales index will help the market gauge consumer spending strength. Likely less important, the government will release its latest data on U.S. industrial production and capacity utilization. Bloomberg consensus shows expectations for a 0.1% drop for industrial production and a 82.2% measure for capacity utilization. This measure's importance is diminished because of service sector dominance in the U.S. economy. The Treasury reports foreign purchases and sales of U.S. assets in August. This measure may increasingly be valuable in measuring the world's confidence in the future of America. Heading the Fed's tour, Governor Susan Bies will be participating in the Economic Outlook strategy session before the American Bankers Association's Forum.

On the earnings front, Intel, Johnson & Johnson, Office Depot, IBM, Motorola and Yahoo! are scheduled to report. Yahoo! shares have not kept up pace with other large-cap Internet shares of late, and have an opportunity to make up the lost ground if they can report a positive outlook. At $24.42 YHOO shares are well off their 52 week high of $43.66.

On Wednesday, the Mortgage Bankers Association will report on its most recent refinancing index. Its previous report showed strong refinancing activity that we speculated was driven by mortgage bankers pushing variable rate loan holders into fixed rate mortgages. Also, the National Association of Home Builders will release its index for sales of new, single-family homes for October. Bloomberg's poll finds consensus at 1.64 million, down from 1.67 million in August. The Consumer Price Index for September will be reported at 8:30 AM. According to Reuters and Bloomberg polls, economists forecast the overall CPI fell 0.3 percent in September, while core CPI, which excludes volatile food and energy prices, is seen up 0.2 percent by Reuters. In August, both overall and core CPI rose 0.2 percent. The Energy Department will provide its weekly update on U.S. crude-oil, distillate and gasoline stocks. The earnings scene remains hot on Wednesday, with reports from Abbott Laboratories, Aztar, eBay, JP Morgan Chase, Apple Computer and AMR Corp.

On tap for Thursday, the Labor Department will release its recent data on weekly U.S. jobless claims. The Conference Board, a private research group, will post its composite index of leading indicators for September. The index represents a gauge of future economic activity, and is expected to measure 0.3%. With all the information becoming available this week, the market will weigh one against another in an attempt to gauge what the Fed will do with rates the following week, but more importantly, it will feel out the depth of economic slowdown and date of arrival of recovery. Also on Thursday, The Federal Reserve Bank of Philadelphia will report on its business-conditions index for October, a measure of the region's manufacturing sector's health. In September, an unexpected contraction of 0.4 sparked rallies in stocks and bonds. An expansion of 7.0 points is expected this period, according to Bloomberg. Reporting earnings, Google, Coca Cola and Baxter International highlight the schedule.

Friday, American behemoths Caterpillar, Merck and Schlumberger report earnings. On the international front, Vladimir Putin meets in Finland with European Union member nations, with energy expect to headline the schedule. North Korea's response to newly imposted sanctions will be telling for markets as well, as it will act as a gauge of the North's bite versus a loud bark. If North Korean ships are boarded, the actions of the Stalinist state will decide how the market discounts related risk. If North Korea starts sinking Japanese fishing vessels, markets are likely to tank, but if it responds with words alone, the markets should recover any lost confidence.

We hope this information proves useful to your weekly strategy and trading efforts, and helps improve your sense of preparedness. (disclosure)

Friday's Brew - Oct 13

Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful. Moving markets today, more earnings, hawkish inflationary commentary from the Fed, retail sales weakness, oil rising, and the U.N. close to agreement on sanctions for North Korea. In early market activity, the Dow futures are down 9 points, S&P 500 futures down 1.1 points, while the NASDAQ is up slightly.

OVERSEAS

Following its recent setback on North Korean concern, the Nikkei average rose 1.02 percent on Friday, ending at a five-month closing high. The index likely also benefited from solid earnings reports and an upgrade of Sony Corp. by Morgan Stanley. Britain's FTSE 100 index was down fractionally on Friday on what appears to be shaping up as a light trading day.

COMMODITIES

In early trading, crude for November delivery was up over a dollar from the year low touched yesterday. The U.S. Energy Department reported fuel consumption increased last week, the first rise in seven weeks. In other news, Statoil ASA and Royal Dutch Shell Plc announced they would halt output at two platforms after Norway's Petroleum Safety Authority said some lifeboats would split apart in an emergency. The temporary shutdown of the platforms is expected to reduce global output by 280,000 barrels a day. Yesterday's inventory data produced a surprise as well, revealing that U.S. inventories of distillates, including heating oil, fell last week to 1.5 million barrels.

Gold is up $9 in early trading, as inflationary concerns, weaker retail sales data and a sanctioned and illogical North Korea threaten world stability. Gold has been tracking energy prices in its recent trend downward, and inversely tracking the dollar. It has recently benefited from renewed inflationary concerns and from safe-haven seekers, with the rise of intensity regarding the Korean and Iranian issues on the global plate.

GEOPOLITICAL ISSUES

Japan has passed sanctions and the U.S. has softened sanctions overnight making them more palatable for the Chinese and Russians. The U.S. has adjusted wording so that if military action were to take place, it would have to be supported by a second set of U.N. passed resolutions. Also, the Chinese were concerned that the boarding of North Korean ships in search of weapons payloads might lead the North to a military response. The U.S. is hopeful to strike quickly with sanctions while the iron is hot on the issue and while Chinese support exists. A vote is anticipated for Saturday, or possibly as early as today. We expect further hard-line rhetoric from North Korea today to worry markets ahead of the weekend. For this reason, equities are likely to be negatively impacted, while gold should benefit.

ECONOMIC & OTHER MARKET MOVING NEWS

The Commerce Department reported that retail sales decreased 0.4 percent in September, versus expectations for a 0.2 percent decline. The slip was impacted by a 9.3 percent drop in gasoline sales. Excluding gasoline sales, retail sales rose 0.6 percent, perhaps benefiting from lower gas prices. We interpret the news as positive for the U.S. economy, but markets appear to view it differently this morning. Excluding autos, consumer spending fell 0.5 percent, further than expected.

Last night, Chicago Fed Chief Mike Moskow indicated that further rate hikes might be necessary to curb inflation. He is now the fifth Fed representative on record downplaying the likelihood of a near-term Fed rate cut.

STOCKS

General Electric speaks loudest to the market this morning, as its third quarter revenues came in a billion dollars more than expected to $40.9 billion and total orders and backlog rose 15% and 21%, respectively. Organic growth showed a gain of 10%. EPS from continuing operations measured $0.49 per share, up 14%, and in line with expectations for the sixth consecutive quarter. However, GE looks to trade lower today, as its forward guidance range positioned analysts' estimates toward the top end.

Health insurer Aetna Inc. will streamline corporate and business operations in an effort to further reduce administrative expenses. About 2%, or approximately 650, of the company's total workforce of 30,000 will be affected, including nearly 200 employees in management positions. The actions will result in a fourth quarter charge of approximately $20 million, after tax, related to severance costs. We hope you enjoyed your Morning Coffee, and wish you a good day trading and a pleasant weekend. (disclosure)

Thursday's Brew - Oct 12

Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful today. Stock futures were bouncing higher this morning, after yesterday's market decline. Positive stock specific news has set a good early tone for trading. Yesterday, inflation concerns were renewed by the Fed September meeting minutes and continued concern about North Korean counter measures to pending sanctions. Also, a disappointing EPS report from Alcoa started the quarterly earnings season off poorly.

OVERSEAS
MSCI's index of stocks in Asia outside of Japan, moved 0.2 percent higher, while Tokyo shares slipped slightly. Japan moved ahead of the U.N. with a plan to impose new sanctions on North Korea that are expected to impact the North. Seafood shipments into Japan are expected to be turned away, as is all sea traffic. North Korea is dependent upon its neighbors for the well-being of its weak economy. The Stalinist nation has already responded with hard-line rhetoric, recalling Japan's annexing of Korea early this century. Korea announced that its response to Japan's sanctions would be enhanced by its actions of the past, and failure to make up for them. That potential retribution should continue to spook Asian markets. Just what will Korea do? If it were to sink a Japanese vessel, this would undoubtedly spark war. Less sensitive to these concerns, the FTSEurofirst 300 index edged up as much as 0.4 percent to 1,431 points, its highest since June 2001. M&A activity within Europe continues at a rapid pace, raising interest in the continent's shares.

COMMODITIES
Oil continues weak, as OPEC slowly progresses toward a production cut that appears to be useless in stemming the price decline. Today, natural gas inventory data will be released as usual, and we suspect the numbers will continue bearish for investors in the commodity, but we see near-term opportunity in natural gas shares as a cold wave sweeps across America. Trading in the commodity is typically sensitive to weather, but a recent report noted expectations of a warm winter and stemmed the commodity's advance earlier this week.

ECONOMIC & OTHER MARKET MOVING NEWS
The release of the September Meeting minutes from the Fed met investors with a slap in the face, as the information proved hawkish on inflation. The Fed remains hopeful that a downturn in housing and a slowing economy could help restrain inflation, but it is far from certain that this will occur. The words of Fed VP Donald Kohn earlier this month were telling as well. "Don't sell the Fed's concern about inflation short,'' Kohn told his audience. "Further upward movements in inflation would be very adverse to the economy and would, I think, require policy actions.'' The take away from traders surveyed was that the likelihood of a Fed rate cut by March 2007 has decreased. This was deflating to equity markets, and should continue to drive sideways trading, as we have mentioned previously. Until it becomes clear to the market that the Fed rate direction is headed lower, and the economy is not recession bound, stocks cannot rise with conviction. If lower energy prices hold, this could help to ease inflation.

The U.S. trade deficit unexpectedly widened to a record $69.9 billion in August as energy prices rose and the shortfall with China reached an all-time high. Initial jobless claims increased by 4,000 to 308,000 in the week that ended Oct. 7, the Labor Department said today in Washington. The rise was off of a two month low in the prior week, but still presents a resilient job market. Today the Fed's Beige Book is due out, measuring business conditions compiled from the 12 regional Fed banks. Traders will look for any indicators on how the U.S. economy is reacting to lower energy prices and for possible signs of recovery in the housing market.

STOCKS
Pepsi, Costco, McDonald's and Yum! Brands all exceeded or raised estimates last night and this morning, providing a positive tone for stocks this morning. We should get a better feel for how the quarter's earnings season is trending from today's data. We continue to favor investment in gold and energy shares, and see near-term rebound for each as uncertainty reenters the economic and geopolitical picture. We hope you enjoyed Today's Morning Coffee, and we wish you a good day trading. (disclosure)