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The Wall Street Greek blog is the sexy & syndicated financial securities markets publication of former Senior Equity Analyst Markos N. Kaminis. Our stock market blog reaches reputable publishers & private networks and is an unbiased, independent Wall Street research resource on the economy, stocks, gold & currency, energy & oil, real estate and more. Wall Street & Greece should be as honest, dependable and passionate as The Greek.

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Thursday, September 27, 2007

Today's Market Moving News - No Time to Buy


Mixed news and data have the market in flux today, though up modestly. We say mixed data, but the flow clearly has a negative bias to it. August new home sales fell off a cliff, and there seems to be a lot of cliff diving going on lately, from the Employment Situation Report to durable goods orders to home sales. New home purchases declined 8.3% in August, to an annual pace of 795,000. Economists surveyed by Bloomberg were looking for 825,000. We alluded to this likelihood in our weekly market-moving event planner, "The Greek's Week Ahead - The Dollar and the Shadow." The bad housing news didn't end with sales, as the Commerce Department reported the median price of a home dropped 7.5% since last year.

Shares in the beaten down housing group were mixed on the news, with KB Homes (NYSE: KBH), D.R. Horton (NYSE: DHI) and Lennar (NYSE: LEN) down on the day, while Toll Brothers (NYSE: TOL) and Hovnanian (NYSE: HOV) moved higher. KB Homes reported earnings today, posting a loss versus a prior year gain, and warning about ongoing troubles in 2008. Recent foreclosure data has been foreboding, and though bankers are working with troubled borrowers facing resets of variable rate loans, it's yet unclear how much the Fed can do. After the Fed cut rates last week, long rates moved higher, meaning fixed mortgages didn't get any cheaper, while variable rate improvements could help. Still, the Fed looks handcuffed with overseas central banks still seemingly geared to contain expansion. As a result, as the Fed cuts, the dollar weakens, which could in turn help give birth to higher inflation if treasuries must be sold at higher yields to retain foreign investors.

Let's get all the bad news out of the way before we move to the short list of good stuff, shall we?... In a move ominous for deal flow, J.C. Flowers wants a better agreement or out of its current contract with SLM (NYSE: SLM). Great timing, considering KKR is trying to unload $10 billion of First Data loans to the market today.

Weekly initial unemployment claims surprised on the soft side, as last week's data showed new claims for benefits at 298,000, versus the economists' consensus view for 320,000. Not bad, but recent data and economists' views, not the mention the Wall Street Greek's outlook, still indicate unemployment will increase in the months ahead.

In one of today's articles below, CNBC reported that Q3 EPS growth is anticipated to be pathetic (4.4% and 2.1%), but estimate aggregators like Thomson Financial and Standard & Poor's, which uses its own analysts numbers as a first source, are expecting recovery in the fourth quarter. From experience, we disagree. While employed as an analyst, we noted that the majority of earnings estimates even one quarter out were often far from updated or reflective of the likelihood of change, especially at a firm we knew well. Estimate changes in fact, typically consistently lagged reality. Based on this discovery, we believe S&P's forecast for 10.8% growth in Q4 will very likely look significantly less optimistic after Q3 has passed and analysts have updated their models, in one experienced analyst's view.
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Wednesday, September 26, 2007

Today's Key Market News - It's Over! Now Let's Build More Square Cars!

(Stocks in article: NYSE: GM, NYSE: F, NYSE: TM, Nasdaq: AMZN, Nasdaq: NDAQ, Nasdaq: PLUG, Nasdaq: BLDP, NYSE: LUM, Nasdaq: MTSN, NYSE: ATU, NYSE: GY)

Equities opened broadly higher today! Go figure... Durable goods orders taken during the month of August were reported earlier this morning, providing yet another piece of horrible economic data that implies economic woes to come. August's orders declined 4.9%, worse than the 4% drop that was expected by the consensus of economists surveyed by Bloomberg. August's decline followed a revised July rise, now measured at 6.1% growth. We have been pounding the table here for awhile regarding our view that eventually, soft U.S. demand will impact manufacturers, despite the growth of global markets. This is based on the fact that American consumers still butter the bread of American producers. Sure, a growing stream of revenue is reaching U.S. multinationals from exports, with some 29% of revenues now derived from international sources. Still, a multitude of producers and small businesses, which dominate our economy, are limited to the U.S. market.

Detroit and New York were enthused that General Motors (NYSE: GM) came to agreement with the UAW, ending its national strike after only a couple days on the picket line. More importantly, it appears the UAW has agreed to exchange billions in corporate health care obligations for the improved job security of its members. The deal will likely help GM to bridge the cost gap toward its toughest rival, Toyota Motor (NYSE: TM). The agreement shows that the UAW comprehended the gravity of the situation, and understood that more American jobs might be lost otherwise. So now GM autoworkers can get back to building competitively inadequate square-shaped gas guzzlers! The deal also signifies that future agreements are likely with Ford (NYSE: F) and Chrysler. The auto sector is higher as a result today, led by GM. However, we want to remind investors that Toyota, which is the apparent loser here, was also impacted by plant shutdown this past quarter. It's own closure was driven by natural disaster, however, not union confrontation.

The American Banker's Association reported some key information on the state of consumer credit today. Delinquencies on home equity lines of credit moved to their highest level in 5-1/2 years (0.77% in Q2), but before you go cutting your ear off Van Gogh, take note that the ABA's composite delinquency rate declined. Also, the rate of late payment on credit cards actually improved as well, to 4.39%, from 4.41% in Q1. However, plenty of variable rate mortgages are in the process of resetting payments higher, and the employment situation looks to be slackening. The consumer remains stressed by relatively high energy, gasoline and food costs as well. Thus, we expect these ABA readings are more likely to deteriorate in future quarters than to improve. Please find today's handpicked market-moving news below:

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Tuesday, September 25, 2007

Today's Key Market News - Data Retakes Focus

(Stocks in article: NYSE: GM, Nasdaq: MSFT, NYSE: LEN, NYSE: TGT, NYSE: LOW, NYSE: NRG, NYSE: GIS, NYSE: FDS, Nasdaq: CRXL, NYSE: F, Nasdaq: CSCO, Nasdaq: YHOO)

The euphoria of the Fed's big 50 basis point move is now well worn, and the market is refocused on miserable data flow. With concerns raised that the dollar and inflation could prevent a string of Fed cuts, and the memory of Greenspan's early 2001 ease, after which the market immediately rallied before sinking well below previous lows over the following 21 months, investor confidence is soft. See our thoughts on the dollar in this week's market-moving event planner, "The Greek's Week Ahead - The Dollar and the Shadow."

Today's report from the ICSC-UBS (see below) showed relative retail weakness, as consumer financial muscle atrophy sets in. The Conference Board's Consumer Confidence measure for September was reported at 10:00 AM EDT, and provided further insight into the consumer's state of affairs. The reported level of confidence, at 99.8, fell off a cliff versus expectations. This news should suck the wind out of the market, and raise new concerns about just how bad things could get within retail and the economy. Also at 10:00, August Existing Home Sales were reported downright disgusting, but about as expected. Home builder Lennar (NYSE: LEN) reported earnings today, showing more red ink than was expected. Home builders have sharply corrected as a result, and you profited if you acted on our advice from within the weekly article. Later this week, KB Homes (NYSE: KBH) will report as well, but Lennar's news has brought discount to all the builders today, after they rallied last week on the Fed move. We also told you in the weekly article that Lowes (NYSE: LOW) was likely to show the impact of housing on the home supplies retailer, and LOW and Target (NYSE: TGT) both provided reduced forecasts to the market today.

The UAW surprised many industry experts, and my personal contacts at Ford (NYSE: F) alike, this week with the strike move. Wall Street Greek views it as a brilliant strategic action, acting quickly and decisively before its auto governors could move in court to prevent its action. It seems the union still has some power in this country, and though I use to think unions were unnecessary here in the modern day, after my own personal beating by a foolish, ignorant and unappreciative higher up, we have changed our view. In little known Greek trivia, the Wall Street Greek's grandfather served as a forman at Bethlehem Steel, helping to forge the supports of America.

In an action we believe offering further evidence of opportunity in large cap technology companies involved in facilitating the Internet and computer usage, Microsoft (Nasdaq: MSFT) looks to be set to take a stake in Facebook. Recall, some of Wall Street Greek's favored names in the space include MSFT, Cisco Systems (Nasdaq: CSCO) and Yahoo! (Nasdaq: YHOO. Shortly, we will resume daily publication of "Today's Coffee," which we expect to evolve into a end of day market wrap up piece discussing the topics usual covered within the article: economic data, commodity markets, geopolitical factors and company specific issues.

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Monday, September 24, 2007

The Greek's Week Ahead - The Dollar and the Shadow

The Greek's Week Ahead has been engineered to prepare you for events that could impact your portfolio this week.

Poor Ben. Even in the week that contained what will likely be noted in history as his defining moment, Federal Reserve Chairman Ben Bernanke was once again overshadowed by his predecessor, Alan Greenspan. Alan, as it seems, finally finished his memoirs after 15 months of effort, and rolled out his new book, "The Age of Turbulence: Adventures in a New World," coincidentally the same week as Big Ben's ballsy ballyhoo.

Ben, the poor guy, goes out on a limb against his better judgment, and gives the Bush administration what it was looking for, the big rate cut to save the day. And this old geezer, mind you, considered genius by some and intellectually clumsy by others, shows up at Barnes & Noble with what will most likely jump right to the top of the best seller's list. Oh Magoo! You've done it again! Seriously though, and mind you that I was a fan of Greenspan's, shouldn't the old guy be put out to stud or sent to Harvard or Wharton to train the next generation of Triple Crown winners? Instead, he keeps wandering onto the course getting in the way of today's thoroughbreds!

In last week's copy here, we warned that Ben would be damned if he did and done if he didn't. He did, and now the dollar is done, or is it downed! Almost immediately after the Fed's big move and last triumphant spurt of the market, concern shifted from the economy and the credit crisis, to the dollar and inflation. Yeah, remember that bad dream called inflation that Bernanke kept warning us about. Remember how we wouldn't buy into it. From Larry Kudlow down to George Bush, who was quoted as saying, "I'm told, blah blah blah...," nobody really believed inflation was anything more than myth. George's words pretty much implied, "it's their heads on the block, not mine."

And now, the dollar seems certain to tank as other major central bank authorities threaten to stick to their restrictive monetary stance of recent times, despite the Fed's move. While CIA agent double oh-Jacques, Nicholas Sarkozy, pleads with the ECB's Jean-Claude Trichet (in French), the ECB chief speaks proudly of the independence of his organization, and it's greater than political cause. And don't expect anything different from the Japanese either. Everybody has bought into this idea that the international economies of the world have detached from the American market. Now that's a myth!

Still, there now remains serious risk that foreign investment capital could look to Europe for direction, or to Japan or elsewhere. Even our good old friends, the Saudis, appear ready to follow Iran's lead in denominating oil proceeds in something other than the greenback. A few months ago, we told you gold looked like a good place for capital. We received a ton of critical letters in the days that followed. "What say ye now?!" proclaimed Midas.

Our reasoning for gold, however, was more tied to the safe haven bet than to inflation, though we accounted for that demon as well. Here's the answer to all your woes, and we're talking directly to President Bush. Arrest this crazy Iranian while he's here in New York pretending to be a nice guy, ship him off to Guantanamo, and start your war. The currency reset and global risk reallocation that follows will bring things right back to normal. Europe and Japan will cut rates in minutes. The Chinese will be desperate for oil. No capital will flow to emerging markets, but instead find its way to the good old, buffered by two oceans, USA.

The week ahead...

Monday starts the inflation centric week off quietly, with no major economic data set for release. Markets will not even open in Japan, South Africa, South Korea and Taiwan, due to Autumn Equinox Day. Boy could some countries use a few less holidays, or maybe we should be donning aluminum foil caps and celebrating as well. Reporting earnings on September 24th, look for Analogic (Nasdaq: ALOG), Financial Federal (NYSE: FIF), Learning Tree International (Nasdaq: LTRE), Navisite (Nasdaq: NAVI), SYNNEX Corporation (NYSE: SNX), Wolseley plc (NYSE: WOS), YM BioSciences (AMEX: YMI) and a few foreign firms.

Tuesday looks to provide two key economic data bits that the market will be well-tuned in for. At 10:00 AM EDT, the Conference Board is scheduled to report September's consumer confidence level. The consensus of economists measured by Bloomberg anticipates a reading of 104.0, versus the 105.0 figure posted a month prior. Based on recent trends and the market environment, you might expect the actual result to fall short of the 104 anticipation. The metric read 104 in April and 103.9 in June, so expecting a little worse seems well-founded. We expect such a measure to be a difficult one for the market to digest as it desperately seeks signs of economic growth and inflation moderation. However, because the market anticipated a Fed cut, stocks rose into the cut, and that also implies that confidence may have been restored some before the reporting period closed. In other words, this one is tough to call.

The other major report scheduled for Tuesday is the National Association of Realtors' Existing Home Sales report for the month of August. The consensus is looking for existing home sales to be reported running at an annual pace of 5.5 million. This would be down from July's 5.75 million. Remember, the existing home market is more than six times the size of the new home market, and is thus more useful in studying the health of the selling environment. Also, existing home sales are not as influenced by sporadic incentive offerings regularly used by home builders to push sales. Speaking of incentives, judging by Hovnanian's (NYSE: HOV) decision to reduce inventory through fire sale, we do not expect any significant positive news out of the housing sector this week. Also, the S&P/Case Shiller Home Price Index for July should be reported, and to nobody's surprise it should show further price decline. This should only get worse in August and September, given the signal from Hovnanian.

We will also be closely following the weekly ICSC-UBS Same-Store Sales report for any signs of dramatic change. Last week's figure showed year-over-year growth of 2.9%, down from last year, but holding steady compared to recent weeks' data. The week-over-week figure, which showed a decrease, was most likely impacted by the seasonal "back to school" season conclusion.

In other news, the Bank of Japan is scheduled to publish the minutes from its August meeting. On the Fed tour, Philly Fed President Charles Plosser is scheduled to speak on the topic of "Invention, Productivity and the Economy."

Lowe's (NYSE: LOW) is conducting its investor conference, providing some insight into how retail directly related to housing health might be flailing. Tuesday's earnings schedule will be headlined by home builder, Lennar Corp. (NYSE: LEN), and we expect things are turning uglier there as well. In other words, we wouldn't go looking for a buying opportunity within the home builders just yet, especially not before the release. Also on slate to report, Aehr Test Systems (Nasdaq: AEHR), CMGI Inc. (Nasdaq: CMGI), FactSet Research Systems (NYSE: FDS), H.B. Fuller Co. (NYSE: FUL), Landec Corp. (Nasdaq: LNDC), Oil-Dri Corporation of America (NYSE: ODC), PHC, Inc. (AMEX: PHC), Red Hat (NYSE: RHT), Resources Global Professionals (Nasdaq: RECN), Standard Microsystems (Nasdaq: SMSC), Spectrum Control (Nasdaq: SPEC), The Marcus Corporation (NYSE: MCS) and Worthington Industries (NYSE: WOR).

While markets are closed Wednesday in Hong Kong, South Korea and Israel, U.S. investors will be up bright and early for the 8:30 Q2 Durable Goods Orders Report. August orders are seen declining by 3.1%, according to Bloomberg. July's orders rose 5.9%, and the difference is perhaps indicative of the new economic state we are entering into. Imagine if foreclosures and defaults are rocketing higher, what happens to less important expenditures for the typical consumer. Your mortgage is the first bill you pay, we assume. However, in some instances where the mortgage has become greater than the value of the home, owners may find economic sense in walking away from the collateral rather than selling the home at a loss and short of the debt owed. Even so it may make economic sense for some, we suspect that it is still a difficult decision to make for most home owners, and rising foreclosure rates more likely reflect cash strapped consumers than a situation of economic logic leading conventional action.

The Mortgage Bankers Association will make its regular reporting of Purchase Applications on Wednesday morning as well. There are two very good reasons why the Fed's rate action of last week should play no role in application activity. First, long rates actually rose and inflation risk increased on the expansionary move. Secondly, the data should measure through the 21st of September, not allowing time to see impact since the cut.

Wednesday's scheduled earnings reports include those from Actuant Corp. (NYSE: ATU), Asure Software (Nasdaq: ASUR), Bed, Bath & Beyond (Nasdaq: BBBY), Copart (Nasdaq: CPRT), GenCorp (NYSE: GY), Intervoice (Nasdaq: INTV), Luxottica Group (NYSE: LUX), Paychex (Nasdaq: PAYX) and Xyratex (Nasdaq: XRTX).

At 8:30 on Thursday morning, the final reporting of Q2 Real GDP will take place, and the consensus expects Q2 to close out showing 3.8% growth, down slightly from the last check, which had growth pegged at 4.0%. Corporate Profits will also be reported for Q2, but more attention will find the Weekly Initial Unemployment Claims Report, where the consensus is looking for a result of 320,000, up from 311,000 reported last week. Most economists agree, least of which is the Fed, that the unemployment rate will tick up in the months ahead. Furthermore, many are expecting a rate of unemployment greater than 5.0% soon enough.

New Home Sales for August are expected to show an annual run rate of 835,000, according to Bloomberg (828,000 according to Barron's). The rate was 870,000 in July, and we also expect a significant drop-off this month. After all, what else could spur Hovnanian to drop prices by so much. Finally, at 3 p.m., the Department of Agriculture will release its Farm Prices Index, showing, you guessed it, the change in prices. This data is extremely important as it will be a useful barometer for inflation within the food sector.

In a very important regulatory matter, a Senate subcommittee will study the impact of Google's (Nasdaq: GOOG) acquisition of Web advertiser, Doubleclick (Nasdaq: DCLK), on the competitive landscape of the space. Thursday's earnings news will emanate from CelebrateExpress (Nasdaq: BDAY), Chattem (Nasdaq: CHTT), Christopher & Banks (NYSE: CBK), Cintas Corporation (Nasdaq: CTAS), Cognos (Nasdaq: COGN), CRA International (Nasdaq: CRAI), Finish Line (Nasdaq: FINL), Global Payments (NYSE: GPN), Jabil Circuit (NYSE: JBL), KB Home (NYSE: KBH), McCormick & Co. (NYSE: MKC), Neogen (Nasdaq: NEOG), Rite Aid Corp. (NYSE: RAD), Saba Software (Nasdaq: SABA), Texas Industries (NYSE: TXI), TIBCO Software (Nasdaq: TIBX) and Vail Resorts (NYSE: MTN).

Friday brings a busy end to the economic week, with a slew of data set for release. The most important data of the day will be the first to hit the wires. At 8:30, Personal Income and Spending will be reported for the month of August. Bloomberg's consensus sees income rising 0.3% and spending increasing 0.4%. This compares to increases of 0.5% and 0.4%, respectively, in July. Perhaps more important that the spending data, the PCE Deflator will inform the market of just how imminent a threat inflation may or may not be. It's clear that this report will carry a ton of responsibility and play an integral role in the near-term movement of stocks.

At 9:45, Chicago PMI will measure the health of manufacturing in the Midwest, and the consensus view is for the September index to measure 52.9, reflecting continued expansion. At 10:00, September Michigan Sentiment is set for release, and the consensus expects a reading of 84.3. We expect this view will be greatly influenced by the general consensus that existed regarding the likelihood of Fed action last week, and this was the same factor that drove stocks higher ahead of the rate cut. Finally, August Construction Spending is seen decreasing 0.5%. This is our opportunity to reiterate our view that softness of consumer spending will lead to a weak retail environment, which in turn should drive retail consolidation and reduction in commercial construction. With residential building already in the tank, construction spending would look to move lower in aggregate.

On Friday, the European Commission is slated to give its quarterly report on the euro zone economy. This will be an important report, as American and apparently French leadership, will be hopeful for indication that European regulators might consider following the American lead in cutting interest rates, and thus helping to stabilize currencies (read stop the dollar dive). Also, the guy many view as the Fed's second in command, Fred Mishkin, is scheduled to speak in Chicago on Globalization and Systemic Risk."

Friday concludes with earnings news from AZZ Inc. (NYSE: AZZ), Fonar (Nasdaq: FONR), LightPath Technologies (Nasdaq: LPTH), SYS Technologies (AMEX: SYS) and several international firms. We hope you once again found value in our weekly market-moving event planner, and look forward to providing you with value-added content the rest of the week.

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Saturday, September 22, 2007

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Friday, September 21, 2007

Today's Key Market News - Dollar Limbo

(Stocks in article: NYSE: NKE, NYSE: MAT, NYSE: GM, Nasdaq: AAPL, Nasdaq: ORCL, NYSE: ABN, NYSE: BCS)

How low can you go? Limbo lower now... That's the song the dollar is dancing to these days, same as yesterday and the day before. Things are exacerbated now though, with the Fed cutting rates by a half point. While the economy gets a boost, as U.S. participants can borrow at more attractive rates (theoretically), and while American exporters benefit from more competitive offerings overseas and in currency conversion back to dollars, there remains risk to both inflation and foreign investment in the U.S.

As perception turns to panic, Wall Street Greek suspects foreign investors will increasingly look to Europe over the U.S. for investment of their capital. In turn, we will have to offer treasuries at higher rates to attract buyers, thus having the opposite effect than that intended. Inflation is at risk, and the economy still teeters on a longer term cliff.

If I were a betting man, I might venture to suspect Nicholas Sarkozy could be a CIA agent. The guy is actively pushing for a euro rate cut, totally against the wishes of his fellow Frenchman, Jean-Claude Trichet, who heads up the ECB. Sarkozy's positions are so pro-American, it's quite a shock for us. It's like we are going through Jacques Chirac withdrawal or something. The ECB is set on a path of rate hike, while the U.S. is cutting, not good for the dollar/euro trade-off.

As we suspected, the binge drinking ahead of the Fed cut led to a hangover yesterday, and now the market asks, "what's next?" In today's key news below, we are slowly being proven correct that the risk in owning Apple (Nasdaq: AAPL), because of its iconic leader's decision-making regarding options, could end up outweighing the benefit from the company's pioneering product innovation. Jobs was subpoenaed yesterday, and that's undeniably a bad thing. Sorry Apple fans... In other tech news, Oracle (Nasdaq: ORCL) kept up the solid trend of large-cap tech, posting a strong EPS report.

We were wondering if most Americans were as angry as we were to see the headline, "Mattel (NYSE: MAT) apologizes to China for toy recall." Jeez! Just when the Greek thought there was nothing worse for Mattel's public image than selling toys covered in lead paint, Mattel's management team comes up with one better. Hey Mattel, how about apologizing to the American mothers who trusted you?!? Mattel looks like a good short, and I do not even care what the valuation is. When it comes to their children, American parents don't f#$k around. Please feel free to comment about this in the section below this article.

The UAW is playing hardball with General Motors (NYSE: GM), but is the union willing to risk putting the automaker out of business and losing its best U.S. employer for good? We wonder who has the position of strength in this weak tug of war. A war of a attrition is good for nobody here.

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Thursday, September 20, 2007

Today's Key Market News - Gone Fishing

We've gone fishing folks, and some technical problems have complicated things today. However, please find today's most important market-moving information below.

Wall Street Greek will be intently awaiting the Weekly Initial Jobless Claims Report on Thursday. While we are sticking to our argument that new hiring should slow before layoffs begin, ahem, and yes, we were correct given the last Employment Situation report. We think the signs of employers buying into recession are apparent now, and there should not be much delay before consumer sensitive retail and other services are hit hard by consolidation. Bloomberg reports consensus expectations for about 320,000 newly laid off benefits filers, up 1,000 from the week before.

At 10:00 a.m., August Leading Indicators will be announced, and the consensus is looking for a 0.3% decline, after a rise of 0.4% was reported last month. The September Philly Fed Survey is expected to measure 4.0 after posting 0.0 in August. We find the sentiment of the manufacturing sector ominous at this point.

Fed Chairman Bernanke will be in Washington testifying on the state of the mortgage market. Meanwhile the "First Distressed Capital Connection-Opportunities to Invest in Distressed Businesses Conference" begins in New York, just in time for a large group of lenders and builders.

The fate of ABN Amro will be discussed at the company's shareholder meeting on Thursday. Reporting earnings, Goldman Sachs (NYSE: GS) is expected to post the most positive of reports among the investment banks. Also reporting, look for 3Com (Nasdaq: COMS), A.G. Edwards (NYSE: AGE), ACI Worldwide (Nasdaq: ACIW), American Greetings (NYSE: AM), Bear Stearns (NYSE: BSC), Carnival Corp. (NYSE: CCL), Circuit City (NYSE: CC), ConAgra Foods (NYSE: CAG), Diamond Foods (Nasdaq: DMND), Electroglas (Nasdaq: EGLS), FedEx (NYSE: FDX), IHS Inc. (NYSE: IHS), Media Sciences International (Nasdaq: MSII), Nike (NYSE: NKE), Optium (Nasdaq: OPTM), Oracle (Nasdaq: ORCL), Pier 1 Imports (NYSE: PIR), Progress Software (Nasdaq: PRGS), Scholastic (Nasdaq: SCHL), Steelcase (NYSE: SCS), Tektronix (NYSE: TEK) and a good group of foreign companies.

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Wednesday, September 19, 2007

Today's Key Market News - The Right Stuff

(Stocks in article: NYSE: MS, NYSE: GIS, Nasdaq: LEND, NYSE: GLW, NYSE: PG, NYSE: AIR, Nasdaq: DBRN)

The Federal Reserve answered the market's plea for help yesterday, and we're off to the races. Here's what your resident skeptic sees coming next though... Based on the Fed's Policy Statement, we do not view this move as part of a traditional string of moves. In recent times, the Fed has acted, and then acted, and then acted again, in a methodical and long drawn out fashion to move the economy in a predictable and nudging way. This leaves most market participants expecting more rate cuts to come. However, we expect something different.

Now that Ben has sort of succumbed to the will of the administration, and the Senate and House economic committees, we expect the stubborn soul, and the rest of those stingy, proud folk at economic police headquarters, to turn cold. The Statement itself offers both a willingness to support the economy (read market) and a continued eye on inflation. Human psychology says a lot for what happens next. The Fed has given its government overseers what they wanted, but they likely will now need to flex their muscles a bit. We expect some tough talk and clear indications in the near-term that will make it apparent that the Fed's next move remains uncertain.

Until that day, however, we look clear to rise. Remember though, September 24 marks the start of the Annual Assembly at the United Nations. Iran will now come to focus. Oh, and did anybody notice that Israel just declared Gaza an enemy of state. Basically, the all clear has been given to move tanks and wrecking crews through Gaza to remove the scourge of Hamas. We fully expect this pressure to be redirected toward the head of Mahmoud Abbas. If there was one guy I wouldn't want to be through the rest of this decade, or life, whichever comes first, it would be Abbas.

Top Ten Guys I Wouldn't Want to Be:
  1. Mahmoud Abbas, stuck between a rock and a hard place
  2. Mahmoud Ahmadinejad, with no place to hide
  3. Iran's Supreme Leader Ayatollah Khamenei, an even slower guy with nowhere to hide
  4. Any villager in Iran watching it rain steel
  5. General Petraeus
  6. Mikheil Saakashvili, or anybody standing in Putin's way
  7. Hillary Clinton once she wins nomination and the Republicans take aim
  8. Pervez Musharraf, facing potential Islamic revolution
  9. A member of the Saudi royal family, facing inevitable uprising
  10. A Chinese citizen, with food running out and misguided leadership

In the stock specific news below, several important earnings reports hit the wire this morning. Morgan Stanley (NYSE: MS) missed its profit forecast, after Lehman Brothers (NYSE: LEH) surprised on the upside yesterday. It does not really matter at this point, since the Fed move will raise all ships. The saga that was the acquisition of Accredited Home Lenders (Nasdaq: LEND) appears to be nearing an end, and a good one for shareholders. LEND managed to keep its suitor at the table, albeit it at gunpoint, but it appears the two have agreed to a price they both can swallow, for now... Please find today's most important stories below:

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Tuesday, September 18, 2007

Today's Key Market News: Place Your Bets on the Fed

Stocks in this article: Lehman Brothers (NYSE: LEH), Best Buy (NYSE: BBY), Kroger (NYSE: KR), E*Trade (Nasdaq: ETFC), Northern Rock (LSE: NRK.L), Moody's (NYSE: MCO), Adobe (Nasdaq: ADBE)

Don't miss our weekly market-moving event planner, "The Greek's Week Ahead - The Fed's Dirty Dozen."

In a few hours the anticipation will end, and the Fed will act, we hope. It's become increasingly troubling to us that the economic police have waited until the regular meeting date for this action, and this delay provides some support for the quarter point bet. However, it's also possible that the Fed is a little less than surefooted here, and is hoping to review every piece of available data before taking action. This is what allows for the possibility of a greater action.

We had two important pieces of news this morning, including a better than expected earnings report from Lehman Brothers (NYSE: LEH) and an August PPI report that seems welcoming for a Fed action on the surface of it. The headline PPI figure was reported down 1.4%, versus expectations for a decrease of 0.3%. That's quite a difference, and worth exploring. The decrease was greatly impacted by the period's decline in energy prices. The Core PPI, which excludes food and energy, posted a 0.2% increase, which is greater than the 0.1% increase that was expected. We know oil prices have since risen, so there is no support for the Fed to cut rates. Some naive reports indicated that the PPI data showed soft inflation. This is untrue! In fact, inflation persists, as indicated by the Core figure. The Fed will not like this number, and given the rise in oil prices in September, could now be in favor of a quarter point cut.

If the Fed cuts by just a quarter point, we expect the market to give back ground. On a half point reduction, we see stabilization, not rally. Anything greater will drive strong rally, while no action would likely move the market to retest recent lows.

In the news below, Adobe (Nasdaq: ADBE) and Kroger (NYSE: KR) reported solid quarters, and their respective shares are rising this morning. Lehman Brothers (NYSE: LEH) and Best Buy (NYSE: BBY) reported as well, and appear to be benefiting from expectations for a Fed action. E*Trade (Nasdaq: ETFC) shares are down some 5% as it warned and disappointed investors this morning with its report. ETFC's troubles are tied to its exposure to the mortgage market, which it is exiting. This, H&R Block (NYSE: HRB), and many of the homebuilders' current troubles are proof positive that firms put investor capital at higher risk when they drift from their core competency.

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The Greek's Week Ahead - The Fed's Dirty Dozen

The Greek's Week Ahead has been engineered to prepare you for events that could impact your portfolio this week.

The Wall Street Greek has figured it out. We know what big Ben Bernanke has to do to save the economy. We have the blueprint. The poor guy is faced with a situation where he's doomed if he does and doomed if he doesn't. On the one hand, if he shows restraint, waits for the economic evidence and does not cut rates or cuts by a quarter point, the economic participants of this great nation, stock market players included, will lose confidence in him. Political pressures would mount to force him out of his unenviable position.

On the other hand, if Benjamin succumbs to the heat and cuts by a market enthusing 50 basis points or more, which by the way we view as the right decision, he risks igniting inflation and drowning the dollar. Either way, the poor bearded fellow looks doomed.

However, the Wall Street Greek believes he has found a way for Big Ben and the dirty dozen district Fed presidents to save the day. Now, our idea is a bit unconventional mind you, but drastic times call for drastic measures. The Fed boss needs to round up his dirty group of rebel misfits, dress them up in William Poole fashion, bandanna and all, and hit the road. He's also going to need to modify the old helicopter to handle more than just cash drops. It's going to take some real handy work, but that propeller perpetrator is going to have to be refit with some nuke ready cruise missiles. Now, he might have to clone Telly Savalas to get all this accomplished, but Ben has got to get this plan together for a clandestine mission, and launch a war on Iran.

A loyal reader of the Greek, a guy who is so modest he does not even desire recognition, helped put a few ideas together to see where things might be headed. The Greek thanks Mr. Ferguson for his seeding thoughts that spawned this week's theme. The administration's saving grace to this economic mess, and something that might even get a Republican into the Oval Office again in 2008, is war, perhaps... If the dollar is an important enough concern to restrain the Fed, since we wouldn't want to lose our Asian investors' interest in American assets, then maybe a war that is threatening to enough of the world to drive broad currency reset is what the Fed needs now.

If Iran were dangerous enough to really focus and threaten the U.S. alone, such a war might just add fuel to the dollar fire sale, since capital would look for safe haven. However, Iran is more threatening to its neighbors than it is to us, with some 600 missiles pointed toward Israel according to the latest report. The damage caused by disrupted energy supply to the economies of Iranian oil importers, which by the way does not include the U.S., would weaken those nations' currencies and perhaps support the dollar. So to heck with global drivers! If China can't fuel its plants, the yuan is going to weaken, as are the currencies of Iran's new enemies in Europe. In case you haven't heard, the Iranians recently scorned the French for their criticism of Iranian nuclear efforts.

Now, the guys in the Pentagon have their own reasons to make war on Persia, but if Big Ben and the boys get involved, the result seems certain. However, Defense Secretary Gates was quoted over the weekend saying that America's current focus is clearly to use economic and political pressures to gain Iran's compliance. Yeah, yeah sure... Like the Greek hasn't noticed what's really up. For instance, how about the President's recent statement that the 30,000 surging soldiers just deployed to Iraq could be sent home within twelve months of heading over there. If that doesn't stink of smoke screen meant to keep the Iranians off the real reason for deployment, we don't know what would. And, what about the oil inventory supply issues highlighted recently and OPEC's decision to boost production, all while the American economy is expected to slow and Europe seems likely to follow. Like that has nothing to do with the filling of the strategic oil reserve! Before you get angry, we wouldn't write these things if we were not fairly certain Mahmoud Ahmadinejad were not a Greek fan. He isn't on the mailing list anyway, though he's reportedly making a second trip to the UN this September.

When the government announced it would begin filling the strategic reserve, something it has done ahead of every other major engagement, we calculated it would be full around March of next year. However, when we published those thoughts, we also noted that it was unlikely our leadership was in the business of making things obvious to the enemy, so we expected the actual pace would be well ahead of the published copy. Besides this, the fact that Israel is flying over Syria, testing what missile batteries might light up, provides even more evidence things are progressing. Did we note that three aircraft carriers were recently in the area practicing for an Iranian engagement? That's a lot of military might.

Iran remains the joker in the deck, the card that is not planned for by the market. It's the factor that threatens global market correction more than any other, even American recession. Questions remain unanswered as to the degree of cooperation between the Iranians, Syrians and North Koreans. Why has North Korea recently decided that now would be a good time for light and refrigeration, after all these years of candlelight and ice blocks. Maybe they're just watching their rears, because any nuke that might go off around the world will most likely be traced back to Korea, or possibly the Russian black market.

We think it's quite ironic that war with Iran, as dangerous as it would reportedly be, may also provide the support needed to allow for economy bolstering Fed rate action. We know what you conspiracy theorists with your defamed American flags and Union Square buddies are all thinking now. Hey, maybe this provides great cover for a terrorist action to start the next war. Unless you expect O.J. to be involved, we disagree. Nah, sorry to spoil your dementia. On the contrary, terrorism within the U.S. would just support foreign investment in Euro denominated and other international investment assets. We discussed this topic previously in our issue, "Country Risk, Is America Safe?" Now, let's take a look at this week's schedule, shall we?

The week ahead...

The Empire State Manufacturing Survey was reported on Monday morning, with expectations for a reading of 20.0, which would have been down from August's measure of 25.1. The even lower actual result of 14.7 was startling, and likely indicates growing concern and participation of manufacturers in a slowing American economy. Recall, Wall Street Greek has outlined manufacturing's benefit from exporting from a weak dollar position and into the developing world. With manufacturing and employment following the path laid out by consumer pressures, we should be closing in on recession.

Analysts' third quarter earnings estimates for S&P 500 companies are projecting 3.3% growth over last year, while their views for '08 forecast 11.5% growth, and we thank Michael Santoli's weekly piece for that info. We are not surprised by the divergence though. Analyst are very unlikely to diverge far from historical growth, and are usually a lagging indicator regarding economic pace and direction. You are just not going to find these guys sticking their necks out, and for good reason. They would lose them. Only truly independent shops, small outfits missing that mind limiting corporate box structure, are going to do that. The big independent shops just don't pay enough to even keep their people in the office after five, and I speak from experience.

Credit Suisse's (NYSE: CS) homebuilder's conference got underway in New York on Monday in a dark room full of the spirits of investors past. The day's light earnings schedule included Adobe Systems (Nasdaq: ADBE), Napco Security Systems (Nasdaq: NSSC), OMNOVA Solutions (NYSE: OMN), Avanquest Software (Paris: AVQ.PA), Biomerieux (Paris: BIM.PA), Burren Energy plc (LSE: BUR.L), COIL (Paris: COI.PA), Gyrus Group (LSE: GYG.L), SQLI (Paris: SQI.PA) and Zodiac Group (Paris: ZC.PA).

Tuesday starts with the usual early morning Weekly Same-Store Sales Report from ICSC-UBS. Last week's data posted weekly growth of 0.3%, and a year-over-year increase of 2.9%, which actually represented a sharp bump up from the week just prior. Friday's retail sales report and sustained pressures on consumers, however, point toward continued weakness in consumer spending.

The August Producer's Price Index is set for 8:30 a.m. EDT release, with Bloomberg's consensus of economists expecting a decrease of 0.3%, compared to growth of 0.6% in July. Core PPI, excluding food and energy prices, are expected to show a rise of 0.1%, compared to the same increase in July.

The Treasury will report International Capital flows for the month of July. It should be interesting to follow how capital flows might be impacted by the potential for a further weakening dollar. We would anticipate capital will increasingly seek other destination, and add pressure to interest rates. This is a key concern of the Treasury Secretary, and an important reason why he is so hopeful the U.S. economy can withstand the current credit crisis. Or, maybe he only talks to his old buddies at Goldman Sachs (NYSE: GS), where the third quarter is not seen being too bad.

The State Street Investor Confidence Index will likely not reflect lower confidence in State Street (NYSE: STT) stock, ensuing its own recent public issues, but instead measure the amount of portfolio risk held by investors these days. Capital flows out of U.S. equity funds has been heavy over the past few weeks, but looks to be subsiding finally. August's index measure was 99.3.

The Housing Market Index set a new low of 22 in August, and we would not expect improvement this month. Hovnanian (NYSE: HOV) is having a fire sale, while in an even keeled voice, stating, it's just normal business. Beazer Homes (NYSE: BZH) looks to be in worse condition, battling regulators and facing default on some debt covenants. You remember those right? D.R. Horton (NYSE: DHI) is not far behind, in our view.

The highly anticipated FOMC Policy meeting will finally result in a rate decision at 2:15 p.m. To show you how confused the market is, regarding the Fed's choice between a quarter and half point cut, Bloomberg states economists' consensus at 50 basis points, while Barron's writes a quarter point cut is expected. We continue to view a 50 point cut needed to restore credit market stability. It is also the pill the equity market needs to restore its confidence in the Fed and our economic future. The harder question to answer is, which way will the Fed go? We are leaning toward a 50 point cut on that view also.

Stanford Group kicks off its water conference in New York city, but the most important corporate news of the day will be the earnings report from investment banker, Lehman Brothers (NYSE: LEH). It will be the barometer used by the market to measure the future of its peers. We believe the barometer has already made a stealth appearance in Merrill Lynch's (NYSE: MER) filing to the SEC on Friday, within which it stated it would be marking down credit instruments when it reports earnings in October. And, even more importantly, the severity of that mark down may have been implied by a Merrill analyst's preceding downgrade of the company's peers Lehman Brothers (NYSE: LEH), CitiGroup (NYSE: C) and Bear Stearns (NYSE: BSC).

Others reporting earnings on Tuesday include Animal Health International (Nasdaq: AHII), AutoZone (NYSE: AZO), Bakers Footwear (Nasdaq: BKRS), Best Buy (NYSE: BBY), CBRL Group (Nasdaq: CBRL), Darden Restaurants (NYSE: DRI), Kroger (NYSE: KR) and a few foreign firms.

The first data to hit the wires on Wednesday will be the regular reporting of the Purchase Index by the Mortgage Bankers' Association. You don't need us to tell how the mortgage market is doing any longer though... The Consumer Price Index is scheduled for report on Wednesday as well, with the headline figure expected to show no change for prices in August, compared to a 0.1% increase in July. Core CPI, excluding food and energy, is seen growing 0.2%, compared to the same change in July. The PCE Deflator, the Fed's most favored measure of inflation will also be reported and is worth noting. Remember, the Fed favors a number short of 2% here. Housing starts are expected to be running at an annual rate 1.36 million in August, down from 1.38 million in July.

Wednesday's earnings reports include AAR Corp. (NYSE: AIR), Apogee Enterprises (Nasdaq: APOG), CarMax (NYSE: KMX), CKE Restaurants (NYSE: CKR), CLARCOR (NYSE: CLC), Comtech Telecommunications (Nasdaq: CMTL), Dress Barn (Nasdaq: DBRN), Dynamex (Nasdaq: DDMX), General Mills (NYSE: GIS), Herman Miller (Nasdaq: MLHR), Morgan Stanley (NYSE: MS), Netsol Technologies (Nasdaq: NTWK), Possis Medical (Nasdaq: POSS), Somanetics (Nasdaq: SMTS), Target Logistics (AMEX: TLG) and a few more.

Wall Street Greek will be intently awaiting the Weekly Initial Jobless Claims Report on Thursday. While we are sticking to our argument that new hiring should slow before layoffs begin, ahem, and yes, we were correct given the last Employment Situation report. We think the signs of employers buying into recession are apparent now, and there should not be much delay before consumer sensitive retail and other services are hit hard by consolidation. Bloomberg reports consensus expectations for about 320,000 newly laid off benefits filers, up 1,000 from the week before.

At 10:00 a.m., August Leading Indicators will be announced, and the consensus is looking for a 0.3% decline, after a rise of 0.4% was reported last month. The September Philly Fed Survey is expected to measure 4.0 after posting 0.0 in August. We find the sentiment of the manufacturing sector ominous at this point.

Fed Chairman Bernanke will be in Washington testifying on the state of the mortgage market. Meanwhile the "First Distressed Capital Connection-Opportunities to Invest in Distressed Businesses Conference" begins in New York, just in time for a large group of lenders and builders.

The fate of ABN Amro will be discussed at the company's shareholder meeting on Thursday. Reporting earnings, Goldman Sachs (NYSE: GS) is expected to post the most positive of reports among the investment banks. Also reporting, look for 3Com (Nasdaq: COMS), A.G. Edwards (NYSE: AGE), ACI Worldwide (Nasdaq: ACIW), American Greetings (NYSE: AM), Bear Stearns (NYSE: BSC), Carnival Corp. (NYSE: CCL), Circuit City (NYSE: CC), ConAgra Foods (NYSE: CAG), Diamond Foods (Nasdaq: DMND), Electroglas (Nasdaq: EGLS), FedEx (NYSE: FDX), IHS Inc. (NYSE: IHS), Media Sciences International (Nasdaq: MSII), Nike (NYSE: NKE), Optium (Nasdaq: OPTM), Oracle (Nasdaq: ORCL), Pier 1 Imports (NYSE: PIR), Progress Software (Nasdaq: PRGS), Scholastic (Nasdaq: SCHL), Steelcase (NYSE: SCS), Tektronix (NYSE: TEK) and a good group of foreign companies.

Friday marks the Jewish Day of Atonement, Yom Kippur. In light of recent terror threat issuance that seem to carry a heavier, more meaningful tone to them, we wonder about days like these. Traders, however, are likely to be more concerned with Quadruple Witching on Friday.

The day's earnings schedule includes Eni S.p.A. (NYSE: E), Global Crossing (Nasdaq: GLBC) and North American Scientific (Nasdaq: NASI). We hope you once again found value in our weekly piece and look forward to providing you more valued-added work the rest of the way.

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Monday, September 17, 2007

Today's Key Market News: Hard to Sell a Rock These Days

After last week's market rise in anticipation of a Federal Reserve target rate cut this week, the market is second guessing this morning. The three most widely followed indexes, the Dow Jones, S&P 500 and NASDAQ have all started the day lower, as market participants begin to question whether, and by how much, the Fed might act. Beyond that, perhaps the market is already thinking, so what next?

In England, we've discovered it's harder to sell a rock these days then it was in the 70s. Northern Rock's (LSE: NRK.L) shares were halted Monday, as depositors lined up again before sunrise to get their money out of the flailing concern. Guess what, that's not going to help business any either, and the bank's managers are now aggressively seeking an exit strategy. It seems the only way to restore confidence in depositors would be to sell the company to a larger concern. The Financial Times reported today that the Rock has spoken with Lloyds TSB (NYSE: LYG), the UK's fifth largest bank, in that regard. But, it's hard enough to sell a rock, let alone a crumbling one.

This week, four major investment banks prepare to report earnings, Lehman Brothers (NYSE: LEH), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS) and Bear Stearns (NYSE: BSC). The market has anticipated this quarter's reports for quite some time now, and appropriately marked down the shares as analysts have sharply cut estimates. We thought it was quite interesting, however, that Merrill Lynch's (NYSE: MER) industry analyst downgraded many of his firm's peers last week, especially since it came just a few days before MER issued a filing to the SEC on Friday indicating that it had made fair value adjustments to financial instruments, reflecting credit market difficulties. Read into that as you like... Please find today's market-moving news below.

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Friday, September 14, 2007

Smithfield Foods' Complicated Web

(Stocks in article: NYSE: SFD, NYSE: TSN, NYSE: HRL, NYSE: SDA, NYSE: PDA)

Smithfield Foods’ reported earnings recently, but the big news was gleaned from its conference call and a China export deal that followed.

Smithfield Foods (NYSE: SFD), best known as the world’s largest pork processor and hog producer, reported earnings a few weeks ago that exceeded expectations by $0.05 before inclusion of discontinued operations. Besides operating as the world’s leader in hog production and pork processing, Smithfield is the fifth largest beef processor in the U.S. The company also has its hoofs in turkey production, but Smithfield is the serious king pig, as its pork segment processes about 26 million hogs annually, accounting for 26% of the country’s market share.

During its earnings conference call, management mentioned that it was in discussions with COFCO, a major Chinese trading company. What really enthused investors and the analyst community was management’s discussion of China’s deficient pork supply, and the degree of opportunity that might exist for exporters into the market.

After significant discussions with Chinese market participants, SFD’s team speculated that as much as 20% of China’s hog market may be lost to disease. Smithfield’s President and CEO, C. Larry Pope then compared that 20% loss to the U.S. market, stating,“that could be a 100 million hog shortage, and that’s as large as the whole U.S. production.” He continued, “If they have to solve even a part of that, it could be enormous.” Commenting on speculation that Smithfield might be in discussions with the Chinese, SFD’s chief enthusiastically stated, “I can report to you today that we have been having substantial conversation with a very large Chinese trading company, the company COFCO.” He expanded, “We have been having conversations with them about some sizeable shipments, even this fall and winter, into China.”

A day after alluding to the possibility, SFD entered into agreement with “an undisclosed trading company” to deliver 60 million pounds of Pay-lean free pork to China through year-end. After labeling the deal as “modest,” management also indicated that more agreements could ensue.

Now 60 million pounds sure sounds like a lot, but we were wondering just how important that really is to the American meat processor. Well, in fiscal year 2006 (ended Apr.), Smithfield sold 3.5 billion pounds of fresh pork products. 60 million pounds of pork is just 1.7% of that, so this is really not as big as it sounds. And it’s not even as important as 1.7%, since SFD sold another 2.4 billion pounds of processed pork that same fiscal year. So, that puts it into proper perspective for you, and probably explains why SFD shares rose on the news, but then returned profits in the days that followed the announcement.

Still, the fact remains that a new and huge market has opened up to Smithfield, and this sale may only be the chop of a larger pork. So, the shares’ price reversal may have allowed even smarter money than the money that figured out how lean the deal was, an opportunity to enter.

Before we decide if that’s the case or not, let’s study the company’s fiscal first quarter report, and then take a look at valuation. Smithfield reported a Q1 revenue increase of 21.5%, benefiting significantly from three acquisitions since last October. Still, management was disappointed with fresh pork sales, while enthused with the performance of its processed pork segment. We took note of management’s recognition that some of its rivals did better than Smithfield in the fresh pork segment. SFD blamed its own weakness in the business to seasonal issues, but if peers did better, that means there was either a market share shift or those peers found new markets that SFD is not significantly exposed to. The way to figure this out is to study peer results and just plain get to know the industry better.

SFD has been pursuing a strategy geared to increase the sales of processed pork, since segments of this market offer better margin than fresh pork sales. As a result of this value-added effort, the company’s operating margin from continuing operations widened 70 basis points, year-over-year, to 2.8%. That’s a lean profit margin that’s characteristic of the industry, but the fact is that Smithfield and its peers have seen pressure on feed prices. In its conference call, SFD’s management indicated that recently rich corn prices have reached the live hog market. Smithfield has built a vertically integrated operating structure in an attempt to contain volatile pricing, but the company is still a net buyer of hogs on the open market. In any event, management noted that corn prices have receded some of late.

Smithfield grew earnings from continuing operations at a 31% clip, thanks to acquisitions and aided by the disposition of poor performing assets. This was especially impressive due to the company’s debt burden and share dilution born from its acquisitive activity. SFD’s acquisitions have been accretive to operations, as its earnings per share growth overcame a near 19% increase in diluted shares outstanding this past quarter.

Okay, so we can say the company is improving its operations, and we can speculate that a bonus opportunity may avail itself in China. But are the shares attractive for purchase?

Company ------------------- Ticker -------- P/E -- P/B --- Div Yld. -- ROE
Meat Products Ind. Ave. ----------------- 26.1 -- 2.96 --- 0.65%
Smithfield Foods -------- NYSE: SFD --- 19.4 --- 1.64 ---- NA ------ 8.8%
Tyson Foods -------------- NYSE: TSN -- 36.4 --- 1.42 --- 0.9 ------ 4.0
Hormel -------------------- NYSE: HRL -- 17.2 --- 2.56 --- 1.7 ------ 15.9
Sadia S.A. ----------------- NYSE: SDA -- 13.2 --- 2.42 --- NA ------ 19.8
Perdigao S.A. ------------- NYSE: PDA -- 24.8 -- 2.74 --- 0.1 ------ 15.7

Looking at industry statistics without detailed review of the company’s peers, which we recommend if in fact you are choosing between them, we studied SFD’s valuation. The shares trade at a P/E discount to industry rivals on average, and toward the bottom of the peer group in terms of price-to-book value. The company also offers a lighter return on equity than its peers. This, however, does not exclusively preclude the buy decision. No, in fact, it may support a buy decision, but only if one factor is present.

That necessary factor that would lead us to recommend the purchase of SFD, is change. If there is reason to believe SFD is an improving operation, then we could argue that its valuation would move toward its peer average. Well, if you are betting the change will be driven by China alone, then you are in fact gambling. Smithfield’s management said on its conference call that any pork producer that built new capacity based on anticipated Chinese demand would be foolish, because they argued their view that China would want to feed the Chinese over the long-term and was using Smithfield only as a near-term stopgap. Now, just because SFD’s management team believes this to be so, does not mean China will not become a significant importer of proteins.

Your favorite Greek here happens to believe China’s bursting population is not to be ignored, childbirth limits or not. Also, China’s industrialization is drawing farmers and ranchers into the more lucrative manufacturing industry. The country recently became a net importer of grain, so it is entirely possible that the current taste of pork importation might just make it easier for the behemoth to indulge in the trade in the future. Whether China uses pork as a tool in its stealth trade war with the U.S. will likely greatly depend on other supply opportunities and the health of its own pens.

Another reason we like Smithfield’s outlook is its movement to create more value-added revenues. We believe the company will continue in the direction of expanding processed food production, and drive more value creation. Now, it still has a debt burden to eat at, with debt standing at more than 50% of capital, but we anticipate the new CFO, Mr. Carey Dubois, is strong enough to handle the challenge. As an analyst, I would spend a couple more days before confidently recommending the shares, but I take some confidence in the fact that approximately nine analysts currently recommend buying or accumulating the shares, while four recommend hold and one sell.

We expect SFD’s valuation will move toward its peers, but over the course of the next twelve months, we see the price-to-book value likely improving well short of its closest peers’ 2.5X, perhaps reaching 2.0X instead. Using SFD’s book value of $2.91 billion on July 29th, the shares would be valued at approximately $44, representing about 33% appreciation potential from the closing price on September 14, 2007. Still, one major risk could oink this theory. Tyson Foods (NYSE: TSN) just cut its '07 profit forecast partly on higher than expected live cattle costs, a business Smithfield participates in. Now, while Smithfield procured 15% of its cattle from its own live cattle feeding operations in FY 07, its beef segment operations generated 19% of its total sales. That's not negligible.

If the Chinese opportunity does not materialize, we believe the company’s operations are improving enough to move SFD’s valuation in the direction of its peers. However, because of this newly surfaced risk related to the cattle/beef industry, and our mosaic theory that Smithfield could also see impact, our enthusiasm is limited for SFD despite its valuation discount. The downside is probably somewhere near TSN's price-to-book value of 1.42, which would put downside price risk near $31.24, representing a 6.3% decrease in value. A lot depends on the difference in importance of beef production for TSN and SFD, but with a thumbnail estimate of 6.3% potential downside and 33% potential upside, we would take a modestly positive view on SFD shares.

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Thursday, September 13, 2007

Today's Key Market News - Market Finds Religion?

(Stocks in this article: NYSE: PTR, NYSE: ALU, NYSE: GS, NYSE: MEH, Nasdaq: CELG, Nasdaq: SPTN, Nasdaq: MOVI, Nasdaq: MSFT)

Stocks are up a bit more than just modestly this morning, with the Dow leading the way, rising near 1%. The day is an off one for devout Jews and Muslims, who are marking the holidays of Rosh Hashanah (Jewish New Year) and Ramadan. As a result, the streets of downtown Manhattan are a little quieter than usual with a significant portion of the workforce taking time off. While this Greek/American is actually returning to the desk today, we wish our Jewish and Muslim friends the best, and we hope that days like these bring us together rather than divide us.

Meanwhile, Wall Street Greek believes that the market is pricing in the likelihood of a Fed rate cut, but we anticipate that sometime between Friday and the FOMC meeting, doubts and uncertainty will create renewed volatility in stocks. These concerns will likely arise from the market's lack of confidence in the Fed, which we view deserved. Investors are uncertain whether the Fed sees reason enough in the data to initiate a greater than quarter point rate cut. We expect that a quarter point cut would not be a significant positive factor for stocks or the economy, but we are increasingly concerned that this could be the direction the Fed goes. We note, however, that the accompanying Fed Policy Statement could help to reassure investors.

We place a higher degree of possibility in a 50 point cut, enough to show economic participants that the Fed is backing up its words with evidence that it will take aggressive enough action if necessary. We very much doubt the Fed is prepared to initiate a greater than 50 point cut, and we also view a "no action" decision as unlikely. We have taken solace in Fred Mishkin's research on the impact of housing, and his strategic goal to dramatically reduce rates in that event. At the same time, we think he may already be too late.

This article, marking our return to the desk, will be a light one. We are doing some catching up, and plan to publish a Today's Greek Coffee later this evening. In today's key market-moving news articles below, you will find information on the Bank of England's action to ease lending restrictions further. Also, China is in focus, as Warren Buffet reduced his stake in PetroChina (NYSE: PTR), and the big red nation announced foreign investment remained robust in August. We have included much discussion on the dollar, and its weakness and pending weakness that could follow a reduction in interest rates. Next week's upcoming "Greek's Week Ahead" article will address the dollar, and the cure we see for it, so don't miss it!

Goldman Sachs' (NYSE: GS) Global Alpha Fund reported a 22.5% depreciation in value in August, but thus far, hedge funds have not added much fuel to the economic fire. However, we would not advise confusing timing with economic probability. Remember though, hedge funds and alternative investment vehicles cover a broad range of investment styles. Some are in fact geared to profit from situations like the current investment environment. Also, liquidity for these sophisticated investors is typically not fluid enough to allow them to exit in panic. Many times, investors are limited to forewarn portfolio managers well in advance before pulling capital. This may provide some funds an advantage over mutual funds in capital flow management. In other words, it gives hedge fund investors an opportunity to sleep on it before pulling capital in panic. Still, a great enough cause for capital withdrawal would not preserve hedge funds any more than it would any other vehicle. People relate "risk" too often with hedge funds, though sometimes rightly so due to the often high degree of leverage employed. However, hedge funds, for the most part, if managed properly and depending on their goals, are engineered to minimize risk while providing absolute return.

Thank you for the many heartfelt thoughts readers shared with me concerning September 11th. They were warming, kind and inspirational.
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Tuesday, September 11, 2007

Sharing My Personal 9/11 Experience

I feel there is no better way to share my thoughts with you on 9/11 than through my own eyes and an email (found below) written to friends just after I arrived home on that tragic day.

I remember sitting in my apartment on Thursday September 13th, thinking I had forgotten something, that I needed to be somewhere. And as I recalled that I was late for a meeting, that I had registered for a conference taking place that morning in the Twin Towers, I broke into tears, as those beautiful symbols of American capitalism and opportunity were no longer there. As I realized that my life's path was possibly altered by a mere 48 hours and as I thought of those whose fate was also determined within that time-span, I wept uncontrollably.

We all witnessed it, but for those of us who smelled the fuel of the fire, whose eyes filled with smoke and hair filled with soot, for us, it was life altering. Before 9/11, I consistently worked until 10 pm on weeknights, and never left the office earlier than 9 PM. I worked most Saturdays from 12 pm through 12 am and many Sundays through the winter. My friends would telephone me from bars on Saturday night and call me crazy, but they knew why I was so crazy. You see, I was living my dream, working on "Wall Street", but I was not earning enough yet to cover my educational debt expenses and cost of living. I was determined to succeed in the endeavor I set forth on from childhood. What seemed like a mountain to climb, just making it to downtown NYC, was just one step in the mountain range that lay before me to attain my long-term goals.

All that hard work eventually paid off, as I was promoted into a special role within my firm, and I achieved success as evidenced by my performance. I was proud to say that I achieved that success without a moral or ethical sacrifice. I followed 40 companies as a sell-side analyst, without an assistant, when most of my peers on the street followed 12-15 with one or two junior analysts providing help. To do that properly, you either make personal sacrifice, as I did, or you make a poor ethical and moral decision to take shortcuts like many of my colleagues did and all of my supervisors. I was unwilling to violate the fiduciary responsibility I owed to our clients. You see I was raised right, and I turned out to be an honest guy with strong ethical values. I was viewed as a threat to many of my supervisors because of my high moral standards. I would call them on the error of their ways and refused to be a "yes-man", and that led to a degree of dislike and mistrust from some of them. However, I would not change a thing.

I remember walking from my office on Broadway one late evening, tired and frustrated with the slow rate of my own personal financial progress, and at that moment, as if designed by God, I looked up. Before me was a street sign and it read "Wall Street". I became overjoyed, so much so that I screamed "I work on Wall Street!" Nobody heard me but a homeless man and a couple of other fools who probably needed to hear it anyway. Sometimes we become so enthralled within our daily struggles that we forget about how far we have come. It was an epiphany for me.

After 9/11, I rarely worked a Saturday again and never on a Sunday. I still had my all-nighters before leaving for vacation and an occasional late night, but regularly left by 7:45 to catch the last Mario's Van Shuttle up the East Side. Although I was one of maybe five hard-working, good analysts in the office when I left, I still felt like it was early. I needed balance in my life, and I found it. Soon after, I met a great girl who I married, and have since altered my thinking quite a bit. Before 9/11, I would have considered getting my first Wall Street job the greatest accomplishment of my life, whereas now, I'm sure it will be the birth of my first child, however basic a human event that may be. It is still a miracle beyond any other.

For a good while after 9/11, many of my friends and colleagues used alcohol as a crutch, but I'm happy to say, they all seemed to make it through that tough period. We made it through together. Our friendships strengthened and our priorities changed. Now I will conclude this post with the unedited email I wrote to my friends and family after that horrible day. I wish the families of those lost my deepest sympathies and an assurance that they shall never be forgotten. They were my peers. They were regular people who got up to go to work one morning and were targeted by barbarians blinded by their cause. As I told people on that long walk home that morning, they have awakened a sleeping giant and they will regret the war they so naively sought.

The unedited email I sent to friends after 9/11:

"I'm ok. I was in a cab with 3 other people on the highway staring at the smoke coming out of the first tower, wondering if it was really happening and what had happened, when we saw the second airplane hit the South Tower. The ball of flame that came out was just unbelievable. I wandered around,watching the buildings burn. talked to people that were inside and got out, even one guy from 99th floor. talked to a guy who was covered in soot, who was alive only because he was inside his car when debris hit it. I was breathing dust and there was a coating all over everything. a woman was crying cause her son worked inside one of the buildings. I hugged her and told her I would pray. I was gathered around a car radio with a bunch of people when someone screamed the tower is falling!!!! I heard a rumble and looked over the building in front of me waiting for the building to come and crush me. My building is about a 5-10 minute walk to the WTC. I decided to walk north along the river. as I walked I saw people running toward me with a dust cloud chasing them. they were panicked. we were too far from the building, but if it was falling sideways, it could knock others down toward us. I kept going through the dust with others, north, not toward the building. I reached an open area and waited to see what was left of the WTC. as I stared up there into the dust, I noticed an American flag waving; I could have rewritten the Star Spangled Banner right there and then.... and before my eyes, the second tower fell into nothingness. my eyes still have dust in them. I felt very angry that someone was rejoicing somewhere about the murder of innocent civilians. I expect major and severe retaliation against the responsible cowardly enemy. I am more than ready to enlist against that enemy, or any that would do something like this. No question, this is the first attack on American soil since Pearl Harbor, and now, I understand war. I walked 90 blocks home and got here at 2pm. only now do I cry, as I think about the people I saw jumping to their deaths, exchanging burning for a quicker, less painful end. I always thought this was possible, but today, it still felt surreal. God help us get through it. We will I'm sure, just as that American flag did.

God Bless America"


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Monday, September 10, 2007

Publishing Schedule

Due to an urgent matter requiring our attention, our publishing over the next few days may be delayed and/or abbreviated. We thank your for your loyal interest in our work, and assure you that we continue to strive to provide value-added content despite the temporary disruption.

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Video - Rocky Balboa On Life

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Sunday, September 09, 2007

The Greek On Life & Rocky Balboa

I want to personally thank Sylvester Stallone for his contribution to society in creating and writing the words spoken by this inspirational character. Sylvester, before he became famous, spent some time working at a metal products fabricator and wholesaler on American Street in Philadelphia. I know this because my father and I would shop there for sheet metal used for restaurant kitchen wall cover etc. They were very proud of him.

The story of this man's own personal triumph, as detailed in the DVD version of his first film, Rocky, written and produced by him, is something worth owning. One particular piece within that documentary that I found interesting was that Stallone was offered $100,000 for his script. He turned it down, despite being near penniless, and made the film himself. Had he accepted the money, he would probably still be an unknown actor today. Instead, he turned down the lesser treasure to continue in the pursuit of his dream, and the rest is history.

I think that this particular scene, in the conclusion to the saga, Rocky Balboa, will go down as one of the most inspirational scene's in filmmaking history and be shown again when Sylvester is inevitably honored into the industry's hall of fame. Fictional characters in film like Rocky, Zorba, George Bailey, have inspired me, as have triumphant characters of real life like Peter Lynch, Winston Churchill, John F. Kennedy. Thank God for men like these and for genius like Sylvester's.

There's a Greek song with the lyrics, "I was born different. I am from those who win when they lose." Rocky's quote fits in with this character trait perfectly, and is something people like me, who find hope with each morning's first light despite a seemingly endless stream of challenge, live by. Never quit. Never give up. Like Rocky says, "life isn't about how hard you hit, it's about how hard you can get hit and keep moving forward." God bless those of you facing struggles. I say to you, keep standing. Fighters fight!

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Friday, September 07, 2007

BREAKING NEWS: Nonfarm Payrolls Severely Weak

Nonfarm payrolls for the month of August were reported this morning at 8:30 down 4,000, versus an expectation for an increase of 100,000. Wait, it gets worse! July was revised lower as well, to an increase of 68,000. These are levels indicative of a recessionary environment. Hang on to your hats folks, we may redefine the term "Black Friday" today. Wall Street Greek is expecting the market to not just retest lows in the near-term, but to set new ones. The Fed may now be forced to speed its rate cut, which we expected in time for its regular meeting in mid-September. Our forecast is for a 50 basis point cut, and we would anticipate the same if the Fed is forced to act today to stop financial markets from seizing up.

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Thursday, September 06, 2007

Happy Birthday Greek!

Wall Street Greek quietly turned one year old today. We thank you for your loyal readership and appreciate your interest in our viewpoints. We have had a ball doing what we love most, and have enjoyed the freedom to do so as we please, employing this wonderful medium. We hope you will continue to follow our site as we enter our second year of operation. We have some major changes in store, and we expect they will of course be value-added. That's our mantra folks! We seek to add value to your day. Thank you again. Now, who wants the piece with the flower?

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Wednesday, September 05, 2007

The Greek's Rest of the Week Ahead - The Laboring Market

Wall Street Greek welcomes back our belly-filled readership from the Labor Day holiday. We hope your spread was as good as ours, which of course also included a few Greek dishes, like Mamma Greek's best pastichio. So now you understand why this week's copy is uncharacteristically late, as it took awhile to digest the massive portion we downed!

A day late, but you should not be a dollar short if you've been reading the Greek this year. The shortened week ahead offers an important glance into the state of the labor market, and thus might provide some insight into the direction of the economy. Last week, we outlined our expectation of the Fed and its upcoming September policy meeting. We believe the Fed will cut its target rate by a half a percentage point. However, this week's data from ADP and the Labor Department will go a long way in either allowing for that possibility or making it more difficult for the inflation-centric Fed to act.

Last Friday, after our review of the President's proposal we picked through the Fed Chairman's speech from Jackson Hole. As a result, we gained confidence in the Fed boss... an ounce of it anyway. It seems clear that he agrees with our line of thinking now, but we're not sure if he got there on his own or after some meaningful nudging from the President or Congressmen Dodd and Frank. The concurrent timing of the President's announcement certainly showed how important the problem's resolution is to the administration, and rightly so. The election of another Republican, or the entry of a Democratic administration may rest on the fate of the economy.

The week ahead:

Tuesday started the business week off with two important economic reports. In his Jackson Hole speech, Bernanke noted that the Fed would be closely following more relevant recent data over more dated material. For whatever reason, the Fed has not seen the signs of consumer softening the Wall Street Greek has since we first began authoring articles nearly a year ago. That same reasoning must be behind the Fed's current focus on August numbers and indicators over July's results, since it seems to believe its current problems are aberrations or born from market induced panic. Actually, there remains a large group of experts and reporters of experts who believe current economic issues are the result of self-fulfilled prophecy. Others would call it logical result! For us, it's what makes Mozart so intuitive. Even if you've never heard a particular piece, you intuitively know what the next note is. Those of us in tune with this frame of thought understand the dynamism of the market, and can foresee what's around the corner. There's nothing mystical about it; rather its something rythmic.

Construction spending declined 0.4% in July, versus expectations for no change. Well, it's about time! It looks like the homebuilders have finally laid off all their illegal immigrants and are starting to work through the first traunches of U.S. citizenry. Well, actually June spending fell 0.3%, so there goes the theory of sudden trouble. What's even more frightening to us is the fact that nonresidential construction rose. Remember, we anticipate consumer softening could expose a saturated retail environment that would need to consolidate; this would drive a downturn in commercial construction if a credit crunch does not do it all by itself. In any event, we do not believe now is the time for new shopping center addition. And as for housing, construction in the housing segment declined 1.4%, as homebuilders were finally forced to cease construction and consolidate operations.

The Institute for Supply Management released its August index, and at 52.9, it still represents an expansionary state for the manufacturing sector. Still, as we stated in our daily copy, direction and rate of change are more important than the static of level. The direction of manufacturing, as indicated by the ISM data, is negative. July's index measured 53.8. We continue to expect the manufacturing sector to be the last signal, perhaps a late one, in indicating recession. U.S. manufacturers benefit from the strength of international demand, which is supported by the weak dollar.

Motor vehicle sales were reported to be 12.6 million in August, ahead of consensus expectations for 12.0 million and up from July's 11.5 million. Tuesday's earnings schedule included Avanex (NASDAQ: AVNX), Champps Entertainment (NASDAQ: CMPP), Donaldson (NYSE: DCI), Finisar (NASDAQ: FNSR), Guess (NYSE: GES), Mitcham Industries (NASDAQ: MIND), Mobile Telesystems (NYSE: MBT), NCI Building Systems (NYSE: NCS), Wimm-Bill-Dann Foods (NYSE: WBD) and several foreign firms.

Wednesday led off with the week's flood of jobs data with reports from two key sources. ADP Employer Services reported job additions in the private sector only increased 38,000 in August, after a revised 41,000 increase in July. Detractors of the ADP report are now pointing out its notoriety for revision, but we note that the report has been much more accurate since its producers revamped the process and figure. We also believe that it has been short as a predictor. Still, it has generally accurately predicted the state of things, later agreed to by the Labor Department's report that regularly follows it. ADP's figure is its lowest reported since June 2003.

There was a second bit of evidence of economic trouble provided on Wednesday morning by Challenger, Gray & Christmas. The group reported that planned layoffs soared 85% in August. Most of the weakness was attributed to the financial sector, but we see the retail sector taking the baton soon enough. As consumers put the skids on spending, consolidation will have to take place in retail and other consumer sensitive areas.

ICSC-UBS reported weekly same-store sales figures on Wednesday, showing a continuation of soft trends. Week-to-week sales rose 0.2%, while sales increased 2.3% year-over-year. Trends were running much hotter just a year ago. Also on Wednesday, pending home sales were reported down 12.2% in July.

At 2:00 PM, the Fed's beige book was released. The book provides anecdotal evidence on economic conditions, and is put together by a revolving list of the twelve regional reserve banks two weeks prior to each FOMC monetary policy meeting. Clearly, the report takes on the flavor of the reporting regional body, so let's hope Bill Poole isn't authoring this next copy! The Fed said the economic impact of credit market turmoil has been limited, and that the economy has continued to expand. Not exactly the kind of discussion conducive to a significant Fed action in a couple weeks.

U.S. Bancorp (NYSE: USB) is holding its investor day on Wednesday, while the earnings report schedule includes ABM Industries (NYSE: ABM), ADC (NASDAQ: ADCT), AeroVironment (NASDAQ: AVAV), Altera Corp. (NASDAQ: ALTR), Casella Waste Systems (NASDAQ: CWST), Casey's General Stores (NASDAQ: CASY), DSW Inc. (NYSE: DSW), Enel SpA (NYSE: EN), Imergent (AMEX: IIG), J. Crew Group (NYSE: JCG), Martek Biosciences (NASDAQ: MATK), Mediware Information Systems (NASDAQ: MEDW), Nevada Gold & Casino (AMEX: UWN), OSI Systems (NASDAQ: OSIS), Rex Stores (NYSE: RSC), Sport Supply Group (AMEX: RBI), Sycamore Networks (NASDAQ: SCMR) and a few more.

Thursday should offer up quite a bit of newsworthy information. The European Central Bank is meeting and is widely expected to keep rates steady, while the Bank of England is seen doing the same. Our own Fed offers up a slew of speakers from its group of governors, including perhaps the markets' least favorite, William Poole. We say this because we fear Poole's tongue since his now infamous statement that the Fed would not act outside of a "calamitous event." We simply viewed the statement inappropriate and unnecessary. Fed speakers must be very careful of their word usage in between official policy statements, and his words were especially ill-conceived in our view.

The Institute for Supply Management will report its non-manufacturing index on Thursday, and Bloomberg's consensus of economists anticipates a reading of 54.5 for August, compared to 55.8 recorded in July. Remember, the service sector drives the American economy, so this data is much more significant than the manufacturing survey released earlier this week.

The revision to second quarter productivity is scheduled for 8:30 a.m. release on Thursday, and the consensus sees a 2.5% quarter-to-quarter improvement and a 1.5% increase in unit labor costs. Speaking of labor, some more information reaches the market on Thursday, and it will not get as much attention as Wednesday and Friday's news. However, the Monster Employment Index will be reported. We view the index as the new age "Help-Wanted Index," since most job search is done online nowadays. The metric rose earlier this year, but has since plateaued. June's 186 measure, or July's 183 reading, may not be surpassed for quite some time, in our view. Weekly Initial Jobless Claims caught our eye last week, and the market's as well. We suspect the rise of 9,000 in the league of newly unemployed was a sign of things to come. The consensus is looking for a reading of 330,000 this time around, compared to last week's 334,000. Weekly readings can be bumpy, so we suggest paying closer attention the trailing four week figure.

Retailers report August sales around this time of the month, and the monthly Chain Store Sales Report is due for release Thursday. We fully expect retailers to post a disappointing "back to school" season this time around, and we would remain underweight consumer discretionary shares now. We noted our industry weighting preferences in a publishing weeks ago, and we plan to soon incorporate a section into our site providing our current view on specific industry sectors.

H&R Block (NYSE: HRB), Millipore (NYSE: MIL), National City (NYSE: NCC), TempurPedic (NYSE: TPX) and Juniper Networks (NASDAQ: JNPR) are meeting with analysts or investors on Thursday. The day's earnings schedule includes Alloy (NASDAQ: ALOY), America's Car-Mart (NASDAQ: CRMT), American Software (NASDAQ: AMSWA), Campbell Soup (NYSE: CPB), Cascade Corporation (NYSE: CAE), CDC Corp. (NASDAQ: CHINA), China Power (2380.HK), Dolan Media (NYSE: DM), Duckwall-ALCO Stores (NASDAQ: DUCK), Fleetwood Enterprises (NYSE: FLE), Hayes Lemmerz International (NASDAQ: HAYZ), Hooker Furniture (NASDAQ: HOFT), Hovnanian Enterprises (NYSE: HOV), Jackson Hewitt Tax Service (NYSE: JTX), Kellwood Company (NYSE: KWD), Korn Ferry Int'l (NYSE: KFY), Lantronix (NASDAQ: LTRX), MDS, Inc. (NYSE: MDZ), Methode Electronics (NASDAQ: METH), Movado Group (NYSE: MOV), National Semiconductor (NYSE: NSM), Nobility Homes (NASDAQ: NOBH), Plato Learning (NASDAQ: TUTR), Qualstar Corp. (NASDAQ: QBAK), Quiksilver (NYSE: ZQK), SAIC, Inc. (NYSE: SAI), Smith & Wesson (NASDAQ: SWHC), Solera Holdings (NYSE: SLH), The Cooper Companies (NYSE: COO), The Descartes Systems Group (NASDAQ: DSGX), UTI Worldwide (NASDAQ: UTIW), VeriFone Holdings (NYSE: PAY), Volt Information Sciences (NYSE: VOL) and a few more international operations believe it or not.

All us Wall Street nerd types will be up all night anticipating Friday's Employment Situation Report from the Labor Department. The consensus of economists anticipates an unemployment reading of 4.7%, and we agree, along with the Fed, that unemployment will gradually rise toward 5%. The tenth of a percentage point increase this month is expected now even among "Goldilocks" delusionaries. Nonfarm Payrolls are seen increasing some 100,000, though Barron's reported an expectation for a reading of 109,000. The weak ADP Report has likely led to many revisions lower. Average hourly earnings are seen increasing 0.3%, and we anticipate labor costs will not adjust in time to set up the accommodating inflation environment the Fed seeks in order to cut rates.

Wholesale Trade for July is also set for release Friday. Barron's reports the consensus view for a 0.4% increase in wholesale inventories, which is a component of the trade figure that measures both inventories and sales. Inventories rose 0.5% in June.

Friday ends the shortened week with earnings news from Aceto (NASDAQ: ACET), APT Satellite (NYSE: ATS), Hi-Tech Pharmacal (NASDAQ: HITK), Logility (NASDAQ: LGTY) and a few others.

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