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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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Friday, November 30, 2007

Gas is Expensive, So Let's Shop Online

Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

(Stocks in this article: Nasdaq: EBAY, Nasdaq: GSIC, Nasdaq: AMZN, Nasdaq: NILE, NYSE: MA, NYSE: DKS, NYSE: ARO)

For a consumer who is counting his pennies, the rising cost of filling the tank might be enough to spur online sales to race ahead of their already torrid pace. With this theme in mind, I prospected for some appropriate investment ideas for you and turned up one you knew in Ebay (Nasdaq: EBAY) and one you might not have known in GSI Commerce (Nasdaq: GSIC).

There’s generally no argument any longer that the consumer is carrying a heavy burden including the rising cost of food and energy, increasing unemployment, decreasing home equity, and in some cases, mortgages that are adjusting higher. We have observed gradually easing weekly same-store sales growth rates throughout the year, with this past week’s data from the International Council of Shopping Centers showing a 2.5% annual increase for the period including Black Friday. The overall tally from Black Friday itself showed sales increased over the prior year period, but on a lower ticket per shopper.

So, if the consumer is more price sensitive this year, then rising gasoline prices could be a noteworthy driver of sales trends. Over the past decade, the penetration of the SUV into American society has established the gas guzzler within a great deal of American households. Just two weeks ago, this article at bankrate.com showed the hypothetical cost of filling some of the most expensive tanks on the road at $100+ if gas were to reach $3.50 a gallon. In fact, in real terms after adjusting for inflation, crude prices have already flirted with the historic high of 1980. Gasoline prices are catching up. According to the Energy Information Administration, the national average price of gasoline had reached about $3.10 a gallon in the week ended Nov 26th, though the price had slipped about a penny from earlier this month.

So if consumers grow weary of putting miles on the old wagon, then perhaps online sales will spike even higher than their already hot pace. ComScore, an expert on the subject, projects online sales will increase 20% this holiday season (November and December), to $29.5 billion. This would represent some 24% of total forecast online sales this year. Quoting Paris Hilton, “that’s hot,” but I posit that online sales could exceed that forecast if gasoline prices continue higher.

Based on this thesis, I set out to identify some likely beneficiaries, some of which I hoped might be on sale due to the market’s recent slide. A quick glance at the stock charts of the companies I will discuss here seems to indicate so. A few of these names you already know unless you live on Mars, but one I think might be new to you.

When thinking about online shopping, three names immediately come to mind, including Amazon.com (Nasdaq: AMZN), Ebay (Nasdaq: EBAY) and newcomer and highflier Blue Nile (Nasdaq: NILE). Unfortunately, even though all these names have given back ground along with the market of late, some are still plenty expensive in my view.

Blue Nile

I’m proud to call myself an early adopter when it comes to Blue Nile, after buying the diamond for my wife’s engagement ring from the company some three years ago. However, the company and its stock are no secret anymore. Even after giving back mucho ground recently, NILE’s valuation at 58X the ’08 consensus estimate of $1.32 compares to a five-year growth rate estimate of 24%. That exceeds Cramer’s 2.0 P/E/G ratio danger zone, and I have to agree represents risky territory. Even so, an optimist would note the company exceeded estimates by $0.14 last year. If we add that amount to the $1.32 estimate for ’08, and adjust that number up to $1.46, the stock trades at a P/E of 52. Looking at this year’s earnings growth rate of 38%, we could say the five-year forecast might be understated. However, even if we apply a 30% five-year rate to the adjusted 52 P/E, that’s still offering a P/E/G of 1.7, and not much margin of safety in case we’re wrong or something goes awry. So, I would not buy NILE now.

Ebay & Amazon

Amazon.com (Nasdaq: AMZN) also looks expensive to me at 53X the ’08 consensus of $1.62, given its long-term growth outlook of 23%. But Ebay (Nasdaq: EBAY) seems to offer value, the kind of value that makes you ask why, what’s wrong here. With a P/E of 19.5X and a long-term growth forecast of 18.6%, EBAY looks attractive based on the numbers.

I believe the company’s overpayment for Skype, and related charge in ’07, as well as its diversification across various Internet businesses, like Stubhub.com, Rent.com and others have fogged the picture for some and kept valuation restrained. In my view, this has created a buying opportunity in a proven business model that has plenty of room for international growth and interesting assets like Skype that could prove breadwinners later on. I specifically see opportunity for Skype to develop into a leading social network with a twist, should management take it in that direction. In any event, the company’s marketplaces segment and PayPal look to be solid drivers of growth in the near-term. PayPal just reported a 33% increase in online payment volume this Black Friday, compared to last year’s big day. PayPal is becoming a serious competitor to other payment processors like Mastercard (NYSE: MA). Thus, I would buy EBAY here.

GSI Commerce

GSI Commerce (Nasdaq: GSIC) is a rising mid-cap in the net space. The company helps traditional retailers with the online end of their operations. GSIC boasts a client list 50 strong and growing, including mostly well-known retail names like Dick’s Sporting Goods (NYSE: DKS) and Aeropostale (NYSE: ARO).

GSIC has managed to grow its revenues at a 43% average annual clip from 2001 through 2006. However, if you look at the consensus ’08 EPS number, you get a GAAP estimate that includes a special tax item. Needham & Co.’s Mark May, who rates the stock “Hold,” has an adjusted fully taxed EPS estimate for FY 08 of $0.60. That represents 150% growth over May’s ’07 expectation of $0.24. If we use his ’08 EPS estimate, we get a P/E of 44X. Applying the long-term analysts’ consensus growth forecast of 31%, that puts GSIC’s P/E/G ratio at 1.5. That’s not bad considering the relative valuation of the company’s peers discussed in this article, and given GSIC’s strong growth. I have a hunch growth estimates could prove conservative, given the company’s solid client footing, and likely greater ability to attract new customers as a result. Thus, I would call GSIC an “accumulate” or soft buy here. After all this insight, all you have to do now is boot up and shop for your stocks.

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Morning Report: Who's the Chicken?

(Stocks in this article: Nasdaq: DELL, NYSE: TIF, NYSE: MOT, NYSE: COP, NYSE: SPY, NYSE: DIA, Nasdaq: QQQQ, Nasdaq: GSIC, NYSE: MS)

Who does the chicken represent in the illustration here? Is it the Fed, the media or the market? This is a question that must be asked this morning as the Fed appears to be making an about face. Is the Fed making a complete turn in light of market need, or is the media depicting the Fed in this light? There's a little of both ingredients in this soup I believe. While the Fed discusses both sides of the argument, the media highlights what it views news-making. It's not news gathering per se, it's news making.

But what about the market. Is she efficient or not!? If she is efficient, then it should not matter for long what the media announces. The market should figure it all out and interpret it as it should be best understood. This is why, if the Fed surprises the market on December 11th, most of the blame should be directed to the Fed. There is no argument for misinterpretation over extended periods, just miscommunication. The media is powerful though, and influences the great American majority, so the picture can be skewed. But, the picture is only skewed, not altered.

  1. Bernanke's Speech - I listened to Bernanke's address, and reviewed Kohn's speech as well today. In my view, Bernanke was much less dovish than Kohn, and it seems to me far from certain what the Fed will do on December 11th. What seems certain is that the Fed has no intention of an earlier emergency meeting, as some fanatic rumor mongers are whispering about on the Street. The credit market issues are of grave concern, and depending on developments, could require Fed help (whatever it can do along with Paulson and the banks). However, we (including the Fed) have to be careful about confusing fourth quarter bank charge-offs with new problems. Also, we should be careful about completely believing the heads of the banks, who will do what they can to influence Fed action as favorable as possible for their own interests. I believe there's now a 60/40 chance of inaction versus a 25 basis point cut, and I am completely alone in this view. I do believe the Fed could react like a chicken with its head cut off when the stock market panics after the hypothetical inaction I described. Will the Fed act then in order to avoid a knee jerk reaction later? This may occur as well. I believe Bernanke's discussion is being taken for more than its value or intention today. Also, take close note of Kohn's qualification before his speech this week, where he says that his views may not agree with the views of other members of the FOMC Policy Committee. Anecdotal evidence I've seen does not frighten me about the pay performance of SIVs. In fact, pricing, while lower, is not panic button lower. However, I recognize the ledge we walk as well. Remember me in December, but if the dynamic market requires a change in advice, I'll provide it rather than stick to an opinion based on stubborn pride or image concern, like you'll find in corporate boxes. Remember that I am discussing my view on market perception of Fed future action, not on what I believe the economy needs. Stocks will move on perception now, while driven by the economy and Fed support or blunder over the longer term. Offering daily advice requires me to do this, but I do my best to present the long-term view as well. As Cramer says, and I agree, the best investor is omni-aware of the current situation, and not necessarily a buy and hold investor. This conventional strategy suits those best who will not follow broad matters that affect less than long-term price movement. However, there is also value to be added by selling stocks you like for the long-term (on valuation), in order to buy them back cheaper later, or replace them with undervalued ideas.
  2. Personal Income & Consumption - Personal income and consumption both increased at a less than expected pace of 0.2%. No surprise here, as we expect the economy to slow this quarter. The PCE Deflater information within the report offers the data that is market-moving, or could be today. The Fed's favored inflation gauge, excluding food and energy, was up 1.9% over October of 2006, matching the revised higher September figure. This is enough to keep the Fed's attention, but it seems unemployment is rising faster as well. Next week's jobs data will prove critical, in my view.
  3. Credit Market Ailments & Cures - Hank Paulson is reportedly working with banks in an effort to keep ARM introductory rates from resetting en masse for long enough to let the economy stabilize. It sure does seem like a band-aid though, but anything that gives the economy more time to digest things might also allow it and credit derivative markets time to stabilize through other solutions.
  4. Mass Crude Exodus - Fundamental short-term demand factors are being realized finally. We noted here that the price of oil was unsupported, and we recommended exit from the commodity. We were early by a few weeks, as is often the case, but better early than late or never. I see oil dropping precipitously now, perhaps to sub-$80.

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Thursday, November 29, 2007

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Morning Report: Much to Digest

(Stocks in this article: Nasdaq: SHLD, Nasdaq: ETFC, NYSE: HNZ, Nasdaq: DELL, NYSE: SFD, NYSE: VSE, Nasdaq: USBE, NYSE: WMG, NYSE: TM, NYSE: SPY, NYSE: DIA, Nasdaq: QQQQ)

Stocks are retracing today on much news to digest, including a pipeline explosion, economic concerns and bad news from Sears.

  1. GDP - Third quarter real GDP growth was revised higher to a 4.9% rate, up from the advance reporting of 3.9% and second quarter growth of 3.8%. While many will focus on the strength in this number, smart money will look to the forecast slowing rate of growth for Q4 (brilliant money looks to the Fed and '08). The result was just a tenth of a percentage point ahead of expectations, so the number should not have a discernable impact. The price index for gross domestic purchases was unchanged at 1.6% growth, while prices measured up 1.7% excluding food and energy, up from a 1.5% increase in Q2. CNBC's Rick Santelli, my favorite TV analyst, called this number comforting (paraphrasing), but I'm concerned with the quarter-to-quarter trend. The strong GDP rise was powered by 2.7% growth in personal consumption expenditures, nonresidential fixed investment and structure growth, 18.9% increased exports, partly offset by a 19.7% decline in residential fixed investment. Defense spending rose 10.1%. Change in inventories nearly added a full percentage point. Remember now, it's the future that matters to the market, not the pundits who will come out today proclaiming that Goldilocks is alive and kicking. The market worries about her tomorrow.

  2. Critical Pipeline Explosion - An oil pipeline connecting Canada and the U.S., through which some 20% of our country's oil is sourced (the 4 line system), exploded. The operator immediately closed down four pipelines, before reopening two. 2 million barrels a day flow through that channel, and oil has appropriately reacted today, as NYMEX crude futures opened $2 higher. The explosion reportedly occurred while the affected line was shut for maintenance, so I venture to guess that this maintenance might have played a role. Otherwise, this explosion, following by a day the arrest of several terrorists in Saudi Arabia who were reportedly planning this kind of attack, is very suspect. Maybe the FBI should be attuned to America's energy resources now. Terrorism on energy infrastructure hurts the U.S. while driving prices higher, benefiting the pockets of our Iranian enemy. There's a logic behind this type of attack, should it be found to be terrorism. Regarding crude pricing and despite any future implications, I suspect this hit will give those longs left behind another opportunity to reduce their positions and keep crude from rocketing much higher.

  3. Sears - It's one thing to take blame and accept fault, but this is ridiculous! Eddie Lampert's Sears (Nasdaq: SHLD) is down 14% this morning on a depressing press release and commentary (and poor results by the way). While it may help to limit shareholder lawsuits (actually no, it doesn't), it also offers very little hope. The headline is that SHLD experienced a 99% decline in quarterly profit on troubled sales at Kmart and Sears and other investment losses. On the bright side, sales only slipped 3%. I think this result is greatly due to housing and consumer confidence, and the saturated retail environment I've discussed so often.

  4. Jobless Claims - Weekly Initial Jobless Claims spiked higher last week to 352K, well ahead of the consensus 330K view. More disturbing is that the four-week moving average rose 5,750 to 335,250. It's time for unemployment to pick up at a faster pace and the anecdotal evidence is littering the street these days. The wires are carrying more and more news of layoffs. Remember, my call for the kicker in this punch is that post the holiday season, retailers will cut employment sharply, and as the year progresses, a saturated retail/restaurant environment will be exposed, leading to consolidation and commercial construction recession as well. You heard this here first months ago, and when it plays out, please tell your friends about the Greek's calls in '07. Otherwise, they are lost in the mix with the news reporters of current events. In the beginning of this year, when I was warning of a second leg lower for housing and dangerous repercussions for the financial sector, I was actually labeled an "Armageddon Analyst." Well, for those who labeled me, I now say, welcome to Armageddon.

  5. Corporate Profits - Corporate profits declined, as weakness in domestic profits for both financial and non-financial firms outweighed profit growth from international sources. Nothing new here, exports and international sales continue to do well while the domestic economy softens. Remember my call, that it is the American consumer who butters the bread of American companies, multinational or not, and in the end they will influence global economic stability as well.

  6. Foreclosures - Foreclosures ran at a 94% rate of increase in October, year to year. What's important to note about this data is that the level of foreclosures has leveled off since peaking in August. As we lap this past year's ugly results, growth rates as stunning as these recent monthly reports should moderate some. Foreclosures should still increase though in my view, as more mortgages reset and unemployment increases.

  7. October New Home Sales - New home sales came in well short of consensus, though the news was initially misreported by financial media due to a revision lower of prior month results. At a 728,000 annual pace of sales, the news is far from good.

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    Wednesday, November 28, 2007

    Here Comes Santa Claus

    santa clausVisit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.


    Besides filling their tummies, last week’s tasty turkey should have warmed market participant memories of festive holiday seasons past. Here’s why I think we’ll enjoy a Santa Claus rally late next month.

    It’s the fourth quarter stupid!

    While I believe a good deal of the blame for the recent market mayhem goes to the Fed for shifting to neutral, let’s not forget that it’s the fourth quarter. It’s not so much that time of year for roasting chestnuts, as it is for writing off the kitchen sink at ailing homebuilders, lenders, investment banks, automakers and other impaled companies whose shares drive the major indices. This quarter’s parade of write-offs seems to have blindsided the market, but it should not have. Every Benjamin Graham and his mother knows America’s sick and wounded will take the opportunity to wipe the slate clean now, and hope to start ’08 anew.

    At some point, hopefully soon, charge-off warnings should peter out. However, we will still have to contend with another phenomenon indigenous to Q4, tax loss selling. I’m sure it’s already played a role, but it could continue as investors trade losses in companies like Beazer Homes (NYSE: BZH) for new interests in shares like Toll Brothers (NYSE: TOL). Despite my example, a good deal of tax loss selling is not replaced with new holdings in the same specific industry; this is probably much more common within institutional portfolios. Nevertheless, when we run the final lap of a losing year, you can expect stocks to generally sell off further. However, the trend also provides greater likelihood for a strong “January Effect.” The important point is that at some point before the end of the year, tax loss selling and fourth quarter warnings should run out of fuel, leaving scavenger value investors ample pickings for the winter.

    So then Greek, how do we play this hand?

    To best advantage I would seek the top ideas in weak industries where I believe valuation may be unjustly penalized most due to the circumstances outlined above. These names will have been sold off alongside their more troubled peers, but they will also likely be added into many portfolios whose charters or strategies call for diversification and industry exposure. In home building for instance, I view Toll Brothers (NYSE: TOL) as the crème de la crème. TOL, which caters to a higher-end home buyer, has seen its shares tank 44% this year through November 26. Still, that compares to a decline of near 85% for BZH. While the entire group could find shareholder support starting in December or January, I would not venture any new capital into any participant but the industry leader since housing is expected to remain troubled well into ’08 and the Fed is set to sit on the sidelines until the fire rages.

    Another clear area to look for beneficiaries of seasonal portfolio adjustment is within the financial sector. If you lost money in Citigroup (NYSE: C), you’ll want to take the tax loss, and then you might also buy into one of its beaten silly peers. These days, most of the capital flow has been out of these shares for the previously discussed tax reasoning, but soon flow should shift as value seekers close in. In the search for buy ideas, I prefer a name like Merrill Lynch (NYSE: MER), down 45% year-to-date, because of its diverse product offerings. Morgan Stanley (NYSE: MS), which has lost 28% year-to-date after netting dividends, also offers opportunity for the same reason in my view.

    I think you get the idea, and you should already be aware of plenty of opportunities of your own that you can apply the strategy too. My risk caveat here is that I would look to about a week after the December 11th FOMC announcement for an upward move to start in earnest, since I expect market surprising Fed inaction to drive further downside. Before today's Kohn comment, and given recent equity direction, there’s a decent chance that this possibility could become fully priced in ahead of the meeting. In that case, you have load up sooner. Good luck applying the strategy, and oh, don’t forget to leave the milk and cookies out for Santa!

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    Morning Report: Kohn Demands Attention

    To see today's morning report and analysis of financial market news, visit our FRONT PAGE.

    (Stocks in this article: NYSE: WFC, NYSE: SPY, NYSE: DIA, Nasdaq: QQQQ, NYSE: FRE, NYSE: PBY, NYSE: C, Nasdaq: MRVL, NYSE: BBL, NYSE: RTP, Nasdaq: CALD), NYSE: MON, NYSE: MOS, NYSE: POT)

    Don Kohn has the market abuzz this morning. Perhaps he has felt like a side show, as relative youngsters, Mishkin and Bernanke, have risen in popularity. His comments have caused some eyebrows to raise regarding the Fed's current view of the economy and need for rate action. Futures are looking higher as a result.

    1. Wells Fargo (NYSE: WFC) Joins the Fray - WFC said Tuesday evening that it will recognize $1.4 billion in home equity loan losses when it reports its fourth quarter. The company is also packaging $11.9 billion of its riskiest assets for sale. Good luck with that dump! The shares were down in after hours trading and are lower again this morning by about 1%. However, putting a number to the risk might open WFC up to our buy list soon. Estimates will likely be revised lower for this year and next, and the stock's recent price movement is reflective of that. Before recommending the shares, we'll have to study how much analysts discount the risk related to troubled assets. I might be on the same boat as banking analyst Richard Bove, but for the media's ill-conceived expectations for a December rate cut. It's clear the market does not wholeheartedly agree given recent trend, so it befuddles me that the media keeps naively pounding the table and exposing its misunderstanding.

    2. Petroleum Status - At 10:30, all eyes will find the EIA Petroleum Status Report. Last week's report showed a crude oil draw of 1.1 million barrels from inventory. This morning, futures found a floor considering the direction of inventory flow last week. An OPEC production boost gets slowly slid off the table by the slight of hand of the savvy ministers if oil stays in the low $90s this week. At this point, we look too far off the century mark for this data alone to move us there in one swoop, especially with the market so focused now on the most important fundamental driver, economic activity.

    3. Durable Goods Orders (October) - Expectations for a 0.3% month-to-month increase were let down this morning by the report of a 0.4% decline in durable goods orders in October. This is no surprise considering the nature of the goods, the state of housing and the economy, and other current events. Ordering activity would naturally slow in this environment. Excluding transportation and defense, orders were even worse, and the proxy for business investment showed a 2.3% decline. The overall 0.4% drop compares to September's revised decrease of 1.4%.

    4. Fed's Kohn Catching Media Attention - CNBC is abuzz this morning with the comments of Donald Kohn at a prescheduled address. Call me crazy, but saying the market needs to be "nimble" does not signify to me that the Fed will cut in December. In fact, to me it says that the Fed is staying put in December, but would act if it viewed the economy in need. His comment that caused the most stir was that the situation has changed since the last Fed meeting (paraphrasing). So, this would imply that maybe the Fed's position had changed as well. I doubt it, but I expect the next vote to be less than a consensus decision. I still expect the Fed to hold pat in December and let the market down; stocks could discount this fully into price ahead of the event, so that comments about the outlook and Fed willingness to act could actually offer upside to stocks on that day. We'll keep an eye on it for you.

    5. Existing Home Sales (October) - At 10:00 AM, look for the pace of Existing Home Sales to have slipped again in October. Bloomberg's consensus forecast expects an annual pace of 4.95 million sales, compared to 5.04 million in the month just prior.

    6. Beige Book - At 2:00 pm, the Federal Reserve releases its Beige Book survey of regional economic conditions.

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    Tuesday, November 27, 2007

    Morning Report: Infusion of Confidence

    (Stocks in this article: NYSE: SPY, NYSE: DIA, Nasdaq: QQQQ, NYSE: C, Nasdaq: SPLS, NYSE: BCS, Nasdaq: FSLR, Nasdaq: RVBD, Nasdaq: CMRG)

    Stocks have opened higher this morning supported by an investor show of confidence in Citigroup.

    1. Confidence Restored as Citigroup Gets Infusion - Citi (NYSE: C) received a $7.5 billion cash infusion from the Abu Dhabi Investment Authority. The preferred stock dealt will yield 11%, and is convertible to shares starting in March 2010 at prices up to $37.24. The investment represents a 4.9% stake in Citi, and it would seem a good investment for as long as geopolitical stability holds. This should provide some confidence to the troubled financial sector, and help stabilize the group. While I believe the shares could show short-term strength, I remain concerned about the December FOMC meeting and the result I'm looking for in inaction. However, I would be solidly long by New Year's in any event.

    2. Economic Data & Analysis - This mornings weekly same-store sales report from the ICSC-UBS showed a 2.5% year-over-year increase for the Black Friday inclusive period. Not bad... Population growth continues, prices have risen and unemployment is still relatively strong, so this should not be such a surprise. Still, we note that the result was not especially strong, just still displaying signs of life. At 10:00 a.m., the Conference Board will report Consumer Confidence, with Bloomberg's consensus looking for a reading of 90.5. The University of Michigan measure was adjusted higher last week, but not much higher to a still poor 76.1. Despite ongoing holiday shopping, the consumer is showing signs of strain and concern that I view foreboding for economic recession in '08.

    3. Saudis Confirm Production Boost - Not really. The Saudi Minister only indicated that production was up about 200K barrels a day from a point before the November 1 OPEC increase. He would not confirm that OPEC might raise production next week when it meets. This is really no news folks, but it's being interpreted as bearish and interpretation is important for short-term price movement, not reality. I do expect OPEC to raise production though, and this week's inventory data and price activity may play a final role in that decision. However, a loyal Greek, reader forwarded me an article yesterday indicating that the U.S. has secured more tankers than usual to transport more fuel than usual to the Middle East and Indian Ocean fleets and bases over the near term. I've suspected all along that the strategic oil reserve may be filling at a rate faster than the published rate, and this news, confirmed by the government, seems to point toward a coming need. Analysts are speculating that it could be for a war game demonstration, but logic tells us that '08 will be the year war begins with Iran. I'm willing to go out on a limb here again because of my conviction on this topic, and because this is what you deserve from independent research. The only data bit conflicting with the war scenario is the U.S. effort to build a missile defense shield in Eastern Europe. However, it's also possible that we are covering all basis. I remain bearish oil for the short short-term, and bullish over the medium and long-term.
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    Monday, November 26, 2007

    The Greek's Week Ahead - Insane Hour

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

    It started as early as 4:00 AM in some places. It was not a fishing trip or some other event that normally begins at a ridiculously difficult hour. No, it was the start to the shopping season this past BLACK FRIDAY! I participated in the mayhem one wild year, and though it was the most efficient shopping experience of my life, it was also insane. It's all a trick you know... It's commercial America's sly way to get you into the stores for the longest day of shopping history. You get started so early and fueled by the adrenaline rush associated with catching your favorite store's blockbuster deal that you just keep going all day long. And if you miss the morning rush, you know there are still good deals to be had, so you go out anyway. Bah humbug! Keep an eye on the site this week, as I'll be publishing plenty of value-added reports alongside the regular daily market preview.

    The Week Ahead...

    Monday is data empty following the long holiday weekend. The earnings schedule is also light, including the likes of Citi Trends (Nasdaq: CTRN), Donaldson (NYSE: DCI), EDAP TMS SA (Nasdaq: EDAP), On Track Innovations (Nasdaq: OTIV), Shoe Pavilion (Nasdaq: SHOE), SkillSoft (Nasdaq: SKIL) and Streamline Health Solutions (Nasdaq: STRM).

    Tuesday offers the weekly same-store sales data from the International Council of Shopping Centers. Last week's report showed sales only rose 2.2% over the year ago period. This week's data will offer an interesting comparison to last year's week that included Black Friday.

    At 10:00 AM, the Conference Board will report the Consumer Confidence Index. Bloomberg's consensus is looking for further deterioration in a reading of 90.5, down from 95.6 in October. Both confidence figures published by the Conference Board and the University of Michigan are at low points for the year, and down significantly from last year's shopping season.

    Fed President Charles Plosser is scheduled to address a group at Rochester University on Tuesday. The S&P Case Shiller Home Price Index is expected to show further deterioration, and according to Barron's quoted expert from MFR, an acceleration of rate of decline. It's debatable how the market will interpret such information. On the one hand, it clearly means each sale is less profitable for homebuilders. Also, equity values are decreasing for home owners still, and some of these owners may be sitting on homes whose mortgage is larger than the home value, offering incentive to default out of tough loans. On the other hand, lower prices might allow inventory to move at a better rate and bring supply into closer alignment with demand. Eventually, this has to happen for the market to stabilize.

    The earnings calendar includes American Eagle Outfitters (NYSE: AEO), Analog Devices (NYSE: ADI), Bank of Montreal (NYSE: BMO), Casual Male (Nasdaq: CMRG), Central Garden and Pet (Nasdaq: CENT), Dress Barn (Nasdaq: DBRN), Finlay Enterprises (Nasdaq: FNLY), Gravity (Nasdaq: GRVY), Jackson Hewitt Tax Service (NYSE: JTX), Kopin (Nasdaq: KOPN), Linktone (Nasdaq: LTON), Marvell Technology (Nasdaq: MRVL), Pep Boys (NYSE: PBY), Semtech (Nasdaq: SMTC), Sigma Designs (Nasdaq: SIGM), Sonic Solutions (Nasdaq: SNIC), Staples (Nasdaq: SPLS), Talbots (NYSE: TLB), Verigy (Nasdaq: VRGY) and a few others.

    The data load gets busy on Wednesday, starting with the Mortgage Bankers Association reporting of Purchase Applications. Changes to this data are just not important yet, but they have revealed a stealth refinancing effort as the government and interested parties, including banks set to deal with defaults, do their best to get people into manageable loans. Not everybody agrees on the catalysts though. Countrywide Financial's (NYSE: CFC) CEO Angelo Mozilo would probably argue against the point about government action.

    Durable goods orders will be reported for the month of October at 8:30 on Wednesday. Bloomberg's consensus is anticipating a 0.3% month-to-month increase, and this compares to September's decrease of 1.7%. Expectations vary here, and another decrease is not out of the question. For instance, Barron's quoted Lehman Brother's expectation for a 0.7% decline.

    At 10:00 AM, look for the pace of Existing Home Sales to have slipped again in October. Bloomberg's consensus forecast expects an annual pace of 4.95 million sales, compared to 5.04 million in the month just prior. A half hour later, all eyes will find the EIA Petroleum Status Report. Last week's report showed a crude oil draw 1.1 million barrels from inventory. At 2:00 pm, the Federal Reserve releases its Beige Book survey of regional economic conditions.

    The day's earnings schedule includes Aeropostale (NYSE: ARO), Beacon Roofing Supply (Nasdaq: BECN), Brown Shoe (NYSE: BWS), CBRL Group (Nasdaq: CBRL), Coldwater Creek (Nasdaq: CWTR), Culp (NYSE: CFI), Dollar Tree (Nasdaq: DLTR), Inergy Holdings (Nasdaq: NRGP), Jo-Ann Stores (NYSE: JAS), Men's Wearhouse (NYSE: MW), Oil-Dri Corp. (NYSE: ODC), Sycamore Networks (Nasdaq: SCMR), TiVo (Nasdaq: TIVO), White Electronic Designs (Nasdaq: WEDC), XETA Technologies (Nasdaq: XETA) and a few others.

    Thursday is power packed full of economic data points. Corporate Profits for the third quarter will be published at 8:30 a.m. The initial reporting of Q3 GDP at 3.9% is expected to be revised up to 4.8% by Bloomberg's group of economists. Though highly publicized and well-anticipated, it will be interesting to see how the Fed-cut-expecting market receives this news. I continue to expect the market to receive a royal slap in the face on December 11th, when the FOMC announcement is made and rates are kept steady.

    Weekly Initial Jobless Claims are seen matching last week's reporting of 330K. New home sales for October are expected to measure at an annual pace of 753K, down from 770K in September. We do not disagree with the direction, though the level could surprise even lower. The EIA Natural Gas Report comes at 10:30, and nat gas is finding support now from a colder than average temperature forecast for the coming week. Bernanke finds a mic at 7 p.m., so stay tuned to the wire in the evening, or read the Greek's Morning Report on Friday, as this could be news worthy.

    The earnings reporting schedule includes Dell (Nasdaq: DELL), Sears (Nasdaq: SHLD), ACI Worldwide (Nasdaq: ACIW), American Woodmark (Nasdaq: AMWD), Argon ST (Nasdaq: STST), Atwood Oceanics (NYSE: ATW), Bon-Ton Stores (Nasdaq: BONT), Brocade Communications (Nasdaq: BRCD), Cost Plus (Nasdaq: CPWM), Del Monte Foods (NYSE: DLM), Fred's (Nasdaq: FRED), Genesco (NYSE: GCO), Gerber Scientific (NYSE: GRB), Gottschalks (NYSE: GOT), H.J. Heinz (NYSE: HNZ), Hellenic Telecommunications (NYSE: OTE), J. Crew (NYSE: JCG), National Bank of Greece (NYSE: NBG), Rex Stores (NYSE: RSC), Smithfield Foods (NYSE: SFD), The Wet Seal (Nasdaq: WTSLA), Warner Music (NYSE: WMG), Zumiez (Nasdaq: ZUMZ) and a few more.

    On Friday, the last day of November, Personal Income and Consumption for October are due to be reported. The consensus is looking for a 0.4% increase in income. After Friday's rumor of massive pending layoffs at Citigroup (NYSE: C), and Wall Street generally bracing for a round of job cuts and slim bonuses (by Wall Street terms, but still stellar for most humans the world over), this data might start to look bad along with unemployment in '08. Personal Consumption is expected to increase 0.3%; this is the more important figure to the market on Friday, and any softness could start an unsettling stock drop.

    The National Association of Purchasing Managers - Chicago will post its manufacturing report for the Midwest on Friday as well. The consensus is looking for a reading of 49.7. Recall, anything below 50.0 signifies contraction in the business sector. Construction spending for October is expected to have fallen 0.3%, no surprise. However, recall The Greek's forecast from almost a year ago, that construction spending for commercial property will soon follow the path of residential; this based on tighter overall lending standards and lower consumer spending, which should lead to contraction within retail.

    At 3:00 pm, look for the farm report, and please see our article published over the holiday weekend, "Secular Change of Food Prices Justify P/E Expansion for Industry Participants." On the Fed tour, St. Louis President Poole and Fed Governor Kroszner are both scheduled to speak on Friday.

    The day's earnings schedule includes Big Lots (NYSE: BIG), Kirkland's (Nasdaq: KIRK), Royal Bank of Canada (NYSE: RY), Tiffany (NYSE: TIF), TRC Companies (NYSE: TRR) and a few more.

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    Morning Report: Pass the Expresso

    (Stocks in this article: NYSE: NWL, NYSE: RTP, NYSE: HBC, NYSE: M, NYSE: PHG, Nasdaq: ETFC, NYSE: C)

    Welcome back! I feel you... Trust me, market participants are having as hard a time getting rolling today as you are, but the market, she will not wait. After an extra cup of coffee this morning, let's take a stab at the day's market-moving news.

    1. Holiday Shopping Recap - More shoppers X increased discounting = increased sales. That's the story plain and simple. Retailers discounted heavily and benefited from an increase in cost conscious shoppers this year, which I view as a negative sign for the economy. If you have more traffic on Black Friday, that probably means price matters to more people this year.

    2. Will Today be the Day We Break $100 - Nada, not looking so, as Iran's new OPEC Minister says production hikes are possible. Looking at it from Iran's perspective, causing economic havoc upon the U.S. is favored, while stockpiling oil revenue before shipments are impacted by war seems preferred. In other words, while Iran likes seeing high oil prices, it's more in its interest now to book as much revenue as possible by raising barrel delivery.

    3. Company News - Rumors surfaced that Citigroup (NYSE: C) is about to announce significant job cuts. Reuters ventured at a number between 17k and 45k. HSBC (NYSE: HBC) is sinking $45 billion to bail out two SIVs. This seems born out of the SIV Superfund idea, but allows HBC to protect its own interests more directly. If this starts a trend, it may allow specific firms to protect themselves while leaving others more at risk without large bank Superfund participants there to help them.

    Don't miss this weekend's report regarding the secular nature of food price change, and its repercussions for the valuations of agriculture stocks. Please support our effort by visiting the site and supporting our advertisers. Receive Wall Street Greek FREE via email by subscribing here. (disclosure)

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    Saturday, November 24, 2007

    Secular Change of Food Prices Justify P/E Expansion for Industry Participants

    (Stocks in this article: NYSE: MON, NYSE: MOS, NYSE: POT, NYSE: DE, NYSE: DF)

    There is a significant difference between the variations of food prices today, versus changes of the past. Because of this difference, which I posit is the secular nature of today’s price change versus prior seasonal variation, I believe the expansion of P/E ratios and current valuations of some agricultural industry beneficiates like Monsanto (NYSE: MON) are justified.

    The very reason "core" figures exist for the producer and consumer price indices is because of the volatility and perceived insignificance of short-term fluctuations of food and energy prices. Recall, the "core" figure excludes changes in food and energy, and the Federal Reserve has relied upon it as a trustworthy resource in its gauging of inflation. But, the times, they are a changing.

    The Fed, following Alan Greenspan’s recent expression of concern (and the Greek’s warnings if you have been reading my blog from the beginning of the year), will be providing forecasts for inflation, including the headline figure. The new venture began this past week, and clearly highlights the significance of changing marketplaces for food and energy and the drivers of price change.

    Here’s what’s going on…

    Significant global supply/demand dynamics have, and are, altering the economic implications of changes in food and energy prices. The changes we have seen in recent times are not representative of random movement, but instead characteristic of clear and perhaps long-term trend. Food and energy prices are steadily rising, not fluctuating. The drivers behind today's change are not seasonal or short-term factors, like drought and OPEC production restrictions. Rather, the drivers of today's rising trend are secular in nature. Let me expound, and this next point is critical to your understanding...

    Regarding food, bursting global population growth; the shifting of resource utilization in emerging nations; and new uses for agricultural commodities are raising demand for foods while at the same time limiting agricultural production. Regarding our crowded planet, the drivers of population growth are clear. While developed nations progress in a paced manner, birth rates in the emerging world run high. At the same time, advances in medicine and efforts to share advanced medicine and treatment across the globe, aided by Internet and media, have expanded the longevity of mankind. Now, don't get me wrong, this is a great accomplishment. However, it places increased burden on food supply.

    The second point regarding foods is that as third-world nations emerge and develop, resource utilization is shifting. When countries like China industrialize, there is a great draw of farmers and laborers into industrial centers and away from agricultural production. As this occurs, there is increasing likelihood and risk that nations like China will gradually shift into consistent net importers of grain and other commodities. So, as China's industrial revolution progresses, its fuel and energy usage are directly impacted, but its food production is indirectly impacted as well.

    The third point is that as science helps to solve existing problems through the development of new uses for corn and other agricultural goods, especially in the production of biofuels, it's at the cost of food and feed uses. Thus, crop production becomes inadequate and introduces pressure on grain prices. Supplies of surrogate grains like soybean and wheat, suffer as more acreage is dedicated to corn production. Thus, surrogate prices increase as well. As feed prices also rise, the costs of protein production, including beef, pork and poultry, rise and drive up those prices too. This leads to the pass-through of price pressure to processed foods producers like Dean Foods (NYSE: DF), distributors and finally restaurant goers as well as supermarket shoppers.

    Now, what you haven't heard often, but may be a positive result of this predicament, is that while science is pressuring prices higher today, science may also provide the means of price reduction in the future. Companies like Monsanto (NYSE: MON) are working to develop genetically altered crops. Thus, the day may dawn when significantly less acreage produces adequate agricultural produce to help prices retract. This kind of scientific effort can protect plants from disease, while also otherwise improving production. As a result, Monsanto’s seeds are in high demand.Thus, we can see the logic behind the value creation at Monsanto. If logic is not enough, analysts' consensus five-year EPS growth estimate of 44% should be. As a result, Monsanto’s P/E ratio of 36X the consensus earnings per share estimate of $2.55 for 2008 (Aug.) does not look excessive to me. No, and despite the shares’ recent spike higher, I view them attractive for long-term purchase.

    Company ---- Tic ---- P/E f1 ---- 5-Yr. Gr. Est. ---- P/E/G
    Monsanto MON 36 44 0.8
    Mosaic MOS 16 9 1.8
    Potash POT 23 10 2.3

    Mosaic and Potash Corp. have seen price rise as well, and analysts’ near-term EPS growth estimates, as compiled by Thomson Financial, are pretty hot for the two, but their five-year growth outlooks are not. If we take the analysts’ forecasts as infallible, then I would not buy MOS or POT now. However, with near-term growth forecasts both significantly higher than the long-term view, it’s possible that the analyst community is misinterpreting secular change for short-term variation. I would go so far as to say this is significantly possible, and the stocks’ short-term growth outlooks are screaming buy me if that’s the case. However, given the analysts’ expert view, I must be wary regarding MOS and POT, or take a much closer look at each individually. Regarding MON, despite its P/E ratio, I like the stock given its strong growth outlook and the credence I give to secular change in the agricultural sector.

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    Thursday, November 22, 2007

    Thank You

    On this Thanksgiving, I want to personally thank you for your interest in and support of our site, and for the value-added insight you have contributed through email exchange and commentary to articles and reports. We appreciate and welcome your thoughts, and maintain our goal to remain an open-minded institution no matter how large God wills us to become. God bless you all and best wishes on this heartwarming occasion.

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    Wednesday, November 21, 2007

    Morning Report: Oil Flirting With $100

    (Stocks in this article: NYSE: DE, Nasdaq: ERIC, NYSE: ANF, NYSE: TM, NYSE: LTD, Nasdaq: SGEN, NYSE: FRE, NYSE: SPY, Nasdaq: QQQQ, NYSE: DIA, NYSE: FNM, NYSE: GM)

    On a day most consider a strange mix between holiday and workday, traders in the oil pits will make no mistake of it. While most of you clean your desks and pack your bags, hard working oil barterers are attentively anticipating today's weekly inventory report as crude has $100 in its sights.

    1. Oil Inventory Catalyst to $100 - For reasons to be discussed in topic 2, oil found hope in yesterday's Fed releases. Traders anticipating future economic juicing rate cuts drove oil up rapidly. Follow-through alone could take oil over $100 today ahead of the inventory report, which will decide where the commodity closes. Analysts surveyed by Dow Jones Newswire anticipate an 800K barrel build to inventory will be reported for last week. Analysts surveyed by Platts expect a 150K barrel draw in crude, so there's enough confusion to allow for oil to push ahead of $100 before the data release even. Clearly, depending on the data, I believe there is a good chance fanatic and frenzied trading could take oil to plus $100. If the data is bearish, I would hold on because it seems clear this pit wants to go to $100 one way or another. If the news is bullish, I would sell before the close of trading after oil breaks the illusory peak. This price level is unsustainable in my view in light of factors I've outlined in countless past articles. The caveat, war I see with Iran sometime next spring should help oil to break all records. My play is still the refiners now, including Valero (NYSE: VLO) on its specific issues holding down the stock.

    2. Tuesday's FOMC Meeting Minutes & New Projections - Bernanke's Fed produced forecasts that indicate slowing economic growth and softening inflationary pressure, nothing much different than what they've already been telling us. However, despite discussion in the October meeting minutes indicating that a cut was not a sure thing (again old news) the market found hope in the release. It mistakenly viewed Fed concern for the slowing economy as bias for future rate cut. I am disappointed in the ignorance and blind hope of market participants in this regard. Clear logic and the words of the Fed are telling us that a December cut is not in the offing, yet the market continues to hold out hope, even expectation for it. I expect economic and geopolitical conditions will lead to rate cuts in '08, but nothing tells me to expect a December action. It just may be that the media misinterpreted the driver for the market yesterday. It may very well have been Freddie Mac's (NYSE: FRE) news that raised expectations for a near-term rate cut. That would certainly be more likely and justified in my view.

    3. Economic Reports Non-Events - A few economic reports reached the wire today, but I see no impact to equities as a result. The Mortgage Bankers Association weekly data showed applications fell last week. Until mortgages reach inflection point and the market truly turns, this report is somewhat meaningless in my eyes. Weekly Initial Jobless Claims came in at 330,000, teasing the high end of this year's run rate, but off 11,000 from last week's report. This is clearly not alarming data as all eyes search for rising unemployment. The second reporting of November University of Michigan Consumer Sentiment came in above expectations at 76.1, but still weaker than the measure taken during our last recession. Leading Indicators reported a 0.5% decline, worse than the consensus view for a 0.3% decrease.

    4. Company Specifics - In news I plan to follow up on with a specific article, Toyota Motors (NYSE: TM) looks to challenge GM (NYSE: GM) in China. Surprisingly, this might be one battle American manufacturers can win over the Japanese, due to history... I think you see where I'm going with this. Deere (NYSE: DE) put up good numbers, as all agriculture plays continue to do well. Look for an article later today or on Thanksgiving covering this subject.

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    Tuesday, November 20, 2007

    Morning Report: Ominous Volatility & the Fed Catalyst


    Down 300 points; up 200 points! Where's it all leading to, you must be asking. We drag into mid-August, rise into mid-October, drop again now... You must be confused. However, there is clear and powerful driver behind each move, the Fed. Market expectations of Fed bias have driven each of these moves, and are behind the currently confused, though clearly negatively biased market direction.

    When we were rising, expectations were for a Fed expansionary trend, and as we declined the market was looking for possible restrictive monetary policy to combat inflation. The current environment is one in which the Fed has told us it has shifted to neutral. However, the market still contains many skeptics who argue the Fed is just misinterpreting data and will come to its senses. Today will offer some serious directional data, as the Fed publishes its October FOMC Policy Meeting minutes and begins its new offering of long-term forecasts.

    Volatility is clearly increasing, and periods of high volatility have coincided with significant market corrections of the past. We find this ominous and threatening if the right catalyst comes to the fore in the near-term. We are very confident Iran will not be that catalyst now. Our government is not going to start a messy war during the critical fourth quarter. No, you can expect Iran to show up on CNN sometime after January, but likely before June.

    Catalysts we cannot foresee include terrorism. Despite the annual shopping mall threat, and intensified chatter heading into the fall, we simply cannot invest or disinvest based on fear of terrorism. The only imminent threat is the Fed and the economy. If data or the Fed issue a wake up call to investors, we will be faced with that crescendo sell-off. So Greek, is it going to happen?

    I expect the market has already awoken somewhat, but a further wake up call is likely. I expect that after the holiday shopping season concludes, unemployment will increase significantly as margin squeezed retailers face the reality that the consumer is just not spending like she use to. Higher unemployment, slowing GDP could overcome the Fed and welcome recession surprisingly faster than expected possible by the group. In any event, I believe the Fed will have to cut when it receives the call from the Administration next spring that war has begun. Before then, data will dictate the day and confusion and volatility will rule stocks. Volatility is here to stay for awhile. The CBOE Volatility Index (Chicago Options: ^VIX) has increased 61% from its October 9 recent low through November 19.

    In the meantime, kitchen sink write-offs typical of the fourth quarter will continue to offer bad news, and tax loss selling will continue to drive stocks lower, until that fuel is dry. At that point, I believe you can expect a Santa Claus rally sometime in December.

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    Wednesday, November 14, 2007

    Morning Report: Decent Data Deceives

    (Stocks in this article: NYSE: BSC, NYSE: HBC, Nasdaq: VRSN, Nasdaq: QCOM, NYSE: WEN, NYSE: MT, NYSE: DD)

    Today's important economic data proved decent; but was the news deceptively decent? In any event, equities look to follow through on yesterday's rally again today. Beware, however, that tomorrow's CPI data might send a different message, though it's not likely to show up from energy since gasoline prices have only just started to move higher and weather likely delayed heating oil purchases.

    Economic Data

    October Retail Sales

    Sales surprised many today just by meeting consensus. October results rose 0.2% over September's, meeting expectations. However, 0.2% is not robust growth heading into the holiday season. Pressures on consumers do not seem likely to ease either. In fact, they will likely only intensify. Gasoline prices are seen rising as refiners feel pressure from higher input costs. Gas could be 20 cents higher before Christmas, eating into the little spending cash, credit-stretched and limited consumers can handle. While a great majority of our country remains employed, the fact remains that that same majority lives check to check, and is seeing rising cost of living expenditures cut into discretionary cash flow.

    October Producer Price Index

    October PPI showed a modest 0.1% increase, and no change when excluding food and energy costs. Prices were ironically controlled by a decrease in oil during October, versus September. Clearly, that will show up on the other end of the table in November after oil nearly touched $100. Here's my concern. If commodity price increase is not passed forward, margins should be squeezed. Maybe that is the necessary catalyst for inflation to begin to catch fire. Keep your eye out for that.

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    Tuesday, November 13, 2007

    Morning Report: Oil Sliding & Wal-Mart's (NYSE: WMT) Share Grab

    (Stocks in this article: NYSE: WMT, NYSE: HD, Nasdaq: NEWS, NYSE: VOD, Nasdaq: FOSL, NYSE: VLO)

    A few weeks ago when we warned to sell oil and gold and buy the dollar, we were a bit early, and we looked a bit bad over the short term as both gold and oil bubbled up to their peaks in the days that followed. In this game, being right is important, while being correct in direction and perfect on timing is ingenious; still at a week and a half off, we think did okay. We told you there were catalysts in play that could give oil a short short-term pop, including Turkey, Pakistan, inventory data and storms, but we also forewarned that the medium-term fundamental catalysts would eventually gain traction, those being, the Fed shift to neutral, economic slowing, a likely stabilising dollar, a likely warm winter and OPEC production increase I expected.

    I believe OPEC may be handcuffed, and could have its own supply concerns driving production strategy. Or, it could simply be greed driving decision making. The reason I say this is because the Saudi OPEC minister immediately retracted his comment that a hike might result from the pending meeting, after oil prices dropped. Since then though, the EIA reduced its demand forecast, and this has taken over the baton now, leading oil lower.

    The biggest news of this week is yet to come, with tomorrow's October retail sales data and the pending PPI and CPI reports, with the inflation message they carry. Clearly, the inflation reading is critical to this market, as it will sway investor expectation for future Fed action.

    Today, Wal-Mart (NYSE: WMT) reported quarterly results, and its earnings exceeded its previously downgraded forecast. More important to value creation, this retail leader is engaging in a very interesting and apparently effective strategy.

    The skinny...
    It's seeking to take market share from rivals by moving forward its holiday sales discounts. If you view holiday sales as a limited quantity, then drawing them in before rivals mark down inventory on Black Friday should be an effective way of stealing market share. However, no arbitrage opportunity, which this is, clearly lasts forever. This should drive a fundamental change in the retail industry eventually, bringing rivals to match Wal-Mart's efforts. Also helping the stock today, the company's full-year forecast is above analysts' view, and that's always a good thing.

    Retail industry peer Home Depot (NYSE: HD) did not have much positive to say today in its quarterly report. The worst of it was its reduction in full-year forecast to an expectation of an 11% decline in earnings from continuing operations. Same-store sales fell 6.2% in the quarter, and things don't look to improve any time soon with the housing sector still in the tank and consumers facing rising costs of living.

    The International Council of Shopping Centers - UBS posted decent year-over-year same-store sales growth of 2.7%, but we would focus on monthly change to avoid the distraction of weather differences.

    Besides the EIA revision for oil demand, a representative of the group noted the possibility for a 20 cent price increase in gasoline by the end of the year. Margin dynamics are thus improving for the refiners as oil price moves lower, while gasoline moves upward. So, I continue to like Valero (NYSE: VLO) and other refiners here. VLO took a hit last week due a fire that should prove a short-term influence only.

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