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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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Tuesday, July 31, 2007

Today's Coffee - Credit Collapse & Consumer's Plea

"Today's Coffee" has been designed to provide value-added analytical insight into the economic data of the day, international and commodity market activity, and geopolitical and company specific news.

The market collapsed at the close Tuesday, on mounting credit concerns. Mortgage insurance partners MGIC (NYSE: MTG), PMI Group (NYSE: PMI) and Radian (NYSE: RDN) announced that their partnership, Credit-Based Asset Servicing and Securitization LLC (C-BASS), might be worthless. At the same time, American Home Mortgage Investment (NYSE: AHM) sank 88% on its cash shortage. Meanwhile, off in the distance, a solitary figure waves his arms wildly and screams as loud as he can, though he is unheard as his voice is lost in the wind. The consumer is crying for help. He's flashing a mirror, but the rescue squad, the Fed, doesn't see him.


Personal Income and Spending
This morning at 8:30 a.m., the Commerce Department released this highly anticipated report. Personal income rose 0.4%, below the expectations of Bloomberg's consensus, who were looking for a 0.5% increase. Personal spending in June inched higher 0.1%, missing economists' forecasts for a 0.2% rise. Back in May, spending rose 0.6%. Year-over-year, spending in the second quarter rose at a 1.3% annual pace, according to a previous report, and this was a third the rate of Q1 growth.

Wall Street Greek readers should not be surprised, as we have been tirelessly highlighting the impacts of higher gasoline and food prices on retail sales. With home equity also falling into the red for many new home buyers, and monthly payments on variable rate loans adjusting higher, there's only added pressure to tight budgets. The PCE deflator, the Fed's preferred inflation gauge, showed prices increased 0.1% in June, excluding food and energy. The measure increased 1.9% over last year's level, thereby falling within the Fed's comfort range of 1-2%.

S&P/Case Shiller Home Price Index
We anticipated this barometer might show an increase in pricing, based on recent data from the National Association of Realtors. The NAR's June report on existing homes showed prices had improved within the "existing" segment that makes up the majority of the housing market. Recent new homes sales data indicated a price decrease in the corresponding smaller segment. So, you would think S&P/ Case Shiller must be talking to different folks, since their measure of 20 American cities showed prices dropped 2.8% in May, the steepest decline in at least six years (we're concerned about that lack of precision). They more precisely reported that their index of ten cities showed the greatest decline since 1991. In fact, prices dropped in 15 of 20 cities.

The difference between the two reports may have been partly due to the variance in reporting periods, with the NAR data being one month ahead. Clearly though, logic tells us prices are probably decreasing still, but perhaps nearing stability. Home builders are finally facing the reality of the situation, reducing construction and seeking to move inventory and land. Economists indicate the S&P/Case Shiller data is more accurate, as it traces the actual home sales, while the NAR tracks the median price of aggregate sales. It's possible that a greater percentage of higher priced existing homes sold, relative to less expensive ones, and that this influenced the median price to provide an illusion for us poor little peasants.

But, what if more higher priced homes sold, relative to lower priced ones? What does that tell us? We think it means lower income Americans are backed into a corner by rising food and gasoline prices, and are not anywhere near considering a home purchase. And, as for those who want a home, lending restrictions have increased so much as to price many of them out of the market. It's higher lending restrictions and the consumer burden creating the illusion of rising prices in the NAR data, in our opinion.

Conference Board Consumer Confidence
In our weekly article, "The Greek's Week Ahead - Panic Room," we argued that this month's figure would likely be high, and not accurately reflect the current situation. We posited that the reporting period may not have picked up the stock market's recent weakness, rather incorporating its ascent to Dow 14,000. The Conference Board reported July confidence at 112.6, compared to the year's low point in June of 105.3. As a result, most press outlets are seeking out supporting evidence for high confidence, rather than questioning its validity as we are. We view it as a timing flaw, and one that is now misdirecting analysis and possibly some forecasts as well.

Employment Cost Index
The broadest measure of labor costs was reported today, and it showed its biggest rise in two years. Nice, inflation + potential recession = potential stagflation, or in algebraic terms, a terrible state of affairs. So, the Employment Cost Index for the second quarter posted an increase of 0.9%, quarter to quarter, and 3.4% year to year. The quarterly rise matched consensus. The way it got there was downright weird though. Wages and salaries rose 0.8%, but benefits paid by employers increased some 1.3%. From a distance, this appears as though it may be a timing issue, since first quarter benefits only increased some 0.1%. Thus, the second quarter strength may be due to some make up factor.


Jordan: Where the Ruse of Injustice May Serve Fundamentalists Well
In a desperate and perhaps brilliant move, the Islamic Action Front, a political party in the Kingdom of Jordan, announced its protest of elections and the withdrawal of its candidates. The IAC waited until elections had begun, and maybe noticed how it was going before acting. Based on complaints that the government had dispatched troops to areas where municipal seats were up for grabs, the IAC abruptly claimed injustice and walked away. This is the first time Jordan was offering 68 council member seats through free election, keeping another 34 under the King's thumb. However, the kingdom was guaranteeing 20% of the seats to women, a measure sure to weaken the influence of the IAC. You see, women would not generally support a cause that seeks to lock them up in basements covered from head to toe in last year's burka fashion.

So, by pulling out of the election, support for the IAC could now grow grassroots. Where there is perceived injustice, there is an underground movement to alter it. The IAC may now gain a broader following than it would have through elections. Though likely to take on a militant face, this was probably the only way Islamic fundamentalists could influence Jordan. Is that true though?

In Turkey, perhaps the most conservative of Islamic countries, and I use conservative loosely here, the populous elected an Islamic party president and then reelected him just recently. Wall Street Greek thinks King Abdullah has the right idea here, as dictatorships are always doomed to eventual and sometimes ugly revolution. However, democracy can also drive Islamic revolution, and that may be in process in Iraq.


CNBC broke news today that enough of the Bancroft family had agreed to the News Corp. (NYSE: NWS) bid to allow for the sale of Dow Jones (NYSE: DJ). Remember, we thought it wouldn't happen when we issued our article, "Dow Jones Will Sell, but NOT to Potter!" Rupert Murdoch may not be anywhere near as bad a character as Mr. Potter was in It's a Wonderful Life, but to the Bancrofts, we estimated he was no better. In the end, it looks like the Bancrofts were no George Bailey.

What's next for News Corp.? We suspect Mr. Murdoch will leverage the Wall Street Journal and Barron's brands well as he builds out his new financial cable network that is scheduled to hit the airwaves in October. Murdoch has proven a true media mogul, and we expect him to create value in Dow Jones and News Corp. as a result of this deal. Still, how long will it take him to make up for the exorbitant premium he's paying, that's the question. Hey Rupert, if you're looking for a fresh new pen or face, Wall Street Greek is open to offers! Barron's is a wonderful magazine, and we hope it retains its old times appeal. There's nothing better than smoking a cigar in the park while reading Barron's on a Saturday afternoon.

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Today's Key Market News - Consumer Exposed

Stock futures are indicated higher this morning despite a clear bright red warning flag from the personal spending data released this morning, which was slightly below expectations. The market continues to seek sharp turns before it moves, but with an economy this large, those kinds of turns are only caused by slap in the face type events, like 9/11 for instance or the Saddam Sell-off. When you're looking for consumer softening, don't expect it to show up out of the blue. Rather, pay attention to the mounting case and the logical direction of relative factors. We are preparing a "Today's Coffee" for you to take a closer look at the details.

Key Headlines:

Bloomberg: Consumer Spending Comes Up Short
CNN Money: Oil Inching Near Record High
USA Today: Employment Costs Problematic
Bloomberg: S&P/Case Shiller Housing Price Index Shows May Decline
Forbes: Forbes Writes Dow Jones Deal Off, CNBC Says Deal Certain
Yahoo! Earnings Calendar
AP/Yahoo!: GM Posts Profit
AP/Yahoo!: J&J to Restructure Business, Cut 4% Workforce (JNJ)
AP/Yahoo!: Sirius Loss Narrows (SIRI)
AP/Yahoo!: Sun Micro Beats Street (SUNW)
AP/Yahoo!: Mortgage Insurance Not the Sure Thing Anymore (PMI, RDN, MTG)
AP/Yahoo!: Gartner, IT Barometer
BBC: Condi Warns Mideast About Iran
BBC: Creating a Ruse Perhaps Just as Effective for Islamists in Jordan
Financial Times: Abe's Fight for Survival
Economist: The Geopolitical Week Ahead
Iran Daily: Tales from the Dark Side

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Monday, July 30, 2007

The Greek's Week Ahead: Panic Room

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

Traders are calling the week a "touch and go." So, should we head to the "panic room" or is there still room to panic? There are two questions to answer before we make that choice. The first question to ask - is the assumption that a credit crunch is possible correct, and we think so. Secondly, if correct, is it happening now, or is the market just anticipating it early. If the market is simply foreshadowing what is to come, stocks could hold here or even improve. However, if it recovers, it will rise having left you a message to heed. We think a crunch is occurring, but if there are no stories this week of an LBO deal gone bad or large hedge fund going under, the market could get a pass. If one of those two things happens though, the confirmation it provides would bring the sellers back in force, we think.

As I write this week's copy, Asian markets have opened lower Monday morning, but not "panic room" lower. It's become clear to global traders that the U.S. market still pretty much dictates the world's trading direction. So, the mantra in Hong Kong and Tokyo these days is probably, "why panic until we see how America opens." And then there's the Chinese mainland market, which is as defiant as ever. The CSI 300 Index is trading some 2.0% higher Monday, through midday.

I'm sure a good amount of Chinese investors are not even aware of what is unfolding in America, what with the communist iron curtain in place and all. Besides, the rate of inflation still makes holding cash a losing deal in Shanghai, so what else are you going to do with your yuan when faced with five different brokers selling you the recent stellar Chinese market performance record.

Even as I know readers are intently focused on this week's copy for insight into the current situation, I have a difficult time not looking forward a few months. This week, Barron's covered the dangers of a credit crunch and the risk in emerging market shares, two critical topics of the day. But we wrote about them long ago in our issues, "The Greek's Week Ahead - Emerging Market Glam" and "The Greek's Week Ahead - When the Liquidity Dries." We didn't miss rising risk spreads either. So, now that all that we spoke of months ago is considered current, we have a tendency to want to move forward. The problem is, we know you want more about the here and now. You're really worried about the week ahead, and we're going to try to help walk you through it.

Everybody wants to know if this is it. Is it time to panic? To this we respond, never panic! We know from experience that there is value added by adrenaline in times of danger, but panic never does you any good. Preparedness and thoughtful decision-making will work in your favor while others panic. That said, there are three clear issues that could set the market into full-scale panic mode this week, and you should be aware of them. One of the three is not specific to the week, but may show it's ugly head anyhow.

There are concerns on the street about the investment banks' exposure to the subprime space and to LBO loan commitments. According to Barron's article "Ouch!", Banks and Wall Street firms are committed to fund over $200 billion of LBOs this year. With risk spreads rising, value is destroyed, but the banks are committed. With buyers likely to remain scarce, I-banks may be big losers soon. Deutsche Bank (NYSE: DB) looks to do okay though, after just flashing its prescient trading hedge. The big American investment banks have learned plenty of lessons in their weathered past, and most experts expect that none of the players are holding heavily levered one-sided bets. Bear Stearns (NYSE: BSC) didn't even have significant exposure to its well-publicized hedge fund failures of late. Well some would say that still depends on its ability to retain the clients who lost capital in the deal.

HSBC Holdings Plc., whose ADRs trade in New York under (NYSE: HSB), could be set to report more troubling debt related losses on Monday. Recall that a couple heads rolled last quarter at HSBC due to mortgage mistakes. Besides the ongoing I-bank related risk, the other two concerns this week are Tuesday's personal spending data and Friday's Employment Situation Report. We cover the two issues below.

Let's take a look at the week ahead...

Earnings rule the day on Monday, with no important key economic data scheduled. Pfizer (NYSE: PFE) faces a civil suit in Nigeria worth approximately $2 billion. Key reports are anticipated from ABN Amro (NYSE: ABN), Alberto-Culver (NYSE: ACV), Anadarko Petroleum (NYSE: APC), Apria Healthcare Group (NYSE: AHG), Archer Daniels Midland (NYSE: ADM), Brookfield Homes (NYSE: BHS), Cameco (NYSE: CCJ), Cytyc Corp. (NASDAQ: CYTC), Eagle Materials (NYSE: EXP), Florida Rock (NYSE: FRK), HSBC Holdings (NYSE: HBC), Humana (NYSE: HUM), Kyocera (NYSE: KYO), Manitowoc (NYSE: MTW), Monster Worldwide (NASDAQ: MNST), Morton's Restaurant (NYSE: MRT), Overstock.com (NASDAQ: OSTK), Pitney Bowes (NYSE: PBI), RadioShack (NYSE: RSH), Sun Microsystems (NASDAQ: SUNW), The Hanover Insurance Group (NYSE: THG), The Principal Financial (NYSE: PFG), Tyson Foods (NYSE: TSN), ValueClick (NASDAQ: VCLK), Verizon (NYSE: VZ), Vulcan Materials (NYSE: VMC), Wm. Wrigley (NYSE: WWY) and many more.

Tuesday has the potential to provide a surprise punch to the nose of investors. June Consumer Spending will be reported at 8:30 a.m. EDT. Bloomberg's consensus is looking for growth of just 0.2% month-to-month. However, some are speculating that lower vehicle sales may lead spending growth to an even lower level. Spending increased 0.5% in May, and Wall Street Greek sees the possibility for a decrease in spending in June. We believe that in light of the current sensitive state of the market, such a result could make an important impact. This is all based on the consumer-softening scenario we have laid out so many times here. Briefly, an increasing cost of living globally should impact consumer spending, in our view. There's only so much an overlevered consumer can handle before he gives. We believe there are already signs of consumers moving down price categories in order to save more. For instance, we see traffic moving from the casual dining space into fast food.

We expect the ICSC-UBS Weekly Same-Store Sales Report, which precedes the spending report, will only provide more evidence for the case we have been making for months, that the consumer is softening. The consumer is the foundation of our economic growth, and if that pillar of strength is weakened, we expect a state of recession and perhaps stagflation would ensue.

Personal income is seen increasing 0.6%, versus 0.4% in May, as it rides on the shoulders of relatively strong job growth. Still, healthy employment growth implies wage inflation risk, which is a major concern of the Fed. The Employment Cost Index will add some color to that picture on Tuesday morning. The consensus expects second quarter growth of 0.9% over Q1. The first quarter saw growth of 0.8% over the fourth quarter of 2006, and 3.5% annual growth.

The Conference Board is scheduled to provide its Consumer Confidence Index at 10:00 a.m., with the consensus expecting confidence to post a rise in July to 105, from the year's low point of 103.9 in June. This figure may be meaningless, as confidence is sure to slip should current economic concerns and market weakness persist.

June construction spending is expected to have risen 0.4% from May. It surprisingly increased 0.9% in May. The S&P/Case-Shiller home price index will also be reported Tuesday. Recent data showed new home price values declining, while existing homes prices had actually strengthened. Existing homes make up a much larger portion of the market, so we would expect prices to be flat to higher. Also the National Association of Purchasing Managers - Chicago will publish its index. Bloomberg's consensus is looking for a measure of 58, down from June's 60.2.

Two key financial system representatives will have microphones on Tuesday and could drive market activity. Treasury Secretary Paulson will meet with China's President Hu Jintao to discuss currency and product safety issues. SEC Chairman Christopher Cox will testify to the Senate Banking Committee.

Tuesday's earnings reports include Alcan (NYSE: AL), AlCATEL-LUCENT (NYSE: ALU), Amkor (NASDAQ: AMKR), Arch Chemicals (NYSE: ARJ), BUCA (NASDAQ: BUCA), Buffalo Wild Wings (NASDAQ: BWLD), Cedar Fair (NYSE: FUN), Cephalon (NASDAQ: CEPH), Chipotle Mexican Grill (NYSE: CMG), Coach (NYSE: COH), Coventry Health (NYSE: CVH), Cowen Group (NASDAQ: COWN), Denny's (NASDAQ: DENN), DENTSPLY International (NASDAQ: XRAY), DreamWorks Animation (NYSE: DWA), First Solar (NASDAQ: FSLR), Gartner (NYSE: IT), General Motors (NYSE: GM), Hanover Compressor (NYSE: HC), Headwaters (NYSE: HW), Hologic (NASDAQ: HOLX), ImClone Systems (NASDAQ: IMCL), LCA-Vision (NASDAQ: LCAV), Liz Claiborne (NYSE: LIZ), Marathon Oil (NYSE: MRO), MetLife (NYSE: MET), Nicor (NYSE: GAS), Oil States International (NYSE: OIS), Pilgrim's Pride (NYSE: PPC), Sirius Satellite Radio (NASDAQ: SIRI), PMI Group (NYSE: PMI), Under Armor (NYSE: UA), Valassis Communications (NYSE: VCI), Valero (NYSE: VLO), Vornado Realty Trust (NYSE: VNO), Waste Management (NYSE: WMI), WebMD (NASDAQ: WBMD), Whole Foods (NASDAQ: WFMI) and quite a few more.

On Wednesday at its usual time, the Mortgage Banker's Association will report its Purchase Index, providing information about the state of new mortgage originations and refinancings.

Some key employment data will reach market on Wednesday. ADP provides its private employment report. Last time around, ADP reported a month-to-month increase of roughly 97,000 for May. The Challenger Job Cut Report is due for release the same day, and last month showed announced layoffs of 55,726. We think it's about time the employment situation starts wavering. We expect the retail and construction sectors to lead the way lower on employment.

The ISM Manufacturing Index is expected to show a July reading of 55.0, compared to June's 56. We have continued to express our view that manufacturing will follow the lead of other sectors of the economy, as manufacturing is buoyed by a weak dollar and global demand. Even so, some of the large-cap multinational stars of Q1 have not been quite so impressive in Q2, allowing this correction to occur. Pending home sales for June are set for release as well. May's figure declined 3.5%. Finally, motor vehicle sales are expected to reach 12.2 million in July, versus 11.6 million in June. Indeed, Ford (NYSE: F) just posted a quarterly profit, and GM (NYSE: GM) is expected to do the same this week. The weekly EIA Petroleum Status Report might help us understand how future auto sales might trend, as gasoline prices remain a key peg in this economic engine.

Wednesdays earnings reports include Allergan (NYSE: AGN), Arcelor Mittal (OTC: ARLOF.PK), Atmel (NASDAQ: ATML), Avalonbay Communities (NYSE: AVB), Barrick Gold (NYSE: ABX), BASF AG (NYSE: BF), Beckman Coulter (NYSE: BEC), Boyd Gaming (NYSE: BYD), Cal Dive International (NYSE: DVR), CIGNA (NYSE: CI), Cognizant Technology (NASDAQ: CTSH), Deutsche Bank (NYSE: DB), Devon Energy (NYSE: DVN), Electronic Arts (NASDAQ: ERTS), Equity Residential (NYSE: EQR), Garmin (NASDAQ: GRMN), Given Imaging (NASDAQ: GIVN), GlobalSantaFe (NYSE: GSF), Gold Fields (NYSE: GFI), Human Genome Sciences (NASDAQ: HGSI), Invitrogen (NASDAQ: IVGN), Jones Apparel (NYSE: JNY), Kinross Gold (NYSE: KGC), Kraft Foods (NYSE: KFT), LeapFrog Enterprises (NYSE: LF), LoJack (NASDAQ: LOJN), Martha Stewart (NYSE: MSO), MasterCard (NYSE: MA), Mesa Air (NASDAQ: MESA), Napster (NASDAQ: NAPS), Noble Energy (NYSE: NBL), Novamed (NASDAQ: NOVA), OfficeMax (NYSE: OMX), ONEOK (NYSE: OKS), Prudential Financial (NYSE: PRU), Qwest Communications (NYSE: Q), Rehabcare (NYSE: RHB), Sanofi-Aventis (NYSE: SNY), SOHU.com (NASDAQ: SOHU), Starbucks (NASDAQ: SBUX), Sunoco (NYSE: SUN), Tasty Baking Co. (NASDAQ: TSTY), Tetra Tech (NASDAQ: TTEK), THQ (NASDAQ: THQI), Time Warner Cable (NYSE: TWC), Time Warner (NYSE: TWX), Transocean (NYSE: RIG), United Rentals (NYSE: URI), Walt Disney (NYSE: DIS), Weight Watchers (NYSE: WTW), Wyndham Worldwide (NYSE: WYN) and others.

Overseas on Thursday, the Bank of England and the ECB are both expected to leave rates at current levels. In light of recent events, this makes perfect sense. Tightening credit at this point only further stresses the market and liquidity.

The Monster Employment Index will help investors gain further insight into the employment picture, as will the weekly initial jobless claims report, also due out Thursday. Monster's June report measured 186, which matched May's figure. It may still be too early for this metric to show a softening employment outlook. Jobless claims are expected to rise to 310,000. It's new job growth that we have our eye on. That's where the first signs of weakness in the employment environment should show their ugly heads.

June Factory Orders are expected to rise 0.1%, better than May's decline of 0.5%. The EIA Natural Gas Report shook up the nat gas market last week, and this week should be no less dramatic.

Thursday's earnings reports include Activision (NASDAQ: ATVI), Advanced Medical Optics (NYSE: EYE), Alkermes (NASDAQ: ALKS), Alliant Techsystems (NYSE: ATK), Allied Waste (NYSE: AW), Barclays (NYSE: BCS), CABELAS (NYSE: CAB), Charter (NASDAQ: CHTR), Checkpoint Systems (NYSE: CKP), Chesapeake Energy (NYSE: CHK), Clorox (NYSE: CLX), Coinstar (NASDAQ: CSTR), Credit Suisse (NYSE: CS), Green Mountain Coffee (NASDAQ: GMCR), Haemonetics (NYSE: HAE), Hertz (NYSE: HTZ), Imperial Oil (AMEX: IMO), International Paper (NYSE: IP), Investment Technology (NYSE: ITG), Jones Soda (NASDAQ: JSDA), Lear Corp. (NYSE: LEA), Morningstar (NASDAQ: MORN), Newmont Mining (NYSE: NEM), Nokia (NYSE: NOK), PPL Corp. (NYSE: PPL), Pride International (NYSE: PDE), Safeguard Scientifics (NYSE: SFE), Sempra Energy (NYSE: SRE), Steinway Musical Instruments (NYSE: LVB), Pantry (NASDAQ: PTRY), Total SA (NYSE: TOT), Viacom (NYSE: VIA), Williams Cos. (NYSE: WMB), World Wrestling Entertainment (NYSE: WWE) and many more.

The big news on Friday comes from the Department of Labor. The Employment Status Report is expected to show an increase in nonfarm payrolls of 125,000 in July. Wall Street Greek believes we could start to see important changes in the retail and construction sectors in this month's report. In other words, the number could come in light, and we would look to this as an early tangible sign economic growth would likely weaken in the second half of the year. Unemployment is seen steady at 4.5%, while average hourly wages are expected to post a 0.3% month-to-month increase. In other news, ISM's Nonmanufacturing Survey is seen measuring 58.5 in July, versus 60.7 in June. We expect this metric to also begin to show a weakening trend after early signals.

Friday's earnings reports include Allianz SE (NYSE: AZ), Arbor Realty Trust (NYSE: ABR), British Airways (OTC: BAIRY.PK), Brookfield Asset Management (NYSE: BAM), EOG Resources (NYSE: EOG), FTI Consulting (NYSE: FCN), Hercules Offshore (NASDAQ: HERO), MannKind (NASDAQ: MNKD), Olympic Steel (NASDAQ: ZEUS), Proctor & Gamble (NYSE: PG), Silver Wheaton (NYSE: SLW), Sonus Pharmaceuticals (NASDAQ: SNUS), TETRA Technologies (NYSE: TTI), Progressive (NYSE: PGR), Toyota Motor (NYSE: TM), Weyerhaeuser (NYSE: WY) and a few more. We hope we have added value to your trading week, strategy and long-term planning.

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Saturday, July 28, 2007

Recent Work for the Motley Fool

Below, please find our most recent work for The Motley Fool. We have attached links to the articles for your perusal.

  1. Ethan Allen's Masterful Q4 Decor (July 26, 2007) - See our brief take on Ethan Allen's (NYSE: ETH) fiscal fourth quarter earnings report. ETH masterfully managed EPS to within a penny of last year's result, despite a less than hospitable housing environment. (Companies mentioned within the article include: ETH, FBN, HOFT)
  2. Pool Corporation's Soggy Q2 (July 24, 2007) - This article takes a deep look into Pool Corporation's (NASDAQ: POOL) second quarter report, and applies a broad valuation perspective that considers the company's sensitivity to housing and lending. This in-depth article provides unique insight into a company I followed as an analyst. It was in fact one of my first selections, discovered scientifically through screening. However, from approximately twenty screen survivors, I handpicked a select few, including POOL. Only 20% of the stocks that were discovered scientifically continued to beat the market in the year that followed. However, my choices quickly made me into an in-house star. That just goes to show you that it takes just the right mix of science and art to select stocks well. Despite the company's excellent performance, it was a tough sell to my supervisors, who initially vetoed my recommendation to make it a "Strong Buy," opting instead to make it a "Buy." As it quickly became one of our best performers, and I continued to push, my supervisors started to get it. When I left my firm in July 2005, I had the stock rated a "Hold" based on valuation and my concern for housing and interest rates. (POOL, ELY, OO)
  3. Grilling Darden Restaurants (July 23, 2007) - This article provides a refreshing look into Darden Restaurants (NYSE: DRI) and the casual dining industry. It's a review of Darden's presentation, which I got a chance to survey during the company's recent road show. The casual space is currently under pressure, as consumer spending softens from the weight of the increasing cost of living. In Wall Street Greek's view, unlike the Fed, this includes food and energy prices. Darden is a company I analyzed in graduate school, and recommended and purchased as a result about ten years ago. I subsequently sold DRI and have held no interest for years now. I first gained insight into discounted cash flow analysis at the University of Pittsburgh's Katz Graduate School of Business, with the help of my favorite professor, Ken Lehn. I applied DCF analysis to value DRI, and later introduced DCF valuation to the group at S&P through a presentation. In the years that followed, a canned model was created for the entire department's use. (DRI, RUTH, PFCB, EAT, APPB, CAKE)
  4. Chico's June Follows Suit (July 16, 2007) - A brief take on Chico's FAS (NYSE: CHS) rather weak, though in line with peers, June sales results. (CHS, ANN, KSS, JCP, M)
  5. Taxing Consequences for Private Funds (June 28, 2007) - This in-depth article discusses my expectation for the "Blackstone Bill" currently in Congress, and how I think it could impact the private equity and hedge fund industries, and perhaps the entire financial system. It mentions Blackstone Group (NYSE: BX), Fortress Investment Group (NYSE: FIG), T. Rowe Price Group (NASDAQ: TROW) and Goldman Sachs (NYSE: GS).
  6. Tasty Chicken, Tepid Price (June 28, 2007) - The brief article discusses Yum! Brands (NYSE: YUM) shares two weeks ahead of its earnings report. It reaches a little beyond YUM, discussing pressures on restaurants as well. (YUM, DRI, EAT, CAKE, MCD)
  7. CKE Restaurants Drowning in Fat? (June 29, 2007) - My brief take on CKE Restaurants (NYSE: CKR) and its recent earnings report. (CKR, WEN, MCD, SNS)

So, you see, the Wall Street Greek is not relaxing on a beach in Santorini as you expected. Remember, I will republish these articles in their entirety a week after "The Fool." This effort will only enhance my daily and weekly work for you.

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Friday, July 27, 2007

Today's Key Market News - Market Turmoil, A Fearless Buy Idea

As the global community digests an unsavory day of trading in the U.S., American investors will have to reassess the situation again today. Because of the serious driver behind this decline, Wall Street Greek expects trading to be highly volatile today, but adopt a decisive downward bias. It is still early in this move, and many will advise investors operating within a long-term time horizon to buy. The thing is, the short term matters. It could trouble you to see your portfolio statement at the end of July if you stay put, and if you can mitigate some of the losses, it certainly makes sense to do so.

Therefore, I agree with Jim Cramer, my fellow Philadelphian, in that as we pick at buys, we should also be hedging against greater losses. Consider selling at "risk firms" within the financial space. Blackstone Group (NYSE: BX) tanked yesterday before finding late buyers, and the shares are trading sharply lower in the premarket today. We wrote in our article, "Taxing Consequences for Private Funds," that the Blackstone guys were going to look brilliant down the road. Folks, when smart, wealthy fellows like these, who fund takeovers based on liquid credit, decide to share the profits, there's a red flag there. Here's a Greekism for you, "Never buy from a smarter guy than you..." Regarding BX in particular, the move may be overdone on the open, but think about like risks and holdings within your portfolio. Yes, I'm worried about the investment banks.

Once again defying the permabear stigma, here's a buy for you. Heely's (NASDAQ: HLYS) reports earnings in a couple weeks, and today, peer CROCS Inc. (NASDAQ: CROX) is moving on a strong EPS report. HLYS shares are down dramatically since their last report, but since then the company has backed out of a new financing plan that would have diluted existing interests. This has allowed participating brokerage analysts to once again speak about the shares. We expect upgrades and reiterations soon and a solid earnings report. In the interest of full disclosure, we added to Heely's holdings within our portfolios yesterday. Unlike many of our independent equity research breathren, we're not afraid to put our money where our mouth is, and we'll tell you about it when we do. Another idea for portfolio insurance is the UltraShort S&P 500 ProShares (AMEX: SDS), but be careful when and where you buy. This investment seeks to advantage from downward moves in the S&P 500 Index (see Yahoo!'s profile page here).

Please find today's key market-moving news below, and remember, this is available daily in our sidebar section "Headline News."

Bloomberg: Advanced GDP Report for Q2 +3.4% Bests Consensus +3.2%
CNBC: July Michigan Consumer Sentiment 90.2, Misses Consensus 91.0
CNN Money: Asian Markets Run for Cover
AP/Yahoo!: Communist China Stocks in the Dark
Financial Times: Europe Contends with Largest Weekly Drop Since March
CNBC: Oil Stabilizes
Kiplinger's: Video - What to do When Market Tanks
Yahoo! Earnings Calendar
AP/Yahoo!: Volkswagen's Stellar Q2
AP/Yahoo!: Medco Health Profits
AP/Yahoo!: Baker Hughes' Q2 Slump
AP/Yahoo!: Toshiba's Fivefold Profit Rocket
Bloomberg: Blackstone Shares Collapse
CNN Money: Headwinds for KKR IPO
CNBC: Amgen Tops Forecasts
Economist: Putin Versus Nobody Serious
BBC: Students Occupy Red Mosque
Iran Daily: Tales from the Dark Side

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Thursday, July 26, 2007

Today's Coffee - Dow 14,000 Minus 526.43

Back by great demand, "Today's Coffee" is geared to provide insight into the flood of international market news, economic data, commodity market activity, geopolitical happenings and company specific news of the day.

Whew! At least it's over, or is it... Now China and Japan have to digest the American market action, and more importantly, it's drivers. With concern now heightened over the potential for a credit crunch in the U.S. and softening consumer spending, heavy exporting nations with high flying shares, like say China, are at risk. Friday could get even uglier in the states if a severe correction ensues in Asia, and my dear friends, Wall Street Greek views that event likely.


Durable Goods Orders for June

June's report showed durable goods orders rose 1.4%, short of the economists' consensus view for a 2.0% increase, as compiled by Bloomberg. What was concerning here was that ex-transportation equipment, durable goods orders decreased 0.5%, marking the second monthly such decline. Business investment fell again, pulling the rug out from under the bull case that corporations would increase investment. There's one forecast that this report fits perfectly into, and that's Wall Street Greek's detailed economic and market outlook, as provided to you weeks ago in our weekly article, "The Greek's Week Ahead - O' Say Can You See Our Economic Future." In this article and articles that followed during that same week, we outlined our expectation that the market would run up into earnings season, before turning lower no later than two weeks in. Well, here we are backing up from 14,000. Wall Street Greek continues to expect consumer spending data to show an economy losing support. And, time and again we've warned that American multinationals still have their bread buttered by American consumers. We anticipate domestic spending weakness will impact multinationals and then also emerging markets.

New Home Sales (June)

The new homes data offered a quite different view than the vista provided by existing homes earlier this week. New home sales fell to an annual pace of 834,000, missing analysts' consensus for 890,000 and falling off from May's 893,000 (revised). New home inventory increased while the median price of a new home fell. This was in stark contrast to the existing home data, and we believe this data provides a more accurate view of the current situation. Home builders are finally facing up to their reality and pushing out recovery forecasts. We believe you can expect to hear of significant layoffs and increasing property write-downs in the near future.

Beazer Homes (NYSE: BZH) reported earnings today, while Pulte Homes (NYSE: PHM) reported after the bell last night. Beazer was down about 9%, after reporting a quarterly revenue decline of 37% and a loss of $3.20, compared to EPS of $2.37 in the year ago period. Pulte reported 40% lower revenue and a quarterly loss of $2.01, compared to EPS of $0.94 in last year's period. Pulte didn't miss forecasts because it warned analysts recently it would lose $2.00 to $2.10.

Weekly Initial Jobless Claims

First time collectors of unemployment benefits totaled 301,000, below Bloomberg's consensus view for 312,000 and marked a decrease from the week just prior. Remember, we here at Wall Street Greek preach that unemployment will not provide us the early glimpse at labor softness, but that a tail-off in new hiring will first signal the softness we expect from retail and consumer needy businesses, as well as "on the books" losses from home builders. The inside word is that layoffs in construction have been understated due to the amount of illegals in the industry's workforce.

Tomorrow brings the advanced GDP report for the second quarter. We expect the figure will miss the consensus estimate of 3.2%. Michigan Consumer Sentiment will also be reported, and is seen measuring 91.


After the Chinese mainland market took off today, and the Shanghei Composite Index SE broke a record, things could be quite different tomorrow. Given the Dow's drop of 2.26% Thursday, Friday is likely to be tumultuous overseas. This is especially likely, as the source of weakness in the U.S. is concern for a credit crunch and reduced consumer spending. As the U.S. is such an important market for just about every nation, especially the high flying Asian production machines, a collapse in China is perhaps likely Friday. If this happens, Friday portends to get even uglier in the states.


Friday's earnings reporters include Active Power (Nasdaq: ACPW), Baker Hughes (NYSE: BHI), Celanese (NYSE: CE), Chevron (NYSE: CVX), Fortune Brands (NYSE: FO), Gene Logic (Nasdaq: GLGC), Idexx Laboratories (Nasdaq: IDXX), Ingersoll-Rand (NYSE: IR), Medco Health Solutions (NYSE: MHS), Sepracor (Nasdaq: SEPR), Veeco Instruments (Nasdaq: VECO) and more.

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Today's Key Market News - Falling Apart

We arose this morning to a market suddenly hypersensitive to every market and economic concern in existence. All signs point toward market instability in the near term, and today's Durable Goods Orders Report for the month of June showed a decline when excluding transportation orders. Also, business investment was lower for the second month in a row. Second quarter GDP forecast revisions are likely ensuing as a result.

Email subscribers should be aware that we do not send every article to you, so as to not overburden your inbox. For instance, last evening, we published "Earnings Roundup" without mailing. You will have to visit the site to see what you missed. We plan to only mail "Today's Morning Coffee" and occasional other value added pieces in the future. Now please find all of today's market-moving news below, and remember, you can find these important news stories fresh daily in our sidebar section, "Key Headlines." "Today's Morning Coffee" is on its way.

Bloomberg: Durable Goods Orders
Bloomberg: Corporate Bond Risk Rising
AP/Yahoo!: Weekly Initial Jobless Claims Declined
Wall Street Journal: June New Home Sales Fell
Yahoo! Earnings Calendar
AP/Yahoo!: Ford Swings Profit (NYSE: F)
USA Today: Union Trouble May Lie Ahead for Automakers
AP/Yahoo!: Apple's Results (NASDAQ: AAPL)
AP/Yahoo!: Dow Chemical Profit Inches Higher (NYSE: DOW)
AP/Yahoo!: Aetna Profit Up 16% (NYSE: AET)
AP/Yahoo!: Office Depot Earnings Fall (NYSE: ODP)
AP/Yahoo!: Newell Rubbermaid Reports (NYSE: NWL)
CNN Money: ExxonMobil Profit Miss (NYSE: XOM)
CNBC: 3M Reports Higher Profit (NYSE: MMM)
CNBC: Beazer Homes Posts Loss (NYSE: BZH)
Financial Times: Debt Problems Signal End to Buyout Boom
CNBC: Moody's Sees More Declines for Home Prices
CNN Money: Prime Borrowers Catching Subprime Ills
Forbes: China Market Tops Record
CNBC: Crude Surges to High
CNN Money: Corn Prices Fall
Economist: China Takes the Bank
Reuters: Iran Says Will Never Stop Nuclear Activity
Iran Daily: Tales from the Dark Side

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Wednesday, July 25, 2007

The Greek's Earnings Roundup - ETH, PFCB, PLUG

The market settled today after Monday's indigestion. The bounce likely had something to do with the good news from Boeing (NYSE: BA) and Amazon.com (Nasdaq: AMZN). There were a good deal more earnings reports Tuesday, both during the day and after the close. We selected a few here to discuss. In order to more clearly express our approval or disapproval toward the stock's outlook and management's performance, we will provide a rating of either Opa! (bravo! or "Buy") or Sopa! (quiet! or "Sell").

Ethan Allen Interiors (NYSE: ETH) reported earnings Tuesday, posting EPS of $0.65 in its fiscal fourth quarter. This was in line with analysts' consensus, though a penny short of last year's figure. Net sales declined 5%, but gross margin improved over 200 basis points on sales mix improvement and cost containment efforts. Operating margin still narrowed 100 basis points, but a lower tax rate and significant share repurchases allowed the company to preserve the bottom line. Ethan Allen's 65% domestic manufacturing and sourcing is admirable to us, as is its quality distinction and market leadership impressive, in our view. We give Ethan Allen an Opa! on its report, as despite a difficult operating environment, management seems to have a handle on inventory and in differentiating its products well.

P.F. Chang's China Bistro (Nasdaq: PFCB) reported earnings Tuesday, but missed its own guidance while reporting second quarter EPS of $0.36, versus $0.30 in the prior year period. Same-store revenues were disappointing enough for the company to revise forecasts lower for the remainder of the year. Traffic at both the P.F. Chang's China Bistro restaurants and Pei Wei Asian Diner locations trailed forecasts, likely due to significant store presence in California, an especially hard hit housing market. The rising price of gasoline seems to be impacting casual dining chains hard, so we expect the entire industry to experience valuation adjustment and decreasing earnings estimate momentum. PFCB revised its forecast for 2007 revenues and EPS lower, now expecting to earn $1.34 in '07, from $1.38 previously seen. We have to give PFCB a Sopa! as a result.

Plug Power (Nasdaq: PLUG) posted a second quarter loss of $0.19, six cents worse than the consensus expected. Revenues of $4 million exceeded the consensus forecast for $1.9 million, as compiled by Thomson Financial. Installations of 41 GenCore Systems sharply exceeded the prior year achievement of 17. PLUG attributed its loss expansion to acquired businesses. Operating cash burn allows the company some leeway before it needs to raise capital, but we are not enthused about its products' mass appeal. With most of its revenue coming from R&D Contract line, and not product sales, and most of the interest seemingly from government organizations, we are skeptical of its near term growth potential. Fuel cell technology is mostly dependent on natural gas, and as long as natural gas pricing is relatively expensive, we believe there is no alternative energy advantage provided. We would not regard PLUG along the same lines as its solar and wind peers, and that's likely the reason PLUG trades at a valuation (0.92X book value) discount to companies like First Solar (Nasdaq: FSLR) (20X) and Trina Solar (NYSE: TSL) (7.5X). We have to give PLUG a Sopa! for this reason.

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Today's Key Market News - Dead Cat Bounce

The market is bouncing this morning, aided by a couple nice profit reports from Boeing (NYSE: BA) and Amazon.com (Nasdaq: AMZN), rescuing the Dow and the tech sector perhaps in the short term. But how much bounce does this market have to it? Today's Mortgage Bankers Association report of its Purchase Index showed activity at a 5-month low, while existing home sales for June fell from May. However, there was one bright spot, inventories decreased and prices firmed. Net net, that alone is not enough to strike the alarm bells. However, the fact that KKR has to raise rates to close a deal, Bill Gross is screaming "The bears are coming! The bears are coming!" and a well-bronzed Countrywide (NYSE: CFC) CEO warns that the prime lending sector may also be in trouble, well that's enough to make this bounce a dead cat type.

Check out our latest two pieces for The Motley Fool, "Pool Corps.' Soggy Q2" and "Grilling Darden Restaurants." Remember, in a week's time, we'll publish the unedited versions of both these articles right here on your favorite independent equity research site. All the market-moving news from our sidebar section "Headline News" appears below:

Bloomberg: June Existing Home Sales Fall, But Prices Rose and Inventories Declined
Motley Fool: Greek's Take - Grilling Darden Restaurants
Motley Fool: Greek's Take - Pool Corps.' Soggy Q2
CNN Money: Mortgage Applications Hit 5-Month Low
CNBC: Pimco's Gross Threatens Equity Earthquake
CNBC: Oil Slips on Refinery Expectations
Bloomberg: KKR Providing Evidence of Credit Crunch
Yahoo! Earnings Calendar
AP/Yahoo!: Boeing Earns $1.1 Billion
AP/Yahoo!: Colgate-Palmolive Profit Up 47%
AP/Yahoo!: Glaxo Net Up 1.4%
AP/Yahoo!: IHOP Posts 37% Earnings Rise
AP/Yahoo!: Amazon.com Profit More Than Triples
Bloomberg: Tribute Profit Tumbles
CNN: Terror Dry Runs
myway: Airports Warned of Terror Plot
BBC: Israel Hears Arab League Peace Plan
Economist: Belarus' Concern
Iran Daily: Tales from the Dark Side

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Tuesday, July 24, 2007

Today's Greek Coffee - For Whom the Market Bell Tolls

In Greece, old souls like myself like to drink a Greek coffee in the afternoon, after siesta. It helps drive the passion that drives them to squeeze the lemon of life for all the juice it has.

It's become clear that the tone of the second quarter's earnings season is much different than that of the first. In Q1, the key driver of stocks was the strong earnings reports from the large-cap multinationals. This time around, Caterpillar (NYSE: CAT) and others ran up ahead of their reports only to surprise the market with weak results, some of them anyway. It may be time to pay the piper for CAT, or at least take profits! Heck, investors couldn't even count on the mystical earnings magic of Google (Nasdaq: GOOG) this time around.

Subprime mortgage woes are nothing new at this point, but Tuesday's report from Countrywide Financial (NYSE: CFC) still shook the market. As I sat and watched the company's well-bronzed CEO speak on CNBC after Q1, talking about the opportunity before his firm as weaker competitors disappeared, I thought for sure the guy had spent the last three months on a Mediterranean beach, where I know from experience that the troubles of the world have a way of evaporating in the sunlight. But the market bought into his argument back then. In fact, it bought into the arguments of many who charged the woes of subprime were contained, including Fed Chief Ben Bernanke. The problem was not that subprime issues would spread, though they have spread to the owners of mortgage-backed securities that have since been marked down. But that wasn't it. For prime borrowers, it was more an issue of the same set of factors impacting another set of borrowers. Sure, it should take a little longer, but we all know Americans do not live within their means, not even prime borrowers. Wait until unemployment increases; then we would really see some blood on the street.

I think back to January when I was out on a limb arguing that the housing market was headed for a double dip. My loyal readers and I felt like crazy-eyed preachers on the corner of 42nd and 8th screaming "the end is near!" That's how far the herd had drifted from reality. Now everyone is screaming, "the end is here!"; everyone that is, except us. No, we're busy looking ahead.

On Tuesday, Countrywide Financial reported earnings and promptly dropped some extra weight, losing 10.5% in a hurry. Angelo Mozilo, the company's CEO stated that prime home equity borrowers were behind his company's troubles. Prime, subprime, what's the difference anymore?! It seems Moody's (NYSE: MCO) and Standard & Poor's weren't sure, having only recently downgraded a good bit of debt and announcing that their models needed to be updated to reflect a higher level of corrupt mortgage brokerage activity in the modern marketplace. No kidding! As a result of today's news, Tuesday's biggest losers were led by lenders Fremont General Corp. (NYSE: FMT) (-18%), Accredited Home Lenders (Nasdaq: LEND) (-15%) and IndyMac Bancorp (NYSE: IMB) (-5.4%).

I will try to say this as humbly as I can now... HELLO!!! Late last year I was talking about the very same excesses that are a notorious yet common commodity for market bubbles. So, how could the Greek know it, and the models of the most important rating agencies not? Sometimes human logic is lost you see, usually when you become comfortable with models and the daily routine. This is why we say financial market navigation requires a bit of science and a bit of art. Still, nothing bothers me more than incompetence, and its common place in our society. Why must things first explode for people to notice there's a problem? We should be better than that.

So the new concern that the prime market might have caught the contagion troubling subprime is now frightening the talking heads, or headless chickens. They're concerned it might dry liquidity and cause risk spreads to widen in the credit market. That means, say goodbye to your little private equity premium friend. If that happens folks, then stocks have to give back some ground.

It was only a few months ago that we anxiously awaited Monday morning for the latest round of private equity buyouts, and began anticipating what might go private the following week. Please refer to our article from weeks ago, "The Greek's Week Ahead - When the Liquidity Dries" for some detail as to what might happen next. And I quote, "Liquidity, now as abundant as Chinese investors, may soon face drought conditions. I'm positively certain this argument will find criticism, sort of like how global warming does, and I'm absolutely sure people will forget I mentioned it when they can't find buyers for their Dow shares down the road."

Thank you for your interest. We hope you will continue to support our advertisers and tell your friends about the Wall Street Greek. (disclosure)

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Today's Key Market News - A Bead on Oil

Please find the published copy of "The Greek's Week Ahead - A Different Tone to Trading" just below this article on the site. Today's trading is being defined by company specific disappointments and the continued slide in oil prices. We made a definitive decision recently, expecting oil to slide in the short term. Please recall, we also advised of the bottom price of oil early this year, and we were correct to the pinpoint of the hour as to where oil bottomed.

Read through these two articles on January 18th and January 19th, and then review the Department of Energy's historical price page, and you will see we issued a clear buy recommendation for oil prices the morning the spot price bottomed. We recommended buying oil that day, before the commodity had started trading and we told you exactly when to buy, after the inventory report. We couldn't have been more correct. The price of oil has not looked back. WTI Crude spot prices bottomed at $50.51 that day, the low for this year. We reiterated our call the following morning, and in that article, you also got some prescient information about the threat of food inflation. Needless to say, we see a short term move in oil lower now, but we are clear to note "short term." As you know, we fully anticipate a messy war involving Iran and much of the Middle East to support prices higher down the road.

Please catch today's key market-moving headlines below, and find these in our sidebar section "Headline News" daily.

ICSC Weekly Same-Store Sales -0.2% week/week, +3.0% year/year
CNBC: Oil Falls and The Greek Called It
Bloomberg: DuPont, Others Driving Market Lower
Yahoo! Earnings Calendar
AP/Yahoo!: Pepsico Profit up 13%
AP/Yahoo!: McDonald's Posts Loss
AP/Yahoo!: AT&T Posts Sharp EPS Rise
AP/Yahoo!: Lockheed Posts Gain
AP/Yahoo!: JetBlue Posts 50% Gain
AP/Yahoo!: Lilly's Profit Drift
Bloomberg: Dollar Drops to Record
CNN Money: Bancrofts Promise Decision by Friday
CNN: YouTube's Presidential Debate
BBC: Blair and Hope
Economist: The Geopolitical Week Ahead
Financial Times: U.S., Iran Talking Again
Iran Daily: Tales from the Dark Side

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Monday, July 23, 2007

The Greek's Week Ahead - A Different Tone to Trading

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

After last week's unexpectedly disappointing earnings reports from the likes of Google (Nasdaq: GOOG), Caterpillar (NYSE: CAT) and Yahoo! (YHOO), the tone of this season's reporting calendar has shifted quite a bit. The first quarter's strong reports from the large multinationals in the Dow Jones Index spurred quite a run. The memory of those results took the Dow up over 14,000 last week, but the tone has since changed.

In recent issues of "The Greek's Week Ahead" we have looked forward to a short earnings run higher that we anticipated would last a couple weeks or so. Shares could still gain some enthusiasm from the plethora of reports due this week. They could also benefit from decreasing energy prices, which we view as a strong possibility. Oil and natural gas have already started weakening from recent highs. This week's inventory data on Wednesday and Thursday should prove important to the degree of decrease, though we think the power behind a declining price trend will be overwhelming in the short term.

As far as stocks are concerned, if not rescued this week by more corporate reports or the GDP report, though the bar is set high, than the earnings run may already be over and we can look forward to tough times ahead. In recent weekly issues, we looked forward to growing concern about consumer spending and later economic softness this year to threaten stocks. Eventually, we expect war with Iran to drive a severe correction in global equities. As for now, we have quite a busy earnings week in store, and a good deal of market-moving news will be generated by companies until Friday's key GDP and consumer sentiment reports.

Now let's take a look at the week ahead...

Monday's focus will be on corporate earnings and the beginning of two important meetings for the publishing and auto industries. The soap opera continues within publishing firm, Dow Jones (NYSE: DJ), as the Bancroft family, who own a controlling interest, meets to discuss whether to follow the advice of Dow Jones' board of directors and accept Rupert Murdoch's $60 bid. Of course, the family could also side with the view of newly departed Director, Dieter von Holtzbrinck, who found the decision so disheartening that he withdrew his membership in the group. We found a couple things about the meeting very interesting. Christopher Bancroft reportedly left early, while Leslie Hill, a family member, abstained from the vote.

We wrote an article weeks ago that illustrates our belief that the family has strung Murdoch along in order to keep his bid in play as it attempts to lure another buyer it might better digest (see "Dow Jones Will Sell, but Not to Potter!"). If the Bancrofts let Murdoch's offer slip away, the next best proposal known to the public is the Greenspan offer for a 25% interest in DJ. The price is the same, but the family would still be involved, while allowing the Internet entrepreneur two board seats and an opportunity to implement his digital strategy. Greenspan has since returned to the table with a revised plan, a more detailed version of how he plans to create value for shareholders. We expected Ron Burkle to show up with an offer, but he has yet to do so, despite rumors that he might partner with Greenspan to raise the offer or acquire the entire company.

In effect, what the board has done here is serve its employer well, the shareholders of Dow Jones. Now, the controlling party can influence whether a sale occurs or not, while the Board remains neutral and avoids liability.

Also on Monday, the United Auto Workers Union begins formal discussions with Ford and General Motors, after having begun discussions with Chrysler on Friday. With national contracts set to expire on September 14, and taking the recent downswing in the business cycle into account, these meetings are critical to both parties. The big three need to bring their costs into parity with Japanese manufacturers, and if the UAW doesn't agree, that can happen via Mexican production for North America.

Earnings season has its second busy week ahead of it, and Monday starts the schedule with reports from Altera Corp. (Nasdaq: ALTR), American Express (NYSE: AXP), Arch Coal (NYSE: ACI), Chemical Financial (Nasdaq: CHFC), Crane (NYSE: CR), Dr. Reddy's Laboratories (NYSE: RDY), DSP Group (Nasdaq: DSPG), Equifax (NYSE: EFX), Everest Re (NYSE: RE), Halliburton (NYSE: HAL), Hasbro (NYSE: HAS), Hercules (NYSE: HPC), Merck (NYSE: MRK), Netflix (Nasdaq: NFLX), PetMed Express (Nasdaq: PETS), PrePaid Legal (NYSE: PPD), Schering-Plough (NYSE: SGP), Taser International (Nasdaq: TASR), Texas Instruments (NYSE: TXN), Weatherford International (NYSE: WFT) and others.

On Tuesday, we will be anxiously awaiting the usual ICSC-UBS Weekly Same-Store Sales Report. Recent weeks' trends have shown sales at a level well below prior year growth rates. For your information, we are going to begin tracking this report within our sidebar soon. Also on Tuesday, State Street reports its Investor Confidence Index. Recall, the report studies levels of risk held within portfolios. Considering June's report reflected an increase from May, to 97.2, we expect investor excitement heading into earnings season could drive a positive result for July.

St. Louis Fed President William Poole is scheduled to address a group in Delaware on the topic of energy and the U.S. macroeconomy. Internationally, North and South Korea are scheduled to hold high level military meetings. Perhaps the tension along the million man border could be reduced as a result. We can hope and dream... With everything becoming state controlled, it may not matter anymore that markets in Venezuela will be closed on Tuesday.

Tuesday is perhaps the busiest day of earnings season, with a slew of companies set to report. The day's schedule includes Aaron Rents (NYSE: RNT), AFLAC Inc. (NYSE: AFL), Akzo Nobel NV (Nasdaq: AKZOY), Alliance Financial (Nasdaq: ALNC), Amazon.com (Nasdaq: AMZN), AT&T (NYSE: T), Biogen Idec (Nasdaq: BIIB), BJ Services (NYSE: BJS), Calamos Asset Management (Nasdaq: CLMS), Cavalier Homes (AMEX: CAV), CDW Corp. (Nasdaq: CDWC), Centex Corp. (NYSE: CTX), Countrywide Financial (NYSE: CFC), DuPont (NYSE: DD), Eli Lilly (NYSE: LLY), Energizer (NYSE: ENR), Jacobs Engineering (NYSE: JEC), JetBlue Airways (Nasdaq: JBLU), Kimberly Clark (NYSE: KMB), Lab Corp. of America (NYSE: LH), Lockheed Martin (NYSE: LMT), McDonald's Corp. (NYSE: MCD), Nabors Industries (NYSE: NBR), Occidental Petroleum (NYSE: OXY), Panera Bread (Nasdaq: PNRA), PepsiCo (NYSE: PEP), Plantronics (NYSE: PLT), Robert Half International (NYSE: RHI), Sony Corp. (NYSE: SNE), The Cheesecake Factory (Nasdaq: CAKE), UAL Corp. (Nasdaq: UAUA), USG (NYSE: USG), Websense (Nasdaq: WBSN), XTO Energy (NYSE: XTO) and quite a few more.

When reported Wednesday, Existing Home Sales are expected to show an annual pace of 5.87 million homes sold in June. In May, the same report showed a sales pace of 5.99 million. It's our view that home builders are finally facing reality, and making serious cutbacks to production, while likely consolidating operations and laying off employees. This builder capitulation should better allow inventory to sell off, and eventually lead to stabilization and growth again. See, Wall Street Greek is not a permabear afterall; we just call it like it is. Earlier the same morning, the Mortgage Banker's Association will report on new applications.

The Fed is scheduled to release its Beige Book of regional economic conditions on Wednesday afternoon. Most of the regional data has been strong, so we do not expect a negative impact here. Also, New York Fed President Timothy Geithner will speak about economics and global integration. Of course, the regular Petroleum Status report at 10:30 a.m. EDT will be closely watched with oil prices showing signs of having reached a near-term top last week.

The earnings report schedule includes Alcon (NYSE: ACL), Allegheny Technologies (NYSE: ATI), Ameriprise Financial (NYSE: AMP), Anheuser-Busch (NYSE: BUD), Apple Inc. (Nasdaq: AAPL), Baidu (Nasdaq: BIDU), Cabot Oil & Gas (NYSE: COG), Colgate-Palmolive (NYSE: CL), Conoco Phillips (NYSE: COP), Covance (NYSE: CVD), DaimlerChrysler (NYSE: DCX), Drugstore.com (Nasdaq: DSCM), EnCana Corp. (NYSE: ECA), Fair Isaac (NYSE: FIC), Fiserv (Nasdaq: FISV), General Dynamics (NYSE: GD), GlaxoSmithKline (NYSE: GSK), Honda Motor (NYSE: HMC), IHOP (NYSE: IHP), MEMC Electronic Materials (NYSE: WFR), National Oilwell Varco (NYSE: NOV), Nomura Holdings (NYSE: NMR), Norfolk Southern (NYSE: NSC), P.F. Chang's China Bistro (Nasdaq: PFCB), Plug Power (Nasdaq: PLUG), Psychiatric Solutions (Nasdaq: PSYS), Pulte Homes (NYSE: PHM), Qualcomm (Nasdaq: QCOM), Rockwell Automation (NYSE: ROK), Sealed Air (NYSE: SEE), Seattle Genetics (Nasdaq: SGEN), SEI Investments (NYSE: SEIC), Symantec (Nasdaq: SYMC), Boeing (NYSE: BA), Tractor Supply (Nasdaq: TSCO), Travelzoo (Nasdaq: TZOO), WellPoint Inc. (NYSE: WLP), Zebra Technologies (Nasdaq: ZBRA) and many more.

Over the last two days of the week, the heavy earnings report schedule will be complemented by a handful of important economic data, so trading could get really hot and heavy. The Durable Goods Orders Report is due bright and early on Thursday morning. Bloomberg's consensus expects orders to show a 2.0% June rise, compared to a 2.8% decrease in May. Weekly initial jobless claims will be reported as usual, with expectations for 312,000 new collectors of unemployment benefits. This is about in line with recent results, and not a market moving forecast. The Help-Wanted Index is reported Thursday, but since published ads are now overshadowed by online advertising, this data is somewhat insignificant.

Following the existing home sales report of a couple of days prior, new home sales for June are expected to have run at an annual pace of 890,000, according to Bloomberg. That's down from 915,000 reported in May.

Earnings season continues with reports from 3M Company (NYSE: MMM), Aetna (NYSE: AET), Airtran (NYSE: AAI), AmeriSourceBergen (NYSE: ABC), Amgen (Nasdaq: AMGN), Apache (NYSE: APA), AutoNation (NYSE: AN), Ballard Power Systems (Nasdaq: BLDP), Beazer Homes (NYSE: BZH), Blockbuster (NYSE: BBI), Bristol-Myers Squibb (NYSE: BMY), Bright Horizons (Nasdaq: BFAM), Cash America (NYSE: CSH), Celgene (Nasdaq: CELG), Coherent (Nasdaq: COHR), Comcast (Nasdaq: CMCSA), D.R. Horton (NYSE: DHI), EarthLink (Nasdaq: ELNK), Echelon Corp. (Nasdaq: ELON), Evergreen Solar (Nasdaq: ESLR), ExxonMobil (NYSE: XOM), Ford Motor (NYSE: F), Global Payments (NYSE: GPN), Goodrich (NYSE: GR), Janus Capital (NYSE: JNS), Kellogg (NYSE: K), KLA-Tencor (Nasdaq: KLAC), Kulicke & Soffa (Nasdaq: KLIC), L-3 Communications (NYSE: LLL), MBIA (NYSE: MBI), McAfee (NYSE: MFE), Millennium Pharmaceuticals (Nasdaq: MLNM), Newell Rubbermaid (NYSE: NWL), Office Depot (NYSE: ODP), Penn National Gaming (Nasdaq: PENN), Potlatch (NYSE: PCH), Raytheon (NYSE: RTN), Royal Carribean (NYSE: RCL), Southern Company (NYSE: SO), The Dow Chemical Company (NYSE: DOW), Travelers (NYSE: TRV), TheStreet.com (Nasdaq: TSCM), US Airways (NYSE: LCC), VeriSign (Nasdaq: VRSN), Wendy's (NYSE: WEN), XM Satellite (Nasdaq: XMSR), and so many more.

On Friday, two very important bits of data will be reported to help us analyze both the past and the future. At 8:30 a.m. EDT, second quarter GDP is expected to have grown at a 3.2% growth rate, compared to 0.7% growth in Q1. The price index is seen measuring up 3.4%. Wall Street Greek is on the record anticipating Q2 growth before later softness. We view housing critical to the economic wellfare of Americans. Despite the relatively lower level of interest rates, strong unemployment and international demand, which no doubt are very supportive, there are significant price pressures on a good deal of Americans. The expenses of gasoline and food are two of the most important and common expenses seen across this country. There's no escaping it. Consumer spending growth has weakened this year. We'll get a look see into how consumers are feeling when the Michigan Consumer Sentiment metric is provided at 10:00 a.m. Sentiment in July is seen at 91. In June, sentiment measured 85.3, but renewed stock market gains have helped boost the figure more recently. Even so, things are changing in the market.

Reporting earnings on Friday, look for news from Active Power (Nasdaq: ACPW), Baker Hughes (NYSE: BHI), Celanese (NYSE: CE), Chevron (NYSE: CVX), Fortune Brands (NYSE: FO), Gene Logic (Nasdaq: GLGC), Idexx Laboratories (Nasdaq: IDXX), Ingersoll-Rand (NYSE: IR), Medco Health Solutions (NYSE: MHS), Sepracor (Nasdaq: SEPR), Veeco Instruments (Nasdaq: VECO) and more. We hope you have found value in this week's report.

Thank you again for your interest. We hope you will continue to support our advertisers and tell your friends about the Wall Street Greek. (disclosure)

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Today's Key Market News - Oil on the Slide

"The Greek's Week Ahead" is on its way, we promise. We think you will not mind the delay, after you read the value added work we produced for The Motley Fool over the weekend. In the meantime, catch today's market-moving headlines below. We probably should have noted for you last week that we took a short position in oil stocks. Well, actually it was one name, but based on a view that oil has topped. We correctly called the oil price bottom at the beginning of 2007, to the hour in fact, and we think oil has topped here in the near term. Despite some important sector earnings reports this week, we think the focus will be on price direction and the forward outlook. In such a dynamic market, with Iran in focus, no forecast is smartly directed to the long term. However, traders might have an opportunity in the less than long-term by going short, in our view. (More reasoning to follow)

Key Headlines:

Bloomberg: Transocean to Acquire GlobalSanteFe
CNN Money: OPEC Official Says $60-$65 Oil is Appropriate
USA Today: WalMart to Cut Back to School Prices
Forbes: UAW to Hold Talks with Ford, GM
AP/Yahoo!: Japanese Automakers to Resume Production Post Quake
AP/Yahoo!: Merck Profit Rises
AP/Yahoo!: Schering-Plough Profit More than Doubles
AP/Yahoo!: Halliburton Doubles Income
Yahoo! Earnings Calendar
AP/Yahoo!: Hasbro Posts Lower Earnings
Financial Times: Barclays Seeks Partner to Raise ABN Bid
CNBC: Cerberus to Buy United Rentals
BBC: Erdogan Wins Turkey
Economist: The Geopolitical Week Ahead
Iran Daily: Tales from the Dark Side

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Once-A-Year Sale at Sandals Resorts

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Chico's June Follows Suit

Chico's FAS (NYSE: CHS), the retailer of casual-to-classy women's apparel, posted a 7.3% decline in June comps, knocking its shares for a loop. Its stock dropped 7.4% in the three days following the report, despite a market rally during the same period.

Total sales at the women's chain, which includes its namesake locations, its White House/Black Market stores, and Soma Intimates shops, increased 4.4% in the five-week period ended July 7. Total sales growth benefited from a larger relative store count.

The company reported same-store sales using both fiscal and comparable time periods. According to the company, the "fiscal" period is year over year (the periods start at different times), while the "comparable" period compares the exact same weeks during both years.

On a fiscal-year basis, same-store results fell 11%. On a "comparable" basis, same-store sales dropped 7.3%. The differences most likely stem from the timing of the holidays, Memorial Day and Independence Day, within the five-week periods. But no matter how you look at it, clothes aren't flying off the hangers right now at Chico's.

While Chico's provided no same-store guidance for it to miss, we speculate that the weakness in the entire women's apparel segment may have inspired a shift of capital into hotter sectors. Peer AnnTaylor Stores (NYSE: ANN) experienced a sharper drop-off of 8.4% in the period. We certainly can't attribute the weakness to market-share loss, since rival department-store chains also exhibited weakness. Kohl's (NYSE: KSS) reported a 4.9% same-store decline, while at Macy's (NYSE: M) and J.C. Penney (NYSE: JCP), sales dropped 2.7% and 1.5%, respectively.

With strength reported in discount chains, speculation abounded that perhaps consumers were making fewer trips to the mall, and doing more "commute shopping" instead -- purchases made between trips to and from work. With gasoline prices choking consumers, among other expenditures, many observers believe that shoppers are paying more attention to their gas tanks these days, and enjoying less discretionary spending.

In a recent telephone interview, Chico's CFO Charles J. Kleman told me that we should look to the fall for the first signs of same-store sales improvement, as new merchandise hits the racks. We think investors are likely more focused on the shares' own recent fall and can't see that far ahead.

This article was initially published at Motley Fool. Wall Street Greek has the exclusive right to republish this article. We thank you for your support of our advertisers. It and our passion for the markets are the sustaining force fueling our effort. (disclosure)

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Friday, July 20, 2007

Today's Key Market News - Stocks Backtrack

After surprising earnings misses from the likes of Caterpillar (NYSE: CAT) and Google (Nasdaq: GOOG), the Dow Jones Index seems assured to drop from yesterday's milestone close above 14,000. Please see today's key market-moving news below, and enjoy our latest work for the Motley Fool, Chico's June Follows Suit.

AP/Yahoo!: Caterpillar Misses Forecasts
AP/Yahoo!: Google Disappoints
CNN Money: China Raises Interest Rates
USA Today: GM Back on Top
CNN: 4.2 Mag Quake Hits San Francisco
Financial Times: Sarkozy Reaches Out to U.K.
Greek's Take on Chico's June Sales
Yahoo! Earnings Calendar

AP/Yahoo!: Citigroup Profit Rises
AP/Yahoo!: Wachovia Reports In Line
CNBC: Microsoft Reports
CNBC: Boston Scientific Misses
BBC: Pakistan Judge Reinstated
Al Jazeera: Abbas Welcomes Released Prisoners
Iran Daily: Tales from the Dark Side

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Thursday, July 19, 2007

Today's Key Market News - Bernanke Part II

Be sure to catch yesterday's copy of "Today's Greek Coffee - Bernanke Building Upon a False Foundation." You may click on the link here or just scroll down to the article below. Please find the day's market-moving news below. Remember, these articles are available daily in our sidebar section, "Headline News."

CNN Money: Jobless Claims Fall
CNBC: Today's Upgrades and Downgrades
Bloomberg: China GDP Grows 11.9% in Q2
CNBC: Oil Prices Extend Rise
USA Today: GM's Global Growth & Domestic Weakness
Yahoo! Earnings Calendar
AP/Yahoo!: Bank of America Beats Estimates
AP/Yahoo!: Baxter International Beats on Adjusted Basis
AP/Yahoo!: Continental Airlines Exceeds Estimates
AP/Yahoo!: Dow Jones' Profit Falls
Bloomberg: Honeywell Profit Rises
Financial Times: Russia Expelling Four British Diplomats
Economist: Pakistan
Iran Daily: Tales from the Dark Side

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