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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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Wednesday, April 30, 2008

Uncle Ben's Rice

uncle ben bernanke

By Steven C. Ferguson

Cooking Instructions:
  1. Bring inflationary waters to a scalding boil

  2. Stir in Uncle Ben’s white rice and, if desired, oil

  3. Cover all investment bank losses, reduce rates 25 more bps and let simmer six months

  4. Remove temporarily from heat while rice deflates

Rice Instability

Poor Uncle Ben. He cannot seem to find that winning recipe. As the unfortunate host of bearishly ravenous dinner guests, he just had to avoid a financial faux pas… not to mention scathing reviews from stern critics… with a hastily-prepared meal just before last month’s FOMC. But as master economic chef, he must be ashamed, having completely spoiled his secret sauce and Fed family formula for inflation targeting and price stability in the process.

Now it seems painfully evident that no matter what ingredient he substitutes from the CPI basket of goods, he just cannot keep the inflationary pot from boiling over. And with the latest consumer confidence readings, we can definitely see that expectations are not anchored. Apparently, this is one watched pot that does boil, despite any clever claims to the contrary.

Indeed, shady statistics can no longer hide the unsavory truth of monetary and price inflation. And with the harmful ingredients fully exposed, the only remaining beneficiaries of hedonics are the hedonists with their ten-figure bonuses, yachts, vacation homes and sumptuous fare. All the while, the rest of the riotous world cannot even get enough rice to eat. Now that is moral hazard!

Dollar Menu at Benny’s

As Uncle Ben has served up his best to Wall Street over the last eight months, nearly every dollar-denominated item on the menu has gone up in price. In fact, the dollar has dropped so fast that restaurants abroad may soon stop printing menus for US tourists over a concern that prices may double before the main course is even served.

To hedge against this runaway inflation, investors have driven commodities into an outright speculative bubble. For example, Bloomberg News reports that commodity ETFs like the (AMEX: DBA), fueled largely by hedging and speculation, now control half the corn, wheat and soybeans in the United States. The resulting parabolic ascent in food commodity prices has led to multiple, self-reinforcing problems:


  • Food hoarding, rationing and shortages

  • Food riots in Haiti, Indonesia, Mexico, Egypt, etc.

  • Record food prices for consumers and producers

  • Difficulty for growers and handlers to manage expensive risks

  • Increased debt load to finance inventories

  • Greatly diminished profit

Pressure to solve these problems (which are characteristic of unstable, positive-feedback systems) has been mounting worldwide even as a UN Task Force was formed to mitigate the effects of soaring food prices on the poorest of poor.

Price Choppers

Concern that inflationary waters would come to a boil became evident before the March FOMC when the President met with the working group on financial markets. Among the working group members is the chairman of the CFTC. Shortly after that meeting, margin requirements were raised for commodities trading accounts in an effort reduce speculation in commodities markets. Within a day, oil and commodities stocks plunged taking indices down almost 3% during intraday trading.

Later in March, Fed President Gary Stern also suggested that the central bank may need to target asset bubbles. While it was unclear whether Mr. Stern was referring to the growing speculative bubble in commodities or just asset bubbles in general, the timing of the remark was suspect, particularly in light of recent action through the CFTC. It is also worth noting that a concurrent G7 meeting on financial market turmoil likely included discussion of both currency intervention and asset targeting among central bankers familiar with that practice.

Given the ECB’s hawkish stance against inflation, and given that other central banks do not rely exclusively on broad-based inflation targets (certainly not on targets with watered-down and cooked data), it is possible that Bernanke may be relenting in his views. However, his writing suggests otherwise: that "there should be no additional response of monetary policy to asset price fluctuations" even though the (inflation-targeting) approach has "not often been stress-tested by large swings in asset prices."

Well, the stress test results from the housing bubble are in and the patient narrowly avoided a heart attack. Worse, the patient has been overindulging in commodities ever since. In Bernanke’s view "there are good reasons … to worry about attempts by central banks to influence asset prices, including the fact that (as history has shown) the effects of such attempts on market psychology are dangerously unpredictable." Equally dangerous are the results of hyperinflationary intervention to prevent collapse. Why is this evidently so hard to fathom?

Simmer Down

In light of the above, the FOMC will announce its policy decisions today at 2:15 p.m. EDT. Most expect that the Fed will lower rates 25 bps and include statements to suggest that no further action will follow in the immediate future. Alternatively, the Fed could stand pat and let inflation simmer down for a few months.

But will the central bank engage in a more concerted asset-targeting effort to (in the words of Alan Greenspan, 1994) "prick the commodities market bubble?" Or, in a rare but biased show of self-restraint, will the Fed let the market respond naturally to deflationary forces? In either case, the temporary strengthening of the dollar, coupled with coordinated currency support from central banks abroad could have "unexpected" results. After all, such price oscillation is to be expected in a nearly frictionless system with boiling money sloshing around between asset classes.

Whether tomorrow or in 2009, it is only a matter of time before the Uncle Ben's bag of minute rice bursts and splatters scalding water all over the world economy. For now, I would expect the stock market, along with commodities, to simmer down.

Please see our disclosure at Wall Street Greek. Article for readers of (AMEX: DBA, AMEX: DIA, AMEX: SPY, AMEX: DOG, AMEX: SDS, AMEX: QLD, Nasdaq: QQQQ).

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GDP Report Misleads on Inventory Build


The market was closely attuned and received "good news" this morning, supposedly. Q1 GDP was reported 0.6% higher, but the numbers deceive.

First Quarter GDP

This morning's advanced reporting of GDP showed surprising growth, despite economists' projections for the same. The market, after all, was expecting recession no? Economists were actually projecting 0.3% growth, or better than recessionary data anyway. We got an even better showing, as Q1 GDP was reported 0.6% higher, matching the rate of growth seen in the fourth quarter of '07. So what gives?

One important driver of GDP stood out like a sore thumb as a false prophet, albeit an expected one. Inventories increased at a $1.8 billion annual rate, adding 0.81% point to GDP. The thesis here is that inventories rose because sales slowed, and despite just-in-time pervasion, this appears to be the case. Some analysts found optimism in the narrowing of the trade deficit, but we argue that this has as much to do with the decline of American consumption of imports as it has to do with increased demand for cheaper U.S. goods overseas (exports). However, imports increased, while at a slower pace than exports.

There's no doubt that American goods are in high demand overseas though. Thanks to the Internet and efficient shipping and distribution channels, it's relatively easy for foreigners to attain U.S. goods. The Greek has the unique privilege of access to Greek TV, and inflation mania and competitively priced U.S. goods are gaining a lot of media attention in Europe. As a matter of fact, after seeing the European Union's spring forecasts and watching the related media coverage, I'm certain the EU will not be cutting rates anytime soon. In fact, a rate hike is very possible. Thus, any near-term strength in the U.S. dollar that might result from a shift in Federal Reserve policy could be quickly negated.

Within the GDP report, it's important to note that household consumption grew at a pace only matching levels seen during the last U.S. recession, so the likelihood of Q2 contraction seems solidified. There's no doubt that the tax rebate checks are arriving just in time, and wouldn't it be a amazing if the government's stimulus managed to keep GDP in the green in Q2. If that happened, wouldn't we have to give due credit to President Bush and his treasury secretary. Remember, George's strength coming into his presidency was not foreign policy as you may have suspected, but in fact was his economic prowess... Considering the money spent to fund the Middle Eastern efforts during his stay, George has done a decent job at thus far keeping the U.S. out of dire depression, but maybe that just takes more time. All is not said and done just yet, as consumer spending only rose 1% in Q1, and personal consumption for March will be reported tomorrow (things could get worse when GDP is revised in May).

Business fixed investment declined at an annual rate of 2.5%, so one has to wonder if it's too early to be picking at tech stocks. Often times, these stocks run higher on anticipation, retrench on reality and then move in earnest (still ahead of economic recovery). So, be aware that semiconductor and semi-equipment names (AMEX: SMH), and other very cyclical plays should prove volatile while they generally rise ahead of recovery.

Motor vehicle output subtracted 0.3% from GDP, and despite Ford's (NYSE: F) recent strong report, General Motors (NYSE: GM) today announced plans to reduce production capacity to match current economic realities and lighter demand.

Prices paid increased 3.5%, and when excluding food and energy (as if they didn't matter - don't shoot me, I'm just the messenger) prices increased 2.2%, versus 2.3% in Q4 '07.

Employment Data

ADP Private Employment Report

Don't get too excited about the positive number from ADP this morning. The 10,000 reported April jobs increase for the private sector compares to a revised March figure of +3K. So, this does not signify that the economists' consensus view for nonfarm payrolls, to be reported on Friday, is grossly mistaken at negative 75,000. Last month's nonfarm decrease measured at 80,000, despite the +3K figure from ADP.

The usual suspects were to blame in the weak jobs figure, as large and medium sized businesses led the attrition, or near attrition. Also, manufacturing, construction and financial lending related to construction and home ownership suffered again. Small businesses continue to grow, but we expect much of the current growth will hit a brick wall later this year, and many small businesses should fail considering the state of the consumer.

Employment Cost Index

Employment costs rose 0.7% in Q1. Lets think about why. First of all, the population continues to grow despite economic deceleration. Prospective parents were not considering the potential recession of 2008 when they were conceiving their children 19 years ago. Shame on you! Also, inflation adjustments continue as part of employment contracts, and have not been overwhelmed by job cuts, and may never be unless things get really horrible.

The market digested the tasty data well this morning, still ahead of the afternoon FOMC announcement. The Dow Jones Industrials ^DJI (AMEX: DIA), Standard & Poor's 500 ^GSPC (AMEX: SPY) and Nasdaq ^IXIC (Nasdaq: QQQQ) all increased fractionally in the AM.

Please see our disclosure at Wall Street Greek.
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Stock Market News Video Today

A video review of the day's stock market news.



The opinions expressed within the videos may not agree with the view of The Greek.

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Tuesday, April 29, 2008

Wall Street Week Ahead - Best Resiliency Test Yet


Our regularly published Wall Street week ahead article has been engineered to prepare you for the period's scheduled market-moving events.

With GDP and the Employment Situation Report on tap, the market will face the toughest test of its resiliency yet starting on Wednesday. The vessel that is the stock market has thus far sailed through some harsh weather, albeit after taking on a flood of water initially as the iceberg of economic reality brushed her port side. This week's first quarter GDP report offers possible confirmation of economic contraction. Economists, while mostly saying one thing in the public forum, quietly hold a consensus expectation for growth in Q1.

Is this a pipedream or hot air meant to keep client funds in managed portfolios... we estimate the latter. Despite the published expectation, the market probably anticipates contraction in Q1, so bad news might not shake the ship. The degree of bad news though, could certainly take the titanic under for a moment or two.

Since employment lags as an economic indicator, this month's report threatens to be the worst yet. On Friday, the last day of trading heading into the weekend, the potential also exists for sell-off and yet another retest. We'll truly see how slalwart the latest capital surge is through the Wednesday to Friday period.

The Week Ahead

Monday

The first of the tax rebate checks roll out Monday, and not soon enough for many. The Greek's Main Street read of the situation is that things are getting pretty tough out there. Last week's consumer confidence reading might not have been as full of as much overreaction as contrarians want to find in it. There's a strong case to be made for buying stocks when Main Street is sure things are horrible because of the lag of Main Street opinion as an economic indicator.

While the first day of the week is devoid of economic data, it will offer the European Commission's spring economic forecasts for 2008-2009. Yanks will be mostly concerned with how this plays for the U.S. dollar. A good portion of the portfolio management community is anticipating the dollar to strengthen against the euro this year, according to Barron's Big Money Poll seen in this week's copy. Also, we should not discount the interest of American exporters in seeing ongoing European economic health (read avoiding recession).

The United Nations is starting a semiannual meeting within which it will focus on the food crisis and climate change. Funny (sad actually) how these problems of the future that the majority of us use to ignore have all of sudden become serious to us.

Regulators will start a two-day examination of the Bank of America (NYSE: BAC), Countrywide Financial (NYSE: CFC) deal. Still in the height of earnings season, the slate includes: Alberto-Culver (NYSE: ACV), American Dental Partners (Nasdaq: ADPI), American Safety Insurance (NYSE: ASI), Atheros Communications (Nasdaq: ATHR), Axis Capital (NYSE: AXS), BE Aerospace (Nasdaq: BEAV), CH Energy (NYSE: CHG), Choice Hotels (NYSE: CHH), China Petroleum & Chemical (NYSE: SNP), CNA Financial (NYSE: CNA), Cognex (Nasdaq: CGNX), Covance (NYSE: CVD), Digi Int'l (Nasdaq: DGII), Fair Isaac (NYSE: FIC), Flowserve (NYSE: FLS), FMC Technologies (NYSE: FTI), FPL Group (NYSE: FPL), Gen-Probe (Nasdaq: GPRO), Hanger Orthopedic (NYSE: HGR), Hartford Financial (NYSE: HIG), Humana (NYSE: HUM), IHOP (NYSE: IHP), JDA Software (Nasdaq: JDAS), Kaydon (NYSE: KDN), Loews (NYSE: LTR), Manitowoc (NYSE: MTW), Microchip Technology (Nasdaq: MCHP), Olin Corp. (NYSE: OLN), PrePaid Legal (NYSE: PPD), RadioShack (NYSE: RSH), Rent-A-Center (Nasdaq: RCII), Saur-Danfoss (NYSE: SHS), Silver Wheaton (NYSE: SLW), Sinopec Shanghei Petrochemical (NYSE: SHI), SOHU.com (Nasdaq: SOHU), Southern Copper (NYSE: PCU), STMicroelectronics (NYSE: STM), SYSCO Corp. (NYSE: SYY), The Hanover Insurance Group (NYSE: THG), Travelzoo (Nasdaq: TZOO), Tyson Foods (NYSE: TSN), Verizon (NYSE: VZ), Visa (NYSE: V), Wm. Wrigley (NYSE: WWY) and many more.

Tuesday

After Friday's Reuters/University of Michigan consumer sentiment report, which showed sentiment at its lowest level in more than 25 years, the Conference Board will also report on April consumer confidence Tuesday at 10:00 a.m. Bloomberg's consensus of economists anticipates a measure of 62.0, versus 64.5 when measurement was last taken in March.

The ICSC-UBS offers its weekly take on chain-store sales earlier that morning. We recorded the first contraction of weekly same-store sales, on a year-to-year basis, last week and nobody noticed. We view the outlook bleak for the retail space, but the stimulus package rebate checks are coming just in time. The Federal Open Market Committee begins its two-day meeting Tuesday. Of international interest, Japanese markets will be closed.

The heavy earnings schedule includes Advent Software (Nasdaq: ADVS), AGCO (NYSE: AG), Allianz SE (NYSE: AZ), Archer Daniels Midland (NYSE: ADM), Avon Products (NYSE: AVP), Ballard Power Systems (Nasdaq: BLDP), Banco de Chile (NYSE: BCH), Bemis (NYSE: BMS), Boston Properties (NYSE: BXP), Boyd Gaming (NYSE: BYD), Buffalo Wild Wings (Nasdaq: BWLD), Burlington Northern Santa Fe (NYSE: BNI), Carpenter Technology (NYSE: CRS), CommScope (NYSE: CTV), Convergys (NYSE: CVG), Corning (NYSE: GLW), Daimler AG (NYSE: DAI), DaVita (NYSE: DVA), Deutsche Bank (NYSE: DB), Domino's (NYSE: DPZ), Echelon Corp. (Nasdaq: ELON), Energizer (NYSE: ENR), Express Scripts (Nasdaq: ESRX), FEI Co. (Nasdaq: FEIC), Flextronics (Nasdaq: FLEX), Group 1 Automotive (NYSE: GPI), Harris (NYSE: HRS), Holly Energy (NYSE: HEP), ICON plc (Nasdaq: ICLR), K-Swiss (Nasdaq: KSWS), Kensey Nash (Nasdaq: KNSY), LCA-Vision (Nasdaq: LCAV), Lear (NYSE: LEA), Lithia Motors (NYSE: LAD), Martha Stewart (NYSE: MSO), Mastercard (NYSE: MA), Medco Health (NYSE: MHS), National Instruments (Nasdaq: NATI), Office Depot (NYSE: ODP), Oil States Int'l (NYSE: OIS), Panera Bread (Nasdaq: PNRA), Plantronics (NYSE: PLT), Renaissance Re (NYSE: RNR), Techne (Nasdaq: TECH), Temple-Inland (NYSE: TIN), McGraw Hill (NYSE: MHP), TheStreet.com (Nasdaq: TSCM), Titan Int'l (NYSE: TWI), Under Armor (NYSE: UA), United Rentals (NYSE: URI), Valero Energy (NYSE: VLO), Vishay Intertechnology (NYSE: VSH), Waste Management (NYSE: WMI) and many others.

Wednesday

If one day can define a week, Wednesday looks like the day. The market will get its toughest resiliency test yet when first quarter GDP is reported. Economists are widely discussing recession while quietly maintaining forecasts that indicate otherwise. Bloomberg's consensus of the double-talkers indicates expectations for 0.3% growth this quarter. You can't record recession when you get growth, so one has to wonder if the media is only taking speakers with extreme views, and only the view that sells advertising. It wouldn't be the first time would it...

The Greek is saying one thing and forecasting it too. We think Q1 will fall short of the consensus figure, into negative territory. However, we note that we do not have a model or dedicated staff to forecast this figure, and are basing this estimation on our memory of the data we follow on a regular basis and its "contractionary" overtones over the last three months. Don't knock it, as it's perhaps this small distance and our insight that have allowed us to avoid the paralysis that over analysis can lead to sometimes. The Greek is a big fan and beneficiary of due diligence (i.e. doing your homework, but it's equally critical to be able to weed the noise from the important information - insight). Many are good at tracking numbers and plugging them into spreadsheets, while reporting the news, while also poor at forecasting the future based on data knowledge.

Also on Wednesday, that favorite group of economic crime fighters we all admire, the Justice League, also known as the Fed and its FOMC, will make its latest decision on its target rates. Most expect the Fed to cut the fed funds target rate by a quarter point, and to also adjust the discount rate lower a quarter point. The tide of market sentiment has definitely turned, and the market now wants to see some caution from the Fed. Commodity prices are really starting to concern the market, so even free money is no longer welcome.

The Employment Cost Index for the first quarter is also scheduled for early morning reporting, but what do we want to learn from it? That's the tough question. With all costs rising, don't we want compensation to likewise rise so that Americans can afford to spend money this summer? But, if this very important cost component rises, it could also add to inflation fears, and rightly so. The cost index is expected to have increased by 0.8%, quarter to quarter, in Q1.

The ADP Employment Report for April is due for release early Wednesday morning, but the GDP figure will render it mute just fifteen minutes after. Still, the prelude to the Employment Situation Report on Friday is widely followed and very important.

At 9:45 a.m., the National Association of Purchasing Managers - Chicago will offer its Business Barometer Index, with expectations for a measurement of 47.5 for April. That compares to 48.2 in March, both measures indicating economic contraction (sub - 50.0).

Wednesday's busy slate will also contain the regular mortgage activity and petroleum status reports, as well as the Farm Prices Report at 3:00 p.m. No shortage of information to swallow on Wednesday, so we'll offer a wrap up of the data and its consequences Wednesday evening.

The earnings schedule will not let up either, with news arriving from: Akamai Technologies (Nasdaq: AKAM), Alcatel-Lucent (NYSE: ALU), Allegheny Energy (NYSE: AYE), Allied Waste (NYSE: AW), Amkor (Nasdaq: AMKR), Asset Acceptance (Nasdaq: AACC), Atmel (Nasdaq: ATML), Avalonbay Communities (NYSE: AVB), Beckman Coulter (NYSE: BEC), Cabot (NYSE: CBT), Cabot Oil & Gas (NYSE: COG), Cache (Nasdaq: CACH), CACI Int'l (NYSE: CAI), CalDive Int'l (NYSE: DVR), Centex (NYSE: CTX), Cincinnati Bell (NYSE: CBB), Colgate-Palmolive (NYSE: CL), Corinthian Colleges (Nasdaq: COCO), Cummins (NYSE: CMI), Dean Foods (NYSE: DF), Diebold (NYSE: DBD), First Solar (Nasdaq: FSLR), Fiserv (Nasdaq: FISV), Furniture Brands (NYSE: FBN), Garmin (Nasdaq: GRMN), General Motors (NYSE: GM), Hess Corp. (NYSE: HES), IAC Int'l (Nasdaq: IACI), Ingersoll-Rand (NYSE: IR), International Paper (NYSE: IP), JDS Uniphase (Nasdaq: JDSU), Jones Apparel (NYSE: JNY), Kellogg (NYSE: K), Kraft Foods (NYSE: KFT), Las Vegas Sands (NYSE: LVS), LoJack (Nasdaq: LOJN), Micros Systems (Nasdaq: MCRS), Millipore (NYSE: MIL), Morton's Restaurant Group (NYSE: MRT), Murphy Oil (NYSE: MUR), National Oilwell Varco (NYSE: NOV), Novo Nordisk (NYSE: NVO), OfficeMax (NYSE: OMX), Olympic Steel (Nasdaq: ZEUS), ONEOK (NYSE: OKE), Procter & Gamble (NYSE: PG), Psychiatric Solutions (Nasdaq: PSYS), RehabCare (NYSE: RHB), Sanofi-Aventis (NYSE: SNY), SAP AG (NYSE: SAP), Sealed Air (NYSE: SEE), Southern Co. (NYSE: SO), Starbucks (Nasdaq: SBUX), Sunoco (NYSE: SUN), Symantec (Nasdaq: SYMC), Tetra Tech (Nasdaq: TTEK), The Brinks Co. (NYSE: BCO), Thomas & Betts (NYSE: TNB), Time Warner (NYSE: TWX), Visteon (NYSE: VC), West Marine (Nasdaq: WMAR) and more.

Thursday

Take a breath and get ready for another heavy dose of economic data on Thursday. The first bit of news arrives at 6:00 a.m. with the Monster Employment Index, followed by the 7:30 reporting of the Challenger Job-Cut Report. We do not expect to see significant improvement or reason to celebrate arriving from any of the jobs data. Weekly initial jobless claims are set for release also, with consensus expectations set at 360K. We saw a bit of a break off from this year's trend last week, but we would not expect that to prove any indication of inflection point. Employment measures should lag other indicators, and they've just started to deteriorate over the last few months.

Personal Income and Outlays are set for 8:30 release, and this very important barometer will offer insight into the status and spending habits of the American consumer. Bloomberg pegs expectations for the March measurement at increases of 0.3% for both income and consumption. Both these figures would prove reassuring to the stock market if they prove true. Motor vehicle sales are also set for release and will provide some information on the big ticket spending habits of Americans. Despite Ford's (NYSE: F) recent success, we're not expecting much from the overall industry.

The Institute for Supply Management will issue its Manufacturing Index for April at 10:00 a.m. Bloomberg's consensus indicates a measurement of 48.0, versus last month's measure of 48.6, again both indicating economic contraction. Manufacturing showed early weakness in this economic downturn, despite the benefits of a weak dollar for multinationals based in the U.S.

Construction spending, due for release at 10:00 a.m., will likely get lost in the flood of data. This is a been there, done that bit of news, and the market will find no surprise in poor result and no hope in positive surprise, in our estimation. Bloomberg's consensus is expecting construction spending to have declined 0.9% in March, after a decrease of 0.3% in February.

Thursday's earnings schedule includes Affiliated Computer (NYSE: ACS), Annaly Capital (NYSE: NLY), Ansys (Nasdaq: ANSS), Apache (NYSE: APA), Apria Healthcare (NYSE: AHG), Atmos Energy (NYSE: ATO), Bebe Stores (Nasdaq: BEBE), Black Hills Corp. (NYSE: BKH), Burger King (NYSE: BKC), Cabelas (NYSE: CAB), Callaway Golf (NYSE: ELY), Cardinal Health (NYSE: CAH), Cephalon (Nasdaq: CEPH), Chesapeake Energy (NYSE: CHK), Chiquita Brands (NYSE: CQB), CIGNA (NYSE: CI), Cirrus Logic (Nasdaq: CRUS), Clorox (NYSE: CLX), Coinstar (Nasdaq: CSTR), Comcast (Nasdaq: CMCSA), CVS Caremark (NYSE: CVS), Digital River (Nasdaq: DRIV), Dynamic Materials (Nasdaq: BOOM), Eastman Kodak (NYSE: EK), Elizabeth Arden (Nasdaq: RDEN), Expedia (Nasdaq: EXPE), ExxonMobil (NYSE: XOM), Haemonetics (NYSE: HAE), Helmerich & Payne (NYSE: HP), Hercules Offshore (Nasdaq: HERO), Jones Soda (Nasdaq: JSDA), Marathon Oil (NYSE: MRO), MetLife (NYSE: MET), Mine Safety Appliances (NYSE: MSA), Monster Worldwide (Nasdaq: MNST), National Fuel Gas (NYSE: NFG), Nicor (NYSE: GAS), Noble Energy (NYSE: NBL), Odyssey Re (NYSE: ORH), Patterson-UTI Energy (Nasdaq: PTEN), Pride Int'l (NYSE: PDE), ResMed (NYSE: RMD), Sepracor (Nasdaq: SEPR), St. Mary Land & Exploration (NYSE: SM), Sun Microsystems (Nasdaq: JAVA), First American (NYSE: FAF), Timberland (NYSE: TBL), Tyco Int'l (NYSE: TYC), Websense (Nasdaq: WBSN), Williams Cos. (NYSE: WMB) and many more.

Friday

We would be remiss not to focus on the Employment Situation Report, which has the ability to undo or make the entire trading week. As recession likely takes grip of the economy, portfolio managers the world over will closely monitor the employment situation to take measure of the possible depth of decline. If employers can withstand a bit, consumer spending might also recover sooner. Still, in a competitive marketplace, with margins getting squeezed from the cost of component commodities and energy, corporations are most likely to place the good of their firm ahead of the good of the whole, for their job's sake. We anticipate the employment situation will deteriorate further through most, if not all of the year. Bloomberg's compilation of experts sees a loss of 75,000 jobs in April, with the unemployment rate slipping to 5.2% from 5.1% the month before. Average hourly earnings are seen rising 0.3%.

Factory orders, due for release at 10:00 a.m., are expected to have increased 0.3% in March, after a 1.3% decrease in February. The earnings schedule includes Agrium (NYSE: AGU), Ameren (NYSE: AEE), Apartment Investment & Management (NYSE: AIV), BorgWarner (NYSE: BWA), Chevron (NYSE: CVX), Consolidated Edison (NYSE: ED), Duke Energy (NYSE: DUK), EOG Resources (NYSE: EOG), Federal Signal (NYSE: FSS), KBR, Inc. (NYSE: KBR), Lubrizol (NYSE: LZ), MDU Resources (NYSE: MDU), Nortel Networks (NYSE: NT), Sempra Energy (NYSE: SRE), Viacom (NYSE: VIA), Weyerhaeuser (NYSE: WY) and more.

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Monday, April 28, 2008

Week in Video Review: April 21 - 27

Enjoy your week in video review below. We've also included some week old but very interesting information about Iran and Israel that you may have missed.



As always, the opinions expressed within the videos may not agree with the view of Wall Street Greek. For readers of (AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, AMEX: QLD, AMEX: DOG, AMEX: SDS).
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Friday, April 25, 2008

Greek Easter and Good Friday

Over the next few days, due to the Greek Orthodox Easter holiday, our site's publishing schedule will be limited, if an article appears at all. We notify you of this, not to alienate the majority of our readership that consists of other faiths and beliefs, but to let you know what's going on with the site and what The Greek is up to. Today for Greeks, Good Friday, is meant to be spent in prayer and meditation, not working. Thank you for your understanding and all the bargain priced Easter goods too!

Best Wishes,

The Greek

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Wednesday, April 23, 2008

Stock Market Wrap - Technology Stocks in Focus

See the day's video summary below.



The views expressed within the videos may not agree with the opinion of The Greek. Please see our disclosure at Wall Street Greek.

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Stability, Friction and Regulation


By Steven C. Ferguson

Financial Instability Abounds

Ever since the recent Bear Stearns (NYSE: BSC) bailout, financial news reports have been replete with discussions and plans of new regulatory measures aimed at providing financial stability and preventing further such financial crises. Congress, the G-7, Paulson and Bernanke, along with a host of pundits and politicians, have all weighed in on the Fed's present and future response to what some have even labeled as financial terrorism. Indeed it does seem we must save the suicide bankers with the CLOs strapped to their balance sheets to avoid collateral damage to the entire financial system and eventual collapse of the U.S. Economy. So far, while there has been much talk of Homeland Financial Security, nothing substantive has changed to protect Main Street from the twin threats of Greed and Risk.

And while it is irksome to consider the hypocrisy of unilateral laissez-faire policies, which apparently apply only during the greed and risk-ridden bubble inflation phase; while it is incredible to hear the hyperbolic hypotheses of what "would certainly" have befallen us had we let "free market" response prevail in the case of BSC; and while it is downright irresponsible to ignore the downstream and not-so-hidden costs of the Fed's morally hazardous monetary response to this credit crisis (how about the contribution to $119-a-barrel oil and hyperinflationary food riots for starters?! Someone should be yellin' to Yellen: "Inflation expectations are not anchored!"); these stark observations are not even required to substantiate the obvious need for more careful regulation of Wall Street investment bankers. Instead, systems theory provides the rationale rather directly.

Shaky Foundation

Given the theoretical premises upon which our financial system is built, it should come as no surprise to anyone that the system would easily become unstable, making its eventual catastrophic failure a very distinct possibility. In fact, the system itself appears to be constructed with (at best) what can be termed "bounded-input bounded-output (BIBO) stability." In such a system, a large disturbance, coupled with complex interactions between wealth stores and asset classes, could easily lead to unexpected and harmful price oscillations. We have observed as much in government bond yields last summer, equity prices for the better part of nine months, and especially in currency exchange rates of late. The reason for this instability is simple: the system lacks necessary friction in the form of prudential regulation.

The reason the system lacks such necessary and properly implemented frictional components is also simple: investment banks, central planners and various other regulation-averse beneficiaries with questionable motives would prefer to minimize or eliminate regulatory oversight. Even a cursory survey of the literature reveals how planners view any form of regulatory friction as deleterious, costly and even loathsome.

For example, friction is generally only included in economic models for the purpose of demonstrating rather contrived and costly effects. Mr. Bernanke views credit market friction as the mechanism for his sometimes dreadful "financial accelerator" hypothesis. Paulson's overhaul proposal evidently favors a very "light touch" where regulatory friction is concerned. Greenspan was often quick to reaffirm his view that "the costs of regulation exceed the benefits." (Of course, the reader will kindly ignore the cost of any ensuing bailout.) A technical paper written by the FRB in 2005 even suggests that reduced market frictional factors (i.e. regulatory provisions in housing loans), lending to consumers without strong collateral and related financial innovation which magically securitized risk, were all reasons for wonderfully diminished economic volatility! Yes, we can all see that now.

From all of these perspectives, it would seem as if the anticipated costs of regulatory friction, which would preemptively dampen oscillations in the financial machine, have never been objectively compared to the enormous expense of catastrophic cleanup when the machine spins out of control and crashes. It would seem that both planners and market participants need to gain a better appreciation of friction in order to see prudential regulation as friend rather than foe.

Friction is Your Friend

Friction can stabilize any system, including a financial system. For example, an automobile without shock absorbers would bounce over potholes in such a violent manner that it might rattle your fillings. Without much friction, we all know how easy it is to slip and fall on the ice. Combine low friction with momentum, and collisions between players in a hockey game become even more spectacular. The friction between the four tires on your car and road beneath them allows you to generate thousands of pounds of force for stable acceleration, braking and steering using a contact area about the size of an 8 ½ x 11 sheet of paper. At high speeds, without that friction, instability can lead to a deadly crash.

Though economies and capital markets are more complex machines which involve non-linear and time-varying human behaviors across industries, regions and even cultures, friction (i.e. prudential oversight) can likewise be employed judiciously to prevent excessive momentum (e.g. bubbles) and avert crash. Regulators and market participants must understand, appreciate and embrace necessary changes in order for self-regulatory supervision to be meaningful and effective.

Friction, Dissipation and Heat

Friction does not come without a price. Regulation does result in explicit costs, both in terms of money and time. However, the cost associated with a crash in capital markets and/or economies is significantly higher and of longer duration.

In physical systems, friction dissipates energy. Dissipated energy can take the form of heat or noise. When an automobile is braked in a stable manner using friction brakes, the rate at which energy is dissipated is controlled; heat is exchanged between brake pads and rotors, and between the tire and road, but the car itself is stable and safe. If friction is removed at the road or at the brake pads, the energy in the car is dissipated all at once. We call that an accident. Such a crash is also much more expensive, time-consuming and even irreversible.

It turns out that friction also creates heat both in capital markets and on Capitol Hill. The very discussion of regulatory reform generates heat. The effects of friction can even be observed directly in the U.S. Congress. We see it every day and especially in relation to the need for regulatory reform: nothing but hot air!

Please see our disclosure at the Wall Street Greek website. This article should interest readers of AMEX: DIA, AMEX: SPY, AMEX: SDS, AMEX: DOG, AMEX: QLD, Nasdaq: QQQQ.
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Tuesday, April 22, 2008

Wall Street Wrap & Apple Computer On Tap

Several topics are covered within this article, including discussion of (Nasdaq: AAPL, NYSE: MOT, NYSE: AAI, NYSE: T, Nasdaq: RIMM). Be sure to see our discussion of APPL, where we wrote, "the bonehead analyst who downgraded Apple forgot one thing, on any given earnings day Steve Jobs could announce he's invented teleportation!"



Stock Market Wrap

This is where you need a man with a sharp tongue at the head of the Federal Reserve, and not the soft-spoken Ben Bernanke. It's about time good old American muscle flexing came back to fore, because the reckless Europeans are about to send global markets into spin cycle. I mean, what was that comment? Was that a weak attempt at signaling to the market that the ECB might actually raise rates in the future, or was it just pure recklessness. We think it was the latter.

Come on Bush! Don't you have any Texans to place at the head of the Fed? We need some good ole gun toting cowboys to issue some threats at this point. What strong dollar policy is this? Blow up Geneva or something; that would be a strong dollar policy! Well, actually it would send gold soaring and everything else into hell. Still, Bernanke has to take his focus off putting fires out, and start cutting off some of the fuel, including the ECB. Otherwise, get ready for headlines reading "Euro Tops $2" and "Oil Reaches $175!" The market has been resilient, but if we do not stop the ECB from either a dangerous move or reckless commentary (you decide what it was), I'm not sure she'll hold captain.

I must share a meaningless aside about George Bush at this point. Last night, I had a dream, in a series of such dreams, in which George Bush and I are good buddies. Last time, he offered me a ride in his limo. This time around, after an exclusive Wall Street Greek interview, he offered me a position in his administration. And then he also asked me if his wife was right that his shorts and 20-year old worn out pink t-shirt with some kind of lewd cartoon on it were appropriate dress for his trip back to Washington. I said, "you're the President, stand at your height! Wear whatever you want." Then I reflected and said, "but that might concern a lot of people and lead to impeachment..."

Greek Prescience

If you read our piece last night entitled "Stock Market Wrap & Airlines on Tap," you were not surprised by the airline industry's collapse today. We very clearly warned of it, and pointed out specific weakness in AirTran Holdings (NYSE: AAI), which by the way collapsed 21%. Good job Markos, now here's another dime to buy a potato. So what's up for tomorrow then oh prescient one...? (I'm good when I'm tired eh?)

Apple Computer (Nasdaq: AAPL) on Tap

Today some fool analyst downgraded Apple Computer (Nasdaq: AAPL) and it fell 4.7%. We have not derided him here because of his downgrade, but due to his premise. He said Apple would likely beat estimates, but that he was concerned they might not beat their number by enough to appease the market. This is an example of nearsighted behavior from either an unseasoned analyst or a negligent one; actually, there's another scenario I'm well aware of. He may have been pressured into it by his boss and used a lame reason to vent his frustration. Here's why he's wrong:

Stocks behave the way he described during bull markets, when their valuations are extended and extra reasoning beyond normal is needed to support further rise. In bear markets, when sentiment is as poor as it is now, stocks that beat their number have no such requirement to beat by excess. Companies that beat estimates are a rarity in such market environments, and thus draw capital, as long as their outlook is still solid.

AT&T (NYSE: T) today posted decent numbers, but what was noteworthy to us was that they noted solid iPhone sales. Early reports indicated iPhone sales were strong, but later nosing around seemed to uncover less than clear disclosure. Still, Apple clearly has itself the hottest thing since slice bread, or at least Motorola's (NYSE: MOT) old Razor, before everyone discovered how fragile they are, in my estimation. My wife's first Razor busted on a single fall, and the second died because of a touch of water. Mine broke because I wiped it with a wet cloth. Never again Motorola! Never again! Unless of course you want to send The Greek a new one (or something else); then there will be no hard feelings my dear friends.

Anyway, Apple may fall tomorrow, but it would not be because of the analyst's premise. The most likely catalyst in such a cataclysmic scenario would be some kind of warning about the outlook, or if Steve Jobs just came out and said he was out of new ideas. God forbid! If that happened, the poles might shift sending the world into complete catastrophe. The iPhone has proven so strong a product that it has given renewed energy to like-competitor Research in Motion (Nasdaq: RIMM) and forced plane vanilla phone-maker Motorola out of the cell phone business. I've taken some liberty here, so you techies don't get all nuts on me. I can use writers liberties after 11 p.m., when I'm on my third article for the day, okay?!!!

Let's look at the valuation, at a quick glance. A P/E of 33 is not favorable in this kind of environment, except for titans like Apple. Results have beaten estimates over the last three quarters, and each quarter at a declining rate. So, he's probably right in saying the number will beat by less this time around. But, he's forgotten about the wild card in the deck, the intangible... Steve Jobs. On any given earnings day he could say, "we've discovered the teleport," and bang, AAPL $1,000!

Listen folks, I really want to discuss the ICSC figures and State Street sentiment numbers, but I'll have to include that in tomorrow's bit if you don't mind. Zzzzzz See our disclosure at Wall Street Greek.
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Introducing the Karyatides Portfolio (also Caryatids)


Wall Street Greek introduces the Karyatides Portfolio (also Caryatids), with its first two components, SEI Investments (Nasdaq: SEIC) and VCA Antech (Nasdaq: WOOF)

The Karyatides

Like the Karyatides that hold up the Porch of the Maidens at the Erechtheion, upon the Acropolis in Athens, we plan for these component stocks to prove reliable pillars for any long-term portfolio. Likewise, we expect the model portfolio to prove a source of reliable long-term growth.

Karyatides are sculpted female figures that serve as architectural supports in the place of columns. A pillar supports a structure, and must prove reliable and strong over time. Symbolically, this fits perfectly with our hope for this portfolio.

The Karyatides in Athens consist of six such figures, and so our portfolio will consist of six components. Detailed reports on each component of the portfolio, with target price and earnings estimates, will only be available to subscribers to the Wall Street Greek value added offerings site. This project is still under development, so you enjoy this free notice for now. In the future, we will announce new additions and subtractions from the portfolio on this blog, but we will not offer detailed information regarding the stocks except to subscribers.

First Two Additions to the Karyatides Portfolio

We bear some risk in introducing the first two components of the portfolio at this time, just ahead of their individual earnings releases. However, recent market turmoil and even a management warning at one of the companies have served to adjust the prices of these shares to very attractive points for long-term acquisition, in our view. So, while the risk of near-term disappointment exists, we would very likely only grow more interested in taking positions in these two stocks on any negative interpretation of data within their respective reports. At the same time, we believe ample opportunity for upside surprise exists as well.

SEI Investments (Nasdaq: SEIC)

SEI Investments (Nasdaq: SEIC) is not a new name to Wall Street Greek readers. We have written about it on several occasions. The shares are down 5% today, ahead of the company's earnings report release, which is scheduled for distribution after the market close. SEIC management will discuss the report tomorrow morning at 10:00 a.m.

There is great concern for SEIC shares ahead of the earnings report for good reason, because of the company's core business. SEI provides investment processing, fund processing and investment management business outsourcing solutions to corporations, financial institutions, financial advisers and affluent families. Much of its performance, if not all, is greatly dependent upon investment asset values, since it earns fees on those. However, over the years SEIC has been especially good at one thing, managing earnings. In times when business was good, it could leverage asset growth over its expense structure and offer above consensus performance. Even when times were bad, SEIC has put its cash to use buying its own stock and expanding into better performing international markets when necessary.

Last quarter, the company offered in line results, and this quarter clearly presents a challenge. Next quarter is likely to present an even greater challenge since there is a lag on its fees and asset values they are earned upon. Perhaps guided by management, consensus estimates for this quarter have come down, now standing at $0.34, according to Thomson Financial. This is down from $0.37 ninety days ago. The price movement ahead of the report certainly indicates investor trepidation. The stock chart is the worst it has looked in years.

SEIC shares are down 23% year-to-date, and that's excluding today's 4% decline. So, why do we like it then? The company has been successful in offering outsourcing services to clients ranging across several business lines. Offering investment services, it's able to leverage its core offerings across end clients. It's made a billionaire out of its founder, Chairman and CEO in the process. Returns on capital have improved over the years as a result of this leveraged growth.

We expect the company will continue to grow, aided by international demand for its offerings and a ripe for picking market overseas. Also, the company still has opportunity domestically, and may advantage from the failure of peers during these tough times. Trading at 16.5X the consensus EPS estimate of $1.44 for '08 (based on a price of $23.74), and matched against 15% long-term growth expectations (19.5% growth over the last five years), the shares offer a unique opportunity for entry. We feel market fear has created an enhanced opportunity for long-term interests.

VCA Antech (Nasdaq: WOOF)

VCA Antech (Nasdaq: WOOF) the nation's largest operator of free standing veterinary hospitals, with an attractive and profitable national diagnostic laboratory operation, operates in an extremely fragmented market still opportune for long-term growth.

This stock is down mostly due to its own corporate management warning that the effects of recession could come to play in its business. We are very enthusiastic about this opportunity as a result. WOOF, scheduled to report earnings at the close on Wednesday April 23, 2008, is down 36% this year. Both of these stocks operate in the Mid-Cap realm, having grown into the sector while I've been following the firms. Thus, both have suffered from capital withdrawal out of Small-Cap funds as small cap finally fell out of favor for cheaper, multinational large-cap stocks.

However, both these firms operate viable businesses with unique growth opportunity. So, they have suffered by little fault of their own. Valuations were somewhat extended because of the flow of funds favoring small caps, but that situation is now fixed.

WOOF should benefit as it gobbles up its mom and pop competitors, sort of like how Home Depot (NYSE: HD) and Wal-Mart (NYSE: WMT) did in the past. Clearly, its market is smaller than those two comparables, but the $18 billion plus animal health care services market composed of 22,000 hospitals nationwide offers plenty of room for growth. WOOF operates as the leader in the industry with its network of less than 500 hospitals. The competition is fragmented, and significant economies of scale are gained over them as WOOF grows.

Are Americans going to give up Fido because of economic hardship? Some 63% of American homes own a pet, and surveys indicate they're willing to spend $700+ to save their pet's life. While Rex may not be enjoying as many treats as he use to, we expect he'll still get his shots.

WOOF now trades at about 18X '08 earnings expectations of $1.57. That compares to a 16% long-term growth outlook (grew 26% over the past five years). We think there's a unique opportunity for investors who give this dog a bone now. WOOF is a serial UPOD (Under Promise, Over Deliverer) when it comes to earnings, so we expect the company to not let investors down.

Wall Street Greek will record Tuesday April 22, 2008 closing prices as our cost basis in return calculation. We hope you benefit from these ideas, and offer you deeper insight through our subscription offerings. Please take the time now to indicate if you would have interest in such an offering, which is also likely to include a periodic new stock idea and weekly conference calls. We have a lot of exciting ideas in mind, and look forward to your feedback. Even go so far as to tell us what you think 23% annual return performance is worth, assuming I could duplicate the result achieved as an analyst. Thank you.

Please see our disclosure at the Wall Street Greek website.
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Housing Looks to Settle


Some contrasting data reached the market today concerning home prices, but it's hard not to notice that home sales appear to be bottoming.

(Stocks in this article: NYSE: FNM, NYSE: FRE, AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, AMEX: QLD, AMEX: SDS, AMEX: DOG)

The State of Housing

A wave of data and news reached the wire today concerning the state of the housing industry. First and foremost, Existing Home Sales for the month of March were reported modestly below economists' expectations, and off February levels.

Existing home sales ran at an annual pace of 4.93 million in March, down from 5.03 mln. in February and short of economists expectation for 4.95 million. According to the National Association of Realtors, sales were 19% off last year's pace. Despite the slight miss, weak housing results are well accepted now by the market and so this report likely plays no role today in market activity.

The NAR also noted that the national median price of a home fell 7.7% from March 2007. Total existing home inventory increased to 9.9 months, versus a 9.6 month supply in February (based on sales pace).

Meanwhile, OFHEO reported that prices for homes mortgaged through Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) rose 0.6% in February, while declining 2.4% for the trailing 12-month period ending in February. OFHEO representatives were surprised, but perhaps lower income homes fall less because they have less distance to fall, and perhaps they rise now spurred by expanded government incentives.

Nonetheless, we agree with an economist at the National Association of Realtors, that the Fed has to now consider showing reserve regarding interest rates. Any further cuts of the fed funds rate could fuel inflation and have a detrimental impact to mortgage rates and the housing market.

William Wheaton, a professor at MIT, has the right idea. The federal government has started to go overboard, taking on what could become faulty collateral and bad loans, and placing an end result greater burden on taxpayers. Wheaton's proposal seems capable of adjusting home prices without raising home inventory; he proposes allowing companies to buy homes on foreclosure with a plan to rent those same homes to current owners at market rental rates.

A general consensus exists that home prices are still greatly inflated and should adjust downward to intrinsic value for orderly and sustainable economic recovery. We agree on this one, and our favorite Democrat (remember The Greek is an Independent now, reformed Republican) Senator Dodd looks wrong with his joint plan (with Barney Frank) to prevent foreclosures by burdening the government and thus taxpayers further.

See our disclosure at the Wall Street Greek website. Join our email subscribership by clicking the link below this article.


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Stock Market Wrap & Airline Earnings on Tap

This article offers a video and brief written wrap up of the day's activity, and a summary glance at some important earnings reports on schedule for Tuesday morning.

(This article should interest readers of NYSE: AAI, NYSE: BAC, Nasdaq: JBLU, Nasdaq: UAUA, AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, AMEX: DOG, AMEX: SDS, AMEX: QLD)



The opinions expressed within the video may not agree with the views of Wall Street Greek.

Stock Market Wrap

What happens to a bird that swallows a mosquito infested with the larva of parasites? Probably the same thing that happened to Bank of America (NYSE: BAC) I suppose. Saving Countrywide Financial may yet kill BAC. We're exaggerating, but the pain to own this leader in the facilitation of home ownership is proving hard to bear at the moment. Maybe we'll all laugh about this when the housing market is back to its normal growth patterns and Bank of America is sitting pretty, but it's sure hard to envision that at this point isn't it...

That the market once again held up despite the worse than expected report from BAC, was like Rocky Balboa calling on Apollo Creed to keep it coming. They say life is not about how hard you can hit, but how much you can take and keep moving forward. If that's true, than yours truly is one tough mother.

Earnings on Tap

Of the slew of earnings reports scheduled for Tuesday, we tried to pull out a handful of the most interesting ones due for morning reporting.

Considering that airlines keep turning belly up, or merged with their neighbor, you should be interested in the reports of a few airlines on Tuesday. The funny thing about the situation in the airline industry is that you can't make heads nor tails of how to play the group. Unless you are the shrewdest of analysts, and have close and friendly relationships with management, you could be handed your head. A company you peg for bankruptcy could prove a synergistic addition to some other industry participant's plans, or vice versa.

AirTran Holdings (NYSE: AAI) moved its conference call back a day, perhaps due to a flight delay? AAI investors better hope it's not due to a flight cancellation. I can just see the CEO telling the Investor Relations Chief, change the word "disaster" to "difficulty" and "recession" to "contraction." That's the new English folks!

The analyst community of four (with estimates) has grown increasingly sour on this one, as the consensus estimate has deteriorated by twenty-two cents over the course of the last ninety days, and now stands at a loss of $0.31 for the March quarter. The rest of the year has not moved counter to trend, and the full year '08 figure is now deep in the red also, at a per share loss of $0.44, according to Thomson Financial. Yikes!

AAI's price-to-book is about 1-to-1, but what matters more than any value indication is which way book value is headed and at what rate. Who cares what the P/B is when book value is disappearing. Debt stands at over two times equity, and EBITDA-to-interest is at 2.8X based on '07, and guess what, debt is growing (so it should not improve). I do not know this company intimately, but a quick look at the numbers says "watch out" to me. Just a thought... Of the few brave souls who cover the company, probably because they have to, most look asleep with a hold rating, while a couple are real rodeo stars with buy ratings. There's a big short interest and the stock chart says head for the hills. Some would say the short interest offers reason for optimism, but I would not be playing roulette with this one.

Also on the earnings slate for Tuesday are JetBlue (Nasdaq: JBLU) and UAL Corp. (Nasdaq: UAUA). That's all for now folks... I'm tired.

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Monday, April 21, 2008

The Greek's Week Ahead - EPS Spells Relief


Our Wall Street Week Ahead primer has been engineered to prepare you for the events that could impact your portfolio this week.

The market was set up for it, but it still got the major media outlets all excited. Volatility had eased, and a sense of acceptance had taken over control of stock trading. Recession was now a given, and stocks had already adjusted for the fear factor within it all. So, when more companies reported better than expected results last week than those which reported bad news, the relief rally that ensued should have come as no surprise.

I know what you're thinking... It's easy to say that now Greek. So what's next then... Well, the current market can be compared to your toddler. He'll test you and test you to see what he can get away with before you discipline him. The market will test the economy now, to see what it can get away with before any worse than already expected news reprimands him back into his place. The money on the sidelines, of which there is a lot, is itching to take advantage of bargain pricing (assuming the sale can't get better), so we expect this rally to hold... at least until Talbot's (NYSE: TLB) reports results.

Don’t get me wrong though. I'm not on drugs. I realize not all the news has been good news. The market has endured its share of hard-hitting losses this quarter too. General Electric (NYSE: GE), Citigroup (NYSE: C), Merrill Lynch (NYSE: MER) and AT&T have each shown the wear of recession within their respective earnings releases.

However, each of these aforementioned stocks defiantly posted price gains last week, as cost cutting efforts were taken as positives and decent results elsewhere offered hope. The stock market appears to be breaking out (for now), at least according to major media cheerleaders anyway. There’s no denying last week’s rise though, as the Dow Jones Industrials closed the period up more than 4%.

The Week Ahead

The week ahead is dominated by earnings reports, with some important housing data on tap as well.

Monday

Monday's Boston Marathon might perhaps remind us that a rally is a sprint, whereas the next true bull market will take some time before it's sure-footed. President Bush is scheduled to meet with his counterparts from Canada and Mexico in New Orleans on Monday. Also, Fed Governor Randall Kroszner will address a group in Minnesota. We doubt any of these news points will prove market moving on Monday though.

However, the market should find interest in earnings reports from health care giants Merck (NYSE: MRK), Eli Lilly (NYSE: LLY), Quest Diagnostics (NYSE: DGX) and Lincare Holdings (Nasdaq: LNCR). Also, the administration's favorite energy son, Halliburton (NYSE: HAL), is set to report earnings on Monday. HAL spiked 5% on Friday, perhaps in anticipation of its report. Or perhaps HAL rose on the outside chance the stock has some relation to oil, and might benefit from a $117 barrel price tag... In any event, the company has beaten estimates the last three quarters in a row, but the consensus estimate figure has been skimmed over the past 90 days, from $0.68 to the $0.64 figure Thomson Financial now quotes.

Other earnings reports on the schedule include Aladdin Knowledge Systems (Nasdaq: ALDN), Albermarle (NYSE: ALB), Ametek (NYSE: AME), Amylin Pharmaceuticals (Nasdaq: AMLN), Arch Coal (NYSE: ACI), ArthroCare (Nasdaq: ARTC), Bancorp South (NYSE: BXS), Bank of America (NYSE: BAC), Boston Scientific (NYSE: BSX), Brown & Brown (NYSE: BRO), Cadence Financial (Nasdaq: CADE), CEMEX (NYSE: CX), Crane (NYSE: CR), Diedrich Coffee (Nasdaq: DDRX), DST Systems (NYSE: DST), Ethan Allen (NYSE: ETH), Everest Re (NYSE: RE), Gannett (NYSE: GCI), Hasbro (NYSE: HAS), Hercules (NYSE: HPC), Innovex (Nasdaq: INVX), Logitech (Nasdaq: LOGI), Mattel (NYSE: MAT), Nabors Industries (NYSE: NBR), Netflix (Nasdaq: NFLX), Novartis (NYSE: NVS), Novellus (Nasdaq: NVLS), Packaging Corp. (NYSE: PKG), Rohm and Haas (NYSE: ROH), Sensient (NYSE: SXT), Steel Dynamics (Nasdaq: STLD), Texas Instruments (NYSE: TXN), Weatherford Int'l (NYSE: WFT), Yanzhou Coal Mining (NYSE: YZC), Zoran (Nasdaq: ZRAN) and more.

Tuesday

The weekly same-store sales report from the International Council of Shopping Centers continues to get our motor revving on Tuesdays. Last week’s report showed growth stuck at 0.3%, not far from the red zone of contraction. The State Street Investor Confidence Index will likely reinforce the reason why. The index measured 77.4 in March. In other news, the Bank of Canada is scheduled to make a decision on the country's target interest rate, and we expect Canada will follow America's direction, due to economic interrelation.

Existing Home Sales for the month of March is set for report on Tuesday. In February, the annual rate of sales was running at 5.03 million. Economists are anticipating sales ran at a slower pace of 4.95 million in March. Last week, Housing Starts (March) offered sobering news about the state of industry, with starts running at a pace of 947K and permit signings proving even less enthusiastic. In other words, don’t get your hopes up for this week's reports just yet.

The Chairman of the SEC is scheduled to testify before the Senate Banking, Housing and Urban Affairs Committee on the role of credit-rating agencies in creating our current mess. Congress is looking for some heads to roll, and Standard & Poor's seems like a good place to look considering some of the favorable ratings the firm held on what turned out to be not so safe investments.

The critical Pennsylvania Democratic presidential primary should make for some interesting television on Tuesday night as the polls close.

Tuesday’s earning schedule highlights Brinker International (NYSE: EAT), Calamos Asset Management (Nasdaq: CLMS), Encana (NYSE: ECA), Jacobs Engineering (NYSE: JEC), Lockheed Martin (NYSE: LMT), Robert Half (NYSE: RHI), McDonald’s (NYSE: MCD) and Yahoo! (Nasdaq: YHOO).

Also reporting, we note: Aaron Rents (NYSE: RNT), AK Steel (NYSE: AKS), Alliance Financial (Nasdaq: ALNC), Ameriprise Financial (NYSE: AMP), AmSurg (Nasdaq: AMSG), Anadigics (Nasdaq: ANAD), Analysts Int'l (Nasdaq: ANLY), Aries Maritime Transport (Nasdaq: RAMS), AT&T (NYSE: T), Baker Hughes (NYSE: BHI), Broadcom (Nasdaq: BRCM), Carlisle Cos. (NYSE: CSL), CEC Entertainment (NYSE: CEC), Celanese (NYSE: CE), Cerner (Nasdaq: CERN), Chicago Mercantile Exchange (NYSE: CME), Coach (NYSE: COH), Corn Products Int'l (NYSE: CPI), Cree (Nasdaq: CREE), DuPont (NYSE: DD), Fifth Third Bancorp (Nasdaq: FITB), First Cash (Nasdaq: FCFS), Gentex (Nasdaq: GNTX), Harsco (NYSE: HSC), IberiaBank (Nasdaq: IBKC), IDEX (NYSE: IEX), Invitrogen (Nasdaq: IVGN), JetBlue Airways (Nasdaq: JBLU), Kelly Services (Nasdaq: KELYA), Kimberly Clark (NYSE: KMB), Lexmark (NYSE: LXK), National City (NYSE: NCC), Old Dominion Freight (Nasdaq: ODFL), PACCAR (Nasdaq: PCAR), Parker Hannifin (NYSE: PH), Peabody Energy (NYSE: BTU), Pentair (NYSE: PNR), Raymond James (NYSE: RJF), SEI Investments (Nasdaq: SEIC), Sherwin-Williams (NYSE: SHW), Smith Int'l (NYSE: SII), Smurfit-Stone Container (Nasdaq: SSCC), Sovereign Bancorp (NYSE: SOV), Telefonos De Mexico (NYSE: TMX), Tellabs (Nasdaq: TLAB), Teradyne (NYSE: TER), Tupperware (NYSE: TUP), UAL (Nasdaq: UAUA), UnitedHealth Group (NYSE: UNH), USG (NYSE: USG), VF Corp. (NYSE: VFC), VMware (NYSE: VMW), Waters Corp. (NYSE: WAT), Wyeth (NYSE: WYE), Yum! Brands (NYSE: YUM) and more believe it or not!

Wednesday

Wednesday offers the weekly Petroleum Status Report. Perhaps more notable than the move in stocks last week, oil prices rocketed higher nearly five dollars, to approximately $117 a barrel in after hours trading on Friday. More importantly to you perhaps, the price of gasoline has started to catch up. Refining margins have gotten so tight, that some refiners have cut back on capacity usage. This logical consequence has resulted in a tightening of gasoline supply, and is now serving to drive gas prices higher. With the national average price at approximately $3.45 a gallon already, most analysts see the price moving yet higher.

The Mortgage Bankers Association reports its regular reading on mortgage activity, but the market and industry interests will pay much closer attention to the home sales reports out this week.

The earnings schedule includes Amazon.com (Nasdaq: AMZN), Apple Computer (Nasdaq: AAPL), Genzyme (Nasdaq: GENZ), GlaxoSmithKline (NYSE: GSK), Philip Morris Int’l (NYSE: PM), Boeing (NYSE: BA) and VCA Antech (Nasdaq: WOOF).

Also look for reports from Aflac (NYSE: AFL), Alcon (NYSE: ACL), Allegheny Technologies (NYSE: ATI), Ambac (NYSE: ABK), AmeriSourceBergen (NYSE: ABC), Anheuser-Busch (NYSE: BUD), Becton, Dickinson & Co. (NYSE: BDX), Biogen Idecc (Nasdaq: BIIB), Cadence Design (Nasdaq: CDNS), Candela (Nasdaq: CLZR), Chipotle Mexican Grill (NYSE: CMG), Citrix Systems (Nasdaq: CTXS), Delta Airlines (NYSE: DAL), DPL Inc. (NYSE: DPL), Electronics for Imaging (Nasdaq: EFII), EMC Corp. (NYSE: EMC), FMC Corp. (NYSE: FMC), Freeport-McMoRan (NYSE: FCX), General Dynamics (NYSE: GD), Genzyme (Nasdaq: GENZ), GSI Commerce (Nasdaq: GSIC), JAKKS Pacific (Nasdaq: JAKK), Lam Research (Nasdaq: LRCX), Level 3 Communications (Nasdaq: LVLT), Mattson Technology (Nasdaq: MTSN), Moody's (NYSE: MCO), Noble Corp. (NYSE: NE), Northwest Airlines (NYSE: NWA), NutriSystem (Nasdaq: NTRI), P.F. Chang's (Nasdaq: PFCB), Pactiv (NYSE: PTV), Praxair (NYSE: PX), Pulte Homes (NYSE: PHM), Qualcomm (Nasdaq: QCOM), Regis (NYSE: RGS), Rockwell Automation (NYSE: ROK), Ryland Group (NYSE: RYL), Sanmina-SCI (Nasdaq: SANM), The Allstate Corp. (NYSE: ALL), Tractor Supply (Nasdaq: TSCO), WellPoint (NYSE: WLP) and more.

Thursday

Thursday brings with it the New Home Sales Report for March. Over the prior two months, sales of new homes have run at an annual pace around 590K. Spring is the hot season for home sales, but homebuilders are spent (not to mention buyers) and may not have the ability, or will, to market incentives as well as they might like this year. Plus, buyers are shy now, with prices moving in the wrong direction.

Weekly Initial Jobless Claims are seen measuring 375K for this past week, compared to 372K the week before. We remind you that last week's reported figure represented a drop from the prior week's move above 400K. March Durable Goods Orders are seen increasing 0.6%, after posting a 1.7% decline in February. While it would be nice to see a bounce, and one is possible off of the perhaps caution-driven decline last time out, we again would not get our hopes up.

Individual corporate reports, including one from Canadian natural gas giant Encana (NYSE: ECA), should drown out the noise from the EIA's weekly inventory report this time around. Sovereign wealth funds will be the topic of concern, when Fed Board General Counsel Scott Alvarez addresses the Senate Banking, Housing and Urban Affairs Committee on Thursday.

Thursday’s earnings schedule highlights news from Aetna (NYSE: AET), American Express (NYSE: AXP), PepsiCo (NYSE: PEP), Potash Corp. (NYSE: POT) and Rockwell Collins (NYSE: COL).

Others reporting include 1-800-Flowers.com (Nasdaq: FLWS), 3M (NYSE: MMM), Affymetrix (Nasdaq: AFFX), Altria (NYSE: MO), Amgen (Nasdaq: AMGN), AstraZeneca (NYSE: AZN), AutoNation (NYSE: AN), Baidu (Nasdaq: BIDU), BJ's Restaurants (Nasdaq: BJRI), Black & Decker (BDK), Brunswick (NYSE: BC), Cash America (NYSE: CSH), Chubb (NYSE: CB), Coherent (Nasdaq: COHR), Cohu (Nasdaq: COHU), ConocoPhillips (NYSE: COP), Credit Suisse (NYSE: CS), Deckers Outdoor (Nasdaq: DECK), Diamond Offshore Drilling (NYSE: DO), EarthLink (Nasdaq: ELNK), Eastman Chemical (NYSE: EMN), Electronic Data Systems (NYSE: EDS), Exelon (NYSE: EXC), Fortune Brands (NYSE: FO), Goodrich (NYSE: GR), ImClone Systems (Nasdaq: IMCL), Janus Capital (NYSE: JNS), Juniper (Nasdaq: JNPR), Kennametal (NYSE: KMT), KLA-Tencor (Nasdaq: KLAC), Kulicke & Soffa (Nasdaq: KLIC), L-3 Communications (NYSE: LLL), Lab Corp. (NYSE: LH), Mathews Int'l (Nasdaq: MATW), Microsoft (Nasdaq: MSFT), Motorola (NYSE: MOT), Northrop Grumman (NYSE: NOC), Occidental Petroleum (NYSE: OXY), Pool Corp. (Nasdaq: POOL), Raytheon (NYSE: RTN), T. Rowe Price (Nasdaq: TROW), The Cheesecake Factory (Nasdaq: CAKE), Dow Chemical (NYSE: DOW), US Airways (NYSE: LCC), Whirlpool (NYSE: WHR) and more.

Friday

Friday closes out the week with the University of Michigan’s Consumer Sentiment Survey for April. There’s not much reason to be hopeful for improvement in this report after March sentiment dipped to 69.5, down from 70.8 in February. The earlier readings for April were already much worse, so consensus views for 63.2 here are not a surprise.

Friday’s earnings include Coventry Health (NYSE: CVH), Honda Motor (NYSE: HMC), Wendy’s Int’l (NYSE: WEN), Bright Horizons (Nasdaq: BFAM), Ceradyne (Nasdaq: CRDN), Entergy (NYSE: ETR), Goodyear Tire & Rubber (NYSE: GT), Idexx Laboratories (Nasdaq: IDXX), Kyocera (NYSE: KYO), Nomura Holdings (Nasdaq: NRSCF.PK), QLT, Inc. (Nasdaq: QLTI), Standard Register (NYSE: SR), Ericsson (Nasdaq: ERIC), Viad Corp. (NYSE: VVI) and others.

Please see our disclosure at the Wall Street Greek site.
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Friday, April 18, 2008

Week in Video Review - The Pope & Taxes

Enjoy this week's video review. We've included some coverage of the Pope's visit as well as some hilarious tax season comedy.



The views expressed within the videos may not agree with the opinion of The Greek. Please see our disclosure at the Wall Street Greek website. Article should interest readers of (AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, AMEX: DOG, AMEX: QLD, AMEX: SDS)

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Life's Real Bankroll


They tell me, Greek, don't discuss politics or religion. Don't you understand this is a "no no?" But, this is my forum, and my interests and hopes extend beyond economies and equities. There are in fact, significantly greater issues we must address, whoever and wherever we are. Plus, I'm a stubborn S.O.B., and conforming is not in my character.

By: The Greek

Many of you may have guessed that I'm a member of the Greek Orthodox church. However, unlike many "believers" who wear blinders to the views and lives of members of other religions, I see people as one common group. I look for the common message in people of faith, and there is one we all share.

I see belief in God prevalent in a world scientifically advanced, but I no longer ignore the reason why. I see thousands of churches and other places of worship, new and old, that have survived thousands of years of so called evolution and progression. Don't you think there's good reason for the survival of belief then?

What survives through centuries? Not bones, not truths (they become myths and legends), not castles, not governments, not nations, not races. Belief in God remains as the wind shuffles the dust of everything else by. At the risk of losing some of you, I'll tell you why belief continues to exist. It's because the presence of real evil reinforces belief in the generations that come to pass. God has a reason even for his tolerance of evil.

The Church Heals Wounds

Over the past few days, the Pope has healed old wounds, and I'm very happy about that. The immoral actions of some members of clergy have served a purpose you see, evil's purpose. Consider if you will what leverage is gained over the masses by turning thousands away from the church. The devil can manage his end game strategy to massive scale. Rather than gaining one soul by one tedious soul, he turns the media glued masses away from God through the sins of men of the cross, or symbol of your choosing.

Has the devil not turned thousands away from God by his construct of the premise of hypocrisy upon God's servants? I've heard it said time and again... they say, "I don't go to church, or follow the Catholic faith. Look at the priests. If they can commit sin, then what can I believe in." So, the devil undermines broader belief by discrediting God's servants.

What the Pope did in America this past week was great. He recognized the flaws of men, even those within his church. I only wish he would also shed light on what whispers in their ears. But, rather than wish, perhaps I'll shed that light.

Even in this modern day, amazing society, we are nothing but ants. We place our names on buildings, companies and even other people, and we think we are kings, but we are nothing but ants. When a football player scores a touchdown and then points to the sky, do not view him as a hypocrite. Do not think God has no purpose in football, a game. Even that touchdown could not be scored without God willing it. The message sent by that wide receiver is true, however insignificant the forum may seem to you. Nothing happens without God's will.

Whether Citigroup (NYSE: C) rises or falls is insignificant to the real bankroll we build in life. It is in fact, a distraction from it. But, we do it to survive. Scanning back thousands of years, one man had salt and another had sheep. They traded some of each for the purpose of their own survival.

Today, we buy shares of Cisco Systems (Nasdaq: CSCO) and sell shares of IBM (NYSE: IBM) for that same purpose, to survive. Trade has evolved to its most progressed form in capitalism. Still, there's something intrinsically wrong with self purpose.

While there were many things wrong with Communism as well, the worst of which was the suppression of religion, the goal was perhaps noble. Be careful now. Don't you dare label me a Communist, or you'll find me at your door. I'm what's called a humanist, and also a Christian! By placing God first, and the good of humanity at the fore, we build wealth beyond understanding.

It's clear this is going to be a multiple-part article. I think we've covered enough for now. I'll be looking to sneak into Yankee Stadium to see the Pope. If anybody can score me a ticket, send me a note.

God bless.

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Thursday, April 17, 2008

The Economy, While I Was Away...

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By: The Greek

Did you miss me? Well, The Greek is back and raring to serve this economic data hungry lot.

(Article interests readers of: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: MER, Nasdaq: EBAY, NYSE: NOK, AMEX: VDE)

While I was away, the market celebrated better than expected monthly retail sales data, before souring on yet another poor ICSC-UBS weekly same-store sales survey (+0.3%). Hey, at least the weekly tally of chain stores showed growth, which is more than we could ask for in a period of general economic recession.

Inflation continues to rage with the PPI posting a big increase, driven by energy costs. The CPI also rose, but in line with expectations. Speaking of energy, petroleum storage saw yet another important draw, and we will have some interesting insight to share on that topic in the near-term, so keep a look out for the report at The Greek. Meanwhile industrial production and the Empire State Manufacturing Survey indicated a stabilization of manufacturing activity, however illusory that indication may be. Production capacity utilization also edged up a bit.

Today's Economic Data

With the most frightening of economic reports behind us, the market found some bargain hunters yesterday. Yet today, traders are spooked again after some more concerning company specific news from Merrill Lynch (NYSE: MER), eBay (Nasdaq: EBAY) and Nokia (NYSE: NOK), to name a few.

Weekly Initial Jobless Claims

Weekly claim benefit filers rose 17K to 372,000 this week, but more importantly, the long-term trend continues to rise. Despite moderating slightly, the four-week moving average still stood at 376K, a level significantly higher than a year ago. More importantly the direction is clearly pointing toward a growing strain on the labor market.

Leading Economic Indicators (March)

The Conference Board reported Leading Indicators for the month of March, posting a 0.1% increase, versus economist expectations for a 0.2% rise. Despite the shortfall, the index broke a streak of five consecutive monthly declines. The index clearly benefited from Fed rate cut efforts and we think on international demand for domestically manufactured goods, but the report continues to find negative contributions from housing, employment, consumer expectations and the stock market. The opinion of the Board itself, composed of economists well-attuned to this specific data and its historical usefulness, states, "the current behavior of the composite indexes suggests economic weakness is likely to continue in the near-term." Also noteworthy, the Board indicates the trouble has spread across economic factors.

Philadelphia Federal Reserve Survey

The Philly Fed Survey was reported (-24.9), below expectations and not in line with some positive news from other sources earlier this week. The Empire State reading stuck its nose above waterline a few days ago, and industrial production also offered good news yesterday when it was reported up 0.3% for March.
We have to wonder how domestic versus international end markets come to play within each region. We would assume the Port of New York is a more important international hub, and has thus attracted more multinationals into the New York region, but we're just speculating here. In any event, the two surveys have coincided for the most part ahead of this reported period, and New York's news was also not very good when considered in isolation.

Natural Gas Report

News from the EIA's weekly inventory report did not match yesterday's petroleum status data, as a build matched against oil's draw. The Greek is a big fan of natural gas, and rather than get into why and what plays we like this year and next, we'll instead use that inspiration for a coming piece. Thank you for your support, and enjoy a heavier schedule of informative commentary in the coming forever.

Please see our disclosure at the Wall Street Greek website.

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Tuesday, April 15, 2008

What is Value?

intrinsic value

This is my inaugural column for Wall Street Greek. My perspective is European - Dutch, to be precise. My background may be of more importance though. I am a securities analyst - following telecoms, Internet and media stocks, to be precise. So, I will cover a diverse range of topics, usually around a healthy dose of alphabet soup: FTTH, LTE, WiMAX, etc.

Still, I hope all that doesn't impede me to write stuff that our readers will value.

Speaking of which - value must be among the most misunderstood concepts on and off Wall Street.

Business school taught us how using Market Value is preferable to using Book Value - and how we could use it to make fun of accountants who live in a “rearview mirror” world. All they care about is book or historic values, whereas Market Values reflect (to whichever degree) every single expectation we have - be it earnings expectations or interest rate, inflation or employment rate expectations.

However, there is something beyond Market Value. Market value may be all we "have," but there is something that goes beyond the whims of the market, True Value. The problem with True Value, however, is that we don’t "have" it. All we can do is try to calculate it. And, to make matters worse, the outcomes of such calculations vary from person to person and from day to day.

It is interesting to see how Wall Street adopted the concept of True Value, the outcome of a discounted cash flow (DCF) calculation, over the past 20 years or so. Nowadays, DCF-modelling is part of every decent Wall Street report. It works by discounting all future cash flows of a company at the proper rate (the opportunity cost of capital) and adding them together. Simple! A chimpanzee can do it. And so can Wall Street analysts. (Now, it remains to be seen how well they are done, but that's stuff for another column.)

The thing is, DCF modelling isn’t just a Wall Street toy. And that is where things start to get interesting.

A few years ago, Ad Scheepbouwer, CEO of the Dutch incumbent telco KPN (KPN.AS), complained about the share price of his company. He said that the Market Value was much too low and didn’t reflect all of KPN’s opportunities. More recently Ben Verwaayen, the Dutch CEO of the British incumbent telco BT Group Plc (NYSE: BT), in an interview with a local Dutch newspaper, commented that he didn’t have any opinion on BT’s share price, a.k.a. Market Value.

How come these two people have such different views, and ways of talking about Market Value? The answer is easy: Ben is doing his job (until his departure, May 31), trying to maximize the True Value of BT, whereas, Ad is more concerned with "share price management," in our opinion. Unless of course Ad was referring to a DCF calculation he did (in a spare moment, when he wasn’t maximizing KPN’s True Value). Who knows... But then there is very little point in being frustrated over the Market Value. In places like Wall Street, one can hear people say that "in due course" the market will recognize the real value, and hence Market Value will approach True Value. The problem is that the True Value, as much as the Market Value, is a moving target.

Please see our disclosure at the bottom of the Wall Street Greek website, and Tim's disclosure on his profile page found through his name atop the article. (For readers: NYSE: BT, Nasdaq: FSCTX, Amsterdam: KPN.AS, AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ)

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Tim Poulus



Senior Analyst - Tech & Telecom

Tim Poulus is an independent analyst following the Technology and Telecommunications industries. He previously served as Senior Financial Analyst at IRIS Research. IRIS is an unusual brokerage, in that it combines both sell-side (sells research mainly to parent company, Rabobank) and buy-side (performance oriented) elements. At IRIS, Tim covered a pretty broad range of stocks and sectors, but his primary focus is on telecoms, Internet and B2B publishers.

Tim is an avid blogger, and started his Communications Breakdown site in March of 2003. Looking at recent history, Tim's main focus areas are FTTH teleworking, IPTV, WiMAX, Web 2.0 and DCF modeling - to name a few.

Tim holds a degree in Physics and is a Registered Beleggings Analyst (RBA), which could be translated to read Registered Investment Analyst. Tim is married with two children, Max and Daphne, and lives in Utrecht, right in the center of the Netherlands.

Beyond work, Tim is a passionate music and literature lover. Tim is not Greek (not that there's anything wrong with that), but he tells us he enjoys the composer Nikos Skalkottas, a pupil of Arnold Schoenberg, and the famed author Nikos Kazantzakis. "Christ Recrucified," the controversial Kazantzakis novel of 1948, is among his favorites and was beautifully set to music by the Czech composer Bohuslav Martinu as "The Greek Passion."

The Greek welcomes Tim with pleasure to scribe within our column. Enjoy Tim's blog found through the banner below.

Tim's Article Portfolio:



Full Disclosure: Mr. Poulus has agreed to Wall Street Greek policy to not author articles about securities he personally owns. In the event of a special case, Tim will make full disclosure of ownership interest. The work of contributors to Wall Street Greek is their own, and may not necessarily agree with the opinion of the site or its founder, and does not constitute financial advice. Please see our full disclosure at the site (Wall Street Greek).

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Monday, April 14, 2008

The Greek's Week Ahead - Iron Mike's Market

iron mike zambidis
Mike Tyson use to speak about his old mentor and trainer, Cus D'Amato, and the encouraging words he offered Mike that served him well in the ring. Cus would say, "The hero and the coward feel the same way. They are both afraid. But the difference between the two is that the hero faces his fear." That's called "courage" folks, and the market seems to be displaying a good deal of it lately. Iron Mike Zambidis, perhaps the greatest kick boxer in history, and likely the most courageous modern day warrior in existence displays that same courage in the image here.

Despite Friday’s near 300-point decline in the Dow Industrials Index, the market has shown interesting resilience to bad news lately. Sure, Friday’s report from General Electric (NYSE: GE), indicating that it had missed forecasts sent the stock for its biggest one-day dive since the 1987 market crash. That's good enough reason for panic. Of course, consumer sentiment readings that were off the charts on the low end reminded investors of the realities of recession as well. It is logical then that investors would want to protect their capital through the weekend and sell heavily on Friday.

However, up until Friday, the market had shown a new and very interesting characteristic through the week, that being resilience. Plenty of other bad news hit the wires this week, including the confessions of the Treasury Secretary and Federal Reserve Chairman that "contraction" was in store and "sharp decline" was in process. It seemed clear to us that Paulson and Bernanke were simply covering their tails now for the onset of recession. That cover may fly on Main Street, but Wall Street will crucify the two for having denied economic strife until the midnight hour, and having targeted it, albeit aggressively, a day late and certainly a dollar short.

Still, we think the market’s new found courage (until Friday) might in fact be indication of a trough for stocks. In other words, downside risk might finally be evening out with upside potential.

The Week Ahead

The week ahead holds in store important metrics of inflation and the economy, as well as the sincere start to earnings season.

Monday

Monday offers the market opportunity to follow through on its fearful Friday closure. Retail sales threaten to be disturbingly bad when reported for the month of March before the market open. All indications point toward an ugly report. Last week, individual retailers noted mostly poor chain store sales for the same period. According to Bloomberg's survey of economists, retail sales will be unchanged in March. Anything worse than that, or in other words, a reported decline in sales would be viewed threatening to equities. Even so, much of this expectation is already priced into shares, and we would expect stocks to find support by the close.

Business inventories (for February) are set for 10:00 AM release. Last week, we saw inventories rise on the wholesale level for the same reporting period. The economists' consensus is looking for an increase of 0.6% in this report, after inventories rose 0.8% in January. Despite the just-in-time manufacturing economy, inventories are still on the rise, like in economic troughs of eras past. This may say more for the speed and "sharpness" of the decline, than for anything else.

Importers get a chance to voice complaints about the declining dollar to the man greatly to blame (for at least near-term softness), as ECB President Jean-Claude Trichet addresses a group at New York University.

Monday's earnings reports include Eaton (NYSE: ETN), Equity Lifestyle Properties (NYSE: ELS), Exponent (Nasdaq: EXPO), Integra Bank (Nasdaq: IBNK), Joe's Jeans (Nasdaq: JOEZ), Modtech Holdings (Nasdaq: MODT), NovaGold Resources (AMEX: NG), Phoenix Footwear (AMEX: PXG), Royal Philips Electronics (NYSE: PHG), Stanley Furniture (Nasdaq: STLY), Sun Bancorp (Nasdaq: SNBC) and W.W. Grainger (NYSE: GWW).

Tuesday

Besides the Pope, Tuesday and Wednesday bring the Producer Price Index and Consumer Price Index in successive order. Within these reports we find important measures of inflation, especially within the consumer data. Bloomberg's survey shows expectations set for a 0.5% month-to-month increase in the PPI, and 0.2%, when excluding food and energy.

According to last week’s report from the ECB, European economic growth is holding up, and the ECB did not cut interest rates as a result. This is bad for Greeks or other foreign born nationals planning a summer return to the motherland, and also poor for Greek merchants who import goods from Europe for sale here. The dollar cannot firm up against the euro in the near term without consistent movement from the ECB to match the American Federal Reserve.

However, Jean-Claude Trichet, the ECB chief, pointed to still decent economic growth and hot inflation in Europe as good cause to keep rates steady. Unfortunately for us, if his forecast holds true and Europe does not follow us into recession, there’s a tough pill here to swallow. This means global demand could hold up, and thus prices as well. So, the CPI report threatens to defy Fed Chief Bernanke’s assumption that prices will ease as a consequence of recession. If China still needs steel, rice and oil, and Europe continues growing, then how can prices ease for Americans who live within the global economy?

The Empire State Manufacturing Survey, which measures the health of the important New York area manufacturing sector, is expected to post another dismal figure. After reading -22.2 in March, economists are looking for a gauge of negative 16.0 this month. Remember the importance of delta in the movement of stocks. Delta represents directional change, and what we see here is actually improvement in that regard. However, the degree of improvement is likely negligible by the market's eye.

The weekly ICSC-UBS same-store sales results get us all excited over here at The Greek, while the report draws virtually no attention from the rest of the media world. That's their fault folks, because this report has offered us important insight into the state of retail. Last week's growth rate softness to 0.3%, marked slippage from 0.5% the week before and 1.0% the week before that. We are finally realizing The Greek's long standing expectation for severe impact to the retail sector arising from a decreasing consumer propensity to spend. Remember, we're looking for the retail and restaurant industry to suddenly look too fat for demand, and weaker players to start dropping like flies as a result. And, that spells trouble for commercial real estate, and lending.

The Treasury International Capital Report, which measures foreign demand for long-term U.S. securities, is due at 9:00 on Tuesday. Foreign interest in securities had backed off sharply in December and January, and for good reason, but Barron's reports Lehman Brothers (NYSE: LEH) expectation for demand to have picked up in February, to $75 billion. Finally, the Housing Market Index for April could show a firm-point has been discovered, after the measure read 20.0 in the past two consecutive monthly reports.

Tuesday's earnings reports include Intel (Nasdaq: INTC), Johnson & Johnson (NYSE: JNJ), ADTRAN (Nasdaq: ADTN), AmeriServ Financial (Nasdaq: ASRV), Badge Meter (AMEX: BMI), Banco Latinamericano (NYSE: BLX), BOK Financial (Nasdaq: BOKF), Champion Enterprises (NYSE: CHB), China Eastern Airlines (NYSE: CEA), Comarco (Nasdaq: CMRO), CPI Corp. (NYSE: CPY), CSX Corp. (NYSE: CSX), East West Bancorp (Nasdaq: EWBC), Enterprise Financial (Nasdaq: EFSC), First Mariner (Nasdaq: FMAR), Forest Laboratories (NYSE: FRX), Gander Mountain (Nasdaq: GMTN), Infosys Tech (Nasdaq: INFY), Insteel Industries (Nasdaq: IIIN), Linear Tech (Nasdaq: LLTC), M&T Bank (NYSE: MTB), Marshall & Ilsley (NYSE: MI), MedAvant Healthcare (Nasdaq: PILL), Northern Trust (Nasdaq: NTRS), Polaris Industries (NYSE: PII), Regions Financial (NYSE: RF), Renaissance Learning (Nasdaq: RLRN), Renasant Corp. (Nasdaq: RNST), Seagate Tech (NYSE: STX), State Street (NYSE: STT), U.S. Bancorp (NYSE: USB), Washington Mutual (NYSE: WM), Westamerica Bancorporation (Nasdaq: WABC) and a few penny stocks.

Wednesday

The Consumer Price Index will garner all early media attention on Wednesday, and the gauge of inflation is expected to show prices rose 0.3% month-to-month in March, or 0.2% when pretending that energy and food price change do not matter. The delusional government still likes to tell us that. Please refer to our past piece on the subject of the dynamics of secular change in food and energy prices.

March Housing Starts are also due for early morning release, and Bloomberg's consensus is looking for an annual pace of 1.018 million starts as of March. The market will prove more concerned with the pace of permits for new homes, but we unfortunately do not have a gauge on those expectations. Regarding housing, Wednesday brings the weekly reporting of mortgage activity, recently greatly driven by FHA loans and improved government incentives and opportunities for such aid.

March Industrial Production is expected to have declined 0.1%, but we would not be surprised to see a greater drop, considering the weak reads from regional indexes lately. Capacity utilization is seen declining to 80.3% from 80.9%. The auto industry seems to have no light at the end of its tunnel, but Barron's wrote an interesting piece making a case to buy Ford (NYSE: F). We could not help but agree with the case made by one of our favorite scribes, Mike Santoli. We know a couple writers over there at Barron's personally, but Michael is not one of them, so we hope he does not mind our calling him Mike...

Speaking of regional indicators, the Fed's Beige Book, which takes a close look at each region's independent view of local economies, is due for release at 2:00 p.m. It gets attention these days, so keep your afternoon eye out after that post lunch cup of coffee. San Francisco Fed Head Janet Yellen will address a group on Wednesday as well, and she's been real good lately at stating the obvious. So, if you have amnesia, you won't want to miss her discussion.

Finally, the EIA Petroleum Status Report is now like a weekly superbowl for energy traders. Last week's nat gas and oil reports both offered up surprising draws from inventory. That's not suppose to happen when you are in recession folks, so oil found good reason to break old records last week. Still, oil pricing seems to hang precipitously, waiting for large builds that seem all but an eventuality. Like general price trends though, a lot depends on growth in Europe and Asia, and if that sticks, get use to $100 plus oil.

The earnings schedule gets heavy on Wednesday's and includes Abbott Labs (NYSE: ABT), Altera Corp. (Nasdaq: ALTR), AMB Property (NYSE: AMB), Aptar Group (NYSE: ATR), ASML Holdings (Nasdaq: ASML), Astoria Financial (NYSE: AF), Blackrock (NYSE: BLK), Cavium Networks (Nasdaq: CAVM), Coca-Cola (NYSE: KO), Community Capital (Nasdaq: CPBK), Con-Way (NYSE: CNW), Courier Corp. (Nasdaq: CRRC), Crown Holdings (NYSE: CCK), Donegal Group (Nasdaq: DGICA), eBay (Nasdaq: EBAY), Gilead Sciences (Nasdaq: GILD), Gramercy Capital (NYSE: GKK), Illinois Tool Works (NYSE: ITW), International Business Machines (NYSE: IBM), Intersil (Nasdaq: ISIL), J.P. Morgan Chase (NYSE: JPM), Johnson Controls (NYSE: JCI), Kinder Morgan (NYSE: KMP), Knight Capital (Nasdaq: NITE), Knoll Inc. (NYSE: KNL), LeCroy Corp. (Nasdaq: LCRY), Leggett & Platt (NYSE: LEG), Lufkin Industries (Nasdaq: LUFK), MEDTOX Scientific (Nasdaq: MTOX), Mission West Properties (Nasdaq: MSW), Mobile Telesystems (NYSE: MBT), New Oriental Education & Technology Group (NYSE: EDU), Piper Jaffray (NYSE: PJC), Polycom (Nasdaq: PLCM), RLI Corp. (NYSE: RLI), SLM Corp. (NYSE: SLM), St. Jude Medical (NYSE: STJ), Torchmark (NYSE: TMK), Valmont Industries (NYSE: VMI), Wells Fargo (NYSE: WFC) and Wolverine World Wide (NYSE: WWW).

Thursday

Another regional manufacturing index, the Philly Fed measure, is due out on Thursday and gives us a monthly reason to refer to the NL East Champion Philadelphia Phillies. We expect plenty of feedback from NYC traders more likely in line with the Mets. Bring it on! Bloomberg's consensus sees a Philly Fed measure of negative 15 in April, sort of similar to the number of games the Mets lost in September to choke to division away. Oh! Did he really just say that?! I might have to borrow some of the Pope's security detail this week...

Weekly Initial Jobless Claims backed off of the prior week frightful figure of plus 400K, and this week's consensus forecast is for 375K new claims filers. It's as if economists the world over read our column last week, as for once, the forecast does not match the prior week's result (357K this time). But, wait a second, maybe it's just a typo since the "5" and "7" seem switched! I would bet on a typo here, considering the constistency of past estimates.

Leading Indicators is set for report, and remember, we're talking about a leading indicator that measures a past month while we're halfway through this month. March Leading Indicators are seen rising 0.2%, in case you cared. We would bet on a decline. The regular EIA Natural Gas Report is due for release at 10:30. Also, Sam Zell has scheduled a press conference, and all of Chicago is sure to be attuned.

Thursday's earnings schedule includes Capital One Financial (NYSE: COF), E*Trade (Nasdaq: ETFC), Google (Nasdaq: GOOG), Merrill Lynch (NYSE: MER), Pfizer (NYSE: PFE), A.O. Smith (NYSE: AOS), Advanced Micro Devices (NYSE: AMD), AMCORE Financial (Nasdaq: AMFI), Amdocs (NYSE: DOX), American Greetings (NYSE: AM), Ameritrade (Nasdaq: AMTD), Avocent (Nasdaq: AVCT), Bank of NY (NYSE: BK), Baxter Int'l (NYSE: BAX), BB&T (NYSE: BBT), Briggs & Stratton (NYSE: BGG), Check Point Software (Nasdaq: CHKP), CIT Group (NYSE: CIT), Citizens Republic Bancorp (Nasdaq: CRBC), Comerica (NYSE: CMA), Continental Airlines (NYSE: CAL), Cypress Semi (NYSE: CY), Cytec (NYSE: CYT), Danaher (NYSE: DHR), Evergreen Solar (Nasdaq: ESLR), Fairchild Semi (NYSE: FCS), Genuine Parts (NYSE: GPC), Harley-Davidson (NYSE: HOG), International Game Technology (NYSE: IGT), Intuitive Surgical (Nasdaq: ISRG), Keycorp (NYSE: KEY), Krispy Kreme (NYSE: KKD), Landstar (Nasdaq: LSTR), Marriott (NYSE: MAR), McMoran Exploration (NYSE: MMR), MGIC Investment (NYSE: MTG), Nokia (NYSE: NOK), Nucor (NYSE: NUE), PMC-Sierra (Nasdaq: PMCS), PNC Financial (NYSE: PNC), PPG Industries (NYSE: PPG), Sandisk (Nasdaq: SNDK), Sonoco Products (NYSE: SON), Southwest Airlines (NYSE: LUV), Stryker (NYSE: SYK), SunPower (Nasdaq: SPWR), Supervalu (NYSE: SVU), Teradyne (NYSE: TER), The New York Times (NYSE: NYT), United Technologies (NYSE: UTX), Zions Bancorp (Nasdaq: ZION) and more.

Friday

Friday is clean of economic news, but offers earnings reports from Caterpillar (NYSE: CAT), Citigroup (NYSE: C), Honeywell (NYSE: HON), Manpower (NYSE: MAN), Mohawk Industries (NYSE: MHK), Schlumberger (NYSE: SLB), Student Loan (NYSE: STU), Wachovia (NYSE: WB), Wilmington Trust (NYSE: WL), Xerox (NYSE: XRX) and a few more.

There's some risk of market-moving news arising from the meetings of two technical analyst groups in San Francisco on Friday. Also, South Korea's chief of state meets with President Bush. The Pope addresses a packed house at Yankee Stadium on Sunday, and The Greek will try his best to get in. For those of you hoping to see the religious leader, you do not need a ticket to station yourself along 5th avenue (up to 72nd Street) on Saturday around 1 p.m., as his caravan passes by on its way to another destination. And say hi if you see me there! God bless.

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