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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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Monday, June 30, 2008

Week Ahead - The Worst Case Scenario Bear Market

bad bear market
"The Greek's Week Ahead" has been engineered to provide you with a tool you can reference all week long, a schedule of the week's market-moving events. Please also see our article, "Week in Review," which serves as a primer for this piece.

Enter the dragon of a bear market. This could get really ugly before it's over folks. We're down 20% on the Dow now, and 30% to 50% is not out of the question considering that inflation and Iran loom.

While the Fed might have a defense against inflation, it cannot predict what Iran has been planning over the last seven years, a period throughout which we have telegraphed our own plans for an eventual attack. And, the Fed cannot predict what Communist China will do if Middle Eastern oil flow is severely disrupted by a disturbed Iranian regime. Nor can it predict what opportunistic Vladimir Putin and his clone, might do if the U.S. were preoccupied or injured.

No Empire Lasts Forever

I spoke with someone recently who believes the American ego is getting exactly what it deserves. Her lecture theme centered on the premise that we Americans think too highly of ourselves, and we are being shown our place now. These words came from a proud American actually, with an open mind and a bad taste in her mouth from chewing on the faults of President Bush, the state of our economy and the state of our standing in the world. While admittedly sympathizing with her a bit regarding some of the faults of the Bush administration, I could not help but think to myself, "forgive her Lord, for she knows not what she says."

Before all is said and done, if she's right, then that lovely person will very likely regret the realization of those words. When she's homeless and hungry, far different than her current standing, we're very sure she will wish she was not so prescient. And, if you think poverty is beyond you, that starvation is outside of the realm of possibility for you... well, I say you are the product of too many good years of living and too little creative foresight (read blind). It will take more than a little of that to digest our pending article about Iran, or even the paragraphs that follow here.

Be sure to stay tuned to the Wall Street Greek over the next week, as we will publish a disturbing piece or two that will have you barricading your doors and stocking up on canned goods. Or you'll decide "The Greek" is insane... sort of like how many did when we first wrote about what would happen to our economy when liquidity dried (well ahead of 99% of economists); or when we said oil had bottomed at $49 (correct to the hour); or when we said food and energy price volatility were different this time around (before anyone noticed); etc. etc.

Interesting Apocalyptic Reading

Let's assume a worst case scenario for the sake of interesting apocalyptic reading... If and when the system itself ever fails, your paper dollars and securities would become worthless. You would be left with whatever you have stored in your home and whatever means you have to defend it from the not so prepared rest of the country. I realize how ridiculous this seems, and how unlikely it appears today, but it's not at all impossible.

Okay, it's a given that a lot would have to happen to get us to where we could have a productive debate on this currently very hypothetical scenario. I mean even I, a man who predicted airplanes could strike the Twin Towers (candidly once or twice and I can't prove it, nor do I want to), and who avoided seeking work in New York for nearly six months before becoming the fixture I have become... even I have to look a couple chess moves ahead to imagine that kind of situation. But I CAN see it just the same. And for the record, I have no store of canned goods, nor even one bottle of water. (Remember, "The Greek" survives on your support of our advertisers and potatoes... PS: send potatoes and clicks.)

Why the Threat is Real

This is why John McCain says the only thing worse than confronting Iran is allowing Iran to attain nuclear weapons. That means confronting Iran is mighty dangerous folks; let's not mince words. This is why Mahmoud Ahmadinejad is so cocky on the world stage. I mean, the man has the example of the decimated and now deceased Saddam Hussein, and he still threatens the end of Israel. Is he insane? Is he another brazen fool, the spitting image of Saddam? Or does he have a master plan full of secret allies and already well-aimed missiles? And, does he have the will to see it through... It sure seems so. And our extensive missile defense system tests over the last few weeks say something to that as well, as does Israel's most extensive civilian emergency preparedness campaign in history.

No, if we challenge her, we must show no mercy to Iran. You never go into a fight pulling punches, especially not after you've announced your plans. I hope we are prepared to defend the Middle East after Israel launches its mission, because we will have to. And I hope America is ready for the realization of many of those feigned threats from al-Qaeda, which Iran actually has the capability to pursue.

This is the real reason oil is moving higher. This is part of the reason why the dollar has softened, and I'm not overlooking the main driver of Fed free-flowing fiscal and monetary policy. But, oil has no right climbing above $140 otherwise, especially as the dollar holds still. The smart money behind those $150 and $200 price targets knows what's in store for Iran, and they might also know a little bit about what John McCain is so sober in thought over. If you want to buy something folks, buy gold maybe, water and canned goods definitely, and some other timely stocks that I'll put together for you shortly. I'll publish an article with a nice set of hedge plays for you, to be prepared for the worst case scenario.

I'm not looking for any near-term bounce for stocks. We will break into bear territory across the board soon enough. Spring is over and hope is not eternal. However, America is not afraid, nor is she incapable. Never confuse my candor for fear. I have no doubt about our great spirit as a nation or our military capabilities. While the final result seems certain to be victory, I warn you, expect surprises and an injury or two this time.

The Week Ahead

The week ahead is a holiday shortened one, as Americans celebrate Independence Day. The week's marquee data point is clearly Thursday's Employment Situation Report, which follows up on last month's dramatic unemployment increase to 5.5%. Even so, there will be plenty more to keep us busy.


Economic data will be scarce on Monday, but the National Association of Purchasing Managers (NAPM - Chicago) is scheduled to report on Midwestern manufacturing. Recall, both New York and Philly area reports were softer than expectations. Bloomberg's consensus of economists is looking for a measure of 48.0 in June here, compared to 49.1 in May. Recall, a reading below 50 indicates economic contraction, which should be no surprise to you by now.

The National Agricultural Statistics Service will follow up on Friday's Crop Report with its own take on individual states' acreage planted and harvested data.

Monday marks the end of the second quarter, but earnings season will not start until next week. Of the handful of firms reporting earnings on Monday, look for news from H&R Block (NYSE: HRB), Mesa Air (Nasdaq: MESA), Advanced Photonix (AMEX: API), Castle Brands (AMEX: ROX), GenCorp (NYSE: GY), Hemispherx Biopharma (AMEX: HEB), Investors Real Estate (Nasdaq: IRETS), LCC International (Nasdaq: LCCI), LJ International (Nasdaq: JADE), Mad Catz Interactive (Nasdaq: MCZ), MTS Medication Technologies (AMEX: MPP), Robbyns & Myers (NYSE: RBN) and US Dataworks (AMEX: UDW). Navistar Int'l (Nasdaq: NAVZ.PK) is scheduled to post delayed Q1 and Q2 results on Monday, and to be relisted on the New York Stock Exchange.


On Tuesday, the Construction Spending and ISM Manufacturing reports should only offer more bad news about these distressed sectors of the economy. We expect the construction report to indicate the spread of pain from residential into commercial construction, as retail and restaurant chains cut back on investment.

According to Bloomberg, economists are looking for Construction Spending to have decreased 0.5% in May, from April. Economists project ISM will post a June index of 48.7, compared to May's 49.6 result. Again here, contraction territory is depicted by a reading below 50. The manufacturing sector has been in contraction since the start of February, according to ISM.

The International Council of Shopping Centers' (ICSC-UBS) weekly same-store sales reports continue to illustrate the benefit of the economic stimulus distribution. Last week's result measured +2.2% year-over-year. Even so, the monthly Motor Vehicle Sales data that is due for June should see no benefit. General Motors (NYSE: GM) and Ford (NYSE: F) started warning about the period right from the get-go. As the companies were reporting May results, they began warning about June, so don't get your hopes up. However, the two stocks have discounted a horrible month already. The movement of the shares on Tuesday will likely have more to do with company forecasts and other unexpected announcements they may make.

After every FOMC meeting, Federal Reserve officials schedule a plethora of public appearances. This offers the market a chance to hear what was left unsaid in the brief FOMC Policy Statement. Atlanta Fed President Dennis Lockhart will address a group on Tuesday. Also, the IMF will offer their assessment of the global impact of rising food and energy prices. Finally, the Bank of Japan will publish its quarterly tankan business survey.

Markets are closed in Hong Kong and Thailand on Tuesday. In the states, Bank of America's (NYSE: BAC) acquisition of Countrywide Financial (NYSE: CFC) is expected to close. Tuesday earnings slate includes Apollo Group (Nasdaq: APOL), Constellation Brands (NYSE: STZ), CardioDynamics Int'l (Nasdaq: CDIC), MSC Industrial Direct (NYSE: MSM), Rostelecom OAO (NYSE: ROS), Schnitzer Steel (Nasdaq: SCHN) and Standard Microsystems (Nasdaq: SMSC).


Wednesday starts the flow of monthly employment reports, as the Challenger Job-Cut Report, Monster Employment Index and the ADP Private Employment Report all weigh in on the deteriorating state of the labor market. But before any of these reports hits the wires, the OECD is scheduled to publish its employment outlook for 2008 from Paris.

Monster (Nasdaq: MNST) kicks things off with its 6:00 a.m. ET reporting of its index. The barometer was reported at 166 in May, down from 174 in April. Challenger is up to bat at 7:30, and the report will garner a great deal of attention this month, after it noted a lofty 103.5K announced layoffs in May, as compared to 90K in April and 53.6K in March. ADP's Private Employment Report follows, and will match up against a reported May increase of 40K jobs. Prior month data is often revised, and it should be as interesting to follow revisions as it will to see the current month's tally.

Wednesday offers the regular Mortgage Banker's Association mortgage activity report and the EIA's Petroleum Status data. Then at 10:00 AM, look for the May reading of Factory Orders. Economists are on record with a mean forecast for 0.6% growth, month-to-month. Orders increased 1.1% in April.

The National Association for Business Economics is holding a conference to discuss the financial crisis. Also, Fed heavyweight, but soon to be retired, Fred Mishkin will address a group on "The Global Financial Disruption and the World Economy." Also, Treasury Secretary Paulson will speak on the topic of the economy and markets.

Wednesday's short earnings schedule includes A. Schulman (Nasdaq: SHLM), Family Dollar (NYSE: FDO), Acuity Brands (NYSE: AYI), Isle of Capri Casinos (Nasdaq: ISLE), Schawk (NYSE: SGK), Spectrum Control (Nasdaq: SPEC), UniFirst (NYSE: UNF) and WD-40 (Nasdaq: WDFC).


On Thursday, the regular weekly Initial Jobless Claims data will be overshadowed by the monthly Employment Situation Report. This data portends trouble if the unemployment rate gets even worse than last month's 5.5%. After such a dramatic change last time around, further softening would seem to investors as if the wheels were coming off the economy, and they would be...

However, we anticipate the unemployment rate will hold ground or back up a little bit. Economists are generally predicting a rate of 5.5% for June. The consensus is looking for a nonfarm payroll loss of 50K jobs, compared to a decrease of 49K in May. The regular Weekly Initial Jobless Claims Report is seen producing a result of 385K new benefits filers, a number just one thousand higher than the week before.

Also on Thursday, look for an important European Central Bank meeting to potentially offer the ECB's first rate increase in its well-publicized battle against inflation. There is some hope the ECB might delay, after last week offered poor retail sales and confidence readings for Europe.

The day also offers another tough sentiment measure, the RBC Cash Index, and a check on the state of the non-manufacturing sector from ISM. The RBC Cash Index measured 22.5 in June, a steep fall from 39 reported in May. ISM's take on the other than manufacturing sector, which comprises the majority of American industry, is expected to offer a reading of 51 in June, versus 51.7 in May.

Ahead of the holiday, the U.S. stock markets and financial futures and options markets close at 1 p.m. ET, and bond markets shutter at 2 p.m. British Airways ADR (Nasdaq: BAIRY.PK) is scheduled to post its June traffic numbers on Thursday. The earnings schedule is empty in the states, but beware the company that posts an after market press release in the hopes of sneaking bad news by the holiday distracted public.


U.S. markets are closed for Independence Day.
However, ECB President Trichet will address a group in France. In Asia, the opening of direct flights between Taiwan and China will serve as a positive gesture toward a hopeful future for the two nations in dispute.

Article also interests AMEX: DIA, AMEX: SPY, AMEX: SDS, AMEX: DOG, AMEX: QLD, Nasdaq: QQQQ, NYSE: NYX. Please see our disclosure at the Wall Street Greek website.

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Sunday, June 29, 2008

Week in Video Review - Zimbabwe Chaos, Democratic Unity

Enjoy our "week in video review" at the Wall Street Greek website. We must admit that it is our pure pleasure to produce the regular piece for you. Please fast forward through the some 50 videos we've hand selected for you, and enjoy the important economic and market reports, the political and world news, as well as the offbeat and just plain fantastic humor of TV's Craig Ferguson.

Please be sure to see our new stock market news website (MarketMovingNews.com), launched this past week. We hope it will serve as a great pre-market tool for you.

As always, the views expressed within the videos may not agree with the opinion of "The Greek." Article interests AMEX: DIA, AMEX: SPY, AMEX: QLD, AMEX: SDS, AMEX: DOG, Nasdaq: QQQQ, Nasdaq, YHOO, Nasdaq: MSFT, Nasdaq: GOOG, Nasdaq: RIMM, Nasdaq: ORCL, NYSE: C, NYSE: MER, NYSE: GS, NYSE: MS, NYSE: JPM, NYSE: NYX. See our disclosure at the Wall Street Greek website and blog.


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Saturday, June 28, 2008

Week in Review - As Bad as Expected

as bad as expected
Over the past few weeks, Wall Street Greek has been warning that as the market digests the new reality of inflation as a serious threat, it would likely retest its March 10 lows. Ironically, on the same day the Federal Reserve released its minutes from the emergency meetings it held back in March, the market did retest the lows. The Dow Industrials closed the week down 4.2%, settling into a new low at 11,346.51. The S&P 500 also drifted 3.0% last week, to close within five points of that aforementioned March floor.

As we pointed out in our article, "Technology Stocks, Underweight Tech Now!," the Nasdaq Composite has lagged the overall market's move to the break-point. We should point out though, that it's not as if the Nasdaq has not moved lower in concert with the other indexes. It has, and it declined another 3.8% last week. It's just that the composite is still 6.7% off the bottom, while the other indexes are already there.

The reason for this divergence is likely because the higher beta, or more volatile technology stocks that dominate the Nasdaq, previously moved sharply lower in exaggerated fashion into the March 10 bottom. This occurred as part of a market capitulation process. Capitulation occurs when investors give up on stocks en masse due to a catalyst event, like the Bear Stearns unraveling. When that happens, high beta issues lead the market lower while exaggerating the broader move. Since we have not had another capitulation (read yet), the Nasdaq has lagged in revisiting its low-point.

"The Greek" believes that this quarter's earnings season will offer evidence of both consumer spending softness and corporate investment weakness, leading technology firms to reduce their forecasts. We saw two companies do this on Thursday, in Research in Motion (Nasdaq: RIMM) and Oracle (Nasdaq: ORCL). We then warned about Micron Technology (NYSE: MU), which later reported bad news on Thursday evening sending the stock down nearly 13% on Friday. We expect more of the same for the rest of the tech sector in July, and so we are recommending investors underweight technology stocks now.

Economic Results

We closed last week out with news that consumer sentiment sank to a 28-year low, and approached a 50-year trough. At the same time, we received news that Personal Income increased a strong 1.9% in May, but the gain was greatly boosted by the delivery of government stimulus checks. The also perverted Consumer Outlays figure for May rose 0.8%. The feeling is that this temporary boost will fade in July and August, and the underlying economic woes of our nation will be apparent in this monthly report as well.

First quarter GDP was revised higher a tenth of a percent last week, to 1.0%, and Q2 stands to benefit from the government handout. Corporate Profits continued to decline, portending further layoffs in American industry. The Weekly Jobless Claims data offered a figure hovering in that same range we've seen over the past three weeks; it came in at 384K for the second week in row.

The most important economic news of the week was reported as expected. The Federal Open Market Committee held rates steady and focused its policy statement on inflation risk. In our opinion, a clear signal was issued that the long string of expansionary rate cuts is over. The Fed clearly understands the importance of strengthening the dollar. But, is it too late... Will the Fed prove handcuffed, like Wall Street Greek told you they were months ago.

As the Fed tiptoes around a tough economy while threatening to battle inflation, long rates might move higher out of control and destroy loan supply for borrowers on the fringe. Housing could thus languish for quite a while longer, and deflation of home prices would likely continue to reverse the wealth effect. Meanwhile, the ECB is likely to raise rates as quickly as our Federal Reserve, so just how much of its old glory can the dollar regain anyway...

Last week's housing data was mixed, as new home sales continued to adjust to a lower rate. However, a seasonal uplift did occur in existing home sales. Still, Wall Street Greek warned investors not to get too excited about seasonal boost off of unnatural and dramatic trough.

Oil prices continued higher as market participants and regulators came under heavy scrutiny. Our government took a look at speculation and its role in driving the price spike. OPEC decided contrary to Saudi Arabia, and did not offer to boost production. Meanwhile, rumor after rumor of Israeli air-strike fed plenty of volatility. By the end of the week, OPEC's president declared oil prices might reach $170 per barrel soon. If that isn't adding insult to injury, I don't know what is...

Corporate News

On the corporate front, several analysts downgraded and made troubling forecasts on each other's coming quarter, and the extent of ongoing asset write-downs that are likely. Citigroup (NYSE: C) and Merrill Lynch (NYSE: MER) bore the brunt of the attention, with both firms sinking significantly on the week. AIG (NYSE: AIG) faced the aspect of another major hit to assets, and Royal Bank of Scotland suffered a ratings downgrade. American Express (NYSE: AXP) and Discover Financial (NYSE: DFS) indicated that charge-offs were rising among their card holders. Barclays (NYSE: BCS) came back to market for some more capital, and one has to wonder, when will buyers disappear. It was just plain ugly in the financial sector. This was the perfect illustration of how a cheap price-to-book ratio can serve as a warning, as much as it can indicate value. When book value will continue deteriorating, one must question the validity of the component to the ratio, and thus the ratio itself.

We already noted the warnings in the tech space. Home builders Lennar (NYSE: LEN) and KB Home (NYSE: KBH) reported ongoing strife in their space as well, and it seems all the doubting Thomases who had been looking for value in home building have finally gone the way of everyone else and abandoned the industry altogether. A handful of food companies reported mixed news, as illustrated by the rise in Kroger (NYSE: KR) and fall of General Mills (NYSE: GIS) last week.

Stay tuned for "The Greek's Week Ahead" coming soon.

Article also interests AMEX: DIA, AMEX: SPY, AMEX: QLD, Nasdaq: QQQQ, AMEX: DOG, AMEX: SDS. Please see our disclosure at the Wall Street Greek website.

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Friday, June 27, 2008

Introducing Stock "Market Moving News"

Dear Stock Market News Enthusiasts,

Thank you for your patience over the last couple days as we rolled out our latest endeavor, "MarketMovingNews.com." We hope it will become an easier, more visual way for you to peruse our stock "Market Moving News" section, while you will of course still be able to find that information within our sidebar. We expect the site will prove a great resource for pre-market warm up.

Best Regards,

"The Greek"

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Thursday, June 26, 2008

Technology Stocks, Underweight Tech Now!

tech stocks
While the broader market has adjusted lower, technology stocks have thus far held off retesting lows. The Dow and S&P 500 are finding new footing, but until today, the Nasdaq has avoided drastic decline. Thus, Wall Street Greek recommends underweighting tech stocks ahead of a tough June quarter EPS season.

As we prepared our week ahead article this past Sunday, we noted to ourselves that the Nasdaq was a laggard in the market's broader correction. While it had declined similarly to the Dow and S&P 500 Indices, it had not overcompensated like you would expect a high-beta portfolio to.

The Nasdaq is of course a composite, and so contains significantly more equities than the indexes of the Dow and the S&P 500. For this reason, its beta is likely closer to the broader market than would be reflective of the many technology stocks it contains. Other more concentrated tech portfolios like the Morgan Stanley Technology ETF (AMEX: MTK) or the Vanguard Information Technology ETF (AMEX: VGT) would offer a beta value more reflective of tech stock risk. To give you an idea of a typical tech portfolio beta, MTK's beta is 1.56, and its relative group averages 1.5.

So, while the Dow Industrials are only 0.6% off their March low (as of the authoring of this article), and the S&P 500 just 3.8% off the floor, the Nasdaq Composite is a full 10.7% off bottom still. What's interesting to note is that the higher growth the index is, the further off it is the bottom, indicating that capitulation has yet to occur, if it will recur at all. Because, capitulation occurs when the great majority of investors give up on stocks and hope seems bleakest, higher beta and more hopeful stock portfolios will be the ones exhibiting the most pain at that time. Clearly, March 10 marked the last point this occurred, and until the Nasdaq corrects, we can't say we've capitulated again. But, the question is, are we heading toward another capitulation, and our answer is yes.

We offer even further evidence of the the technology sector's higher near-term risk. If we examine stocks within the S&P 1500 Index, the IT Sector is up 12.8% over the 13-weeks ended June 13th, while the entire S&P 1500 is up only 6.4%. This is a sign that the early cyclical sector led the recent market rise, but failed to compensate for more recent retracing. Only Energy is up more during that span, while Financials are down 2.0%. And we know what's happened since June 13th...

Tech Operations Pointing to Trouble

Technology companies are starting to realize impact from decreasing corporate investment. Oracle (Nasdaq: ORCL) and Research in Motion (Nasdaq: RIMM) offered a clear sign of this today. Yes, RIMM benefits from corporate investment, since many of those Blackberries that corporate managers are using are also corporate sponsored or subsidized tools. When times get tough and layoffs increase, there's less need for these ancillary tools. Of course, some would argue that PDAs are entrenching into the corporate toolbox similarly to PCs, but that still does not negate the impact of consolidated workforce, especially within middle management.

Oracle, of course, offers a clearer look at corporate investment since its offerings are only used by businesses, while RIMM is driven by the retail marketplace. However, both today indicated a tougher outlook ahead, and both stocks are reflecting that reality. In their follow up conference call, Oracle's CFO indicated that the current quarter should offer $0.24 to $0.27 of EPS, but this compared with analysts' expectations for $0.27. The stock is down nearly 5% today as a result. RIMM is down double-digits today on its forecast for $0.84 to $0.89, which compared to analysts' view for $0.89.

Now, one might argue that the corporate management teams at these two relatively strong performing companies are being appropriately conservative, due to tough economic times. But, what's that say about the broader technology space, where performance has been less stellar than at these two firms? It says, watch out!

Underweight Tech Stocks

So, this leads us to recommend underweighting technology stocks over the near-term, and we see little difference from corporate to retail end markets, as we are at a point in the cycle where both are cutting spending. The competitive retail space might offer an easier field to find losers within, while broad weakness should strike the corporate spend space more evenly.

You're screaming, what about valuation Greek, and I'm saying, who cares this time. We have a case where the group has strayed from the mean, and thanks to very real inflation concerns and a handcuffed Fed, we cannot look to a normal recovery. Thus, these early cyclicals have an uncertain leadership role to play. Meanwhile, they're way out there in the wilderness and we've lost contact.

Left to report this week, look for Palm (Nasdaq: PALM), Electroglas (Nasdaq: EGLS) and Micron Technology (NYSE: MU) tonight. Look for more evidence of trouble in each of these names.

Article interests AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, AMEX: SDS, AMEX: DOG, AMEX: QLD. Please see our disclosure at the Wall Street Greek website.
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Wednesday, June 25, 2008

Economic Reports: FOMC and More

fomc policy
Today's economic reports included the FOMC interest rate decision and policy statement, durable goods orders and new home sales. While plenty eventful, the day offered no surprises.

FOMC Policy Decision

The Federal Reserve's Federal Open Market Committee (FOMC) today decided to keep its target for the Fed Funds Rate unchanged at 2%, as expected. Within its policy statement, the FOMC indicated that economic activity continues to expand, driven by some firming of household spending. This "spending," however is receiving significant and temporary boost from the economic stimulus package, and we hope the Fed is discounting that temporary reality.

The FOMC went on to qualify its positive note by pointing out ongoing financial market stress, tight credit conditions, housing contraction and softening labor market. It therefore sees limited economic growth this year.

Regarding inflation, the group expressed concern about elevated risks originating from energy and other commodities. After reminding us of the extensive actions they've taken so far, the governors stated that economic growth should continue and inflation should moderate. Finally, the Fed noted that while risks to economic growth seem to have eased, risks to inflation have intensified.

Thus, they've clearly marked the end of expansionary monetary policy, and signaled yet again the likelihood of future action to stymie inflation. Stocks rose into the news today, perhaps adjusting after having already discounted in higher inflation concerns. After the FOMC release, the S&P 500 initially moved lower but is relatively absent of significant reaction. There was no surprise in the statement, so stocks were already well-priced. However, we believe that as inflation concerns are more broadly digested by the market, stocks are likely to adjust lower on the near-term trend line.

Durable Goods Orders (May)

Durable goods orders posted their first monthly non-decline of the year, but the news was anticipated. We wrote about it ourselves in our "Week Ahead" piece. Economists were not surprised by the 0.0% change in monthly orders either.

Believe it or not, durable goods likely benefited from economic stimulus distribution. Despite the high-ticket cost of durables and anecdotal evidence of broad segment weakness and consolidation (i.e. in airlines and autos), the government's gift distribution of capital offered the still employed majority an opportunity to go out and make long desired purchases. However, we anticipate this month's bounce will prove just a blip in time, and not a turning point for new trend. Times will continue tough this year as inflation proves more stubborn than the Fed's initial estimate. It's also noteworthy that excluding defense and transportation, orders still fell 0.6%.

New Home Sales (May)

New home sales for May drifted further lower, sinking below expectations to an annual run rate of 512,000. This compared with April's rate of 526K, and marked the second lowest rate of sales in seventeen years.

Article interests NYSE: F, NYSE: GM, NYSE: TM, NYSE: HMC, NYSE: UAUA, NYSE: DAL, NYSE: CAL, AMEX: DIA, AMEX: SPY, AMEX: SDS, AMEX: DOG, AMEX: QLD, Nasdaq: QQQQ. Please see our disclosure at the Wall Street Greek website.
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Tuesday, June 24, 2008

OPEC Actually Makes Sense

alternative energy
OPEC today announced that oil production is satisfactory, and so a boost to output would not be needed... While they may of course be partly correct, or even in full, they could throw us a bone here too right?!

What on the surface of things looks like another greed inspired OPEC nose turn up to a Western concern, might actually make sense. If we can get beyond our anger about $4 gas and hefty summer electric bills, OPEC's argument really does hold some water. And, if you're buying into it, then you might redirect your anger over toward the Federal Reserve instead. Or better yet, suck it up, spend less and enjoy the simple things in life.

Even so, something (read EVERYTHING) clearly needs to be done to help entice petroleum prices back into the stratosphere. We agree on that I hope... So, even if it's not a production issue, might there be a production solution? First let's examine the situation a bit more carefully.

OPEC's Announcement

After the conclusion of its meeting with EU representatives today, OPEC President Chakib Khelil declared that the cartel sees no need to boost production since the problem is not a production issue in the first place. Guess what, we're sorry to say that he's mostly correct.

He astutely pointed out that dollar softness and global, though mostly U.S. pressure, on Iran was the key driver behind oil price rise. Khelil stated, "All you need to do is to look at the data to be convinced that the market is well supplied in oil and that we have enough surplus capacity and that we have enough stocks in the market."

Dollar Did Us In

Let's face it, while oil has reached cut-throat-degree expensive for U.S. consumers, it's only choking-level-pricey for the rest of the non-dollar-pegged world. Today again, as the dollar weakened some to $1.558 per euro, oil prices surged before retracing. Okay, a lot of today's move had to do with the OPEC noise and a rumor that Iran had been attacked. This was later denied by Iran, the U.S. and Israel. The long-term trend is clear though, and it pits oil and the dollar as polar opposites to one another.

What About that Bone

The Saudi's (also known as ExxonMobilville (NYSE: XOM) threw us a bone the other day, announcing they would lift production by a couple hundred thousand barrels a day. But the recent oil summit in Jeddah turned up no follow through from other producers, and today's announcement seemed to kill any possibility of further flow. Kuwait (aka Halliburtown NYSE: HAL), OPEC's fourth largest producer, announced today that recent investments will lead to natural production growth of 300,000 barrels daily by mid-2009. Well, that investment was a no-brainer wasn't it... Oil moderated a bit and sits around $136.55 for August delivery on the NYMEX, but the dissipation of the Iranian rumor dissolved crude, not the Kuwaiti news.

Let's face it, price inspired demand destruction will be the driver to do oil prices in. As alternatives become more viable, and as economies suffer through trying times and offer more incentive to alternative energy research and development, demand will ease to better match supply.

Article interests AMEX: DIA, AMEX: SPY, AMEX: QLD, AMEX: SDS, AMEX: DOG, Nasdaq: QQQQ. Please see our disclosure at the Wall Street Greek website.

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Monday, June 23, 2008

Week Ahead - You've Got a Friend

friend not
"The Greek's Week Ahead" has been engineered to offer you a reference to the week's scheduled and unscheduled market-moving events.

How's that Carole King song go, "Winter, spring, summer or fall, all you have to do is call, and I'll be there, yes I will... you've got a friend..." Well, the Feds, and we mean Bernanke, Paulson, Congress and the President, were all there when we needed them through winter, spring, summer (all couple days of it so far), but they probably won't be there to prevent our fall this time around my friends. (Please find Carole King's great masterpiece below this article, posted for my dear friend.)

Normally we would have to suggest that the Federal Reserve's FOMC meeting, scheduled for Tuesday and Wednesday, might offer rescue. However, the Fed has done all it can to signal that it is now inflation-centric, if not manic. They should be panicked! Therefore, it would seem likely that Bernanke and crew will leave the liquidity rescue helicopter behind this week. That means our friends won't be there for us this time around, and so the market would seem to have little to help it hold ground above its March 10 low.

The remainder of the week is littered with tragic consumer confidence and housing metrics we've grown accustomed to. Still, on Friday, Personal Income and Outlays for May could offer some good news thanks to the beginning of government stimulus distribution. That euphoria may last only as long as the Farm Prices Report at 3:00 PM though, thanks to widespread flooding in the Midwest.


Following the quadruple witch inspired volatility on Friday, it seems likely the market might reconsider the day's move and buy a little back on Monday. However, our troubles are not going away either, and Iran is coming more and more to the forefront, so who's to say...

There are no scheduled economic reports for Monday, but in keeping with that fresh agricultural mention, we should note that an Australian agency is set to update its quarterly commodities forecasts for agricultural produce and metals. Also overseas, a Mumbai court will hear Vodafone's (NYSE: VOD) challenge to a $2 billion tax levied on its purchase of an Indian company. That's called country risk folks, and Vodafone likely discounted it into its acquisition analysis if their analysts or counselors are worth their salt.

The New York Stock Exchange will rebalance itself today, adding Philip Morris (NYSE: PM), Hess (NYSE: HES), Anadarko Petroleum (NYSE: APC), National Oilwell (NYSE: NOV) and EOG Resources (NYSE: EOG). Names being removed include Franklin Resources (NYSE: BEN), Carnival (NYSE: CCL) , Lehman Brothers (NYSE: LEH), Las Vegas Sands (NYSE: LVS) and Motorola (NYSE: MOT).

Monday's very short earnings schedule includes just Walgreen (NYSE: WAG) and North American Energy Partners (NYSE: NOA). Canadian natural gas concern Encana (NYSE: ECA) will hold its analyst meeting today.


Tuesday's news flow starts bright and early with the weekly ICSC-UBS Same-Store Sales Report. This data continues to benefit from Americans who can't keep a dime in their pockets, as they rush to spend the government stimulus on a new bikini and iPhone. Great job of offering a blind eye to the tough times that lay ahead America. God bless that positive spirit we have though; it's a net asset. Last week, sales rose a relatively strong (compared to recent months) 2.1% year-over-year.

Also early on the schedule, the S&P Case Shiller Home Price Index will be offered up by one of the two parties' representatives, hopefully S&P's David Blitzer. Love the bow tie David, but there's one guy out there who outdoes you with it. I'll be sure to post him here soon... In any event, home prices are expected to decline further for the reported month of April.

At 10:00 AM on Tuesday, the Conference Board will further depress us by telling us how depressed we are. June's Confidence Index is seen by economists at 56.5 this time around, versus 57.2 in May. If it goes below 50, support groups across the nation will likely see increased membership. At 40, atheists start watching TV evangelists. At 30, Wal-Mart (NYSE: WMT) rolls out a delivery service and Mexican immigrants start climbing the fence to go home. At 20, Bush goes into hiding. At 10, we all quit our jobs, raid the liquor stores and hang out on the beach. Hey, wait a second, isn't that what we hope to do when we retire??? Ah ha!

Lest we forget, the Federal Reserve begins its turning point Federal Open Market Committee Meeting Tuesday. The discussion and resulting policy statement and later minutes are very likely to show intense inflationary concern. By now you see, Bernanke has figured out that Israel and Bush will engage Iran, and oil prices could top $200 for an extended period. Can you believe it took the world's best economists and strategists this long to figure it out? I can.

Congress is getting busy again this week, as a Senate committee discusses a bill that is intended to ban some groups of institutional investors from participation in the oil futures market. Here's a clue... maybe it's not manipulation driving oil prices, but sovereign hoarding of oil (read China) and smart money buy into the commodity ahead of an Iranian event!

Years after it begins, everyone will look back on this period and blame Iran for the rise in crude, but you should never forget how they completely excluded it from discussion before the event. This is called conforming, and because discussion of war, however likely it may be, is often viewed as paranoia-based or sensationalistic, the conforming majority will shy away from discussing it. This is why you read Wall Street Greek. Do you think investment bank crude oil price targets of $150 and $200 during a period of economic weakness are not well-informed?

On the corporate front, Rowan Cos. (NYSE: RDC), Roche Holdings (Swiss: RO.SW) and BHP Billiton (NYSE: BHP) will address the public on their operations. Tuesday's earnings slate includes 3Com (Nasdaq: COMS), Aerovironment (Nasdaq: AVAV), Apogee (Nasdaq: APOG), Darden Restaurants (NYSE: DRI), FSI International (Nasdaq: FSII), H.B. Fuller (NYSE: FUL), Jabil Circuit (NYSE: JBL), Sonic (Nasdaq: SONC), Symmetry Medical (NYSE: SMA) and The Kroger Co. (NYSE: KR).


Long-term rates backed up a bit last week, as money raced for treasuries. So, mortgage activity could see a weekly lift in the reported Mortgage Bankers Association data on Wednesday morning.

With Europe hunkering down, ongoing consolidation in Detroit, and manufacturing generally in the dumps (judging by the Philly and New York Fed Reports last week), what should we expect from Wednesday's Durable Goods Report at 8:30... Economists see no change in new orders in May, versus a 0.5% decline in April. That's actually good news. Recall, April was representative of the entire year-to-date, with order decline throughout. However, one factor is working in the reports favor this time around, economic stimulus. Thus, don't be surprised by a possible (not really) increase in orders, and we suggest not getting enthused by it either, should it ensue.

New Home Sales for May are due at 10:00 AM, and economists forecast an annual run rate of 515K, down from 526,000 in April. So much for seasonal uplift from historic trough. That was as short-lived as sunshine is these days in New York City. On that note, I think our Midwesterner, Steve Ferguson, and I may soon get to work building an ark.

Clearly, Wednesday's regular Petroleum Status Report is a must see nowadays, but it should become increasingly clear that the Iran event will dictate near-term oil price movement. For this reason, I think it's important that those who took heed of our refiner recommendation recently, not fail to understand how skyrocketing oil prices could destroy gasoline demand while increasing costs for refiners; that's what we think would happen. So, in other words, we're not so bullish on refiners. The Iran event is too close to ignore.

At 2:15 on Wednesday, the Fed may move the market as much as ever, when it issues its FOMC Policy Statement. The short document will be combed through, and we expect turn up concern for investors. We expect no rate action from the committee though. It's the likely inflation focus that will scare investors, and rightfully so. Even a small rate cut would likely only offer brief respite from the reality of a tough inflationary environment going forward.

Thornburg Mortgage (NYSE: TMA) and Williams Cos. (NYSE: WMB) have scheduled events of investor interest for Wednesday, and the earnings list includes American Greetings (NYSE: AM), Bed Bath and Beyond (Nasdaq: BBBY), CKE Restaurants (NYSE: CKR), General Mills (NYSE: GIS), Monsanto (NYSE: MON), Nike (NYSE: NKE), Oracle (Nasdaq: ORCL), Red Hat (NYSE: RHT), Research in Motion (Nasdaq: RIMM) and Xyratex (Nasdaq: XRTX).


On Thursday, the final adjustment to first quarter GDP should be received in ho-hum fashion, with the consensus looking for a final reading of 1.0% growth. Corporate Profits are also due for adjustment at the same time Thursday.

As you know from reading "The Greek," the Fed regularly goes on tour after its FOMC Policy meeting, and the discussions of its members can offer great insight into what was left unsaid in the FOMC Policy Statement. Therefore, pay attention to Vice Chairman Kohn and St. Louis Fed President Bullard, as they discuss monetary policy just one day after the statement release.

A duo of interesting employment reports are on tap for Thursday, including the regular Initial Jobless Claims tally and the monthly Help-Wanted Index. Economists see Weekly Jobless Claims measuring 380K, versus 381K the week before. We've been stuck in this range as part-time employment opportunities have managed to keep the unemployment rate still tame, despite moving in the wrong direction. That said, we see the part-time job market saturated now, as students seek entry in the workforce over the summer and with job openings likely decreasing on economic pressure... not to mention the fact that the number of those working part-time due to economic hardship has already bulged. Those laid off from full-time positions have sought other means to support their families over the past six months. The Help-Wanted Index is losing steam, replaced by online posting of job openings. For this reason, economists pay closer mind to the Monster Employment Index. Still, in times like these, this report is always worth a look.

The final heavy-hitter for the day should be the Existing Home Sales Report, due out at 10:00 AM. Bloomberg's consensus of economists sees the May measure rising to an annual pace of 5.0 million, from 4.89 million in April.

The weekly Natural Gas Report from the EIA is released at 10:30. If oil spikes on Iran, natural gas will as well, since it's the closest substitute. Still, you're creative analyst here has something interesting coming your way in this regard... so keep your eye on "The Greek."

The FDA should rule by Thursday on Eli Lilly's Prasugrel, a blood-thinner and a drug that would compete against Plavix, co-marketed by Bristol-Myers Squibb (NYSE: BMY) and Sanofi-Aventis (NYSE: SNY).

Also on the corporate front, Sony (NYSE: SNE) is scheduled to discuss internal profitability targets on Thursday. The earnings slate includes Accenture (NYSE: ACN), America's Car-Mart (Nasdaq: CRMT), Christopher and Banks (NYSE: CBK), ConAgra Foods (NYSE: CAG), Discover Financial Services (NYSE: DFS), Electroglas (Nasdaq: EGLS), Exfo Electro-Optical Engineering (Nasdaq: EXFO), Fleetwood Enterprises (NYSE: FLE), Image Entertainment (Nasdaq: DISK), Lennar Corporation (NYSE: LEN), McCormick and Co. (NYSE: MKC), Micron Technology (NYSE: MU), Palm Inc. (Nasdaq: PALM), Paychex (Nasdaq: PAYX), RF Monolithics (Nasdaq: RFMI), Rite Aid (NYSE: RAD), SYNNEX (NYSE: SNX), Tibco Software (Nasdaq: TIBX) and Worthington Industries (NYSE: WOR).


Friday could hold the best news for investors this week, when Personal Income and Outlays are reported for May. Bloomberg's consensus expects personal spending to increase 0.7%, thanks to economic stimulus checks. This compares to a rise of 0.2% in April. Remember though, when we pay more, we spend more by default... Income is seen rising 0.4%, but this should get an unnatural boost from economic stimulus income.

The University of Michigan/Reuters will offer its Consumer Sentiment reading at 10:00. The experts are looking for a measure of 56.9 for June (adjusted from 56.7), down from 59.8 in May. The day's euphoria driven by the personal spending data may only last until 3:00 p.m. though, when Farm Prices are reported. The recent extensive floods throughout the Midwest are threatening significant farm acreage, and thus adding another driver for price rise.

Friday's earnings schedule is limited to AZZ Inc. (NYSE: AZZ), KB Home (NYSE: KBH), Shaw Communications (NYSE: SJR) and Steelcase (NYSE: SCS). For a reminder of what happened last week, see our article, "Week in Review - House of Cards."

Article interests AMEX: DIA, AMEX: SDS, AMEX: QLD, AMEX: SPY, AMEX: DOG, Nasdaq: QQQQ. Please see our disclosure at the Wall Street Greek website.
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Sunday, June 22, 2008

Week in Review - House of Cards

stock market house of cards
By Markos "The Greek" Kaminis

The stock market's growth from its March lows proved to be built upon a house of cards last week. Things simply fell apart. The bad news came from every direction, whether it was housing, manufacturing, inflation, geopolitical or financial sector news, most of it was unfavorable.

Housing sank deeper into the muck, contrary to what we were hoping might prove a seasonal lift. The NAHB/Wells Fargo Housing Market Index moved lower to 18, from a measure of 19 in May. Housing Starts also missed the mark, running at an annual pace of 975K, short of economists' hopes for 985K.

In the manufacturing space, industrial production fell in May, where it was expected to rise, and capacity utilization declined to 79.4%, versus expectations for 79.7%. Northeastern manufacturing is languishing right along with the Midwest. The New York area manufacturing survey showed deterioration to negative 8.7 in June, while the Philly area measure also weakened to negative 17.1.

The Producer Price Index (PPI), a widely followed metric of inflation at the producer level, jumped in May. The PPI soared 1.4% on soaring energy prices, but excluding food and energy, it was up just 0.2%. Oil prices started to moderate last week, following a route we laid out for petroleum in our article "Oil Prices and Refiner Stocks." The move was driven by favorable news flow, as Saudi Arabia indicated it would boost production, and a Kuwaiti oil minister said the natural price of crude was likely closer to $100. But then on Thursday, China announced it would hike energy prices, which was interpreted as a demand destroyer; this pulled oil significantly lower. Within our just mentioned article, however, we included a caveat that offered catalyst which could negate the entire argument, and that read, "barring an Iranian event." So, when Israel practiced for that eventuality, reported on Friday by the New York Times, oil moved back up and closed at $134.62 (crude for July delivery).

The S&P 500 smashed through that imaginary floor at 1,350, moving down 3.1% to close at 1,318. Gold moved higher on the week, and the dollar weakened to $1.56 per euro since it seems the Fed will not start hiking interest rates this week at least. Volume and trading were impacted by quadruple witching on Friday, which encompasses the expiration of four separate types of contracts at the same time, so you would expect a bit of a lift on Monday as a result.

Despite the witchcraft, the close on Friday was disconcerting. We wrote you recently, in our article "Week Ahead - Armageddon Renaissance," that a retest of the March 10 lows seemed likely once the market started digesting inflation realities. Well, guess what, 1,273 on the S&P 500 is right around the corner.

Company Specifics

Market participants got their panties all bunched up about credit again this week when Moody's downgraded the insurance arms of MBIA (NYSE: MBI) and Ambac (NYSE: ABK). Moody's (NYSE: MCO) was worried about the insurers' ability to raise capital and thus grow their businesses... you know, that little ole thing at the core of organic share rise. In case you thought S&P was sleeping again (NYSE: MHP), you were wrong this time; S&P actually cut the ratings of both firms a couple weeks ago. What's that they say though, even a blind squirrel finds a nut sometimes?

A couple old Bear Stearns (now JP Morgan NYSE: JPM) hedge fund managers got taken down by the Feds. They allegedly lied to some of their investors about mortgage market related risk, and how much of their own money they still had tied up in the fund. That fund just so happened to own a ton of mortgage-backed securities and as a result went under.

Merrill Lynch (NYSE: MER) downgraded a bunch of regional banks, while at the same time avoiding rumors that its own quarter would show poorly. Meanwhile, on the week, Goldman Sachs (NYSE: GS) reported better than expected results AGAIN. Come on now, how many psychics can one firm corner? Rivals Lehman Brothers (NYSE: LEH) and Morgan Stanley posted worse than expected results, like all well-respected investment banks are suppose to do when the financial markets are in turmoil. Take note Goldman, you're making everybody look bad...

Citigroup (NYSE: C) fell in line, when its CFO disclosed that the company would have a nice chunk of mortgage related write-downs again this quarter, and that consumer tied debt should prove problematic all year.

Ford (NYSE: F) is holding up the new F-150. Wow, it seems like just yesterday they had proudly rolled it out at the Detroit Auto Show. It looks like the Ford Verve is now clearly the word going forward.

Hey hey! Boeing (NYSE: BA) actually won its sour complaint against the Air Force, after the aerospace giant lost that huge refueling tanker contract to Northrop Grumman (NYSE: NOC) and EADS a few months back. What's this mean for BA? Well, a chance to bid again on the $35 billion dollar contract, according to recently axed Air Force boss Michael Wynne. BA's shares settled a bit Friday after an initial boost on Thursday's news.

Please see our disclosure at the Wall Street Greek website. Article also interests: AMEX: DIA, AMEX: SDS, AMEX: QLD, AMEX: DOG, AMEX: SDS, Nasdaq: QQQQ.
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Saturday, June 21, 2008

Videos of the Week

Enjoy the week's videos below, which include plenty of the Late Late Show's Craig Ferguson, the HotForWords girl, a wonderful amateur bouzouki artist and plenty of other interesting political, world news and financial markets coverage. Fast forward through to your interests...

If you do not see the videos via your local medium, then please visit our Wall Street Greek website. Remember, your visits to the site and your support of our advertisers (i.e. at least window shopping at the sites of our Google advertisers and purchases from others), directly supports our ongoing effort. Thank you so much.

The opinions expressed within the videos may not agree with the view of "The Greek." Article interests AMEX: DIA, AMEX: SDS, AMEX: QLD, AMEX: DOG, AMEX: SDS, Nasdaq: QQQQ.


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Friday, June 20, 2008

CEO Compensation, Excessive or Deserved?

CEO compensation
Is CEO compensation or pay excessive, or is it simply the ultimate accomplishment for the modern day alpha male (and female).

Why do we chastise the corporate chief, when all he has done is accomplished the top achievement along the same scale we all seek progression upon? Each and every one of us pounds the table during our biannual employment review. We remind our bosses of our accomplishments and our hard work, and defend ourselves against unwarranted criticism or misunderstanding. We do all this in hope of attaining higher standing within our firm and greater compensation while we're at it. So, why then do we go on a witch-hunt to take down the greatest achievers of all?

Two videos concerning excessive CEO compensation follow below. We think they're worth your while to see, so please visit our website (Wall Street Greek) if the player does not appear here via the medium your using.

The Facts

CEOs make a whole lot more than anybody else, and significantly more than the average employee at most firms. The median CEO pay package in America amounts to about $8.4 million, and that's up $280,000 from 2006. As you might imagine, this positions CEOs as quite the outlier from Joe Average. The median income for an entire American household was $48,201 in 2006.

It gets even worse at the top. The ten best paid corporate bosses made over half a billion dollars last year. John Thain alone made $83 million. Thain, of course, is the relatively new CEO of Merrill Lynch (NYSE: MER), hired away from the NYSE Euronext (NYSE: NYX) in 2007. The point is, that's no small bit of scratch, especially not for a company that lost $8 billion last year.

The study discussed within the video found that stock price action and profit performance often played little or no role in CEO compensation. Clearly, some significant portion of a CEO's income should be tied to shareholder value creation. While Thain should not be held responsible for Merrill's '07 performance, since he came in to resurrect the firm, the same can not be said of some home builder CEOs who have somehow held on to their jobs despite their firms' struggles. KB Home (NYSE: KBH) CEO Jeffrey Mezger, for instance, saw his company lose about 929 million under his watch in FY 07 (Nov.), and he witnessed his stock sink some 57% (adjusted for dividends). It would seem he didn't feel too remorseful, or mindful of his shareholders' losses, while collecting his pay package, which was reportedly worth over $24 million.

So, the Witch-Hunt Seems Justified

The witch-hunt would seem justified, and we saw this play out on Capitol Hill over the past few months when big oil company executives came under especially heavy criticism. Their pay packages came up in the course of testimony, as did their companies' windfalls on high oil prices.

However, the windfall profit tax was killed by Republicans before all was said and done, and "The Greek" agrees that the special tax was unjustified and unfair. If you want to hedge against higher gasoline prices, just buy Exxon Mobil (NYSE: XOM) (actually choose a name without Mid-East assets) or the refiner stocks, which seem poised for a move higher, as we mentioned in a recent article.

When considering oil firm profits, we must remind readers that America did not tax Google (Nasdaq: GOOG) in any extraordinary fashion when their profits and stock price soared? Still, one might argue that unlike oil companies, Google's profits do not infringe upon the collective standard of living of the country. Still, "The Greek" says don't penalize firms for doing what they are suppose to do, and oil companies are not solely to blame for rocketing oil prices.

The Marketplace is Efficient / Our Suggestion

There's no better inspiration for these firms to invest in alternative energy than what we are seeing unfold now in the marketplace. Demand destruction due to critical price passage is becoming evident in consumer conservation and altered spending and living habits. These consumption level changes will drive companies to chase profits as capital flow leaves the petroleum-based sector. If you are still not happy with the level of R&D activity or the price of gasoline, offer these firms greater tax incentive for pursuing it.

But, Is One Man Worth That Much?

Even so, is one man ever worth $83 million dollars. After all, one man does not a company run. He's surrounded by a team of executives who all play their role. It is true though that the corporate organization is basically an empire with its Caesar CEO. However, it's also an empire that can be taken down by its senate, known in these times as the Board of Directors.
old boys club
The problem is that all too often the Board of Directors is comprised of the CEO's best chums, the fellows from the club. Also, these same buddies may swap roles at other firms. Thus, the old "you rub my back and I'll rub yours" scam seems a real risk. For this reason, corporate governance has risen to prominence, especially since the Enron and Worldcom debacles. Now, we look for outside Director participation, and many investment rating firms assign companies corporate governance rankings while analyzing the shares. Still, no control is perfect, and the chums risk remains.

But, Seriously, Is One Man Worth That Much?

Suppose the controls were perfect, isn't it then a perversion of our society that allows one man to earn so much money based on the size of the firm he manages? After all, he is just one man, however qualified and responsibility burdened. Well, there may be some exceptions. A handful of managers seem to really set themselves apart. For instance, Warren Buffet seems to have done a decent job at Berkshire Hathaway (NYSE: BRK.A, NYSE: BRK)... we think you would agree... but Warren's 6-year average total compensation through 2006 was just $100,000. Yet another reason to like Warren... I mean, does this guy get karma or what... Also, most General Electric (NYSE: GE) shareholders would argue that Jack Welch was worth every penny he took home.

Then there's the argument concerning others atop their field, for instance, Tiger Woods or Alex Rodriguez. However, the highest paid baseball player in history earned a total of $188 million over the entire course of his career through 2006, and that was Barry Bonds. Heck, Thain could make that much in three years time, and without steroids! Surely though, managing a company with the fate of so many employees and shareholders in your hands is significantly more stressful and important than hitting home runs, depending on who you ask. We also know that a baseball player's salary is market driven, not Board endorsed.

Maybe They Deserve it After All

What about the personal risk these top managers face. Legal pitfalls can befall even the honest guys when their underlings make serious enough mistakes. Corporate chiefs now have to sign off on the financial statements of their firms, making the job a riskier endeavor than it use to be back in the good old Enron days. Also, you're constantly under public scrutiny as a CEO, though never as much as the underpaid President of the United States. Still, I bet you would all take the hardship brought on by activist investors and critical bloggers any day for $83 million! Heck, I would do it for a cool mil.
angelo mozilo investigation
Just the same, Countrywide Financial's (NYSE: CFC, NYSE: BAC) old founder and CEO Angelo Mozilo gave a whole lot of money back and turned all kinds of unnatural pale whilst he was under investigation. There's significant value to be assigned to unnaturally graying hair and the earning of sun-unrelated wrinkling. Trading years of your life away is worth the big bucks, isn't it?


While there are no doubt excesses that a few Boards need to be held accountable for, the median level of compensation, at $8.4 million, is likely well-deserved. The fate of so many in the hands of so few, the risks of legal pitfall and public scrutiny, and the cost of health and unnatural aging of one's life; these are a great weight to bear, and one must ask if any amount of money is worth loss of health. We live but one life here on earth, and every moment of every year is therefore precious and priceless. Any job that can turn a young man into old in four years is worthy a great sum of money. I say give the president a raise, while you cut Thain's pay.

There's something to be said about the rest of you also. I know you're out there dealing with the stress of an overbearing, hypocritical and clueless boss. I know too many of you are bearing impossible responsibility in your dark lifeless cubicles, and into the night while your children are reared by a nanny. I know your pain all too well, and you are worth every penny you earn. We'll never sell you short here, you can count on that.

Article interests AMEX: DIA, AMEX: SDS, AMEX: QLD, AMEX: DOG, AMEX: SDS, Nasdaq: QQQQ. Please see our disclosure at the Wall Street Greek website.
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Wednesday, June 18, 2008

Bush Blames the Democrats for Oil

In the video below, President Bush blames the Democrats for expensive oil, saying if only they had listened to him and allowed offshore drilling... He went on about how they were obstructing everything good in the world... Darn Democrats! Come on Prez, are you kidding me? Even "The Greek" thinks this is excessive... I mean how stupid does Bush think we are? Everybody knows Ron Paul and the Martian Empire are to blame. If you don't see the video below, visit our stock news website.

The views expressed within videos may not agree with the opinion of Wall Street Greek. Article interests AMEX: DIA, AMEX: SPY, AMEX: SDS, AMEX: DOG, AMEX: QLD, Nasdaq: QQQQ, NYSE: DO, Nasdaq: HERO, NYSE: WTI.

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Oil Prices and Refiner Stocks

oil prices get sticky
Despite recent intraday volatility, prices for oil (and gasoline) look sticky in expensive territory above $120, while showing signs of potential backtracking off the recent $130 to $140 range. "The Greek" says that barring Israeli bombardment of Iran, oil should move into a lower trading range soon. We think it may be time to consider buying refiners, partly as a result.

The Energy Information Administration released its weekly Petroleum Status Report this morning, adding the fresh data to a stack of reports and news flow that have flooded the market over recent weeks. However, the sudden abundance of information has only added to volatility, rather than clarifying where oil and distillate prices should trend. Also, recently aggressive analyst forecasts have distorted organic price trend.

More importantly, oil would seem to have become comfortable in its recent range above $130. Still, it's hard to ignore the tone of the data and news flow of late. The data is singing a song for lower near-term oil prices, and the volatility is indicative of a commodity that is uncomfortable where it is. So, as information is digested, we expect prices to back up some (read decline toward $120), but only until Iran.

Even the Arabs Don't Like It

Saudi Arabia's recent commitment to boost production was just one, though very important event. Also this week, Kuwait's oil minister suggested oil's natural price should now be $100. So, there seems to be some honest concern in the Middle East that higher pricing will not serve demand well.

Demand destruction is clearly apparent, as the American Petroleum Institute said gasoline demand fell 1.4% in May. The fact that decline in demand has not occurred in any similar period (1st five months of year) since 1991 tells you that we've reached that critical threshold where gasoline and energy usage will decrease. This should help to stabilize pricing and to promote alternative energy technologies.

Petroleum Status Report

Today's report from the EIA showed a lighter inventory draw than in recent weeks, and below forecast as well. However, the market was initially more concerned with an unexpected draw in gasoline inventory. We believe the 1.2 million barrel apparently illogical draw from gasoline inventory is partly the result of refiner efforts to improve margin.

Consider Refiners

Capacity has been reduced, as refiners had been losing money on rising oil prices that had not been matched by gasoline. Now that gas is upward of $4, refiner margins are improving. Thus, it may be time to consider the refinery stocks like Valero (NYSE: VLO), Tesoro (NYSE: TSO) and Sunoco (NYSE: SUN), all of which are down 40% or more over the last 12 months.


We expect an Iran event over the next three months, and that will increase oil prices and undo everything we just suggested.

Please see our disclosure at the Wall Street Greek website. Article also interests AMEX: DIA, AMEX: SPY, AMEX: DOG, AMEX: SDS, AMEX: QLD, Nasdaq: QQQQ.
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Tuesday, June 17, 2008

Inflation on My Mind

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I've got inflation on my mind, not to mention eating up my savings. After today's Producer Price Index (PPI) release, last week's CPI report, recent warnings from Federal Reserve governors and ECB officials, and a slew of negative news flow out of Europe, the world seems to have finally awoken to the warnings of Wall Street Greek's authors, Kaminis and Ferguson.

Yours truly started talking long ago about the dynamic differences between past seasonal and supply driven fluctuation of food and energy prices, versus today's all too different secular drivers. "The Greek's" Steven Ferguson, a brilliant economist we're proud to have enlisted within our ranks, has discussed the dangers of Bernanke's free flowing monetary and fiscal policies. I also told you that the economy might soon experience an "economic fishtail" due to the aggressive and reactionary actions of our Federal Reserve and the influence of tight global supply/demand dynamics on food, energy and other resources. Furthermore, we argue that inflation might undo the hard work of the Fed, and send the economy sliding off the other side of the road as Bernanke overcompensates for economic deceleration.

Central Bankers Sound Alarm Now

Finally, the Federal Reserve has joined the ECB in sounding the trumpets of alarm. That's a bad sign folks. When fed governors join Treasury Secretary Paulson and soon the President in abandoning their economic cheerleading, which is designed to fool you all into believing everything is okay so you don't panic and fall into a self-fulfilling prophecy of recession/possibly depression, then something is up... For the administration to protect its rears so clearly, inflation is obviously about to roar its ugly head in the near term. Remember, it was not too long ago that Ben Bernanke had declared inflation a nonstarter, saying that economic deceleration would naturally lead to easing prices. So what's changed now Bennie baby?

Producer Price Index (PPI)

This morning, the Producer Price Index was reported for the month of May. Core PPI, you know that fictional character that assumes food and energy prices don't really matter, rose just 0.2%, in other words everything is hunky dory... BUT, headline producer prices, those inclusive of the items you spend most of your weekly check on, rose an extreme 1.4% over last month. Of course, energy prices skyrocketed in May, and we had already warned you that this month's report would be much different than last month's milder news.

Here's the big problem. Even though producer prices take some time to work there way through to the consumer level, and in the past have often never found their way there at all, we see too much anecdotal evidence to the contrary this time around. From Kimberly-Clark (NYSE: KMB) to Dow Chemical (NYSE: DOW), from United Airlines (Nasdaq: UAUA) to J.M. Smucker (NYSE: SJM), companies far and wide are raising prices. So, expect future CPI price measurement to show inflation is out of Bernanke's control.

While wage inflation pressure is easing some, since we see manufacturing firms like Ford (NYSE: F) and General Motors (NYSE: GM) making serious strides to consolidate costs, more generally, across America's still heavily-employed labor force, wages have continued rising.

In Europe, and in the U.K., where incidentally inflation was reported at 3.3% today, labor unions are significantly more aggressive. Expect Jean-Claude Trichet's worst nightmare to play out. Companies will individually succumb to the pressure of their workers in the socialist republic dominated nations of Europe. Thus, inflation will become unanchored in the U.S. and embedded in Europe, in our opinion, and the great economic leaders of our day should find the greatest challenge men in their positions have seen in decades.

Please see our disclosure at the Wall Street Greek website. Article also interests AMEX: DIA, AMEX: SPY, AMEX: QLD, AMEX: DOG, AMEX: SDS, Nasdaq: QQQQ.
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Monday, June 16, 2008

Stock Market News

Today's stock market news headlines covered within the following video include: Ross Perot's new website PerotCharts.com; the decision of the FCC Chairman to allow the acquisition of XM Satellite Radio (Nasdaq: XMSR) by Sirius Satellite (Nasdaq: SIRI); and Lehman Brothers' (NYSE: LEH) first quarterly loss since 1994. If you do not see the video below, visit our website through the link atop the article.

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

Don't miss our "week ahead" market-moving event planner, for use throughout the week.

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Week Ahead: Investment Bank Firing Line

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Our "Week Ahead" piece is the most comprehensive market-moving event planner available.

Last week's earnings warning by Lehman Brothers (NYSE: LEH) was likely devised to save the firm from a similar fate to its now nonexistent peer Bear Stearns. However, trading momentum just kept building and LEH ended the week down 20% anyway. Lehman will now offer its full report Monday, followed on the firing line by several of its banking peers.

With as much uncertainty for stocks now as at any time over the past year, the investment bankers' news could offer the right catalyst to send the market through the shaky technical base at 1,350 for the S&P 500. Otherwise, less than disastrous data could offer firmer footing.

In either event, we expect the market will wake up to reality over time, after initially interpreting last week's CPI report positively. The market somehow found a bright side to one of the toughest price increases in recent times, as the headline measure rose 0.6%. Market optimists instead focused on the Core CPI data point, that which excludes food and energy prices. The fictional "core" gauge only rose 0.2% in May. Look for our inflation article later this week, as we'll delve into the details and offer our color on the topic.

Last Week

We passed the test. The market had an important check up this past week, and passed thanks to a rally on Friday. Historically, the midpoint of stock market trough to rally peak has proven an important threshold for price support. That midpoint this time around was 1,350 on the S&P 500 Index.

While we drifted below 1,350 on Wednesday, the market came up for air on Thursday and broke clean free of the water line on Friday, closing exactly where it started the week, at 1,360. It was an important exam, and we view it also significant that the close of the week offered hope. It seems to signal institutional conviction in the stability of that threshold. That said, news flow could prove the technicals worthless this week just the same.

On the week, crude futures for July delivery traded extremely choppy, and couldn't seem to make up their mind on which direction to go. Trading in a seven-dollar span, oil ended the week only about a dollar off where it started, at $136.66. The dollar, however, was more decisive on the week, strengthening to about $1.54 per euro.

The Week Ahead

As if the stock market was not frightening enough these days, this past Friday the 13th will be followed up by a Quadruple Witching this Friday. The week ahead looks like a quiet one on paper though, but you never know what surprises may lay in hiding. The biggest catalyst of the week looks to be the earnings reports of key financial institutions that are scheduled to follow this past week's warning from Lehman Brothers (NYSE: LEH).


The economic schedule includes fresh regional manufacturing data from the Empire State Manufacturing Survey on Monday. The New York area report is expected to show contraction again this time around, as Bloomberg's consensus expects a reading of -0.5, versus -3.2 in May.

Treasury International Capital is also set for Monday morning. TIC measures the degree of foreign investment in long-term U.S. securities. Capital flow has been increasing throughout the year, topping at $80.4 billion in March, but the dollar and bond market are more likely to react to this data than stocks are.

We suspect the Housing Market Index could top May's weak showing of 19, as it potentially benefits from seasonal uptick over a historic trough. Fed Chairman Bernanke speaks at a Senate Finance Committee conference on health-care reform. On the same day, Richmond Fed hawk Jeffrey Lacker addresses the economic outlook.

Kirk Kerkorian and his 5.6% stake is set to meet with several key executives of his favorite automaker, Ford Motor (NYSE: F). We expect America's biggest family owned company will try to figure out how to get Kirk best off their backs. Seems a lot like paying off North Korea to stop its nuclear program doesn't it... The strategic planning behind the meeting is probably similar anyway.

Electronic Arts' (Nasdaq: ERTS) bid for fellow game-maker Take Two Interactive (Nasdaq: TTWO) is scheduled to expire on Monday. Markets in Argentina are closed, but our limited earnings schedule includes important reports from Lehman Brothers (NYSE: LEH), Adobe Systems (Nasdaq: ADBE), La-Z-Boy Inc. (NYSE: LZB), Majesco Entertainment (Nasdaq: COOL), Meade Instruments (Nasdaq: MEAD), Motorcar Parts of America (Nasdaq: MPAA), OMNOVA Solutions (NYSE: OMN), Tegal Corp. (Nasdaq: TGAL) and Titan Machinery (Nasdaq: TTTN).


Housing Starts are set for Tuesday, with expectations for a pace of 985K starts in May (1.032 mln. in April). We think there's a possibility to see the continuation of trend we've already forecast correctly across other housing metrics. More specifically, the spring seasonal boost could lift May results over the dramatic trough levels of April.

The Producer Price Index (PPI) follows up last week's CPI Report, and the consensus is looking for a 1.0% rise in the headline measure for May, and 0.2% increase less food and energy. "The Greek" is increasingly concerned about the flow-through of price increase, and we anticipate publishing an article on this topic later this week.

As manufacturing teeters on the cliff's edge, Industrial Production for May is due for report. Production is actually seen increasing 0.1% this time around, versus a 0.7% decline in April. Capacity utilization is expected to hold its ground at 79.7% as we expect consolidation of overall capacity helps to offset the impacts of layoffs and shift reduction. Not the best savior of utilization...

The State Street Investor Confidence Index is set for Tuesday release, and will have a tough time comparing against May's improved measure of 81.0. The International Council of Shopping Centers, a useful measure of consumer confidence, gets its regular notation. Last week's result benefited again from stimulus distribution, as weekly same-store sales rose 1.8% over last year's level.

The first quarter Current Account is due on Tuesday, and we expect the effect of pricier imports (read oil) will find greater counter weight from lighter domestic demand and increased international demand for cheaper U.S. goods. This should lead to a net narrowing of the deficit.

Corporate news looks heavy for Tuesday, with the Merrill Lynch Global Transportation Conference kicking off in New York (NYSE: MER). Also, Freescale Semiconductor (NYSE: FSL) and Mattel (NYSE: MAT) are scheduled to meet with analysts.

With cigarette in mouth, blindfolded Goldman Sachs (NYSE: GS) takes its position on the firing line. However, Goldman has been a stubborn operational outperformer to date. The remainder of the earnings slate includes Best Buy (NYSE: BBY), Asure Software (Nasdaq: ASUR), Cascal NV (NYSE: HOO), Clarcor Inc. (NYSE: CLC), Factset Research Systems (NYSE: FDS), Gold Reserve (AMEX: GRZ) and Tata Communications (NYSE: TCL).


Wednesday offers its two regular reports and not much else. The Mortgage Bankers Association's weekly tally of mortgage origination activity should show a decrease due to significant recent interest rate rise. The stench of inflation no longer requires a bloodhound to identify.

The EIA has consistently reported draws from inventory over recent weeks, but the Saudi's are reportedly picking up production. The question is though, will strategic reserve filling (hoarding) across major user nations simply pick up pace. Iran is not a mere speculative theory; we believe it's a near-term reality that is secret only to the naive majority.

Next in line to be shot, I-bank Morgan Stanley (NYSE: MS) headlines the earnings schedule for Wednesday. Also look for news from FedEx (NYSE: FDX), American Software (Nasdaq: AMSWA), CarMax (NYSE: KMX), Casella Waste Systems (Nasdaq: CWST), Commercial Metals (NYSE: CMC), Culp Inc. (NYSE: CFI), Healthways (Nasdaq: HWAY), IHS, Inc. (NYSE: IHS), Lindsay Corp. (NYSE: LNN) and Somanetics (Nasdaq: SMTS).


Look for Weekly Initial Jobless Claims to reach 375K this week, according to economists, compared to 384K last time around. Also due on Thursday, Leading Economic Indicators are seen unchanged in May. The Philadelphia area manufacturing measure is due, and expectations are for a poor reading of -10.0. The National Governors Association issues its biannual fiscal survey, offering us more insight into the state of local economies. The EIA Natural Gas Report wraps up Thursday's economic schedule.

The corporate news slate is quite heavy Thursday, with analyst/investor meetings scheduled at Biogen Idec (Nasdaq: BIIB), MetLife (NYSE: MET), Aeropostale (NYSE: ARO), McKesson (NYSE: MCK), Western Union (NYSE: WU) and Cadbury (NYSE: CBY). Also, you should remember that huge contract (for refueling tankers) Boeing (NYSE: BA) lost to Northrop (NYSE: NOC) and EADS. Boeing got salty after losing that long-standing deal, and filed a complaint against the Air Force. Well, the Government Accountability Office is set to rule on the case on Thursday.

On the earnings slate, look for Carnival Corp. (NYSE: CCL), Circuit City (NYSE: CC), Command Security (AMEX: MOC), Gerber Scientific (NYSE: GRB), J.M. Smucker (NYSE: SJM), Logility (Nasdaq: LGTY), Progress Software (Nasdaq: PRGS) and Smart Modular Technologies (Nasdaq: SMOD).


It's Quadruple Witching on Friday, which is actually less a cause for superstitious concern than last Friday the 13th, though still a reason to worry since options, index options, futures and index futures contracts expire on the same day. As if that was not enough, it's also the day before S&P's reshuffling of its indexes. On the other side of the world, Treasury Secretary Paulson is set to discuss inflation and the dollar with representatives of the Group of Eight in Japan.

Sprint Nextel (NYSE: S) will introduce what's been called the iClone, the Samsung Instinct. You can get your early preview of the Instinct right now, by viewing the video we included in our Week in Review - On Shaky Ground" video collage. The only earnings report for the day is that of recreational vehicle maker Winnebago (NYSE: WGO).

We hope you find use of our weekly planner all week long, and invite you to read our daily insights as well.

Please see our disclosure at the Wall Street Greek website. Article also interests: AMEX: DIA, AMEX: DOG, AMEX: SDS, AMEX: SPY, AMEX: QLD, Nasdaq: QQQQ.
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