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Tuesday, March 31, 2009

Today's Market: Home Prices, G-20, Korea, GM, F, LEN, GOOG, CAT

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


Today's Market Moving News

wall street the greek philosopher writer economistThis Tuesday brought a colorful palate of appetizers to sooth a news junkie's hunger. Today saw the auto industry scrambling to pick up the pieces that the Obama Administration broke and scattered yesterday. The day also brought some anticipated negative news flow from economic data, but also one uplifting bit of retail sales data. Finally, things are getting dangerous everywhere, including both the streets of London and the Sea of Japan. Enjoy our summary, offering a tasting of it all below.

Economic Reports

S&P Case Shiller Home Price Index

Two months too late, but a news breaker nonetheless today... Home prices fell again in January, as reported by the Case Shiller metric. The group compiles quarterly data on national price trends, and offers monthly reports on 10-city and 20-city composites. 13 of the 20 metro areas measured in January showed record level annual rates of price decline. More specifically, the 10-metro area composite noted 19.4% price decline, while the 20-city metric posted a 19% price drop. Still, a 30 thousand foot look-see of the graph of decline seems to offer insight into a leveling of price just beginning. In other words, prices seem to be declining at a slower rate, while still declining, and that is going to eventually lead to price stabilization and rise. Because this metric is two months behind, we can't be sure what is occurring now, but we wouldn't bet on anything different just yet. More current data is available from other reports, and so we'll keep you informed.

ICSC Weekly Same-Store Sales Report

Sunny day! We told you the weather matters! As the flowers bloom and the days warm, retail sales seem sure to find seasonal benefit. That's not to mention the coming of the Easter holiday. For the week ended March 28 (Sat.), same-store sales rose 1.1% versus the week just prior, and fell just 0.2% year-to-year. We would be remiss not to remind that unemployment continues to increase, so we fight a significant headwind on the longer term trend, which is naturally seasonally adjusted.

Conference Board's Consumer Confidence Measure

Consumer confidence still stinks, but it inched slightly higher this month. The Conference Board's take on this important barometer showed the index moved up to 26.0, from 25.3 in February. Before you throw a party, let me remind you that we still sit at historic lows on most measures of confidence. Improvement here is a necessity for sustainable consumer spending. Also, the economists' consensus for this month's report was 28.0, a bit above the reported figure.

The "Present Situation Index" fell slightly, but was more than offset by an increase in the "Expectations Index." Both these measures are undoubtedly important, but expectations clearly carry more weight for investors. When both metrics are on a steady rise, we'll have an environment of improving confidence worth buying into. Still, as long as people think the current situation is horrible, they can always reset their "expectations" if things drag on badly.

NAPM-Chicago Purchasing Managers Index

We've noted several times that data out of the Philadelphia and New York regions was mixed this month, but NAPM's Chicago area measure swayed the balance to the bad. The Business Barometer Index fell to 31.4 in March, from 34.2 in February. The consensus expectation was for a read of 35, which would have been indicative of slight improvement. Let's face it, the manufacturing sector is still consolidating (below 50), and these minor changes in the rate of decline remain insignificant. However, rate of change matters almost as much as directional change, in my humble opinion, so it is worth paying attention to. Today's data is a negative for the market, but not going to prove a driver of broader shares. It's informing us that the pathetic environment we've now grown use to is persisting.

Even so, the Midwest is greatly sensitive to auto and auto-tied businesses, and with General Motors (NYSE: GM) and Chrysler now teetering ever more closely to bankruptcy, concern is surely rising at auto suppliers and dealers. You can expect this sentiment measure to stay sour until and if clarity reaches the GM situation. And even then, it'll have to be a clarity that includes an outlook for auto supplier and dealer support.

International Market News & Commodities

G-20 Gets Ugly

Today in London, the previously docile crowd started turning ugly. In fact, the Bank of England was evacuated due to a bomb threat. This protest at the G-20 is only a small sample of an expanding feeling of frustration and anger among the poor and struggling worldwide. By the way, this is a group whose numbers are increasing with every new weekly jobless tally. Global unrest is a serious problem the world's governments face as the weather warms and unemployed folks get up off the couch to go set fire to some rich guy's BMW. This has already begun, and was plainly seen when the home of the former chief of RBS was attacked last week. AIG (NYSE: AIG) CEO Edward Liddy would not offer the names of his executive staff receiving bonuses for the sake of their safety. Most of those folks wisely returned the bonuses after New York District Attorney Cuomo said he would not publish the names of executives who did so.

Governments are shaking with concern as well. President Obama's firing of GM's CEO yesterday and France's warning this morning that it might walk out of the G-20 were both geared to appeasing their citizenry. Unrest is a real possibility this summer all over the world, even here in the USA. We sit on a powder keg.

Korea's War Threat

We may stand at the brink of war, and most of us do not even realize it. Japan's notice to Korea that it would shoot down any threatening rocket launch over its territory was met by a dangerous Korean response. North Korea threatened war if Japan does so. Such a war has the potential of massive fallout and expansion. North Korea has developed nuclear weapon capable fuel, and the country has at least the capability of setting off a very messy nuclear weapon. With a paranoid, homicidal maniac leading the show, Korea represents a powder keg, and so threats like this can never be overlooked. Within a day, the North and South could be engaged in a massacre of a battle, and Japanese casualties would draw support of the United States. From that point, there is no limit to imagination.

Corporate News Drivers

GM and Ford Scramble

President Obama's actions yesterday may have been the right steps to take, but they left a mess behind that General Motors (NYSE: GM) desperately sought to clean up this morning. Opportunistic Ford (NYSE: F) recognized the opportunity and preempted GM, with its own action of the same characteristic.

Early this morning, Ford (F) announced it would cover the car payments (up to $700/mos.) of any new car buyer who later loses his job. Ford's news, however, came on the heels of the concerning developments at GM and Chrysler. If anybody needed to reassure car buyers this morning, it was General Motors. Ford is like a shark that smells fresh blood and is going in for the kill.

General Motors offered similar incentives; let's face it, they had to. Losing market share only compounds the pressure on GM, as it tries to manage costs. GM also held a press conference meant to reassure car buyers and investors, an attempt to keep money from leaving both the car lot and the equity ranks. We are working on an article focused on this topic, so please look for that at the site later.

Lennar Loss Widens

Lennar (NYSE: LEN) shares are down about 15% today, after the company reported a wide loss. LEN's fiscal first quarter loss expanded 77%, impacted by land and inventory write-off as it adjusts to a significantly impaired pricing environment. Even so, Lennar posted stronger revenues than were expected, by about $63 million, but those sales were lifted by aggressive incentive offering. Still, LEN has no debt on its credit line and cash of $1.1 billion, so it would appear poised to be a rising survivor when recovery begins. However, it bears some risk through numerous joint ventures, and it is actively working toward mitigating that. With those concerns in mind, and the fact that its backlog is near half what it was a year ago (and the aforementioned price data), we can understand why LEN and other homebuilders are lower today. K.B. Home (NYSE: KBH) is off by 5%.

Google Launching Venture Fund

Google (Nasdaq: GOOG) announced it would launch a $100 million venture fund with a purpose to acquire early-stage start up companies. The fund will be wholly owned by Google, though managed as a separate entity. Google Ventures' investment portfolio will not be limited to Internet focused firms.

French Caterpillar Employees Seize Control

Workers at a Caterpillar (NYSE: CAT) plant in France detained managers, as they sought better terms on severance packages. The report goes that the managers were not allowed to leave their offices, and representatives of the union called the tactic innocent "pressure." This marked the fourth such incident in France, including several other companies (3M being one of them (NYSE: MMM). Seems folks are getting tired of being pushed around, and the rules of the game are really changing...

EPS Schedule

Janney Montgomery Scott hosts a water industry confab in New York. The EPS Schedule highlights news from Aluminum Corp. of China (ACH), American Caresource (ANCI), American Defense Systems (EAG), Apollo Group (APOL), Astea Int'l (ATEA), Banks.com (BNX), Borders Group (BGP), China Direct (CDII), China National Offshore (CEO), China Sky One Medical (CSKI), Corriente Resources (ETQ), Craft Brewers Alliance (HOOK), Cyclacel Pharmaceuticals (CYCC), deCODE Genetics (DCGN), Document Security Systems (DMC), Edap TMS (EDAP), Exfo Electro-Optical (EXFO), FirstCity Financial (FCFC), FSI Int'l (FSII), Fusion Telecomm (FSN), G-III Apparel (GIII), Gentium (GENT), GigaMedia (GIGM), Goldleaf Financial Solutions (GFSI), H.B. Fuller Co. (FUL), Hana Biosciences (HNAB), Heely's (HLYS), Huaneng Power (HNP), Hythiam (HYTM), Imperial Industries (IPII), Kowabunga (KOW), Lennar (LEN), Lifeway Foods (LWAY), Medis Technologies (MDTL), MIVA, Inc. (MIVA), NN Inc. (NNBR), Northern Dynasty Minerals (NAK), Novavax (NVAX), Petro Resources (PRC), Physicians Formula (FACE), Pressure BioSciences (PBIO), Russ Berrie (RUS), Saba Software (SABA), Saga Communications (SGA), Sealy (ZZ), Sonic Automotive (SAH), Spire (SPIR), Steelcase (SCS), Stonemor Partners (STON), Sypris Solutions (SYPR), TAM S.A. (TAM), Targeted Genetics (TGEN), Team (TISI), Technology Research (TRCI), Telkonet (TKO), TLC Vision (TLCV), ULURU (ULU), WidePoint (WYY) and Willdan Group (WLDN).

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. (Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK).

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Monday, March 30, 2009

This Week: Rally Gets a Credibility Check

credibility check on economy economic analysisVisit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.


The Week Ahead

wall street business news financial markets blogsThis week appears pivotal in testing this rally's conviction. After rising more than 20% this month, investors finally expressed buyers' remorse last Friday, and with the Labor Department's Employment Report due this week, bad memories of months past have resurfaced.

As far as unemployment expectations go, economists are unanimous - it will rise again this month. All the evidence points toward that same conclusion, given the steady growth in the level of insured unemployed seen in the weekly jobless claims data. New claims have not given ground either, so the unemployment rate seems poised to jump sharply again for March. Finally, while earnings season is still a week away, whispers are growing louder on the street of an impending massive and broad reaching miss in store. Still, remember, the news of solid banking figures for this quarter is what got this party started, the "Three Kings Rally," as I've dubbed it.

The demons of the past quelled buyers' fire on Friday, when the Personal Income and Outlays data offered a price index on the rise. Demons of the present threaten unemployment will remain troublesome. Meanwhile, the G-20 convenes in London, in the midst of global protests and a recently heightened state of terror alert for the U.K. (not specific to the meeting). The Europeans are cracking under the pressure of varied national conditions, and the Chinese are pushing for a greater role in world affairs.

While all this is occurring, North Korea prepares a rocket launch that Japan assures will be shot out of the sky. In Afghanistan, al-Qaeda must be feeling the heat, with new U.S. troops on the way and a desperate Pakistani government willing to oblige in exchange for some help in keeping its own government in place. AQ has already lashed out, reportedly bombing a mosque that sat on a new supply route agreed upon by the Pakistani government and United States.

Yes, it seems there will be a significant test of this short bull's conviction this week (having risen over 20%, it classifies as a bull market). We suspect the bulls will cave, at least after March 31st passes and portfolio positions are booked for investor reporting. Nobody wants to look like they've been in cash through this March rally, and so "reverse window dressing" has very likely taken place (I have to credit Kopin Tan of Barron's for bringing this to my attention).


Speaking of credibility, The Arab League and its usefulness is under intense pressure from the populace of many of it member states. The Israeli punishment of Gaza met with lip service from the League, and so the average man on the Middle Eastern street is wondering what the group does then anyway.

Feeling the heat of America's frustration, President Obama had good reason to bring pain and a message to General Motors (NYSE: GM) on Monday. With the company still begging for dollars, somebody's head had to roll, and it was CEO Rick Wagoner who took the blow. The Administration was reportedly not satisfied with the degree of change at GM and Chrysler, nor with their plans moving forward. Ever mindful of a growing frustration among the citizens of this blue collar country, the Administration had to act with force.

Farm Prices are due for report at 3:00 PM, offering insight into changes in crop and protein price change. Monday's earnings schedule highlights news from Arotech Corp. (ARTX), Cal-Maine Foods (CALM), China Petroleum and Chemical (SNP), Community Bankers Trust (BTC), Dover Saddlery (DOVR), Entera Energy Trust (ENT), Entertainment Distribution (EDCI), Formula Systems (FORTY), Full House Resorts (FLL), General American Investors (GAM), Hong Kong HighPower (HPJ), Industrie Natuzzi (NTZ), Infologix (IFLG), Jinpan (JST), Layne Christensen (LAYN), Metabasis Therapeutics (MBRX), Oxford Industries (OXM), Perma-Fix Environmental (PESI), Pharmathene (PIP), SORL Auto Parts (SORL), Telestone Technologies (TSTC), TOR Minerals (TORM), Votorantim Celulose (VCP), WebMediaBrands (WEBM) and Zi Corp. (ZICA).


Tuesday offers a complete contrast to Monday's short schedule, with a very busy day full of market moving events. The pre-market chatter should be consumed with the S&P Case Shiller Home Price data, and another expected drop. Last month, the report showed both December and fourth quarter prices set records for change on the downside. December prices fell 19.2% on an annual basis. The problem with this report is that it comes two months too late. We'll only get January's data on Tuesday, and we're entering April now. A world of change can take place in that much time.

Of course, we'll also receive the weekly same-store sales data from the International Council of Shopping Centers in the early morning. Last week's report showed a 1.4% year-to-year decline. It seems the spring-like euphoria didn't last long, but Easter lies ahead.

Despite Monday's news, Tuesday presents the real deadline for the government to decide whether GM and Chrysler have presented a viable case for more aid. This looks to be rendered resolved by Tuesday though.

Neel Kashkari gets grilled again on Tuesday, as he testifies before the Senate Finance Committee on the state of TARP. This is a regularly scheduled six-month grilling, so rest easy. At 9:45, the National Association of Purchasing Managers (NAPM) - Chicago produces its Business Barometer Index for March. Bloomberg's consensus of economists forecasts the metric might climb to 35.0, from 34.2 in February. Data out of Philly and New York was mixed, so Chicago seems likely to be depressing, or at least sad anyway.

Coming off an all-time record low, the Conference Board's Consumer Confidence Index is set for 10:00 a.m. release Tuesday. Economists are looking for a modest rise from the trough, to 28.0 (25.0 in February). Speaking of Chicago, Philadelphia Fed President Plosser addresses the University of Chicago's Booth School of Business at 1:00 p.m. The topic of the day will be regulatory reform.

The U.K. starts pulling its troops from Iraq on Tuesday, but the escalating tension surrounding North Korea's rocket launch is garnering an increasing amount of attention. We're approaching the advised launch date, as the Japanese scramble interceptors.

Following Monday's Farm Report, the U.S. Department of Agriculture issues its spring planting report on Tuesday. Genentech (NYSE: DNA) gets news on Avastin from the FDA, and Stryker's (NYSE: SYK) spinal putty receives its review as well on Tuesday.

Janney Montgomery Scott hosts a water industry confab in New York. The EPS Schedule highlights news from Aluminum Corp. of China (ACH), American Caresource (ANCI), American Defense Systems (EAG), Apollo Group (APOL), Astea Int'l (ATEA), Banks.com (BNX), Borders Group (BGP), China Direct (CDII), China National Offshore (CEO), China Sky One Medical (CSKI), Corriente Resources (ETQ), Craft Brewers Alliance (HOOK), Cyclacel Pharmaceuticals (CYCC), deCODE Genetics (DCGN), Document Security Systems (DMC), Edap TMS (EDAP), Exfo Electro-Optical (EXFO), FirstCity Financial (FCFC), FSI Int'l (FSII), Fusion Telecomm (FSN), G-III Apparel (GIII), Gentium (GENT), GigaMedia (GIGM), Goldleaf Financial Solutions (GFSI), H.B. Fuller Co. (FUL), Hana Biosciences (HNAB), Heely's (HLYS), Huaneng Power (HNP), Hythiam (HYTM), Imperial Industries (IPII), Kowabunga (KOW), Lennar (LEN), Lifeway Foods (LWAY), Medis Technologies (MDTL), MIVA, Inc. (MIVA), NN Inc. (NNBR), Northern Dynasty Minerals (NAK), Novavax (NVAX), Petro Resources (PRC), Physicians Formula (FACE), Pressure BioSciences (PBIO), Russ Berrie (RUS), Saba Software (SABA), Saga Communications (SGA), Sealy (ZZ), Sonic Automotive (SAH), Spire (SPIR), Steelcase (SCS), Stonemor Partners (STON), Sypris Solutions (SYPR), TAM S.A. (TAM), Targeted Genetics (TGEN), Team (TISI), Technology Research (TRCI), Telkonet (TKO), TLC Vision (TLCV), ULURU (ULU), WidePoint (WYY) and Willdan Group (WLDN).


The recession is over! April Fools... It's April Fool's Day! Get somebody...

The parade of monthly employment reports headlines another busy day on Wednesday. First to the wire is Challenger, Gray & Christmas and its Announced Corporate Layoffs Report. There's been no let up of new claims filers, and the small business sector is now fully wrapped up in consolidation along with larger businesses. February's data showed layoffs amounted to 186,350, a big number, but short of the prior month's tally. We think you can expect something similar this month, as unemployment is a lagging indicator and should be late to change direction.

ADP's Private Employment Report is set for release at 8:15 AM EDT. This precursor to Friday's DOL data offered a harsh forecast last month when it noted 697K monthly job losses on net. This data served to scare the heck out of equity traders and force shares lower ahead of the DOL data last month; the government's report later produced a less tragic result and a relief rally ensued. Investors might remember that recent past and limit the impact of this month's data.

Also in the pre-market, the Mortgage Bankers Association reports on weekly mortgage activity. Last week displayed the early impact of the Fed's new plan to acquire long-rate securities, including MBS. Rates moved sharply lower last week on fixed 30-year mortgages, and mortgage activity spiked reaction. Refinances of course led the charge, with the housing market still plagued by deflation and an uncertain environment. Expect activity to keep improving as of the latest check.

After the open, ISM will produce its Manufacturing Index. Indications seem to be that a bottom is forming in this weather beaten sector. We received mix results this month from the Philadelphia and New York regions, and Chicago's results came due earlier this week. However, while a change in the pace of decline may be in process, activity is still contracting significantly. Economists forecast the index will measure 36.0 for March, versus 35.8 in February. A reading below 50 signifies economic contraction.

We receive two housing metrics on Wednesday, a sector seeing seasonal benefit and potentially a real bottom. However, an article in Barron's this weekend noted significant seasonal adjustment influence in some of the recent housing metrics, and others as well. The truth will be told eventually, but at some point a real bottom will be reached and we'll have to recognize that as well, as difficult as that is becoming.

Construction Spending may still have declined sharply in February, since it includes the nonresidential segment. New Home Sales have seemingly found bottom, albeit a very low one. After all, you can't go lower than zero, and we were getting awfully close near the 300K annual pace point. Still, January's construction spending decline of 3.3% was significantly influenced by nonresidential spending, and judging by the vacancies I see by my naked eye during my short walk to the subway (not to mention the store closings flooding the wires), expect more of the same in the months ahead. Economists forecast spending will ease 1.5% for February.

Pending Home Sales data will eventually show early signs of recovery in the real estate market, but before now and then, it's possible that seasonal influence or unnatural driver (like temporary government provided catalyst) might lead the market to believe it has begun earnest prematurely. As seen by the recent rise in housing stocks, valuations are super-conducive to any spark, so trading opportunities (both long and short) will avail for sharp traders. Eventually sincere traction will take hold though as well. I can't believe I am now reminding investors that stocks can go up and economies can grow. An economists' consensus forecast for this leading measure of the existing home sales marketplace is absent. Last month, we saw a 7.7% month-to-month decline for January, to a level of 80.4.

Automakers will report Motor Vehicle Sales for the month of March on Wednesday. Economists estimate the annual pace of sales will steady at the anemic rate of 6.4 million in March. Considering the fact that the Obama Administration is poised to allow GM and Chrysler to go bankrupt, sales seem likely to suffer for the two going forward; this despite the President's reassurance that the government will stand by GM's warranties. Chrysler is contemplating a merger with Fiat; the other option is bankruptcy in 30 days, so other buyers might come forward, considering the attractive asset pricing and a profit sensitive Cerberus Capital at the helm.

Look for the EIA Petroleum Status Report at 10:30. Last week's data showed a sharp build in oil supply, and oil prices are now reflecting remorse for their recent rise. Japan's Tankan Survey of corporate sentiment is due on Wednesday as well, and expect it to reflect dire-level low confidence. President Obama will meet with his Russian counterpart, Dmitry Medvedev in London. I'm sure there'll be less soul searching than occurred between Bush and Putin the first time they met...

Wednesday's earnings schedule highlights news from Alseres Pharmaceuticals (ALSE), Chaparral Energy (CPR), Multiband (MBND), Pet DRx (VETS), UniFirst (UNF) and Worthington Industries (WOR). It seems nobody wants to report earnings on April Fool's Day.


Two more jobs reports meet us on Thursday morning. The Monster Worldwide Employment Index (NYSE: MWW) is due bright and early. Last month, this measure of online job demand actually improved to 122 for February, from 118 in January. Weekly Jobless Claims has continued harsh, though the pace of deterioration seems to have stalled, albeit at frightful heights. Last week's tally recorded 652K new claims filers, and Bloomberg's consensus forecasts another 655K this week. As accustomed to this data as we've become, this week's count will surely intensify concern ahead of the unemployment rate data release scheduled for Friday.

Overseas, the meeting of the G-20 kicks off with a promise to be heavy on empty rhetoric. Every nation the world over warns of protectionism while each succumbs to national pressures, and applies protectionist measures nonetheless. Governments are toppling and elected officials will often forsake sane economics for the near-term satisfaction of their constituents... unfortunately. There will also be plenty of discussion around the topics of regulation and stimulus, and the roles of emerging market nations seem likely to garner attention as well. The ECB is meeting on Thursday and will announce monetary policy. After taking a pause a few months back, the picky group seems to have its head on straight again. Look for a rate cut this time around, and some are forecasting one of 50 BPS magnitude (to 1.0% for the target rate).

Factory Orders for the month of February are due at 10:00 a.m. Economists forecast a rise of 1.5% this time around, after a decline of 1.9% was recorded for January. Given the recent notation of strong durables goods orders growth, this forecast makes sense. The EIA will post its Natural Gas Report at the usual 10:30 reporting time.

Novo Nordisk's (NVO) diabetes drug, Liraglutide, is under review by the FDA, and so market-moving news might be kicked up for the stock. The earnings schedule highlights reports from Monsanto (MON), Rite Aid (RAD), A. Schulman (SHLM), Acuity Brands (AYI), Aehr Test Systems (AEHR), Allscripts-Misys Healthcare (MDRX), AngioDynamics (ANGO), CarMax (KMX), Cascade (CAE), DemandTec (DMAN), Global Payments (GPN), Lawson Software (LWSN), Lindsay Corp. (LNN), Micron Tech (MU), MSC Industrial (MSM), MSCI (MXB), Origin Agritech (SEED), Research in Motion (RIMM) and RF Monolithics (RFMI).


Once every month, the market focuses complete attention on a single report, perhaps the most important and followed data on the economic stream. This particular Friday is the hot one on the calendar, with the Employment Situation Report reaching wire by 8:30. Economists are on record looking for the unemployment rate to jump to 8.5%, from 8.1% in February. 8.5% seems in the bag, and 8.6% even more likely.

The pace of job loss has been near Biblical in its level of importance, and there's no let up in sight. Nonfarm Payrolls are seen shedding 650K jobs on net, nearly matching February's 651K. The range of estimates, however, spans from 525K to 711K, so there is room for error. Indeed, we believe that this time around, 50K short or above the consensus will have profound impact on stocks in either direction, so stay tuned. What's left of your money is at stake...

At 10:00 AM, look for ISM's Nonmanufacturing Report, the group's tally of the vast service sector. This portion of the American economy now dominates our national productivity, and so this data is not negligible to markets. Still, in the wake of the employment data, it will inevitably be lost in a sea of traders' cries. Economists are looking for a March read of 42.0 for this index, compared to 41.6 in February.

By noontime, we may need the soothing voice of one Ben Bernanke, as he addresses the Richmond Fed. The Fed Chair will cover the credit markets. The problem here is that he'll be in Richmond, which is the realm of Jeffrey Lacker, the Fed's black sheep (so to speak). Lacker has often been on record voting against the consensus at the Fed, and most recently he argued against the Fed's power grab.

Overseas, Indian markets are closed on Friday. The earnings schedule back in the States highlights news from AZZ Inc. (AZZ). I couldn't have planned for a better way to close the week or this article... God bless.

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Please see our disclosures at the Wall Street Greek website and author bio pages found there.

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Wednesday, March 25, 2009

Who Would Downgrade Grandpa - Berkshire Hathaway News (NYSE: BRK-A, NYSE: BRK-B)

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

(Relative Stocks: BRK-A, BRK-B, MCO, MHP)

Who Would Downgrade Grandpa?!

wall street the greek philosopher markosOne rating agency already has, and Standard & Poor's said Wednesday that it would have to as well if things got any worse. So if the greatest investor of all-time took such a hit through this bloody mess of a bear, does it make your losses more bearable? We're sure his annual letter would serve that purpose, as Buffet warmly reminds us that America has faced greater challenges than this, and overcome them... those being the Great Depression and World War II.

Berkshire Hathaway (NYSE: BRK-A, NYSE: BRK-B)

Who would dare downgrade Warren Buffet, or his operating vehicle, Berkshire Hathaway (NYSE: BRK.B, NYSE: BRK.A)? How about that same brazen bunch of rating agencies now actively cutting the sovereign ratings of tough ex-Soviet states like Lithuania OR EU kingpins like Greece! How about that wildly unpopular trio.

Late Tuesday evening, Standard & Poor's, a subsidiary of McGraw-Hill (NYSE: MHP), warned that Buffet's Berkshire Hathaway could lose its "AAA" credit rating within a year if its capital levels or equity share value decline much further. S&P lowered its "outlook" on Berkshire to "negative" from "stable." S&P didn't break ground on this Buffet busting change though, as it followed Fitch's more aggressive March 12 rating cut to "AA-plus" from "AAA." Moody's (NYSE: MCO) still holds a "Aaa" rating with a "stable" outlook. God bless their soul.

We're guessing Warren gets the benefit of the doubt where regular folks might get cut down by the knees. He deserves it though doesn't he? After all, he is the greatest investor of all-time for Graham's sake! Either mercy or guilt seemed evident by the words of the Fitch analyst as he justified his cut, noting the "inconsistency" of Berkshire's capital levels with the normal stability seen at the standard "AAA" rated firm. The S&P analyst also seemed apologetic for the move.

You know what I say, judge not lest you be judged. We're still waiting to see if the rating agencies ever get any real punishment for their failing to properly measure risk, and playing such a significant role in wealth destruction on the grandest of scales.

Of course, Berkshire just posted a horrible year, but it still feels like taking the man's cane and whacking him behind the knees with it. I mean look at his picture. Here you have a nice guy who worked his tail off his entire life and did a great job at it. Do you know how many people lose their humanity as their wallets expand? I've seen a few in my time, and that's for sure. But NOT Warren though.

You can't downgrade America's grandpa!!! Come on man!!! That's just not right...

But What Had Happened Was...
Berkshire (BRK), heavily tied to the housing market, posted 96% lower profits in Q4. The results were significantly impacted by unrealized losses in derivative securities, necessarily marked-to-market. Buffet is not throwing in the towel on those securities though. Still, he felt so responsible to his shareholders for this latest report and year that he dedicated five pages of his annual letter explaining the investments and his decisions. The full-year was reportedly his worst on record, not hard to believe. We've broken many record lows over the past few months.

In Conclusion

We just want to say that as long as "The Greek" is running the show here, if we think Grandpa isn't up to repaying a debt, we still won't downgrade him. As a matter of fact, if there ever was a bet worth doubling down on, it's Warren. What I would do is... I would buy him a stogie, pat him on the back and say don't sweat it buddy. We would head over to the racetrack or baseball field and talk about the Brooklyn Dodgers all afternoon. Gosh, that would be a priceless day wouldn't it... God bless you grandpa, you're still an inspiration to me.

Thursday's EPS Schedule

Thursday's earnings schedule includes Best Buy (NYSE: BBY), ConAgra Foods (NYSE: CAG), Dr. Pepper Snapple Group (NYSE: DPS), Gamestop (NYSE: GME), Lululemon (Nasdaq: LULU), Scholastic (Nasdaq: SCHL), Texas Industries (NYSE: TXI), The Wet Seal (Nasdaq: WTSLA), Accenture (NYSE: ACN), ARYxTherapeutics (Nasdaq: ARYX), Atrinsic (Nasdaq: NWMO), Birner Dental (Nasdaq: BDMS), China Housing and Land Development (Nasdaq: CHLN), China Life Insurance (NYSE: LFC), China TransInfo Tech (Nasdaq: CTFO), Companhia de Saneamiento (NYSE: SBS), Conn's Inc. (Nasdaq: CONN), Cornerstone Therapeutics (Nasdaq: CRTX), Dr. Pepper Snapple (NYSE: DPS), Embraer-Empresa Brasileira de A (NYSE: ERJ), Energy Focus (Nasdaq: EFOI), Flexible Solutions (AMEX: FSI), Fred's (Nasdaq: FRED), FreeSeas (Nasdaq: FREE), GameStop (NYSE: GME), Global Crossing (Nasdaq: GLBC), HearUSA (AMEX: EAR), Intelli-Check (AMEX: IDN), InTEST (Nasdaq: INTT), Lululemon (Nasdaq: LULU), Nanophase Technology (Nasdaq: NANX), New York Mortgage Trust (Nasdaq: NYMT), P&F Industries (Nasdaq: PFIN), Response Genetics (Nasdaq: RGDX), Rosetta Genomics (Nasdaq: ROSG), Scholastic (Nasdaq: SCHL), Smart Modular Technologies (Nasdaq: SMOD), Spectrum Control (Nasdaq: SPEC), Synnex (NYSE: SNX), Synta Pharmaceuticals (Nasdaq: SNTA), Texas Industries (NYSE: TXI), The Wet Seal (Nasdaq: WTSLA), TIBCO Software (Nasdaq: TIBX), UTI Worldwide (Nasdaq: UTIW) and Xyratex (Nasdaq: XRTX).

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. (Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK).

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Economic Reports Reinforce: Durable Goods Orders, Mortgage Activity, New Home Sales

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

Economic Reports Reinforce Rally

markos kaminis the greek philosopher modernThe nascent market rally received some reinforcing economic data today, but after an early surge higher on the news, shares backtracked cautiously. By the close, however, investor sentiment turned encouraging, and a rally saved the day.

(Relative Stocks: BAC, FDX, BA, DIA, SPY, QQQQ, DOG, SDS, QLD, XLF)

Mortgage Activity Surges

Just like we alluded to in our "Week Ahead" copy, mortgage activity responded to lower interests rates, that were in turn driven downward by the Fed's quantitative easing announcement.

For the week ended March 20, 2009, the Mortgage Bankers Associations Market Composite Index (barometer of mortgage application volume) jumped 32.2% on a seasonally adjusted basis when compared to the week just prior. Both components of the composite played positive roles, but as you might expect refinancing activity is much more sensitive to short-term changes in rates. It takes a while to buy a house after all, at least since Countrywide (NYSE: BAC) went under and the devil was sent back to hell...

Mortgage applications for new purchases of homes inched higher just the same, rising 4.2% (seasonally adjusted). Refinancing activity, however, soared on the change in rates, jumping 41.5% week-to-week. Would you expect anything less, considering that contracted 30-year fixed mortgage rates drilled lower to 4.63%, from 4.89% just a week earlier? That's rhetorical Sherlock! The MBA reported the contracted interest rate set a low not seen in decades, and it is just the medicine the real estate market and economy need, not to mention the credit markets.

We're very pleased here with the recent steps the federal government has taken to heal the real estate sector. We expect housing to benefit slowly though, as it faces the headwind of rising unemployment. Still, we expect stabilization and recovery as the government does all it can to make housing as affordable as possible, encourage lending and mitigate foreclosure activity as well.

New Home Sales Rise

While February's new home sales probably didn't benefit as much from government effort as they did from the easy comparable in January, New Home Sales rose just the same. However, if the Detroit Lions win five games next year, we probably will not label that a success, and nor should we get too excited by February's New Home Sales pace of 337K, versus the revised 322K reported in January. We can celebrate a touch in the fact that February's result surpassed the economists' consensus view for 315K. Economists talk to strategists you see, and strategists talk to analysts and portfolio managers. Institutional investor sentiment should therefore find some positive driver in surpassed expectations. Retail investors get excited by the headlines and stock momentum, and thus we see broad rally (dare I say bull market).

Looking more closely at the results, and if you need some sobering up, let me remind you that this February's annual pace of new home sales is still 41.1% below the February 2008 mark. Homebuilder sentiment could not be much worse right now, nor could production be lower, if we go by the last measurements anyway. We're guessing homebuilders have been somewhat aroused by the Fed's latest quantitative idea.

Also sobering, each individual region of the nation saw less sales in February except the South, which carried the month. The closer we look, the less excited we are in fact. The number of homes available for sale dropped further, to 330K, from 340K in January. New Home Sales are now such a minuscule portion of the total that we cannot really take much solace from the impact of less production on existing inventory. Also, the current extremely low rate of sales is not normal, yet is an important component of the inventory equation, so keep that in mind. Nonetheless, the inventory of homes for sale stood at 12.2 months, based on the current sales pace, and compares against 12.9 months in January and 9.7 months last February. Seems inventory may have actually peaked in this segment of the market in January.

Finally, the median price of a new home is now $200,900. While this figure is not directly impacted by foreclosures (obviously, since a home has to be owned to be foreclosed upon), it is indirectly impacted since real estate valuation regularly uses relative comparisons to homes in a given marketplace, which likely includes its share of foreclosures.

Durable Goods Orders Surprises

We got a fantastic surprise from the Durable Goods Orders report for February, closing out three neutral to very positive bits of economic news today. February orders increased 3.4%, compared to a 7.3% drop in January and expectations for a 2.0% decline this month. The simple fact that orders increased was good news enough, considering the previous six months posted declines.

We know what you are thinking, there might have been some freak driver in the defense or transportation component. Well, defense orders did rise significantly, increasing 35.3% in the month, but removing defense still shows an order increase of 1.7%. That's still good news, and better than expected. It's especially noteworthy because defense spending is very likely going to be impacted by Obama Administration plans - thus the strength seen in February is not sustainable. Excluding transportation, new orders still increased 3.9%, which is also good news considering the pain the airline industry is feeling these days. Today, FedEx (NYSE: FDX) was reported questionable on its completion of a Boeing (NYSE: BA) order.


In closing, I would like to express my belief that we may be seeing stabilization materializing in this data. That does not necessarily mean we have reason to celebrate though, as the negative feedback loop still looms threatening. That is, increasing unemployment, tighter lending standards and general fear pose threat to economic recovery. This is why proper fiscal stimulus and other government efforts are so critical to determining the length of this recession. As an investor, you'll very likely miss the market bottom (if you haven't already) if you wait for a turn in employment trends. As I alluded to in an article some prescient moment over the past month, we may have already set "THE" market bottom.

I found today's closing rally enthusing as well, and potentially indicative of a change in investor sentiment. I enjoy the cautious (and also exuberant) language of many economists, strategists, business writers and media, because all those folks were buying like madmen when I was warning on housing and the financial sector. As much as I kind of like stocks now (shhh), I still hold grave concern for our future based on my expectations regarding Iran and other geopolitical trends. And, I see the potential for a fizzle as near as this Friday, but I won't tell you why until tomorrow or Friday morning... so stay tuned.

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. (Article interests: AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK, NYSE: TOL, NYSE: HOV, NYSE: BZH, NYSE: BAC, NYSE: FRE, NYSE: FNM, NYSE: LEN, NYSE: PHM, NYSE: NVR, NYSE: GFA, NYSE: MDC, NYSE: CTX, NYSE: KBH, NYSE: RYL, NYSE: MTH, NYSE: XIN, NYSE: BHS, NYSE: SPF, NYSE: MHO, NYSE: OHB, NYSE: WCI, AMEX: VNQ, Nasdaq: VGSIX, Nasdaq: AVTR.

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Tuesday, March 24, 2009

Today: House Testimony of Geithner & Bernanke Marquees

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

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wall street the greek writer famous chiosToday's business news summary highlights the most important news of the day. Secretary Geithner and Chairman Bernanke survived their grilling at the hands of the House Financial Services Committee. It made for must see TV, and certainly boosted interest in financial networks today. We also had a few interesting economic reports, international releases and corporate news drivers to fill our appetite and yours. Enjoy...


House Testimony of Geithner and Bernanke

The testimony of Treasury Secretary Geithner and Federal Reserve Chairman Bernanke before the House Financial Services Committee lived up to its billing, and then some. You see there was a new aspect added to the regular Congressional grandstanding and government agent persecution. This time around, there was Timothy Geithner, by whose testimony we could assuredly assume is more than a little peeved by his public flogging.

Geithner came out firing with a gnarly opening statement. His teeth were clenched, his scorn apparent. He would have none of it! He defended the appointed CEO of AIG (NYSE: AIG), Edward Lilly, and he would not persecute his forerunner Hank Paulson when fed the bullets to do him in as well. Bernanke complied on that one, as he noted Paulson did not follow through with toxic asset clean up, as Bernanke likely wished he did.

The studious seemingly subservant (read wise) Bernanke was his usual bulletproof. We are sure here that Benjamin was inwardly chuckling at the regular asinine and sometimes ignorant questioning. Today he even responded smartly to the inquiry, "Why won't one of you just answer yes or no!" with the response "The question was poorly posed." The calmness with which Bernanke approaches these events and answers questions, now that he's been seasoned, exposes his own self-confidence in his intellectual superiority over the group of misfits. This understanding has allowed him to take increasingly greater portions of power for his Fed, with which, by the way, he has been fully entrusted by Congress (excluding Ron Paul and his Internet army).

The market was neither reassured by nor disheartened with the testimonies, and for good reason. Not much came of it, and after last week's rally it seemed the meeting only offered risk. The Dow Jones Industrials, S&P 500 and Nasdaq all came out of the meeting relatively unchanged.

AIG Bonuses Coming Home

After a pseudo-threat by New York District Attorney Cuomo, where he stated that he would only publish the names of the AIG (NYSE: AIG) executives who did not return their bonuses, 15 of 20 of them decided the money wasn't worth the hassle. Who can blame the poor chaps, with death threats made upon their families and homes. Protesters have been extremely effective at reminding the brazen bosses just whose money it is they have stolen. I just hope they don't try to go on welfare now too. God bless America!

Economic Report Analysis

State Street Investor Confidence Index

Coming into this report, we expected recent market rise would inspire increased investor confidence. However, the measure for March showed a slight slippage to 70.0, from 72.9 in February. Recall that February's measure reflected a sharp jump from a depressed level in January. This measure tallies investor confidence by considering portfolio risk taking.

ICSC Weekly Same-Store Sales

We suspect weekly same-store sales will improve with the sprouting of flowers and lower long rates. However, over the week ended March 21st sales fell 0.4% from the prior week and 1.4% when compared to the prior year period. The rate of decline is going to be volatile through the month of March, when weather is unpredictable. Don't forget, we are comparing against another volatile period in last March, so we have two tricky figures to take into account. The monthly measure might better reflect any seasonal euphoria. Still, I boldly predict a warming trend for North America through the next few months, and that along with the receipt of tax refunds should give seasonal boost to the week-to-week measure. Smart store consolidation might provide a second impetus for same-store sales, which measures stores open at least a year. Imagine what happens to this barometer when operators cut out poor performing locations from the measurement. Still, we do not want to ignore the overwhelming impact of rising unemployment and the tough treading it provides for the greater industry.

Overseas News Drivers

China Proposes One World Currency

What!?! That's what I said when I saw this headline. Relax Revelation revelers! It's not over yet! While the reintroduction of this idea raises my unibrow, I realize the probability of it occurring, over the next ten years at least, is slim to none. Too many of the world's greatest powers use the dollar and hold great stockpiles of it. But wait... China fits that mold... So what gives then? We'll explore this topic in a follow up article. For now, it's safe to say that one world currency concept is fantasy, but only until something really bad happens to America. Even then, other powers would see their own currencies strengthen, and would be less likely to want to dilute them by mixing with the other class (as he raises his nose).

Bank of Japan Statements

The Bank of Japan published its February meeting minutes, but published a much more interesting note along with it. The second article made public Japan's expectations for 2009 and beyond.

The Bank of Japan, dealing with already rock bottom key rates and having learned the hard way how effective quantitative easing can be, is basically doing many of the things our Federal Reserve has undertaken. The boldness of action may not be as Americanized (we do everything in a big way here), but the likelihood of intensification is increasingly possible as the world adopts the American government's standard.

Within the minutes reflecting the meeting discussion, BOJ members expressed views for economic recovery as early as this year. However, confidence in those beliefs were limited, as "uncertainty" was clearly expressed.

The BOJ published a second strategy report that replaces its standing Medium-Term Strategic Framework for Fiscal 2005-2009. The report, entitled "The Bank of Japan's Strategic Priorities for Fiscal 2009-2011," outlines just that. For lack of resources and time today, we leave it to you to peruse via this link.

U.K. Inflation Hot

The broad CPI inflation measure rose in February, confounding government officials and surprising analysts. Headline CPI rose to 3.2% in February, while analysts had been looking for 2.6% to 3.0%. The rate of price change stood well-above the government's target of 2.0%, forcing a letter of explanation. Blame mostly went to currency impact, and government hopes lie tied to lower oil and commodity prices feeding through to end products. That's not dissimilar to American expectations, though look to our article on inflation later this week to provide a different viewpoint.

Corporate News Drivers

Credit Suisse & Deutsche Bank (NYSE: DB)

Catching the fever from the rise in U.S. banks, Credit Suisse (NYSE: CS) and Deutsche Bank (NYSE: DB) looked through their own books closely enough to produce positive outlook statements. The saying goes, a day late and a dollar short... CS shares fell 9% and DB sank 4%, but the broader financial sector also fell today (NYSE: XLF dropped 5%). Maybe these two sly Europeans were holding on to their bullets for this particular day, perhaps hoping it might keep their shares aloft... In any event, it did not help differentiate them, since broader issues are driving the entire sector over recent trading days.


Surprise surprise! Household goods retailer Williams-Sonoma (NYSE: WSM) reported its profits fell 90% versus the prior year comparable. Surprise surprise, WSM shares actually climbed approximately 6% today, before settling in up about 1.6%! Here's why...

Despite 27% shorter sales of home decor, before nonrecurring items, the store reported EPS of $0.31. That compared against analyst expectations for $0.16. After the charges, WSM earned $0.12, which was inconsequential to analysts who look at operating (ongoing) results. Without having heard the conference call, I assume Williams-Sonoma benefited to a greater extent than expected from swift store closings and layoffs. Same-store sales were pathetic, though expected that way, falling 22%.

The stock is down about 58% or so over the past 52 weeks, so today's glory is better looked at as recovered lost ground. Shareholders are likely thrilled their company, whose business is so tied to housing, is still profitable and providing a dividend yield of about 4.5% or so. That's reason enough to celebrate these days.

EPS Schedule

The day's EPS schedule highlights news from Macy's (NYSE: M), Target (NYSE: TGT), Deutsche Bank (NYSE: DB), Ares Maritime Transport (Nasdaq: RAMS), American Bio Medica (Nasdaq: ABMC), American Medical Alert (Nasdaq: AMAC), Carnival Corp. (NYSE: CCL), China Telecom (NYSE: CHA), ChipMOS Technologies (Nasdaq: IMOS), Comforce (AMEX: CFS), Commercial Metals (NYSE: CMC), Communication Systems (Nasdaq: JCS), Companhia de Saneamento Basico (NYSE: SBS), Compton Petroleum (NYSE: CMZ), Great Basin Gold (AMEX: GBG), Jabil Circuit (NYSE: JBL), Langer (Nasdaq: GAIT), McCormick & Co. (NYSE: MKC), MDRNA, Inc. (Nasdaq: MRNA), Proliance (AMEX: PLI), Proxim Wireless (Nasdaq: PRXM), Robbins & Myers (NYSE: RBN), Taseko Mines (AMEX: TGB), Universal Power Group (AMEX: UPG) and Williams-Sonoma (NYSE: WSM).

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. (Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK).

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Monday, March 23, 2009

Week Ahead: Damage Control

wall street the greek famous writer chios markosobama geithner damage controlVisit the front pages of Wall Street Greek to see our current coverage of economic reports and financial markets.

The Week Ahead

This week is all about damage control, especially related to the big bad AIG bonus blunder. Treasury Secretary Geithner will attempt to divert attention from that whole mess by releasing the details of his toxic financial asset program at the start of the week. However, on Tuesday, both Geithner and Bernanke are scheduled to testify before the bloodthirsty House Financial Services Committee. The President hopes to limit public perception damage by appearing on prime time television that same evening. We're guessing he intends to clear up the impending massacre of Geithner before the media feeding frenzy begins. Talk about pulling out all stops, President Obama will have made three unconventional television appearances within the course of a week, and that's not to mention his NCAA Tournament bracket selection show...

The President is doing all he can to keep his new Treasury Secretary propped up through a barrage of criticism that began almost from the moment of his selection for the role. For the life of me, I can't see why anyone would accept any Administration position now that deals with financial or economic matters.


Damage control begins on Monday morning, as Timothy Geithner takes a stab at resurrecting his own image with the details of his toxic asset plan. The embattled Treasury Secretary, feeling the heat most recently for his approval of AIG (NYSE: AIG) bonuses, will seek a better reception than his first nondescript disclosure on toxic assets. Recall that on that day the market tanked. What happens this week will have a lot to do with how well Obama's team administers damage control.

Geithner is expected to announce the creation of yet another new government entity, the Public-Private Investment Program. The Treasury is expected to seek to incorporate the private sector in its effort to buy up as much as $1 trillion of toxic assets from banks. As you'll recall from the old TARP false marketing, this should unclog the system and free banks up to lend, assuming demand exists or resumes soon.

After last week's reported jump in February Housing Starts, we get Existing Home Sales data first thing Monday morning (10:00 AM). However, the existing segment of the housing market is like the Titanic (in more ways than one), and likewise difficult to turn. It would take significant action or important catalyst to drive change, probably the likes of which the Federal Reserve and Treasury Department have just undertaken. Existing Home Sales are expected to have run at an annual pace of 4.5 million in February, which would place the rate of sales just off January's pace of 4.49 million.

The Nasdaq OMX Internet Index will effect changes on Monday, replacing 1-800-Flowers.com (Nasdaq: FLWS), Orbitz (NYSE: OWW) and RealNetworks (Nasdaq: RNWK) with names like Rackspace Hosting (NYSE: RAX). Meanwhile, Tata Motors (NYSE: TTM) will introduce its Nano model, the world's cheapest car. The Barron's 400 Index undergoes semi-annual rebalancing with 182 new companies in place starting Monday.

Monday's earnings schedule includes reports from Finish Line (Nasdaq: FINL), Lennar (NYSE: LEN), Tiffany (NYSE: TIF), Walgreen (NYSE: WAG), Air Transport Services Group (Nasdaq: ATSG), Focus Media (Nasdaq: FMCN), Hastings Entertainment (Nasdaq: HAST), Irwin Financial (NYSE: IFC), Novacea (Nasdaq: TSPT), On Track Innovations (Nasdaq: OTIV), Origin Agritech (Nasdaq: SEED), Perdigao S.A. (NYSE: PDA), Phillips Van-Heusen (NYSE: PVH), Rubios Restaurants (Nasdaq: RUBO) and Sonic (Nasdaq: SONC).


The House Financial Services Committee will have its claws sharpened for the testimony of Treasury Secretary Geithner and Federal Reserve Chairman Bernanke on Tuesday. The two will face questioning about their AIG bonus bumble. This is "must see TV" if ever there was... The drama that is especially present when House members get a chance to script their future campaign commercials is embarrassing for me to watch. It would be embarrassing enough just listening to the asinine questions posed by the too many know-nothings in this group, but the grandstanding that occurs for media attention tops off the distasteful experience. HOWEVER, we love Dennis Kucinich these days, because the regular crusader finally has undeniably just causes to fight for. In that regard, I will always savor his labeling of the rating agency activity "criminal," but the slap on the wrist the group got is equally criminal...

The President will take to the airwaves AGAIN on Tuesday night at 8:00 PM EDT. Talk about damage control overkill... Leno, 60 Minutes and now this??? Come on man, this is the presidency, not Hollywood! However, not too long ago, we authored an article entitled, "We Need a Hero," and without a doubt, the President is doing his best now to uplift the nation. Still, he has to repair the "Bad News Obama" image he created by constantly reminding Americans of his inheritance of this horrible mess. It took the stock market dropping 20+% under his short tenure to alert his advisors to this need, unfortunately.

This new Obama, the good cop version, filling in basketball brackets and doing late night comedy, seems like an overreaction no? Who the heck is running this PR show? Oh yeah, it's that over-caffinated dude... We need balanced, positive leadership, not poll-tethered viewpoints and media strategy!!! Even so, I like this version of the president better than the apocalyptic one, and his 60 Minutes appearance on Sunday night was simply fantastic in my humble opinion. Finally, despite my criticism, I hope to see the President throw out the first ball on April 5th when the World Champion Philadelphia Phillies take the field!

Overseas news looks to play an important role on Tuesday. Banking executives from the U.S., Europe and Japan are set to convene to discuss the future of banking, bonuses and other important regulatory concerns (mainly bonuses and where they can still get them cheap). The Bank of Japan will also release its February meeting minutes. Finally, speaking from Prague, Chicago Fed President Evans will participate in a panel discussion on the topic of "Central Banking in Times of Crisis - Active Player or Passive Observer."

The ICSC-Goldman Sachs Weekly Same-Store Sales Report produced a 1.4% year-over-year sales decline last week (NYSE: GS). The sales decline was attributed to cold and wet weather, and compared against the prior week's 0.9% drop. We expect that stock market rise and the onset of spring might induce a sort of near-term euphoria for consumers, leading both recently unemployed and the majority of you still employed (but scared to death) to do some shopping in the weeks ahead. The State Street (NYSE: STT) Investor Confidence Index might also improve from February's 72.9 mark, given recent stock market rise. The index measures investor risk taking, and attributes it to their confidence.

The day's EPS schedule highlights news from Macy's (NYSE: M), Target (NYSE: TGT), Deutsche Bank (NYSE: DB), Ares Maritime Transport (Nasdaq: RAMS), American Medical Alert (Nasdaq: AMAC), Carnival Corp. (NYSE: CCL), ChipMOS Technologies (Nasdaq: IMOS), Comforce (AMEX: CFS), Commercial Metals (NYSE: CMC), Companhia de Saneamento Basico (NYSE: SBS), Compton Petroleum (NYSE: CMZ), Great Basin Gold (AMEX: GBG), Jabil Circuit (NYSE: JBL), McCormick & Co. (NYSE: MKC), MDRNA, Inc. (Nasdaq: MRNA), Proliance (AMEX: PLI), Proxim Wireless (Nasdaq: PRXM), Robbins & Myers (NYSE: RBN), Taseko Mines (AMEX: TGB) and Williams-Sonoma (NYSE: WSM).


The weekly Mortgage Bankers Association Purchase Applications Report looks to get a little more interesting in the months ahead, what with the Fed buying up treasury and mortgage-backed securities. Activity has been sensitive to even the slightest change in long-rates, and those rates got a favorable change last week thanks to Bernanke's bold move. If I have not made it clear yet, I admire Mr. Bernanke and his actions. He is like a lone fireman, left in an inferno while he seeks to save its inhabitants; he is unwilling to waver... Heroic.

The Fed's Pianalto and Yellen are both set to take part in luncheon meetings, but recent action that has focused attention on Bernanke and Geithner should render these discussions mute.

Durable Goods Orders will be reported at 8:30 AM. After poor reports from both the Philly and Empire State Manufacturing Surveys, the consensus for February Durable Goods Orders is set for a decrease of 2.0%. Before you accept that as not so bad, realize that this latest decline follows mid-single-digit declines in both previous months, and that this is a month-to-month measure. It's simply difficult to keep piling on cumulative declines in an economy like ours, though not impossible.

At 10:00 AM, look for the New Home Sales Report for February. The sentiment among homebuilders probably could not be much worse than it was last month (Housing Market Index stood at 9 in March and February). For this reason, there should be little rejoicing if the annual rate of sales improves as economists foresee. Bloomberg's consensus of economists forecasts the February sales pace improved to 315K, from 309K in January. While we may not have reached bottom yet, the light seems visible ahead thanks to several recent government efforts.

The EIA Petroleum Status Report is due at 10:30 as usual. In the week ended March 13, oil inventory grew by 2.0 million barrels. Still, oil prices rose last week on the belief that the Federal Reserve's quantitative easing would either spur the economy as intended or set inflation in motion as unintended. We suspect some buyers' remorse might drive a pullback in oil this week.

Automatic Data Processing (Nasdaq: ADP) meets with analysts on Wednesday. Several Chinese firms report results, including PetroChina (NYSE: PTR), China Life (NYSE: LFC), and Industrial and Commercial Bank of China. Also look for news from CKE Restaurants (NYSE: CKR), DSW, Inc. (NYSE: DSW), Fortress Int'l Group (Nasdaq: FIGI), Paychex (Nasdaq: PAYX), Red Hat (NYSE: RHT), ADA-ES (Nasdaq: ADES), American Bio Medica (Nasdaq: ABMC), Antares Pharma (AMEX: AIS), Bioject Medical (Nasdaq: BJCT), Citi Trends (Nasdaq: CTRN), CPI Aerostructures (AMEX: CVU), dELiA*s (Nasdaq: DLIA), Gammon Gold (NYSE: GRS), Green Plains Renewable Energy (Nasdaq: GPRE), Hydrogenics (Nasdaq: HYGS), inTEST (Nasdaq: INTT), SAIC, Inc. (NYSE: SAI), Signet Jewelers (NYSE: SIG), SolarFun Power Holdings (Nasdaq: SOLF), The Orchid Enterprises (Nasdaq: ORCD) and WuXi PharmaTech (NYSE: WX).


Atlanta Fed President Lockhart starts the news flow with a discussion from overseas that most of us will wake up to on Thursday. Then, at 8:30 AM, the final revision of fourth quarter GDP is expected to show further deterioration to -6.6%, from -6.2% at last check. The change in the related price index is expected to stick at 0.5% on a quarterly basis. Quarterly Corporate Profits are reported at the same time as GDP, so look for this data at 8:30 as well.

Weekly Jobless Claims stuck high last week, measuring 646K, and the forecast never wavers far from the prior week's data. In fact, Bloomberg's survey of economists forecasts new claims of 650K this week.

Treasury Secretary Geithner testifies again on Thursday before the House Financial Services Committee, this time on financial regulation reform. Geithner is under intense pressure that would wear on anyone. The scrutiny began as soon as he was chosen by Obama to head the Treasury, and there's been no let up, despite the favored change from Hank Paulson's leadership. The Greek is glad to see Obama sticking behind Geithner, who has been prematurely judged.

Federal Reserve Presidents Fisher, Lacker and Stern are all also scheduled to speak on Thursday afternoon as well. The Natural Gas Report is scheduled for its regular time of 10:30. Last week's draw from inventory was lighter than the week just prior.

Johnson & Johnson's (NYSE: JNJ) patent for the drug Topamax, which is used to treat migraines and epilepsy, expires Thursday. Mylan Laboratories (NYSE: MYL) is expected to launch a generic version of the medicine to compete for market share. Also, Lexmark (NYSE: LXK) is scheduled to meet with analysts.

Thursday's earnings schedule includes Best Buy (NYSE: BBY), ConAgra Foods (NYSE: CAG), Dr. Pepper Snapple Group (NYSE: DPS), Gamestop (NYSE: GME), Lululemon (Nasdaq: LULU), Scholastic (Nasdaq: SCHL), Texas Industries (NYSE: TXI), The Wet Seal (Nasdaq: WTSLA), Accenture (NYSE: ACN), ARYxTherapeutics (Nasdaq: ARYX), Birner Dental (Nasdaq: BDMS), China TransInfo Tech (Nasdaq: CTFO), Conn's Inc. (Nasdaq: CONN), Cornerstone Therapeutics (Nasdaq: CRTX), Embraer-Empresa Brasileira de A (NYSE: ERJ), Fred's (Nasdaq: FRED), Intelli-Check (AMEX: IDN), Nanophase Technology (Nasdaq: NANX), New York Mortgage Trust (Nasdaq: NYMT), P&F Industries (Nasdaq: PFIN), Response Genetics (Nasdaq: RGDX), Rosetta Genomics (Nasdaq: ROSG), Smart Modular Technologies (Nasdaq: SMOD), Spectrum Control (Nasdaq: SPEC), Synnex (NYSE: SNX), Synta Pharmaceuticals (Nasdaq: SNTA), TIBCO Software (Nasdaq: TIBX), TRI-S Security (Nasdaq: TRIS), UTI Worldwide (Nasdaq: UTIW) and Xyratex (Nasdaq: XRTX).


Before the market opens, Personal Income and Outlays will be reported for the month of February. Bloomberg's consensus sees Income decreasing 0.2% month-to-month, after posting a rise of 0.4% in January. Spending is forecast to have risen by 0.3%, versus a 0.6% increase in January. Core PCE Price Inflation is expected to increase 0.2%, versus a 0.1% rise in January. The Core PCE Index is the Fed's most favored inflation gauge. It is expected to produce a change this time around that the market would seem likely to dislike due to recently revived inflation concern. In case you can't read between the lines, this may prove a catalyst for Friday decline in the broader marketplace.

Reuters/University of Michigan Consumer Sentiment is expected to improve in the last reading for March, to 56.7, from 56.6 last time out. Finally, the Inter-American Development Bank will convene its annual meeting on Friday.

Reporting EPS, look for news from Sinopec (NYSE: SHI), Aracruz Celulose (NYSE: ARA), Biofuel Energy (Nasdaq: BIOF), Hellenic Telecommunications (NYSE: OTE), K.B. Home (NYSE: KBH), KHD Humboldt Wedag International (NYSE: KHD), MI Developments (NYSE: MIM), Netlist (Nasdaq: NLST), Sadia (NYSE: SDA), VCG Holding (Nasdaq: VCGH) and Xinyuan Real Estate (NYSE: XIN).

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. (Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK).

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Friday, March 20, 2009

Daily News: DC's AIG Uproar, Hugo Chavez and More

dc uproar over aig bonus payments houseBy Markos N. Kaminis - Washington Analyst:

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

Washington is on my mind, and the rest of the world's as well. Between the whole AIG debacle, Obama appearing on Leno, Chris Dodd and Tim Geithner pointing fingers, and the bill taxing AIG executives 90% on their bonus payouts progressing to the Senate, how could it not be!

Washington Buzz

Washington earthquake is more like it! The outrage that followed the brazen issuing of bonuses to AIG (NYSE: AIG) executives set DC on fire this week. So much so, that we're going to publish a dedicated piece to this subject in the near-term. For now though, we'll cover what's happening today.

Since the bonus penalty passed the House yesterday, the Senate must now consider the bill. A few voices have cried out on the constitutional conflict that seems inherent to this "after the fact" legislation. Concerns over moral hazard, unintended consequences to corporate America and the possibility of human resource brain drain have been arisen as well. So, we do not expect the overwhelming level of support in the Senate as recorded by the House of Representatives yesterday. Still, we expect the bill will pass into law.

Media Darling Obama

President Obama has clearly transcended a message and his long-term political strategy; that being as America's hands-on president. The guy is releasing videos, appearing on talk shows and is generally in your face daily. Four years from now, this will secure his legacy in the minds of Americans far and wide as a hard working blue collar president. This is a brilliant PR strategy, and the earnest effort behind it all is helping America feel good about its vote. So far, I'm mostly on board, but I cannot offer support to the embryonic stem cell change and a few other ultra liberal efforts. My faith will not allow it. I admire what he is trying to do to prevent a new Middle East war. He's gone over and beyond, really thinking outside the box to find solution to the Iranian threat. You gotta love that!!! I suspect a few cubicle robots are malfunctioning though, with all this out-of-the-box thinking.

Bernanke's Address to Community Bankers

It was boring! Let's admit it. He keeps rehashing the same old speech and tweaking it a bit for the individual audiences. But the guy is busy and things do not change fast enough for major speech revisions...

The only differences today were tied to the audience. After reminding us of the Fed and Treasury actions thus far, and his goals going forward (I'm tired of restating this stuff; go ahead and read it yourself or find some other means of self-mutilation to keep you busy), he addressed the challenges and opportunities community bankers face today.

The challenges of course include those old faithfuls tied to any cyclical downturn, including lower loan demand, lighter deposit savings and increased bad debt and reserving needs. Besides that, banks are faced with higher scrutiny from regulators upon regulators, bad press from a frenzied media and community anger and frustration. The banks as a result of all these things must tighten their own lending standards and stick to prudent decision making...what a drag...

However, the community banks are benefiting from the run of money out of the commercial bank space and the removal of non-bank competitors. So, there is a long-term opportunity for their businesses to grow into the void.

TALF Stumbles Out of the Gate

The Fed's Term Asset-Backed Securities Loan Facility kicked off on Thursday, but demand was limited to $4.7 billion of funding to buy new securities backed by credit cards, small business, student and auto loans. The Federal Reserve started this fund out at $200 billion, and believes it could grow to $1 trillion. There's been some rumbling about the impact of the government's "after the fact" regulating of AIG (NYSE: AIG). We've also seen banks like J.P. Morgan Chase (NYSE: JPM) and others seeking to pay back TARP funds to avoid government meddling. Ford (NYSE: F) said no thanks to government money as well, as the Fed and others have effectively taken away the "moral hazard." Nobody wants to be saved by the government now, and that's wonderful. With regard to TALF, the economic environment is likely driving the light demand more than anything else one might speculate about. Risky bets are rising as job security and unemployment deteriorate, and that naturally keeps investment down, even for so-called AAA debt!

Overseas News

Hurricane Hugo

Hugo Chavez looks determined to run Venezuela into the ground and reduce his nation to the poverty level seen in Cuba in the process. We think it's only a matter of time before dissidents rise up, and Hugo hurries off. His latest disaster is the nationalization of the local operations of Spanish bank, Grupo Santander (SAN.MC). So far Chavez has not run into foreign contention in his socialization progress, as fair enough compensation has been paid for assets. Still, ExxonMobil (NYSE: XOM) and ConocoPhillips (NYSE: COP) have given up on the country's energy reserves. This latest bank claim, however, may push Venezuela toward scuffle with Spain. Chavez has a personal issue with the Spanish King, and so he offered $600K less than Santander's asking price for Banco de Venezuela. This story will be worth watching...

Corporate News Drivers

Xerox (NYSE: XRX)

Xerox is feeling the heat, as business customers have frozen spending. The famed copy machine maker notes high-teen revenue decline in January and February of this year, and it slashed its first quarter EPS guidance 85% as a result. Not long after, two rating agencies cut the outlook on the company to negative. Needless to say, it's been a bad day for shareholders, as XRX is off 19% at this hour. Xerox (NYSE: XRX) is meeting its troubles head on though, taking several cost cutting measures including layoffs.


Bayer got good news from the doctor today, err the FDA anyway, and the stock is up as a result. Bayer (XETRA: BAY.DE) and partner Johnson & Johnson (NYSE: JNJ) received FDA approval for their anti-clotting pill. Bayer expects peak sales of $2.7 billion from this first new clotting drug, the first in 55 years. Rivaroxaban, as it's called, has gained approval for hip and knee surgeries initially, opening the door for future procedure approvals.

Today's EPS Schedule

The light earnings schedule includes news from Companhia Paranaese De Energia (NYSE: ELP), Doral Financial (NYSE: DRL), Kirland's (Nasdaq: KIRK) and NeurogesX (Nasdaq: NGSX).

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. (Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK).

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Thursday, March 19, 2009

The Next Big Thing, Church

the next big thing churchBy Markos N. Kaminis - Life Topics:

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

In these extraordinary times of economic trial, there's one Main Street space that boasts full occupancy. While retailers like Macy’s (NYSE: M) close stores and send check-out counter girls packing; as manufacturers like GM (NYSE: GM) and Ford (NYSE: F) slash costs and in GM’s case beg taxpayers for a hand-out; and as AIG (NYSE: AIG) smothers hope for the survival of the spirit of human compassion, one hot spot is packing them in and lifting spirits at the same time. Churches are full or filling... God may ironically be "The Next Big Thing!"

Yes, it's true. Haven't you noticed your friends aren't available for Sunday brunch lately? That secret society you suspect they all joined and left you out of may well be your local institution of worship. While most keep the extent of their faith under their collar these days, I think you would be surprised to see how many folks are filling the pews. The same people who pass you in the street in the kind of hurry that seems surely due to some important lunch meeting, may in fact be on their way to noontime mass.

How do I know? Well, The Greek's been known to explore the offices of religions of all sorts (almost all anyway). I'm telling you, people of all types still believe in a higher power, no matter what the latest nonsensical poll tells you. I see wealthy successful men bowing to their Lord before they pass into the faceless ranks of the faithful, where all are equal. These seats are filling up faster than the Yankees new ballpark, though they're free of charge in the house that the Lord built. The new house that Ruth built is another story...

The cathedrals are packed with CEOs (there apparently are a few good-hearted selfless ones left), Congressmen (not just conservatives either), supermodels (especially the spiritual-currency-savvy ones), actors, singers (but not false idols) and celebrities of all sorts, and just about every type of person you can think of.

The place is so busy though, that the sick and poverty stricken too often feel out of place in the one spot that is actually meant to be most welcoming to them, and so they wait outside while the rest of us find God. Wouldn't it be nice if somebody gathered those sick and poor folks and brought them inside the hallowed walls? Why leave the poor out in the cold waiting for a dollar, when so much warmth and wealth is just beyond the threshold of that spiritual hall.

Thank God that the commercial world cannot corrupt true faith, though it admittedly has its hands dirty in some doomed organizations of heretics, liars and snakes. I ask for wisdom from the ranks of you as I stretch beyond a point that might make you uncomfortable for a moment. I beg you not to judge your God based on the weaknesses of men. Don't you realize that the bad guy downstairs seeks to do in those men, who lead and guide, with even more fervor than he does the rest of us? Can't he take more souls away from the light by defiling God's messengers? Call it a weapon of mass destruction if you like, because it certainly does destroy masses.

While good priests are helpful (and plentiful), your presence in church or your faith should not hinge on the piousness of your priest or the perfection you wish he possessed. These are men, believe it or not, and they are fallible just like you and me. Your priest is merely your guide, counselor, teacher and medium. You're in charge of your own soul in the end, just as any priest will tell you.

So why are people reaching for God then? Well, isn't it obvious? I was lucky to enjoy the presence of famed economist and Professor Charles Calomiris recently, and he spelled it all out in one simple word, "crisis." He said, in "Big Fat Greek Wedding" like fashion, "crisis" is from the Greek word, "krisis." It means: A crucial or decisive point or situation; a turning point. He said, a crisis is a decision time, when we sift, separate and judge… Well that's going on right now isn't it? Haven't Bernanke and Paulson's critics said that we have chosen which banks survive (J.P. Morgan Chase (NYSE: JPM) and which banks fail (National City - whose assets are now owned by PNC Financial (NYSE: PNC))?

Calomiris called the Bible a "crisis chronicle." He said it was packed with political, personal and societal crises, and he used the biblical stories of Job and Ruth as relative examples of the economic and spiritual trials many of us are facing now. In the near future, I hope to publish the renowned professor's speech in full here on these pages, so stay tuned. It was a profound address by a brilliant man.

So as we all face our own personal crisis, we seem to instinctively turn to God. Maybe crisis, then, is God's way of waking people up or giving us a chance to reconsider our ways. Some people blame God for their individual crisis, but it may be that crisis is God's tool, gifted to us for the purpose of our salvation. It seems to me a lot of real good results from hard times and crises, and this time around is no different. We've taken a good look at ourselves as a nation, and we don't like what we see. That leads us toward restoration of both economy and soul.

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. (Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK).

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