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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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Saturday, January 30, 2010

GDP Report for Q4 Not Enough

gdp report q4 gross domestic product not enough
After the Bell: GDP Report Not Enough

Visit the front page of Wall Street Greek to see our current coverage of Wall Street, economic reports and global financial markets.

(Tickers: NYSE: AIG, NYSE: CVX, NYSE: ACI, NYSE: AVY, NYSE: FO, NYSE: HRZ, Nasdaq: IDXX, NYSE: MAT, NYSE: MFG, NYSE: NWL, NYSE: DCM, NYSE: OPY, Nasdaq: PCAR, NYSE: PFS, Nasdaq: ROLL, Nasdaq: SAIA, NYSE: WL, Bombay: ABGSHIP.BO, OTC: ACGFF.PK, OTC: ALNPY.PK, Nasdaq: ASIA, NYSE: ALV, Nasdaq: CLFC, NYSE: CPF, NYSE: DOV, NYSE: EEP, Nasdaq: EBTX, NYSE: GHM, Nasdaq: GSBC, NYSE: KT, Nasdaq: FSTR, NYSE: MTE, Nasdaq: MKTAY, Nasdaq: MCBI, NYSE: NSH, Nasdaq: UCBI, Nasdaq: WTBA, Nasdaq: YTEC, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ)

GDP Report for Q4 Not Enough


Wall Street GDP economic report Q4Fourth Quarter GDP was widely expected to post a strong increase thanks to inventory restocking, and that's exactly what Friday's report showed. GDP improved a stunning 5.7%, marking the largest surge in six years. Economists were looking for 4.5%, so no matter how you look at it (relatively OR absolutely speaking), the data was overwhelmingly positive.

The market rejoiced in the news too, which was released in the pre-market. The S&P 500 gapped open higher (that means it opened above where it closed the previous day), but then proceeded to give away the early gain and more. "The Greek" was so busy this week taking care of behind the scenes matters here at WSG Central, that I never published my note planned for GDP. Guess what it forecast... I know those of you who have been reading for a while will believe me, the rest will just have to trust in the oracle. - So, I wanted to write a note preparing you for a strong GDP report, and at the same time, I wondered how long any short-term lift might hold. I hate when I don't publish prescient ideas. There's only one thing worse, publishing bad ideas! Later in this article, I'll re-share a good one with you.

More Than Just GDP

The economic data flow has been solid of late, and on Friday too, as Chicago PMI and Reuters/Michigan Consumer Confidence both came in improved and better than expected. The Purchasing Managers Index jumped to 61.5, where economists were looking for a decline to 57.0. The Consumer Sentiment Index reached a 2-year high, moving to 74.4 in January, up from 72.5 in December. So what's going on then? Why did the market drop?

Against The Goad

Well I think it's clear. The communal investor mindset is well trained, and the market is well aware; regulation tends to get overdone when enacted post some significant economic failing (this last one qualifies). To this point, "The Greek" was on board with President Obama's economic moves, but the Financial Crisis Responsibility Fee just "stinks of mafia state"(can I quote myself?)! I'll do it again, "the road to hell is paved with good intentions."

In an article published last Friday, we wrote "We suggest you take your profits NOW, because this has trouble written all over it; and IF the bill can pass OR if the Administration takes on China next, read that as "big trouble."

The Strength of our Union Leader

Gosh I like Obama though (bear with me as I get all mushy), and I was reminded of why while watching his inaugural State of the Union Address. Where many of you may have viewed parts of his speech as weak, I saw rare strength, because it's harder to reach out than it is to lash out. I believe that if he draws on the support of the people, he could get anything done (Republican support or not); and I believe in alternative energy (since I argued for it over fighting a war in Iraq when George Junior had only just started his campaign - "Let them choke on their oil!" is still echoing through the halls of Greek Central; as I was saying... alternative energy, health care reform and taking the hard road to do what's right - I believe in those things.

I'm hearing a lot of, "and I'm speaking to Democrats too" from Obama. Think I heard the same from Clinton, and others like Reagan and Kennedy had a special unifying voice that spoke truth of heart (I know what you are going to say! Just not sure which of the three you will choose.). There's something about that Oval Office that makes a man reach though, that's for sure.

That said, you can't indiscriminately tax shareholders because you feel like their CEOs gamed you. Obama basically scared the bejeebers out of stockholders with that one, and that's inclusive of a whole lot of Americans. It took the market a little while to smell the stench, but when a second idea was proposed to limit the size and scope of financial institutions, an attempt at solving the "too big to fail" problem, well then the market took notice of trend. Stocks have rediscovered volatility and downticks ever since. We'll see if these bills pass into law, as Republicans will oppose unless the people revolt. Some of these proposals might be for our better good, but that's of no concern to shareholders' at the moment.

The problem with AIG (NYSE: AIG) was more due to the lack of a super-regulator, who could see the whole schematic of AIG's nebulous web of activities. Whatever the case, the market does not like tangential regulation, new taxes and such. What she dislikes more is an active government getting its hands too deeply into things it might not understand, because when the rules change, the market has to learn new rules and that means she knows nothing today. Uncertainty! That's what it's called, and stocks tend to trend lower when it's in the room.

Earnings News and Pooh-Poohs

We had good earnings reports from Amazon.com (Nasdaq: AMZN) and Microsoft (Nasdaq: MSFT), and from Ford (NYSE: F) from the day before. However, Mr. Softy, Honeywell (NYSE: HON) and others cooled enthusiasm in their conference calls with sour notes of the days to come. Microsoft's CFO Peter Klein said the company had not yet seen a return of enterprise spending growth. So, even after posting a 60% gain in profits, MSFT shares slipped 3.4%. Honeywell dropped 3% as well, even after it beat results, because HON also provided an outlook that offered less hope than analysts had projected. So, it began to look as if many pundits were right, that we had already priced in as far as we had come, and had grown too hopeful for the year ahead. Thus, despite the hot GDP figure, many questioned its driving factors and its sustainability. Within "many," I include myself.

The rest of Friday's earnings included news from Chevron (NYSE: CVX), Arch Coal (NYSE: ACI), Avery Dennison (NYSE: AVY), Fortune Brands (NYSE: FO), Horizon Lines (NYSE: HRZ), Idexx Labs (Nasdaq: IDXX), Mattel (NYSE: MAT), Mizuho Financial Group (NYSE: MFG), Newell Rubbermaid (NYSE: NWL), NTT DoCoMo (NYSE: DCM), Oppenheimer Holdings (NYSE: OPY), PACCAR (Nasdaq: PCAR), Provident Financial (NYSE: PFS), RBC Bearings (Nasdaq: ROLL), Saia (Nasdaq: SAIA) and Wilmington Trust (NYSE: WL). Also look for data out of ABG Shipyard (Bombay: ABGSHIP.BO), Accordia Golf (OTC: ACGFF.PK), All Nippon Airways (OTC: ALNPY.PK), AsiaInfo Holdings (Nasdaq: ASIA), Autoliv (NYSE: ALV), Center Financial Corp. of California (Nasdaq: CLFC), Central Pacific Financial (NYSE: CPF), Dover Corp. (NYSE: DOV), Enbridge Energy Partners (NYSE: EEP), Encore Bancshares (Nasdaq: EBTX), Graham (NYSE: GHM), Great Southern Bancorp (Nasdaq: GSBC), KT Corp. (NYSE: KT), L.B. Foster (Nasdaq: FSTR), Mahanagar Telephone Nigam Ltd. (NYSE: MTE), Makita Corp. (Nasdaq: MKTAY), MetroCorp. Bankshares (Nasdaq: MCBI), NuStar GP Holdings (NYSE: NSH), United Community Banks (Nasdaq: UCBI), West Bancorporation (Nasdaq: WTBA) and Yucheng Technologies (Nasdaq: YTEC).

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Friday, January 29, 2010

Shipping Forecast 2010

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Shipping Forecast 2010: A bearish year upcoming?

Visit the front page of Wall Street Greek to see our current coverage of the Shipping Market, Wall Street, Economic Reports, Global Financial Markets and Foreign Affairs.

(Relative Tickers: NYSE: TNP, NYSE: OSG, NYSE: ISH, NYSE: TK, NYSE: SEA, NYSE: GNK, NYSE: TNP, NYSE: DAC, NYSE: NM, NYSE: NMM, NYSE: NNA, NYSE: SSW, NYSE: SFL, NYSE: BDI, NYSE: DSX, NYSE: EXM, NYSE: DHT, NYSE: SB, NYSE: GMR, NYSE: KSP, NYSE: NAT, NYSE: BC, NYSE: MPX, Nasdaq: DRYS, Nasdaq: TOPS, Nasdaq: EGLE, Nasdaq: GLNG, Nasdaq: VLCCF, Nasdaq: SINO, Nasdaq: PRGN, Nasdaq: TBSI, Nasdaq: ESEA, Nasdaq: ONAV, Nasdaq: SBLK, Nasdaq: XSEAX, Nasdaq: ACLI), NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: IWM, NYSE: TWM, NYSE: IWD, NYSE: SDK)

Miral Shipping Report - 2010 Forecast

First a Look Back at Shipping in 2009


shipping forecast 2010 analyst dry bulk freightIt was an interesting year for dry bulk shipping, to say the least. It started out with very low freight levels being paid to owners of all vessel classes. Freight rates were so low there were fears of a long-term collapse in the shipping market that could have resulted in the potential widespread bankruptcies of ship operators and some owning companies. Those fears largely did not come to fruition.

On the demand side, huge stimulus in many large economies, in particular China, lifted demand for most vessel classes starting in the spring of 2009, and helped underpin freight rates for the rest of the year. For example, China imported record amounts of iron ore (over 600 million tons!) and increased their imports of grain and coal, while also overtaking Germany as the world's biggest exporter. Trade was also more robust than forecast in India, the Middle East and even parts of Europe and South America.

On the supply side, considerably fewer new building vessels hit the market, due to delays in deliveries, which also contributed to keeping rates elevated. Freight rates recovered substantially; not to the extreme levels of early 2008, but rates peaked approximately a third of the way there. Certainly, there were a few bankruptcies of owner - operators, most notably Atlas Shipping and Eastwind. However, the carnage predicted by some and feared by most did not occur. In the end, we can reflect on a much better 2009 than it could have been.

Shipping Forecast 2010



What can we expect from 2010? So far the market indicators are looking more bearish than a few months ago. China is still forecast to import record amounts of iron ore, but they have also taken measures to slow down their economy as asset inflation is once again taking hold. Two weeks ago, it was announced that the People's Bank of China is raising the percentage of deposits that banks must keep in reserve. Further credit tightening is widely expected and this could cool down the sectors that use the commodities that are carried on most dry bulk ships, particularly capesize and panamax tonnage.

"In 2010, like most years, there should be ups and downs but the risk of China slowing down, coupled with a potentially large increase in vessel supply, should be negative for freight rates unless other economies or some unforeseen factors pick up the slack."

I have also seen projections of higher steel production outside of China (namely in Europe), which would be positive for freight. At the same time, I also believe that any substantial economic recovery in Europe or the U.S. is far from certain. On the supply side, indications are for substantially more new vessels to be delivered than in 2009; some say up to 30% of the present fleet. In 2010, like most years, there should be ups and downs but the risk of China slowing down, coupled with a potentially large increase in vessel supply, should be negative for freight rates unless other economies or some unforeseen factors pick up the slack.

Current Shipping Market

Let us turn our attention to what is happening now. Since my last report in November 2009, the Capesize Index rose so rapidly that it tested resistance only 3 days later, and then fell back almost as rapidly towards one of its support levels at approximately $36-38,000 per day. It has held near there during the past month, but just broke through these lows, closing Thursday at $34,795 daily timecharter average, the index at 3706.

The panamaxes followed a similar pattern by hitting resistance in the high $30,000s per day before then dropping back. The panamax index is now at 3523, or at $28,323 timecharter average. However, supramaxes on down to handysize vessels have fared differently. Since November, they have continued to slowly rise, and have remained relatively strong until recently. Only in the last two weeks have they started to weaken. Supramaxes hit a near-term high above $26,000 per day early last week and now stands at 2313 or $24,180 timecharter average. The Handysize Index showed a similar pattern to the Supramax Index, peaking recently just under1250, and now stands at 1177.

Looking Ahead for Shipping

Forecasting ahead a few months, the effect of China's credit tightening and increased vessel supply is negative for freight, but some seasonal positive factors that developed late in 2009 have continued this winter until the last few days. The cold start to the winter in Europe, Asia and North America has increased the movement of thermal coal and de-icing salt; plus the large amounts of fertilizer moving to India has helped keep the handysize and handymax freight markets at relatively high levels. The South-American grain season is set to begin in March-April, and should keep demand for handysizes and handymaxes fairly steady until approximately May 2010.

The capesize market is more uncertain, with the beginning of credit tightening and the New Year in China. The panamax market should benefit with South American grain, but could also be hurt if the capesize market turns out to be weak. Looking further ahead, June - August is usually the slowest period of the year and it looks weak right now. We will keep you informed so stay tuned.

Editor's Note: This article should interest shipping market investors in securities including: Teekay Corp. (NYSE: TK), Navios Maritime Holdings (NYSE: NM), Navios Maritime Acquisition (NYSE: NNA), Navios Maritime Partners L.P. (NYSE: NMM), Tsakos Energy Navigation Ltd. (NYSE: TNP), Overseas Shipholding Group (NYSE: OSG), International Shipholding (NYSE: ISH), Excel Maritime Carriers (NYSE: EXM), Safe Bulkers (NYSE: SB), Claymore/Delta Global Shipping ETF (NYSE: SEA), Genco Shipping & Trading (NYSE: GNK), Diana Shipping (NYSE: DSX), Danaos (NYSE: DAC), Tsakos Energy Navigation (NYSE: TNP), Ship Finance Int'l (NYSE: SFL), Nordic American Tanker (NYSE: NAT), Seaspan (NYSE: SSW), General Maritime (NYSE: GMR), DHT Maritime (NYSE: DHT), Brunswick (NYSE: BC), Marine Products Corp. (NYSE: MPX), DryShips (Nasdaq: DRYS), Top Ships (Nasdaq: TOPS), Eagle Bulk Shipping (Nasdaq: EGLE), Sino-Global Shipping (Nasdaq: SINO), Paragon Shipping (Nasdaq: PRGN), K-SEA Transportation Partners (NYSE: KSP), Euroseas (Nasdaq: ESEA), Star Bulk Carriers (Nasdaq: SBLK), Omega Navigation (Nasdaq: ONAV), Knightsbridge Tankers Ltd. (Nasdaq: VLCCF), TBS Int'l (Nasdaq: TBSI), Golar LNG (Nasdaq: GLNG), Claymore/Delta Global Shipping (Nasdaq: XSEAX), American Commercial Lines (Nasdaq: ACLI).

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Thursday, January 28, 2010

Toyota News (NYSE: TM) - Sell Shares Here? - 01-28-10

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Toyota's Legendary Reputation is Taking a Hit, and So the Company Should Lose Market Share and the Stock Should Lose Further Value

Visit the front page of Wall Street Greek to see our current coverage of stock market news, Wall Street, economic reports, global financial markets and foreign affairs.

(Tickers: NYSE: TM, NYSE: F, NYSE: HMC, NYSE: TTM, NYSE: DAI, Nasdaq: YHOO, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ)

Toyota News (NYSE: TM) - I Would Sell TM Shares Toward $74 to $68 Target


Wall Street analyst toyota nyse tm shares stock newsToyota Motors could shed another 7% to 15% if you believe this hit to its reputation could bring it down to earth, or to a forward P/E ratio comparable to peers Honda Motors (NYSE: HMC) and Ford (NYSE: F).

Toyota Motors (NYSE: TM) said late Wednesday that it was expanding its vehicle recall to include another 1.1 million cars and trucks. This is in addition to the 2.3 million vehicles Toyota recalled last week. The reason for recall is the same across models and years of production, a faulty accelerator pedal that is at risk of sticking. Toyota is now recalling vehicles in the US, Canada and Europe. The additional models and years are:

  • Corolla, Venza & Matrix (2009 - 2010)
  • Highlander (2008 - 2010)
  • Pontiac Vibe (2009 - 2010)
Including last year's recall, which was reported by the company as a problem with floor mats, Toyota has now called back a total of 5.9 million cars and trucks. The catalyst behind the discovery of the sticky accelerator seems to be an investigation by the U.S. National Highway Traffic Safety Administration, which was tied to a deadly accident.

Reputation Hit

Toyota has built its name on quality, and has become the auto industry's global production leader thanks to that record and the troubles of its American rivals. With its reputation now damaged so badly in the US by this matter, and with the rise of low cost producing rivals overseas like Tata Motors (NYSE: TTM), global market share loss seems likely. This might be a classic reversion to the mean scenario, and so I would not be a buyer of TM here weakness, despite the significant price shedding of the past few days.

Considering how poorly the company has managed public relations to this point (just hired a PR firm), and how important honesty is to the American consumer (the appearance here is something less than that), expect this to benefit the Americans. Ford shares gained 3.2% on Wednesday, and were up another 0.87% in the after market (7:59 PM) - partly on this and partly on its own good news this quarter.

Both General Motors and Ford have jumped at the opportunity to take back some recently lost market share. GM said that from now through February, dealers will offer owners and leasees of Toyota vehicles three incentives to buy its cars:

  1. A waiver of three payments up to a total of $1,000 for lease customers
  2. Zero percent interest for up to 60 months for financing customers
  3. A $1,000 purchase bonus for cash buyers.

Ford is offering Toyota customers $1,000 if they trade in their used or leased vehicles. Ford extends this offer to folks who turn in Toyota, Lexus, Scion, Honda or Acura vehicles with model-years between 1995 and 2010. The offer can be applied to all Ford vehicles, except its gas-electric hybrid models, its F-150 Raptor pick-up truck, the new Taurus SE sedan, the Edge SUV all-wheel drive, and its Shelby GT500 and KR sports cars (according to a report published Wednesday by The Wall Street Journal).

Back of the Envelope Valuation

Toyota's shares dropped 8.1% on Wednesday, and were off another half point in after-hours trading (7:54 PM). Since posting a recent short-term high on the 19th of January, the shares are off 13%. If this hit to Toyota's image, which was pretty solid before the scandal and apparent cover up broke, were to bring it's P/E ratio even with Ford's on forward EPS estimates, then Toyota should trade at $68.44 (Note: we have not accounted for the difference in fiscal year. Ford's fiscal year ends in December, and so we used its FY 2010 (Dec) consensus EPS estimate of $0.54 (found at Yahoo Finance (Nasdaq: YHOO)), and then applied the related P/E ratio of 21.389 (based on a closing price of $11.55) to Toyota's FY 2011 (March) consensus estimate of $3.20; theoretically this difference would serve to overstate Toyota's price target though, given no seasonal factor plays a role quarterly results.)

Keep in mind that this is a very rough estimate, using the unstable figures of two companies in quite different situations. However, if we use Honda Motors (NYSE: HMC), which like Toyota has a March fiscal year, and take it's relative forward FY 2011 P/E ratio of 20.83, and apply it to Toyota's $3.20 forward EPS estimate, the target becomes $66.66 (not much different). The average of the two price forecasts is $67.55, and so we might say roughly that Toyota could sink another 15.3% if it were to revert toward and reach the relative valuation mean of these two rivals. Also note that both Ford and Honda are reporting earnings now and may revise forecasts.

Keep in mind that both Ford and Honda stock prices have already closed some of the valuation gap between them and Toyota. So, if both valuations are converging, due to a limited global market size and near zero sum market share trade-off in the developed markets they mostly compete in (though sales recovering), then we might cut the forward loss potential in half, to 7.7% or so, or toward a price target of approximately $73.66 ((Target mean + TM Price) / 2). This assumes the valuations will meet before effective reconsideration takes place ("valuations" are rising F & HMC to falling TM).

Now this implies that the global marketplace is even and fair, but we know Toyota enjoys strong advantage at home. However, we might also argue that President Obama is igniting a nationalistic attitude in the US, which serves to improve American-made demand at home (another significant marketplace). In any event, the case seems to build against Toyota.

"I would sell Toyota toward a price target of $74 to $68."

I would not be buying TM now, but selling toward a price target of $74 to $68. A pare trade, including the purchase of Ford or Honda against the sale of Toyota seems to also work, while weeding out macroeconomic noise. However, you run risk related to the near-term EPS reports of Ford and Honda - both have posted good news lately though, but you still run a special risk with the pare trade.

When I was an equity analyst, I would base my idea only on this information, but I would further research other rival firm valuations, and consider various valuation methodologies before moving forward with a formal recommendation. For an investor, it also makes sense to give more consideration to these issues before putting money on the unfinished theory.

Risks?

Your biggest risk against the sale of TM seems to be that Toyota works a PR miracle, but its actions to this point do not indicate to me it would occur anytime soon. A second risk would be an early upgrade of TM by a stubborn or ambitious Street analyst with a name. That potential action also still seems too far off to me, but seller beware.

We remind you that this is not an investment recommendation, but purely an opinionated written work produced for entertainment purposes. Also, Mr. Kaminis has no position or beneficial interest in any of the securities mentioned.

toyota NYSE:TM forum message board chat rooms
Corporate News Drivers

Other corporate news drivers arrived Wednesday from Apple's (Nasdaq: AAPL) iPad tablet release and the heavy EPS schedule. Wednesday's earnings included reports from 8x8, Inc. (Nasdaq: EGHT), Abbott Labs (NYSE: ABT), AirTran Holdings (NYSE: AAI), Align Technology (Nasdaq: ALGN), Allegheny Technologies (NYSE: ATI), Alliance Holdings (Nasdaq: AHGP), AltiGen Communications (Nasdaq: ATGN), American River Bankshares (Nasdaq: AMRB), AmeriCredit (NYSE: ACF), AmeriGas Partners (NYSE: APU), Amylin Pharmaceuticals (Nasdaq: AMLN), Astoria Financial (NYSE: AF), Bally Technologies (NYSE: BYI), Banco Bilbao Vizcaya Argentaria, S.A. (Nasdaq: BBVA), Banner Corp. (Nasdaq: BANR), BlackRock (NYSE: BLK), BMC Software (NYSE: BMC), BOK Financial (Nasdaq: BOKF), Boston Private Financial (Nasdaq: BPFH), Cabot (NYSE: CBT), CACI International (Nasdaq: CACI), Canon (NYSE: CAJ), Capstead Mortgage (NYSE: CMO), Cash Store Financial (Toronto: CSF.TO), Caterpillar (NYSE: CAT), Celestica (NYSE: CLS), CGI Group (NYSE: GIB), Citrix Systems (Nasdaq: CTXS), Cohu (Nasdaq: COHU), ConocoPhillips (NYSE: COP), Covance (NYSE: CVD), Crown Castle International (NYSE: CCI), CTS Corp. (NYSE: CTS), Cullen/Frost Bankers (NYSE: CFR), DSP Group (Nasdaq: DSPG), E*TRADE Financial (Nasdaq: ETFC), Eagle Materials (NYSE: EXP), East West Bancorp (Nasdaq: EWBC), Electro Scientific Industries (Nasdaq: ESIO), Elizabeth Arden (Nasdaq: RDEN), Empresa Nacional de Electricidad SA (NYSE: EOC), Energen (NYSE: EGN), Enersis SA (NYSE: ENI), Evans Bancorp (Nasdaq: EVBN), FICO (Nasdaq: FICO), First Cash (Nasdaq: FCFS), First Community Bancshares (Nasdaq: FCBC), First Financial Holdings (Nasdaq: FFCH), Flextronics (Nasdaq: FLEX), General Dynamics (NYSE: GD), Green Mountain Coffee (Nasdaq: GMCR), Hanesbrands (NYSE: HBI), Harris (NYSE: HRS), Hess Corp. (NYSE: HES), Hoku Scientific (Nasdaq: HOKU), IberiaBank (Nasdaq: IBKC), Illinois Tool Works (NYSE: ITW), Innovative Solutions and Support (Nasdaq: ISSC), Intersil (Nasdaq: ISIL), John B. Sanfilippo & Son (Nasdaq: JBSS), Kirby (NYSE: KEX), Lam Research (Nasdaq: LRCX), Landstar System (Nasdaq: LSTR), LeCroy (Nasdaq: LCRY), Legacy Bancorp (Nasdaq: LEGC), LSI Corp. (NYSE: LSI), MainSource Financial (Nasdaq: MSFG), Marine Products (NYSE: MPX), MeadWestvaco (NYSE: MWV), Mellanox Technologies (Nasdaq: MLNX), Merchants Bancshares (Nasdaq: MBVT), Methanex (Nasdaq: MEOH), Mizuho Investors (OTC: MZHIF.PK), Murphy Oil (NYSE: MUR), Netflix (Nasdaq: NFLX), New York Community Bancorp (NYSE: NYB), Noble Corp. (NYSE: NE), Norfolk Southern (NYSE: NSC), NVR, Inc. (NYSE: NVR), Owens-Illinois (NYSE: OI), OSI Systems (Nasdaq: OSIS), Piper Jaffray (NYSE: PJC), Praxair (NYSE: PX), Preferred Bank (NYSE: PFBC), PSS World Medical (Nasdaq: PSSI), Punjab National Bank (Bombay: PNB.BO), QUALCOMM (Nasdaq: QCOM), Rediff.com (Nasdaq: REDF), Regis Corp. (NYSE: RGS), Rockwell Automation (NYSE: ROK), Rollins (NYSE: ROL), RPC, Inc. (NYSE: RES), Rurban Financial (Nasdaq: RBNF), Ryland Group (NYSE: RYL), SAP AG (NYSE: SAP), SEI Investments (Nasdaq: SEIC), ShoreTel (Nasdaq: SHOR), Sify Limited (Nasdaq: SIFY), Smith International (NYSE: SII), Solutia (NYSE: SOA), Southern Co. (NYSE: SO), St. Jude Medical (NYSE: STJ), StanCorp Financial (NYSE: SFG), Sunoco Logistics Partners (NYSE: SXL), SurModics (Nasdaq: SRDX), Susquehanna Bancshares (Nasdaq: SUSQ), Symantec (Nasdaq: SYMC), Taylor Capital Group (Nasdaq: TAYC), Teradyne (NYSE: TER), Tetra Tech (Nasdaq: TTEK), Texas Capital Bancshares (Nasdaq: TCBI), The Boeing Company (NYSE: BA), The McClatchy Co. (NYSE: MNI), The Stanley Works (NYSE: SWK), Tractor Supply (Nasdaq: TSCO), Tyco Electronics (NYSE: TEL), UAL Corp. (Nasdaq: UAUA), United Bankshares (Nasdaq: UBSI), United Technologies (NYSE: UTX), Universal Stainless & Alloy (Nasdaq: USAP), USG (NYSE: USG), Valero (NYSE: VLO), Varian Medical (NYSE: VAR), WellPoint (NYSE: WLP), Werner Enterprises (Nasdaq: WERN), Westell Technologies (Nasdaq: WSTL), Wintrust Financial (Nasdaq: WTFC), Yahoo Japan (OTC: YAHOF.PK), Zhone Technologies (Nasdaq: ZHNE) and Zilog (Nasdaq: ZILG).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Wednesday, January 27, 2010

AIG Bailout Testimonies of Geithner & Paulson

AIG bailout testimonies Geithner Paulson
Treasury Secretaries past and present, Timothy Geithner and Hank Paulson, today faced the still politically fired ire of Congressional questioning.

Visit the front page of Wall Street Greek to see our current coverage of Wall Street, business news, economic & corporate earnings reports, global financial markets and foreign affairs.


(Tickers: NYSE: AIG, NYSE: GS, NYSE: JPM, NYSE: BAC, NYSE: FNM, NYSE: FRE, NYSE: MS, NYSE: PNC, NYSE: C, NYSE: UBS, NYSE: CS, NYSE: BCS, NYSE: DB, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD)

AIG Bailout Testimonies of Geithner & Paulson


GreekMust-see TV returned in full force today, with the testimonies of Treasury Secretary Timothy Geithner and former Treasury chief Hank Paulson before the House Oversight & Government Reform Committee. We expected Tim to get tested and testy, as is usually the case for him before an often character-questioning, accusative Congressional panel. Well, neither Congress nor Secretary Geithner disappointed Must-See TV fans! In the end, and please read our conclusion to this post before forming your opinion, we side with Geithner and Bernanke.

Geithner Testimony for Starters

Poor Tim... he just seems to have a face Congress loves to hate on. Or rather, with constituencies standing behind them growling and foaming at the mouth, any Congressman worth his next election campaign spend would be a fool to not at least seem angry about the "Wall Street bailouts," especially when your constituency lives off-Wall. Given America's definition of "Wall Street," where would that really be then? Where in this country is there no bank? Where is there no American who did not benefit from the salvation of the financial system? Yes times are tough, and I taste that myself every single day, but imagine how much worse things could have been. Does that mean that financial companies like AIG (NYSE: AIG), Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE), Goldman Sachs (NYSE: GS), Bank of America (NYSE: BAC), J.P. Morgan (NYSE: JPM), Morgan Stanley (NYSE: MS), Citigroup (NYSE: C), PNC Financial (NYSE: PNC), Barclays (NYSE: BCS), Credit Suisse (NYSE: CS), UBS (NYSE: UBS) and Deutsche Bank (NYSE: DB) did not benefit, sometimes disproportionately and even unfairly? No it doesn't.

We ask you, what's important now, crucifying people for making mistakes under pressure while still saving life as we know it, or moving forward? I say, okay, let's find out what happened and see if any overt evil really occurred, but let's not manufacture it nor overblow human flaws. We all have those.

In any event, still unfolding emails forced out of AIG (NYSE: AIG) apparently show a Fed/Treasury effort to keep AIG security counterparty information secret, and the purported fact that these firms apparently got 100 cents on the dollar, where a bankruptcy would have paid less-to-zero.

Congressman Issa noted that some documents are locked up until 2018, thanks to the agencies' efforts to keep them that way. This information apparently shows that some Swiss banks were paid about $5 billion, while they were at the same time being prosecuted for the anonymous accounts they housed, within which account owners' tax debts (to the US) remained hidden from the IRS.

The Greek believes Tim Geithner when he sounds all Ollie Northish, though I think without real culpability. Call me naive, but I do not think he did anything criminal, nor even the least bit sneaky. The same goes for Benjamin. After all, isn't he from the Carolinas, where people are nice?

Silence is quite a powerful way to say something isn't it. In some instances, ignorance looks criminal, but ignorance is not a viable defense for crime. I think that it is possible that if favoritism occurred, it may have been instigated below street level, meaning underneath these top dogs.

Secretary Paulson, now somewhat separated from the events, still stuttered with the same intensity as he did in 2008, when facing questions about the tough decisions he and Fed Chairman Ben Bernanke made in response to the financial crisis. Sometimes though, honest people act like you might expect guilty folks to when accused. Intuitive people understand what we sift for, and that can lead them to present manifested signs of guilt. I'm not sure what causes Paulson's stuttering; I just know it is not good for his image.

Early on, as Congressional questioners began implying improprieties, Paulson responded strongly, saying that (paraphrasing) if we had not done what we did "unemployment might have reached 25% and home prices... would have fallen even more." Let's face it, Bernanke ran the show, since he was really the only one capable in Washington at the time... at least when we examine the top guys who get all the attention in the press. Behind the scenes may be another story, and I reiterate - the Congressional examiners might take a closer look there as well.

Seems like the Congressmen who voted for TARP were lined up perfectly with the testimony of Paulson, and so the questioning geared to Hank carried a somewhat allied tone. Maybe they just felt a little sorry for the old guy, after the hell he went through. Guess he really earned those millions, as he responded to a remark about how much he must miss Washington by stating (something like), "you could never guess how much." The tone of his response revealed some serious problem, at least in my view. The Congressmen also posed some specific questions about why the company had not been allowed to fall into bankruptcy, working to remind Paulson bashers of where we stood at the time (read: on the brink).

Commentary relayed by a Bloomberg guest commentator noted that state insurance commissioners testified that they "would have taken care of it," had AIG fallen into bankruptcy. Reportedly, the insurance assets would have been seized and sold to other companies in an orderly manner, thus implying the prevention of the end of the world scenario painted by messengers Geithner and Paulson. But what about the rest of the trillion dollars of financial assets AIG had webbed around the globe...

Paulson's thoughts: "If AIG had been allowed to go bankrupt, we would have had absolute economic disaster"

I highlight "absolute" for you for good reason. I think meant it!

Representative Kucinich (I'm a fan) is always good for a verbal barrage of strong-based questioning, and he dug into Paulson about his and other government employee favoritism toward their old firm, Goldman Sachs (NYSE: GS). It seems Goldman, the single largest creditor to AIG, would have gotten a lot less back on its investments in AIG securities had the insurance company gone bankrupt. You think?!? Actually, the answer to that is better than yes, considering they got it all back (supposedly).

Clearly this saga is far from concluded. We have attached Treasury Secretary Geithner's written testimony here for the perusal of those of you interested in reading more. We think every American should read this letter. We noted a few specific excerpts for you here below, and conclude this piece thereunder.

  1. "The decision to rescue AIG was exceptionally difficult and enormously consequential."

  2. "The steps the government took to rescue AIG were motivated solely by what we believed to be in the best interests of the American people. We did not act because AIG asked for assistance. We did not act to protect the financial interests of individual institutions. We did not act to help foreign banks. We acted because the consequences of AIG failing at that time, in those circumstances, would have been catastrophic for our economy and for American families and businesses."

  3. "But everyone should realize that because of the actions of the Treasury and the Federal Reserve, the American financial system is now in a position where it can provide the credit necessary for economic growth, not stand in its way."

  4. "The extraordinary events surrounding AIG took place during what was already the most severe financial crisis the United States and the global economy had seen since the Great Depression. This context is critical to understanding the decisions we made."

  5. "AIG is one of the largest and most complex financial firms in the world. At its peak, AIG had more than $1 trillion in assets..."

  6. "AIG's parent holding company, which was largely unregulated, engaged in a broad range of financial activities that strayed well beyond the business of life insurance and property and casualty insurance."

  7. "AIG used its strong credit rating, which was based on the strength and profitability of its insurance subsidiaries, to become one of the largest providers of credit and rate-of-return protection for other financial products. Imprudent risk-taking in better times meant that, when the financial cycle turned, AIG had hundreds of billions of dollars in commitments without the capital and liquid assets to back them up. Such excessive risk-taking should not have been allowed. But it was.

  8. "The Federal Reserve was the only fire station in town."

We suggest you read Geithner's entire testimony, as it will remind you of the firestorm we stood within and what hell we stood before. After you have read it and remembered those horrid days, ask yourself, if faced with the same circumstances and given the responsibility, could you have risked doing anything but what the government representatives did. I believe if you can honestly place yourself in that position, you will affirm they did what they had to, and they did it the best they could.

Given the time constraints upon them, the high stress they worked under, and the demands on them physically, can we really expect them to have done a perfect job at saving are asses? I think not. So instead of hanging the general who saved us, we might better allow him to take his lessons learned, to place us in better position for the future. I'm speaking of Mr. Bernanke, but I believe in the sincerity of Mr. Geithner's testimony as well. I think we should lay off them. In retrospect, the Financial Crisis Responsibility Fee seems to be geared to correct the imperfection of the medicine, to cure its side effect, which is the bad taste in our collective mouth.

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Tuesday, January 26, 2010

The States of the Union & Global Economy

state of the union, global economy
This Week

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The States of the Union & Global Economy


Wall Street, the GreekThis week's business news schedule is headlined by President Obama's first State of the Union Address and the Global Economic Forum in Davos, Switzerland. That said, an overflowing week's worth of corporate earnings reports offers ample opportunity for blind side catalyst.

Monday

As far as the economic slate is concerned, Monday offers a relatively quiet start to the week, with only one economic report due. Existing Home Sales will be reported for the month of December at 10:00 a.m. Home sales have picked up right on cue since last spring, as the Fed and the feds have done all they can to stabilize the real estate marketplace. The Federal Reserve's free money moves have brought mortgage rates down significantly, and the feds have offered significant stimulus to first-time homebuyers and almost everyone else of late. Existing Home Sales Inventory, which is determined partly by the annual rate of sales reported monthly, has drained; heck prices have even stabilized.

Still, Pending Home Sales dropped 16% in November, due to anticipation of the expiration of the first-time homebuyer tax credit. Odds are that Existing Home Sales will show a commensurate decline over the next couple months, as it takes some four to six weeks for the sale of a home to close. Pending sales measures when sales are entered into contract and Existing Sales measures closings. Thus, the Pending metric offers an indication of forward Existing Sales. Economists have not missed that point, and are forecasting the annual pace of Existing Home Sales fell to 5.9 million in December, down from 6.54 million in November.

Markets in Brazil are closed on Monday. A quiet day on the economic slate State-side does not translate into a peaceful trading session when in the heart of earnings season. Monday offers big time earnings reports from Apple (Nasdaq: APPL), Amgen (Nasdaq: AMGN), Halliburton (NYSE: HAL), Quest Diagnostics (NYSE: DGX), Texas Instruments (NYSE: TXN), VMware (NYSE: VMW) and Waters Corp. (NYSE: WAT). Also look for news out of AK Steel (NYSE: AKS), Atheros Communications (Nasdaq: ATHR), Bank of Hawaii (NYSE: BOH), Celadon Group (NYSE: CGI), Citizens South Banking (Nasdaq: CSBC), CNH Global (NYSE: CNH), Community Bank System (NYSE: CBU), Crane (NYSE: CR), Delta Apparel (NYSE: DLA), Eaton (NYSE: ETN), Equity Lifestyle Properties (NYSE: ELS), FNB Corp. (NYSE: FNB), Graco (NYSE: GGG), Heartland Financial (Nasdaq: HTLF), HF Financial (Nasdaq: HFFC), JDA Software (Nasdaq: JDAS), Lakeland Financial (Nasdaq: LKFN), Matrixx Initiatives (Nasdaq: MTXX), Mindspeed Technologies (Nasdaq: MSPD), Nara Bancorp (Nasdaq: NARA), NBT Bancorp (Nasdaq: NBTB), Olin (NYSE: OLN), Packaging Corp. of America (NYSE: PKG), Parexel International (Nasdaq: PRXL), People's Financial (Nasdaq: PFBX), PLX Technology (Nasdaq: PLXT), PrivateBancorp (Nasdaq: PVTB), Renaissance Learning (Nasdaq: RLRN), Royal Philips Electronics (OTC: PHGFF.PK), S&T Bancorp (Nasdaq: STBA), Sealed Air (NYSE: SEE), Sierra Bancorp (Nasdaq: BSRR), Silicom Ltd. (Nasdaq: SILC), SL Green Realty (NYSE: SLG), Telefon AB LM Ericsson (Nasdaq: ERIC), TheStreet.com (Nasdaq: TSCM), Towers Watson (NYSE: TW), Virtual Radiologic (Nasdaq: VRAD), VOLTAS Ltd (Bombay: VOLTAS.BO), Volterra Semiconductor (Nasdaq: VLTR), VSE Corp. (Nasdaq: VSEC), West Coast Bancorp (Nasdaq: WCBO), Zions Bancorp (Nasdaq: ZION) and Zoran Corp. (Nasdaq: ZRAN).

In foreign affairs, markets in Brazil are closed Monday. Russian President Dmitri Medvedev meets with the presidents of Armenia and Azerbaijan, as he works to broker an agreement on the Nagorno-Karabakh conflict. With the election concluded in the Ukraine, Russia's recently appointed (August) Ambassador travels to Kiev for the first time. A few days before the anniversary of their strange encounter on the stage in Davos, Israeli President Shimon Peres and Turkish President Erdogan will both be in the world news on Monday. Peres travels to Germany to meet with government officials there, while Erdogan meets with the presidents of Afghanistan and Pakistan to discuss broader cooperation.

Tuesday

International events light up the early news wire on Tuesday. The International Monetary Fund (IMF) releases its latest world economic outlook in Washington. The early wire should carry important news from Japan as well. The Bank of Japan (BOJ) is slated to meet and is expected to keep to the status quo in its monetary policy. Meanwhile, markets in Australia and India will be closed Tuesday.

A day after meeting with Erdogan, President Karzai heads to Germany (from where Shimon Peres will have just left) to meet with German Chancellor Angela Merkel. Meanwhile in Turkey, Afghanistan's neighbors continue to confer. In Nigeria, where the world is unsure of who is running the country, the Nigerian Senate will discuss the health status of its President Umaru Yaradua. In Honduras, military officials face charges related to last year's coup.

In the US, the Congressional Budget Office will publish its outlook for 2010. At some point this week, Congress will have to determine the fate of Federal Reserve Chief Ben Bernanke, as his current term expires on Sunday (We Are Debating Bernanke's Chairmanship Here). The Federal Reserve will not be taking any time off while Congress decides, as it kicks off its two-day Federal Open Market Committee policy meeting on Tuesday.

The International Council of Shopping Centers (ICSC) returns to its normal reporting schedule this week. Look for the Same-Store Sales data in the pre-market as usual. Last week's report, covering the period ended January 16, showed sales gained some steam, rising 2.6% on a year-to-year basis (compared to the prior week's 1.7% rate). On a weekly basis, sales improved 2.0%, after dropping 3.0% the prior week. Seems as though weather may have played a role in that prior week period, though we initially speculated that post holiday bare shelves on tight retail inventory management could have led to a smaller bottom line. Given what looks like make-up sales in this latest period, it seems something else may have played a role in restraining purchases of necessities. Weather is an easy target. Whatever the case, the true trend will play out over the next few weeks.

The S&P Case Shiller Home Price Index is due at 9:00 AM Tuesday. Though the report covers old data, popular press and television media are in love with it. We already know December's pricing environment improved, based on the Existing Home Sales Report just published by the National Association of Realtors. So, therefore, why would this report covering the month of November impact trading? The FHFA House Price Index will follow S&P's report at 10:00 a.m., but also covers November; and is limited to transactions that later involve their purchase or securitization by Fannie Mae (NYSE: FNM) or Freddie Mac (NYSE: FRE).

The Conference Board's Consumer Confidence Index is up at 10:00 AM. The Index rose 2.9 points in December, reaching 52.9. The gain was supported by an improvement in consumer expectations, while the Present Situation Index dipped to near a record low, reaching 18.8. This month, with the labor environment still suffering, we are surprised to find economists expect the index to move to 53.5. Look for something short of that, in our view.

Look for State Street's Investor Confidence Index at 10:00 a.m. In December, the index moved 3.1 points higher, to 103.9, thanks to confidence gained in Asia. North American Confidence improved by only 0.9, to 103.1 last month. We know by recent market activity and sour news that confidence in Asia took a dip last week, while European and North American confidence remain strained. So, the market may be unenthused by any gain reported in this report.

The corporate earnings schedule includes news from A.O. Smith Co. (NYSE: AOS), Allegiant Travel (Nasdaq: ALGT), Altera (Nasdaq: ALTR), AmerisourceBergen (NYSE: ABC), AMETEK (NYSE: AME), Ashland (NYSE: ASH), Baker Hughes (NYSE: BHI), Black Box (Nasdaq: BBOX), Boston Properties (NYSE: BXP), Buckeye Technologies (NYSE: BKI), Calamos Asset Management (Nasdaq: CLMS), Callaway Golf (NYSE: ELY), Canadien National Railway (NYSE: CNI), Carpenter Technology (NYSE: CRS), Cascade Financial (Nasdaq: CASB), Cohen & Steers (NYSE: CNS), Concurrent Computer (Nasdaq: CCUR), Convergys (NYSE: CVG), Cooper Industries (NYSE: CBE), Corning (NYSE: GLW), CSG Systems (Nasdaq: CSGS), Delta Air Lines (NYSE: DAL), DeVry (NYSE: DV), Dime Community Bancshares (Nasdaq: DCOM), DuPont (NYSE: DD), EMC (NYSE: EMC), Energizer (NYSE: ENR), Enterprise Financial (Nasdaq: EFSC), First Financial Bancorp (Nasdaq: FFBC), First Place Financial (Nasdaq: FPFC), FirstMerit (Nasdaq: FMER), Flushing Financial (Nasdaq: FFIC), FPL Group (NYSE: FPL), Gilead Sciences (Nasdaq: GILD), Great Southern Bancorp (Nasdaq: GSBC), Harris Interactive (Nasdaq: HPOL), Hutchinson Technology (Nasdaq: HTCH), Infinera (Nasdaq: INFN), Integrated Device Technology (Nasdaq: IDTI), Iteris (AMEX: ITI), Jacobs Engineering (NYSE: JEC), Johnson & Johnson (NYSE: JNJ), Key Tronic (Nasdaq: KTCC), Keynote Systems (Nasdaq: KEYN), Kilroy Realty (NYSE: KRC), Kinetic Concepts (NYSE: KCI), KPN Royal Dutch Telecom (OTC: KKPNY.PK), LAN Airlines (NYSE: LFL), Marten Transport (Nasdaq: MRTN), McKesson Corp. (NYSE: MCK), Mercury Computer (Nasdaq: MRCY), Meritage Homes (NYSE: MTH), MGIC Investment (NYSE: MTG), Molex (Nasdaq: MOLX), National Instruments (Nasdaq: NATI), Network Equipment Technologies (NYSE: NWK), NewAlliance Bankshares (NYSE: NAL), NewBridge Bancorp (Nasdaq: NBBC), Novartis (NYSE: NVS), Nucor (NYSE: NUE), Pactiv (NYSE: PTV), Parametric Technology (Nasdaq: PMTC), Peabody Energy (NYSE: BTU), Peoples Bancorp (Nasdaq: PEBO), Pervasive Software (Nasdaq: PVSW), Plantronics (NYSE: PLT), Polycom (Nasdaq: PLCM), QLogic (Nasdaq: QLGC), Rayonier (NYSE: RYN), Regions Financial (NYSE: RF), RF Micro Devices (Nasdaq: RFMD), RLI Corp. (NYSE: RLI), Rochester Medical (Nasdaq: ROCM), Rock-Tenn (NYSE: RKT), S.Y. Bancorp (Nasdaq: SYBT), Sanmina-SCI (Nasdaq: SANM), Savannah Bancorp (Nasdaq: SAVB), Sherwin-Williams (NYSE: SHW), Siemens (NYSE: SI), Signature Bank of NY (Nasdaq: SBNY), Southwest Georgia Financial (NYSE: SGB), STMicroelectronics (NYSE: STM), Stryker (NYSE: SYK), Super Micro Computer (Nasdaq: SMCI), Tellabs (Nasdaq: TLAB), Tempur Pedic (NYSE: TPX), The McGraw-Hill Cos. (NYSE: MHP), The South Financial Group (Nasdaq: TSFG), The Travelers Cos. (NYSE: TRV), Thomas Weisel Partners (Nasdaq: TWPG), Trustmark (Nasdaq: TRMK), Tuesday Morning (Nasdaq: TUES), UMB Financial (Nasdaq: UMBF), United States Steel (NYSE: X), Verizon (NYSE: VZ), Virginia Commerce (Nasdaq: VCBI), W.W. Grainger (NYSE: GWW), Washington Trust Bancorp (Nasdaq: WASH), Weatherford International (NYSE: WFT), WesBanco (Nasdaq: WSBC), Whitney Holding (Nasdaq: WTNY), WMS Industries (NYSE: WMS) and Yahoo! (Nasdaq: YHOO).

Wednesday

The World Economic Forum kicks off in Davos, Switzerland on Wednesday, where the topic of discussion will be - you guessed it, the state of the global economy. This annual meeting draws the world's most powerful people and most intelligent minds.

Last year's event was memorable for many reasons, but what sticks out in my mind is the on stage exchange between Turkish President Recep Tayyip Erdogan and Israeli President Shimon Peres. It concluded with Erdogan storming off the stage feeling insulted by the moderator who was more concerned about dinner getting cold than the airing of these intriguing point of views. See our coverage of last year's Davos exchange here (including video).

Must see TV returns, as Treasury Secretary Timothy Geithner joins his predecessor, Hank Paulson, in an appearance before the House Oversight and Government Reform Panel. Geithner has been getting testy lately, and might be getting tired of being placed on trial week after week. We think he is most likely to resign among Obama's team, as a life in the private sector probably does not look all that bad to him from his current vantage point. The poison of choice on Wednesday will be the AIG (NYSE: AIG) bailout.

The Mortgage Bankers Association report on mortgage activity trends will be first to the wire on Wednesday. We covered the mortgage trends report in-depth last week, so please see our report via the link here.

Following Monday's Existing Home Sales data, New Home Sales are up for report on Wednesday morning at 10:00 a.m. Unlike Existing Homes, the annual pace of New Homes Sales dropped precipitously in November (-11%) to 355K. The difference between New and Existing Home Sales is clear, and we discussed it in October in the article linked to here. Like existing properties, the monthly fluctuation was partly influenced by the on-again off-again first-time homebuyer tax credit.

Economists are forecasting December will produce a New Home Sales rate of 370K, based on Bloomberg's survey, but that consensus was generated before existing sales missed by a mile. Still, inventory in the new home market was last measured at 7.9 months, based partly on the weak sales rate in November. This gives new homes a chance, but we would not bet on it.

The New York Society of Security Analysts takes up the outlook for natural gas on Wednesday. The EIA reports on Petroleum Inventory at 10:30 a.m. Last week's data, covering the week ended January 15, showed commercial crude oil inventory decreased by 0.4 million barrels. Oil stocks remain above the upper limit of the average range for this time of year. Motor gasoline inventory increased by 3.9 million barrels, and is also above the upper limit of the average range due to light consumption in a still relatively subpar economic environment. Distillate fuel inventory decreased by 3.3 million barrels, but is still above the upper boundary of the average range. Distillates are affected by seasonal factors, as is motor gasoline.

The Federal Open Market Committee (FOMC) will publish its policy statement at the conclusion of its two-day meeting Wednesday at 2:15 p.m. The FOMC is widely expected to keep the fed funds target rate steady at 0% to 0.25%, especially after last week's pick up in weekly jobless claims.

President Obama delivers his first State of the Union Address before Congress on Wednesday night at 9:00 p.m. The highly intense speech to the nation comes just one week after his toughest political week yet, thanks to the loss of the Senate seat in Massachusetts and harsh criticism delivered on recent financial regulation proposals. We criticized one of those here in our article, "Financial Crisis Responsibility Fee."

In overseas activity, Porfirio Lobo Sosa will be inaugurated as the president of Honduras. Protests are expected throughout the country. German Chancellor Angela Merkel addresses the German Parliament regarding its Afghanistan policy. Poland, and the world (except Mahmoud Ahmadinejad) mark the 65th anniversary of the liberation of Auschwitz.

Apple (Nasdaq: AAPL) will reportedly unveil its latest trend setting product, a multimedia tablet that will reportedly allow users to read ebooks, among other applications. Oracle (Nasdaq: ORCL) will hold its analyst day Wednesday's.

The earnings schedule includes reports from 8x8, Inc. (Nasdaq: EGHT), Abbott Labs (NYSE: ABT), AirTran Holdings (NYSE: AAI), Align Technology (Nasdaq: ALGN), Allegheny Technologies (NYSE: ATI), Alliance Holdings (Nasdaq: AHGP), AltiGen Communications (Nasdaq: ATGN), American River Bankshares (Nasdaq: AMRB), AmeriCredit (NYSE: ACF), AmeriGas Partners (NYSE: APU), Amylin Pharmaceuticals (Nasdaq: AMLN), Astoria Financial (NYSE: AF), Bally Technologies (NYSE: BYI), Banco Bilbao Vizcaya Argentaria, S.A. (Nasdaq: BBVA), Banner Corp. (Nasdaq: BANR), BlackRock (NYSE: BLK), BMC Software (NYSE: BMC), BOK Financial (Nasdaq: BOKF), Boston Private Financial (Nasdaq: BPFH), Cabot (NYSE: CBT), CACI International (Nasdaq: CACI), Canon (NYSE: CAJ), Capstead Mortgage (NYSE: CMO), Cash Store Financial (Toronto: CSF.TO), Caterpillar (NYSE: CAT), Celestica (NYSE: CLS), CGI Group (NYSE: GIB), Citrix Systems (Nasdaq: CTXS), Cohu (Nasdaq: COHU), ConocoPhillips (NYSE: COP), Covance (NYSE: CVD), Crown Castle International (NYSE: CCI), CTS Corp. (NYSE: CTS), Cullen/Frost Bankers (NYSE: CFR), DSP Group (Nasdaq: DSPG), E*TRADE Financial (Nasdaq: ETFC), Eagle Materials (NYSE: EXP), East West Bancorp (Nasdaq: EWBC), Electro Scientific Industries (Nasdaq: ESIO), Elizabeth Arden (Nasdaq: RDEN), Empresa Nacional de Electricidad SA (NYSE: EOC), Energen (NYSE: EGN), Enersis SA (NYSE: ENI), Evans Bancorp (Nasdaq: EVBN), FICO (Nasdaq: FICO), First Cash (Nasdaq: FCFS), First Community Bancshares (Nasdaq: FCBC), First Financial Holdings (Nasdaq: FFCH), Flextronics (Nasdaq: FLEX), General Dynamics (NYSE: GD), Green Mountain Coffee (Nasdaq: GMCR), Hanesbrands (NYSE: HBI), Harris (NYSE: HRS), Hess Corp. (NYSE: HES), Hoku Scientific (Nasdaq: HOKU), IberiaBank (Nasdaq: IBKC), Illinois Tool Works (NYSE: ITW), Innovative Solutions and Support (Nasdaq: ISSC), Intersil (Nasdaq: ISIL), John B. Sanfilippo & Son (Nasdaq: JBSS), Kirby (NYSE: KEX), Lam Research (Nasdaq: LRCX), Landstar System (Nasdaq: LSTR), LeCroy (Nasdaq: LCRY), Legacy Bancorp (Nasdaq: LEGC), LSI Corp. (NYSE: LSI), MainSource Financial (Nasdaq: MSFG), Marine Products (NYSE: MPX), MeadWestvaco (NYSE: MWV), Mellanox Technologies (Nasdaq: MLNX), Merchants Bancshares (Nasdaq: MBVT), Methanex (Nasdaq: MEOH), Mizuho Investors (OTC: MZHIF.PK), Murphy Oil (NYSE: MUR), Netflix (Nasdaq: NFLX), New York Community Bancorp (NYSE: NYB), Noble Corp. (NYSE: NE), Norfolk Southern (NYSE: NSC), NVR, Inc. (NYSE: NVR), Owens-Illinois (NYSE: OI), OSI Systems (Nasdaq: OSIS), Piper Jaffray (NYSE: PJC), Praxair (NYSE: PX), Preferred Bank (NYSE: PFBC), PSS World Medical (Nasdaq: PSSI), Punjab National Bank (Bombay: PNB.BO), QUALCOMM (Nasdaq: QCOM), Rediff.com (Nasdaq: REDF), Regis Corp. (NYSE: RGS), Rockwell Automation (NYSE: ROK), Rollins (NYSE: ROL), RPC, Inc. (NYSE: RES), Rurban Financial (Nasdaq: RBNF), Ryland Group (NYSE: RYL), SAP AG (NYSE: SAP), SEI Investments (Nasdaq: SEIC), ShoreTel (Nasdaq: SHOR), Sify Limited (Nasdaq: SIFY), Smith International (NYSE: SII), Solutia (NYSE: SOA), Southern Co. (NYSE: SO), St. Jude Medical (NYSE: STJ), StanCorp Financial (NYSE: SFG), Sunoco Logistics Partners (NYSE: SXL), SurModics (Nasdaq: SRDX), Susquehanna Bancshares (Nasdaq: SUSQ), Symantec (Nasdaq: SYMC), Taylor Capital Group (Nasdaq: TAYC), Teradyne (NYSE: TER), Tetra Tech (Nasdaq: TTEK), Texas Capital Bancshares (Nasdaq: TCBI), The Boeing Company (NYSE: BA), The McClatchy Co. (NYSE: MNI), The Stanley Works (NYSE: SWK), Tractor Supply (Nasdaq: TSCO), Tyco Electronics (NYSE: TEL), UAL Corp. (Nasdaq: UAUA), United Bankshares (Nasdaq: UBSI), United Technologies (NYSE: UTX), Universal Stainless & Alloy (Nasdaq: USAP), USG (NYSE: USG), Valero (NYSE: VLO), Varian Medical (NYSE: VAR), WellPoint (NYSE: WLP), Werner Enterprises (Nasdaq: WERN), Westell Technologies (Nasdaq: WSTL), Wintrust Financial (Nasdaq: WTFC), Yahoo Japan (OTC: YAHOF.PK), Zhone Technologies (Nasdaq: ZHNE) and Zilog (Nasdaq: ZILG).

Thursday

Weekly Jobless Claims spiked in their last reporting, and Wall Street Greek readers were prepared for it. We had been warning of the obvious (to us anyway) over the past few weeks, that the holidays might have a soothing effect on employers hearts, which fortunately seem to still exist (though in small supply). Economists forecast initial claims will tally 440K in the week ended January 23, which would be a stark improvement from last week's 482K reading. The four-week moving average moved up 7K last week, to 448,250. Look for the report at 8:30 a.m., and we would take the "over" on this one.

December's Durable Goods Orders will be reported at 8:30. Orders increased a revised 0.7% in November, versus the initially reported 0.2% gain. Ex-Transportation, Orders increased a revised 1.5%. Philly, New York and Chicago area manufacturing reports have been relatively positive in recent checks, and the ISM Manufacturing Report's New Orders Index improved 5 points in December, to 65.5. So, all signs point toward a gain in December's Order report. Economists forecast Durable Goods Orders improved 1.6% in December (2.0% based on Barron's). Be careful, because this figure oftentimes moves big.

Look for the EIA's weekly Natural Gas Report at 10:30. Last week's data, covering the period ended January 15, showed natural gas inventory declined by 245 Bcf. This year's slope of net natural gas draw has been steeper than both last year's pace of usage and the five-year average. Natural Gas Storage now stands only 22 Bcf higher than last year's level and 6 Bcf below the five-year average for this time of year. At this rate, we seem to be heading toward a significant trough. We've been pointing this out to our readers for weeks now (just go back and look), and have looked toward natural gas prices and the stocks of producers like Encana (NYSE: ECA) for long ideas. Nat gas had traded at a relative discount to crude (in terms of BTU), but has since closed the gap (though I have not looked in a while - so your comments welcomed if your in the know).

The Fed's Balance Sheet and Money Supply Reports come due in the afternoon. Meanwhile, Republicans from the House of Representatives will begin a retreat on Thursday as they contemplate strategy from a new perspective.

Overseas, Greek Prime Minister George Papandreou is scheduled to address the world on his troubled nation's economic outlook and plans to resolve the debt crisis. Also look for the biggest conference of the week on Afghanistan to kick off in London, with the UN Secretary General, US Secretary of State, Afghanistan's President and the UK's Prime Minister all attending. In Tehran, the heads of the Iranian and Iraqi Foreign Ministry consular offices are getting together to discuss neighborhood issues.

Bank of America's (NYSE: BAC) Merrill Lynch group will host a Gaming Industry Conference in Las Vegas. The EPS schedule gets extra heavy on Thursday and includes big names like Microsoft (Nasdaq: MSFT), Amazon.com (Nasdaq: AMZN), Nokia (NYSE: NOK), AT&T (NYSE: T), Ford (NYSE: F), Procter & Gamble (NYSE: PG), Lockheed Martin (NYSE: LMT) and US Airways (NYSE: LCC). queens floristThe rest of the schedule includes data from 1-800-Flowers.com (Nasdaq: FLWS), 3M (NYSE: MMM), 3PAR (NYSE: PAR), Abaxis (Nasdaq: ABAX), Acxiom (Nasdaq: ACXM), Adaptec (Nasdaq: ADPT), Advantest (NYSE: ATE), Airgas (NYSE: ARG), Alaska Air Group (NYSE: ALK), Alliance Fiber Optic Products (Nasdaq: AFOP), Altria (NYSE: MO), American Electric Power (NYSE: AEP), Anaren (Nasdaq: ANEN), Applied Micro Circuits (Nasdaq: AMCC), Ariba (Nasdaq: ARBA), Arkansas Best (Nasdaq: ABFS), AstraZeneca (NYSE: AZN), Avid Technology (Nasdaq: AVID), Avnet (NYSE: AVT), Ball Corp. (NYSE: BLL), Banco Bradesco (NYSE: BBD), Bancorp Rhode Island (Nasdaq: BARI), Baxter Int'l (NYSE: BAX), Becton Dickinson (NYSE: BDX), Bemis (NYSE: BMS), Berkshire Hills Bancorp (Nasdaq: BHLB), Black Hills (NYSE: BKH), Bottomline Technologies (Nasdaq: EPAY), Bridge Capital (Nasdaq: BBNK), Bridgford Foods (Nasdaq: BRID), Bristol-Myers-Squibb (NYSE: BMY), Broadpoint Securities (Nasdaq: BPSG), Brunswick (NYSE: BC), Bryn Mawr Bank (Nasdaq: BMTC), C.R. Bard (NYSE: BCR), CA, Inc. (Nasdaq: CA), Cabot Microelectronics (Nasdaq: CCMP), Cadence Financial (Nasdaq: CADE), Callidus Software (Nasdaq: CALD), Canadien Pacific Railway (NYSE: CP), CARDICA (Nasdaq: CRDC), Cardinal Health (NYSE: CAH), Cash America Int'l (NYSE: CSH), Cathay General Bancorp (Nasdaq: CATY), Cavco Industries (Nasdaq: CVCO), Cavium Networks (Nasdaq: CAVM), CE Franklin (Nasdaq: CFK), Celgene (Nasdaq: CELG), Cepheid (Nasdaq: CPHD), CEVA, Inc. (Nasdaq: CEVA), Check Point Software Tech (Nasdaq: CHKP), China BAK Battery (Nasdaq: CBAK), Chordiant Software (Nasdaq: CHRD), Chubb (NYSE: CB), Cirrus Logic (Nasdaq: CRUS), Citizens Banking (Nasdaq: CRBC), City National (NYSE: CYN), CNX Gas (NYSE: CXG), CoBiz (Nasdaq: COBZ), Coherent (Nasdaq: COHR), Colgate-Palmolive (NYSE: CL), Coloniel Properties (NYSE: CLP), Columbia Banking (Nasdaq: COLB), Columbia Sportswear (Nasdaq: COLM), Columbus McKinnon (Nasdaq: CMCO), Computer Program & Systems (Nasdaq: CPSI), Compuware (Nasdaq: CPWR), Cybersource (Nasdaq: CYBS), Cymer (Nasdaq: CYMI), Cypress Semiconductor (NYSE: CY), Cytec (NYSE: CYT), Danaher (NYSE: DHR), Danvers Bancorp (Nasdaq: DNBK), Deluxe (NYSE: DLX), Destination Maternity (Nasdaq: DEST), Digital River (Nasdaq: DRIV), Dollar Fin'l (Nasdaq: DLLR), Dominion Resources (NYSE: D), Dover Downs (NYSE: DDE), Dover Motorsports (NYSE: DVD), Duke Realty (NYSE: DRE), Eagle Bancorp (Nasdaq: EGBN), Eastman Chemical (NYSE: EMN), Eastman Kodak (NYSE: EK), Eli Lilly (NYSE: LLY), EQT Corp. (NYSE: EQT), Ethan Allen (NYSE: ETH), Exar (Nasdaq: EXAR), Federated Investors (NYSE: FII), Financial Institutions (Nasdaq: FISI), First Commonwealth (NYSE: FCF), FormFactor (Nasdaq: FORM), Franklin Resources (NYSE: BEN), Gentex (Nasdaq: GNTX), Genworth Financial (NYSE: GNW), Giga-tronics (Nasdaq: GIGA), Goodrich (NYSE: GR), Hammi Fin'l (Nasdaq: HAFC), Harsco (NYSE: HSC), Helmerich & Payne (NYSE: HP), Heritage Fin'l (Nasdaq: HFWA), Hub Group (Nasdaq: HUBG), Immunogen (Nasdaq: IMGN), Informatica (Nasdaq: INFA), Integrated Silicon (Nasdaq: ISSI), Interactive Intelligence (Nasdaq: ININ), Int'l Speedway (Nasdaq: ISCA), Int'l Coal (NYSE: ICO), Invesco (NYSE: IVZ), Investors Bancorp (Nasdaq: ISBC), Ixys Corp. (Nasdaq: IXYS), Janus Capital (NYSE: JNS), JetBlue (Nasdaq: JBLU), Juniper (Nasdaq: JNPR), K-Sea (NYSE: KSP), Kansas City Southern (NYSE: KSU), Kennametal (NYSE: KMT), Kensey Nash (Nasdaq: KNSY), Key Technology (Nasdaq: KTEC), KLA-Tencor (Nasdaq: KLAC), Kyocera (NYSE: KYO), L-3 Communications (NYSE: LLL), LaBarge (NYSE: LB), Lancaster Colony (Nasdaq: LANC), Lattice Semi (Nasdaq: LSCC), Leggett & Platt (NYSE: LEG), Life Tech (Nasdaq: LIFE), Macatawa Bank (Nasdaq: MCBC), Maxim Integrated (Nasdaq: MXIM), MBT Fin'l (Nasdaq: MBTF), McCormick & Co. (NYSE: MKC), Mead Johnson (NYSE: MJN), Media General (NYSE: MEG), Medical Properties (NYSE: MPW), Micrel Semiconductor (Nasdaq: MCRL), Midsouth Bancorp (NYSE: MSL), MIPS Tech (Nasdaq: MIPS), Mitsubishi (OTC: MSBHY.PK), Monro (Nasdaq: MNRO), Motorola (NYSE: MOT), National Penn Bancshares (Nasdaq: NPBC), NBTY (NYSE: NTY), NEI (Nasdaq: NENG), NewMarket (NYSE: NEU), Nidec (NYSE: NJ), NStar (NYSE: NST), Occidental Petroleum (NYSE: OXY), Old Dominion Freight (Nasdaq: ODFL), Old Republic Int'l (NYSE: ORI), Omnicell (Nasdaq: OMCL), Oplink (Nasdaq: OPLK), optionsXpress (Nasdaq: OXPS), Oriental Fin'l (NYSE: OFG), Oshkosh (NYSE: OSK), Pacific Capital (Nasdaq: PCBC), Pixelworks (Nasdaq: PXLW), PMC-Sierra (Nasdaq: PMCS), Polaris (NYSE: PII), Potash (NYSE: POT), Quantum (NYSE: QTM), Rambus (Nasdaq: RMBS), Raytheon (NYSE: RTN), Robert Half (NYSE: RHI), Rockwell Collins (NYSE: COL), Royal Caribbean (NYSE: RCL), Ruddick (NYSE: RDK), SanDisk (Nasdaq: SNDK), Sandy Spring Bancorp (Nasdaq: SASR), Sappi Ltd (NYSE: SPP), ScanSource (Nasdaq: SCSC), SCBT Fin'l (Nasdaq: SCBT), Seacoast Banking (Nasdaq: SBCF), Selectica (Nasdaq: SLTC), SK Telecom (NYSE: SKM), Sonic Foundry (Nasdaq: SOFO), Southern Community Fin'l (Nasdaq: SCMF), Southwest Bancorp (Nasdaq: OKSB), Span America Medical (Nasdaq: SPAN), Standex Int'l (NYSE: SXI), Stanley (NYSE: SXE), Strattec Security (Nasdaq: STRT), Sybase (NYSE: SY), Synovus Fin'l (NYSE: SNV), T. Rowe Price (Nasdaq: TROW), Taiwan Semi (NYSE: TSM), Teledyne (NYSE: TDY), Telular (Nasdaq: WRLS), Tessera (Nasdaq: TSRA), Textron (NYSE: TXT), The Bancorp (Nasdaq: TBBK), Estee Lauder (NYSE: EL), Thoratec (Nasdaq: THOR), Time Warner Cable (NYSE: TWC), Transcend Svcs (Nasdaq: TRCR), Tyco Int'l (NYSE: TYC), Umpqua Holdings (Nasdaq: UMPQ), Under Armour (NYSE: UA), Varian Semi (Nasdaq: VSEA), Vistaprint (Nasdaq: VPRT), Waddell & Reed (NYSE: WDR), Washington Banking (Nasdaq: WBCO), WESCO Int'l (NYSE: WCC), Williams Controls (Nasdaq: WMCO), World Acceptance (Nasdaq: WRLD), WSFS Fin'l (Nasdaq: WSFS), Xcel Energy (NYSE: XEL), Yadkin Valley Bank (Nasdaq: YAVY), Zenith National Insurance (NYSE: ZNT), Zimmer Holdings (NYSE: ZMH) and Zoll Medical (Nasdaq: ZOLL).

Friday

Friday brings five economic reports with it, including the first reporting of GDP for the fourth quarter. Third quarter GDP was revised downward significantly in its last check up, to 2.2% growth, from 2.8%. Economists are looking for this preliminary reporting of Q4 2009 to show growth of 4.5%, according to Bloomberg's survey (4.6% by Barron's). Inventory building should have contributed nicely to growth this past quarter. The GDP Price Index is seen heating up, according to the economists, who see a 1.3% increase, against the 0.4% rise last quarter. The investment community will pick carefully through the data, and so will we, so be sure to be with us on Friday morning. Keep an eye on exports too, as Chinese demand is looking pretty hot.

Fourth Quarter Employment Costs should continue tempered by high unemployment and the resulting hiring and salary "freezes" in effect across American industry. Employment costs rose 0.4% in both Q2 and Q3 of 2009, and economists see the same for Q4.

Look for the Chicago Purchasing Managers Index (PMI) at 9:45 on Friday. Economists see the pace of improvement slowing in January, as the index is seen slipping to 57.0 (57.4 at Barron's), from the revised 58.7 posted in December.

At 9:55, catch the final January reading of the Reuters/University of Michigan Consumer Sentiment Index. The Conference Board's measure will have already reached the wire earlier in the week and given insight into this reading for the close of January. Bloomberg's survey of economists shows expectations for improvement to 73.0, from a level of 72.8 in mid-January.

Finally, Farm Prices are due for report at 3:00 p.m. Overseas on Friday, former U.K. Prime Minister Tony Blair will testify on his nation's role in the Iraq war. A Nigerian Court is scheduled to rule on a lawsuit seeking to implant Vice President Goodluck Jonathon into the President's office; this due to the illness of the president.

Diamond Foods (Nasdaq: DMND) has an analyst meeting scheduled. The somewhat lighter earnings schedule includes news from Chevron (NYSE: CVX), Honeywell (NYSE: HON), Arch Coal (NYSE: ACI), Avery Dennison (NYSE: AVY), Fortune Brands (NYSE: FO), Horizon Lines (NYSE: HRZ), Idexx Labs (Nasdaq: IDXX), Mattel (NYSE: MAT), Mizuho Financial Group (NYSE: MFG), Newell Rubbermaid (NYSE: NWL), NTT DoCoMo (NYSE: DCM), Oppenheimer Holdings (NYSE: OPY), PACCAR (Nasdaq: PCAR), Provident Financial (NYSE: PFS), RBC Bearings (Nasdaq: ROLL), Saia (Nasdaq: SAIA) and Wilmington Trust (NYSE: WL). Also look for data out of ABG Shipyard (Bombay: ABGSHIP.BO), Accordia Golf (OTC: ACGFF.PK), All Nippon Airways (OTC: ALNPY.PK), AsiaInfo Holdings (Nasdaq: ASIA), Autoliv (NYSE: ALV), Center Financial Corp. of California (Nasdaq: CLFC), Central Pacific Financial (NYSE: CPF), Dover Corp. (NYSE: DOV), Enbridge Energy Partners (NYSE: EEP), Encore Bancshares (Nasdaq: EBTX), Graham (NYSE: GHM), Great Southern Bancorp (Nasdaq: GSBC), KT Corp. (NYSE: KT), L.B. Foster (Nasdaq: FSTR), Mahanagar Telephone Nigam Ltd. (NYSE: MTE), Makita Corp. (Nasdaq: MKTAY), MetroCorp. Bankshares (Nasdaq: MCBI), NuStar GP Holdings (NYSE: NSH), United Community Banks (Nasdaq: UCBI), West Bancorporation (Nasdaq: WTBA) and Yucheng Technologies (Nasdaq: YTEC).

Rev up for the Daytona 500 on Saturday, with the start of the 48th Rolex 24 at Daytona at 3:30 PM.

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Friday, January 22, 2010

Financial Crisis Responsibility Fee

financial crisis responsibility fee
Visit the front page of Wall Street Greek to see our current coverage of Wall Street, Washington, global affairs, economic reports and global financial markets.

The Financial Crisis Responsibility Fee is an irresponsible proposal, in my view. While bonus jockeying by TARP babies disgusts me, two wrongs do not make a right. I propose the Administration instead seek to reform the process of determination of executive compensation, since it is paradoxical that Americans view it grossly excessive, and yet shareholders agree to it.

(Relative Tickers: NYSE: BAC, NYSE: JPM, NYSE: GS, NYSE: MS, NYSE: WFC, NYSE: C, NYSE: USB, NYSE: BK, NYSE: PNC, NYSE: STI, NYSE: RY, NYSE: TD, NYSE: BNS, NYSE: KEY, NYSE: SAN, NYSE: STD, Nasdaq: ITUB, NYSE: WBK, NYSE: MTU, NYSE: MFG, NYSE: CS, NYSE: UBS, NYSE: BCS, NYSE: DB, NYSE: BMO, NYSE: IBN, NYSE: LYG, NYSE: NBG, NYSE: BAP, NYSE: AIB, Nasdaq: GGAL, NYSE: SBP, NYSE: BLX, NYSE: XLF, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD)

Financial Crisis Responsibility Fee


Wall Street, the GreekLast week, the President proposed his Financial Crisis Responsibility Fee, a tax on the 50 largest financial companies. The proposed fee has been engineered to recover funds provided to the firms, issued to ensure their survival through the financial crisis, and to save the country's financial system as well. There are various possibilities for the reasoning behind the Administration's seeking to impose this fee now.

The President may simply intend what he states, to ensure that those who benefited from the TARP payouts meet their obligations. The benefit to him and his party is clear, as he would demonstrate to the American people that greedy executives will not pay themselves big bonuses at the cost of the American taxpayer. Rather, in this case, the shareholders of the firms in question will continue to rightly to bear their cost.

As with any political issue, the exploration of other possibilities cannot be avoided. As the Treasury Budget deficit expands due to stimulus and other government spending that is matched against slimmer government receipts, the President is under intensifying pressure to find money. Tapping into popular sentiment that stands against Wall Street offers an easy route toward those funds, especially as these firms issue their annual bonus payouts. However, the taxpayer is only owed $117 billion by "conservative estimates," with fund flows spread out over a period of 12 years; so we are not talking about a significant annual inflow. Perhaps every little bit counts though... Finally, there is a possibility that the Administration only seeks to better position itself for political jockeying purposes.

While I understand the President's ire toward irresponsible and selfish executives at work on Wall Street, I disagree with his Administration's response. The American President pushed the tenets of capitalism aside, by proposing a new special levy on what appears an unscientifically identified group of financial organizations. Fifty of the nation's largest banks have been targeted, supposedly in order to drive home a lesson, that excessive risk taking does not pay. The action seems to me a naive and sloppy hacking for the sake of a misguided sense of righteousness, or perhaps yet another politically motivated perversion of the American way.

Democrats have come under a lot of pressure of late, and might benefit from championing this Main Street cause. Since both the recession and TARP were Bush's babies, it makes sense to form a corrective political strategy. Even if Obama's inspiration is not political, I doubt his party's political positioning advisers are talking him out of it. I am not so sure about the economic crew though, because this stinks of mafia state.

Politically speaking, with the loss of the Senate seat in Massachusetts, the Administration will have difficulty getting the Democratic Party agenda accomplished. Playing hardball on issues like this one might simply give the Democrats the bargaining chips they need to pass legislation like health care reform.

Still, I am almost apologetic for my words, because I am far from favoring the excesses and criminal-like, selfish activity I see at the TARP and other government saved firms. The bonus jockeying that occurred on Wall Street last fall disgusts me. Several bank corporate executives determined their firms should sell new shares of stock in order to raise capital, so that they might repay TARP loans early.

Before you pat them on the back for their great sense of responsibility to the government, let us examine their incentive and who bore the real cost. The reason existing shareholders' stakes were diluted by these hurried equity offerings could be attributed to corporate executives' intent to once again collect the bonuses they had grown accustomed to over the years. You see, just before these slick maneuvers occurred, the government decided no TARP baby could pay bonuses to their executives. So, the entire nursery made a break for it.

I think you can see why I am not in perfect opposition to the President in this case, but I will explain now why I disagree with this method of engagement. Free market capitalism works best when the game is played fairly. When one team cheats, it does not improve the game if the other does as well. In other words, two wrongs do not make a right. We should not impose surprise taxes on the shareholders of these firms. What we should have done is taken equity stakes in the firms, enough to ensure bonuses would not be paid out. Casting a broad net is unfairly catching goldfish along with the sharks. Firms have been discriminately selected based on their size alone, and some of these organizations were forced to take part in TARP while others did not have as dirty hands as those we seek to punish.

Maybe though, it takes some naivete' to get great things done, and perhaps this is just the cost we bear for it. It is possible that shareholders might punish their corporate leadership and improve corporate governance as a result of this bill, should it pass into law. What our government should really be seeking to do, is to change the way corporate executive compensation is determined. If Americans disagree with the amount of compensation executives make, than the system of determination must be flawed. Otherwise, why do the shareholders of these firms, which are inclusive of Americans, continue to elect and agree to such payments?

The destructive effect of this Presidential proposal is to raise uncertainty around this government. In the eyes of the investment community, it is now unpredictable. Investors and corporate America will worry that the government makes rules up as it goes along, and therefore cannot be trusted. The stock market is a great judge of value, and though it was slow to catch on to the agenda this time, as the President announced another action this week to go along with his new tax, stocks rediscovered volatility. I am sure the Administration does not seek to do more harm than good, but this action is poised to, in my view.

"It is also in reality the integrity of our government and financial markets that we place in peril."

Political will has shown itself to be soft through this economic crisis, and so I anticipate our elected leaders will cave like jellyfish to populist sentiment that stands strongly against the proverbial “Wall Street;” though it is in reality 50 big banks we speak of. It is also in reality the integrity of our government and financial markets that we place in peril.

Bloomberg took a survey of its subscribers that showed 77% of investors and analysts view the President as anti-business, which may perhaps be a side effect the Democrats had not anticipated. Still, investors and analysts do not comprise the entirety of the nation, as 52% of Americans said Obama struck the right balance.

The idealist in me doubts a bill like this could pass through Congress, but the realist, who knows what short length political will extends, worries it might. The only hope for honest capitalism to remain unmolested now is if the Democrats only seek to use this initiative as a bargaining chip, to be traded later for another legislative gain. We must not allow this proposal to become law, not for the sake of "responsibility," but for the sake of the integrity of our capitalism.

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Editor's Note: This article should interest investors in the largest financial institutions, including Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C), US Bancorp (NYSE: USB), Bank of New York Mellon (NYSE: BK), PNC Financial Services (NYSE: PNC), Suntrust Banks (NYSE: STI), Royal Bank of Canada (NYSE: RY), Toronto-Dominion (NYSE: TD), The Bank of Nova Scotia (NYSE: BNS), Keycorp (NYSE: KEY), Banco Santander Chi (NYSE: SAN), Banco Santander ADR (NYSE: STD), ITAU Unibanco (Nasdaq: ITUB), Westpac Banking (NYSE: WBK), Mitsubishi UFJ (NYSE: MTU), Mizuho Financial (NYSE: MFG), Credit Suisse (NYSE: CS), UBS AG (NYSE: UBS), Barclays Plc (NYSE: BCS), Deutsche Bank (NYSE: DB), Bank of Montreal (NYSE: BMO), ICICI Bank (NYSE: IBN), Lloyds Banking Group (NYSE: LYG), National Bank of Greece (NYSE: NBG), Credicorp (NYSE: BAP), Allied Irish Banks (NYSE: AIB), Grupo Financiero Galicia SA (Nasdaq: GGAL), Santander Bancorp (NYSE: SBP), Banco Latinamericano (NYSE: BLX), NYSE: XLF, etc.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Obama's Financial Regulation, Google (Nasdaq), GE (NYSE: GE), McDonald's (NYSE: MCD)

Obama's financial regulation Google Nasdaq: GOOG McDonalds MCD NYSE: GE
Morning Coffee

Obama's regulatory attack on Wall Street has got the market buzzing this morning, but a few big earnings reports deserve some attention as well. News from Google (Nasdaq: GOOG), General Electric (NYSE: GE) and McDonald's (NYSE: MCD) serve as a good barometer for the economy.

Visit the front page of Wall Street Greek to see our current coverage of Wall Street, economic reports and global financial markets.

(Mentioned Tickers: Nasdaq: GOOG, NYSE: MCD, NYSE: HSY, NYSE: GE, NYSE: BAC, NYSE: JPM, NYSE: C, NYSE: GS, NYSE: XLF, NYSE: AGU, NYSE: CF, NYSE: APD, NYSE: ACO, NYSE: AVX, NYSE: BBT, NYSE: EXC, NYSE: HOG, Nasdaq: HBAN, NYSE: JCI, NYSE: KMB, Nasdaq: MBFI, Nasdaq: PRSP, NYSE: SLB, Nasdaq: SCMF, Nasdaq: STBC, NYSE: STI, Nasdaq: ERIC, NYSE: WBS, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD)

Obama's Financial Regulation & Google, GE and McDonald's


Wall Street, the GreekThe world is abuzz about President' Obama's nascent onslaught of the US financial sector. Yours truly wrote about this in an article that never made these pages last week, as it was sold to another publisher. We will publish a reconstituted work on the same premise here today. While we do our best to publish our top work here on the blog first, we need your suppport in order to ensure you the provision of our most prescient work on a timely basis. You could have been ahead of the curve on financials, if we could afford to publish here alone. Please consider a donation to help us make that possible.

Obama's War on Wall Street

The Dow Jones Industrial Average sank 2% Thursday, after falling 1.1% the day before, greatly due to the rumors of and the release of the President's latest whipping of Wall Street. Obama is showing his ugly side, the one every Republican and Independent who voted for him worried about. We suggest you take your profits NOW, because this has trouble written all over it; and IF the bill can pass OR if the Administration takes on China next, read that "big trouble."

With the late Edward Kennedy's Senate seat in Massachusetts falling to the reds, it seems the Democratic majority is adopting a new strategy based on really scary stuff. What's going on is a positioning in order to gain bargaining power for the important (to the Democrats) work. The Dems are playing on Main Street ire, and there's quite enough fuel for that fire given high unemployment and a general feeling on the street of being duped by the big boys on Wall Street.

In the meantime, stocks are tanking, with the financials leading the way. The Financial Select Sector SPDR (NYSE: XLF) fell 2.8% yesterday led by big drops at Bank of America (NYSE: BAC) -6.2%; Goldman Sachs (NYSE: GS) -4.1%; J.P. Morgan Chase (NYSE: JPM) -6.6%; and Citigroup (NYSE: C) -5.5%. An analyst at a Wall Street firm today estimated the economic costs of the President's regulation for these firms would be significant, justifying the value destruction seen (that will likely continue today).

In our yet-to-be-seen-here article, we mentioned that we doubted Obama's economic gurus were on board with the new regulatory effort against Wall Street. Today, many in the mainstream media are questioning the same, especially with regard to the position of Treasury Secretary Geithner. If the President goes too far, perhaps we will see some resignations.

All this concern about the economic leadership skill of the President has got the dollar down as well. Such a shame, just when the Greek debt crisis and questions about European unity had shaken the euro... Look for our detailed work on this regulation campaign later today. We assure you, it's still worth reading.

Speaking of...

The House Financial Services Committee takes up executive compensation today. President Obama will meet with small business representatives to discuss the economy and the small business situation. Hiring in the small business sector is said to be "gun shy" due to concerns about legislation and the surety of economic recovery. Funny that in a recent Bloomberg poll, a rather timely one mind you, President Obama is seen as anti-business by 77% of US investors. Gee, I thought you all thought he was the anti-Christ, not the Anti-Businessman!

In other government meddling (how soon we forgot the crisis and corporate improprieties huh?), the Chief Investment Officer of the TARP program, Jim Lambright, gives a speech in New York today.

Corporate News Drivers

We see good news in the three of these economic barometers. Between Google, GE and McDonald's, we've got a good read on the overall economy, and from a global perspective. Advertising recovery at Google reflects growth in an economically sensitive sector. Improved sales in December for McDonald's speaks of growing consumer spending. Rising orders for GE's goods offers sign that demand for equipment and infrastructure is up.

Google

Google (Nasdaq: GOOG) reported strong earnings results last night, but the stock is off today. GOOG's EPS line beat the analysts' consensus, posting $6.79 when excluding special items, compared to the consensus estimate for $6.48, based on Thomson Reuters data. However, revenue was reportedly only in line, and the market was apparently looking for a beat on the top line.

Google representatives said the US market was outpacing Europe in recovery, and the situation did not seem recession like anymore. Google pointed toward an upturn in Internet advertising, clearly critical to the company's business, as the driver behind the gain. I would look for a turnaround in GOOG shares from the down start, but if Obama spits on the entire market (don't forget I like the guy generally), you might get a better entry point for your long-term play down the road. The Greek has been a fan of Yahoo! (Nasdaq: YHOO) since its drop to mid-single digits (and we still like it), but we love Internet all around, as you might expect... and Google is king. Keep an eye on valuation though...

General Electric

General Electric (NYSE: GE) reported Q4 EPS results this morning as well. GE's shares were up 3.3%, despite reporting lower revenue and earnings. While revenue fell 10% and EPS (from continuing operations) dropped 22%, the market found reason to rally. GE's EPS result of $0.28 still beat the analysts' view for $0.26, according to Bloomberg. Also, some kind words from the GE crew on order growth offered investors some hope.

GE's better than expected results came mostly from cost cuts (read jobs shed), and also on a tax gain. Still, GE's order backlog increased, offering investors a sign that revenue erosion may finally cease. Its Equipment and Services backlog improved a billion to $175 billion, and Infrastructure orders rose $3.7 billion.

Still, concerns remain about GE Capital. The segment is writing fewer loans and raising reserves, while conspicuously refraining from significant write-downs. The company added $700 million to reserves, and noted its real estate segment had about $7.0 billion in unrealized losses, with another 13% value decline seen this year. Still, with the aid of its historic dividend cut, GE was able to generate $16.6 billion in cash in 2009.

The most important takeaway for global economy followers is that order backlog is stabilized and increasing in the businesses where GE makes things.

McDonald's

McDonald's (NYSE: MCD) shares are up today, after the company reported EPS ($1.03) a penny ahead of the analysts' consensus, based on Thomson Reuters. The company also noted an important 1% same-store sales rise in December, versus decreases in the prior two months. Revenues also beat analysts views, and the three of these factors are key to analyzing MCD's outlook and economic recovery. The company noted its international operations and growth continued to pick up its weaker US business, where stiff competition in tough times has discounting hurting all (especially chickens confined to a tight space for their entire lives so you can eat that $1 McNugget pack).

Other Corporate News

Agrium's (NYSE: AGU) offer to buy CF Industries (NYSE: CF) is due to expire Friday. The earnings slate includes news from Air Products & Chemicals (NYSE: APD), AMCOL International (NYSE: ACO), AVX Corp. (NYSE: AVX), BB&T Corp. (NYSE: BBT), Exelon (NYSE: EXC), Harley-Davidson (NYSE: HOG), Huntington Bancshares (Nasdaq: HBAN), Johnson Controls (NYSE: JCI), Kimberly-Clark (NYSE: KMB), MB Financial (Nasdaq: MBFI), McDonald's (NYSE: MCD), Prosperity Bancshares (Nasdaq: PRSP), Schlumberger (NYSE: SLB), Southern Community Financial (Nasdaq: SCMF), State Bancorp (Nasdaq: STBC), SunTrust (NYSE: STI), Telefon AB Ericsson (Nasdaq: ERIC) and Webster Financial (NYSE: WBS).

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