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Bearish Calls

Wednesday, August 20th, 2008 Talbots (TLB) -- “Urban Outfitters and TJX are better retail stocks. Why reach down to Talbot’s. Take profits on Talbot’s. Sell, sell, sell.” Vale (RIO) -- “This is a commodities bear market. This stock has done nothing but come down. I personally feel there is some real value here. I don’t want to get rid of it but Vale is a “don’t buy.” VeriSign (VRSN) -- “Didn’t like the quarter. I got enough problems. They didn’t deliver the numbers. I do not trust VeriSign.” Whole Foods (WMFI) -- “Another bad quarter occurred. Since they lost the dividend things have changed. I can’t get behind Whole Foods, he said. Sell, sell, sell.” Tesoro (TSO) -- “I don’t like these refiners. Refiners can’t be owned right now. Don’t buy.” US Steel (X) -- “I am waiting for steel to break in price.”

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Wall Street Over Look With Oil Prices

Tuesday, August 19th, 2008 Freddie Mac (FRE) and Fannie Mae (FNM) “What we have today is just some serious profit taking,” Jim Cramer told viewers. He described today's market action as simply giving up some gains. Cramer explained that while the market considers the repercussions of a possible government takeover of Freddie Mac and Fannie Mae, he cares more about the true underpinnings of the market, mainly the price of oil and natural gas. The Price of Oil - Anadarko Petroleum (APC) Jim Hackett, CEO of Anadarko Petroleum, discussed just how big an impact the declining cost of natural gas is having on his company. Hackett said there will be continued strong demand for natural gas until a viable alternative fuel is developed. He described the decline in his company's stock as normal market volatility and felt it was nothing to be concerned in the long term. Hackett confirmed that raw costs are indeed up 50% since the beginning of the year, but said that his company has minimized those effects by hedging and what he called “smart drilling.” The effect to Anadarko's bottom line has been on the order of just 5% to 7%. Cramer and Hackett agreed that the price of many oil and natural gas stocks are trading at a big discount to the price of the commodity itself. Cramer reiterated his buy on Anadarko and the sector as a whole. Outrage of the Day - Transocean (RIG), Rowen Drilling (RDC), Chesapeake Energy (CHK), XTO Energy (XTO), Ultra Petroleum (UPL) Cramer cautioned viewers not to take their eyes off what's important in the market. While the media may be focused on Iran, the events in Georgia and the looming tropical storm in the Gulf of Mexico, Cramer said it's the supply and demand for oil that controls the market. In the past, said Cramer, any one of these events would have instantly taken oil to $150 a barrel. Yet today, oil remains at $110 a barrel and is likely to fall even further. This only confirms that supply and demand rules the day and at $4.50 a gallon, the demand for oil and gas just isn't there. Cramer cautioned investors to scale out of the oil stocks that are directly affected by the decline in oil prices. They include companies such as Transocean, Rowen Drilling, Chesapeake Energy, XTO Energy and Ultra Petroleum. He said while it may be tempting to buy into these names ahead of the media events, the market is indicating there is more pain to come. The Magical Kingdom's Formula – Disney (DIS) Bob Iger, president and CEO of Walt Disney (DIS), talked about the effects of a slowing economy on his company's business. Iger said that Walt Disney should not be viewed as a media company, since only 20% of the company's revenues come from advertising. He said that Disney has made an intentional decision to continually lower that number as the company diversifies its assets. “We are in the media business, but that's not what we're all about,” he said. Iger said that Disney is in the business of creating and building great, long-term brands that can be leveraged around the globe. Disney, he said, is the No. 1 brand in its space because of the high quality it offers. Iger said the company fares well in tough economic times because the company's business is not as cyclical as analysts believe. He said that Disney offers a great, affordable product and flourishes from its global reach. Final Thoughts – Lowe (LOW), Macy (M) Cramer told viewers to consider some of the beaten-down bank stocks. He suggested looking into Lowe's and Macy's, both of which recently reported better-than- expected numbers.

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Todays Markets At A Glance

Monday, August 18th, 2008 *  Asia markets closed lower, with the exception of Tokyo. Nikkei +1.12% to 13,165. Hang Seng -1.09% to 20,931. Shanghai -5.34% to 2,320. BSE -0.53% to 14,646. * European markets are higher at midday. London +0.3%. Paris +0.8%. Frankfurt +0.2%. * U.S. futures are up at 7:10 AM. Dow +0.27%. S&P +0.27%. Nasdaq +0.32%. Crude +0.2% to $114. Gold +1.04% to $800.20.

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Must Know About Wall Street

Monday, August 18th, 2008 # ARS deals ignore some. Recent pacts between NY AG Andrew Cuomo and Wall Street brokerages (C, UBS, MS, JPM, WB) fall short of helping individual investors who didn't buy their auction-rate securities [ARS] directly, but rather through smaller wealth-management houses. "This is a glaring oversight," one investor - who bought Goldman Sachs- (GS) issued ARS through a different broker - says. JPMorgan confirms its settlement doesn't extend to clients of other firms, as does Wachovia. Cuomo said recently he's working his way down the list, and would eventually bring action against smaller brokers. Firms like Oppenheimer counter they had no advanced notice of the likely failure of the ARS market. # BHP Billiton posts record profit. BHP Billiton (BHP), the world's largest miner, posted a record profit on historically high prices for petroleum, iron ore, copper, and coal. Net profit for the year was $15.3B (+14.7%), short of consensus estimates of $15.86B. Revenue rose to $59.5B (+25.3%). The company acknowledged the record profit by raising its dividend to $0.41/share (vs. market expectations of $0.36/share). Despite the good report, BHP's $131B bid for rival Rio Tinto (RTP) may be in trouble. Rio is expected to release strong earnings later in the month, and some investors see no reason to combine companies doing so well individually. # MUFG-UB $3.5B deal likely be approved. In now-friendly talks with UnionBanCal (UB), Mitsubishi UFJ (MTU) offered to acquire the 35% of UB it doesn't already own for $3.5B. After the initial offer was rejected as being too low, Mitsubishi UFJ raised its bid to $73.50/share (vs. a previous $63), - a 25% premium on where UB's shares were trading before the initial bid. UB will recommend shareholders accept the offer. A deal may be a sign of encouragement for a U.S. financial sector eager to see that healthy assets still command attractive premiums. # OPEC threatens production cuts. OPEC may cut crude oil production in early September, Iran's OPEC governor Mohammad Ali Khatibi says. Prices are being pressured by higher supplies and lower demand. Khatibi says the market is oversupplied by at least 1M b/d. # Economists ready to cheer commodity bull slaughter. Earlier this year, global inflation seemed to be spiraling out of control. But recent ruptures in the energy/commodity complex now have most economists thinking unabated inflation fears are no longer a serious risk, especially in Asia. Commodity-linked economies like Malaysia and Latin America are vulnerable, but economists note many producers have set aside large portions of their windfall profits for harder times. While almost all agree moderate inflation is an "unambiguous positive," caveats include how sticky high prices will be, and continued pressure from financial and credit market woes. # Debt markets sweat; equity markets stride along. Measures of credit turmoil have moved higher in recent weeks, and are now at levels not seen since the Bear Stearns debacle. The stock market, meanwhile, is uncharacteristically sanguine. One possible explanation for the divergence is that the market has already priced everything in. It's also possible that debt spreads are being widened not by default fears, but because banks are dumping assets in the process of strengthening their balance sheets. Even so, bank deleveraging could lead to household deleveraging - which could ultimately impact the equity market. # Housing slide stretches on. The latest housing numbers from real-estate research firm Zillow show little signs of a housing-market bounce. Including foreclosures, 24% of all homes sold during the last year were sold at a loss. Among buyers over the past five years, 29% now have negative equity. Mean home value fell 10% Y/Y in Q2, the worst on record. # Qwest sidesteps strike. Qwest Communications (Q) and unions representing over 20,000 employees agreed to extend negotiations, holding off a planned strike. Contract talks have focused largely on health-care benefits. # Euro-zone posts unexpected trade deficit. The Euro-zone's June trade balance was weaker than expected, posting a €0.1B deficit instead of the expected €1.1B surplus. The shortfall indicates a strengthening euro and weakening global demand are hitting exporters hard. Analysts think a depreciation in the euro will make euro-zone exports more competitive. # U.K. house prices fall the most since 2002. U.K. house prices fell 4.8% Y/Y, the largest yearly decline since at least 2002. BoE's Mervyn King says the housing market faces "a significant adjustment."

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Today’s Markets

Tuesday, August 12th, 2008 *  Asian markets closed lower on Tuesday. Nikkei -0.95% to 13,304. Hang Seng -1.0% to 21,641. Shanghai -0.52% to 2,457. BSE -1.88% to 15,213. * Europe at midday: London +0.2%. Paris +0.05%. Frankfurt -0.05%. * U.S. futures at 7:10 AM: Dow -0.08%. S&P -0.04%. Nasdaq +0.15%. Crude -0.74% to $113.63. Gold -0.65% to $822.80. * Tuesday's economic calendar: 7:45 ICSC Retail Store Sales 8:30 Trade Balance 8:55 Redbook Chain Store Sales 10:00 IBD/TIPP Economic Optimism 10:00 Job Openings and Labor Turnover 10:30 Fed's Gary Stern on CNBC 2:00 PM Treasury Budget 5:00 PM ABC Consumer Confidence Index * Notable pre-open earnings: CNO, FOSL, GOL, JASO, TJX, UBS, VSE * Notable post-close earnings: AMAT, BZP, CREE, DNDN, MELI, NVDA

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Wall St On The Move

Tuesday, August 12th, 2008 # UBS posts Q2 loss, plans to restructure. Swiss banking giant UBS (UBS) reports a Q2 net loss of CHF358M ($329M), including $5.1B in writedowns. Looking ahead to the second half, UBS says it doesn't expect any improvement "in the adverse economic and financial market trends that affected this quarter's results," adding, "UBS will continue its program to reduce personnel levels, costs and risk." As anticipated, UBS said it will begin separating its troubled investment bank from its wealth-management unit - but said it has not plans to sell the I-bank. UBS continued to cut back on its exposure to toxic debt: Subprime holdings fell to $6.7B from $15.6B while Alt-A exposure dropped to $6.4B from $17.1B. Shares rose 2.8% in overseas trading. # Morgan Stanley's $4.5B ARS offer fails to impress Cuomo. Morgan Stanley (MS) said it is willing to buy back $4.5B in auction-rate securities, following similar settlements by Citigroup (C), UBS (UBS), and Merrill Lynch (MER). NY Attorney General Andrew Cuomo called Morgan Stanley's (MS) buy back offer "too little, too late." Cuomo is expected to press for fines on top of a more substantive settlement. # IEA breathes a bit easier. The IEA (International Energy Agency) says tight global oil supply that has seen crude rise to record heights this year is easing - but cautions that heavy China consumption and geopolitical tension still have the potential to send prices back up. "In terms of oil fundamentals, crude and product supply tightness has eased," it said. But "we continue to stress the supply uncertainty that's out there. The events over the past week in Georgia and Turkey have only reconfirmed that." The IEA dropped its global demand growth forcast by 100K barrels/day due to a major demand pullback in the U.S. (-3.1% this year and -2% next year). (.pdf) # Mitsubishi UFJ plans UnionBanCal buy out. Mitsubishi UFJ Financial Group (MTU) plans to spend $3B to buy out minority investors in U.S. commercial-banking unit UnionBanCal (UB). At $63 per share, Mitsubishi UFJ's offer represents an 8.3% premium on UnionBanCal's Monday closing price. Mitsubishi UFJ has made it clear that it wants a bigger presence in the U.S., and plans to take part in future consolidation of the U.S. banking industry. The bid is the latest in a series of multi-billion dollar deals in the U.S. by Japanese companies that have emerged relatively unscathed from the subprime crisis. # 3M iPhones in first month. After just one month, iPhone 3G (AAPL) sales reportedly top 3M - way ahead of expectations. "They are seeing unprecedented demand," Michael Cote of the Cote Collaborative says. While not commenting on Cote's estimates, Apple did disclose it sold 1 million iPhones during the first three days; it took Apple 74 days to hit the one million mark with the original iPhone. # Germany mulls limiting foreign investment. The German government will vote on August 20 on a bill that could be used to prevent foreigners from buying 25% or more in German companies deemed crucial to the country's security. Opponents say it will deter foreign investment. (ETF: EWG) # Toyota mulls exporting us gas guzzlers. Trying to stay ahead of the auto industry downturn, Toyota (TM) said it is considering downsizing U.S. manufacturing jobs, and may start exporting U.S.-made U.S. pickups and SUVs abroad. Some analysts were puzzled by the proposal; the larger vehicles are not big sellers outside of U.S. borders. # Precious metals plunge again. Gold, platinum, and silver hit 7-month lows on concerns of reduced demand for raw materials. Commodities descend Monday into bear territory, with S&P's GSCI index off 22% from its July 3 highs. # Blue Chip economists sour on H2 and 2009. They now see Q3 GDP growth of 1.2%, down 0.1% from previous estimates, and Q4 growth of just 0.3% - down 0.3%. Year-end unemployment is seen at 6%. 56% think the U.S. economy is in recession. # India production up 3.4%. India's production in six key industries, accounting for a quarter of the country's industrial production, grew 3.4% in June from a year earlier. (ETFs: INP, EPI) # Inflation pulls back in China. China's inflation slows to a ten-month low, allowing the government a chance to focus on sustaining economic growth instead of fighting rising prices. (ETFs: FXI, PGJ)

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Todays Markets Around The Globe

Friday, August 8th, 2008

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Earnings Thursday After Close 8/08/08

Friday, August 8th, 2008 *  CROCS (CROX): Q2 EPS of $0.06 beats by $0.01. Revenue of $223M (-0.7%) vs. $219M. [PR] * Clearwire (CLWR): Q2 EPS of -$1.21 misses by $0.20. Revenue of $58.6M (+65.1%) vs. $54.2M. [PR] * Heelys (HLYS): Q2 EPS of -$0.01 misses by $0.03. Revenue of $18.2M (-75.5%) vs. $24.5M. [PR] * Jones Soda (JSDA): Q2 EPS of -$0.10 misses by $0.03. Revenue of $14M (+5.6%) vs. $14.4M. [PR] * Live Nation (LYV): Q2 EPS of $0.02 beats by $0.22. Revenue of $1.16B vs. $1.05B. [PR] * Spectrum Brands (SPC): FQ3 EPS of $0.06 vs. consensus of $0.25. Revenue of $730M (+10.5%) vs. $694M. [PR]

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Earnings Friday Before Open 8/08/08

Friday, August 8th, 2008 *  AES (AES): Q2 EPS of $0.27 misses by $0.03. Revenue of $4.15B (+24.1%) vs. $3.38B. [PR] * Beazer (BZH): FQ3 EPS of -$2.85 misses by $0.51. Revenue of $456M (-39.5%) vs. $430M. [PR] * MBIA (MBI): Q2 EPS of $0.96 vs. consensus of -$1.37. Revenue of $3.29B vs. $389M. [PR]

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Market Morning Update

Friday, August 8th, 2008 # Citigroup, Merill Lynch buy back $17B in ARSs; UBS may be next. As part of a settlement with state and federal regulators, Citigroup (C) agreed Thursday to buy back $7.3B of illiquid auction-rate securities that it marketed to clients as being as safe as cash. Hours later, Merill Lynch (MER) announced a buy-back plan for up to $10B in similar securities. Other banks are likely to follow suit as more than 20 banks and brokerage firms are under investigation by the SEC over auction-rate securities, including Bank of America (BAC), Goldman Sachs (GS), Lehman Brothers (LEH), JPMorgan Chase (JPM), Morgan Stanley (MS), Wachovia (WB), and UBS (UBS). UBS may be close to reaching a settlement that could cover as much as $25B in ARS. # DreamWorks nears deal to leave Viacom. Amid rising tensions between Steven Spielberg's DreamWorks (DWA) and Viacom's (VIA) Paramount, DreamWorks is nearing a deal with an outside investor that would allow it to split from Paramount as early as November. The $550M investment deal with Indian billionaire Anil Ambani could be reached as soon as next week. The studio would then borrow $400M, and will not need any more outside equity. A new distributor, possibly General Electric's (GE) Universal Pictures, would release DreamWorks films. # Downgrade threat socks Amex. Shares of American Express (AXP) fell 4.2% after Moody's placed the company's long-term debt rating under review for a possible downgrade. Losses from soured credit-card loans could see its A1 rating drop one level, Moody's said, affecting $89B in securities and deposits. It noted AXP is particularly prone to loan losses in U.S. areas hardest hit by home price declines. Shares are off 30% YTD. # Airplane problem can't be taken sitting down. Having battled with complex assembly issues that have delayed their upcoming jets, Airbus and Boeing (BA) are now being saddled by a shortage of mundane items like as seats, toilets and galleys, WSJ says. The two say that companies manufacturing such equipment are frequently small, and unable to quickly ramp up production as demand picks up as it did over the past two years. # July retail sales disappoint. Discounters were the bright spot in July same-store sales that generally fell short of expectations. Sales were hurt by weak consumer confidence as stimulus-check spending winds down. Teen retailers' sales were notably weak. "The July results and the August outlook indicate that most kids will be returning to school in last year's duds," Lazard's Todd Slater says. (Table: how retailers fared) # DB's gamble. Deutsche Bank (DB) foreclosed on Ian Bruce Eichner's $3.5B Vegas casino. MGM (MGM) or Hilton may help run it. "No doubt the banks will take on more homes, casinos and even ski resorts before this is over," KBW's Matthew Clark says. # Ethanol mandate stays. The EPA refused the State of Texas's request to rescind the federal mandate for ethanol use in gasoline, driving crude down and corn prices up. Ethanol producer Pacific Ethanol (PEIX) gained 12.2%, while Pilgrim's Pride (PPC), a major force behind the move to defeat the mandate, fell 8.4%. # The euro fell through critical support at $1.52, and is now down 1.3% to $1.5096. Nybot's dollar index +1.19% in overnight trade. Evidence is mounting that non-U.S. economies are in equally bad shape - giving the greenback a boost. Also, the yen carry trade continues to unwind. # Jobless Claims climbed to 455,000 vs. 425,000 consensus. Last week: 448K. 4-week moving average jumps 26,750 to 419,500. One factor that may be distorting jobless claims, S&P economist David Wyss says, is the extended benefits program that caused many to drop out and then reapply. Of course, they would have previously skewed jobless claims the other way. # Pending Home Sales rose 5.3% from May to June, the biggest jump since last October, but remain 12.3% lower than a year ago. "With a tax credit now available to first-time home buyers, increases in home sales could be sustained with the momentum carrying into 2009," NAR's Lawrence Yun says. The downside of stronger-than-expected pending home sales: "I think a lot of the increase has to do with foreclosure sales, which are selling at quicker pace and have a faster turnaround time," Lehman economist Michelle Meyer says. # EIA Natural Gas storage was up 56 billion cubic feet (Bcf) to 2,517 Bcf, less than the +62 Bcf consensus. Stocks are down 353 Bcf from a year ago. # China's Shanghai Composite dove 4.5% to 2,606 on Friday. Investors had expected Beijing would do something to prop up markets - down 50% YTD - ahead of the Games. Disappointed, they seem to have taken their money and go home.

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