Sunday, April 8, 2007

Monday Curtain Raiser

From a calendar standpoint Monday is a quiet day with no major economic releases scheduled and Barron's only listing Delta and Pine Land on Monday morning. The biggest economic release doesn't hit until the release of inflation data on Friday.

Earnings season officially kicks off when Aloca (AA) reports earnings, the first of the 30 Dow Industrial components, on Tuesday. 75 cents a share is expected. On Friday GE is expected to report earnings of 44-cents.

S&P futures are up 4 points as of the time of this writing, reflecting mirth over the better than expected non farm payrolls data that came through on Good Friday - 180,000 jobs created last month.

The stock market managed to finish at its best levels of the day on Thursday and it looks as if we're going to see some follow through buying come Monday. BUT, after re-reading the American Home (AHM) confession and going back and looking at their past pr releases, that company appears to be in a spiral... perhaps going into the fatal third spin (which is what I was told it would take to get my Cessna into an unrecoverable spiral). Remember, AHM never did any subprime and now finds itself in a critical situation all in the space of ONE month (does this sound familiar??). AHM are a sneaky bunch, pre-announcing on Good Friday of all days. Dante's Inferno comes to mind with this one. For the longs, the message is simple: "Abandon every hope, ye who enter here".

I am going to be dumping some puffed up long holdings on Monday morning and redeploy into selected Alt-a targets and keep some extra powder dry for potential pre announcements and post pre announcement spirals. I think the next phase is on: Alt-a and a broader contagion that will eventually punch the overall stock market down. While the broader market may try to chug higher, I sure wouldn't get to comfortable with the market at these levels. To get more to think think the bull has really come back or some such nonsense, I want to see a day where advancers pummel decliners at 3000 to 300 and volume approaching 2 bln shares.

As usual, crude oil will need to be watched and commodities overall. The CRB has inflation bells ringing in my head. WRT crude, if the bears fail to take out the 200 day support at $63.82 in decisive closing fashion by a buck or more, look out above. $70 crude could be a reality within the next few weeks.

Most important, dollar-yen needs to be looked at closely. A move to 120 could certainly fuel a further rise in stocks, but again that's in the backdrop of not only the AHM news, but also the collapse in capital spending that was seen in data last week. Folks, there are some major cracks in the dam showing up. Even though my liver works just fine, when I look at the stock market going up in the face of housing implosion and capital spending contraction, my eye turns a jaundiced yellow.

Could this be a sure sign that things are getting carried away? A $50 bln Buyout On the Way for Dow Chemical?

Who do you believe??
White House: Bush economy stronger than Clinton economy... Clinton camp says claim is absurd.

I'm still in Virginia and had a great time visiting Jamestown Settlement and Historic Jamestowne over the past couple of days. Those sites will be commemorating the 400th anniversary of the landing of the Brits next month. As usual the story of what happened 400 years ago involves 'following the money'. One of the intriguing things that I learned while walking through the beautiful new museum of Jamestown Settlement was the role of copper in the Powhatan Indian society in Virginia. It was a status symbol and a viewed as a precious metal. The statue of Powhatan, the chief of the Powhatans, shows him wearing a large piece of copper jewelry. I asked one of the curators about that copper. It turns out that Powhatan controlled the flow of copper into the area from supplies provided by Indian tribes in the Great Lakes region. Powhatan as depicted by that statue was showing off some 17th century bling! When the British arrived and began trading and offering copper they unwittingly diminished the status of Powhatan and disrupted overall tribal order which in turn escalated tensions and led to episodes of war.

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