Friday Curtain Raiser

My apologies, folks, for my limited posting of late as I've been busy attending to other business matters in recent days. I've also been walloped with a pretty severe case of sinusitis which has kept me down for the count (yes, the left side of my face is killing me). Another thing I've been busy doing is managing a small options account of a friend who put me to a friendly test of doubling it for her. She gave me $10,000 to work with and 8 trading days later it's at $20,515 (spread sheet available). I'm actually not going to stop there, but as I've explained to my friend, as the numbers get bigger, generating similar large returns will get harder and that her money will not be doubling every 8 trading days. I should also add, that I note this because it has been time consuming to do this type of swing trading and has been a reason for my absence in posting. For those new to options - DON'T TRY THIS AT HOME. The spreadsheet is being available just so you know I'm not telling a tall tale.

The big number tomorrow is the monthly non farm payrolls figures. The Barron's survey says the consensus figure expected is 135,000 with unemployment expected at 4.5%.

Some interesting corporate developments tonight:

Bancroft Family Agrees to Meet with Murdoch Over Dow Jones Sale;
Wall Street always loves layoff news: Dell Lays Off 8000 As 1Q Earnings Fall - shares jump 6%.

So, if Wachovia (WB) is buying AG Edwards (AGE) for $89.50 why did more than 2000 June 90 AGE calls trade today? Late today Bank of America put out a note stating that the WB bid was "fair" but not full and upped its target to $95. hmm.

Analysts see DIVX as Oversold

JPMorgan, Price Target $30:

Reiterate Overweight. DIVX is trading at 15.3 times FY08 PF EPS estimate of $0.91, a 32% discount to the mean of our coverage universe. With FY07 revenue growth tracking 45% y/y and pretax income growing 78%, DIVX looks significantly undervalued.We hosted investor meetings with DIVX management yesterday. The story, essentially unchanged since the IPO, remains encouraging – weexpect a slew of new DIVX-certified products (incl DIVX Connected) in2H07, including STB/DVRs. With the stock still under pressure, we aremissing something. In our view, this very strong growth story should now appeal to value investors too. Reiterate Overweight

Maxim Group, Price Target $25:

What should investors do with DIVX stock? We remain upbeatabout DIVX and continue to recommend that investors Buy thestock. While yesterday’s investor presentation didn’t provide much new information, we believe that the additional color about 1Qresults and 2Q guidance, a conciliatory tone, and further discussionabout the company’s growth drivers should help assuage someinvestor concerns. After 1Q07’s disappointing (on a number offronts) conference call, we believe that recent stock price weaknessis more a factor of management effectively communicating withinvestors than executing on its business plan.

Cannacord Adams, Price Target $26:

On the heels of the Q1 report, DivX shares have been making new lows. We believe the stock is oversold and that patience should be rewarded at current levels as new DivX-enabled devices ship this fall, fueling a highmargin IP Licensing model.We would be aggressive buyers at current levels.

DIVX trading up +0.85 (5.63%)

Morning Market Comment

Brief today as I've been running around shuttling my daughter to a special school event.

In spite of the barely growing economy at .6% annualized growth in Q1, stocks are poised to open higher (the notion being the Fed won't need to lift rate and may need to cut). Deals continue to be the dominant theme with AG Edwards (AGE) being taken out at a $10 premium.

I've got anoher appointment I have to run out to. More early in the afternoon.

Quick Evening Market Comment

I was in NYC for much of the late afternoon and early evening attending to some important business. My calendar has been jammed packed with activities of late.

I want to thank a donor for New England who kicked a nice donation into the Paypal tip jar today. That is much appreciated. Between subscriptions for publications, even fees to have the S&P ticker up, the site is costing deep five figures to operate.

The Dow managed to close above 13,600 for the first time. While indicators like RSI above 70 may warn of overbought conditions, so long as private equity remains active there is a major floor of support under the market. The market was also able to blow off the latest Shanghai surprise since a one day 6.5% didn't even get the Shanghai market to close beneath its 20 day moving average, and unlike the February China market swoon, this one wasn't accompanied by a flight to yen which suddenly caused an unwinding of carry trades to take the U.S. stock market down hard. The Yen was little changed today.

Latest deal tonight: Ceridian agrees to be sold for $5.3B.

Rumors of deals continue to capture the hearts and minds of speculators. Cleveland Cliffs (CLF) surged $3.52 or more than 3% today on speculation CLF is holding talks to be bought by CVRD (RTP) for around $100 a share. CLF surged another 3% to $84.30 after it got a very favorable mention from Cramer on CNBC this evening. I have been long CLF since last Friday.

GDP revision and jobless claims hit the market at 8:30 tomorrow morning. Manufacturing and construction spending data at 9:45 and 10.

Eventually it will all end badly. When? I have no idea, but I continue to keep a close eye on SPX put and call activity and the volatility index among other indicators. The Washington Post reminds today the housing ATM is broken. That will surely catch up with the consumer at some point.

This would also mean a bad day in the markets - if this were enacted: http://www.whitehouse.gov/news/releases/2007/05/20070509-12.html.

Morning Market Comment

How spooked will Wall Street be today following a 6.5% dive in the Shanghai Composite Index overnight? That's the $64 question this morning. S&P futures are indicating that we're going to see a knee jerk lower at the open. Thus far, declines in Europe are limited to dips of no more than around 1%. Developments in the Chinese market will need to watched closely since a sharper unwind in their markets will have negative global repercussions. The Goldman Sachs Macro report, I'm told, this morning suggests that hedging with Dec Eurodollar calls vs S&P puts is the better way to go - fyi.

The Chinese market dive was brought on by an increase in a tax on trades by the Chinese government from .1% to .3%. The tax increase is part of what is seen as a series of measured responses by Beijing to cool rampant speculation. Prior to last night's swoon, the Shanghai benchmark was up 62% year to date. While it's all well and good for the Chinese government to be 'measured', there's still plenty of risk that they push too hard to cool things and cause a classic boom/bust scenario that will hurt global equity markets.

The ADP employment report indicates that Friday's official payrolls data could be a bit softer than what economists are expecting: U.S. private payrolls up 97,000 in May: ADP. Earlier, the Mortgage Bankers reported softer activity: US mortgage applications fell last week-MBA. At midday we'll see the minutes that were taken at the last FOMC meeting.

Is ICE gaining the upper hand in the battle for Chicago Board of Trade? ICE signs exclusive deal with CBOE.

Crude oil, dollar, bonds little changed. Gold down $2.

Wednesday Curtain Raiser

While in the Lancaster area of Pennsylvania over the weekend, I discovered how to get to Paradise! How? Through Intercourse! It was an eye opening experience. Yes, in order to get to Paradise, PA, you first have to drive through a town called Intercourse, PA. Astounding, eh?

In the ongoing intercourse of business on Wall Street volume was lighter than usual and the range was fairly tight, but with an upward bias. Deals remain a primary buying motivator. Who next will be taken out for a rich premium? And once again, the deals that have been announced involved companies with little mention in the rumor mill. This included the $7 bln CDW takeout and the $15 bln buyout of Archstone; little in the way of huge options activity beforehand. It really makes me view any name as a possible takeover target coming out of the rumor as suspect with the best strategy being a time spread to capitalize of volatility fluctuations, or to go long on certain names that have been perpetually mentioned on Wednesday and dump by Friday.

There is a certain level of desperation where these rumored deals are concerned - where it almost seems as if money for speculation in the options market is no object - where money is thrown at anything with even a hint of a possible buyout. Micron Technology (MU) is a case in point. While the activity slowed considerably from last week, nearly 37,000 June calls traded again today. Blackstone has been the rumored suitor for a price of $16 a share. The rumored Blackstone interest is being given more credence than usual on Wall Street trading desks because if Blackstone were to buy, China would indirectly - because of its $3 bln non voting stake in Blackstone - gain a bigger piece of the action in DRAM which is now dominated by companies based in Korea, but with China in hot pursuit. Still, MU slipped 1-cent today to $11.96 as investors moved into a "show me" state of mind after a deal failed to materialize this past weekend.

Tomorrow's not a completely dead day on the earnings front. A bunch of retailers will play show and tell including: RL, CHS, DLTR, WSM, PSS, DBRN and JAS. JOYB and NOVL will also be posting for a little high tech fun.

Every bit of economic data is very important as 10 year treasury yields back up toward 4.9%. Tomorrow the key release is the ADP Employment Report which will give us some inkling into what this Friday's employment report for May will show. Economists are expecting May non farm payrolls to rise by 135,000.

Oh, and what's going on with the ABX indices again? More trouble ahead on the mortgage front as demand again increases for credit default swaps?



The dollar was a touch weaker today, but what has me keeping an eye on forex is the apparent bottoming, or at least near bottoming of carry trade funding currencies like the Yen, the Swiss Franc and even the Czech Koruna. This is another reason why every bit of economic data is important. Prospects for a tighter Fed will certainly impact the carry trade situation (near 10% returns in this realm in a month and a half) and ultimately stock market liquidity.

Many are already heralding the end of the rise in gasoline this season as the march to Memorial Day is now history: OIL FUTURES: Nymex Crude Drops $2 On Nigeria ; Gasoline Slumps. There are many reasons to be bearish with Cushing brimming with crude, pressure on someone or a group who have been stopped out of arb or crack positions, etc. But the simple fact of the matter is that gasoline stocks remain well below normal for this time of year. I won't be standing in front of weak technicals in my trading of crude, I'll just be mostly standing pat to see how all of this shakes out in the days ahead since I'm not completely convinced the rally in energy is over for the summer.

And a big face off on Wednesday: Steve Jobs and Bill Gates to make rare joint appearance tomorrow

USA Today Finally Wakes Up

Back in January this blog covered the issue of the more than 50 TRILLION dollar hole our federal government is in. USA Today picked up on the story today - better late than never!

My January post contains the link to the treasuy report which contains the $50+ Trillion figure.

Numbers Are Precise, But What We Do With Them....

Former Bloomberg Radio colleague Wes Richards (a pros pro in the radio business) has some interesting thoughts about numbers: http://wessays.blogspot.com/.... wisdom to consider as we get hit with a barrage of economic numbers later this week.

Visual Sciences's (formerly Web Side Story) Hidden Value

Web analytics company Omniture (OMTR) has severely outperformed competitor Visual Sciences (VSCN) (formally known as Web Side Story) over the past year, OMTR gaining over 150% since the IPO while VSCN lagged behind gaining less than 50%.VSCN recently broke out of a range on heavy volume after an impressive quarter, fading risks, and upbeat guidance.

VSCN has endured a rough year of aquisitions, management changes, legal expenses, reorganization of products, and finally the name change to Visual Sciences which they annonced during the 1Q07 conference call last month. However, with all of this behind their shoulders, impressive new product releases, multi-channel market expansion such as mobile, email, etc, broadening distribution channels, and international opportunitites is adding momentum to the company.

At current levels VSCN is trading around 19x 2007E EBITDA while OMTR is trading more than 47x '07 EV/EBITDA. As Visual Site, their high end offering gains momentum, issues with management changes are largely priced in and exaggerated, and a more aggressive marketing approach following their new products and re-branding, valuation is very attractive.

While the space remains competative, especially pricing pressure from Omniture, Visual Sciences has several emerging competative advantages in their new product roll out which should be cost saving, expand market share, and grow existing customers to other channels and to the V/S Platform 5.0.

All in all, companies continue to see huge benefits using web analytics tools to understand customer behavior across multiple channels improving marketing and advertisiting strategy, and the increasing amount of online media advertising dollars spent all bode well for continued growth in this space.

A Big Merger Tuesday Ahead

I'm still on the road this evening so just a quick update. It looks like it is going to be a big merger Tuesday.

From the Wall Street Journal:
"Tishman and Lehman are near a pact to buy Archstone-Smith, a top apartment real-estate trust, for more than $12 billion."

And there are more likely deals...

Rio Tinto may join Alcan race, Norsk Hydro also in the fray.

Coca-Cola purchase of Highland Spring said to be in pipeline.

URS buying Washington Group for $2.6B.

Avaya reportedly in talks to be sold.

CVRD declines comment on talks to buy Cleveland-Cliffs.

Stock futures are showing a modest gain this evening. Tuesday's economic data features consumer confidence figures at 10 a.m. Thursday features revise GDP, manufacturing data and jobless claims figures. Friday is the big day for reports with the monthly employment data due for release along with figures on housing, personal spending and consumer sentiment.

Blackstone to Buy Micron?

Once again, options activity is brisk in the Micron Technology (MU) calls. They're talking about it in lovely Idaho: Blackstone to buy Micron?

CNBC Media Advisory

My good friend Scott Fullman, Executive Vice President and Director of Investment Strategy at
Israel A. Englander & Co., will be on CNBC this morning at around 11 A.M. Scott is a CMT, ROP and RFA and all around options expert who has written books on the subject.

Morning Market Comment

It looks like a rebound is in the making for Wall Street with rising S&P futures. As noted yesterday, The S&P 500 managed to stay above the 3 month trendline (its 20 day moving average) which was one of the few positive things in an otherwise ugly day of fairly strong selling. One eye will need to be kept on the S&P for any testing of the 1500 level which appears to be a key support area; another eye kept on the 10 year note yield as additional firming would pressure stocks. Volume will be lighter than usual by midday ahead of the Memorial holiday weekend. I will be among the masses leaving town this afternoon.

A good chunk of the folks heading to their Memorial Day destinations will do it using an automobile. Triple-A guesses that more than 32 mln will people will use a motor vehicle to travel 50 miles or more during the holiday weekend, up about 2% from last year and despite record high gasoline prices. My own anecdotal indicator is observing traffic on Sunday afternoons headed south (since I'm usually going north after a visit to mom's house) on the NY Thruway to the Tappan Zee Bridge toll bottle. Last weekend the Thurway (I 287/87) was jammed packed. Travel experts say those with holiday weekend budgets strained by the high price of gasoline will offset that cost by perhaps staying in slightly cheaper accommodations, or by buying less tourist trap junk, eating at a cheaper restaurant, etc. Energy remains a big concern for the markets because of its impact on the driving force of the economy: consumer spending. And there appears to little relief in sight at the pump: Gasoline prices rise on low inventories, refinery outages. Keep praying there is no hurricane strike on energy assets later this summer in the Gulf of Mexico.

Energy is also driven by geopolitical events and surely stories like these keep the pressure up:
Iran will push nuclear program 'to the limit'
Oil edges up on Nigeria woes
Iran’s leader warns Israel on war in Lebanon

From an options standpoint, a three day weekend should be looked at with caution. There have been many situations lately where option volatility is ramped up, especially in front month contracts, due to rumor mill speculation. Buying and holding those types of options through the long weekend, unless a given deal happens, will result in an unpleasant decay in value by the time Tuesday rolls around. Be careful.

On the corporate front this morning, M&A remains a dominant theme:

Coke to buy Glaceau in $4 billion deal.

Ah, dah Sveeden: Nasdaq to buy Nordic bourse group OMX for $3.7 bln.

There's more buzz surrounding Apple's iPhone. CNBC reported that June 20th is the release date, citing a "local store". PC World is stoking some controversy over whether AT&T stores are taking iPhone pre orders.

We get Existing Home sales data at 10 today.

A few quick analyst notes:

• Banc of America starts Gilead (GILD) with a Buy and $94 target
• Friedman Billings starts Hewlett Packard (HPQ) with a Outperform and $53 target
• HSBC downgrades Tiffany (TIF) to a Neutral on valuation.

Late Day Closing Comment

A further slide in treasuries (upward pressure on yields) and a modest bid for the Yen conspired to send stocks lower today. Is there any great surprise after 3 days of the market pulling off of the intraday highs in record high territory that the market was looking ripe for a respite? As rates have backed up, one of the big leaders in the rally - the utilities - have been pinched with the Utilities SPDR (XLU) already testing its 50 day moving average. Even non utility dividend paying stocks have been hit hurt as bond yield look more attractive. The DJ Dividend iShares outperformed to the downside today with a decline today of more than 1%.

Chips were also a key ingredient today - the wrong ingredient for the bulls. The spinal tap for investors without the benefit of anesthesia from Network Appliances (NTAP) and its lowered guidance late yesterday and the Komag (KOMG) warning from this morning also weighed heavy on the market. I've noted in recent days that a rise in the market without at least a little leadership from the chips is not a good thing and could be a forward indicator for things to come in the broader market. The Semi Holders (SMH) today completed filling the late April upward gap today on heavier than normal volume.

I'm not by any means declaring the bull dead, but it will be interesting, with the S&P perched at its 20 day moving avg, to see if we don't end up testing S&P 1500 sooner rather than later.

S&P 500 Puts

Just a brief note here on the purchases of SPX July puts. Volume on the SPX July 1500 puts has been above 10,000 contracts for 5 of the last 6 sessions including today. Prior to that there was little focus on using these July puts. Just some hedging ahead of the holiday weekend? I imagine interest has picked up because the recent expiration of May contracts, but would have thought the heavy hedging that's already taken place in the June SPX's would have been sufficient.

Regarding The Twombly Ruling Earlier This Week

It will have a big impact on future cases involving collusion allegations in antitrust cases: Legal Sanity "Discovered".

Wendy's (WEN)

FYI.. fresh speculation that WEN is entertaining a $49/shr bid. Wendy's has been exploring strategic options. This is another case of when will the rumors be true? A large private equity firm is said to have made the offer, according to trading desks that I'm touch with. Call options volume is overwhelming put volume in WEN, but the total volume of calls is thus far only about 3,000 in the June contracts. I have no position yet.

Dell (DELL) and Wal Mart (WMT)

Dell To Sell Systems Through Wal-Mart. No doubt, not a good development for Radio Shack (RSH).

Glaxo (GSK) and Avandia

I come at this from the perspective as a diabetic first, then an investor.

Who do you believe given the problems with prescription meds in recent years?

Door #1: US FDA Warned Glaxo in 2001 About Avandia Marketing (Update2)

Door #2: Avandia is safe, says drug maker

Monty, I'll go with Door #1.

Morning Market Comment

Stock futures briefly perked up on the .6% rise in April durable goods orders and the revision higher for March orders. Capital goods orders were up more than 1% last month.

U.S. weekly jobless claims were up 15,000 to 311,000, the first weekly rise in six. Existing home sales are due at 10 and I think we get a better idea of the bulls can save the day after those numbers are out.

There are already some decent headwinds:

GM gets SEC request, details Delphi exposure.
Toll Brothers profit tumbles.
A warning from Komag (KOMG): Komag Updates Second Quarter 2007 Business Outlook


Following the comments of Greenspan and the likelihood of a Chinese market crash, the Chinese market slipped about a half-percent overnight.

The great climate change debate is hitting the board rooms: Investors push Exxon board member on climate .

Interesting little write up on iPhones and whether pre-paids will be available: CNET: Prepaid iPhones? We'll see about that.

On the Dow Jones (DJ) battle front, Citi's Smith Barney has an interesting report out. The analyst there lifted DJ's target to $55 from 37, but maintains a hold. The report says there's a 65% chance Murdoch lifts his offer to $65 and that it's accepted. Citi thinks there's a 35% Newscorp (NWS) is rejected and no chance someone walks in with a competing bid.

I continue to watch the Alcan (AL) situation closely: Alcan up on report of talks. I may comment further later today.

Brief Evening Market Comment

Toppy and Sloppy again. Out of the gate fairly firm this morning only to lose momentum as the day progressed. Is this three strikes and you're out with the S&P 500 stalling out for a third day? Or, just waiting for the latest indicators on the economy including housing data and jobless claims tomorrow morning?

Former Fed head Alan Greenspan threw a wet blanket on the proceedings of the bulls by (and remember he is now a gainfully employed bond guy) proclaiming that the floor will soon be removed from the Chinese stock market. Ya think?

Stock players have also been keeping a wary eye on the bond market: 10-year yield at 3 1/2-month high.

Fifth Third (FITB). I more than doubled on my calls and dumped them. No news to explain that thundering options pile on. Perhaps I should have held some, but "sell too soon" are not bad words to live by when a gift-option practically falls from out of a blue sky.

Greenspan The Stock Forecaster

UPDATE 1-Greenspan sees dramatic drop in Chinese stocks. When the dramatic drop in Chinese stocks happens, what happens to the U.S. stock market?

Quick Midday Update

The Options Scanner has been fairly quiet with most of the stuff coming up on it being weeded out. One thing that is striking is the activity in Fifth Third (FITB) calls with big volume in the 45 strikes across much of that chain. No news but a brief entry on theflyonthewall.com noting the heavy options as well. OptionsDoggy has been on top of it as well http://optionsdoggy.typepad.com/options_doggy/. One well connected trading desk tells me Wachovia (WB) is the name that has been popping up today for FITB. But that and $2 won't get you even a half cup at Starbuck's. I am long FITB and not recommending that you should be.

Yesterday Illionios Tool Works (ITW) rallied on takeover speculation. NY Times DealBook asks why a director would be selling shares. Good Question. http://dealbook.blogs.nytimes.com/2007/05/23/big-tool-deal-in-the-works/,

The call volume has been amazing today on Apple (AAPL). At one point the stock was up at 115 (all time high) and the June 125 calls were trading like hot cakes. But AAPL is well off the highs the day. Piper has a report out saying that iPod sales look light for May, according to NPD data.

Applebees (APPB)

Back on May 16th I scoffed at the notion of a big takeover premium for Applebees. FT.com mergermarket section notes that top bid is now $26.50 after the first round. 2nd round in early June.

Morning Market Comment

Another morning, another likely higher open as S&P futures show a gain of better than 4 and are high enough above fair value. Whether the market can close on the plus-side remains to be seen, as the last couple of days have featured rally attempts only to see them sputter. Once again, M&A is providing the bulls with plenty of morning ambition:

Now that Alcan (AL) has rejected Aloca (AA), the question is who's the White Knight? BHP in Alcan white knight talks. AL will move a couple of dollars higher this morning.

Here's a deal, but with a small premium: Morgan Stanley to buy Crescent Real Estate

The stride is right for Payless: Stride Rite to be acquired by Payless. Stride Rite (SRR) is up 32% in pre market trading.

Could there actually be interest on the part of some of the Bancrofts in Murdoch's offer? Bancrofts and Murdoch to meet.

Speaking of deals and/or potential deals: Could Daimler Be Takeover Bait?.

There's non-deal news as well:

Cypress Bioscience (CYPB) is up 107%, and Forest Labs (FRX) surging as well: Forest, Cypress Post Preliminary Milnacipran Data. With this news a variety of firms upgraded FRX.

As noted last night, Medtronic beat the street and is up 4% (long here). Piper also upgraded to Outperform.

Other developments to watch:

• Troubles for Amgen: NY subpoenas Amgen sales, marketing data
• SEC to finalize Sarbanes-Oxley tweaks
• They're suprised, but we're not: Speed of subprime bust surprises lenders CNNMoney.

Other analyst comments of note:

• Matrix downgrades Advanced Micro (AMD) to strong sell citing loss of market share to Intel (INTC)
• After earnings last night, Analog (ADI) downgraded to Sell at Merrill
• Valueclick (VCLK) downgraded to Neutral at Credit Suisse due to valuation

Coming our way at 10:30 the latest energy inventory data - should be interesting in light of yesterday's slide in RBOB.

No economic data again today. Tomorrow the markets will be confronted with Durable Goods, Jobless Claims and New Home sales figures.

Forex - Dollar firm after Lacker comments; 10 year treasury down 1/32nd, yield at 4.835%. Gold is up $3.

Examining The S&P 500

Former Bloomberg colleague Paul Lin is doing work these days for the folks at the Wall Street Journal. He hosts this clip on the upward progress of the S&P.

The Kingsland Report Noted In Barron's!!

The Electronic Investor column in Barron's gives a nice mention of this blog! So a big hat tip to Barron's this weekend.

"LOOKING FOR A BLOG? Kingsland Report (buttonwood1792.blogspot.com) emanates from blogmaster Jim Kingsland, a television and radio professional who hosts a bursting-at-the-seams series of pages. A morning market update gives you the lowdown on the current trading day, with links to outside resources like Bloomberg.com and the Houston Chronicle (http://www.chron.com/). Kingsland contributes his own commentary on timely topics like earnings and occasionally posts a "buy opportunity," like a recent one on VA Software (ticker: LNUX). Building and maintaining a blog is easier than reinventing a full-blown Website like Investors Hub. And neither is quite as challenging as figuring out how to make a venerable newspaper grow again."

Toppy and a Bit Sloppy

I'm a little tight on time tonight, so Marketwatch will do the honors of recapping the markets for today: Stock rally takes breather.

After the bell Alcan said, NO: Alcan rejects takeover by Alcoa, but says its in talks with third parites; stock takes off after hours.

Medtronic (MDT) - I stuck with it and they didn't guide lower. They generalized their guidance to say their "comfortable" with fiscal '08 consensus estimates of double digit revenue growth. Management added that profit growth would grow at a faster pace. At last check the stock was up more than 3%.

NOAA and The Hurricane Season

Following forecasts from the private sector over the past month, this NOAA news almost seemed a bit old. But it's still noteworthy: NOAA: Hurricane season to be active.

The energy markets paid little notice as commodities sank in general today...
Commodities sag as crude oil, gold and grains futures all decline

Money & Politics: Lieberman

Bloomberg has picked up on a big story: Lieberman, Sticking With Democrats for Now, Warns Them on Iraq. The repercussions of a switch by Lieberman to the Republicans, were it to happen, would certainly resonate all the way to Wall Street - something to keep an eye on.

5/25 - Mark It On Your Calendar

Bear Stearns issued a note today advising that the International Trade Commission will issue a ruling this Friday on what remedy Qualcomm (QCOM) will need to provide for infringing on a Broadcom (BCRM) patent. Options activity has exploded in both names.

Freemont (FMT) Surges 40% and a Quick Observation

Fremont soars on stake, loan unit sales

I've been watching Medtronic call options activity (I am long in this name) and more than 13,000 June 52.5 calls have traded today vs open interest of 9,500. More than 10,000 out of the money June 55 have traded as well, though volume has not exceeded open interest. So there appears to be a very confident call options crowd ahead of earnings tonight.

This morning Lazard said the company will like beat when it releases earnings this evening. However, yesterday Cowen alerted that MDT might lower '08 guidance. I've got 3 more hours to decided if I remain long.

Edit; OptionMonster reporting on their site, almost all the action in the 52.5 calls has been buys. ANother options pro in NY I talked mentioned takeover speculation and that bull spreads are being initiated. Interesting stuff. I;ve got to run out to Trader Joes... back later.

CBS Acquires Wallstrip!!

I've been proud to have Wallstrip as a featured fixture on my blog almost since I started blogging last November.

CBS has acquired Wallstrip... details here at http://www.howardlindzon.com/. A huge congratulations to Howard and the rest of the Wallstrip team!

Further details here: CNET:Wallstrip's Lindzon confirms CBS buy.

Quick Morning Market Comment

Stocks futures are on the rise. One of the factors is excitement and mirth in the leisure and gaming spaces thanks to Kirk Kerkorian's moves on MGM: Tracinda to explore options for MGM Mirage stake. MGM is up more than 20%.

Energy will continue to be a focus. WTI is down a tad this morning at just under $66 a barrel. If articles like this have a modicum of likelihood: Guardian: Iran's secret plan for summer offensive to force US out of Iraq - then the respite from the recent surge in gasoline that many are predicting after Memorial Day is likely not to happen. Oh, and don't forget: At 11 this morning, NOAA will be releasing its summertime hurricane forecast. Private forecasters including AccuWeather are already predicting an active season. Key in today's forecast is whether a bias is mentioned toward it being an East Coast season, or a Gulf season.

Notable analyst calls...

• The negative New England Journal of Medicine report on Glaxo's (GSK) Avandia drug has prompted ABN and Deutsche Bank to downgrade GSK to hold.
• Goldman downgraded the Steel sector Neutral from Attractive
• Merrill downgraded a variety of mem chip makers to Neutral. including Sandisk, Samsung, Hynix, and ProMos.
• Goldman notes the former CEO and founder of Monster (MNST) sold a million shares last week. While this former officer is no longer employed and not privvy to inside information, the firm thinks the sale inidcates a sale of MNTR is not imminent.

Marketwatch.com asks the question: What's after Blackstone? A brief article on where China may next put its vast reserves to work. Speaking of China, trade talks start at 9:15 between the U.S. and China: How China Experts See the Trade Talks. Also ahead of the talks: Yuan at post-reval high ahead of US-China talks.

"Robert Kyosaki - What a Joke" is the title of a thoughtful piece on the guywho was one of the chief advocates of house flipping. Worth the read.

On the Bloomberg for President watch - interesting that Google ads for Mikebloomberg.com are starting to pop up:

Evening Market Comment

I've been out most of the late afternoon. Part of today's activities included taking my two older children to see Shrek The Third after school. We liked the movie, opting to go today to avoid the weekend crowds. It was nice to walk into a mostly empty theater. Still, a large group of kids decided to sit right behind us. While they were quiet, some kid kept bumping the back of seat. It was tempting to become Ogre like but I just turned around and gave a glance and the bumping stopped for the most part.

The air proved a bit too thin for the bulls today in record closing high S&P 500 territory with the index missing an all time close by just a few points. It was really the energy story that got trader's attention and helped to take stock off the highs: the continued rise in crude oil and the ascent of the retail gasoline price to record highs in real dollar terms.

Headlines like this: Israeli killed in rocket attack from Gaza and Al Qaeda's New Front in Lebanon only serve to add an element of concern in the energy market about stability in the Middle East. Add to that, worries about Nigeria and the result... Oil above $66 on Nigeria worry, US gasoline eyed.

Late today, news from Tracinda was no mirage: Tracinda looks to buy Bellagio, CityCenter from MGM. MGM jumped 15%.

The options screener was interesting today...

Elan (ELN) options were active on word that its Alzheimers treatment is going into advanced phase testing. The time to pounce on those was Friday, which featured unusually heavy call volume in the June 17.5 strike (took my profit there first thing this morning).

Amazon (AMZN) options volume remains amazing heavy as spreaders and directional players make their bets. 15k June 75s trading today - some folks have high hopes.

Valueclick (VCLK). They must have read Howard Lindzon's recent posts about Valueclick being a likely takeover target.

OptionsXpress (OXPS) was the subject of rumors that E*Trade would like to buy them. I did a brief in and out trade on that one today.

Yahoo! (YHOO) volume was especially heavy in the out of the money July calls - no doubt 37 to 42.5 and 35 to 40 July calendar spreads are the latest rage. This Seeking Alpha article gives some food for thought.

No comment on the rest since some are newly rolled out July calls. All info provided for informational purposes, not recommendations.

Hopes Springs Eternal - Dendreon (DNDN)

DNDN is rallying big (up about 20% at one point) following a favorable CNBC report featuring urologists who say their patients are practically begging them for the company's Provenge prostate cancer treatment and even personally appealing to the FDA. I distracted when they mentioned a web site appealing to the FDA to approve the drug. Will get a link when I can find one, or maybe someone can provide the link in the comments section.

Not mentioned on CNBC. There's was a huge turf battle within the FDA that let to just the approvable letter. It really could be the basis for a good book on the 'politics' involved in getting these drugs to market. One of these days I will elaborate.

Glaxo (GSK) Getting Smaxo'd

Big slide in GSK today on this development: Diabetes drug Avandia linked higher death risk (for the benefit of my fellow diabetics). Perhaps that's the best cure nowadays, kill the patient? This is a drug I couldn't tolerate to begin with because it caused edema (not to be confused with the Funky Cold Medina). Merck (MRK) has a newer competing diabetes drug called Januvia (wasn't that a planet in an original Star Trek episode?) and MRK shares are near the highs of the day on word that Avandia might raise the risk of a visit from the Grim Reaper (now a regular on Fox's Family Guy cartoon sitcom).

Morning Market Comment

There are more deals then you can shake a stick at this morning:

• China to take $3 billion stake in Blackstone
• Equity Firms to Buy Alltel in $27.5 Billion Deal
• Merrill taking stake in hedge fund GSO -WSJ
• Hologic to buy Cytyc for $6.2 billion
• Sun Pharma to buy Taro for $454 mln, shares up
• Yahoo eyes MySpace rival?
• Chief of EGL Raises Buyout Bid Yet Again
• DTE Energy to Sell Antrim Shale Gas properties
• Maguire Properties Announces Disposition of Three Orange County ...

Deal-mania has helped to push stock futures off the lows of the night. The upward channel in the Dow is striking, though the bulls, perhaps, would be happier if the Nasdaq could get out of its sideways funk. In other words, while these deals are all well and very good - there's a need for a stronger tech rally lest the Nasdaq become a leading indicator for a near term end to the big blue chip rally.

I'm also keeping an eye on bond market yields. The 10 yr sure has been making upward progress. The higher above 4.8% on the ten year, the stronger the head winds for the stock market?

But in the meantime, it's been almost a 'sky is the limit stock market' with a mantra of buy on the dips.

Hope on the Alzheimers front? (I am long ELN): Elan, Wyeth plan advanced trials for drug.

Google, Salesforce.com (CRM) may team up. This is being seen as bad news for Monster (MNTR) buyout speculators.

The dollar has been drifting a bit higher as it sets its sights on resistance up above dollar index-82 level. Here's a festering situation: Kuwait ends currency peg to US dollar.

A few quick analyst comments to note:

• Merrill downgraded Medtronic (MDT) Underweight
• UBS downgrades Intuit (INTU) to Neutral
• ING upgraded BP to Buy from Hold
• Countrywide (CFC) downgraded to Market Perform at Friedman, Billings

Lowes (LOW) with a mixed bag. Q1 earnings a penny light at 48c and revenue light at 12.2 bln vs estimates of $12.4 bln. LOW upped Q2 EPS outlook to 62 to 64c vs consensus of 60c and full year to $1.99 to $2.03 vs estimates of $2.01.

Blackstone is also in the news this morning since it's IPO time: Blackstone sets IPO, could raise $3.87-$4.13 bln.

Merger Monday is Well On Its Way

TPG, Goldman, near $25 bln deal for Alltel - report

A very nice premium in this deal: Hologic to Acquire Cytyc for $6.2B.

27% premium for Taro: Sun Pharmaceutical Industries Agrees to Acquire Taro ...

A $1 bln deal here: Atlas Energy Resources, LLC to Acquire DTE Gas & Oil Company for ...

Wow - China Picking up 9.9% Stake in Blackstone

FT.com: Beijing to buy stake in Blackstone.

Interesting to note that President Bush and Blackstone founder Steve Schwarzman spent some quality time together back in April.

Sunday Morning News Roundup (Linkfest)

• Cadbury Still on the Prowl for Hershey (HSY)? Cadbury to unwrap £5bn sweetener.
• $15 bln bid coming for Virgin Media (VMED)? Virgin Media faces private equity bid -paper.
• New CEO: Siemens picks Loescher to be next chief executive.
• Alcoa plans Alcan aerospace and auto sales.
• Citigroup arm may buy stake in Indian broker - paper.
• Warner may offer extra 100 mln stg for EMI -paper.

Report: The Subprime Default Rate Much Higher Than Reported

The Orange County Register has been doing some excellent reporting on the subprime debacle. One their reporters says the default rate is above 20%! Click Here.

Weekend Feature: Microsoft Halo 3

The dk Report & Commodity News And Mining Stocks

A hat tip to the the dk report which is a high quality report that summarizes market activity. I noticed tonight I'm on the blogroll. Thanks for the add! The dk report should be regular reading.

There's another blog that I'm adding to the blogroll - a well done blog concerning commodities news and Canadian mining stocks at this link called, Commodity News And Mining Stocks - Wolf Stone.

As the old saying goes, "You're only as good as your information". The two blogs above are fine additions toward getting good info on the markets.

Heading Into The Weekend

While there was indication from options open interest that we'd see an up day today, the real drivers were M&A (excitement over the huge premium that aQuantive received) and even China. It was so nice of the Peoples Bank of do their rate, currency and reserve adjustments on a weekday for a change. The Chinese moves answered questions and concerns investors have had concerning China and its handling of overheating stock markets. While the moves on the part of China are small ones they at least lean in the direction of action being taken even if the Shanghai market continues to look risky and vulnerable.

S&P 500 finishes at a 7 year high - just 5 points shy of a new record. Will the record close happen Monday? I actually wouldn't be surprised to see the standard Monday post options expiration reversal at least early on. But the S&P's move above 1520 is an encouraging breakout for the bulls from the recent range bound trading below 1515. I could drag any number of indicators out to worry and fret about the level of the market. Someone the other day even featured comments in one of the comments threads in the blog about someone becoming "ugly bearish". Whether this is 99/2000 all over again when "overbought" meant nothing - I'm not certain, but it seems that bearish bets placed too early will be fatal. I'm of the opinion that The Trend Is Your Friend and when it's over you'll know. My eye will continue to be on 1500 as important support and then 1460.

It was a fairly quiet trading day for me today. I faded the spike on IGT (IGT) by picking up some June 40 puts earlier this morning and dumping them before the close with the stock down more than a dollar from its merger rumor high of the day. Elan (ELN) caught my eye today, in particular the June 17.5 calls where volume was on the extreme side especially relative to open interest. I'm holding that through the weekend, though I was thinking Biotech conference catalysts. There are also Biogen (BIIB) buyout rumors floating around concerning ELN. 25,000 ELN June 17.5 calls traded today vs open interest of 2,400.

Regarding the aQuantive (AQNT) Purchase By Microsoft (MSFT)

Howard Lindzon at http://www.howardlindzon.com/ hits it right on the head. His commentary is well worth a read.

When you come back from Howard's blog, check out Steve Ballmer's recent performance...




Here's more on the deal...

Now, This Will Be Some Coin Collection

The company behind this find is Odyssey Marine (OMR), up 58% today.

Morning Market Comment

We're going into expiration-Friday with strong stock futures. While there was a large exercise of OEX calls late yesterday, 695 and above for OEX will help to maintain a positive bias for the market today.

Grabbing the headlines this morning: China raises interest rate,bank reserve requirment. The most noticeable impact is a small rise in the Japanese Yen. This is a triple whammy from China with rates, reserves and Yuan trading band all being adjusted.

Deals again are big support to the market...
A huge premium in this deal: Microsoft to Acquire aQuantive, Inc. AQNT being taken out at $66.50 cash. Shares closed yesterday at $35.87. The stock is up over 80%.

GE reported near sale of plastics unit

I would imagine that big names recently in the rumor mill (MNST and YHOO come to mind) could get a boost from the concept of the huge premium that MSFT is paying for AQNT.

A brief note on gold. I think it remains soft so long as the Euro is unable to break above old highs above $1.36 (notice the big double top in the Euro). Gold shares, basis XAU, have also failed to provide leadership.


With gold now testing its 100 day moving average it's not looking good. Next support is down in the $630 or the 200 day moving average range. Other metals also weak: Shanghai copper 5-pct limit down on LME, stocks.

The Dendreon (DNDN) disaster continues: Dendreon reduces work force by 15%.

Evening Market Comment

Some weeks ago I noted that the extreme parabolic ascent of major market indexes like the S&P couldn't go on forever and that it was likely the S&P would level out just north of 1500 and that's where we're at.

But at the very least, the market is holding 1500 quite well. Unless data like consumer confidence tomorrow is catastrophic we could see an attempt to go higher thanks to supportive OEX going into expiration. OEX 695, or higher could spark computer driven buy programs. After that, so long as the market holds 1500 and further below 1480, we've got a good shot at taking out all time highs on the S&P. Does it completely make sense? No, but that's the lay of the land for now barring an unforeseen blow up somewhere in the world.

It sure took long enough: Wolfowitz bows to pressure and quits World Bank.

After the bell earnings developments: Intuit shares jump 8%; Focus Media lifts outlook.

Question for Bernanke: "If the housing market propelled the economy a few years back, how can you say it won't hurt the economy?" That would be my question: Bernanke plays down US mortgage woes.

Here's an example of why you should be very careful about listening to analysts ahead of earnings. An analyst at BWS Fianncial earlier today said that Marvell's (MRVL) results could spark a rally to $20. MRVL posted its results, stock up 19-cents this evening. Volume exceeded 2,000 contracts in the MRVL May20 calls... all to expire worthless tomorrow.

Research in Motion (RIMM) is finally finished! RIM says no material impact from restatement.

Apple (AAPL) At the HIghs Du Jour

Bloomberg is quoting a spokesperson as saying the Apple (AAPL) iPhone will ship in late June after receiving FCC certification.

The Rumor Mill Operating At Full Tilt Today

It started out with a rumor that Norfolk Souther (NSC) was going to do a debt recapitalization and had put out invitations for a meeting on 6/6. I actually jumped on that one and booked a quick 15% gain, but jumped out. Bear Stearns now says the meeting is likely for a dividend increase.

Implied volatility has been rising on Jeffries (JEF) again. MassMutual has been the rumored buyer. I've been long on this one.

Monster (MNST) continues to be active with theflyonthewall.com noting "chatter" surrounding the name. The Optiondoggy site says there are three bidders. I am long MNST... what the heck.

Lexmark (LXK) surged as much as 7% on speculation is has received a $70 buyout off from China's Lenovo. Smith Barney, however, is saying that a bid is unlikely and maintains a Hold rating. Stock well off the high.

Pogo Producting (PPP) is mentioned again as getting closer to a deal to sell part or all of itself according to various reports on the web. Options trading is not overwhelming, but there is activity out to the $60 strike. I've been long here for a while.

Jobless Claims and Other Matters

First, US jobless claims fall to lowest level since early Jan.

There's a big breaking deal with a 30% premium: ALLIANCE DATA TO BE ACQUIRED BY BLACKSTONE GROUP FOR $7.8 BLN. ADS is the ticker for Alliance, another one that has popped up recently on the Option Screener.

With respect to the offer for 24/7 (TFSM), an analyst at Wedbush says there could be a higher offer. $11.75, says the firm, is too low. Indeed, shares are trading near the $11.90 mark.

Morning Market Comment

Stock futures are drifting lower this morning ahead of economic data. Today at 8:30, we get the release from the government on jobless claims. Philly Fed and Leading Indicators are also due for release. At 9:30, Fed chairman Ben Bernanke about the subprime mortgage market at the Chicago Fed Bank Structure conference, No Q&A .

There's a good amount of news this morning about takeovers and potential deals...

Here's an announced deal - 24/7 Real Media Announces Agreement to Be Acquired by WPP. The 24/7 (TFSM) options activity has seen spurts of activity in recent weeks.

Bank of America this morning notes that Alltel's (AT) credit spread are at all time highs. BofA says its revised LBO analysis suggests a 60% chance for a $71 offer, 10% chance for a $77 bid.
They also assign 30% chance that a deal falls apart and the stock returns to $55.

Freidman Billings is stoking the flames of merger speculation in some large banking names. FBR says Keybank (KEY) could be acquired by National City (NCC) for $52 a share. FBR says it could be JP Morgan (JPM) for Comerica (CMA) for $85 a share. JP Morgan could also be an acquirer of Suntrust (STI) for nearly $100/shr. FBR says Wells Fargo, US Bancorp, PNC and BB&T are all possible suitors for STI.

Cerberus, the folks who are buying most of Chrysler, appears to be on a buying spree. Cerberus readies BCE bid.


There's an interesting post mortem this morning concerning the engadget.com report yesterday that knocked $4 bln off of Apple's (AAPL) market cap. And there's an interesting twist concerning who's liable.

Motorola lands a big deal: China Postel inks $2.3bn deal with Motorola.

Quick Evening Market Comment

I'm on the laptop tonight and all thumbs. It's one thing to have backup power, but another to lose the cable modem - down since around 4 p.m.

I'm going to keep this entry brief. Stocks are up in Asia following more records for Wall Street today. I had wondered a few weeks back if earninings catalysts would simply be replaced with M&A and it has. Plus, it didn't hurt today that a few billionaires disclosed the stocks they're buying - good old fashioned U.S. names like Citi and Union Pacific.... even Microsoft. Am I concerned about the level of the market - sure I am. But liquidity, deals and big investments will continue to push this market higher until the reality eventually settles in that our economy is faltering. That could take the summer to unfold.

I am going to devote some words tomorrow to gold and the volatility index - not together, but in separate posts. While I am long term bullish on gold, very clearly the yellow metal is in for a decent sized drop. And the VIX... up in this 13 to 14 neck of the woods. Interesting, isn't it. I think it will continue to revert to the LONG TERM mean... which is not 10, or 11. How 'bout 18?

Have a good evening.

Tornado Watch for Much of the Tri State Today

Already I've had one "deep sag event" with my power here as the dark clouds roll in. Even As I type the lights are flickering on and off. Thank goodness for overkill on the power back up!

Applebees (APPB) - Speculatin' Bad In The Neighborhood

Options trading in the June30 Applebees calls has been busy today with over 18-hundred trading. The whispers on Wall Street have been the company will sell for $39 a share. I don't believe it. SMH Capital released a report today saying that it's unlikely APPB will fetch a significant premium. That's on top of a May 3rd report from AG Edwards which stated that it didn't see much upside given lagging fundamentals.

Apple (AAPL) Delays?

There was a report out that said Apple's iPhone would delayed until October; Leopard until January. But now they've changed their tune...
http://www.engadget.com/2007/05/16/iphone-delayed-until-october-leopard-delayed-again-until-januar/

Google (GOOG) Races Ahead

Bear Stearns maintains an Outperform on Google (GOOG) stating that its soon to be released search algorithm could actually widen GOOG's lead over Microsoft (MSFT) and Yahoo! (YHOO). Bear even says that GOOG could gain additional market share as opposed to losing it as the street widely expects.

Follow Up - Today a Bloomberg Denial

Since I worked with and for the guy for years, this is a subject that I will be covering.

amNewYork: Bloomberg denies plans to run for president. What would this be, denial #6,321? LOL.

Housing Starts and Other Matters

Housing Starts managed to rose to a greater than expected annual rate of 1.528 mln in April, but building permits... shabby: Building permits fall to a 10 year low.

Stock futures are barely higher approaching the open as stock investments by various billionaires are lifting specific big names like the railroads and Citigroup (C), while weak results and/or guidance from Home Depot (HD) and Applied Materials (AMAT) will be a drag on the market.

OEX open interest looks positive for the bulls IF OEX can remain above 690 going into Friday expiration.

Fresh M&A... Bausch & Lomb in $3.67 bln deal with Warburg Pincus.

As the stock market has climbed - E*Trade daily client trades up 8.8 percent.

Morning Market Comment

Stock futures little changed this morning as the market awaits the latest Housing Starts data. The numbers are due at 8:30 et and will give ammo for either the bulls or bears to work with. A rise of 3% is expected. Yesterday's NAHB housing sentiment numbers remained in the 'ugly' catagory: Home builder sentiment sinks to 15-year low. Meantime, the latest Mortgage Bankers Association numbers are soft: US home loan demand falls first time in four weeks.

What are billionaires investing in these days?

In additional to new stakes in Union Pacific (UNP) and Norfolk Southern (NSC), Berkshire Hatahway's (BRK-A) Warren Buffet has upped his stakes in Johnson and Johnson (JNJ) and Wells Fargo (WFC). He has reduced stakes in Ameriprise (AMP) and H&R Block (HRB).

Lampert buys into Citigroup, Motorola
Investor Soros more than doubles stake in Microsoft
Gates discloses Tractor Supply, PF Chang's stakes


On the tech front...

Following the weak orders outlook given by Applied Materials (AMAT) late yesterday, Citi's Smith Barney maintains a Hold on Applied saying they would be buyers at $17. Cowen downgraded AMAT to Neutral citing the weak orders.

Harpertown and Barcelona are two key destinations in the chip world as Intel (INTC) and Advanced Micro Devices (AMD) continue to duke it out.

Crocs (CROX) is a big mover this morning, up nearly $2. JP Morgan has initiated CROX with an Overweight rating citing the company's strong growth.


Crude oil showing a dip of about 20-cents at just under $63.
The Nikkei 225 creeped higher with a 0.1% gain and the FTSE 100 was down 0.1% in London.
Two day Bank of Japan policy meeting underway - Yen Declines to Record Low Against Euro; Yield Spread to Widen.

... More after the housing starts data is released.