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Weekend Reading – Looking for Green Shoots

I've been beefing up our bullish plays on the Watch List.

If we're going to get more bullish I thought it would be a good time to look for some bullish premises so we don't feel totally silly paying 20-year high p/e's for the S&P 500.  Obviously, our main hope is that the stocks we buy will grow into their earnings so the next month's worth of reports will be key.  The bar for corporate earnings is still set at very easy to beat levels yet, like this limbo-playing child, when they announce their beats of very low expectations we're going to get all excited and tell them how great they are doing.

The problem is, these are not kids who we hope may grow up one day to be President or CEOs of major companies. these ARE CEOs of major companies and they are being paid top salaries for top performance and we, the stock purchasing public, are paying top dollar for what should be SPECTACULAR performance, not beating 75% off last year's earnings by a penny! 

When I am being asked to buy IBM back at it's all-time high or AMZN or BIDU or AM, PALM, NFLX, PCLN, URBN, UHS, CERN, CREE, GMCR, CY, SWM, TRLG, BKE, etc – then their performance better look like this:  


Nothing against those particular companies, any individual company can be exceptional and beat the market, but - Are the companies we're buying really doing exceptional things or are have we just developed such ridiculously low expectations that we have been psychologically conditioned (and Wall Street firms employ armies of behavioral psychologists for a reason) to treat these stocks and the CEOs who run them like our children?  If your child was the child in the above picture and I asked you for $20 to see her limbo show – you might pay it.  If it's not your child though, would you even consider making an afternoon of it?  No, of course not, for good money you expect to see the cool fire guy at the top of his game and that is what you should expect from companies trading at or near all-time highs – NO LESS!

I love President Obama but he was just given a Nobel Peace Prize simply for not being President Bush – low expectations!  On Sept 17th, PALM announced that it lost 10 cents a share, not losing the 25 cents expected and gave lowered guidance for Q3.  The non-adjusted loss for PALM was their 9th consecutive GAAP loss in a row.  What did the stock do?  Today it's up 25% with a forward p/e of 40.  Why?  Low expectations!  And even that is based on the assumption that they will break their 9-quarter losing streak and turn a .42 profit next year.  For that you are being asked to hand over $17 of your hard-earned cash for each share of this stock.   

ADBE missed by a penny (3%) on 9/15 and they actually fell off their year's high of $35.78 but now they are back to $34.64 and will hopefully manage to earn $1.52 this year (p/e of 23), perhaps about right as they earned $2.07 last year and traded in the low $40s.   DBRN missed on revenues on 9/16 and guided lower for 2010 to $1.15 per share and they are up 10% to $18.43 (p/e 16 if they don't guide down again).  Just this Wednesday, MON announced a bigger loss than last quarter ($233M or .43 per share vs a loss of .31 last Q) and revenues were down 10% from last year and dropped 2010 forecast 10% to $3.20 a share – that was good for a 3% gain into the end of the week.  LOW EXPECTATIONS!

OK, I am done with my rant, now let's see what all the fuss is about in our new and improved economy (items copied from SAlpha Market Currents, Phil's Favorites and various other news sources):

A new survey of economists puts Q3 GDP growth at a whopping 3.2%, the best quarter since Q3 2007, and up from an estimate of 0.2% just one month ago.  Which gives even more meaning to this chart from Eddy Elfenbein, according to which corporate profits as a percentage of overall GDP have plenty of upside.

lobbyingSurprise! No bank failures Friday night. Tally for the year holds at 98.  Banks got rescued by a Treasury secretary more favorable to them than any in a generation. So, Joe Nocera asks, how can they shamelessly oppose consumer protection as defined by Geithner? Congress debates protective measures this week that are in danger of getting watered down

Lobbyists from the financial industry have paid hundreds of millions to Congress and the Obama administration. They have bought virtually all of the key congress members and senators on committees overseeing finances and banking.  This is easy to confirm in black-and-white. See for yourself: here, here, here, here, here and here.  Great chart from Barry Ritholtz showing ROI on lobbying efforts.

Meanwhile, every 13 seconds in America, there is another foreclosure filing. According to the Center for Responsible Lending, foreclosures are on track to wipe out $502B in property values this year.  Condo prices remain fairly cheap, but it's nonetheless alarming to hear a Miami real-estate broker say: "It's really been a crazy, hectic time in South Florida. It sort of reminds you of 2005 all over again."

Bennett editorial cartoon

Speaking of paid-off Senators, John Barrasso (R-WY) was so full of crap in his anti-health care arguments that even Fox's Shep Smith had to stop and correct him.  Wha'ts most interesting about this interview is while Shep talks, the Senator is like a blinking machine, I'm not sure what that means but I don't think he went on Fox expecting to run into an opposing viewpoint.  Will Shep be schlepped out of town by Murdoch or is Fox realizing the need to get a little more fair and balanced?  Part of Shep's commentary:

Over the last 10 years health care costs in America have skyrocketed. Regular folks cannot afford it, so they tax the system by not getting preventive medicine, and we all end up paying for it. As the costs have gone up, the insurance industry's profits, on average, have gone up 350 percent. And it's the insurance companies which have paid and which have contributed to senators and congressmen on both sides of the aisle to the point where now we can't get what all concerned on Capitol Hill all seem to [believe] and more than 60 percent of Americans say they support, a public option.  Every vote against the public option is a vote for the insurance companies.

Meanwhile, House Minority Leader John Boehner told reporters, “I’m still trying to find the first American to talk to who’s in favor of the public option, other than a member of Congress or the administration… I’ve not talked to one, and I get to a lot of places and I’ve not had anyone come up to me — I know I’m inviting it — and lobby for the public option.”  Well, some of Mr. Boehner’s constituents decided to take him up on his offer and rally outside his district office in West Chester, Ohio, delivering over 1,800 signatures of people in his district who support a public option.

Keep in mind that this cartoon is from 1994, 15 years of no hope and no change!!!

Aside from giving human beings health care, another major problem that has now been targeted for termination by conservatives is the Bible.  According to Consevapedia: "Liberal bias has become the single biggest distortion in modern Bible translations."  The eager young men at Conservapedia are p.o.'d that the Bible might be seen as too liberal. So they've come up with the Wiki-style Conservative Bible Project, to make sure the Lord doesn't go all wobbly on us and have laid out the following guidlines for rewriting the Bible so that it may be enjoyed by right-thinking people and the children they are programming:

  1. Framework against Liberal Bias: providing a strong framework that enables a thought-for-thought translation without corruption by liberal bias
  2. Not Emasculated: avoiding unisex, "gender inclusive" language, and other modern emasculation of Christianity
  3. Utilize Powerful Conservative Terms: using powerful new conservative terms as they develop;[4] defective translations use the word "comrade" three times as often as "volunteer"; similarly, updating words which have a change in meaning, such as "word", "peace", and "miracle".
  4. Combat Harmful Addiction: combating addiction by using modern terms for it, such as "gamble" rather than "cast lots";[5] using modern political terms, such as "register" rather than "enroll" for the census
  5. Accept the Logic of Hell: applying logic with its full force and effect, as in not denying or downplaying the very real existence of Hell or the Devil.
  6. Express Free Market Parables; explaining the numerous economic parables with their full free-market meaning
  7. Exclude Later-Inserted Liberal Passages: excluding the later-inserted liberal passages that are not authentic, such as the adulteress story


The project lists possible approaches to creating a conservative Bible translation:

  • identify pro-liberal terms used in existing Bible translations, such as "government", and suggest more accurate substitutes
  • identify the omission of liberal terms for vices, such as "gambling", and identify where they should be used
  • identify conservative terms that are omitted from existing translations, and propose where they could improve the translation
  • identify terms that have lost their original meaning, such as "word" in the beginning of the Gospel of John, and suggest replacements, such as "truth"

AlterNet has a nice article listing the 30 conservative Senators who voted against the "Franken Ammendment" which seeks to withhold defense contracts from companies like KBR "if they restrict their employees from taking workplace sexual assault, battery and discrimination cases to court."  GOP Senator Jefferson Beauregard Sessions of Alabama allowing victims of sexual assault a day in court is tantamount to a "political attack" at Halliburton.

In a green shoot for the oil bulls, James Hamilton notes the "daunting" challenge private oil companies face in just keeping oil production steady. Technology helps with existing fields, but it takes new discoveries just to keep up with demand.  This is good for oil prices but not the companies themselves unless they get those high prices and, if they get those high prices, what happens to the rest of the economy?  It's like we are doomed to repeat last year over and over again…

Chinese leaders are concerned that their nation's enormous economic expansion is becoming an excuse for foreign suppliers to inflate commodity costs. So, they hope to use their three futures exchanges to fight back.  Government officials say the country is positioning its futures markets to be major players in setting world prices for metal, energy and farm commodities. By letting the world know how much its companies and investors think goods are worth, China hopes to be less at the mercy of markets elsewhere.

Matt Lynn predicts a coming boom in M&A activity.  This is one of the major things I need to see to get more bullish.  "All the signs are that the global capital markets are gearing up for the next big thing: a wave of mergers and takeover bids. Kraft Foods Inc. is stalking U.K. confectionery maker Cadbury Plc; mining company Xstrata Plc has proposed combining with Anglo American Plc; and computer manufacturer Dell Inc. just acquired Perot Systems Corp."

U.S. banks are reducing their lending at the fastest rate on record, tightening the credit squeeze and threatening to leave many otherwise viable businesses unable to borrow money to expand their businesses, meet their payroll or refinance their maturing debts. According to weekly figures provided by the Federal Reserve,total loans at commercial banks have fallen at a 19% annual rate over the past three months, while loans to businesses have dropped at a 28% annualized pace.

Reminiscing about October crashes past, and their disturbing similarities to today (a worrisome sliding dollar) and an important difference (those times: interest rates soaring in response to inflationary threats).

In the "Not a green shoot" department:

David Rosenberg, of Gluskin Sheff, notes that on an operating (”scrubbed”) basis the price/earnings ratio of the Standard & Poor’s 500 has expanded a whopping 10 points since its March low, and stands at 27.6. Historically, Dave observes, when the economy is making the switch from contraction to expansion, as it did in the third quarter, the P/E is 15.

Trailing earnings are untouched by clairvoyance, in contrast to forward earnings, which depend heavily on projecting the future. But such estimates have their drawbacks, particularly since Wall Street forecasters are a cheerful lot predisposed toward upbeat prognostication.  A year ago, equities were trading at a modest 12 times forward estimates. In fact, as Dave puts it, with perfect hindsight, the market at the time was really trading at 30 times forward earnings.

Currently, Dave reckons, the S&P 500 is priced for $83 in operating earnings, or double the most recent four-quarter trend, and normally it takes five years for profits to double from a recessionary low. Such a feat would be more than a little impressive, since revenues, for the first time ever, have registered four quarters in a row of double-digit decline.  Given the going estimates for operating earnings of $48 a share this year, $53 next year, $63 in 2011 and $81 for 2012, he concludes that “the market is basically discounting an earnings stream that even the consensus does not see for another two to three years.” In Dave’s book, stocks remain more than fully priced.

 How do we turn this into a green shoot?  Bloomberg manages with this doozy:

Investors outside the US are purchasing companies in the S&P 500 Index as the cheapest valuations on record, their buying power boosted by a seven-month decline in the dollar. The S&P 500 is priced at 19.9 times earnings, the biggest discount to the MSCI World Index of 23 developed countries since May 2003, according to monthly data compiled by Bloomberg. For euro-based money managers, currency translations push the cost of U.S. stocks down to 13.6 times profits, the lowest level ever relative to global equities and a discount that dollar-based investors have never enjoyed, data compiled by Bloomberg show. The last time US stocks were this inexpensive, in 2003, the S&P 500 began a four-year, 62% advance.

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  1.  An article appeared in my home-town newspaper this weekend by Joe Queenan, who writes for the New York Times, Barrons, etc.  Had he not been known to be the writer, you would have thought it was Phil.  The gist of the article was that this is not a bull market, but only a classic sucker rally in the midst of a bear market.  He advises great caution in investing ‘bullishly".   I believe the correct approach is largely as Phil has laid out.  That is, find some stocks which are likely to do well over time, make them a part of your ‘bullish’ portfolio, but stay well hedged on the short side.  I would add, to have a plan ready for taking advantage of any abrupt downward movement in the market.  I think this is one thing we don’t talk about much on this site.  How would we take advantage of a 10 day drop in the DOW from 9,700 to 8,000?  This is worth contemplating, as markets tend to trudge up slowly, but often drop precipitously.  During the most recent severe correction I watched my shorts discharge the cash INTO my portfilio like a well-greased slot machine.  Had I only had more shorts (than longs) at that time.   Would your portfolio and trading style take advantage of such a downward movement, or merely watch it, taking the 20% profit….then into cash, or worse, suffer greatly from it?  Phil, if you have time and inclination, look to this question sometime.  How would we recognize, and quickly play such an abrupt correction?

  2. Phil
    Off topic but a relevant question on a position. I own two positions that are down and need adjustment.
    1)The first is DXD NOV 32/35 @ 1.63
    Should I watch until Tues as the markets could go up on light volume and then buy back the 35′s that were sold and then average down the 32′s? I can again cover if needed on Wednesday after setting tight stops.
    2)Th second is SKF which is down a lot more. I won the 24/26 NOV  @ 1.05
    Again after watching Mon/Tues action,should I buy back the short side as it has a nice profit and DD on the long calls and set stops?
    Thanks for the help as always.

  3. Phil, I registered at WSS and sent you a buddy request Username: foss. (Still not sure how to view the portfolio, maybe after you accept i will be able to view)

  4. Big drop/Iflan – Hey, I thought we were trying to stay positive…  It’s really hard to pull the trigger on bullish plays if we keep looking for bearish ones!  It’s kind of like when you are driving up one of those crazy, narrow mountain roads and all you do is keep looking down the cliff and wondering what happens if a car comes the other way… 

    Anyway, the Mattress Play strategy isn’t about just stopping with a 5% gain, it’s just been so long since we’ve had a big sell-off that we haven’t had occasion to trigger a 2nd layer.  Ideally, we have our original hedged position that’s meant to double.  So say we have the Jan $100 puts ($5.10) with a 1/2 sell of the Nov $97 puts ($2) with DIA at $98.69 (Dow 9,869ish).  If the Dow drops 200 points, there’s nothing to do.  Our Jan $100 puts are $4 in the money and the puts aren’t worth much.  If the Dow drops 400 points (DIA $94.69), the 1/2 sell is $2.31 in the money and our puts are $5 in the money, still not a big deal. 

    At that point, our long puts should be about $8 and we MIGHT, if we think that’s a bottom, want to drop our Jan position down $4, taking $2.50 off the table in case we bounce.  If we DON’T think it’s a bottom, then we can buy 1/2x the Jan $96 puts for $5.50 (estimating) and put a stop on 1/2 the Jan $100s at $7.50 and 1/2 at $7.  That’s how we caputre our profits as the market goes down… 

    If the market heads down another 250 points without stopping us out, we’d be at DIA $92 (Dow 9,200) and we’d REALLY be expecting a bounce around there.  Our $97 putter would be $5 in the money but easy to roll to 2x the Dec $95 puts so not a big issue and our $100s would be $8 in the monney and worth around $10 (the current $107 price) and the 1/2 x $96 puts would be up around $7.20.  At that point, we can buy another 1/2 x the Jan $93 puts (although I might want to move to March by then) and we’d put $9.50 and $9 stops on the Jan $100s.  Notice at this point that the $9.50 you stop out at pays for almost 2x the new puts you are buying and you already have double coverage on the way down. 

    So you can end up massively beaish if the market keeps going down and you simply follow that strategy as it was laid out back in early 2007 but, unfortunately, the markets are so much more volatile now that we’re constantly getting stopped out of even .50 (50 Dow point) moves.  It’s important to understand the spirit of the strategy though,  when things are generally heading south, we take those upper level profits and put them into a larger amount of lower level puts.  In a real crash, this strategy can end you up with a ton of puts and, if you keep sensible stops and manage your numbers, you can keep out of trouble on a rebound.  

    Also keep in mind that, from a portfolio perspective.  If you are $55K bearish and $45K bullish and you get a 10% move to $60.5/$41, you don’t need to go back to 55% bearish if you aren’t feeling it.  You can just allocate $5K of your short profits back and then you are $60.5/46 bearish and another 10% dip puts you at $66.6/41.5 bearish and if 20% isn’t enough dip to turn you bullish, you can drop just $3.5K to the bull side and you are $63.1/45 bearish.

    Keep in mind that this also works well because your bull plays get cheaper.  If it were BAC at $17.50 and you had $4,500 in that one (10% allocation, 257 shares), you would be adding back $500 in round one at $15.75 (32 shares) and then $350 at $14.18 (25 shares), giving you 314 shares of BAC at $14.18 ($4,452), so you are maintaining (roughly of course) a dollar allocation of BAC but, if they ever come back to $17.50, even without wisely flipping bullish, you end up with $5,495 if that applies steadily to the other 90% (and good luck with that!), you have $54,950 on the bull side if we go back to scratch and if we assume your $66,600 short side drops the whoile 22% on the rebound, you still end up with $51,948 on the bull side.

    The balance strategy is NOT supposed to make you rich on big market swings, it’s supposed to give you opportunities to adjust your trades and add to the ones you still like.  Our main goal remains to derive an income from the short puts and calls we sell and if we can just maintain our $100K of stock (or leap) positions through good balance and pick up 5% from selling puts and calls each month – that’s pretty much all we need to be successful.

  5. DXD/Chakra – DXD is at $33.89 so you are still in the money and the spread is still $1.30.  Those veritcals do sting on the way down as your caller will hold value better than you do, especially when there’s lots of time left.  The only reason you want to switch is if you change your mind about direction.  Keep in mind that the delt of this trade can be adjusted by selling an extra caller at any level.  If you have 5/5 then your total delta is $350 and your caller is $220 so you are losing $130 per $1 move in DXD.  If you want to cut that in half, you can sell 1 more Nov $33 call at $2.20, which has a .61 delta.  Of couse it caps half your upside differential but you can put a stop on it or on 2-3 of the $1.40 $35 callers, perhaps at $1.60 to manage the upside risk.   In general, don’t think of your positions as frozend and don’t think of your strikes as being the only ones you can trade. 

    As a bullish (market bearish) adjustment, I would expect that we won’t have a bad day until Wednesday, when we get a ton of earnings and data.  IF that isn’t a bad day, we may never have one!  You can go more neutral with a single sale if you want but, for an adjustment, I’d roll down rather than buy more.  It only costs you .70 to roll down $1 and that’s in the money so you are literally buying $1 for 70 cents.  If you add a $32, it’s got $1 of premium and if you spend to the same $7 it would cost you to roll 5 down to the $30s rather than having 8 $32s and DXD finishes at $36 you would have 8 x 4 = $32 vs $5 x 7 = $35. 

    So you would need a pretty hefty move in DXD, WAY past your caller, to recognize the same gain you’d get from rolling yourself down.  Also, if you roll down to the $30s at $4.20 you can also roll 3 $35 callers ($1.40) to 3 $33 callers at $2.20, paying for about 1/3 of your long roll.  You can then set stops at $1.60 on the other 2 caller and that would leave you with 3/5 coverage so a move up to $35 would net you 3x $3 + 2x $5 vs the 5x $3 you’re hoping for now.  Obviously, on the way down, you can just add 2 more $33 callers to give yourself good protection for almost another 10% dip. 

    SKF is similar and I’d say yes but with stops, not just buying them back to no purpose.  We should have more fear of the banks heading up as there could be more stimulus aimed in their direction to get things moving in the market (certainly the REIT sector is expecting a massive bailout soon).  In general, like any spread, you should be following the 50% rule as we are more than 2 weeks out but the rule is to set tight stops (maybe $1.60 on the Nov $26s) although I would also point out that, rather than spend $1.60 to buy back the Nov $26 calls because you HOPE SKF comes back and saves you – you can spend $2.15 to roll down to the Jan $22s, which puts you in a $4 spread for net $3.20 with a 2 month advantage.  Probably a better move if things go against you and you still want to maintain an SKF hedge.

    WSS/Foss – I haven’t seen a buddy request.  I used to get them in the mail.  

  6. Obama Wins Booker Prize

    The Mann Booker Prize, Britain’s most prestigious literary award, has been conferred for 2009 on President Obama, it was announced yesterday. Not only is this the first time the Booker Prize has gone to an American. It is the first time the prize has gone to someone who has never published a work of fiction. By the terms of the Mann Booker Trust, the prize is awarded annually to “the author of what is judged to be the best novel published each year in the United Kingdom.” Obama has written two highly regarded memoirs, but neither was published in 2009 in the United Kingdom, and neither is a novel. At the press conference where the award to Obama was announced, the chairman of the judges said, “He’s bound to have a short story or two shoved into a drawer somewhere. That’s good enough for us.” And besides, the chairman noted, it was the unanimous conclusion of the judges that the president’s “whole life is a great novel.”
    Although as recently as 24 hours ago, the president’s name was entirely absent from the traditional frenzy of speculation about the Booker Prize, he is now considered the leading candidate for the Prix Goncourt, which is the French equivalent of the Booker and possibly even more prestigious. Among past winners are Marcel Proust and Simone de Beauvoir. Traditionally, as a prize for novel writing, it has gone to someone who has written a novel. Obama got the award, according to the judges, for “smoking cigarettes and wearing those Euro-cut suits and skinny ties, and generally looking like a French intellectual.”
    The president is considered a shoo-in for an Oscar in the category of best cinematography at next spring’s Academy Awards. “We had to give him something,” a spokesman said, “and nobody knows what the heck cinematography is anyway.”
    Obama is also expected to win this year’s Nobel Prize for Physics, for an experiment he conducted two decades ago in a science course at the high school he attended in Hawaii. By dropping two coconuts from the top of a tower, he determined that gravity works in Hawaii just like it does in England, where Newton had conducted a similar experiment several centuries earlier, using apples, even though Hawaii is much closer to the equator. “Whether distance from the equator might make some difference in the way gravity works is a question that nobody had thought to ask,” the Nobel citation declares. “Now, thanks to Mr. Obama’s research, we have the answer.” Obama will be the first person to win two Nobel prizes in the same year. “Next year, he’s going for three,” said presidential adviser David Axelrod yesterday.
    Among other prizes Obama has won or is expected to win in 2009 are Scariest Costume at the annual Halloween Ball of the National Press Club (he came dressed as Elizabeth McCaughey), Parent of the Year at the Sidwell Friends School (“So what if he missed all the PTA meetings?” the citation read), and Most Hot Dogs Consumed in Five Minutes (14) at this year’s White House staff July 4 picnic. A controversy broke out when the Post reported that they were actually veggie-dogs, but House Speaker Nancy Pelosi ruled that the new-age sauages should count. “Next year he’s going for 16,” said Axelrod. “Eyes on the prize.”

  7. Phil
    I have been re-aligning my long term portfolio positions in order to hedge against a long term anticipated decay in the USD value as a result of blow-out govenment budget deficits. Given  the budgets proposed by the federal government,.and notwithstanding the hype of projected success, I personally feel this slippage of value in USD relative strength will prevail for a very long period of time, given the sick economy and the lack of appropriate treatment. I have concluded the administration is clueless as to what creates jobs ( the first step in a recovery ), and it is apparent the steps that are being taken to remedy the situation, are merely a waste of money and a budget buster. Therefore, I am immediately focusing all of my investment strategy on foreign opportunities ( growth forecasts projected are superior to the US), and at the same time purging many of my positions that are solely domestically based. Some of these positions should be categorized as members of "the walking dead", as they would be in the graveyard but for the help of the taxpayer and the benevolent government saviors. I am taking positions in BMO, BNS, RY and BP tomorrow and will enjoy their terrific yields, and will not have to worry about the funerals of the ones on life support here in the US – C and BAC et al.

  8. Economists have tied months of extreme volatility in the stock markets to a light switch with a My Little Pony cover plate in 7-year-old Jenny Stackhouse’s room.
    In a paper released this month, researchers with the National Bureau of Economic Research and MIT’s Department of Economics concluded that Jenny’s light switch, in a cozy three-bedroom cape she shares with her parents, has controlled the wild swings experienced by the Dow Jones industrial average since last fall.
    “We checked our calculations over and over again for discrepancies, but the results didn’t change,” study author Xavier Blaust said. “We went into this thinking it had to be the banks, the hedge funds, the insurers, the irresponsible lending, the CDOs, the credit default swaps, the breathtaking greed, the government response. And do you know what? It’s a little girl in Nutley who’s taken the nation, and the world, to the brink of financial collapse.”
    Jenny’s mother, Paula, reported Jenny and her friends started playing disco dance hall in her room last September by quickly and repeatedly flipping the light on and off. Her father noted he had done some electrical work in his daughter’s room last summer and allowed the possibility he may have crossed some wires.
    “I’ve done wiring a few times before, so I wasn’t nervous or anything,” Mitchell Stackhouse said. “However, I wasn’t familiar with the green wire with dollar signs all over it and the how-to books say when you’re not sure, just connect it. There was some sparking.”
    Researchers suspect days when the Dow dropped most precipitously were when Jenny left the light off entirely. For example, on Sept. 29, when the market plunged 777 points, Jenny was on a playdate at Allison’s house.
    Conversely, one the days when the Dow recorded its largest point gains ever, Oct. 13 and 28, Jenny was grounded in her room and couldn’t have friends over. The light stayed on the whole time, Blaust said.
    Rather than be alarmed at her daughter’s ability to control world markets with the flip of a switch, Paula Stackhouse said Jenny usually is a failure at most things and was glad to see her finally succeeding.
    “I can’t really see changing anything with that switch for at least another two or three years,” her mother said. “We’re talking about a young girl’s confidence here and what could be more important than that?”

  9. Oct. 12 (Bloomberg) — Investors outside the U.S. are purchasing companies in the Standard & Poor’s 500 Index at the cheapest valuations on record, their buying power boosted by a seven-month decline in the dollar.
    The S&P 500 is priced at 19.9 times earnings, the biggest discount to the MSCI World Index of 23 developed countries since May 2003, according to monthly data compiled by Bloomberg. For Europe-based money managers, currency translations push the average cost for a dollar of U.S. profits down to 13.6 euros, the lowest level ever relative to global equities and a discount that investors in America have never enjoyed, data compiled by Bloomberg show.
    Overseas investors that hold almost $2.5 trillion in U.S. equities are getting a bigger slice of corporate America with each euro, yen and pound they spend just as S&P 500 companies from PepsiCo Inc. to General Electric Co. post higher overseas sales. While more losses in the dollar would cut returns, the last time U.S. stocks were this inexpensive, in 2003, the S&P 500 began a four-year, 62 percent advance.

  10. Blackstone cashing in
    LONDON (Reuters) – Private equity firm Blackstone Group LP is planning to list up to eight companies it owns and sell at least five others, the Financial Times said on Monday.
    The FT said the move by Blackstone, the world’s largest buyout firm, marked a reversal of its pessimistic view of the global economy and financial markets.
    The newspaper quoted Blackstone founder Steve Schwarzman as telling investors in a letter sent on Friday that the firm saw the world changing once again:
    "At least for private equity, the worst is behind the industry," it quoted him as saying.
    Schwarzman said Blackstone was in the process of selling five companies at values twice as high as those estimated at the end of 2008. Investors were likely to receive about $2.8 billion as their share of the profits, it said.
    Blackstone had invested more than $4 billion in the eight companies it was considering listing in the next year, it said.
    The expected valuation for these companies "compares very favorably to our costs, in some cases significantly," it quoted Schwarzman as saying.

  11. A support fund created to help Dubai pay its debts has "insufficient" resources to cover the billions of dollars worth of debt coming due, an analyst at credit rating firm Standard & Poor’s said Sunday, putting added pressure on the struggling city-state to raise additional cash.
    The sheikdom and its network of state-controlled companies amassed at least $80 billion in debt on projects like manmade islands and opulent high-rises during a multiyear building boom that saw the city-state craft itself into the Middle East’s financial, trade and tourism hub.
    About $50 billion worth of that debt needs to be covered over the next three years, said Farouk Soussa, S&P’s head of Middle East government ratings. A lack of government information has left investors wondering how it all will be repaid or refinanced.
    "It’s anyone’s guess how much the government of Dubai has to support that debt," Soussa said at a conference in Dubai. "It comes back to transparency."
    In February, the Dubai government raised $10 billion in a hastily arranged bond sale to the United Arab Emirates central bank, which is based in the oil-rich neighboring emirate of Abu Dhabi. That deal was seen be many analysts as a federal bailout of the seven-state UAE federation’s most free-spending member.
    Dubai officials have said part of that money, allocated to a government "financial support fund," has gone to pay unpaid bills to contractors of state-backed companies such as property developer Nakheel.
    Soussa estimates that no more than $4 billion remains in the support fund.
    "From our point of view, that’s insufficient," he said. "The notion that the government will be able and/or willing to stand 100 percent by all that debt on an equal basis is wrong."
    Dubai has suggested it plans to issue another $10 billion worth of bonds before year’s end — funds that could help cover a closely watched Nakheel debt of $3.5 billion coming due in December.
    Investors and debt-rating agencies like S&P are eager to see whether Dubai can interest creditors beyond the central bank in the bonds.
    Outside interest in the offering could be seen as a vote of confidence in Dubai’s creditworthiness, and might ease the pressure on the emirate as it seeks ways to unwind the rest of its debt pile.
    Nasser Saidi, chief economist of the Dubai International Financial Center, said he believes the city-state could succeed in attracting outside investors.
    "From what I hear from market participants, there is interest in participating in a new Dubai issue. So I think you’ll see more private sector participation," he said.
    Saidi’s comments echo those made over the weekend by Mohamed Alabbar, a top adviser to the emirate’s ruler and the chair of an advisory council set up to help Dubai maneuver through the financial crisis.
    In an interview with CNN’s Marketplace Middle East, Alabbar said the second $10 billion round of fundraising will "be majority government, some private sector," and could be issued this month or next.
    Alabbar also said Emaar Properties, a development company he chairs, hopes to have its Burj Dubai, the world’s tallest skyscraper, ready to open by the Emirates national day on Dec. 2.
    "I think it’s an achievable date," he said.

  12. Foreign Positions/Gel – Man you guys have trouble getting positive!  If we go down, the world goes down, make no mistake about that.  The jobs in Europe are as bad as here and just like a company engages in deficit spending in order to build a base, countries do too.  The problem America has at the moment is not that we spent too much on stimulus, it’s that we spent too little and we spent it in the wrong places so far. 

    I said back in January that Obama should have just been sworn in on and then walked over to the podium and whipped out a $2Tn check book and started funding programs:

    • Install Solar Panels on every possible home – $250Bn/yr, 2M jobs, saves 10s of Billions of energy cost, lowers oil imports, takes pressure off the grid
    • Fix every road, bridge and tunnel in America – $250Bn/yr, 2M jobs
    • High-Speed Rail – $250Bn, 1M jobs
    • Purchase $100,000 in equity on anyones home – $200Bn (a year for 30M homes), ends most foreclosures, puts hundreds of Billions in consumer pockets
    • Army Corps of Engineer-style projects to build energy infrastructure, including nuclear, clean coal, nat gas, solar, wind, wave… - $150Bn, 2M jobs, decreases oil imports
    • Fix New Orleans – $100Bn, 1M jobs
    • Universal Health care for 47M uninsured: $80Bn/yr, money spent on health care, 1.6M jobs
    • Suppliment 1/3 salary for first-year hires in new companies under 10 people up to $20,0000 – $60Bn for 3M jobs
    • 3% loans for new manufacturing equipment in any company that is net hiring from last year - $30Bn per $500Bn 
    • US Energy Prize – $22Bn, $1Bn a month and a $10Bn grand prize to best energy saving products or ideas in America.  Can be given as $20M prizes per state with annual state and national winners. 

    Putting 10M people back to work generates about $200Bn in tax revenues so you’re getting 10% a year back right away and we add about $1Tn back to the GDP, fix the financials before they cost us a few Trillion anyway and real estate and retail get on a path to recovery.  Focusing on cutting back energy use keeps oil prices low, which helps the transport industry and keeps airfares and shipping costs down.  This is not hard or complex stuff and, if we have another emergency, it’s very possible you’ll see some drastic action taken.  I’m just pointing our how quickly things can be turned around when there’s the political will for it.

  13. Oct. 12 (Bloomberg) — Investors outside the U.S. are purchasing companies in the Standard & Poor’s 500 Index at the cheapest valuations on record, their buying power boosted by a seven-month decline in the dollar.
    The S&P 500 is priced at 19.9 times earnings, the biggest discount to the MSCI World Index of 23 developed countries since May 2003, according to monthly data compiled by Bloomberg.
    My first impression after reading this was ‘wow’!.  And to be a European buying into the US market it really is a ‘wow’.  But to us (US), to think the greatest recession since the depression has given us a market priced at levels we had only 6 years ago (2003) is laughable.  Sure, the market went up 62% from there.  But that was on the backs of the housing bubble and free money.  Was that real?  Hell no.  Then what is real?  How the hell do I know.  That’s what makes all of this so hard!  You can’t tell what is real and what isn’t real.  ESPECIALLY on a day to day basis. 
    Bear test:  If you were a European, with the incredible discount you have by exchanging your euros to buy US stocks, would you do it today?