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Buzz Bits: DOW Surge Eases


What's on the Buzz?


Earnings Report - MV News

  • McAfee (MFE) reported Q4 EPS of $0.27 vs $0.26 cons on revs of $253.3 mln vs $254.0 mln cons.

  • MetLife (MET) reported Q4 EPS of $1.04 vs $1.01 cons on revs of $11.55 bln vs $12.55 bln cons. Premiums were $6.35 bln vs $.5.80 bln y/y.

Flashback! - Bill Meehan - 3:40 PM

This day in market history...
  • Closing levels 10 years ago found
    • DJIA: 5541.62
    • S&P 500: 656.37
    • Naz: 1094.60
    • Crude: 17.83
    • Gold: 408.00

This day in Minyanville history...

  • In '04, Collins joined the fray and Toddo accepted nickname suggestions in Kastaway

In other news...

  • In 1932, America entered the 2-man bobsled competition for the first time at the Winter Olympics. I don't think I can name an American bobsledder beside Herschel Walker.

They call it... - Todd Harrison - 2:56 PM

Contra-hour is in full effect as Boo tries his paw on the sell side. I see what you see--pink (slightly red) tech, slippage in the net space, art carnage in the energy patch--but unless the internals give back pa nub (they're still 2:1), Snapper will view this as a necessary nuisance.

Be that as it may--and it may be wrong--I've done little to augment my risk profile today. Setting stops removes emotion and my 'active risk' remains below the trigger points. Regardless of which way the tape sprays into the close, I wanna stay long some gamma and capture the disconnect between perception and reality.

Moisture may be the essence of wetness (and wetness is the essence of beauty) but that, in my view, is the essence of trading.


Say What? - Kevin Depew - 2:49 PM

A look at commentary, opinion and analysis from around th world:
  • According to the Christian Science Monitor, the US is planning a massive data sweep, from blogs and e-mail to government records and intelligence reports. Question: If I preemptively record all my actions and communications and mail all the hard copies and video footage to the government, is that considered tax deductible?
  • The Washington Times says "Too-good-to-be-true offers leave borrowers in a bind."

And looking at the fundies . . . - Fil Zucchi - 12:43 PM

Prof. Peterson's technical piece on Akamai (AKAM) suggests the next target in the $33-34 area. I have not worked through my little model yet, but I am ballparking about $1.00 of cash earnings for FY '06. That's courtesy of the very large NOL carry-forward AKAM will be using for several quarters to come. With EPS growing at 30-35%, the fundies should suggest a reasonable value of $30-35.

Meanwhile Whole Foods (WFMI)'s report was just good enough to avoid a total implosion. That being said, the estimates revisions I have seen so far are all to the downside, and this is the second quarter in a row that analysts adjust their models south. That is NOT going to do the trick with a 50 P/E on forward numbers.

Positions in AKAM, WFMI

Mini-Minyan Mailbag - Kevin Depew - 12:27 PM

Prof. Kevin -

Based on your article this morning, are you thinking that yesterday and today could be "Bull Traps" for the indices?

Minyan Eric B. N. Rakim

Dear Minyan Eric B. N. Rakim -

Follow the leader, you microphone fiend; that is largely what the broad indices are typically about. Since energy is a leading group, and that is where many of the failed shakeouts and specific point and figure bull trap patterns have taken place, it makes sense that as the leadership fails, the indices could follow suit, but only in a general sense. The article this morning was referring to a very specific type of pattern.

The larger problem is that the rolling technical deterioration among formerly leading groups (energy, metals, basic materials, homebuilders) is not being supplanted or replaced by other strong group leadership. At least not yet.

Sector rotation is normally a game of follow the leader during normalized market environments. But at market tops it becomes a game of incredible shrinking island. Imagine standing on an island that is sinking. The dry land shrinks as the island sinks. You can hop from one dry piece of land to another, avoiding the water, but eventually the water covers everything.

Position in RUT/SPY equivalents

Nice Call - Sanjay Somaney - 12:08 PM

The Cognizant Technology Solutions (CTSH) call just wrapped up and it went pretty well. The company is extremely optimistic for this year and next. They have upped guidance for 2006 and Q1. Guidance for 2006 has been taken up by 42% YOY growth in revenues and by 36% YOY for EPS. In addition, CTSH management is notoriously understated. Just imagine how good the numbers will actually be after all is said and done. My take is more like 45% and 40% respectively YOY.

The headcount growth in 2005 was 58% and they are expecting to increase headcount by 42% this year. Again, not your General Motors (GM) or Ford (F) here, no.

The demand for their services is strong and I expect it will continue to be for the foreseeable future. I think for those that do not have exposure to the name, even at these levels scaling in is a great idea. However, keep a long-term horizon given the move.

Position in CTSH

What, Me Worry? - Adam Warner - 11:00 AM

How quickly they forget. Barely a day removed from an ugly-looking sell off, the VIX and VXO are within a wind gust of regaining Little League eligibility.

Now relative to Moving Averages and the like, they are not oversold yet. But relative to a market that is jittery at best? Too low in my subjective opinion, as Complacency returns way too fast for my liking.

My personal favorite spots to own gamma now are not the cheapest though; rather, names in the energy and metal patches that remain in the Pat Benetar Battleground camp.

Don't answer the door! - Herb Greenberg - 10:05 AM

I did a piece on MarketWatch yesterday quoting the esteemed Mr. Zucchi regarding Portfolio Recovery Associates (PRAA). Today Robinson Humphrey is out with some of the same concerns voiced by Mr. Zucchi in a report questioning the valuation differential between Portfolio Recovery and its peers, including Encore Capital (ECGP) and Asset Acceptance (AACC). "The current valuation disparity assumes either that the quality of PRAA's receivables portfolio is twice that of its peers or that its collection expertise is doubly superior l(or some combination of the two," writes analyst Mark Hughes. "In our view, this is unlikely."

With all these new bonds, technicals get so confusing... - Bennet Sedacca - 9:23 AM

What I mean is, the 'new' 10 year is trading at 4.57%, while the 'old' benchmark 10 year note is trading around recent lows at 4.61%, just below the key level of 4.63% that we have been babbling about for a month. To keep things straight, we will now focus instead on the 10 year future to key in on support and resistance (depends if you are referring to price or yield).

Please see the chart here. Basically, a close below 107-16 in 10 year futures could bring an avalanche of selling. There are some short-term cycles suggesting a high around the 16th, but then seasonality takes over-negative seasonality. Note that bonds often trade sloppy around auctions and then higher the next week as dealers distribute their inventory to the Street. So a rally followed by a breakdown seems the most obvious to me. We need to keep in mind this is a REALLY important spot for bonds (as it relates to housing, banks, etc) so I would expect it to be defended mightily. That is why a break would be so important. Stay tuned...

Positions in Various Treasury Securities

Hot Beef Injection - John Succo - 9:14 AM

Morton's Steak House
is going public.

Morton's Steak House went private three years ago.

And around and around we go.

This is how Wall Street makes money.

They leverage a company and bring it private. Then they dress it up. Then they get investors to pay up for the value in a public offering (it is magical how companies are worth more as public companies than private ones; the magic is only perception).

This de-levers the company. The stock price sinks over time and then they bring it private again through leverage.
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