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Buzz Bits: Wal-Mart Weak, Markets Slammed

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Editor's Note: This is a small sample of the content available on the Buzz and Banter



Earnings Report - MV News

  • Freddie Mac (FRE) reported '05 diluted EPS of $2.75 vs $3.94 y/y and GAAP ROE of 7.72% vs 10.16% y/y.



Only the little guys pay taxes... - John Succo - 2:53 AM

Due to heavy lobbying, Time Warner (TWX) was able to increase substantially the cash allowed in subsidiaries exchanged in swap transactions between companies in legislation just enacted and signed by President Bush May 17. This essentially allows big companies to sell one another appreciated assets and totally avoid taxes.

Time Warner is selling to Liberty Media the Atlanta Braves valued at around $500 million. They will exchange a subsidiary and the Braves for $1.8 billion in TWX stock owned by Liberty. The rub is that this subsidiary is basically 73% cash.

In an effort to reduce these types of transactions where corporations avoid taxes, last year the White House and Congress sought actually reduce the amount of cash allowed to under 20%.

Instead the amount was increased to just under 75%.

Wow.



Some quick queries... - Jason Roney - 2:22 PM

Based on the gap down and staying down action in the bond and SP futures today, here are some quick queries, for what it's worth:

  • For the last day of month when the prior day's SP futures opened lower and never traded positive (24 times) the market opened higher 71% of time... but the close is mixed.
  • On the Tuesday after any holiday, if the the SP opens lower and never trades
    positive (19 times), then on Wednesday the SP finished higher 79% of the time.
  • On the second to last day of May if the SP opened lower and never traded positive,
    the SP opened higher and closed higher 2 of 2 on the last day of May.
  • On the day after any U.S. holiday, if bond and SP futures opened lower and
    never traded positive (15 times), bonds closed higher 80% of the time, SP 60% of the time (note that has not happened since Jan 2000).
  • On the second to last day of any month, if the bond and SP futures opened
    lower and never traded positive (10 times), then on the last day of
    the month the bond opened higher and closed higher 70% of the time and the SP
    closed lower 60% of the time.


Yes I heard it through the grapevine . . . - Fil Zucchi - 1:23 PM
  • A well informed Minyan has taken the time to go through the Akamai's (AKAM) proxy statements to divine whether there might be some "options" issues. With the caveat that it is nearly impossible to draw a precise conclusion, his sense is that the odds of a problem are fairly low.

  • I am beginning to circle back to some oldies that have been pounded. Chief among them 4.3% yielder Spectralink (SLNK). This is a function of price more than some pending catalyst.

  • Looking at the charts of Time Warner (TWX) and Intel (INTC) you'd have a tough time believing that they have some of the biggest buyback plans behind them. Uhhhmmm.

  • Dollar Index (DXY) 83.35 is not necessarily critical support from a chart standpoint, but my gut is that if it breaks things might get fast and spooky.

  • Please see Whole Foods (WFMI) moving into the earnings gap. Below $62.75 Hoofy is gonna have a frown on his snout.

  • So far it has been a textbook dead "animal" bounce. The question now is whether we are testing the lows or getting ready for another leg down. Considering there is plenty of downside if the latter develops, pressing things right-here right-now does not appeal to me.


Position in akam, slnk, intc, wfmi, spx



What could happen if emerging market debt suddenly became 'submerging market debt' in the event of some problem or dislocation out there? - Bennet Sedacca - 12:07 PM

I talk often about things that I have seen happen that most people think can't happen. Well, take a look at this chart of a chart from Ned Davis Research highlighting the Lehman Brothers Emerging Markets Yield Index.

Once again, it shows the utter and total disrespect by the market, due to easy money, for risks in the riskiest markets. If yields in the US below 2% aren't bad enough, this chart says it all. It is a blatant disregard for risk.

Not advice, but all I can say is that if that dislocation which many of us are expecting at some point rears its ugly head, you do not want to be near this nuclear waste. I mean this sincerely. It is why we continue to stress quality and not take the chance of blowing up a portfolio or a client's hard earned money.

Believe me, I have lived through many events like that since 1981. Trust me. They are NOT fun.



Death of a Salesman - Vitaliy Ketsenelson - 11:39 AM

I know some smart money managers who made a lot of money in "death" stocks like Service Corp. International when it temporarily flirted with bankruptcy a couple of years back. But I refused to analyze "death" stocks then and I refuse to analyze them now - they simply depress me.

Today a Barron's article looks at this group, and the article highlights the type of (depressing) analysis one has to do to analyze them:

  • Death rates are hitting all time lows, they've been on a slide since the 1950s - bad for funeral home stocks.
  • People live longer - bad again.
  • The possibility of a hurricane or Avian Flu wiping out 20% of US population? - good (OK, I made it up, Barron's did not talk about it, but you see the point).
  • Costco (COST) - my favorite retailer where I shop religiously (the Museum of Capitalism), I'd love to own the stock but it never gets cheap enough), is selling caskets online.


Well I am glad they are keeping caskets out of their brick and mortar stores at least, as I'd hate to go shopping there and explain to my son about the cost savings that come with the casket of the month.



Welcome back... - Kevin Depew - 10:17 AM

Your dreams may have been your ticket out, John Sebastian, but the rest of us are right back here at the same old place that we laughed about... about halfway between SPX 1250 and 1280. Where we are is almost no man's land for now.

I can make a case for SPX 1300 by next week, but I am worred that a move to 1245 would usher in a new, more serious wave of selling. Because the indicators I follow are negative, and the easy trade (from 1250-1280 in my opinion) is behind us, I am positioning for what I believe could be the more serious wave of selling still to come. I think 1300 is the dime in front of a bulldozer trade, and 1170 the more probable destination. That's about 29 upside to possibly 100 downside right now, nearly 3-1.



Dell is swell - note the gap fill - Brian Gilmartin - 9:33 AM

Lots of good chatter about Dell (DELL) this morning, as the stock has taken a pounding and it now looks to be bouncing.

Remember, Dell guided to a fiscal 2nd quarter that would be very much like the quarter ended April 30th, thus I am guessing this latest bounce is bringing the stock back towards the downside gap near $28 per share, left from the pre-announcement.

We have been long-term owners of the name (doh!) off the market bottom in 2003. The risk - reward and valuation of Dell in my opinion makes it a compelling long for longer-term investors, but patience will be required.

Position in DELL


Bear market "bounce," or "bounced?" - Rod David - 8:30 AM

AvidTrader's "Fat Lady" setup Wednesday predicted a non-permanent bounce Thursday, and the past week's reverse ascending triangle predicted a bear market rally that Friday's rally began to fulfill. "Began" to fulfill, or completely fulfilled? That's the question now as S&Ps have fallen overnight to retest Friday's cash session low. And Friday's low needs to hold as support to maintain the bounce's momentum.

The "Friday Factor" signaled that today's opening price action would trend up since Friday's opening and closing price action both trended up. This indicator doesn't speak to the actual opening tick, it just says that the open's tick (or thereabouts) should be a low. Friday's morning's highs at SPX 1277.25/1279.25 (ESm 1279.50/1281.50) still need to be recovered through the opening sequence to at least neutralize sellers' traction.


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