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Five Things You Need to Know: Where Are the Bears?; Fed's Fischer Clarifies FOMC Stance: Expect Next Rate Move To Be Either Up Or Down; Wheat To Rejoin Chaff; Weird Trade of the Moment; Dell to Crack Chinese Market


What you need to know (and what it means)!


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Where Are the Bears?

According to Bloomberg, despite a housing slump that has shaved $5.6 trillion from global markets, Wall Street strategists are the most bullish they've been since 2000. Where are the bears?

  • The rally has taken the S&P 500 to within 5 percent of strategists' average year-end forecasts of 1,595, the most bullish since December 2000, Bloomberg said.
  • "You couldn't mix a better drink for the stock market,'' gushed James Paulsen, who helps oversee $175 billion as chief investment strategist at Wells Capital in Minneapolis, to Bloomberg.
  • Meanwhile, none of the Wall Street strategists tracked by Bloomberg cut their 2007 S&P 500 forecasts during the August sell-off.
  • In fact, they actually become more optimistic during the year, bringing the average estimate to 1,595, up from 1,550 in January.
  • Perhaps the best advice for bulls comes from The Morning Call:

2. Fed's Fischer Clarifies FOMC Stance: Expect Next Rate Move To Be Either Up Or Down

Federal Reserve Bank of Dallas President Richard Fisher said this morning the U.S. central bank could move again, in either direction.

  • "FOMC (Federal Open Market Committee) members will continue taking in-depth soundings on the progress of the economy and the financial markets as we evaluate the impact of the 50 basis point course correction," Fisher told the North Dallas Chamber of Commerce, according to Reuters.
  • "Should further correction -- either to port or to starboard -- be needed to stay on the course toward sustainable, noninflationary growth over time, we will make it," he said.
  • Fisher is not a voting member of the FOMC, but he does have a fondness for nautical terms and the ability to clearly and successfully obfuscate potential FOMC policy actions.

3. Wheat To Rejoin Chaff

Farmers may be sowing the seeds for an end to the biggest rally in wheat since the Soviet Union cornered the US market in the 1970s, according to Bloomberg.

  • "Growers from Kansas to India are preparing the world's largest wheat crop in 10 years, overwhelming demand and refilling barren grain bins," Bloomberg reported.
  • Meanwhile, Wheat for December delivery this morning is up almost 2% to $8.87 a bushel.
  • Earlier this month Wheat reached a record $9.1125 on the Chicago Board of Trade.
  • Rising wheat and milk prices have helped fuel a 2.4% increase in U.S. inflation this year, according to Bloomberg.
  • However, even commodity bull Jim Rogers is reluctant to consider wheat.
  • "Would I buy wheat today? No,'' Jim Rogers, told Bloomberg.
  • "Wheat has been going straight up for about a year. I don't like to jump on a moving
    bus," he added.

4. Weird Trade of the Moment: Canadian Book Arbitrage

Pick up the most recent book you purchased (which in our case happens to be "What Color Is That Dude's Parachute and How Can I Sabotage It to Get Ahead at Work") and check out the price, usually found on the inside jacket sleeve. Notice anything funny? In our case the U.S. price is $25.95, while the Canadian price is listed at a whopping $35.95. What gives?

  • Isn't the Canadian Loonie now at parity with the U.S. dollar for the first time in more than 30 years?
  • So why the price difference?
  • Simple: Publishers have to charge more money for books published in Canada in order to cover the cost of translating the text from English to Canadian. Just kidding.
  • The USA Today notes that while the dollar historically has had a higher value than Canada's, Canadian prices for books typically have been higher than exchange rates alone could explain.
  • Among books released in recent weeks, the list price on Alan Greenspan's The Age of Turbulence is $35 U.S. and $42 Canadian.
  • According to the newspaper, among the reasons cited for the discrepancy are:
    - Time lag - list prices are often set six months in advance for printing purposes.
    - Export costs - pricing reflects cost of shipping and storage.
  • ultimately, the price difference is related to "what the market will bear."
  • According to Douglas Porter, deputy chief economist at BMO Capital Markets, Canadian consumer spending has been quite robust in the last year."
  • Producers and retailers "will charge what they believe the market will bear," he told the market.
  • In that case, let the arbitrage begin: long U.S. books, short Canadian books.

5. Dell to Crack Chinese Market

Dell (DELL) today is expected to announce a deal to sell computers through Chinese retailer Gome, furthering the computer maker's push into China retail markets in an attempt to regain lost global market share, according to the Financial Times.

  • A deal to sell computers in Gome's hundreds of retail stores - scattered throughout more than 160 cities - would give Dell its first firm foothold in the Chinese retail market, the FT reported.
  • Dell already operates a string of retail kiosks in China.
  • The company this year has moved to establish a stronger physical retail presence after years of relying almost exclusively on direct sales of computers over the telephone and Internet.
  • As well, the company earlier this year said it would begin selling some desktop computers at Wal-Mart (WMT) and recently announced a retail push in Russia.
  • The expansion into China's retail market, which is second only to the US in total PC sales, does not come without some significant changes for the company.
  • Minyanville was able to obtain some of the changes consumers in China should expect to see as the company seeks to bridge cultures.
  • Among the most significant changes, all of Dell's Chinese-sold computers will be made entirely of lead with paint that chips away easily for quick inhalation.
  • As well, Dell monitors will contain high levels of mercury and melamine, and every computer will feature a wireless mouse manufactured with high levels of diethylene glycol that is easily absorbed through the skin.

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