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Buzz Bits: Dow, Nasdaq Move Up

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The Way To Look At It - Mr. Practical - 3:15 PM

What the Fed is doing is confusing. Let's try to look at it simply.

  • The market has decided that credit was too easy. That is being reflected in wider credit spreads where institutions are paying more to borrow even though treasury rates have not risen, and in fact have fallen.

  • In normal times the Fed accepts only treasuries, risk-free paper as collateral when a banking institutions wants to borrow money from it. After all, the government issues treasuries when it wants to borrow money, so it should buy them back (repo) when it wants to lend (even though the public debt has been going up and up).

  • But when the Fed accepts risky collateral like mortgages when institutions want to borrow, what it is saying is the markets are wrong, that credit spreads should not be wider.

  • This is what I refer to as the socialization of markets (some call it nationalization): the Fed directly making decisions on credit, taking those decisions away from investors that have made their own decision. This is what some of us call moral hazard.



Breakfast of Champions - Sally Limantour - 12:58 PM

Questions regarding the wheat rally have come up and here is what I know thus far.

The December wheat contract posted 11 year highs yesterday due to solid export demand and bullish news from Canada that is looking at a smaller crop. Global supplies are tight and exports continue to be strong. Even Iraq is buying wheat from the US.

On the weather front there has been persistent dry weather in eastern Europe which has hurt the crop and does not bode well for winter wheat plantings unless they receive substantial rain.

See a chart of wheat here.

Position in wheat futures.


Gap Gains - Jeff Macke - 10:22 AM

  • Gap (GPS) is gapping slightly higher this AM after the company sort-of beat lowered estimates, announced more cost savings and closed its Forth & Towne division. As mentioned yesterday on the 3:30 PM TV Spot thing, there was a long-side trading opp. into the release based on the idea that "doing anything" would be an upgrade from GPS' strategy over the first nine months of 2007.

    From where I'm sitting, it did something. The easy trade is over and there are better places to invest until the Gap can hit the next level by "doing something constructive".

  • Speaking of things; Todd-O screwed up my plans to do nothing for the next ten days by alerting me to Petty this weekend in the Hamptons. I think I'll be able to forgive him but he's going to have to deal with my speaking (and singing) in my best Petty-twang for the next 36 hours.

  • Back on the news front, keep an eye on Home Depot (HD) today as the company completed its deal, at a lower price, for the sale of its HD Supply unit. The story is still unfolding and has possible implications throughout the pending M&A space.

    That means Tribune (TRB) and at least half a dozen others...



View From Q - Quint Tatro - 7:53 AM

Good morning Minyans, while you're sipping on that coffee and catching up on the news flow, here are some ideas to consider for the day:

Futures are pointing to a slightly lower opening however since the bears have been showing up with pea shooters lately, it will be interesting to see if they can press this opportunity. I will be watching yesterday's lows in the averages as I suspect some stops are set there and should they not hold, we could see a whoosh lower. I continue to be in the cautious camp, and am so glad I am not alone among the profs here because the limb feels skinny and it's tough to watch stocks move without you.

On my short term, it's Friday so I won't do much at all with today's long list. I still have Anadigics (ANAD) which continues to trade in a tight range and is starting to play with my emotions. I am looking for a solid, break that actually holds above the $16.20 level or so on high volume as an add point. Recent earnings stand out Hms Holdings (HMSY) is also consolidating at recent highs and is one to keep on watch. I am considering a place holder for now and will revisit in the coming weeks. As momentum traders seek out movers today, I am watching Acadia Pharmaceuticals (ACAD) for a high volume move over $15.00 and Bentley Pharmaceuticals (BNT) over $13.00.

It still feels early to do anything with conviction so stay on your guard and keep your time frames short. If you are looking for anything more than a short term trade, consider booking a tee time and playing 18.

Position in ANAD.

No positions in stocks mentioned.

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