The Dollar’s Decline: Taking Responsibility for the Future
July 11, 2008
Menzie Chinn submits:
As of 2008Q1, wholly 100% of the increase in the trade deficit since 2001Q4 is accounted for (in a mechanical sense) by the increase in the value of oil imports. And the dollar share of reserves appears to continue its decline.
To the first fact:
The Dollar’s Decline: Taking Responsibility for the Future
Key Earnings Reports Next Week
July 11, 2008
Hickey and Walters (Bespoke) submit:
In the chart below, we highlight the number of companies reporting earnings on each trading day through August 8th. While things do start to pick up next week, they don’t really get going until the following week. Next Thursday (the 17th) will be the most active for earnings, with 93 companies releasing their quarterly results.
Key Earnings Reports Next Week
Percentage of Stocks Over 50-Day Moving Average
July 11, 2008
Hickey and Walters (Bespoke) submit:
Currently, just 14% of stocks in the S&P 500 are trading above their 50-day moving averages. While this is extremely oversold, the number got down to 8% last August and 11% in January.
Financials and Industrials are the sectors struggling the most. Each of them have just 2% of stocks trading above their 50-days. Consumer Discretionary isn’t far behind at 5%, however. The two sectors that look the best at the moment are Health Care and Utilities. Health Care has 42% above their 50-days, while the Utilities sector sits at 39%.
Percentage of Stocks Over 50-Day Moving Average
11 Jul 2008 16:00:00 - Top 5 Stocks up on Unusual Volume
July 11, 2008
| Intraday Unusual Volume - Top 5 Up |
| Symbol | Volume % Change |
Price % Change |
News | |
| OZRK | 324% |  18.03% |
news | |
| WYNN | 307% | 78.14% |
news | |
| CENX | 246% | 64.70% |
news | |
| MNTA | 197% | 13.89% |
news | |
| BABY | 195% | 22.95% |
news | |
|
||||
11 Jul 2008 16:00:00 - Top 5 Stocks up on Unusual Volume
Weekend Thinking: An Agency Recapitalization Proposal
July 11, 2008
John Jansen submits:
I had a conversation with a research analyst at a large investment bank whose purview is the GSEs. This particular gentleman believes that a direct government bail out of Freddie Mac and FNMA is an unlikely government event. He posits that it is an unlikely event at the outset of this episode and ,if necessary, would only play out much further along in the process .He suggests that Hank Paulson is flipping through his Rolodex (much better than a Blackberry) and he is busy stitching together a plan which would require money from other large banks , central banks and private pools of equity capital from around the globe.
In his view the losses which the GSEs will suffer over the next 2 years will be in the vicinity of 40 billion to $50 billion and that could be handled without direct intervention by the US.
Weekend Thinking: An Agency Recapitalization Proposal
Even the Legends Are Losing in Today’s Markets
July 11, 2008
Yikes.
If anything reveals the difficulty of investing in today’s market, it’s the fact that investing legends have been losing money hand over fist. The market has fallen over 12% in the first six months of 2008. Meanwhile, many of the world’s greatest investors have lost more… a lot more.
Even the Legends Are Losing in Today’s Markets
Friday Options Update: FRE, FNM, LEH, WB, AIG, SLM, MER, XLF
July 11, 2008
Freddie Mac (FRE), Fannie Mae (FNM)– The market tumbled out of bed this morning to speculation of a possible government “conservatorship” of mortgage financers Freddie Mac and Fannie Mae, which own or guarantee nearly half of all U.S. home loans, bringing to mind the worst possible images of not only the impotence of the two chartered companies in their present form, but also the auxiliary effects through the broader financial sector if the companies were declared unfit to carry on. Remarks from U.S. Treasury Secretary Henry Paulson (who indicated today that the Feds’ current mission was to support the financers as they are presently structured) seemed to rule out an imminent government takeover. This did little to assuage traders, who feel that a bailout would essentially value these shares at nothing and set in motion potentially very negative auxiliary effects in the larger financial space. Fannie Mae options are trading at nearly 4 times the normal level against a 22% drop in share price value to $10.39 – paring some of the pre-Paulson cataclysmic losses earlier in the session. Implied volatility has risen another 47% on the session to 267%, and comparing this shoulder-to-shoulder with the 123% degree of volatility shown by Fannie Mae shares historically tells us that the option market is pricing in about 117% more potential price risk to its shares over the next 30 days. In other words, the cost of insuring against price swings is rising appreciably as speculation over the future of the mortgage financers broadens. Puts at the July 5 strike have already traded at some 4 times the normal level, attracting buyers as well as sellers as the 45-cent premium on this contract reflects about an 11% probability of Fannie Mae shares halving in value again by next Friday.
VIX – Concern about the aftershocks of a possible forced socialization of Fannie Mae and Freddie Mac sent the S&P dramatically lower, leading the CBOE Volatility Index 10% higher by midday to 28.16. Intimations of “the other shoe to drop” in the broader market caused a rush among option traders to buy calls at the July 27.50 strike, where the $1.90 premium implies a move to at least 29.40 between now and next Tuesday. While the clear bias was to buyers at the 27.50 strike, calls at strikes 30 and 32.50 attracted buyers and sellers, and we wonder if selling pressure in August calls at strikes 27.50 and 30 may be evidence of traders cashing out of those positions to fund the purchase of front-month protection. The cost of protecting S&P-exposed portfolios against volatile price movement over the next 3 days is up more than 100% at most strikes in the July contract. In this environment, it would be no surprise to see traders resort to VIX call and calendar spreads, selling higher-strike positions to keep trade costs under control.
Friday Options Update: FRE, FNM, LEH, WB, AIG, SLM, MER, XLF
Parsing Paulsonspeak
July 11, 2008
Greg Newton submits:
The Hank and Ben Show went before Congress yesterday, ostensibly to talk about plans for the alleged modernized financial regulatory structure. But with former Federal Reserve Board governor Bill Poole having so recently thrown around the insolvency word, the evil twins Phony and Fraudy (© Barry Ritholtz) got their share of their attention:
Fannie Mae and Freddie Mac are also working through this challenging period…Their regulator has made clear that they are adequately capitalized.
Fannie Mae (FNM) is a SELL
July 11, 2008
SELL
rating on Fannie Mae
(FNM)
Start Price: $8.71
Start Date: 07/11/2008
impressive record of earnings per share growth (OXY, rated BUY)
July 11, 2008
Today’s stock’s selection
OXY
Inspired by:
If the earnings of everything outside of financials are rising 9%, but the market is going down, it seems to me that we ought to be buying stocks with rising earnings and falling stock prices.
http://articles.moneycentral.msn.com/Investing/StrategyLab/Rn…
World energy needs will spike by more than 50% by 2030 but adequate oil reserves, conservation and new methods of recovery mean supply will keep pace with demand, the Organization of Petroleum Exporting Countries said Thursday.
http://money.cnn.com/2008/07/10/news/international/opec_repor…
Strong fundamentals:
| Profit Margin (ttm): | 29.20% |
| Operating Margin (ttm): | 44.16% |
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| Balance Sheet | |
| Total Cash (mrq): | 1.50B |
| Total Cash Per Share (mrq): | 1.822 |
| Total Debt (mrq): | 1.81B |
| Total Debt/Equity (mrq): | 0.075 |
The company’s strengths can be seen in:
robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid
stock price performance, impressive record of earnings per share growth and compelling growth in net
income
Occidental Petroleum Corporation Earnings Conference Call (Q2 2008)
Scheduled to start Thu, Jul 24, 2008, 11:30 am Eastern
impressive record of earnings per share growth (OXY, rated BUY)
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