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Philip Davis
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  • Bailout? Greece Don't Need No Stinking Bailout!

    We have us a classic Mexican standoff over in Europe.

    European debt markets have been on a roller coaster as they try to parse the EU smoke signals to judge whether Greece will win financial backing from its neighbors, or just verbal support. So far this month, the 10-year Greek yield has swung between 6.05 percent and about 6.8 percent as hopes for help waxed and waned. The euro, however, didn’t exactly jump for joy at the prospect of an aid package, which tells you that a salvage operation for Greece is no panacea for what ails the common currency’s economies and now Greece is saying they don't want or need a bailout with Greek Finance Minister George Papaconstantinou saying: "The worst possible signal which we could send out is one calling for outside help."

    Actually, I'm pretty sure the worst possible signal they could send would be defaulting on their debt but who am I to question our oldest Western civilization?  It does seem that the EU has come to an arrangement that is NOT a bailout, just a loan with VERY EASY terms - kind of like TARP, which worked fine over here so I'm pleased but we don't have the details yet (7 am).   

    Perhaps Papaconstantinou has a point as Peter Coy writes:

    The European Union’s experiment with a single currency is deep in crisis because Europe failed to learn from the Greeks.  Not today’s Greeks -- the ancient Greeks, specifically Odysseus, the hero of Homer’s epic poem. Odysseus knew his limitations. Realizing he was vulnerable to temptation, he ordered his sailors to tie him to the mast of his ship. That way he could listen to the bewitching song of the Sirens without obeying their call to steer the ship onto the rocks.

    Today’s Sirens are the investors and traders of the global bond market, who lure nations into tapping abundant credit at low rates when times are good. If a nation borrows too much, those open-handed investors abruptly turn into vigilantes who punish the country by making new loans scarce and expensive.  Greece has fallen into that trap, Bloomberg BusinessWeek reports in its Feb. 22 issue. It got low-interest loans by promising to behave responsibly and keep its budget deficit low. That gained it admission to the single-currency zone in 2001.

    But because Greece was never tied to the mast, it kept spending. Its debt is now about 125 percent of gross domestic product, more than double the supposed EU ceiling. Eventually, all that debt brought down the wrath of the bond-market vigilantes, who drove up yields by betting against Greek debt, precipitating what has become the worst mess for the euro since the single currency’s launch on Jan. 1, 1999.

    Greece needs to borrow $75Bn this year to fill it's budget gap and, were they they only country in debt it would be fine to let them fail but Spain, Italy, Ireland and Portugal also need to borrow a considerable amount of money and the ECB can't afford to risk "contagion," where the default of one spins borrowing costs for all out of control.  So far Greece has been able to borrow from markets but is facing increasing interest costs as markets price in higher risk of a possible default. Mr; Papandreou on Wednesday promised to reduce Greece's deficit to 8.7% of gross domestic product this year, from 12.7% last year, the highest in the EU and four times above an EU limit.

    ZeusBut markets doubt Greece's credibility after it admitting falsifying statistics (with the aid of Goldman Sachs) for years to make the deficit look smaller. They also worry that Greece can't carry out any cuts because it risks social unrest. Greek workers shut down schools, grounded flights and walked out of hospitals Wednesday to protest austerity measures, and a much broader strike is planned for Feb. 24.  As Gus Lubin says at Clusterstock: "Strikes are a beloved tradition in many European countries, but they do make financial reform hard. Recently, Iceland refused payment on a financial crisis debt for fear of angering the population."  Striking Civil Servant chants included "We won’t pay for their crisis!" and "Not one Euro to be sacrificed to the bankers!" according to the New York Times.

    As I decided on the weekend, something will be done before this gets out of control (the Greeks strike at the drop of a hat so it's not that big a deal yet).  It's not like the big boys in the EU are running a surplus anyway so a fairly quick arrangement was reached today by the entire 27-member union panel of the in time for lunch today and they promise details of the agreement at the meeting's close today - hopefully ahead of our own market's close so we can get a nice relief rally. 


    5pm Note:  This may have been more helpful to you this morning (there was a link to it in my Morning Post).  These articles can be delivered to you each morning for $29 a month ($199 a year) along with tons of other interesting stuff that is not available on SA - if you SUBSCRIBE HERE.

    Disclosure: We are long on the market
    Tags: GS, Debt, Greece, EU
    Feb 11 5:26 PM | Link | 3 Comments
  • Long Play of the Day: Hansen Medical Inc. (HNSN)
    David's play of the day

    Long Play of the Day: Hansen Medical Inc. (HNSN)

    Analysis: I am a big fan of what is going on in earnings for medical supplies. A lot of these companies are turning extremely nice profits, and I think HNSN is poised to make a run up until their earnings come out Thursday night. Tomorrow, the earnings of Boston Scientific are set to be release, which if positive should give a boost to their entire industry, including Hansen. Then, Friday will be the day of reckoning for the stock after earnings.

    Hansen is projected to hit a negative EPS of 0.28. Yet, the company has improved their EPS over the past four quarters. This estimate is only 0.04 higher than last quarter, while most medical suppliers have been jumping EPS 100%, even more. I think the estimate is way too low, and it is presenting a great trade for us over the next few days.

    Twelve out of fifteen of the recent medical supplies companies reported beating EPS estimates with surprises. Hansen, if in that category, which I think it will be, will be looking at some big swings. First off, the stock has high beta - over 2. We like that because it allows the needed volatility in the stock to make it move in large quantities. Secondly, the stock is in the pits right now. It is 66% off its 52 week high, and it is trading right at its lower bollinger band. Some good earnings from Boston followed by good earnings at home could produce 8-9% easy. 

    Get into this one by the end of the day, and ride this baby up and away.

    (p.s. I know this is posted on my instablog and I will remove it shortly. - Ilene )

    Disclosure: none
    Tags: HNSN, stock, trading
    Feb 09 3:54 PM | Link | Comment!
  • The Oxen Report: Unemployment Numbers to Boost Market and Continue Rally?
    The Oxen Report: Unemployment Numbers to Boost Market and Continue Rally?

    Courtesy of David at PSW 

    Hello Oxen Report Readers,

    Yesterday, I recommended an Overnight Trade of the Day in Pioneer Natural Resources Co. (NYSE:PXD). The company, an independent oil producer, announced a surprise on their EPS estimates. The company earned 0.18 EPS vs. the expected 0.05. The company’s stock did not take off quite like I had wanted in pre-market, but it is up 1.5% on very light volume. We should look to get out of this one for 3-4% today, which is feasable given the market’s outlook.

    Which brings me to our Pick of the Day…

     Buy Pick of the Day: Ultrashort Proshares Oil and Gas ETF (NYSEARCA:DUG)

    Analysis: Its a confusing day in the market for sure. We got very good numbers from the ADP Nonfarm Employment Change for the month of January. We saw only a 22,000 persons decrease vs. the expected 40,000 and December’s 60,000. To me, it was a pretty significant number. On top of this, we saw great earnings from market leaders like Pfizer and Time Warner. Even overseas was pretty good. Asia is up and Europe is about neutral. Yet, we see futures having risen into the green after the employment news but already lost momentum. This neutral reading on the market can only be a result of the market worrying itself into the red.

    Therefore, I suspect that we are headed down this morning, and the small run up we have seen in oil over the past few days may be over starting today. The NYMEX is already down this morning, and it is going to be pretty difficult for the crude inventories to top the nearly 4 million barrel drop it saw last week. I think investors are looking to make profits today and sell off, which will give a boost to inverse ETFs across the board. I like DUG the best, though, because of its direct affiliation with the market news today.

    Over the last few days, DUG has dropped 8% after a significant run the prior weeks. Yet, the significant drop has moved it into the middle of its bollinger bands, and it has actually passed into oversold area in fast stochastics. This points to the fact that short term the ETF has seen some selling, and the lower price should attract investors.

    I think the worry is obviously we cannot make 2-3% in the morning before the announcement of inventories, and they are good. Yet, the market futures continue to dwindle away, and I do not see any reason why DUG can’t move this morning. Further, we have the inventories that could boost DUG. Set your stop losses just in case and try to exit by 10:30 if possible. Yet, I do think hitting a 4 million drop will be hard and anything less should be a disappointment.

    Entry: We are looking to enter in the 12.55 - 12.65 range.

    Exit: We are looking for 2-3% gains before exiting.

    Stop Loss: 3% on bottom of entry price. 

    Good Investing,

    David Ristau

    Disclosure: none
    Feb 03 9:36 AM | Link | 1 Comment
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