So far, 6 home builders have reported their Q4 earnings: DHI, BZH, SPF, MHO, MDC, and NVR. By now, it should be clear that the builders have made progress digging themselves out of the 2007 through 2009 housing ditch. For the most part they increased orders, sold homes, and slowed cancellation rates. This quarter, they were profitable albeit in large part due to favorable tax benefits.

The builders' made headway improving their balance sheets:

If institutional investors thought of leverage as a bouquet of daisies, they'd be playing "(S)he loves me, (S)he loves me not" and hoping to still be respected in the morning. Now that the worst economic recession of modern times might be abating somewhat, more than a few buy side executives are looking for a sweetheart to help them replenish diminished portfolio values. Let's just hope that the love affair is not fickle, causing more hurt than help.

In "Wall Street's New Flight to Risk" (February 15, 2010), Bloomberg BusinessWeek reporters Shanon D. Harrington, Pierre Paulden and Jody Shenn write that investors are on the prowl for yield. With over $150 billion allocated to U.S. bond funds, returns are low and the only way to add some excitement is with exotics such as "payment-in-kind" bonds that encourage the issuance of more debt than a borrower's operating cash flow would ordinarily support. Derivatives are another Valentine, with banks "again pushing" collateralized debt obligations ("CDO"s) that can increase in value (depending on the trade) as defaults increase.

The U.S. Dollar is Finally Getting Invited Back to the Investment Party

The buck is up 6% against the euro in the last three weeks. Notwithstanding problems in Greece and Spain, and the attendant complications for the E.U., this is a pretty good performance.

On Tuesday the euro was on the rise after it was revealed that ECB President Trichet was going to leave a central bank meeting in Sydney. His premature departure created a significant amount of speculation that a Thursday EU summit in Brussels had been called to present a bailout for Greece and other struggling Eurozone nations. The significant number of latecomers to the euro-bashers ball was in part forced to move rapidly to the sidelines and so illustrated the vulnerable state the market finds itself in. The euro added a cent in a very short time frame as a result of today’s story, which turns out to be true in content but lacking in rationale.

Developers Diversified Realty (DDR) filed an 8k yesterday with an investor update. Here are some of the details:

• Q4 2009 FFO/sh ($0.15) - ($0.13)
• FY 2009 FFO/sh: ($2.52) - ($2.49)
• Q4 2009 Operating FFO/sh: $0.30 - $0.32 (expectations are $0.31)
• Q4 Operating FFO: $61MM - $64MM
• FY 2009 FFO: $298MM - $301MM
• Q4 Net loss/sh ($0.47) - ($0.45)

The difference between operating FFO and FFO are non-operating charges taken. These charges primarily related to the company’s investments in the various Coventry II joint ventures, as described below, and the establishment of a full reserve of $67 million relating to a loan advanced to that joint venture.

Allowing the "re-importation" into America of medicine sold abroad is one of those perennially debated issues. I've tended to oppose it on the grounds that it would wind up reducing innovation and decreasing the discoveries of miracle drugs by importing foreign-government-imposed price controls into the American drug market. But I can also see the free-trade argument, and it irks me as an American taxpayer and consumer that we're essentially paying top retail dollar for medicine while the rest of the world gets a discount.

Some recent press on the issue indicates that the Obama administration wants to push re-importation only after a health-care overhaul is passed, so the House and Senate bills don't touch the issue. In fact, advocates of re-importation, led by Senator McCain, lost a vote in the Senate. The issue usually comes up in connection with Americans importing cheaper drugs from Canada.

A football team embraced by a city as escapism and for the excitement it provided the residents of New Orleans following the disastrous aftermath of Hurricane Katrina has now come full circle to offer its hometown the celebration it deserves and desires. The New Orleans Saints defeated the Indianapolis Colts in Superbowl XLIV, the 44th such contest of football's conference champions, and sent the French Quarter and the surrounding and still rebuilding areas into a frenzy that's likely the continue well into Mardi Gras.

As much as the spectacle of the Superbowl is remembered for what happens on the field, it gets almost as much attention for what happens in between the action. Commercials are always a hot ticket, and with price tags in the $2.5Million to $3Million range for a spot this year it was up to corporations to deliver catchy, memorable and likable ads. A game that featured two of the league's top Quarterbacks was sure to be a windfall for CBS Corp. (CBS), and early ratings would suggest that's the case. A report put viewership of the game at a 23 year high. That's a lot of eyeballs watching the players on the field and all those commercials.

Media reports: Greece! It’s falling! It’s terrible! It’s bankrupt! It may collapse the Euro! It could tear the European Union asunder! Can the US withstand this coming catastrophe?

Meanwhile, back at The Wall Street Journal on the front page of the Money & Investing section: “Is Greek Tragedy Too Much Drama?” (February 8, 2010; page C-1) The lead paragraph reads:

On Friday, soybeans closed at just $9.17/bushel:

And that's up from the four-month lows of $9/bushel hit earlier in the week. In fact, on Feb. 4, soybean prices dropped so low that Don Roose, the president of U.S. Commodities Inc., told Bloomberg, "Farmers have stopped selling.

Action in Europe is becoming interesting. A whole bunch of countries have trouble financing their budget deficits, with Greece and Spain having the most trouble. Half a year ago, Hungary and Latvia had similar problems, but they managed to get loans and can breathe (for now). In the near future, we might also witness panic regarding Portugal and Italy, and maybe even the UK.

There are two big unknowns in this situation. First unknown: will the EU bail out every country nearing default? Or will they decide to play strict parents and let one of the countries default. I am almost sure that there will be at most one default in EU (one of my non-predictions for 2010). But honestly, even one default will be too many.

The European Union was established as a massive economic experiment in 1993 in order to unite its smaller member countries for economic gain and to establish a seat as a major world power. There are currently 27 member countries of the European Union with over 500M citizens speaking 23 different languages and living by the motto, "United in Diversity".

As an economic power the conglomerate makes up about 30% of world GDP in nominal terms, which often ranks it as the largest "single" contributor to world output. Of the 27 member countries, 16 have adopted a common currency, the Euro (€).

The current Board of The Adams Express Company (ADX) appears entrenched, may be lacking independence and objectivity, and may not currently be acting in the best interest of its shareholders in terms of maximizing shareholders’ value.

Key Points: With regards to ADX’s Board being entrenched, the average age of ADX’s board is 66 (see chart below). The average age of S&P 500 boards is 61 years. According to ADX’s website, the oldest board member is 90 years old while the youngest member is a spry 52.

Stock price: €94 ($128.87 USD)
Conclusion: 2009 once again reflects Hermes's (HESAF.PK) unique earnings visibility in the luxury goods industry. Therefore, we find justified the current 50% premium to the sector. Nevertheless, we think LVMH (LVMHF.PK), and Dior, PPR or Burberry (BBRYF.PK) offer superior potential return for the next 12m.

Sales 2009: Sales up 8.5% to €1.9bn, up 4% organic. Earnings guidance: net earnings in line with 2008 (EPS estimate 2009 €2.86). Looking for mid single digit growth in 2010.

Book: Extreme Value Hedging: How Activist Hedge Fund Managers Are Taking on the World

Author: Ronald Orol

Gold: Gold rose some 1% in US trading yesterday to close at $1,065.30/oz. It then rallied to over $1,073/oz Asian trading before giving up some of those gains in European trading this morning. Gold is currently trading at $1,066.00/oz and in euro and GBP terms, gold is trading at €779/oz and £685/oz respectively.

The Dow’s close below 10,000 yesterday will make market participants nervous especially from a technical perspective. However, world stock markets have not reacted overly negatively and are mixed this morning.

• UBS is profitable but still bleeding clients. UBS (UBS) reported its first profit in more than a year, earning 1.2B Swiss francs ($1.1B) in Q4 thanks to lower debt-related costs, a tax credit and gains at the investment bank. However, UBS said withdrawals by wealthy clients are accelerating, rising to 45.2B francs from 26.6B francs in the previous quarter, and far exceeding analysts' estimates of 17.5B francs in outflows. CEO Oswald Gruebel expects outflows to continue "in the immediate future." Shares +1.8% premarket (7:00 ET).
• Continued recalls test Toyota. As expected, Toyota (TM) will recall 437,000 hybrid cars globally to correct faulty braking systems. President Akio Toyoda apologized again to consumers in a Washington Post op-ed and promised to work "to restore trust in our word and in our products," but consumer confidence will be hard to regain and Toyota has lost around $31B in market value since the recalls began on Jan. 21. In more bad news for the firm, a congressional hearing is set for Wednesday to investigate whether Toyota and federal regulators have fully grasped what caused the brake problems. Shares +3% premarket (7:00 ET).
• Exxon feels less than jubilant. Ghana has blocked the sale of a $4B stake in its Jubilee oil field, ending months of talks with potential buyer Exxon Mobil (XOM). A Ghanaian official said state-run Ghana National Petroleum Corp would be the only entity allowed to buy the stake. This is Exxon's second recent setback in Africa, after plans to buy a stake in a major Uganda field also fell through. Shares +0.8% premarket (7:00 ET).
• American Airlines faces major safety fine. American Airlines (AMR) may face a civil penalty of $10M-20M for serious maintenance lapses. This would represent the largest penalty the Federal Aviation Administration has ever levied against a company. Separately, the Department of Transportation is preparing to release a report that outlines American Airlines' apparent failures to identify and promptly resolve aircraft-maintenance problems in 2008.
• JAL jilts Delta. Confirming yesterday's local media reports, Japan Airlines says it has decided to stick with American Airlines (AMR) and its Oneworld alliance, and will end talks with Delta (DAL). Without directly addressing JAL's decision, Delta issued a statement that it remains a big player in Asia. American Airlines said JAL had made the right choice and that the two companies "will now focus on building a joint venture that can offer JAL significant revenue growth beyond the stability that Oneworld offers today."
• Massive short of the euro. Traders and hedge funds have bet nearly $8B against the euro in the largest ever short position of the currency. Concerned about a eurozone debt crisis, traders have built up more than 40,000 contracts against the euro.
• Trichet travel change prompts bailout speculation. European Central Bank President Jean-Claude Trichet sparked rumors of an imminent Greece bailout when he abruptly left a summit in Sydney today, a day earlier than planned. An ECB spokesman said the travel change was purely due to logistics "because there was some concern that he would not catch a connecting flight and therefore miss the EU summit" this Thursday. Speculation of a Greek bailout helped lift the euro 0.4% against the dollar (7:00 ET).
• Rakoff to rule on BofA. Judge Jed Rakoff promised to rule by the end of next week on Bank of America's (BAC) proposed $150M settlement with the SEC. He wants to hear from lawyers on both sides first, and has made clear that the deal will require some changes, including possibly allowing the court to oversee important issues at the bank such as compensation. Rakoff also questioned whether the revised settlement still unfairly punishes shareholders. Shares +0.8% premarket (7:00 ET).
• AgFeed to sell 20% of unit in IPO. Chinese hog producer AgFeed Industries (FEED) announced it plans to sell up to 20% of its animal nutrients feed subsidiary through an IPO in order to raise $20M-25M. The move is meant to "enhance the ability of our animal nutrition business to pursue strategic initiatives and growth, upgrade personnel, foster innovation and raise capital."
• Boeing going ahead with its largest plane. Boeing (BA) successfully completed a test flight of its 747-8 freighter yesterday, the largest plane the company has ever built. The test happened a year later than originally planned, and delays in producing the new freighter prompted Boeing to say late last year that it's recording a $1B charge. The company now expects assembly to begin in mid-2010, with the first delivery in Q4 2011.
• Opel offers up restructuring plan. General Motors' Opel unit outlined a restructuring plan this morning that asks for €2.7B ($3.7B) in loans and loan guarantees from European governments. Opel plans to invest a total of €11B through 2014 and will cut around 8,300 jobs across Europe.
• Report on Lehman collapse coming soon. The court-appointed examiner looking into the collapse of Lehman Brothers said he has completed his 2,200-page report on the matter and it will be made public as soon as possible. The examiner was asked to investigate Lehman's collapse, its sale of key assets to Barclays (BCS) and whether there were any signs of fraud, dishonesty or misconduct.
• Xstrata sees value in Glencore merger. Xstrata (XSRAF.PK) has acknowledged that a merger with privately held commodities trader Glencore could create value. Glencore owns 34% of Xstrata and the prospect of a merger has risen in recent months as Glencore tapped capital markets and Xstrata pursued deals to gain scale. Separately, Xstrata reported a 60% drop in annual profits yesterday, but said it will resume its dividend payments after a 19-month hiatus.
• Areva gets aggressive on solar energy. Areva (ARVCF.PK), the world's largest nuclear plant builder, says it's diversifying into solar energy with the intent of becoming a world leader in the sector by 2012. The company is starting with a purchase of U.S.-based solar thermal player Ausra. Terms of the acquisition were not disclosed.
• Job growth on the horizon. Conference Board's Employment Trends Index rose 1% in January to 93.2 vs. 91.8 in December. "The continued rise in the ETI makes us more optimistic that job growth will resume in the first quarter of 2010," said researcher Gad Levanon. "The improvement is widespread across all eight components," and the "large decline in the number of involuntary part-time workers was the first time this component showed a strong signal of improvement."

Earnings: Tuesday Before Open

• Cognizant Technology Solutions (CTSH): Q4 EPS of $0.47 beats by $0.01. Revenue of $903M (+20%) vs. $888M. Shares +2.4% premarket. (PR)
• Coventry Health Care (CVH): Q4 EPS of $0.74 beats by $0.18. Revenue of $3.42B (+15%) vs. $3.48B. Shares +2.5% premarket. (PR)
• NYSE Euronext (NYX): Q4 EPS of $0.58 beats by $0.10. Revenue of $640M (-6.3%) vs. $638M. Shares +1.3% premarket. (PR)

Earnings: Monday After Close

• Apollo Investment (AINV): FQ3 EPS of $0.48 beats by $0.17. Total investment income of $85.6M. Shares +0.8% AH. (PR)
• Atmel (ATML): Q4 EPS of $0.04 beats by $0.04. Revenue of $343M (+2.7%) vs. $318M. Shares -0.4% AH. (PR, earnings call transcript)
• Axis Capital (AXS): Q4 EPS of $1.87 beats by $0.56. Revenue of $868M (+50%) vs. $341M. Shares +1.4% AH. (PR)
• Camden Property Trust (CPT): Q4 FFO of $0.71 beats by $0.08, after excluding a $1.24/share impact from impairment losses. Revenue of $153M (-3%) vs. $132M. Shares -1.5% AH. (PR)
• Chimera Investment Corp. (CIM): Q4 EPS of $0.12 misses by $0.02. Revenue of $101M (+325%). Shares +0.3% AH. (PR)
• Electronic Arts (ERTS): FQ3 EPS of $0.33 beats by $0.02. Revenue of $1.35B (-23%) in-line. Sees Q4 EPS of $0.02-0.06 vs. $0.13, on sales of $800M-850M vs. $851M. Sees fiscal 2011 EPS of $0.50-0.70 vs. $0.74. Shares -8.2% AH. (PR, earnings call transcript)
• Hartford Financial (HIG): Q4 core EPS of $1.51 beats by $0.11. Expects 2010 core EPS of $3.70-4.00 vs. $3.96. Shares -4% AH.(PR)
• Lincoln National (LNC): Q4 EPS of $0.90 beats by $0.07. Revenue of $2.4B (+12%) vs. $2.5B. Shares -2.8% AH. (PR)
• Nuance Communications (NUAN): FQ1 EPS of $0.29 beats by $0.02. Revenue of $285M (+16%) vs. $269M. Shares -0.1% AH. (PR, earnings call transcript)
• Pharmaceutical Product Development (PPDI): Q4 EPS of $0.16 misses by $0.07. Revenue of $357M (-2%) vs. $314M. Shares +0.5% AH. (PR)
• Principal Financial Group (PFG): Q4 EPS of $0.62 misses by $0.03. Revenue of $2.4B (-6%) vs. $2.5B. Shares -1.9% AH. (PR)
• Qiagen (QGEN): Q4 EPS of $0.24 beats by $0.02. Revenue of $289M (+21.9%) vs $237M. Shares -2.0% AH. (PR)
• Teck Resources (TCK): Q4 EPS of C$0.70 beats by C$0.18. Revenue of C$2.2B (+37.5%). (PR)
• Tw Telecom (TWTC): Q4 EPS of $0.07 beats by $0.02. Revenue of $308M (+5%) in-line. (PR, earnings call transcript)
• Veeco Instruments (VECO): Q4 EPS of $0.41 beats by $0.07. Revenue of $146M (+32.7%) vs. $110M. Shares -2.4% AH. (PR, earnings call transcript)
• W.R. Berkley (WRB): Q4 EPS of $0.81 includes gains from investments of $0.10/share and may not be comparable to estimate of $0.67. Revenue of $1.18B (+9%) vs. $1.15B. (PR)

Today's Markets

• In Asia, Nikkei -0.2% to 9933. Hang Seng +1.2% to 19790. Shanghai +0.5% to 2949. BSE +0.7% to 16042.
• In Europe at midday, London +0.2% to 5100. Paris -0.3% to 3595. Frankfurt -0.1% to 5479.
• Futures: Dow +0.4%. S&P +0.6%. Nasdaq +0.7%. Crude +0.3% to $72.09. Gold +0.1% to $1,067.

Tuesday's Economic Calendar

• 7:45 ICSC Retail Store Sales
  8:55 Redbook Chain Store Sales
  10:00 Wholesale Trade
  1:00 PM 3-Yr Note Auction
  5:00 PM ABC Consumer Confidence Index
• Notable earnings before Tuesday's open: AGCO, AGU, ANR, BIIB, BJS, CAM, CE, CTSH, CVH, IACI, KO, NYX, PHM, TAP, TIN, VSH
• Notable earnings after Tuesday's close: BIDU, CERN, CFN, CXW, DIS, EOG, UDR, XL

Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.

Recent earnings results by Ralcorp (RAH) and AIPC (AIPC) have been met with a positive response from investors. Both companies delivered improved earnings growth with flat volume pulled lower by price deflation. Of course, it doesn't hurt that the stock market has gone negative and defensive stocks like food companies are by their nature more in favor during tough economic times.

Treehouse Foods (THS), Ralcorp and AIPC are the best pure plays in the food manufacturing sector that focus on private label manufacturing. Treehouse continues to add companies and categories (recent Sturm Foods purchase) and is positioned as the top private label focused company. Ralcorp acquired Kraft Foods (KFT) Post cereal division and so far has struggled to deliver positive results.

Here's a chart of lumber futures prices over the last month. Of particular interest is the big upward movement starting on January 28th. Between then and this last Friday, lumber TWICE went up the session limit of $10 / thousand board feet (mBF).

At the beginning of the month, I was bearish on lumber because I suspected housing starts have not actually increased whatsoever (and at the time I took a short position, only to be stopped out in accordance with my personal trading philosophy); however, now I am even more bearish because I think this pricing run-up neither makes sense nor is in any way sustainable.

Stocks discussed on the in depth session of Jim Cramer's Mad Money TV Program, Monday February 8.

Intel (INTC), Xilinx (XLNX), Marvell Technology Group (MRVL), Cypress Semiconductor (CY), Broadcom (BRCM), Avnet (AVT), Altera (ALTR), Texas Instruments (TXN), Cisco Systems (CSCO)

If you've checked out any of the new reserve reports being released by oil and gas producers, you've probably noticed that the new SEC rules make comparisons to prior-year reports virtually meaningless. Fortunately for us, companies are explaining the effects in great detail and presenting their numbers both according to the old rules and the new rules. This exercise is revealing a lot of useful information for energy investors.

What's new, wildcat?
To review quickly, here are a few major changes in the rules, which went into effect on Jan. 1, 2010:

Those of our readers who have followed the evolution of Steak n Shake (SNS) over the past couple of years know that the company has made huge strides in terms of stabilizing operations and creating value for shareholders. Whereas the previous management team almost ran Steak n Shake into the ground, new chairman Sardar Biglari quickly restored the company's fiscal health, ensuring that Steak n Shake will be around for a long time to come. Not least, Steak n Shake's stock price has enjoyed a renaissance of sorts after languishing for years under the old management.

Despite all the positives that Sardar Biglari's involvement has brought to Steak n Shake, the Indianapolis Business Journal (IBJ) has published an article that can hardly be described as anything other than a hatchet job. In the article, Cory Schouten writes:

Formally known as the Saskatchewan Wheat Pool, Viterra Inc (VT.TO - C$9.50, VTRAF, VTRAF.PK - US$8.78) is an emerging Canadian-based grain infrastructure company that is poised to capture a bigger piece of the expanding Asian agricultural grain import market. Two of the largest grains producing areas are Canada and Australia.

Combined, farmers in these growing regions produce 37% of the world’s exports of wheat, barley, and canola, compared to 34% for the US. Asian imports of these commodities are expected to grow by approximately 4% annually for the next 10 years. While many on the Street presently rank Viterra as a “market perform”, the current share price should be attractive for long-term investors looking to diversify into the consumer/food/agricultural commodity sector, and especially for US investors looking to increase international exposure. VT has built a market-leading position in many of its niche businesses, and is the fifth largest global agri-business by market cap, with estimated FY2010 revenues of C$9 billion.

The ATP Oil & Gas (Nasdaq: ATPG) faithful are getting to feel like that songbird of which the Bengali poet and Nobel laureate spoke.

First production from the firm's deepwater Telemark field, which promises to more than double 2009 production in 2010, is on schedule for later this quarter. Despite this critical fact, relayed in the middle of a decidedly confusing press release last week, skepticism swirls around the stock. Shares are beaten down, and short interest is running high. Even InterOil (NYSE: IOC), which is a real lightning rod, doesn't have this big of a target on its back.

With 2010 getting off to an even worse start than 2009 at this point in the year, it should come as little surprise that the current decline has been the sharpest since the S&P 500 bottomed in March 2009. One indicator we monitor on a daily basis and update each day in our Morning Lineup is the percentage of S&P 500 stocks that are oversold and overbought (stocks that are more than one standard deviation above or below their 50-day moving average). Currently, 305 stocks (61%) in the S&P 500 are oversold, while only 25 are overbought. As shown in the chart below, the percentage of oversold stocks in the S&P 500 (green line) is higher than it has been at any other time since the S&P 500 bounced off the lows in March 2009.

click to enlarge

With both Burger King (BKC) and Yum! Brand (YUM) earnings out last week, a number of similarities between the circumstances facing the two are apparent. Both companies are trying to emerge from the same store sales slump that most of the QSR sector has faced since late 2008. YUM may have a margin pickup advantage going forward, however. (See BKC's earnings conference call transcript here and Yum! Brands' here.)

Burger King did post an improvement to the comparable sales trend, at -2 % worldwide system versus -4.5% and -4.6% two quarters earlier. But we think that most of this gain occurred after the October 19^th start of the $1 double cheeseburger offer. However, there was no analyst query whether the promotion paid off by generating enough traffic improvement, with BKC noting the cannibalization of higher priced items was “within their expectations.”

With the Chinese New Year almost upon us, I went around the web to see what people are prognosticating about the Year of the Metal Tiger. These are some interesting observations:

From KCI Investing (written by Yiannis G Mostrous):

"In the upcoming Year of the Tiger, investors should keep in mind that tigers often live dangerously. The ancient Chinese admired the tiger for its fighting qualities, as well as its power and graciousness, and the animal is lauded for its agility and ability to take advantage of tough situations.

Last week the New York Times ran a story that, in the print version, was headlined “Bipartisan Financial Reform Talks Crumble in the Senate." My first thought upon reading this headline was to wonder if I still had any of those crumbly shortbread cookies I bought last week. (Sadly, not.)

My second thought was that maybe, rather than waiting around for Congress to pass sensible, comprehensive financial reform – which will presumably happen right after Hell’s residents start ordering parkas from L.L. Bean, the moon waxes turquoise, and the Saints win the Super Bowl (hey, one down!) - we should table all attempts to fix the crap that got us into this crisis, and instead just try to fix the crap this crisis has gotten us into.

Yes, I agree with that strategy. However many investors are looking for alternatives in the world of ETFs to hedge their portfolios. I have come up with three ETFs that will help protect your portfolio if the pullback in the market continues any further.