In a CNBC interview on December 31, 2009 (video below), Jordan Kotick at Barclays Capital (BCS) shared technical chart tales of some possible market corrections in Q1 or Q2 of 2010.

Bovespa (BVSP): Index, currently at an almost all time new high, is signaling a possible correction coming when traders start to fade this market. But overall trend is still upward positive. Brazil, Mexico and Chile are the three crucial ones to watch in the emerging markets.

We laughed, we cried, we kissed another ten years goodbye. It is virtually impossible to cram ten years into one article, nonetheless I will attempt to chronicle some of the central and silly events that bubble up in my memory bank.

2000

Mortgage Fraud is a very unpopular topic. It is simply not something anybody wants to talk about at all, let alone trace the corrosive effects of the dishonesty of our neighbors and fellow citizens on the fabric of the economy. However, it is not something that will go away. Indeed, the longer this fundamental problem is ignored or swept under the carpet, the more futile will all economic remedies be to alleviate the weakness and fragility of our financial system.

The magnitude of the problem – here is a link (.pdf) to the Eleventh Periodic Mortgage Fraud Case Report, addressed to the Mortgage Bankers Association. According to this document, losses for 2008 will be between 15 and 25 billion. Of course, readers have become inured to big numbers: a billion is now chump change, we need to talk in trillions when addressing the magnitude of our financial woes. That apparent imbalance will be addressed later in this article when discussing the multiplier effect of mortgage fraud.

4:15 PM, Dec 3, 2009 --

• NYSE down 65 (0.9%) to 7,157.05.
• DJIA down 86 (0.8%) to 10,366.
• S&P 500 down 9 (0.8%) to 1,100.
• Nasdaq down 12 (0.5%) to 2,173.14.

GLOBAL SENTIMENT

By Jon "DRJ" Najarian

TARP Repayment Has Ripple Effect

The news that our friend Charlie Gasparino broke Wednesday on CNBC, that Bank of America (BAC) would repay $45 billion in TARP funds in part through the sale of $18.8 billion of securities, is helping lift the financial sector. BAC trades up $0.60, Goldman Sachs (GS) is higher by $1, Fifth Third Bancorp (FITB) is up $0.35, Morgan Stanley (MS) is higher by $0.40, and JP Morgan (JPM) is up $0.45 in the pre-market on our Heat Seeker tracking program.

Wednesday, we began starter stake in bond insurer Assured Guaranty (AGO) - for those not familiar with the space, think of the 2 disaster of companies called MBIA (MBI) and Ambak (ABK) which we talked about at length in first quarter 2008. This is not my typical fare, but a speculative, "special situation" ... a company whose competitors have been so beaten into the ground, it is currently running a near monopoly on debt issuance for muncipalities.

Technically, the company exploded higher last week on a very surprising earnings report, and has now filled that gap perfectly. I am begining the stake just over $23, with hopes it falls to $20-$21 where I would like to make the position larger. For now, I just did a 0.7% position to get started.

• JPMorgan snaps up Cazenove. JPMorgan (JPM) agreed to acquire the half of British stockbroker Cazenove it doesn't own for £1B ($1.7B) in a widely-expected deal. JPMorgan will combine JPMorgan Cazenove's cash equities and research divisions with its existing operations covering Europe, the Middle East and Africa. JPMorgan has weathered the financial crisis better than most rivals, and is now taking advantage of its problems and grabbing opportunities.
• OECD doubles growth forecast. The 30 countries that make up the Organization for Economic Cooperation should grow 1.9% next year - twice what the group forecast in June - and by 2.5% in 2011, according to its latest Economic Outlook. China will lead the way both years, with 10.2% growth seen in 2010. Heavy debt levels mean the U.S. and euro regions will lag, gaining 2.5% and 0.9% respectively. The OECD gave 2011 growth forecasts for the first time, with the U.S. seen growing 2.8%, the euro area 1.7%, Japan 2% and China 9.3%.
• Obama warns of double dip. The U.S. is flirting with a double-dip recession if it doesn't act to contain rising U.S. deficits, President Barack Obama warned Wednesday in an interview with Fox TV. The government is challenged in trying to boost the economy and spur job creation while setting a path toward long-term deficit reduction. Obama said the administration is considering tax measures to spur companies to hire.
• Blackstone eyes Birds Eye. Blackstone Group's (BX) Pinnacle Brands will reportedly pay $1.3B in cash to buy privately-held Birds Eye Foods, the largest frozen-vegetable company in the U.S. and owner of brands such as Duncan Hines and Swanson, another sign private-equity deals may be coming back to life. Birds Eye is majority-owned by the private-equity firm Vestar Capital Partners.
• Vivendi wants no part of NBCU. Vivendi's (VIVDY.PK) CFO says the company has no plans to be part of the future JV that Comcast and General Electric (GE) are discussing. Selling its 20% percent stake in NBCU would give Vivendi "additional financial headroom" after it gained control of Brazil's telecoms operator GVT last week, he said, but cautioned, "we are not there yet."
• Did Goldman mislead over AIG risk? Goldman Sachs (GS) could have been on the line for billions of dollars in losses when AIG collapsed if the U.S. government hadn't come to the insurer's rescue, a new government report suggests, confirming everyone's suspicions. Among other things, the report raises doubts about Goldman's previous claims that it was hedged against potential AIG losses, and suggests that Goldman would have found it difficult to liquidate its trading positions with AIG, even at discounts. A Goldman spokesman called the risks a "moot point."
• Fortinet on fire. In a promising sign for venture-capital-backed IPOs, Fortinet (FTNT) soared 33% after the network security provider launched on Nasdaq Wednesday, the fourth best showing of any U.S. IPO this year, although one analyst said this was in part because shares were priced at a discount to its peers. Venture-capital backed IPOs have mostly lagged those by private-equity owned companies in 2009.
• Toll warns of FHA train wreck. Homebuilder Toll Brothers (TOL) said the FHA has created a potential "train wreck" because it insures home purchases made with down-payments as small as 3.5%. FHA loans accounted for about 8% of the mortgages Toll closed last quarter, while the agency guarantees 20% of all single-family loans. While the FHA's insurance reserve ratio has fallen to an all-time low, a senior government official denied that the FHA is the next subprime mortgage crisis.
• Wells in auction-rate slapdown. One year after the auction-rate securities market collapsed, Wells Fargo (WFC) agreed to repay up to $1.4B to brokerage clients whose assets were frozen when the market collapsed. Wells will also pay a $1.9M fine and reimburse investors who sold their holdings at a discount. Wells said the repurchase will have an estimated impact of $150M in Q4, and that it expects to recover this over time through redemptions of the securities. So far, banks have been forced to buy back $61B in ARS since February 2008.
• AMD cleans up debt. In a move to clean up its debt-riddled balance sheet, AMD (AMD) said it's buying back up to $1B of convertible notes and $390M in senior notes. To help pay for the converts, the company plans to issue $500M of senior notes due in 2017 in a private offering. AMD's shares rose 8.9%.
• U.S. wants out of GM. The U.S. government wants to fast-track its way out of the nearly 61% stake it holds in GM as part of a policy to restructure the automaker in bankruptcy, and is planning to to exit through an IPO as soon as Q4 2010, providing the automaker is meeting its recovery targets and financial markets are receptive. GM is revaluing its balance sheet to provide "fresh start" accounting of its assets and liabilities since emerging from bankruptcy in July. Last week, GM said it may repay government loans sooner than expected. Separately, a senior official in the administration's auto task force said the group was caught off guard when GM decided to scrap a planned sale of its Opel unit backed by Germany, but affirmed the company's independence to make such decisions.
• No more "too big to fail". Still smarting over the tens of billions the government spent to save some of America's biggest financial firms year, the House Financial Services Committee approved a proposal that would empower regulators to break up large financial firms that threaten economic stability. The measure was an amendment to a broader bill that's expected to face a committee vote as soon as Friday. Regulators would evaluate factors such as a firm's size, exposure, leverage and relationships, and would have the power to call for tougher oversight, halt or change a firm's activities, limit mergers and acquisitions, or even dismantle them.
• Fed may focus on back-door tightening. St. Louis Federal Reserve Bank President James Bullard said Wednesday that, "The main challenge for monetary policy going forward will be how to adjust the asset purchase program without generating inflation while interest rates are near zero" and that the inflation outlook hinges on what the Fed does with this program. The Fed has bought $300B in longer-term U.S. government debt and plans to purchase about $1.43T in mortgage-related securities by the end of March. Bullard suggested the Fed would not wait as long as it has after previous recessions to raise interest rates, given criticism that a delay fueled the housing bubble.
• Santa may come late for Amazon rivals. Sony (SNE) and Barnes & Noble (BKS), both angling for a piece of the growing e-book reader market that Amazon.com (AMZN) cornered with Kindle, are falling behind in the race to get rival products out in time for Christmas delivery. Sony said Wednesday its new Daily Edition Reader - promised to be ready for the holidays - will only ship Dec. 18 through Jan. 8, adding that the actual delivery date can’t be guaranteed. Barnes & Noble said the same last week. Late orders could leave the field wide open to Amazon. Separately, Sony pushed back its elusive 5% operating profit margin - originally slated for 2008 - to 2013.
• New head of DirecTV signals sale? The appointment of a PepsiCo veteran with no experience in pay-TV could signal that parent Liberty Media (LINTA) is prepping DirecTV Group (DTV) for a sale, sources say. Verizon (VZ) and AT&T (T) have already expressed interest in the unit over the past year, but the talks ground to a halt due to regulatory concerns and are not currently active. Liberty Media shareholders are set to vote today to approve a plan to split DirecTV from Liberty Entertainment (LMDIA), a move some believe could pave the way for a telephone company to put in a bid for DirecTV, perhaps prompting a similar bid for smaller rival Dish Network (DISH).
• Paulson gold bug. After clocking $20B by betting against the housing and financial markets for his hedge fund, John Paulson is launching a new fund that will buy shares of gold-related investments and gold derivatives. Paulson reportedly has more than 10% of his some $30B under management in gold-related investments, including billions of dollars worth of gold ETFs and futures. Although Paulson's gotten a boost from the recent surge in gold prices, some say the rally raises questions about the timing of the launch.
• GE sees slow growth for key unit. The economic downturn in the U.S. and European economies will likely bog down revenue growth for General Electric's (GE) technology infrastructure segment, a senior company official says. The division accounts for 39% of GE's profit. Growth in China will likely help, but won't offset the downside the company will feel in developed markets, he said.
• U.S. data damps inflation fears. Consumer prices rose moderately in October, suggesting the Fed will refrain from raising rates in the near future. CPI rose 0.3% from 0.2% in September; economists were expecting a 0.2% climb. Home construction data, meanwhile, suggest that the economic recovery is still hooked on government support after October home construction fell 10.6% from the prior month to 529,000, the fewest starts since April's record low.
• Ambac back from brink. Ambac (ABK), once the No. 2 bond insurer in the U.S., said its main bond-insurance unit now has a capital surplus - quelling fears of a liquidity crunch and possible bankruptcy in 2010. The company, which has been hobbled by losses from derivative-based guarantees it sold on mortgage-related securities during the housing boom, said statutory capital for Ambac Assurance Corp. was $856M, well above the $2M minimum required. Ambac said in an 8-K filing that it benefited from $311M reinsurance payments and its ability to cancel four asset-backed securities derivative contracts that had been worth more than $5B for cash payments of $520M. Shares jumped 44% to close at $1.01.

Earnings: Before Open

• Children's Place (PLCE): Q3 EPS of $1.38 in-line. Revenue of $463M (+2.8%) in-line. SSS -2%. (PR)
• Dick's Sporting Goods (DKS): Q3 EPS of $0.16 beats by $0.07. Revenue of $990M (+7.1%) vs. $961M. Sees Q4 EPS of $0.41-0.46 vs. $0.57 consensus. "Our estimates also recognize the continued uncertain consumer environment, particularly as we head into our largest quarter of the year." Shares -3.3% premarket. (PR)
• Patterson Companies (PDCO): FQ2 EPS of $0.41 in-line. Revenue of $815M (+7.3%) vs. $788M. (PR)
• Sears (SHLD): Q3 EPS of -$0.81 beats by $0.28. Revenue of $10.19B vs. $9.92B. Gross margin 27.2% vs. 26.8% last year. SSS -4.6%. Total debt $3.8B vs. $4.5B last year. (PR)
• Suntech Power (STP): Q3 EPS of $0.16 beats by $0.08. Revenue of $473M (-20.4%) vs. $427M. Shares +3.5% premarket. (PR)
• Trina Solar (TSL): Q3 EPS of $1.29 beats by $0.53. Revenue of $250M (-14.1%) vs. $216M. (PR)
• Williams-Sonoma (WSM): Q3 EPS of $0.16 beats by $0.11. Revenue of $729M (-3.1%) vs. $686M. (PR)

Earnings: Wed. After Close

• Gymboree (GYMB): Q3 EPS of $1.15 beats by $0.02. Revenue of $266M (+2%) vs. $269M. Sees Q4 EPS of $0.95-1.03 vs. $1.13. Shares -2.4% AH. (PR)
• Hot Topic (HOTT): Q3 EPS of $0.15 beats by $0.02. Revenue of $189.6M (-4%) vs. $190.5M. Sees Q4 EPS of $0.23-0.26 vs. $0.30. Shares -4.8% AH. (PR)
• Jack in the Box (JACK): FQ4 EPS of $0.70 beats by $0.15. Revenue of $540M (-7%) vs. $549M. Sees fiscal 2010 EPS of $1.90-2.10 vs. $2.32. Expects Q1 same-store sales down 10% and fiscal 2010 SSS down 3-7%. Shares -5.9% AH. (PR)
• Limited Brands (LTD): Q3 EPS of $0.02 beats by $0.03. Revenue of $1.8B (-4%) in-line. Same-store sales down 2%; raises full-year EPS guidance to $0.93-1.08 from $0.75-0.90, vs. $0.97. Shares +3.2% AH. (PR)
• NetApp (NTAP): FQ2 EPS of $0.37 beats by $0.07. Revenue of $910M (+0%) vs. $881M. Sees Q3 EPS of $0.36-0.37 vs. $0.36, on revenue of $935M-955M vs. $921M. Shares +4.3% AH. (PR)
• Netease.com (NTES): Q3 EPS of $0.44 misses by $0.05. Revenue of $129M (+9%) vs. $139M. Shares -8% AH. (PR)
• PetSmart (PETM): Q3 EPS of $0.31 beats by $0.03. Revenue of $1.3B (+4%) in-line. Same-store sales up 0.3%. Shares -1.2% AH. (PR)
• Phillips-Van Heusen (PVH): Q3 EPS of $1.08 beats by $0.19. Revenue of $697M (flat) vs. $670M. Sees Q4 EPS of $0.38-0.42 vs. $0.49, on revenue of $585M-595M vs. $582M. Raises full-year guidance to $2.59-2.63 from $2.30-2.40, vs. $2.50. (PR)

Today's Markets

Asia markets were sharply lower Thursday, with the exception of Shanghai. In Europe, stocks are under pressure at midday, as are U.S. futures in the premarket.

U.S. Financial Institutions are interconnected – as the fall of Lehman demonstrated, they are tied together and interwoven in a complex web of obligations which can rip, run or unravel with unexpected consequences. As such, they may be regarded, for analytical purposes, as having one balance sheet. Double entry bookkeeping, which underlies all GAAP accounting, suggests that assets should equal liabilities for this giant composite balance sheet. I doubt that it does. The purpose of the article is to raise questions on two areas that do not seem to add up, and suggest that exploring these relationships would be a good task for the systemic regulator.

Derivative Assets and Liabilities – Five large banks together constitute the bulk of the U.S. Derivative market. The nature of the derivative transaction is such that each position has two sides, an asset and a liability, which will be on the books of the counter-parties. While numerous hedge funds and other bit players add complexity to the picture, it is evident that collectively derivative assets should equal liabilities for the banks involved, since a majority of the trades eventually make their way back to the largest players.

Ambac Financial (ABK) recently reported in a filing to the SEC that it may run out of liquidity before the second quarter of 2011. Short interest in Ambac stands at 12.9% of shares outstanding (+4.7% on the week) and active utilization has reached 75% (23% on the week).

To view the full report with graphics, click here.

I have really started to dislike municipal bonds as an asset class. They have seen a huge rally along with almost every other financial asset but the underlying fundamentals are weak because of financial distress at states and municipalities.

Last week, I wrote a first piece on this topic, based on some work by Philip Greenspun and Fred Sheehan. I also just wrote a piece about Ambac Financial’s (ABK) likely bankruptcy, which will impact this market because of Ambac’s municipal bond guarantees. But, a Barron’s piece about Jim Chanos of Kynikos called “Short Seller: Dump Munis” piqued my interest and precipitated this particular article.

Bond insurer Ambac Financial (ABK) has warned bankruptcy is a distinct possibility, sending its shares plummeting more than 30% Tuesday.

What is intriguing about this pending bankruptcy is how this company escaped bankruptcy in 2008, was downgraded continually in 2009, yet just reported billions in profit 5 days ago. Now it warns of bankruptcy?

Sentiment

Stocks opened lower after four days of gains, but with no real news to guide the market action, are trading mixed late Tuesday. With no economic data and no earnings of broad market significance, the Dow Jones Industrial Average dipped on profit-taking after a four-day 4.7 percent advance.

However, the selling never gathered any momentum and the industrial average has traded in a narrow 63-point range. With an hour left to trade, the Dow has overcome the early weakness and is up 17 points.

By David Russell

Ambac Financial (ABK) shares are slipping back under the 200-day moving average, and the bears are pushing for the next leg down.

Yesterday, Ambac Financial Group (ABK) (a big bond insurer) reported that it earned more than $2 billion in the third quarter, or $7.58 per share. As reported over at Marketwatch, these must be among the lowest quality earnings in accounting history:

Ambac Financial Group reported a $2.19 billion quarterly profit Wednesday as the company got a big accounting boost from deterioration in the perceived creditworthiness of its main bond insurance unit. …

Q3 2009 Earnings Call

November 4, 2009 11:00 am ET

• GM U-turn on Opel sparks German road rage. German officials were outraged by GM's surprise decision to keep Opel, its European arm, abandoning a long-expected sale to a Magna- (MGA) led group that the German government had agreed to back with €4.5B of state aid. GM said improving business conditions and the strategic importance of Opel had prompted the move, which came after the EU forced GM's board to revisit the deal over concerns Germany had influenced its decision. GM expects restructuring Opel to cost about €3B; it's unclear whether the German government will help it restructure.
• Buffett joins Goldman in bid for tax credits. Sources say Berkshire Hathaway (BRK.A) has joined Goldman Sachs (GS) in a bid to buy $3B in tax credits from Fannie Mae (FNM), adding a twist to a politically sensitive deal. The credits are virtually worthless to Fannie Mae, and require it to take losses each quarter as their value declines, while profitable companies could use them to offset taxes. The government, which controls Fannie, is thought to be reluctant to approve a deal that would allow Goldman to save on taxes, given the firm's already tenuous standing with lawmakers and on Main Street; taking widely-respected Buffett as a partner could reduce the tension.
• Berkshire bets big. Warren Buffett says his $100/share bid for Burlington Northern Santa Fe (BNI) was his first and only offer, stressing that the deal is "not a bet on next month or next year. We're going to own it forever." Berkshire (BRK.A) will pay about 60% cash and 40% stock for the railroad, taking on $8B in debt and depleting its cash store to about $20B, leaving it almost fully-invested according to its standards, which analysts say could result in strategic divestments in the future. Berkshire will split its so-called Baby Berkshire shares (BRK.B) by 50 to enable small Burlington stakeholders to participate in the share swap, which will help bring its famously pricey stock within the means of retail investors.
• Obese healthcare premiums. A Senate probe found U.S. health insurers (AET, CI, CVH, HUM, UNH, WLP) are spending considerably less of their premiums on medical care than official industry estimates - an average of $0.70/dollar instead of the $0.87 cited by industry group AHIP. The report also singled out Cigna for mis-categorizing $5B worth of clients. "The American people and I are asking a serious question and one that deserves a straight answer – why are health insurance costs going up each year?" Sen. Jay Rockefeller said. "While health-care costs are spiraling upwards, consumers are paying more and getting less, and the health insurance industry doesn't want anyone to know what they are up to."
• Regulators fret Asia bubble. The World Bank warned Tuesday that the sudden reappearance of billions of dollars in investment capital in East Asia is "raising concerns about asset price bubbles," while the IMF cited "a risk" that surging Hong Kong asset prices are being driven by a flood of capital "divorced from fundamental forces of supply and demand." About $53B has gone into emerging-market stock funds this year.
• China backs Shanghai Disney. Beijing gave Disney (DIS) the go-ahead to build a $4B theme park in Shanghai, allowing the media giant to establish a presence in a massive market that has presented substantial hurdles to foreign entertainment companies. The park has been discussed for close to a decade. Disney already operates a theme park in Hong Kong.
• Oracle awaits EU veto. Oracle (ORCL) is expecting a formal objection to its planned $7.4B acquisition of Sun Microsystems (JAVA) from the EU Commission within days, sources say. Despite concerns over the deal's impact on the database market, Oracle has refused to make any concessions to European regulators.
• Bain in exclusive talks to buy Citi's Bellsystem. Private-equity group Bain Capital is reportedly in exclusive negotiations with Citigroup (C) to buy its Japanese telemarketer Bellsystem24 in a deal that could be worth more than $1B. A team of CVC Capital and Blackstone (BX) also made an offer in the final round of bidding, which closed last Friday. Citigroup put Bellsystem24 up for sale as part of its efforts to raise cash; it has already sold its retail broker Nikko Cordial Securities and asset management firm Nikko Asset Management in Japan.
• Car sales show spark. U.S. vehicle sales declined less than 1% in October, the first signs of a recovery without the aid of government incentives. The drop made October the year's strongest month aside from August, which received a lift from the cash-for-clunkers program. The seasonally adjusted annual sales rate was 11.2M. "Thinking of where we've come from, it's certainly a positive signal," J.D. Power's Jeff Schuster said. GM's sales rose 5% - the first gain since Jan. 2008. Ford's (F) grew 3%.
• Second IPO nixed. Aviv REIT Inc. (AVI) became the second U.S. company in less than a week to pull its IPO after pricing and demand failed to meet investors' expectations, dealers said. September and October's 18 IPOs have collectively beaten the S&P 500 by just 0.3% during their first month of trading - the worst showing on record.
• Mortgage apps rise. Mortgage applications increased 8.2% from a week ago, MBA said, led by a 14.5% jump in refinancing. The average rate for 30-year fixed mortgages declined to 4.97% from 5.04%.
• Oct. Challenger Job-Cut Report: Announced layoffs fell to 55,679 vs. 66,404 in September, the lowest total since March 2008. As recently as October 2008, the number stood at 113K.

Earnings: Wed. Before Open

• Agrium (AGU): Q3 EPS of $0.16 in-line. Revenue of $1.84B (-40.8%) vs. $2.07B. (PR)
• Ambac (ABK): Q3 EPS of $7.58 vs. consensus of -$4.43. Revenue of $23.6M (-24.6%) vs. $23.4M. Says results "reflect significant unrealized mark-to-market gains in the credit derivatives portfolio and gains resulting from reinsurance cancellations during the quarter." Shares +30% premarket. (PR)
• Automatic Data Processing (ADP): FQ1 EPS of $0.56 beats by $0.06. Revenue of $2.1B (-3.6%) in-line. (PR)
• Aqua America (WTR): Q3 EPS of $0.25 in-line. Revenue of $181M (+2.1%) vs. $189M. Increases quarterly dividend by $0.01 (7.4%) to $0.145. Says results were negatively impacted by eighth wettest summer in 137 years. (PR)
• Baker Hughes (BHI): Q3 EPS of $0.26 misses by $0.10. Revenue of $2.23B (-26%) in-line. Says international results were negatively impacted by price discounting. Expects to complete acquisition of BJ Services (BJS) in Q1 2010. (PR)
• Becton Dickinson (BDX): FQ4 EPS of $1.25 beats by $0.01. Revenue of $1.9B (+5%) in-line. (PR)
• Comcast (CMCSA): Q3 EPS of $0.33 beats by $0.08. Revenue of $8.8B (+3%) in-line. Declares quarterly dividend of $0.0675. (PR I, II)
• Devon Energy (DVN): Q3 EPS of $1.10 beats by $0.20. Revenue of $2.1B (-64.9%) in-line. O&G production is up 8% YTD. Shares +4.3% premarket. (PR)
• Diedrich Coffee (DDRX): FQ1 EPS of $0.07 beats by $0.02. Revenue of $15.8M (+52%) vs. $13.2M. Diedrich is being acquired by Peet's Coffee & Tea (PEET). (PR)
• Foster Wheeler (FWLT): Q3 EPS of $0.71 beats by $0.08. Revenue of $1.22B (-29.2%) vs. $1.29B. (PR)
• Garmin (GRMN): Q3 EPS of $1.02 beats by $0.03. Revenue of $781M (-10.2%) vs. $704M. Gross margin 52%. Operating margin 30% from 25% last year. (PR)
• Huntsman (HUN): Q3 EPS of -$0.24 misses by $0.16. Revenue of $2.11B (+13%) vs. $1.95B. Says expansion of Asian ops "has allowed us to take advantage of markets less affected by the ongoing global recession." Anticipates economic recovery will continue. (PR)
• IAMGOLD (IAG): Q3 EPS of $0.18 beats by $0.08. Revenue of $235M (+3.7%) vs. $224M. Shares +3.5% premarket. (PR)
• Liz Claiborne (LIZ): Q3 EPS of $0.43 misses by $0.23. Revenue of $770B (-24.1%) vs. $790B. Says it's seeing "significantly improved comparable store sales results" Q4 to date. (PR)
• Marsh & McLennan (MMC): Q3 EPS of $0.48 beats by $0.22. Revenue of $2.52B (-10.5%) vs. $2.6B. (PR)
• Martha Stewart Living Omnimedia (MSO): Q3 EPS of -$0.22 misses by $0.13. Revenue of $49.8M (-25.1%) vs. $51.3M. Shares -8.1% premarket. (PR)
• MFA Finanacial (MFA): Q3 EPS of $0.25 misses by $0.01. Shares +0.3% premarket. (PR)
• Molson Coors (TAP): Q3 EPS of $1.14 beats by $0.16. Revenue of $854M (-7.3%) vs. $834M. (PR)
• Pulte Homes (PHM): Q3 EPS of -$1.15 misses by $0.46. Revenue of $1.09B (-30%) vs. $1.23B. Says results "reflect a homebuilding industry that continues its transition toward more stable market conditions as lower prices and historically low mortgage rates are helping to support homebuyer demand. Challenges remain, however, as economic weakness, foreclosures, rising unemployment and recent uncertainty over the expiration of the federal tax credit continue to influence buyer behavior." (PR)
• Quanta Services (PWR): Q3 EPS of $0.32 beats by $0.11. Revenue of $781M (-25.6%) vs. $858M. (PR)
• R.R. Donnelley & Sons (RRD): Q3 EPS of $0.54 beats by $0.09. Revenue of $2.5B vs. $2.4B. (PR)
• Time Warner (TWX): Q3 EPS of $0.61 beats by $0.08. Revenue of $7.13B (-5.9%) in-line.(PR I, II)
• Transocean (RIG): Q3 EPS of $2.65 misses by $0.02. Revenue of $2.82B (-11.6%) in-line. (PR)
• TRW Automotive (TRW): Q3 EPS of $0.68 beats by $0.52. Revenue of $3.11B (-13.5%) vs. $2.87B. Sees Q4 revenue of $3.2B vs. $3B. "The cautious optimism that has emerged for the industry is supported by the increasing vehicle production forecasts. Although it appears the bottom of the financial crisis has been reached, full recovery will be a long and gradual process." (PR)
• Tyco Electronics (TEL): Q3 EPS of $0.30 beats by $0.03. Revenue of $2.7B (-24.6%) vs. $2.6B. (PR)
• Watson Pharmaceuticals (WPI): Q3 EPS of $0.66 beats by $0.01. Revenue of $662M (+3.3%) vs. $688M. (PR)
• XTO Energy (XTO): Q3 EPS of $0.86 beats by $0.02. Revenue of $2.29B (+7.7%) in-line. (PR)

Earnings: Tue. After Close

• Anworth Mortgage Asset (ANH): Q3 EPS of $0.27 misses by $0.04. Interest income of $63M (-14%). Shares +2% AH. (PR)
• CBL & Associates Properties (CBL): Q3 FFO of $0.50 beats by $0.03. Revenue of $263M (-8%) vs. $255M. Shares -0.8% AH. (PR)
• Con-Way (CNW): Q3 EPS of $0.39 misses by $0.20. Revenue of $1.1B (-18%) in-line. Shares +0.1% AH. (PR)
• Crown Castle International (CCI): Q3 EPS of -$0.13 misses by $0.09. Revenue of $429M (+12%) vs. $419M. Sees full-year EPS of -$0.58 to -$0.49 vs. -$0.45, on revenue of $1.54B vs. $1.66B. Shares -6.3% AH. (PR)
• Digital River (DRIV): Q3 EPS of $0.42 beats by $0.01. Revenue of $99.4M (+3%) vs. $98.3M. Sees Q4 EPS of $0.30-0.34 vs. $0.42. Shares -1.3% AH. (PR)
• Discovery (DISCA): Q3 EPS of $0.22 misses by $0.05. Revenue of $854M (+1%) vs. $850M. Shares -0.1% AH. (PR)
• Excel Maritime (EXM): Q3 EPS of $0.81 beats by $0.68. Revenue of $174M (-25%) vs. $101M. Shares +6% AH. (PR)
• Exco Resources (XCO): Q3 EPS of $0.20 misses by $0.02. Revenue of $131M (-70%) vs. $229M. Shares -0.5% AH. (PR)
• Hartford Financial (HIG): Q3 core EPS of $1.56 beats by $0.45. Results exclude highly variable realized gains/losses. Raises full-year EPS guidance to $0.85-1.05 from $0.00-0.20, vs. $0.50. Shares +4.8% AH. (PR)
• Kraft (KFT): Q3 EPS of $0.55 beats by $0.07. Revenue of $9.8B (-6%) vs. $10.3B. "Our volume/mix, profit margin and cash flow trends are strengthening as we successfully execute our growth plan." Shares -2.9% AH. (PR)
• Onyx Pharmaceuticals (ONXX): Q3 EPS of $0.35 beats by $0.13. Revenue of $69M (+36%) vs. $65M. Shares -0.7% AH. (PR)
• Pioneer Natural Resources Company (PXD): Q3 EPS of -$0.06 misses by $0.13. Revenue of $410M (-32%) vs. $400M. Shares -0.2% AH. (PR)
• STEC (STEC): Q3 EPS of $0.50 beats by $0.03. Revenue of $98M (+54%) vs. $97M. Shares -31.9% AH. (PR)
• Unum Group (UNM): Q3 EPS of $0.64 in-line. Revenue of $2.52B (+3%) vs. $2.56B. (PR)
• Vivus (VVUS): Q3 EPS of -$0.30 beats by $0.01. Revenue of $4.3M (-2%) vs. $5.3M. Shares -3.7% AH. (PR
• Yamana Gold (AUY): Q3 EPS of $0.12 misses by $0.01. Revenue of $333M (+50%) vs. $358M. Shares -2% AH. (PR)

Today's Markets

Overseas markets posted solid gains Wednesday after U.S. markets rebounded from early weakness to finish off Tuesday flat. Futures are higher in moderate overnight trading.

By Paul Amery

In his latest IndexUniverse.com blog, Matt Hougan sings the praises of ETNs and argues that the risk of losing money is “vanishingly small”.

One of the quandaries of running a subscription service is that when you have some really juicy stuff, you inherently limit the audience that you are able to reach. Normally, this isn't that big a deal. When you believe that there is a mass cover up aiming to prop up the largest cadre of zombie, insolvent companies in modern history it becomes a much bigger deal. This leads me to distribute a significant amount of research for free. On that note, I have been following the breadcrumb trail of hidden (or more aptly put, concealed) corporate liabilities, and it has led me to (of all places) off the balance sheet of the big banks. I have spent a lot of time concentrating on exactly where the losses, if any, will come from in these banks. We have already established that the smaller banks had, have and will totally drain the FDIC's insurance fund over a year and a half ago (see As I see it, 32 commercial banks and thrifts may see the feces hit the fan blades Friday, 23 May 2008, notice how many of the banks have gone under since then) in the post "I'm going to try not to say I told you so...

I would also like to add that I raised the flag on this regional bank/commercial real estate issue many months before the sell side and the main stream media said a peep. This is not to brag or boast, for I am a fundamental investor and the market has definitively ignored the fundamentals for 7 months running. The point that I am trying to convey is that analysts in the big sell side banks work for their trading desks, underwriting and sales departments, and not for the investor (be it retail or institutional). Thus, proclamations of "Buy! Buy! Buy!" do not necessarily mean we have entered into a fundamentally firm area in which to buy stocks, bonds or any other risky assets covered by these guys. For a sterling example, see "The sell side is pushing with all of their might to inflate the market...".

Sentiment

Stocks are trading broadly higher late Wednesday after the Federal Reserve concluded its latest meeting on monetary policy and the post-meeting statement didn't include any unpleasant surprises. Instead, the Fed kept rates unchanged, as expected, and noted some signs of improvement in economic activity.

The major averages traded in a narrow range ahead of the news, as there wasn't much new information to guide the market in morning trading. Some of the energy-related names came under fire after weekly inventory data sent crude oil sliding back towards $69 a barrel.