One of the greatest assets you can have as a trader or investor is having the ability to spot trends, and use that information to draw conclusions about what will occur in the future.

I have long used the options market as a way of watching where the “smart money” is making bets. It has allowed me to foresee the collapse of financial stocks and the re-emergence of oil and commodity related stocks.

Sentiment

Stocks fell in early trading, but are trading mostly higher late-Tuesday after positive economic data helped offset worries about the banking industry and the swine flu outbreak. Stock index futures were in the red before the exchanges opened in New York after the World Health Organization listed the swine flu as a Category 4 out of a possible 6, saying it can spread fast but is not yet to pandemic.

Meanwhile, Dow components Citi (C) and BofA (BAC) were back under pressure after the Wall Street Journal reported that early stress tests indicate that both banks might need to raise additional capital.

• BoA, Citi likely need more capital. Regulators reportedly told Bank of America (BAC) and Citigroup (C) that the banks may need to raise additional capital based on early stress test results, with a capital shortfall in the billions of dollars at Bank of America. Sources say both banks, unsurprisingly, object to the preliminary findings and plan to present regulators with detailed rebuttals. Analysts also expect Regions Financial Corp. (RF), Fifth Third Bancorp (FITB) and Wells Fargo (WFC) to be among the banks most likely to need capital. Premarket: BAC -12.2%, C -8.5% (7:00 ET).
• Unstressful stress tests. Elizabeth Warren, head of the Congressional Oversight Panel for TARP, is worried the adverse scenario being used to test banks' health is 'disturbingly close' to current economic conditions, and that there may need to be a second set of stress tests if the economy worsens. She also expressed her disappointment that the government's description of its methodology lacked critical details. Warren wants to see enough details provided by the Federal Reserve to allow outsiders to run their own versions of stress tests. "The stress tests will make a terrific contribution if they are tough and transparent," she said. "If they are not, they will be useless."
• GM's survival plan looks shaky. General Motors (GM) presented its final plan to restructure outside of bankruptcy by cutting debt, eliminating over 21,000 more U.S. jobs and nationalizing itself by giving majority control to the government. The company said it will file for bankruptcy if its proposed debt swap fails to reduce $27B in bond debt by around 90%. Analysts doubt the debt exchange will succeed, and bondholders blasted the terms of the deal, setting GM up for a likely bankruptcy. In response to the nationalization proposal, which would put 89% of the company in the ownership of the government and the UAW union and present the government with several potential conflicts, a White House spokesman clarified "it is not our desire to either own or run one of the auto companies." Shares -2.5% premarket, after a 20.7% gain yesterday (7:00 ET).
• UAW to get 55% Chrysler stake. The tentative agreement reached between Chrysler and the United Auto Workers union would eventually give the UAW 55% ownership in a restructured Chrysler. Chrysler will also issue a $4.59B note to the health-care trust fund that the union will manage for retired workers. Fiat will 'eventually' end up with a 35% stake, while the government and Chrysler's secured lenders will get 10% ownership. Separately, Daimler agreed to give up its remaining 19.9% stake in Chrysler and pay up to $600M into the automaker's pension fund.
• BP profit fall prompts spending cuts. BP's (BP) Q1 net income fell to $2.56B ($0.14/share) from $7.09B ($0.37/share) the year before, prompting the oil company to cut its 2009 spending target for a second time to less than $20B. Despite the profit slump, the company still beat analyst estimates with adjusted earnings of $2.58B vs. $2.2B consensus. BP raised its quarterly dividend 4% to $0.14 per common share. Shares +1.9% premarket (7:00 ET).
• SEC freezes financier's assets. The SEC froze the assets of financier Danny Pang and two of his firms, accusing Pang of defrauding investors of hundreds of millions of dollars. Regulators say Pang faked his resume, forged documents, pledged unrealistic returns and paid investors with cash raised from new ones.
• Deutsche posts profit on I-bank income. Deutsche Bank (DB) returned to profitability in Q1 with net income of €1.19B as trading income rose at its investment bank. Investors remain concerned about the possibility of future writedowns and as earnings from so-called stable businesses missed analysts' expectations. CEO Josef Ackermann agreed to extend his contract by three years. Shares -4.0% premarket (7:00 ET).
• Citi to sell Japan units. Citigroup (C) will reportedly sell most of its Nikko Cordial Securities Inc. and Nikko Citigroup Ltd. businesses in Japan to Sumitomo Mitsui Financial Group (SMFJY.PK) for over ¥500B ($5.2B). Citigroup paid ¥1.6T for Nikko Cordial in January 2008. The Nikkei newspaper says a deal will be announced by the end of the week.
• IBM, Brocade deepen ties. IBM (IBM) and Brocade Communications Systems (BRCD) are strengthening their relationship, and IBM will rebrand ethernet switching and routing products made by Brocade as IBM products and sell them to mutual corporate customers. The move comes amid increasing rivalry between IBM and Cisco (CSCO).
• Swine flu fears continue. The World Health Organization raised its alert level to phase 4 as suspected cases of swine flu rose worldwide, and said containment of the outbreak is not feasible. Fears about the possible pandemic pushed down share prices of travel stocks for the second day in a row.
• Amazon buys e-book firm. Amazon (AMZN) added to its growing portfolio of e-book offerings with the acquisition of Lexcycle Inc., a company that makes a popular e-book reading application for the iPhone (AAPL). Terms of the deal were not disclosed.
• McDonald's reaches drinks deals. Dr. Pepper Snapple Group (DPS) and Coca-Cola (KO) reached deals with McDonald's (MCD) to give the beverage companies' brands a wider presence in McDonald's stores.

Earnings: Tuesday Before Open

• AGCO (AG): Q1 EPS of $0.36 beats by $0.13. Revenue of $1.6B (-11.6%) in-line. Shares -0.7% premarket (8:20 ET). (PR)
• American Greetings (AM): FQ4 EPS of $0.26 beats by $0.01. Revenue of $442.5M (-10.3%) vs. $467.3M. (PR)
• Becton, Dickinson and Co. (BDX): FQ2 EPS of $1.18 beats by $0.02. Revenue of $1.74B (-0.4%) vs. $1.76B. (PR)
• Bemis (BMS): Q1 EPS of $0.43 beats by $0.09. Revenue of $843M (-11%) vs. $873M. Reaffirms FY '09 guidance, sees EPS of $1.50-$1.70. (PR)
• Bristol-Myers Squibb (BMY): Q1 EPS of $0.48 in-line. Revenue of $5.0B (+2.5%) vs. $5.1B. (PR)
• Celanese (CE): Q1 EPS of $0.08 beats by $0.18. Revenue of $1.15B (-37.9%) vs. $1.25B. (PR)
• Coca-Cola Enterprises (CCE): Q1 EPS of $0.20 beats by $0.15. Revenue of $5.05B (+3.2%) vs. $4.86B. Issues upside guidance for FY '09, sees EPS of $1.24-$1.29 vs. $1.20 consensus. (PR)
• Coventry Health Care (CVH): Q1 EPS of $0.30 beats by $0.05. Revenue of $3.6B (+21.5%) vs. $3.4B. Sees FY '09 EPS of $1.70-$1.90, revenue of $13.59B-$13.99B. (PR)
• EarthLink (ELNK): Q1 EPS of $0.30 beats by $0.03. Revenue of $199M (-24.3%) vs. $203M. (PR)
• EMCOR Group (EME): Q1 EPS of $0.55 beats by $0.22. Revenue of $1.4B (-16.1%) vs. $1.5B. (PR)
• FirstMerit (FMER): Q1 EPS of $0.36 beats by $0.09. (PR)
• FPL Group (FPL): Q1 EPS of $0.90 beats by $0.13. Revenue of $3.7B (+7.9%) vs. $3.6B. Issues upside EPS guidance for FY '09 of $4.20-$4.40 vs. $4.06 consensus. Issues upside EPS guidance for FY '10 of $4.65-$5.05 vs. $4.56 consensus. (PR)
• HCP Inc. (HCP): Q1 EPS of $0.50 misses by $0.03. Revenue of $252M (+2.8%) vs. $256M. (PR)
• Hecla Mining (HL): Q1 EPS of $0.02 beats by $0.08. Revenue of $55M (+45.9%) vs. $48M. Shares -3.8% premarket (8:10 ET). (PR)
• Hospira (HSP): Q1 EPS of $0.60 beats by $0.05. Revenue of $860M (-3.3%) vs. $859M. Issues in-line guidance for FY '09, sees EPS of $2.67-$2.72 vs. $2.67 consensus. (PR)
• Interpublic Group of Companies (IPG): Q1 EPS of -$0.16 beats by $0.04. Revenue of $1.3B (-10.8%) in-line. (PR)
• Lazard (LAZ): Q1 EPS of $0.26 misses by $0.57. Revenue of $273M (-20%) vs. $342M. "We have accelerated our major global hiring initiative at the senior level. We are reinforcing our areas of strength, investing in areas of growth, developing new products, containing costs and maintaining liquidity, in order to take advantage of current and future opportunities. Our planning is to have significantly improved revenues during the second half of the year." (PR)
• Level 3 Communications (LVLT): Q1 EPS of -$0.08 in-line. Revenue of $980M (-10.3%) vs. $1.03B. (PR)
• McGraw-Hill Companies (MHP): Q1 EPS of $0.20 beats by $0.02. Revenue of $1.15B (-5.7%) in-line. (PR)
• Nexen (NXY): Q1 EPS of $0.26 beats by $0.13. Revenue of $1.05B (-44%) vs. $1.36B. (PR)
• Office Depot (ODP): Q1 EPS of -$0.10 in-line. Revenue of $3.22B (-18.6%) vs. $3.26B. (PR)
• Paccar (PCAR): Q1 EPS of $0.07 beats by $0.02. Revenue of $1.7B (-52.2%) vs. $1.9B. (PR)
• Petro-Canada (PCZ): Q1 EPS of $0.23 misses by $0.15. Cuts 2009 capex by $600M to $3.4B. Announces a quarterly dividend of $0.20 per common share. (PR)
• Pfizer (PFE): Q1 EPS of $0.54 beats by $0.05. Revenue of $10.87B vs. $11.08B. Sees full-year EPS of $1.85-1.95 vs. consensus of $1.95 and revenue of $44-46B vs. $46.1B. (PR)
• Potlatch (PCH): Q1 EPS of $0.72 beats by $0.14. Revenue of $130M (+15.1%) vs. $112M. (PR)
• Rockwell Collins (COL): FQ2 EPS of $1.03 beats by $0.05. Revenue of $1.1B (-4%) in-line. Issues downside guidance for FY '09, sees EPS of $3.70-$3.90 vs. previous guidance of $4.10-$4.30. See FY '09 revenues of about $4.5B vs. $4.68B consensus. Shares -3.5% premarket (7:40 ET). (PR)
• Scotts Miracle-Gro Company (SMG): FQ2 EPS of $1.25 beats by $0.01. Revenue of $960M (+0.2%) vs. $1.0B. Issues downside guidance for FY '09, sees EPS of $2.20-$2.30. (PR)
• Tellabs (TLAB): Q1 EPS of $0.05 beats by $0.02. Revenue of $362M (-22.1%) vs. $359M. (PR)
• Valero Energy (VLO): Q1 EPS of $0.59 beats by $0.09. Revenue of $13.8B (-50.5%) vs. $19.9B. Shares +2.5% premarket (8:00 ET). (PR)
• Vishay Intertechnology (VSH): Q1 EPS of -$0.16 beats by $0.01. Revenue of $449.5M (-38.7%) vs. $470.6M. (PR)
• Waddell & Reed Financial (WDR): Q1 EPS of $0.22 beats by $0.02. Revenue of $177M (-24.5%) vs. $185M. (PR)
• Waters Corp. (WAT): Q1 EPS of $0.74 beats by $0.16. Revenue of $333M (-10.4%) vs. $338M. (PR)

Earnings: Monday After Close

• Albemarle (ALB): Q1 EPS of $0.28 in-line. Revenue of $487M (-27.2%) vs. $559M. (PR)
• Axis Capital (AXS): Q1 EPS of $1.05 misses by $0.06. Revenue of $715M vs. $786M. (PR)
• Baidu.com (BIDU): Q1 EPS of $0.86 beats by $0.10. Revenue of $119M (+41.5%) vs. $116M. Shares +3.4% AH. (PR)
• Compass Minerals (CMP): Q1 EPS of $1.85 misses by $0.29. Revenue of $309M (-18.7%) vs. $384M. Expects weak potash sales through Q2, but says they may pick up in H2. Shares -7.1% AH. (PR)
• DaVita (DVA): Q1 EPS of $0.92 beats by $0.01. Revenue of $1.45B (+7.7%) in-line. Reiterates operating-income guidance. (PR)
• Emulex (ELX): FQ3 EPS of $0.05 beats by $0.01. Revenue of $78.6M (-38.5%) vs. $80.7M. Sees FQ4 EPS of $0.01-0.05 vs. consensus of $0.06 and revenue of $73-80M vs. $82.7M. Shares +2% AH. (PR)
• Fidelity National Financial (FNF): Q1 EPS of -$0.06 misses by $0.18. Revenue of $1.36B (+20.4%) vs. $1.48B. Shares -0.2% AH. (PR)
• Hanesbrands (HBI): Q1 EPS of $0.03 beats by $0.08. Revenue of $858M (-13.2%) vs. $871M. Shares -5.4% AH. (PR)
• Health Management Associates (HMA): Q1 EPS of $0.15 beats by $0.03. Revenue of $1.19B (+3.1%) in-line. Provision for bad accounts was $144M (12.1% of net revenue) vs. $129M (11.2%) a year ago. Shares -1.2% AH. (PR)
• Hexcel (HXL): Q1 EPS of $0.24 beats by $0.05. Revenue of $307M (-10.8%) vs. $334M. "Our previous planning assumption for flat to modest growth seems too optimistic and we are redoubling our efforts to manage costs." Shares +2.8% AH. (PR)
• Jacobs Engineering Group (JEC): FQ2 EPS of $0.88 misses by $0.01. Revenue of $2.98B (+11.7%) vs. $3.13B. Sees full-year EPS of $3.10-3.50 vs. $3.59 consensus. (PR)
• Masco (MAS): Q1 EPS of $0.23 misses by $0.11. Revenue of $1.82B (-25.8%) vs. $1.88B. Full-year EPS guidance in-line. Sees full-year sales down 20-25% vs. a previous mid-to-high teens decline. Shares -1% AH. (PR)
• Meritage Homes (MTH): Q1 EPS of -$0.60 beats by $0.58. Revenue of $231M (-37.8%) vs. $201M. (PR)
• Olin (OLN): Q1 EPS of $0.60 misses by $0.03. Revenue of $401M (+0.4%) vs. $458M. Shares -4% AH. (PR)
• Plum Creek Timber (PCL): Q1 EPS of $0.95 beats by $0.01. Revenue of $470M (+29.5%) vs. $506M. Full-year guidance in line. (PR)
• SL Green Realty (SLG): Q1 EPS of $1.48 in-line. Revenue of $196.5M (+1.4%) vs. $213M. Shares -8.4% AH. (PR)
• Southwestern Energy Company (SWN): Q1 EPS of $0.36 beats by $0.05. Revenue of $541M (+3.2%) vs. $450M. Shares +1.1% AH. (PR)
• United States Steel (X): Q1 EPS of -$3.84 misses by $2.15. Revenue of $2.75B (-47.1%) vs. $3.14B. "Continues to face an extremely difficult global economic environment." Cuts dividend to $0.05 from $0.30. Will offer 18M shares and $300M in notes to pay back debt. Shares -7.4% AH. (PR)
• Weingarten Realty (WRI): Q1 FFO of $0.77 beats by $0.17. Revenue of $149.3M (-1.5%) vs. $146.2M. Shares +2.3% AH. (PR)
• W.R. Berkely (WRB): Q1 EPS of $0.25 misses by $0.12. Revenue of $964M vs. $1.11B. (PR)
• XL Capital (XL): Q1 EPS of $0.63 misses by $0.01. Revenue of $1.53B vs. $1.88B. Sold more than 70% ($1.3B) of the securities related to its Q4 restructuring charge. Shares -5.2% AH. (PR)

Today's Markets

Overseas markets moved lower Tuesday.

Bullish Calls:

AGCO Corporation (AG) – Shares of the manufacturer of agricultural equipment have skyrocketed by more than 10% to $26.00 ahead of its earnings release expected on Tuesday, April 28th. One news source has reported unconfirmed takeover speculation surrounding the company perhaps leading option traders to position themselves for a continued near-term price rally. The more than 16,000 lots that have exchanged hands on AGCO thus far today represent 70% of the existing open interest on the stock of 23,000 contracts. Furthermore, we have observed that nearly 12 call options have been traded to each single put option in action. At the now in-the-money May 25 strike price investors picked up 1,300 calls for an average premium of 1.71 apiece. More optimistic individuals targeted the May 30 strike price where more than 6,300 calls were purchased for 53 cents per contract. In order for the May 30 strike call to land in-the-money by expiration, shares would need to continue to rise by an additional 15% from the current share price. Option implied volatility is up slightly on the day from 71% to the current reading of 74%.

Sentiment

Stocks opened broadly lower amid ongoing uncertainty about the economic outlook and the ongoing problems in the banking world. Citigroup (C) shares are leading the Dow Jones Industrial Average to the downside. C is down 38 percent after investors sold shares on news the bank has agreed to a swap of preferred shares for common shares with the government and a group of private investors. The government would hold a 36 percent stake in Citi after the deal, which seemed to fan fears of nationalization. BofA (BAC) is down 24.6 percent and heading to session lows on worries it might suffer a similar fate.

The economic data offered little help. Data released before the start of trading showed fourth quarter Gross Domestic Product falling 6.2 percent. Economists had predicted economic growth shrank 5.4 percent during that period.

Q4 2008 Earnings Call

January 09, 2009 10:00 AM ET

• Geithner, Obama wait for Senate stimulus. Obama has postponed unveiling his financial recovery plan until tomorrow to allow Congress to give its full attention to the stimulus debate today. Obama stressed the importance of rapid passage in the Senate, and then rapid merger between the House and Senate versions of the bill. Economic adviser Lawrence Summers added "ninety percent of these bills are essentially overlapping" and urged lawmakers not to focus on "the bit of difference." Senate Democrats expressed confidence they can push for a vote on the amended $827B stimulus bill, and will likely do so today. Tomorrow, Treasury's Geithner will announce the administration's plans for the second half of TARP funds, plans that are expected to include efforts to draw private investment back into the economy, as well as help for homeowners.
• No sun at Nissan. Hurting from slumping demand and a strengthening Yen, Nissan (NSANY) said it will cut 20,000 jobs, or 9% of its workforce, will cut production and will post its first loss in nine years. It also eliminated its H2 dividend, may shorten its work week to four days and is seeking a U.S. federal loan under a program for fuel-efficient autos. The company is forecasting a net loss of ¥265B ($2.91B) for the fiscal year ending March 31, compared with earlier forecasts for a ¥160B net income. Sales in the U.S., Nissan's biggest market, fell 31% in January, as CEO Carlos Ghosn warned "our worst assumptions on the state of the global economy have been met or exceeded." He cited declining consumer confidence and tight credit as "the most damaging factors." Shares closed -5.8% in Japan.
• Forced bankruptcy possible for GM, Chrysler. The U.S. government has hired a law firm with bankruptcy expertise to provide advice on how to restructure General Motors (GM) and Chrysler. The two carmakers may have to be forced into bankruptcy to assure repayment of $17.4B in government loans, as U.S. taxpayers currently take a back seat to prior creditors including Citigroup (C), JPMorgan Chase (JPM) and Goldman Sachs (GS). Federal officials are working to change their place in line for repayment, but failing to do so, could make bankruptcy a requirement of any additional aid.
• Mortgage rescues on the way? Sources say the Obama administration is creating a mortgage-rescue program that would have Fannie Mae (FNM) and Freddie Mac (FRE) ease payments for hundreds of thousands of borrowers, creating a model for Wall Street firms to replicate. Officials were working with Fannie and Freddie to agree on standards for who would be eligible for relief and how to get other companies to follow suit with similar plans. Industry sources say efforts thus far by Fannie and Freddie to rewrite home loans have been a disappointment, while officials in Obama's administration believe as many as 1.5M people could remain in their homes this year if their loans were modified.
• Barclays beats consensus. Barclays' (BCS) H2 profit rose by more than analysts expected, buoyed by one-off gains from the purchase of Lehman assets and the sale of an insurance unit. Net income rose to £2.66B ($3.9B), up 49% from the year before, vs. analyst estimates of £2.05B. For the full year, net income declined less than 1% to £4.38B. Barclays will scrap 2008's final dividend to help the bank meet new capital requirements in the U.K. The bank reported its results more than a week ahead of schedule in an attempt to clamp down on losses speculation that has pushed down the company's share price. Shares +9.5% premarket (7:00 ET).
• Swiss banks set for heavy losses. According to Swiss media reports, UBS (UBS) and Credit Suisse (CS) will post massive 2008 losses of 21B Swiss francs ($18B) and 8B Swiss francs ($6.9B). UBS is expected to announce the loss tomorrow, and if reports are correct it will mark the largest loss in Swiss history. UBS will also announce 5,000-8,000 new job cuts in addition to the 9,000 cuts already planned. Credit Suisse will announce its annual results on Wednesday.
• Rio loses its director. Rio Tinto (RTP) director Jim Leng has quit and will not become chairman as previously planned after objecting to a deal with top shareholder Chinalco (ACH). Leng disagreed with how to cut Rio's heavy debt load of around $39B, after the company held talks last week with Chinalco about selling it convertible notes and stakes in some assets. Leng was named as Rio's next chairman less than a month ago. Rio shares -6.9% premarket (7:00 ET).
• Using the D-word. The world's advanced economies are "already in depression," at least according to IMF chief Dominique Strauss-Kahn. The "worst cannot be ruled out," he said, adding that the IMF could further cut its global growth forecasts. Strauss-Kahn's remarks are markedly more pessimistic than IMF forecasts released as recently as Jan. 28.

Earnings: Monday Before Open

• AGCO (AG): Q4 EPS of $1.08 beats by $0.07. Revenue of $2.16B (-0.6%) vs. $2.36B. (PR)
• Alexandria Real Estate Equities (ARE): Q4 EPS of $1.55 in-line. Revenue of $127M (+17.6%) vs. $114M. (PR)
• Beazer (BZH): FQ1 EPS of -$2.08 misses by $0.25. Revenue of $232.4M (-53.6%) vs. $273.1M. (PR)
• Energy Conversion Devices (ENER): FQ2 EPS of $0.33 beats by $0.02. Revenue of $103M (+82.8%) vs. $102M. (PR)
• Hasbro (HAS): Q4 EPS of $0.62 misses by $0.13. Revenue of $1.23B (-5.1%) vs. $1.27B. (PR)
• Hewitt Associates (HEW): FQ1 EPS of $0.68 beats by $0.08. Revenue of $771M (-2.9%) vs. $807M. (PR)
• Loews (L): Q4 loss of $958M ($2.20/share) including $754M in writedowns on its HighMount Exploration business and a $283M loss on its 90% stake in CNA Financial (CNA). Revenue fell 23% to $2.74B. (PR)
• NYSE Euronext (NYX): Q4 EPS of $0.52 misses by $0.03. Revenue of $1.2B (+20.8%) in-line. (PR)
• Rohm and Haas Company (ROH): Q4 EPS of $0.67 beats by $0.02. Revenue of $2.0B (-13.4%) vs. $2.3B. (PR)
• Sohu.com (SOHU): Q4 EPS of $1.35 beats by $0.19. Revenue of $121.6M (+86.2%) vs. $121M. (PR)
• Whirlpool (WHR): Q4 EPS of $0.60 misses by $0.18. Revenue of $4.3B (-19.0%) vs. $4.9B. (PR)
• W.R. Berkley (WRB): Q4 EPS of $0.62 misses by $0.16. Revenue of $1.1B (-22.9%) vs. $1.2B. (PR)

Today's Markets

• Asia markets closed mostly up. Nikkei -1.3% to 7,969. Hang Seng +0.8% to 13,769. Shanghai +2.0% to 2,225. BSE +3.0% to 9,584.
• In Europe at midday, London +1.15%. Paris -0.2%. Frankfurt -0.1%.
• U.S. futures: Dow -0.7%. S&P -0.8%. Nasdaq -0.4%. Crude +0.4% to $40.33. Gold -1.1% to $904.40.

Monday's Economic Calendar

• 8:45 Fed's Fisher speaks about the global financial crisis
  8:00 PM Obama speaks about his economic recovery plan
• Notable earnings before Monday's open: AG, ARE, BZH, ENER, HAS, HEW, LO, NYX, ROH, SOHU, WHR, WRB
• Notable earnings after Monday's close: AXS, CPT, CRK, CRL, CUZ, GNW, LNC, NUAN, PEG, PLD, PPDI, TWTC, UDR, VMC

Seeking Alpha editor Eli Hoffmann contributed to this post.

Stocks are trading broadly lower for a third day amid ongoing concerns about the global economy and corporate earnings. Worries about the economic outlook remain elevated as fiscal stimulus and Obama's "bad bank" plan seem to have stalled.

Republican leader Mitch McConnell warned Sunday that a stimulus bill that cleared the House last week could face defeat in the Senate due to excessive spending. Meanwhile, banks are seeing another day of losses after Obama's "bad bank" plan went MIA. The lack of help from Washington comes as investors face another busy week of economic news, which concludes with key monthly jobs data Friday.

This is the Third Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F filings here.

The other funds we've already covered include:

If you assume that we don't enter a depression and the companies could actually get financing right now, a stunning number of high quality companies - companies with high cash flow and relatively low debt - could take themselves private at today's prices.  Obviously, the assumptions of the screen are unrealistic currently.  If General Electric (GE) is paying Warren "Loan Shark" Buffett ten percent interest rates, then most other companies won't be able to find financing.  But that's beside the point.  At these prices, many quality companies are cheaper than they have been in history.  Money is still available - it's just scared and sitting on the sidelines.  If we see any return to stability in the financial system, many of the stocks on the list could see 25% - 50% upside just by a return to median multiple.        

Q3 FY08 Earnings Call

October 29, 2008, 10:00 AM ET

AGCO Corp.

Guidance

Analysts are looking for EPS of 78c on revenue of $2.03B. The consensus range is 69c to 83c for EPS, and $1.92B to $2.09B for revenue, according to First Call. The company raised its FY08 EPS guidance when it reported its Q2 earnings. AGCO now expects FY08 EPS of $3.60 to $3.70, up from $3.00 to $3.15 vs. consensus of $3.81. The company also expects FY08 revenue growth of 26% to 28% year-over-year.

Warren Buffett's optimism hasn't exactly moved markets lately. Since Buffett announced in mid-October that he is bullish on U.S. stocks, the markets have fallen, not risen. Buffett's not complaining - he can buy even lower.

But that's little comfort to the rest of us. In a recent New York Times article, the legendary investor made it clear that he's not making any predictions about whether the stock markets will rise or fall in a month or a year. Instead, he has long pointed out that it's smart to invest in healthy businesses that provide something people need and appear to be undervalued - as long as you have the time to wait around until the stock rises to its deserved price. Of course, when you're a billionaire, it's easy to wait. When you're a working parent or a pensioner, it's not.

America’s ethanol subsidy program that was fuelled by President Bush’s signing of the Energy Policy Act in August 2005 has been great for heavy equipment companies with exposure to agricultural equipment. Since then, the biofuels push and boost in grain demand that is also being supported by new protein-rich eating habits in emerging economies has driven shares of Deere & Co. (DE), AGCO Corp. (AG) and CNH Global NV (CNH) up more than 100% on average. Industrial equipment names like Caterpillar Inc. (CAT), Finning International Inc. (FINGF.PK) and Toromont Industries Inc. (TMTNF.PK) haven’t done quite so well, but are still up closer to 50%.

In a research note, Desjardins Securities analyst Benoit Poirier said:

Q2 FY08 Earnings Call

July 29, 2008, 10:00 AM ET

Agco Corporation

Guidance

Analysts are looking for EPS of 97c on revenue of $2.17B. The consensus range is 87c to $1.10 for EPS, and $2.05B to $2.23B for revenue, according to First Call. The company gave FY08 EPS guidance when it reported its Q1 earnings. Agco expects FY08 EPS of $3.00 to $3.15 vs. consensus of $3.27. The company stated at the JP Morgan Basics & Industrials conference that it expects FY08 cap ex of $190M to $200M.

Sometimes Wall Street gets ahead of itself, and sometimes it doesn't. The current market looks as if the financials are making a huge turnaround and many commodity stocks are pulling back, even in the face of estimates being raised for
the year. I believe that we made a huge step with respect to write offs in financials, but most likely there will continue to be pain. Anyone that ventures into the unknown now had better have long term targets and /or be an expert in
trading, as the markets tip to the extreme on any comments either positive or negative.

I am unsure as to the gold market and other precious metals, and look somewhat positively on the current coal and steel markets, but most of all I believe that the
agricultural markets will continue to roll. Looking at their current run, many have taken the negative side based only on the belief that nothing goes up forever, but I have not seen anything that points to a slowing of agricultural commodities in
the near term.

AGCO Corp. (AG) manufactures agricultural equipment and replacement parts. The company’s brands include AGCO, Challenger, Fendt, Massey Ferguson, RoGater, Spra-Coupe, and Valtra. Products are distributed through a network of roughly 3,000 independent dealers and distributors in more than 140 countries.

In 2007, about 17% of sales were generated in the U.S., 57% in Europe, and 16% in South America. Other key geographic markets include the Middle East ,Asia, Australia, Africa, Canada and Mexico.