• 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.

In August and September the outlook for shipping and dry bulk shipping rates, was very poor even while the stock market surged up in September. This resulted in more articles predicting Stock market doom. But in October the rate has moved up, as world trade in the Atlantic is improving. The rate has moved up about 30% .

As the Baltic Dry Index (a global shipping "price" mechanism) scuffles back to early May levels despite a "recovering global economy," one must ask what are the drivers? We were raising the question nearly a month ago [Aug 7, 2009: Baltic Dry Index has Worst Week Since October 2008 - Blame China. Prescursor to Slowing Loan Growth?], but as always with the stock market, news does not matter until it matters - hence the cheap headlines of "US markets down on China" are comical, considering the Chinese market has been down many days this month and it did not matter all those days. But suddenly it matters today.

China has simply been the world's driver of all things trade this year - especially of the commodity sort. When the Baltic Dry Index started rallying early this year, we were asking what was the real cause? [Feb 9, 2009: China and the Baltic Dry Index - What's Really Going On?] We opined it was the Alan Greenspan / Ben Bernanke effect on steroids [Feb 16 2009: Is China Pulling an Alan Greenspan?] and in retrospect we appear to have been dead right. When China turned on the spigots, commodities and asset values began to fly higher. The "markets" saw these moves up and attached them to organic recovery signals. Pundits climbed on, and green shoots were shot out from cannons.

At the end of each trading week, Hillbent scans for the equity market for potential anomalies which exhibit extremely oversold and overbought conditions. Past observations have revealed that such candidates may experience reversal corrections to the upside or downside once the market reconfirms that their fundamentals remain solidly intact or relatively poor. From a contrarian perspective, these lists may also serve as a precursor to changes in institutional sentiment and underlying fundamentals.

(The purpose of this report is not to provide specific recommendations, but instead serve as a time-saving reference tool and starting point for investment ideas as the upcoming trading week unfolds. Of course, the results generated are not always perfect and users are strongly encouraged to perform their own due diligence on these names. Note that overbought and oversold conditions are based upon proprietary algorithms and quantitative models instead of conventional technical analysis indicators. As a supplement to this report, please refer to our ETF Trends Report to determine if market direction trends support a bullish or bearish investment bias over short-term, intermediate, and long-term timeframes.)

Sentiment

The major averages traded in a narrow range and are modestly lower late Monday. With no economic data scheduled for Monday and a light earnings calendar, investors didn't find much new information to guide the action early in the day. Commodity-related names are mostly lower after crude oil fell 23 cents to $70.70 a barrel and gold gave up $13 to $946.50 an ounce.

Meanwhile, trading is cautious ahead of event risk later in the week. The Federal Reserve meets to discuss rates beginning Tuesday and issues its post-meeting statement Wednesday afternoon. Retail sales data could move the market Thursday. A handful of retailers, including Walmart (WMT), are due to report earnings later this week as well.

We will all look fondly back at the period of this March and April when companies were rewarded handsomely for diluting their shareholders by 20, 40, 50%+ - I will remember seeing my REIT shorts destroyed as REITs diluted shareholders in excess of >50% and yet the stock went up. But that fairy tale era seems to be over. Being serially diluted is fun when you fear for the life of your company but not so fun in normal times. It appears we are heading back to normal.

Excel Maritime Carriers (EXM) announced a dilution today of about 13%, 6M shares. Compared to peer DryShips (DRYS) who has diluted shareholders around 84 times in the past year (I exaggerate), it's a small dilution [May 8, 2009: DryShips Joins the Dilution Parade]. What I love about these companies is they don't announce it at the same time as earnings - EXM announced earnings just yesterday and then waited another day to drop this on shareholders. That's a bit uncouth, but I've seen many a company do this in the past few months. [Emphasis mine.]

Sentiment

Stocks are holding modest gains in a day of rather uneventful market action Friday. The Dow Jones Industrial Average was off to a slow start early after a report on economic growth showed a 1 percent dip during the second quarter. While the number was a bit better-than-expected (1.5 percent), first quarter numbers were revised down and the data also showed ongoing sluggishness in consumer spending.

Yet, the market held steady early and then seemed to get a modest lift from better-than-expected manufacturing data. The Chicago Purchasing Manager's Index improved to 43.4 in July, up from 39.9 in June and better than the 43.4 economists had predicted.

Sentiment

Stocks are trading broadly higher, as CIT Group (CIT) battles back from the brink of bankruptcy and the day's only economic stat surpassed economist projections. CIT is up 56 cents to $1.26 and well off last week's lows of only 31 cents per share after the Wall Street Journal reported the company has secured $3 billion in much needed capital. The news seemed to lift a cloud from over the financials and the Select Sector Financial (XLF) is up 6 cents to $12.20.

Meanwhile, the only economic report on the calendar until Thursday -- the List of Leading Economic Indicators -- rose .7 percent in June. While not stellar, the increase was better than economists had expected. The major averages opened steady and early gains were extended when the data were released at 10:00 a.m. eastern time.

I was in shock at the turnaround. My shipping index was up 4.4% on Wednesday alone. EXM was up over 20%! GNK, TBSI, EGLE were all up big. So what is going on?

My first thought - ok, so the S&P head and shoulders formation is complete, a sharp down move took place to a known support level, so the market is bouncing up, especially because of the start of earnings season. Everyone is ready to speculate, and they will put their money into the most downtrodden shippers. Does it fit? Not at all. The market has not moved enough to trigger this amount of breadth in the shippers. The distribution of the SMA20 position in the winners is not lower (more oversold) than the losers. In fact, the non-winners tend to be those which are carrying more debt per equity. That means that buyers are being selective. So it isn't just a bounce, there is value buying going on here.

Excel Maritime (EXM) has been performing very poorly, but today there is a 16% spike , so I am going to sell the majority (95%) of a smallish (0.7%) stake into this euphoria. I am exiting around $7.10. Part of this move is 'reflation' is the computers' choice today and part of it is according to TheStreet.com cape-size ships showed the first pickup in pricing after 13 days straight down. I guess the Chinese want to buy some iron ore today.

• Shares in the heavily traded dry bulk shipping sector were a bit stronger Tuesday, apparently bolstered by a spike in shipping rates after two weeks of steady declines.
• Dry bulk, the raw-materials freighters of the global economy, often see their stocksrespond, like an ultra-sensitive seismograph, to the minute movements of things like commodities prices -- anything, in fact, that might indicate an uptick in worldwide trade. The industry is especially dependent on Chinese steelmakers' use of Australian and Brazilian iron ore, which the bulkers haul across the oceans.
• According to the London-based Baltic Exchange, spot-market rates for the huge Capesize-class ships (the ones too big for the world's canals) popped nearly 6% Tuesday to $53,600 per day. That follows 13 straight days of declines. Helping the move upward: four Capesize vessels were booked Tuesday morning to haul ore from Brazil to steel foundries in China and Europe.

Again, this shows you how simplistic and "knee jerkish" things are in the market - Baltic Dry Index jumps one day - all the dry bulk shippers rejoice together. The article above used a great word - seismograph - to describe how the program traders are so sensitive to any tick in news in this group.

The inflation vs. deflation debate has heated up again. The debate looks far from being settled, even among professional investors. This may be the single most important debate in the investment world.

Jim Rogers, Peter Schiff, James Sinclair, Gerald Celente, Marc Faber and Congressman Ron Paul are on the inflation camp. The argument is simple: As the US government racks up trillion dollars of deficit spending, the money can come from neither raising tax, nor borrowing. So the only way out is print money out of thin air. In history, any time a government chooses to solve its fiscal problem through massive money printing, it always leads to hyper-inflation at the end. So that is going to happen. It might be postponed a bit but can not be avoided.

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

Next up is John Burbank's Passport Capital. This is only the second time we've covered Passport's filings, so let's get to some quick background. Burbank founded the $2 billion San Francisco hedge fund in 2000 and the fund uses macroeconomic and sector analysis to select its investments. After identifying macro themes, Passport drills down to find individual companies with rigorous fundamental research. Burbank has over a decade of experience in markets having previously worked as a consultant and as a director of research at ValueVest Management. His educational background includes an undergraduate degree from Duke University and an MBA from Stanford University. Passport has a very respectable track record of gaining 27% annually, but like many other funds, hit a rough patch in 2008. It has bounced back quickly in 2009 though as we've detailed below.

Sentiment

Stocks bounced around in morning action, but trading turned mixed late Friday. The Dow Jones Industrial Average opened higher after the Labor Department reported that the US economy lost 345,000 jobs in May, which was significantly better than the 520,000 loss economists had expected.

However, investors sold into the early strength, as the news sparked a sharp rise in bond yields and a rally the dollar, which also sent crude oil and gold prices sharply lower. Then, another reversal mid-morning helped lift the equity market and the Dow was back in positive territory midday.

In a volatile market, rather than trying to get ahead of the daily movements, successful investors spend their efforts figuring out the big picture of long term fundamentals. Many people often draw the wrong conclusion when their views are too narrow: They look at only the demand side and forget the story on the supply side, or they fail to see the effect of government intervention or speculative forces.

Recently, in researching the market trends of currencies, commodities and shipping, I made a stunning discovery, yet almost no one else discussed it in any public literature.

Another nice markup to close the day. I have to hand it to the magical invisible hand. Not as egregious as last Friday, but we'll take it.

Over under in how many days the "reflation" trade comes back? 2.

Last Thursday, Excel Maritime (EXM) posted an extremely confusing earnings report, again. The report is filled with a great number of usual non-cash items, unusual non-cash items and other extraordinary gains and expenses.

The most confusing part of the report is “Time Charter fair value amortization” in the income statement, which makes up the majority of revenues.

• Couldn't even wait until Friday: In the biggest bank collapse of 2009, regulators seized Florida thrift BankUnited yesterday afternoon, a failure which could cost the FDIC $4.9B. For the current crisis, only IndyMac's failure ($11B) has been bigger. The bust brings into focus recent rumblings that extending government stress test results to smaller banks could result in another $24B or even $100-200B in losses. (table: banks gone bust)
• Geithner pledges to shave deficit. Treasury chief Geithner said Thursday he's committed to trimming the bulging budget deficit and maintaining the U.S.'s pristine AAA sovereign rating: "It's very important that this Congress and this president put in place policies that will bring those deficits down to a sustainable level over the medium term." Treasurys and stocks came under heavy selling yesterday, which influential bond trader Bill Gross said was due to concerns over America's AAA rating, after S&P downgraded the U.K.'s outlook to Negative.
• So long fat profits. Taxpayers could be left to absorb a $10B loss on stock warrants being sold back to banks who are repaying their TARP loans. So far, 17 financial institutions have repaid TARP funds, but only one - Old National Bancorp (ONB) - has come to terms with the Treasury. ONB gave the Treasury $1.2M for warrants that may have been worth $5.81M. If other banks can finagle similar terms, they could walk away with 80% of the profits taxpayers were hoping for.
• Next sucker? AIG (AIG) Chairman and CEO Edward Liddy says he'll step down as soon as a replacement is found, noting the company has reached an 'inflection point' and needs a CEO who's ready to commit long term. Sources say a search could take 3-6 months, which seems optimistic considering the job description includes coming out of a comfortable retirement to put up with congressional buffoonery on an almost weekly basis for a $1 pre-tax salary. AIG also said it will split the two jobs, and proposed a 20:1 reverse stock split, which would bring shares back on to the radar screens of institutional investors. AIG -1.7% premarket to $1.77.
• Card companies brace for big losses. Analysts say companies that pitch credit cards to riskier customers and those that issue cards for retailers will be hardest hit by new legislation being signed into law today. Major players include Bank of America (BAC), Citigroup (C), Capital One (COF), HSBC (HBC), GE (GE), and Target (TGT). Some analysts estimate the new laws - which restrict fees, limit rate increases, and require more transparency - will lop $10B in revenue off the industry's top line.
• GM, union strike deal. UAW reached a tentative deal with GM (GM) and the Treasury to modify its labor agreement, including enabling GM to contribute shares instead of cash to a new, union-managed healthcare plan. On Tuesday, GM said it didn't envision reaching a deal with the UAW before May 26, when an offer to bondholders to exchange $27B in debt for a 10% stake expires. The deal, which must still be ratified by workers, will not necessarily allow GM to avoid bankruptcy. A story in the WaPo says the Obama administration is steering GM to file for bankruptcy protection as early as the end of next week, but Reuters sources say otherwise.
• Citi looks to slice IT costs. Citigroup (C) is ramping up efforts to slash IT costs, and sources say it believes it can save more than $1B 2009 through a massive systems integration.
• Opel draws another vulture. A Chinese automaker expressed interest in GM's (GM) Opel and Vauxhall operations in Europe, bringing potential bidders to four: unnamed Chinese firm, Fiat, Magna International (MGA) and RHJ International, a buyout firm with automotive assets.
• Leading indicators show signs of growth. The Conference Board's Leading Indicators rose 1% in April, in-line with consensus. It was the first increase in seven months, and indicates the recession will be less intense - at least in the near-term - and give hope for growth in H2. "The question is how long before declines in activity give way to small increases. If the indicators continue on the current track, that point might be reached in the second half of the year," Conference Board's Ken Goldstein said. (Conference Board's release)
• Factory sector still struggling. The Philly Fed's Business Outlook Survey edged up to -22.6 in May from -24.4 in April. The increase was substantially less than consensus estimates of -15. Although clearly indicating continued overall decline, the reading was the highest since last September. New orders remained negative, but shipments and the future activity index improved notably. "The survey does suggest that the rebound from the post-Lehman shock is not yet morphing into a sustained recovery story," Ian Shepherdson of High Frequency Economics says. (Philly Fed's release)
• U.S. still bleeding jobs. Initial Jobless Claims fell 12,000 from last week to 631,000 - just worse than the consensus of 625K. Continuing claims rose by 75,000 to 6,662,000. The report failed to satisfy bulls or bears, offering neither proof that job losses have topped, nor clarity that they're headed higher.

Earnings: Thursday After Close

• Aeropostale (ARO): Q1 EPS of $0.49 beats by $0.01. Revenue of $408M (+21.3%) vs. $405M. Issues upside EPS guidance for Q2 of $0.46-0.48. Same store sales for Q1 increased 11% vs. 10% a year ago. (PR)
• Alkermes (ALKS): FQ4 EPS of -$0.14 misses by $0.02. Revenue of $44M (-29.7%) vs. $45M. Issues downside guidance for FY '10, sees revenue $182-197M vs. $205.84M consensus. (PR)
• Aruba Networks (ARUN): FQ3 EPS of $0.01 beats by $0.02. Revenue of $46M (+7.5%) vs. $43M. (PR)
• Autodesk (ADSK): Q1 EPS of $0.18 beats by $0.10. Revenue of $426M (-28.9%) vs. $419M. (PR)
• Dress Barn (DBRN): FQ3 EPS of $0.39 beats by $0.08. Revenue of $376M (+6.6%) vs. $362M. Issues upside EPS guidance for FY '09 of $1.00-1.05 vs. $0.88 consensus. (PR)
• Excel Maritime Carriers (EXM): Q1 EPS of $2.42 beats by $1.73. Revenue of $222M (+218.2%) vs. $109M. (PR)
• Foot Locker (FL): Q1 EPS of $0.20 beats by $0.07. Revenue of $1.2B (-7.1%) in-line. (PR)
• Gap (GPS): Q1 EPS of $0.31 beats by $0.01. Revenue of $3.1B (-7.6%) in-line. (PR)
• LDK Solar (LDK): Q1 EPS of -$0.21 misses by $0.13. Revenue of $283M (-33.6%) vs. $240M. (PR)
• Pacific Sunwear of California (PSUN): Q1 EPS of -$0.13 beats by $0.16. Revenue of $223.5M (-16.3%) vs. $214.5M. (PR)
• Salesforce.com (CRM): Q1 EPS of $0.15 beats by $0.04. Revenue of $305M (+23.1%) in-line. (PR)
• Zumiez (ZUMZ): Q1 EPS of -$0.06 misses by $0.02. Revenue of $77M (-2.4%) vs. $76.5M. (PR)

Today's Markets

Asia was mostly lower following a difficult session in the U.S. Thursday, but Europe stocks have moved up from early lows. Futures are up.

Stocks of dry bulk shipping companies had a huge run up recently. How expensive have they become from fundamental perspective? Below is a table with key parameters for some of the most actively traded pure-play companies in this segment.

Stock	GNK	EGLE	EXM	DSX	SBLK
Recent price per share	18.17	6.59	9.17	15.20	3.48
Shares outstanding (in mln.)	31.7	47	71.8	75.4	60.3
Market capitalization (in $ mln.)	576	309.7	658.4	1146.1	209.8
Fleet market value (in $ mln.)	1137.7	1314.9	1302.8	875.2	364.2
Fair value of above the market charters (in $ mln.)	328.1	227.4	207.3	280	251.3
Net debt (in $ mln.)	1260	1328.3	1420.3	257	250.3
NAV per share	6.49	4.55	1.25	11.91	6.06
Enterprise value/ Charter adjusted fleet value	1.25	1.1	1.38	1.21	0.75

The Baltic Dry Index is setting new highs for the year. This measure of freight shipping costs has often been used as an early indicator in the economy. Because of the global nature of shipping, this index may give a broad take on global economic health but is a less reliable indicator of any specific nation’s economy, particularly a service economy like the U.S. It is thought that much of the rebound in the index is related to Chinese demand for iron ore, and has less direct bearing on our markets.

Perhaps more interesting is the relationship between the Baltic Index and commodity inflation. Consider the chart below, a 20 year history of the Baltic Dry Index (the black line plot) and the Reuters Jefferies CRB index (the red bar plot), a common measure of commodity prices: