Today's real estate metric seems to point toward trouble.

S&P Case Shiller posted its Home Price Indices this morning covering the 10 and 20 city markets it regularly measures. Unfortunately, the data seems to offer insight the market could choke on as economists mull over and pick through October's refuse.

New home sales came in at 31 thousand for September which disappointed investors who had been hoping for more like 34 thousand. The market worried that the real estate market had once again fallen off a cliff as the home tax credit was ending. When the numbers came out, the homebuilders sold off brutally. I think we have to keep these numbers in "historical" perspective. This year's dismal home sales are way below just about anything that has been seen in 45 years.

Between February 1990 until October 2008, no single month came in at less 32,000. Between January 1963 to January 2008, only 18 months came at less than 32,000 and many of these occurred in the 1960s and early 1970s. This September was the worst September since 1981. From 1998 to 2007, Septembers ranged from 53,000-94,000.

Q3 2009 Earnings Call

October 30, 2009 1:00 pm ET

• Economy surges back to growth. Stocks logged their best one-day gain in three months on Thursday after the U.S. economy returned to growth in Q3. The government's first estimate of GDP showed the economy expanded at an annual rate of 3.5%, the first growth quarter in more than a year, and well ahead of Street estimates of 3%, sending Treasury prices and the dollar lower as traders exited safe havens. As recently as last week economists had called for a 3.3% gain, but they pared their estimates in the past couple days after week durable goods sales data came up short. "The economy has emerged with gusto from the deepest recession since WWII," one economist said. "The short-term prospects for the economy remain good."
• Private sector must lead the way - Geithner. The return to GDP growth is encouraging but the recovery is still fragile, Treasury Secretary Timothy Geithner said at a Q&A session Thursday evening following yesterday's Q3 GDP announcement. "The number today was really encouraging... it was broad and strong and it wasn't just cash-for-clunkers and it wasn't just economic stimulus... but it's important to remember that it's very early," he said. Geithner stressed that a robust recovery would have to be led by the private sector, saying the U.S. can't borrow-and-spend its way to health.
• Repsol strikes again. Repsol (REP), long derided as the oil company with no oil, will today announce a "fairly sizeable" discovery in the Gulf of Mexico's Shenzi field that it says will help reduce U.S. dependence on foreign oil. Today's discovery comes on top of big finds in Brazil and West Africa, and leaves Repsol with the unexpected challenge of developing a sudden surge in oil and gas resources. "We've had some success in exploration," CEO Antonio Brufau said.
• CIT, Goldman adjust $3B credit line. CIT Group (CIT) reached an agreement with Goldman Sachs (GS) to amend a $3B loan facility, ending their dispute over a $1B "make whole" payment CIT would have owed Goldman if it files for bankruptcy. Goldman will reduce the loan size to $2.13B, wiping out the unused portion of the facility, for which CIT will pay Goldman a $285M penalty, and post an additional $250M of collateral. The announcement, made in an 8-K filing, comes two days after CIT raised an additional $4.5B to bolster its restructuring.
• Rio Tinto doubles capex. A confident Rio Tinto (RTP) doubled its planned 2010 capital spend to at least $5B after it cut debt and saw signs of economic recovery. Rio had planned to cut capex to $2.5B - just enough to sustain current mines. "We will continue our program of cost reduction and debt repayments, but our renewed strength enables us to focus on disciplined capital expenditure on premier growth options," CEO Tom Albanese said. Rio, the world's #3 mining group, said it had cut its debt by 42% so far this year to $22.3B. (statement)
• EDF/Constellation deal at risk. State-owned nuclear power operator EDF is facing pressure from the French government to abandon its $4.5B deal to buy 49.9% of Constellation Energy Group's (CEG) nuclear assets and build four reactors with the U.S. company. "For us, the priority strategy for EDF is indeed in Europe, notably the U.K. and Italy, and everything outside Europe is less essential to EDF's expansion," an unnamed government official said.
• Credit crunch continues. Loan defaults by small and medium-sized U.S. businesses rose in September to 0.85% from 0.81% in August, according to risk management firm PayNet, but accounts in moderate (30 days plus) and severe (90 days plus) delinquency decreased to 4.22% (from 4.35%) and 1.4% (from 1.48%) respectively, the lowest since January. PayNet's Small Business Lending Index, which measures the volume of financing, is down 22% from a year ago, a sign lenders remain reluctant to extend credit to small and medium-sized businesses. "It's hard to imagine a robust recovery when you see numbers like this," PayNet founder Bill Phelan said.
• BoJ holds steady. The Bank of Japan left its key rate unchanged at 0.1%, but said it would discontinue its corporate bond and commercial paper purchase program at the end of December, as scheduled - "given that issuing conditions in the CP and corporate bond markets have been improving markedly, and thus the purpose of the purchases to restore market functioning has been achieved." Still, the BoJ stressed that this doesn't signal the beginning of its exit strategy, and extended its special lending facility to provide three-month funds at 0.1% until the end of March. Remarking on the decision to scrap its corporate funding support, Japan's PM Yukio Hatoyama remarked that it's hard to be as optimistic as the BoJ. (statement)
• House Energy and Commerce Committee OKs consumer agency. A second House panel voted Thursday to create a Consumer Financial Protection Agency to oversee mortgages, credit cards and other financial products, with a full House vote expected in November. The House bill falls short of the administration's original proposal, exempting auto dealers, credit, mortgage and title insurers and banks with less than $10B in assets, among others - exceptions some worry will weaken the agency's power.
• Sands gets OK for $2-3B IPO. Sources say Las Vegas Sands (LVS) has received approval from the Hong Kong stock exchange for a $2-3B IPO of its Macau unit. Sands will kick off pre-marketing next week, and launch its roadshow on Nov. 9, with a trading debut set for the end of November. Goldman Sachs (GS), Citigroup (C) and UBS (UBS) are coordinating. LVS rose 12% Thursday after posting a surprise Q3 profit; shares are up another 12% premarket.
• Junk bond rally becomes self-fulfilling. Demand for junk bonds hit record highs last week, with investors pouring another $207M into junk bond funds, pushing YTD inflows to a record $27.8B. Junk bond indexes are up more than 50% YTD, as investors become more comfortable with risk. The growing cash flow enables shaky companies to head off default - adding more fuel to the rally.
• AIG won't sell Japan units. AIG (AIG) says it will not sell its two Japanese insurers, AIG Edison Life Insurance and AIG Star Life Insurance, reversing its decision from a year ago at the height of the crisis. AIG said in a statement it now believes it would improve its corporate value to keep the two Japanese units, which have a very firm financial base and strong sales network.
• Energy IPO runs out of steam. Former Enron unit AEI, which operates power and gas distribution lines in Latin America, canceled its IPO Thursday hours after it slashed the size of the deal by two-thirds in the face of weak demand. The IPO, managed by Goldman Sachs (GS), Credit Suisse (CS), Citigroup (C) and JPMorgan (JPM), is the first U.S.-listed IPO this year to be withdrawn after an attempt to price the offering. AEI faulted market conditions for the withdrawal, but analysts say its debt load, risk exposure and expected payout to its private-equity owners also raised concerns.
• ChiNext soars on debut. China's Nasdaq-lookalike ChiNext stock market launched trading Friday with strong gains. An initial 28 companies listed, and shares gained 46-123% from their IPO prices, in line with expectations. The listees priced their IPOs at a hefty 56x 2008 earnings.

Earnings: Fri. Before Open

• Alcatel-Lucent (ALU): Q3 net loss of €182M vs. -€174.4M consensus. Sales of €3.69B (-9.3%) vs. €3.88B consensus. Says it has achieved 80% of its goal to reduce annual expenses by €750M. Shares -2.9% premarket. (PR)
• Ameren (AEE): Q3 EPS of $1.16 beats by $0.13. Revenue of $1.82B (-11.9%) vs. $2.1B. (PR)
• American Axle & Manufacturing (AXL): Q3 EPS of -$0.18 beats by $0.20. Revenue of $410M (-22.4%) vs. $420M. Shares -1.4% premarket. (PR)
• Aon (AOC): Q3 EPS of $0.65 misses by $0.01. Revenue of $1.81B (-2.1%) in-line. (PR)
• Apartment Investment and Management Company (AIV): Q3 FFO of -$0.35 in-line. Revenue of $319M (-7.3%) vs. $313M. (PR)
• Arch Coal (ACI): Q3 EPS of $0.16 beats by $0.12. Revenue of $615M (-20.1%) vs. $605M. Shares +3.9% premarket. (PR)
• Chevron (CVX): Q3 EPS of $1.72 beats by $0.25. Revenue of $46.63B (-40.9%) vs. $47.84B. "In our downstream operations, we continued to experience weak margins on the sale of gasoline and other refined products. Weak demand and plentiful supply affected all our major markets." Shares +0.7% premarket. (PR)
• CMS Energy (CMS): Q3 EPS of $0.32 misses by $0.02. (PR)
• Constellation Energy Group (CEG): Q3 EPS of $1.23 beats by $0.16. Revenue of $4.03B vs. $4.48B. Sees full-year EPS of $3.25-3.45 vs. consensus of $3.10. (PR)
• Coventry Health Care (CVH): Q3 EPS of $0.68 beats by $0.14. Revenue of $3.44B (+17.7%) in-line. Shares +2.4% premarket. (PR)
• Cummins (CMI): Q3 EPS of $0.56 beats by $0.19. Revenue of $2.53B (-31.5%) in-line. “While we saw improvement in some markets in the third quarter, we expect the economic climate to remain challenging until late 2010 - especially in the U.S. and Europe.” (PR)
• Dominion Resources (D): Q3 EPS of $0.99 beats by $0.09. Revenue of $3.65B (-16.4%) vs. $3.94B. Sees Q4 EPS of $0.55-0.65 vs. $0.67. (PR)
• Duke Energy (DUK): Q3 EPS of $0.40 beats by $0.02. Revenue of $3.4B (-3.2%) vs. $3.8B. "Industrial sales volumes continued to show signs of stabilization." (PR)
• Estee Lauder (EL): FQ1 EPS of $0.85 beats by $0.51. Revenue of $1.83B (-3.7%) in-line. Shares +4.5% premarket. (PR)
• ITT Industries (ITT): Q3 EPS of $1.03 beats by $0.13. Revenue of $2.7B (-6.3%) in-line. (PR)
• NYSE Euronext (NYX): Q3 EPS of $0.53 beats by $0.07. Revenue of $1.05B (-9.6%) in-line. Announces equity investment in its U.S. futures exchange by Citadel, GETCO, Goldman Sachs (GS), Morgan Stanley (MS) and UBS (UBS), with NYX to remain largest shareholder. (PR I, II)
• Penske Auto Group (PAG): Q3 EPS of $0.34 beats by $0.06. Revenue of $2.59B (-12.9%) in-line. Shares (PR)
• Progress Energy (PGN): Q3 EPS of $1.22 beats by $0.03. Revenue of $2.82B (+4.7%) in-line. (PR)
• Regency Centers (REG): Q3 FFO of $0.69 in-line. (PR)
• Simon Property Group (SPG): Q3 FFO of $1.38 beats by $0.06. Revenue of $925M (-1.1%) vs. $892M. Shares -0.4% premarket. (PR)
• Sony (SNE): FQ2 net loss of ¥26.3B ($287.5M) vs. consensus of -¥40.4B. Revenue of ¥1.66T (-20%). Sees full-year net loss of ¥95B, up from a previous forecast of -¥120B and -¥98.9B last year. Sees sales -5.6%, unchanged. (PR)
• Tim Hortons (THI): Q3 EPS of C$0.34 misses by C$0.12. Revenue of C$564M (+10.7%) vs. C$552M. (PR)
• Ultra Petroleum (UPL): Q3 EPS of $0.57 beats by $0.05. Revenue of $155M (-47.8%) vs. $239M. (PR)
• Weyerhaeuser (WY): Q3 EPS of -$0.26 beats by $0.19. Revenue of $1.41B (-33.2%) in-line. (PR)

Earnings: Thur. After Close

• AllianceBernstein (AB): Q3 EPS of $0.67 beats by $0.22. Revenue of $806M (-5%) vs. $737M. AUM down 16% Y/Y to $498B. Shares +3.8% AH. (PR)
• Bally Technologies (BYI): FQ1 EPS of $0.53 in-line. Revenue of $197M (-17%) vs. $206M. Shares +0.6% AH. (PR)
• BMC Software (BMC): FQ2 EPS of $0.66 beats by $0.08. Revenue of $462M (-1%) vs. $463M. Raises full-year EPS guidance to $2.55-2.65 vs. $2.51. Shares +1.8% AH. (PR)
• Callaway Golf Company (ELY): Q3 EPS of -$0.25 misses by $0.01. Revenue of $191M (-11%) in-line. Sees full-year EPS of -$0.30 to -$0.35, vs. -$0.21. (PR)
• Cliffs Natural Resources (CLF): Q3 EPS of $0.45 may not compare to estimate of -$0.07. Revenue of $666M (-44%) vs. $535M. Shares +4.5% AH. (PR)
• DTE Energy Company (DTE): Q3 EPS of $0.96 misses by $0.03. Revenue of $2B (-16%) vs. $2.1B. Sees full-year EPS of $2.75-3.05 vs. $3.19. Shares -7.7% AH. (PR)
• Eldorado Gold (EGO): Q3 EPS of $0.08 beats by $0.01. Revenue of $82M (-20.3%) vs. $85M. Shares +0.7% AH. (PR)
• Genworth Financial (GNW): Q3 net income available to common shareholders of $0.04 beats by $0.06. Revenue of $2.4B (+10%) vs. $2.5B. Shares +9.7% AH. (PR)
• Hertz Global Holdings (HTZ): Q3 EPS of $0.15 misses by $0.09. Revenue of $2B (-16%) in-line. Raises full-year EPS guidance to $0.21-0.23 from $0.12-0.15, vs. $0.20. Shares +2.9% AH. (PR)
• Human Genome Sciences (HGSI): Q3 EPS of -$0.32 misses by $0.01. Revenue of $19M (+61%) vs. $24M. Shares +0.9% AH. (PR)
• Ingram Micro (IM): Q3 EPS of $0.25 beats by $0.05. Revenue of $7.4B (-11%) vs. $6.7B. Shares +2.4% AH. (PR)
• KLA-Tencor (KLAC): FQ1 EPS of $0.15 beats by $0.13. Revenue of $343M (-36%) vs. $332M. Shares +0.8% AH. (PR)
• Las Vegas Sands (LVS): Q3 EPS of $0.03 beats by $0.04. Revenue of $1.1B (+3%) in-line. Shares +8.4% AH. (PR)
• Manitowoc (MTW): Q3 EPS of -$0.04 misses by $0.12. Revenue of $882M (-20%) vs. $934M. Shares -7.2% AH. (PR)
• Maxim Integrated Products (MXIM): FQ1 EPS of $0.13 beats by $0.01. Revenue of $449M (-12%) vs. $438M. Shares -4% AH. (PR)
• McAfee (MFE): Q3 EPS of $0.62 beats by $0.01. Revenue of $485M (+19%) vs. $487M. Shares -5.8% AH. (PR)
• MetLife (MET): Q3 EPS of $0.87 in-line. Revenue of $12.4B (-1%) vs. $12.3B. Shares -2.3% AH. (PR)
• Mohawk Industries (MHK): Q3 EPS of $0.64 beats by $0.08. Revenue of $1.4B (-22%) in-line. Sees Q4 EPS of $0.28-0.38 vs. $0.45. Shares -5.3% AH. (PR)
• PEPCO Holdings (POM): Q3 EPS of $0.44 beats by $0.01. Revenue of $2.5B (-17%) vs. $2.9B. (PR)
• PerkinElmer (PKI): Q3 EPS of $0.30 beats by $0.03. Revenue of $437M (-9%) vs. $430M. Sees full-year EPS of $1.23-1.26 vs. $1.22. (PR)
• RealNetworks (RNWK): Q3 EPS of $0.00 beats by $0.06. Revenue of $140M (-8%) vs. $141M. (PR)
• Regal Entertainment Group (RGC): Q3 EPS of $0.05 misses by $0.02. Revenue of $674M (-11%) vs. $702M. Shares +0.3% AH. (PR)
• SBA Communications (SBAC): Q3 EPS of -$0.43 misses by $0.17. Revenue of $139M (+17%) in-line. Sees 2010 sales of $512M-532M vs. $604M. Shares -1.3% AH. (PR)
• Southwestern Energy Company (SWN): Q3 EPS of $0.34 in-line. Revenue of $503M (-26%) vs. $387M. Shares +0.2% AH. (PR)
• Standard Pacific (SPF): Q3 EPS of -$0.01 beats by $0.06. Revenue of $327M (-18%) vs. $285M. Shares +3.4% AH. (PR)
• Varian Medical Systems (VAR): FQ4 EPS of $0.78 beats by $0.04. Revenue of $642M (+8%) vs. $593M. Sees Q4 EPS of $0.52-0.56 vs. $0.60, and full-year EPS of $2.65-2.75 vs. $2.61. Shares -2.3% AH. (PR)

Today's Markets

Overseas markets were mixed Friday, with strong gains in Japan and China, but some weakness in Europe early on. Futures have moved lower overnight.

The home builders represent probably the most "humbled" group of stocks out there, a result of a housing debacle that has seen falling home prices, credit shortfalls and waves of foreclosures.

Home builders also represent some of the best "upside" in the market. The stocks have fallen hard, some trading at one fifteenth of their 2005 share prices. And those share prices have fallen so low that the thirteen "biggest" builders total collectively less than $22 billion in market cap. To put the number in perspective, 138 publicly traded companies in the U.S. trade at market caps of $22 billion or higher. Corning (GLW), Costco (COST), DirectTV (DTV), Potash (IPI), and Ford (F) each have market caps higher than the sum total of all publicly traded home builders. Add up TOL, LEN, PHM, NVR, RYL, MDC, SPF, HOV, BZH, KBH, DHI, MTH, MHO and you get the price of Ford.

For traders with a more short-term time horizon, we have compiled a list of the S&P 1500 stocks that have the largest intraday high-low ranges (based on the average percent spread between the intraday high and low over the last fifty days). We then grouped the stocks based on whether they have a rising or falling 50-day moving average. Stocks highlighted in gray are new to the list this month.

For traders with a more short-term time horizon, we have compiled a list of the S&P 1500 stocks that have the largest intraday high-low ranges (based on the average percent spread between the intraday high and low over the last fifty days). We then grouped the stocks based on whether they have a rising or falling 50-day moving average. Stocks highlighted in gray are new to the list this month.

This month's most volatile stock is AIG, which has an average intraday range of 14.6%. A couple of years ago the stock was considered a conservative and safe investment. Today, it has become a daytrader's dream. As the market becomes more stable, we are also beginning to see an increase in the number of stocks with share prices in the double digits. While AIG's double digit share price is somewhat artificial given the 1:20 reverse split, seven other stocks with prices above $10 are also on the list.

"A man is not a whole and complete man unless he owns a home and the ground it stands on." Those words came not from Bill Clinton on the launch of National Homeownership Day in 1995 or George Bush when he pledged his commitment to “an ownership society.” They came, instead, from Walt Whitman and might reflect how long the idea of owning a home has been around in this country and how deeply it is woven into the fabric of our society.

Given the events of the last few years, it is safe to say that fabric is threadbare in spots and completely ripped apart in others.

The July Credit Suisse First Boston Monthly Survey of Real Estate Agents was made available on Friday for institutional clients and consultants on the survey. Presented monthly, this 60-page (or thereabouts) publication has been an extremely accurate and predictive document - my first choice when I begin pondering my monthly real estate strategy.

Almost always, I focus on the top fifty metro markets and regions, primarily interested in the pure statistics and opinions of "boots on the ground" agents and investors that make this such an excellent read. Another feature of this monthly survey lists agents recommendations for national builders. The percentage number is based upon positive less negative responses from agents. This is an important reflection on these builders, and thus their stock, as over 40% of new home sales involve a real estate agent.

Every now and then the general public gets a chance to see just how valid the green shoots theory really is. Next Friday may prove to be just such a case. On that date, 20 of some of the gnarliest and most troubled stressed and distressed high yield credits have a simultaneous IOU due to their respective lenders, either in the form of an interest payment or outright maturity. Zero Hedge has compiled the list of the 20 most interesting suspects to watch carefully.

At the end of the day, fund flows talk and TV propaganda walks (and both have a 30 day grace period). (Click chart to enlarge.)

• Breaking down the stress tests results. At long last, the Federal Reserve released the results of its bank stress tests. After a series of leaks, the report contained few surprises, with 10 out of 19 banks ordered to raise a combined total of $74.6B and projected total losses under an adverse testing scenario coming in at around $600B. Officials hope the private sector will step up to help banks close capital gaps. Optimists viewed the findings as a sign that the worst of the banking crisis is over, but questions remain about the tests' rigor, especially considering the Fed scaled back some loss projections after being pressured by banks. Analysts also wonder about the health of the rest of the roughly 8,000 banks in the country and the possibility of writedowns at small-cap banks.
  Here's the breakdown of capital shortfall, or lack thereof:
  -American Express (AXP): $0 (+2.8% after hours)
  -Bank of America (BAC): $33.9B (+9.0% AH)
  -BB&T (BBT): $0 (+4.7% AH)
  -Bank of New York Mellon (BK): $0 (+4.4% AH)
  -Capital One (COF): $0 (+3.4% AH)
  -Citigroup (C): $5.5B (+6.8% AH)
  -Fifth Third Bancorp (FITB): $1.1B (+21.8% AH)
  -GMAC: $11.5B
  -Goldman Sachs (GS): $0 (+2.1% AH)
  -JPMorgan (JPM): $0 (+1.8% AH)
  -KeyCorp (KEY): $1.8B (+9.1% AH)
  -MetLife (MET): $0 (+3.0% AH)
  -Morgan Stanley (MS): $1.8B (-0.5% AH)
  -PNC Financial (PNC): $0.6B (+3.4% AH)
  -Regions Financial (RF): $2.5B (+8.4% AH)
  -State Street (STT): $0 (+8.6% AH)
  -SunTrust Banks (STI): $2.2B (+2.9% AH)
  -U.S. Bancorp (USB): $0 (+7.2% AH)
  -Wells Fargo (WFC): $13.7B (-2.4% AH)
  (Read the Fed's press release, Bernanke's statement the Fed's overview of results (.pdf), and highlights of banks' responses.)
• BoA weighs capital options. With the largest capital shortfall of the 19 stress-tested banks, Bank of America (BAC) will pursue several options to avoid additional government investment or ownership. Asset sales are expected to raise around $10B, and could include private bank First Republic, asset manager Columbia Management and a partial stake in China Construction Bank. The bank plans to raise another $17B through a new common stock offering and conversion of private preferred shares into common stock, and hopes to save $7B by outperforming the U.S.'s earning expectations. The shortfall puts added pressure on CEO Ken Lewis, who was ousted as chairman last month, and the bank is reportedly searching for new directors as well.
• AmEx TARP repayment. After passing the stress test with flying colors (though still dealing with growing delinquencies and defaults on credit cards), American Express (AXP) filed a request with the Federal Reserve and Treasury to repay its $3.4B of TARP funds. The company doesn't plan to raise common equity in order to pay back the funds. Since accepting TARP funds, "financial markets have become more stable, and American Express has made substantial progress in adapting to a very difficult economic environment."
• Fed chairman quits after Goldman ties questioned. Stephen Friedman, chairman of the New York Federal Reserve Bank's board of directors, resigned effective immediately to avoid the appearance of a conflict of interest over his Goldman Sachs (GS) ties. Friedman, who is a former chairman of Goldman Sachs, was scheduled to leave his position at the end of 2009, but has come under recent criticism for his continued connections to the investment bank.
• Oracles holds on to Sun's hardware. Oracle (ORCL) CEO Larry Ellison said he won't sell off Sun Microsystem's (JAVA) hardware business, putting an end to speculation that he only wanted Sun for its software units. Oracle agreed to pay over $7B last month to buy Sun.
• AIG reports smaller loss. AIG (AIG) posted its smallest loss in six quarters (see details below), with a $4.4B deficit that reflected continued investment losses and challenges facing its insurance units. Executives said negative publicity since the insurer's bailout had hurt its brand and sales, as has the economic downturn, but that its businesses are still doing okay.
• Taleb: Worse than the Big Depression. Black Swan author Nassim Taleb says today's crisis is "vastly worse" than the 1930s, because global economies have become uncontrollably intertwined. The NYU professor of risk engineering says gold, copper, and other assets "that China will like" are the best investment bets.
• Discounter strength in April sales. Shares of several major discounters got a boost yesterday from better-than-expected April same-store sales, though some said they were hurt by the Easter holiday which cut out a shopping day. Wal-Mart (WMT) was one of the top performers with growth of 5% vs. 2.9% consensus, with grocery, health and wellness, hardlines, entertainment and home contributing to the increase. However, the company plans to drop its monthly report in favor of forecasts roughly in-line with its quarterly reporting periods, a move that will deprive investors of a valuable consumer indicator. Wal-Mart said the switch is a better fit for the company's long-term approach to business and minimizes volatility caused by holiday shifts.
• Google sees more scrutiny. Google (GOOG) CEO Eric Schmidt expects more regulatory scrutiny of his company, but has no plans to step down from Apple's (AAPL) board despite an anti-trust probe into the matter. Schmidt said he doesn't consider Google and Apple to be primary competitors, and that he recuses himself when competitive issues come up.
• Jobless claims fall. Initial Jobless Claims were 601,000 this week, down from last week's 635,000 (revised) and from consensus of 635K. Continuing claims rose to 6,351,000 from 6,295,000 (revised). While it's true the recent moderation in weekly jobless claims is happening from a breathtaking peak, the extent of the drop is impressive. Going back to 1987, such declines have usually happened at the tail end of a recession.
• Productivity rises. Productivity was up 1.1% in Q1 (preliminary), or 0.8% in the nonfarm business sector, vs. consensus of 0.6% and last quarter's -0.6% (revised). Unit labor costs grew by 3.3% vs. 2.7% consensus. Manufacturing sector productivity fell 3.4%, its fourth straight drop.
• ECB opts for QE. The European Central Bank cut its benchmark rate by 0.25% to 1%, and rolled out its first quantitative easing step, announcing it will buy €60B ($80B) in euro-area bonds. Economists said they were pleasantly surprised by the scope of the QE move, but wished the ECB wouldn't have dragged its feet for so long.
• BoE holds steady. The Bank of England kept it key lending rate unchanged at 0.5%, and raised its bond purchase target by £50B to £125B. "The global banking and financial system remains fragile despite further significant intervention by the authorities... But surveys at home and abroad show promising signs that the pace of decline has begun to moderate."

Earnings: Friday Before Open

• AES (AES): Q1 EPS of $0.34 beats by $0.13. Revenue of $3.4B in-line. Sees full-year EPS of $.103-1.13 vs. $1. (PR)
• Beazer (BZH): FQ2 EPS of -$2.97 misses by $1.37. Revenue of $188M vs. $213M. (PR)
• Calpine (CPN): Q1 EPS of $0.07 beats by $0.18. Revenue of $1.68B (+14%) vs. $1.34B. (PR)
• El Paso (EP): Q1 EPS of $0.47 beats by $0.20. Revenue of $1.48B (+16.9%) vs. $1.26B. Shares +4.3% premarket. (PR)
• Huntsman (HUN): Q1 EPS of -$0.55 misses by $0.33. Revenue of $1.69B (-33.3%) vs. $2.2B. (PR)
• M.D.C. (MDC): Q1 EPS of -$0.88 misses by $0.05. Revenue of $176M (-55.6%) vs. $130M. (PR)
• Mirant (MIR): Q1 EPS of $0.79 beats by $0.22. Shares +7.6% premarket. (PR)
• Sonic Automotive (SAH): Q1 EPS of $0.16 beats by $0.20. Revenue of $1.19B (-25.1%) vs. $1.26B. Shares +11.8% premarket. (PR)
• Windstream (WIN): Q1 EPS of $0.20 misses by $0.03. Revenue of $755M vs. $776M. (PR)

Earnings: Thursday After Close

• Activision (ATVI): FQ4 EPS of $0.08 beats by $0.03. Revenue of $724M vs. $593M. Sees FQ1 EPS of $0.06 vs. $0.09 consensus. Shares +2.4% AH. (PR)
• AIG (AIG): Q1 EPS of -$0.97 misses by $0.91. Shares +5.1% AH. (PR)
• Allstate (ALL): Q1 EPS of $0.84 misses by $0.39. Revenue of $7.88B (-2.5%) vs. $8.16B. Says has statutory surplus of $13B at Allstate Insurance and $3.4B at Allstate Life. Unrealized net capital losses rose by $590M to $9.4B from Q4. Shares -6.9% AH. (PR)
• Assured Guaranty (AGO): Q1 EPS of $0.69 beats by $0.52. Revenue of $148M vs. $140M. Shares +15% AH. (PR)
• Bally Technologies (BYI): FQ3 EPS of $0.52 in-line. Revenue of $208M (-10.8%) vs. $224M. Full-year guidance in-line. (PR)
• CBS (CBS): Q1 EPS of -$0.08 misses by $0.15. Revenue of $3.16B (-13.5%) vs. $3.26B. "Softness in the advertising marketplace continued during Q1." Shares -7.3% AH. (PR)
• Crocs (CROX): Q1 EPS of -$0.24 beats by $0.03. Revenue of $135M (-32%) vs. $114M. Sees Q2 EPS of -$0.15 to -$0.31 (median -$0.23) vs. consensus of -$0.17. Shares -13.7% AH. (PR)
• Genworth Financial (GNW): Q1 EPS of $0.03 misses by $0.16. Revenue of $1.73B vs. $2.71B. Shares -14.4% AH. (PR)
• Hansen Natural (HANS): Q1 EPS of $0.44 beats by $0.07. Revenue of $244M vs. $228M. Shares +8.4% AH. (PR)
• Intrepid Potash (IPI): Q1 EPS of $0.33 beats by $0.07. Revenue of $88.9M vs. $72.2M. Shares flat AH. (PR)
• Leap Wireless International (LEAP): Q1 EPS of -$0.74 misses by $0.05. Revenue of $587M vs. $595M. Shares +0.3% AH. (PR)
• Live Nation (LYV): Q1 EPS of -$1.29 misses by $0.55. Revenue of $499M vs. $562M. Shares flat AH. (PR)
• Microchip Technology (MCHP): FQ4 EPS of $0.15 beats by $0.04. Revenue of $173M (-33.5%) in-line. Sees FQ1 EPS of $0.16 vs. $0.14. Shares -0.3% AH. (PR)
• Moneygram International (MGI): Q1 EPS of -$0.20 misses by $0.28. Revenue of $280M vs. $285M. Shares +4.8% AH. (PR)
• Nvidia (NVDA): Q1 EPS of -$0.09 beats by $0.02. Revenue of $664M vs. $515M. Gross margin 28.6% vs. consensus of 35.5%. Shares +0.2% AH. (PR)
• Public Storage (PSA): Q1 EPS of $1.16 misses by $0.04. Revenue of $347M (-0.8%) vs. $396M. Shares flat AH. (PR)
• SandRidge Energy (SD): Q1 EPS of $0.25 beats by $0.17. Revenue of $159M vs. $238M. Shares -0.4% AH. (PR)
• Standard Pacific (SPF): Q1 EPS of -$0.01 beats by $0.26. Revenue of $209M vs. $179M. "Although we saw improvement in new home orders as compared to the anemic levels experienced during the 2008 fourth quarter, we remain intently focused on preserving cash by controlling our expenses, carefully managing new home starts and reducing speculative inventory levels." Shares +18.8% AH. (PR)
• VeriSign (VRSN): Q1 EPS of $0.32 beats by $0.04. Revenue of $255M (+8.4%) vs. $249M. Shares +7.8% AH. (PR)

Today's Markets

Strong gains overseas following much-awaited and largely anticipated bank stress test results (I, II) in the U.S.

On the heels of Moody’s publishing a list of “bottom rung” companies most likely to default, Audit Integrity ups the ante with the preliminary findings of a new quantitative model designed to identify large companies most at risk of bankruptcy.

Chairman Jim Kaplan says their approach is to “combine both the power of static (accounting-based) and hazard (market-based) models. This approach allows for dynamic adjusting for potential bankruptcy between financial reporting periods.”

The S&P 1500 Homebuilder index has rallied 51% off of its lows in March, but the index would still need to gain about 390% to reach its highs from July 2005. Below we highlight the current members of the index. For each stock, we highlight where it was trading at the index's peak on 7/20/05, and how far it is currently trading from its 52-week low. While these stocks have bounced significantly off of their lows, the even more astounding numbers are still how much they are down from their highs.

click to enlarge

This past week I noted in the Financial Times that NYSE Euronext (NYX) has sounded the alarm for another retreat. Apparently it is working with US regulators to ease its listing requirement* of a minimum $1 share price in order to protect itself (and overall market confidence) from a wave of delistings. As of Sunday, 86 companies or about 4% of NYSE listed stocks may not meet this requirement. If one also includes its listings trading at or below $2 per share, which may already be trapped in this bear market’s capital sucking vortex, then the danger list increases to 191 companies or about 8.75% of its listings. (Note that this NYSE stock list excludes preferred stocks and exchange traded funds.)

At Hillbent, a lot of research work is focused on price-volume analysis (for asset classes, indexes, sectors, industry groups/ETFs, and individual stocks/securities) and its impact or projected impact on the market direction. One of my basic tenets for price-volume analysis is that contrary to popular belief, falling prices on less volume is not the best of a bad situation, but instead reflects the most bearish of all relationships. For the sake of brevity (and also the fact that I am only sharing summary conclusions from a proprietary premium research report), the net effect on stocks that are currently eligible for delisting or spiraling towards this direction has been an extreme contraction in average daily trading volume relative to past historical periods.

Q4 2008 Earnings Call

February 17, 2009 11:00 am ET

From Lennar’s Q408 conference call: (LEN)

We generated positive cash flow this quarter and that was a result of our operational focus on significantly reducing land purchases… to only $64 million during the quarter, which is approximately 75% below the quarterly land purchase run-rate through the first nine months of 2008.

Ben Graham, the father of Value Investing and teacher of Warren Buffett, was also a successful investor in 20th century. The four bread and butter strategies, employed by his firm, the Graham-Newman corporation between 1926 and 1956 included arbitrages, related hedges, liquidations and Net-Current-Asset or Bargain issues. Today I will provide a brief overview of the Bargain Issues strategy and provide some current stock picks.

The main goal with the bargain issues was to purchase shares in companies for less than two thirds of their asset values at prices that a private owner might pay at an acquisition. The fact that investors paid less than two thirds of the net working capital for the bargain stocks provided a margin of safety to those shareholders. Furthermore Graham-Newman strived to maintain a diversified portfolio of these Net Current Asset stocks, sometimes holding as much as one hundred of those issues which were worth considerably more than what they are selling for. Experience had taught Graham that few stocks are ultimately worth less than their net current assets minus the total liabilities.
Using this screen from GrahamInvestor.com site I came out with the following list of 40 bargain stocks:

In 1932 at the bottom of the Great Crash, Ben Graham’s fund had dropped 70%, but it was precisely this time when he wrote an article on Forbes about the cheapness of the market and how the market was selling the United States for free. I feel we are close to the same situation.

Deep Value Companies

Stock Market Prognosticator previously shared a list of Net Current Asset Value plays, and I recently wrote about how there were literally hundreds of companies that are being quoted for less than their cash in the piggy bank. One such company that I have analyzed lately is ValueVision Media Inc (VVTV). These companies are being quoted in the market for much less than their liquidating value, as if they were all destined to be doomed. But does it make sense to be quoted for less than the cash in your hand?

I spent time over the weekend poring over the latest DTCC weekly credit default swap data release. I compared the current release with the prior week in terms of notional, net, and total contracts. The following table summarizes the top dozen entities in terms of increases and decreases in percentage terms in the number of outstanding CDS contracts. (The list is filtered down to those with at least 1,000 pre-existing outstanding contracts.)