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The Day That Was-January 9, 2008

January 9, 2008 By Chuck

The Dow started the day fairly flat, falling between the hours of 1:30-2:30, then took off into the close.  It ended the day up 146 points.  Yesterday’s close was 12589.07, and today’s intraday low was 12501.76.  Last August the low was 12517.94 (not where we closed, though) and many charts (and traders) were yelling “oversold” and “technical bounce!”  This was the primary driver of the rally into the close.  Yes, it coincided with “positive” news items, but it was more technical than anything.  The “positive” news?  Well, a spokesman for Berkshire-Hathaway said they might look at buying a bond insurer.  Moody’s said MBIA’s (MBI) plans for slashing its dividend and trying to sell $1 billion of debt to boost capital levels would help to maintain its AAA rating.  The US dollar was rallying, with shorts covering ahead of the European Central Bank and Bank of England’s interest rate decision later tonight.  And, last, but not least, Bear Stearns CEO said there will be no more write-downs and they have adequate capital.  I’ll believe that when the last stone has been upended and I get to see for myself there are no more snakes under there.  I’m not saying the guy is lying, just possibly a PollyAnna, or maybe misguided or……oh, forget it, I don’t believe him.  Bear Stearns (BSC) also shut down an asset-backed hedge fund, citing losses of 39% through Nov. of ’07.

Moody’s cut UPS’s rating to AA- from AAA, saying they are stable, though.  UPS announced they are raising their share buy back to $14B from $2B, that’s 14.3% of their market cap.  Batten down the hatches, mateys!  Moody’s was in a cutting mood today, as they cut 47 of Goldman Sach’s (GS) Alt-A Tranches and may cut 20 more.  I’m sure GS was not happy, but who cares as long as the share price keeps going up!?  (OK, that was sarcastic).

OPEC President Khelil says they are watching the US economy , as it may bring on a decline in the world economy.  That would slow oil demand and effect prices.  Keep watching, sir, because Germany’s industrial production fell in November for the second month in a row and Japan is more than a little worried about their economic slowdown. There will be a decline in the world economy, demand will slow (yes, even from China) and the only reason oil prices will rise is because Iran starts trouble or terrorists keep blowing up pipelines.

Analysts at Goldman Sach’s and Merrill-Lynch analyst David Rosenberg believe the US will have a recession.  I think the consensus is we will have a recession, everyone is just fighting over how bad it will be.  Rosenberg did note that in the past 60 years, when the unemployment rate rose .5% from the low point, a recession followed.  The last unemployment figure was 5.0% from 4.4% last March.  Oops!

I was going to list all of the same-store retail sales reports, but there are so many I’m just going to highlight a few:

Men’s Wearhouse (MW): citing lower traffic in US and Canada, they are cutting EPS estimates to .16-.18 from .46.  This stock is hurting.  Too bad, I like them.

American Eagle Outfitters (AEO):  -2% vs -1.5% estimate. 

Hot Topic (HOTT):  -6.2% vs -6.4% estimate.

It really just isn’t looking good on the retail front, even if a few manage to eke out in-line EPS’s here and there.

Chuck has updated our portfolio.  Please check it out.  By the way, BEN reported assets under management today: Dec. ’07=$643.7 Billion  vs. Nov. ’07=$647 Billion.  That’s a drop of $3.3B.  Somebody took their marbles and went home, I guess.

One last note from the wires tonight:  The Wall Street Journal reports that investors in Credit Default Swaps are signaling rising worries of financial distress for some large banks and insurers. 

See you tomorrow, fellow traders, and have a great night!

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