How do you test a new kind of rocket engine? Step 1: Bolt it to a trailer in the middle of the Mojave Desert. Step 2: Vroom! In this case, NASA is firing up the 5M15, which runs on compressed liquid methane. The odorless substance has multiple advantages over conventional rocket propellants: It’s cheaper, it requires much less insulation, and it exists on several planets NASA hopes to travel to — Mars, here we come. That means astronauts could collect their own fuel for the trip home. Bonus rocket science: Those glowing figure eights in the blast stream are called Mach disks, after the guy who lent his name to the speed of sound. They’re shock waves, created as the expanding fuel hits the higher atmospheric pressure outside the nozzle. If part of this blast weren’t obscured, you could take the number of Mach disks (we count seven) and multiply by the speed of sound — about 758 mph at the 1,300-foot altitude of this test — to estimate the speed of fuel exiting the engine. Just don’t get too close.
Coldplay- Viva La Vida
From Briefing.com
Periodicals Wrap-Up for Friday, August 8th
WALL STREET JOURNAL: The Wall Street Journal reported that Boeing (BA) and Airbus are facing a problem with the production of their existing planes with a shortage of galleys, seats and toilets that is increasing their manufacturing costs, and slowing down their assembly lines and millions of dollars in payments from aircraft customers…The Wall Street Journal also reported that Royal Bank of Scotland (RBS) was pushed into the red after it said its net loss was GBP802M, compared with a profit of GBP3.56B a year earlier. The bank reported the net less after taking GBP5.93B in write-downs on credit market exposure in the first six months of the year prior to its GBP12B rights issue in the spring…FINANCIAL TIMES: According to figures published by the Official Airline Guide, the Financial Times reported that in order to offset record fuel costs, airline carriers will offer 59.7M fewer seats in Q4 than in Q407, resulting in a drop of both the number of flights and seats by 7%. The domestic U.S. market will likely account for about a third of the cutbacks, or around 20M seats…BLOOMBERG: UBS (UBS) may have to buy back auction rate securities valued at $25B, an inside source said. Bloomberg reported that the Swiss bank is close to settling state and federal claims that it fraudulently sold the securities by agreeing to purchase them from its retail and institutional clients…
UBS may repurchase $25B in auction rate securities-Bloomberg UBS (UBS) may have to buy back auction rate securities valued at $25B, an inside source said. The Swiss bank is close to settling state and federal claims that it fraudulently sold the securities by agreeing to purchase them from its retail and institutional clients. If UBS does buy back $25B in auction rate securities, it would easily surpass the value of similar settlements reached by Citigroup (C) and Merrill Lynch (MER).
Asian Markets Wrap-Up for Friday, August 8
Asian stocks retreated and were lead down by Chinese stocks affected by speculation of possible terrorism at the Beijing Olympics…JAPAN: The Nikkei gained 43.42, or 0.3 percent, to 13,168.41, while the broader Topix index rose 1.12, or 0.1%, to 1,259.93. Toyota (TM) was up 5.5% to Y4,830. Mazda Motor Corp. increased 2.6% to Y589. Aisin Seiki Co. added 2.2% to Y2,830. Advantest (ATE) jumped 7.1% to Y2,500. Mitsui O.S.K. fell 5.9% to Y1,200…CHINA: The CSI 300 Index slid 128.98, or 4.7%, to 2,591.46. Citic Securities lost 4.6% to 21.39 yuan. Haitong Securities Co. slumped 8.2% to 21.52 yuan. China Shipping Development Co. declined 8.5% to 16.07 yuan. China Cosco Holdings Co. tumbled 8.6% to 16.17 yuan…AUSTRALIA: The S&P/ASX 200 Index gained 2.90, or 0.06%, to 4,986.20…AROUND ASIA: In Hong Kong, the Hang Seng Index declined -218.99, or -0.99%, to 21,885.21. Lenovo Group (LNVGY) jumped 3.2% to HK$5.41. China Mobile (CHL) fell 1.8% to HK$100.10…In South Korea, the Kospi index advanced 4.72, or 0.3%, to 1,568.72…In New Zealand, Telecom Corp. (NZT) dropped 7.6% to NZ$3.40.
IBM will slash the wages of 3,500 workers-Times Herald-Record IBM (IBM) announced that it would reduce the salaries of 3,500 workers at its upstate New York and Vermont facilities. The workers will be hit with 10% wage cuts, IBM said. Beginning in January, IBM will discontinue paying 20% bonuses for shift employees who work seven 12-hour days over a two-week period, the company added.
Royal Bank of Scotland credit market write-downs result in net loss-WSJ
For the fist six months of the year Royal Bank of Scotland (RBS) showed a net loss of GBP802M versus a GBP3.56B profit for the same period a year ago, mostly a result of its big write-downs related to the credit markets, reports the Wall Street Journal.
Google said to be buying Sprint Nextel-The Inquirer
Troubled Sprint Nextel (S) is rumored to being bought by Google (GOOG), considered by some analysts to be the best possible candidate.
Georgia downs 2 Russian warplanes; Russian tanks enter South Ossetia-Reuters
President Saakashvili says Georgia has downed two Russian warplanes over Georgian territory; 150 Russian tanks, armored vehicles entered South Ossetia.
Russian planes bomb Georgian military airbase-Reuters
“They have declared war against us,” says Kakha Lamaia, a senior Georgian security official. Russian jets have bombed the Vaziani military airbase outside Tbilisi, Georgia’s capital.
U.S. equity futures now point to a lower open
U.S. equity futures are pointing to a lower open. The futures had earlier been higher until Fannie Mae (FNM) announced its quarterly earnings which were much lower than expected. The company also announced that it would cut its dividend to 5 cents from 35 cents, but they also said that foreclosures and defaults continued to increase. The news was a reality check after yesterday’s news that pending home sales were better than expected. Adding to the weakness in the market was news that Merrill Lynch (MER) and UBS (UBS) offering to buy back billions of dollars of auction rate securities from clients, adding to the length of time it will take to recover from the current financial crisis.
Crude Oil-$CL: Key Support and Contract Roll: Bullish and Bearish Factors
The key support for the uptrend leg in place since April 2007 is at the 30-week moving average, last at $116.49. Break that on a sustained basis to the downside and that uptrend leg is finished. Given the breakout of the US Dollar which snapped its three-year downtrend leg on Wednesday, we might well see pressure on all commodities as they reprice in the face of a stronger underlying currency. For commodity bears, this is a dream scenario as stronger consumption would not necessarily move commodity price up as long as the US Dollar appreciates as quickly or faster than the presumed demand premium. Here are some issues for that “Sum of All Fears”, “Commodities are Dead/Equities Rally” scenario. In Crude at least, the roll date is on Monday for the October contract. Roll dates often have extreme price behaviors up to and post the event by a day. What we are seeing today might well be noise from that process. Secondly, sentiment in Crude is starting to approach maximum bearishness. Small speculators are heavily net short the contract while the Commercials are net long. We have seen very lopsided, heavy Crude put buying which has likely helped push prices down, thus becoming self-fulfilling. All of this as we approach long-term support. And that is the potential bad news for Crude bears. Whenever this moving average has been approached, the reaction is not further downward pressure, but rather heavy buying. Although the correction in price has been as sharp, severe and unexpected as the jump up, Crude is still in a bull market until it isn’t. Bears may be approaching maximum negative posture at a potential turn. As we begin to approach home heating season, one additional fundamental factor to watch is the relatively cool summer in the Northeast where most home heating oil demand is found. Forecasters will start turning their attention to the prospect of something we have not seen in a while in the Northeast - a potentially normal and thus much colder than lately-experienced winter which could spike home heating oil demand. In summary, the Crude bulls face the prospect of losing support and facing negative price dynamics from an appreciating underlying currency. For Crude bears, maximum negative sentiment at (but not down through) support may be a set up for a sharp reversal catching them off guard and forcing rapid covering at a contract roll.
Potash-POT: No change in forecast yet due to strike@RBCM RBC Capital said the unionized employees at POT’s Allan Division, COry Division, and Patience Lake Division commenced a strike effective yesterday. The facilities represent approximately 30% of POT’s total potash output and about 5% of global demand. The firm said the stirke could impact EPS by 6c each week but could be mitigated by higher potash prices. The firm is making no changes to its forecast until there is clarity on the duration of the the strike and the potential impact. Shares are Outperform rated.
Global Equities says GPhone delayed by HTC issues-Barron’s
According to Global Equities Research’s Trip Chowdhry, Google’s (GOOG) GPhone cell phones are being delayed by issues from handset maker High Tech Computer. Chowdhry believes the GPhone will be introduced “sometime later” in Q1 of next year from an end-of-year introduction, as HTC is said to be having “structural problems to incorporate Google’s demanded feature set”. Additionally, Chowdhry says HTC is “demanding a guaranteed minimum revenue surety” from Google. Further, contacts have informed Chowdhry that Andoird, the operating system software for the phone, has not been able to pick up developers because rival offerings from Research in Motion (RIMM), Apple (AAPL), Microsoft (MSFT) and Nokia (NOK) have “sucked up” attention.
Fannie Mae-FNM to ‘ramp’ up defaulted loan reviews
The company expects this to increase their credit loss recoveries in 2008 and 2009.
Fannie Mae-FNM to eliminate newly originated Alt-A acquisitions by year end
Fannie Mae-FNM sees 20008 as peak year for credit-related expenses
Fannie Mae-FNM lowers quarterly dividend to 5c per share from 35c per share
Banks move to separate bad loans from core assets-WSJ
The good cop, bad cop has returned to banking in an attempt to weed out bad loans and put them into a subsidiary and away from core assets, reports the Wall Street Journal. It’s not knew and was employed in the 1980s and 1990s during the S&L crisis. Whether or not the move actually resolves issues regarding underlying loans, regulators are open to the concept. “Given the current market disruption, we are cognizant of the need to be flexible, and we are willing to look at any proposals to assist our banks through this difficult period of time,” says Timothy W. Long, senior deputy comptroller for bank-supervision policy at the Office of the Comptroller of the Currency.
Myriad Genetics-MYGN target raised to $77 from $61, reiterate Buy@BOFA
After the company presented at their conference, Banc of America believes MYGN is likely to spin-out its therapeutics and diagnostics business, which would unlock value.
AIG at a crossroads-WSJ
To rid themselves of mortgage backed debt or not, to hold on and hope those losses won’t be greater than anticipated. Those are the questions facing AIG’s (AIG) new CEO Robert Willunstad and the Wall Street Journal’s “Heard on the Street” says he needs to take a better read of the market especially after the company’’s second quarter loss was affected by write-downs of about $25B following $19B in the first quarter. And it gets more complicated. Bottom line: Get it over with and move on.
Airlines’ capacity is set to shrink substantially in Q4-FT
Airlines are expected to reduce their capacity by 59.7M seats in Q4, according to the Official Airline Guide. The number of flights and seats is expected to decline by about 7% year-over-year during the last three months of 2008.
MBIA Inc-MBI reports Q2 EPS 96c vs. consensus of ($1.37)
Reports Q2 revenue $3.29B vs. consensus of $388.78M.
MBIA Inc-MBI CEO says business model functioning as it should
SAC Capital reports a 6.4% Passive stake in Incyte-INCY
Potash-POT volatility Flat into strike POT is recently at $173.39 in pre-open trading, below its close of $178.39. POT said unionized employees at Allan, Cory and Patience potash operations commenced a strike. RBC Capital say’s “The affected facilities represent approximately 30% of POT’s total annual potash output and about 5% of global demand.” POT August 175 straddle is priced at $12.80. POT September option implied volatility of 57 is near its 26-week average according to Track Data, suggesting non-directional price movement.
(Important note on how to use this upgrade/downgrade list with analyst comments and news….you must parse out the factual data (Factual data is the most important) from the opinionated data and always take all analyst comments with a grain of salt. Do not follow blindly with their recommendations. Remember that technicals are the most powerful force in short term direction for stock prices due to the law of supply and demand.)
Jim Cramer’s “Mad Money”
Cramer’s show focused on his “Playbook for Selloffs”. On a down day, it’s important to be able to tell the difference between real opportunities and fake ones. When there’s a huge selloff investors should maximize the opportunities a correction affords. Because corrections are inevitable, it’s important to have cash available to buy stocks when they get cheaper. Cramer’s rule is to never have less than 5% cash. Cramer suggested that investors make a list of stock they own and every stock they’re considering. Stocks can be divided into four categories. (1) ones you’re trying to back the truck up on - ones you plan to buy period; (2) ones that are buys, but only if they go lower; (3) stocks you own and would sell, but only if they rally 5 to 7 percent; and (4) stocks you own and want to sell right now. “In a selloff, you don’t want to sell nothing and buy more of everything,” says Cramer. During a bad day, investors should shift their capital to stocks on the 1st and 2nd lists. The money to buy those stocks will come from selling the stocks on the 3rd and 4th lists, Cramer said. In a down market, it’s tempting to shop for a bottom, trying to get stocks at their cheapest as they rebound, but Cramer said “that’s rarely a safe bet.” Cramer said it’s most important to “avoid broken companies at all cost.” The first place to look for opportunities, according to Cramer, is in stocks that have pulled back from their highs. Of course, some stocks coming off their highs will be going lower for good reasons, so it’s important to choose wisely. The second kind of stock to shop for during a correction is one with a dividend that becomes a whole lot more attractive as share price decreases, Cramer said. If the expected earnings are at least twice the size of the dividend, the stock is a safe bet. During inflation-fueled selloffs, investors should buy gold or mineral stocks, which are anti-inflation plays. During slowdowns soft goods and diagnostics are good bets for a recession, Cramer said.
Fast Money Position recap: First Moves- Jeff says sell XLF, Guy likes JNJ still, Joe thinks RIMM is going to break $130.
Macke Owns (MSFT) (DIS) (COST) (WMT), Adami Owns (AGU) (BTU) (GS) (C) (INTC) (MSFT) (NUE), Finerman’s Firm Owns (ANF) Call Spread, Finerman’s Firm And Finerman Own (KALU) (C) Leaps, Finerman Owns (GS), Finerman’s Firm Owns (JCP) (MSFT), Finerman’s Firm Is Short (IYR) (IJR) (SPY) (MDY) (IWM) (COF) (SPG) (KIM) (XLR), Terranova Owns (INTC) (GOOG) (BNI) (XLF) (IYT) (YHOO) (VLO) (RIMM) (SA) (SU) (KOL) (CME) (FCX).
The market cycle down was not a surprise. FNM came out with abysmal numbers so it will be interesting to see how the market will ultimately react to them. The price of oil seems to be the main driver in recent market action and inversely related to the strength in the dollar. Tech is trying to lead the market higher and energy shares are still near their recent lows. I am about to exchange out FNM from the Optiondragon’s Leading Indicator Basket (LIB) for GOOG, RIMM, AAPL but I want to see how the market reacts to FNM today. Pick plays with a high probability of success, have focus and patience, run technicals through supply and demand. Great luck my readers and HappyTrading! Enjoy your weekend, do something fun!!!!
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