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Trader Talk with Bob Pisani

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  Tuesday, 11 Mar 2008 | 9:02 AM ET

Pisani: Feeding on the Fed

Posted By: Bob Pisani

Futures moved up nearly 20 points as the Fed announced expansion of it securities lending program, all designed to improve liquidity.

The Fed will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (it was previously overnight) and will now take other forms of collateral, including non-agency (i.e. non-Fannie Mae or non-Freddie Mac mortgages) AAA private label residential mortgage backed securities (this means jumbo loans--those over $417,000).

This action is being coordinated with other national banks. The agreements with the foreign banks is a way of providing these foreign banks with more dollars. The Fed is trying to buy more time to ease the pressure on liquidity; most traders are applauding the move.

Every time the Fed has done something, we have had a rally. Their move on Friday definitely blunted the effect of the poor jobs report.

This has improved the metrics, which have been poor. European bourses moved up, and the dollar has rallied.

Freddie Mac and Fannie Mae both rallied now up about 17 percent each.

Financials have also rallied; Lehman and Citi also up about 8 percent.

Elsewhere, HMOs are getting hammered as WellPoint cut its full year forecast to $5.76 to $6.01, from $6.41 a share. This as a result of misjudged 2007 cost trends and disappointing enrollment trends.

Wellpoint down 21 percent, Humana down 16 percent, United Healthcare down 11 percent, Aetna down 10 percent.

Aetna reaffirmed its 2008 guidance of $4.00 (analyst estimate is $4.04). Goldman Sachs cut the entire HMO group, saying that pressure to keep prices down combined with upward pressure on medical costs were threatening the industry with an "outright downturn."

Texas Instruments down 2 percent on a somewhat downbeat mid-quarter update.

GE CEO Jeff Immelt said that NBC Universal was not for sale. GE is our parent company.


Questions? Comments? tradertalk@cnbc.com

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  Monday, 10 Mar 2008 | 3:43 PM ET

Credit, NOT Spitzer Is Street's Problem Today

Posted By: Bob Pisani

While theNew York Times story on Eliot Spitzer is generating enormous email traffic on Wall Street, it is not the cause of the market's problems today. Stocks are again near the lows for the day, again on the same worries about credit, but here the problems are a bit more specific: they revolve around worries on margin calls and counterparty risks.

It's public information that big firms like Thornburg and Carlyle have had margin calls recently, and have been forced to sell assets. These forced sales generate new prices for paper, which in turn generate additional margin calls. This "vicious cycle" is one of the main problems facing the market, and the brokers are right in the middle of it.

There is an additional problem: counterparty risk. If I as a firm go out and buy protection in the form of a credit default swap, who is the counterparty and are they strong enough in the event I need them? This was never an issue until recently, but now buyers are regularly asking who the counterparty is. In many cases, it is brokerage firms, and queasiness about that is putting additional pressure on them.



Questions? Comments? tradertalk@cnbc.com

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  Monday, 10 Mar 2008 | 9:35 AM ET

Financials Top Market Concerns

Posted By: Bob Pisani

U.S. futures up slightly, just off highs of morning, European markets flat, Asian markets down 2-3 percent. Malaysia's KLSE Composite down 9.5 percent; Malaysia stock market temporarily halted during session; political unrest after major upsets by opposition party during weekend elections.

McDonald's keeps knocking the cover off the ball. February same-store sales were strong in the U.S. up 8.3 percent, but Europe stronger, up 15.4 percent. Asia/Pacific, Middle East, Africa up 10.9 percent.

Financials very much in the news this morning. Countrywidedown 7 percent on reports that the FBI has begun a criminal inquiry for suspected securities fraud .

MBIA said they were seeking a withdrawal from Fitch's rating system, that the value of Fitch's ratings were "limited at this time" and only adds extra volatility to its stock. They see a $200m in mark-to-markets losses from CDO business.

Annaly Capital up 6.4 percent, they raised their quarterly dividend to $0.48 from $0.34. The company said, "Our leverage has been running at the lower end of our range, which enables us to manage portfolio financing operations with our diverse and strong roster of counterparties, including handling the haircut adjustments that are typical for volatile periods like this. Moreover, the vast majority of our assets are Agency pass-through MBS, the most liquid and financeable securities in the Agency space."

Blackstone reported earnings of $0.08, estimates were for $0.19, down 3 percent. Dividend (8.2 percent) appears safe . They are holding a conference call at 11 AM this morning.

Morgan Stanley cut estimates of several large-cap banks due to weaker market and credit condition, and said they saw a higher probability of "more cuts coming." Cut estimates for Bank of America by 21 percent, Wachovia and Citi by 20 percent.

Questions? Comments? tradertalk@cnbc.com

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  Friday, 7 Mar 2008 | 11:44 AM ET

Why The Stock "Nose Dive" Did An About Face

Posted By: Bob Pisani

What happened to our nosedive? After a down open, stocks continue to hold up well in what could only be described as a fairly flat market--about even number of stocks advancing to declining, modest volume, financials and techs modestly to the upside. Only a few metals companies like Freeport McMoran and Alcoa are down a couple percent.

So what happened? Fast money traders came in and aggressively bought financials at the open, then took profits a half hour later. Some financials shorts covered as well. Good for them. Now we need real money to sustain the move off the lows, and that's where we will likely have a problem. The general trend has been to buy dips, sell rallies, and believe it or not we did have a rally today.

But now we are in "sell on the rally" phase, and stocks are a bit weaker already. The concern is that we are now easily set up to drift lower for the rest of the day, as the fast money has already made money and may just sit on the sidelines.


Questions? Comments? tradertalk@cnbc.com

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  Friday, 7 Mar 2008 | 9:18 AM ET

S&P Futures Down 14 on Payrolls Report

Posted By: Bob Pisani

S&P futures down 14 on the nonfarm payroll report, which showed a loss of 63,000 jobs in February and downward revisions in December and January. That's two straight months of job losses (the first two-month drop in jobs since May and June 2003).

The Fed is raising the size of the March TAF auctions to $50 billion from $30 billion. Remember, these are short term loans (28 days) and their purpose is to provide additional liquidity to the system.

Ambac priced $1.25 billion of common shares at $6.75 per share (below yesterday's close of $7.42), and $250 million in mandatory convertibles, making good on their plan to raise $1.5 billion in capital. It is heavily dilutive, nearly tripling the common shares outstanding.

National Semiconductor up 6 percent as earnings met expectations. National Semi also said sales in the current quarter (Q4) would range from $440 million to $460 million (estimates are about $462 million).

Short-selling positions hit a record at the NYSE during the two week period ending Feb. 29.



Questions? Comments? tradertalk@cnbc.com

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  Thursday, 6 Mar 2008 | 1:05 PM ET

New Ways to Play Gold

Posted By: Bob Pisani

Gold's at a new high, what to do? How about shorting gold with a new Exchange-Traded product?

Talk about timing--a few days ago Deutsche Bank launched three new Exchange-Traded Notes (ETNs) linked to a gold index they maintain.

Wanna go long gold? How about doubling your bet? The DB Gold Double Long ETN gives you two times the monthly performance of the gold index plus a monthly T-bill index return, which is one of the factors that distinguishes an ETF from an ETN.

If this whole gold rally sounds suspect to you, weak dollar or not, how about shorting the whole thing? The DB Gold Short ETN offers the inverse of the old index plus a T-bill index return.

And if you're really convinced the rise in gold is a sham try the DB Gold Double Short ETN .



Questions? Comments? tradertalk@cnbc.com

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  Thursday, 6 Mar 2008 | 9:25 AM ET

Dollar Falls To New Low But Retail Rises In February

Posted By: Bob Pisani

The U.S. dollar hit a new low as the Fed's Pianalto says the U.S. economy has stalled . Dollar weakness again helping oil. Jumbo mortgage lender Thornburg Mortgage failed to meet a margin call of about $28 million which has triggered cross-defaults.

The Bank of England stuck to its inflation fighting credentials byleaving rates unchanged at 4 percent and the ECB did the same

Retail sales: Retailers reported retail sales for February up 2 percent , according to RetailMetrics. That is at the high end of expectations.

Discounters and club stores are doing very well:

--Wal-Mart beat up 2.6 percent, better than 1.1 percent. They expect March comps to come in between 0 to 2 percent (thanks a lot!), with some recovery in discretionary items.
--Targetwas a bit better.
--Costco , BJ's Wholesale , and Big Lots , which reported yesterday, were all better than expected.

Teen retailers mixed: Aeropostale and Hot Topic were better than expected, but American Eagle lowered first quarter estimates

Department stores struggling: JC Penney down 6.7 percent, well below expectations, Nordstrom's down 3.3 percent (3 straight months of negative comps for Nordstrom) Nieman Marcus down 7.4 percent.

Apparell mixed: Ann Taylor a little better than expected, but Gap, Abercrombie, Chico's worse than expected; TJX up 3 percent, a bit shy of expectations but still pretty good

March will probably be difficult for retailers, because last year Easter fell on the last day for the fiscal month and caught a long Easter selling period, so overall comps were up 6 percent, but this year Easter is very early and in years when Easter is early the colder weather has not usually benefited retailers.


Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 5 Mar 2008 | 4:11 PM ET

Ambac's Impact on Markets

Posted By: Bob Pisani

Ambac down 12 percent and the rest of the market dropped, as Ambac announced a $1 billion common stock offering and $500 million equity units (which must be converted to common stock by 2011).

Why the drop?
First, no white knight came in -- no bank that offered to bail them out -- which was a sign to investors.

Second, there may have been some disappointment that this deal was merely dilutive; some were hoping they might be bought outright.

Third, traders noted that this does nothing to relieve the negative outlook the ratings agencies have on them. There is the possibility that Ambac could need to raise more money in the next few months.

Finally, the company has announced that they are essentially in runoff, meaning they are taking in little if any new business -- even in the muni business. Also, they are paying $100 million in dividends to the holding company from the $1.5 billion in proceeds.



Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 5 Mar 2008 | 12:19 PM ET

Weak Dollar Lifts ALL Key Commodities

Posted By: Bob Pisani

I know that oil is getting a lot of buzz today: It's up 4 percent on reports that Venezuela is moving troops to the Colombia border and on a strong Dept. of Energy report on oil.

But the fact is that it is the weakness of the dollar -- another record low against major currencies -- that is lifting ALL major commodities today, with new highs in copper, silver, gold, and heating oil.

As a result, commodity-related stocks across the board -- including steel, copper, aluminum, gold, fertilizer, etc. -- are all up roughly 3 to 6 percent.



Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 5 Mar 2008 | 11:49 AM ET

Despite ISM, Some Sell Into Rally

Posted By: Bob Pisani

Despite the stronger ISM services index , the market is clearly seeing selling into the rally.

One active trader who went long late yesterday sold a portion of his gains this morning. While emphasizing he was not going back to shorting the market, he did say "we have not been getting paid to hold for big moves -- only trades."

When will he stop selling into modest rallies? "Until the market proves we can hold longer." There's the problem: Professional traders do not trust the rallies yet.

Nice move in oil service stocks, as Exxon Mobil has said they will keep capital expenditures above $125 billion for the next five years. Street has been long oil service stocks on exactly these assumptions.



Questions? Comments? tradertalk@cnbc.com

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About Trader Talk with Bob Pisani

  • Direct from the floor of the NYSE, Trader Talk with Bob Pisani provides a dynamic look at the reasons for the day’s actions on Wall Street. If you want to go beyond the latest numbers— Bob will tell you why the market does what it does and what it means for the next day’s trading.

 

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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