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February 05, 2009

ETF LAUNCH: High-Yield Municipal Bonds (HYD)

Money_stack_pic_3 Van Eck Global has announced the launch of a new ETF to track the high-yield municipal bond market.  This is under its Market Vectors program and is called the  High-Yield Municipal Index ETF (NYX: HYD). This looks like the first ETF designed to track the high-yield municipal bond sector.  This will allow investors to trade a basket of muni's without having to conduct due diligence on individual bond issuers. 

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Electric Utilities Need More Bad Weather (LNT, DUK)

Power_lines_pic Too cool in summer, too warm in winter add up to lower profits for electric utilities. That's the story today from both Alliant Energy Corp. (NYSE:LNT) and Duke Energy Corp. (NYSE:DUK).

Alliant reported full-year EPS of $2.61, down from EPS of $3.78 in 2007, but $0.02 better than analysts' estimates. Full-year revenue of $3.68 billion also beat estimates of $3.59 billion. The fourth quarter was less upbeat, though, with EPS from continuing operations of $0.46, down from $1.80 in the same period a year ago.

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Diamond Offshore Misses (DO, RIG)

Diamond Offshore Drilling, Inc. (NYSE:DO) reported fourth quarter EPS of $2.11 on revenue of $903.2 million. Analysts had been expecting EPS of $2.34 on revenue of $912.42 million. For the full year, Diamond earned EPS of $9.43 on revenue of $3.5 billion, missing estimates of EPS of $9.71 and revenue of $3.55 billion.

Dayrates and utilization are either essentially flat or up from a year ago and up sequentially. The company gave no 2009 guidance.  Diamond opened lower this morning and is down about 3%. It's also dragging Transocean Ltd (NYSE:RIG) down with it. Transocean is off about 1.5% on no news.

Paul Ausick
February 5, 2009

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The Rise & Fall, or Just the Fall of Factory Orders

Factory orders for the month of December fell as you would expect for the current economy.  But the results were even worse than weak estimates out there.  They fell 3.9% rather than the 3.4% decline economists expected.  On an ex-transportation basis, the drop-off was 4.4% and the durable goods figures were revised to a decline of 3.0% from fall of 2.6%.

This marks the fifth consecutive month of declines.  But there is something interesting here.  Because the front months in 2008 remained higher, the full year 2008 factory orders showed a gain of 0.4%.  That means that we are likely to see negative comparisons for a few more months before these even start to look normalized.  Don't be too surprised if these continue to look bad on a year-over-year basis through summer. 

Jon C. Ogg
February 5, 2009

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Rising CEO Confidence, Sort Of

Money_stack_pic_2 The CEO Confidence Index from Chief Executive magazine showed a slight up-tick in January.  Corpoate chiefs are still very cautious on labor conditions, and this index was just at another all-time low the month before.  But the reading is above the all-time lows.  Sometimes the criteria for good news is different from normal.

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Gap (GPS) Still Has Time To Close "Old Navy" And Save Itself

R218533_855025Sales at Gap (GPS) on a same-store basis were off 23% in January, which is breathtaking and sad. Revenue for the chain moved down from $935 million in the month last year to $757 million.

No part of Gap's business is doing well, but the one division that is close to drowning the entire company is Old Navy. It needs to be closed or have a huge number of its stores shuttered.

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Buffett Heads To Switzerland (BRK-A)

Buffett_image Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-A) have been out making fairly large bets in recent months.  It seems that distressed prices are tempting the Oracle of Omaha.  But what is interesting is that Mr. Buffett has invested roughly $2.5 billion into diversified Swiss Reinsurance Co. Ltd.

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GE's Immelt Says Markets Priced In Rating Downgrade; Has Cash Flow To Pay Dividend

GE's (NYSE: GE) CEO Immelt is making comments at WSJ event in New York this AM.. Immelt says a ratings downgrade wouldn't change the way he runs the company. He also said the markets have already priced in a credit downgrade. On the divided, Immelt says the company the has cash flow to pay it.

Shares of GE's have been making fresh 52-week lows daily on fears of a potential dividend cut or AAA rating cut, or both.

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Back to Normal: Wal-Mart Wins At Target's Expense (WMT, TGT)

Target_logo Walmart_logo Wal-Mart Stores Inc. (NASDAQ: WMT) appears to be back to its game of 2008 and late 2007 after being a bit cautious last month.  The company beat its January expectations, and it looks like this continues to be at the expense of Target Corp. (NYSE: TGT).

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Jobless Claims Set Ominous Tone for Unemployment

Jobless_lines_pic We just found out the new numbers for the weekly bread lines at the US Labor Department for the week ended January 31.  Initial jobless claims have now total 626,000.  This is a gain of 35,000 from the week before, which was revised to 591,000 from 588,000. This was the highest reading since October 1982 and the four-week average is up 39,000 to 582,250.  The number of continuing jobless claims keeps growing as well.  That rose 20,000 and now sits at 4,788,000.

Worker productivity in the quarter before jumped by 3.2% and we saw a gain of 1.8% on unit labor costs.  Maybe it is harder to lay off more productive workers. Productivity was expected to hit only +2.0% and labor costs were expected to grow over 3%.  If workers are more productive and cost less than expected, maybe businesses will fire fewer of them in hard times.  But that is just logic speaking rather than the world where companies have to cut costs as the hunker down for harder times.

This is all a bit of a side show until tomorrow's unemployment and jobless data.  The US is expected to see more than 500,000 non-farm payroll cuts and may see 7.5% unemployment in just 24 hours.

Jon C. Ogg
February 5, 2009

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