Companies featured in this edition of the newsletter: ACTC, CHIP, CVM, DKAM, ENZ, IWEB, MBCI, MFGD, PHC

Markets rebounded last week, on the strength of upbeat productivity and manufacturing reports that led to solid gains in all of the major indices. Despite news that the unemployment rate had hit its highest levels in 25 years, the Dow managed to end the week up 310 points, gaining 3.2% on the week to close at 10,023, up 14.2% on the year. The Nasdaq posted a gain of 3.3%, closing at 2112 and extending its yearly gains to 34%, while the S&P 500 and Russell 2000 advanced 3.2% and 3.1% respectively on the week to bring their YTD performance to 18.4% and 16.2%.

Several better than expected economic reports provided buying incentive throughout much of the week, as investors managed to shake off the previous week’s negative bias to send indices into positive territory

...

Bank of America Corp. (BAC) plans to sell bonds worth $2 billion backed by auto loans that are eligible for the Federal Reserve’s Term Asset Backed Securities Loan Facility (TALF) program to boost lending and maintain credit flow to the broader economy.

Investors can procure cheap loans for buying newly created consumer loan-backed, new and existing commercial mortgage-backed bonds. The deadline for investors to request loans for buying asset- backed debt for the seventh round of the TALF is Sept. 3.

The deal, called BAAT 2009-2, will be jointly led by Bank of America/Merrill Lynch, Barclays Capital (BARC), Citigroup Inc. (C), Credit Suisse Group (CS) and Royal Bank of Scotland (RBS). Last month, Bank of America sold the first deal eligible under TALF of $4 billion auto-loan backed deal at 135 basis points over a benchmark.

TALF was set up in March to reinvigorate

...

The probably bankruptcy of CIT Group Inc. (NYSE: CIT) could have major implications on the retail and manufacturing sectors this week, as many related companies are reliant on the financing giant.

With options running out over the weekend, CIT advisors began preparations for a bankruptcy filing. As of Sunday, JPMorgan Chase & Co. (NYSE: JPM) and Morgan Stanley (MS) were talking with other banks about a debtor-in-possession loan, used to fund a company’s operations after it seeks court protection from creditors, Bloomberg News reported.

Bondholders held calls last week to discuss whether to swap some claims for equity to reduce indebtedness. Thomas Lauria, a lawyer at White & Case LLP, told Bloomberg that a group of CIT creditors he represents offered to provide $3 billion in new loans to bridge CIT to an out-of-court restructuring or an orderly bankruptcy, but had yet to hear back from CIT management.

“It seems CIT was

...

BULL - June 1: Deutsche Bank US equity analyst Binky Chadha forecasts S&P 500 at 1060 by 2009 year-end, citing improving corporate profit margins.  He said aggregate profit margins for S&P 500 “remains well below the average of the last few years, implying considerable potential upside over the medium term.”

BULL - June 1: JP Morgan Chase analyst Thomas Lee forecasts 2009 year-end S&P 500 index at 1100.

BULL - June 1: Bank of America/Merrill Lynch analyst David Bianco forecasts 2009 year-end S&P 500 index at 1100.

BEAR - May 30: Morgan Stanley equity analyst Jason Todd says sell this S&P 500 rally. He says Morgan Stanley does not see large upside above 825-850.  He said,  “In the rush to buy a cyclical recovery, it seems earnings or valuation no longer matters. We would be comfortable with this view if the earnings trough was closer, but it is not.”

BEAR - MAY 28: Berkshire

...

By John Ward (previously published at bigwavetrading.net)

No doubt about it, this market’s price/volume action continues to impress. When we rally, we do so on heavy volume; when we pullback, volume contracts and, more than that, we have gotten into the habit of closing in the upper part of the day’s range. Just what you want to see. Yet don’t be lulled into thinking that all is now hunky-dory (the Put/Call falling to .60 tells me many have). This rally, while impressive given the gains of the past month, still leaves much to be desired.

As it stands now, only the Nasdaq trades above its downtrend line:

...

Highlights include American International Group, Inc. (AIG), Citigroup Inc. (C), Bank of America Corp. (BAC) and Goldman Sachs Group, Inc. (GS).Yesterday, in response to the furor over the American International Group, Inc. (AIG) bonus situation, the House passed a 90% tax on all bonus payments from firms getting more than $5.0 billion in TARP funds.There are 2 arguments that have been made against this tax, one serious and the other the height of hypocrisy.The serious argument is that this tax amounts to an unconstitutional ex post facto bill of attainder. It is a serious objection, but on close inspection I don't think it will hold up. (I'm not a constitutional lawyer, and it is likely to be a close call in the courts.)The first reason it is not likely to hold up is that it is ...

Highlights include American International Group, Inc.  (AIG), Bank of America Corp. (BAC), Citigroup Inc. (C) and Wells Fargo & Co. (WFC).Apparently the contracts that were signed by AIG (AIG) with its executives in its Financial Products unit -- the part of the company that wrote all the Credit Default Swaps and sank the company and almost sank the world financial system -- are iron clad. So says Treasury Secretary Tim Geithner and AIG CEO Ed Liddy (installed at only $1 a year after the mess had been made).I'm a finance and economics guy, not a lawyer, but it does strike me that there are probably several grounds on which the contracts are at least ambiguous enough that the company should have avoided paying them. If a company knows it is in financial trouble, it cannot strike sweetheart deals with some ...