Chicago, IL – November 10, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: JP Morgan Chase (JPM), U.S. Bancorp (USB), Zions Bancorp (ZION), SunTrust Banks (STI) and PNC Financial (PNC).

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Here are highlights from Monday’s Analyst Blog:

Bank Failure Tally Reaches 120

The FDIC entered into a purchase and assumption agreement with Ameris Bank, Moultrie, Georgia, to assume all of the deposits of United Security Bank; Liberty Bank and Trust Company, New Orleans, Louisiana, to assume all of the deposits of Home Federal Savings Bank; Alerus Financial, National Association, Grand Forks, North Dakota, to assume all of the deposits of Prosperan Bank; Central Bank of Kansas City to assume all of the deposits of Gateway Bank of St. Louis; and East West Bank, Pasadena, California, to assume all of the deposits of United Commercial Bank.

In order to replenish the declining fund, the FDIC board recently proposed that approximately 8,100 insured U.S. banks and savings institutions should pay fees for three years in advance. Also, the regulators are considering requesting the healthy banks to bail out the government as soon as it is necessary to replenish the deposit insurance fund, which has slipped to 0.22% of insured deposits, below the mandated minimum of 1.15%.



In the second quarter of 2009, the number of banks on the FDIC's list of problem institutions grew to 416 from 305 in the first quarter. This is the highest since the savings and loan crisis in 1994. Increasing loan losses on commercial real estate are expected to cause hundreds more bank failures in the next few years. The FDIC anticipates the bank failures to cost about $100 billion over the next four years.



The failure of Washington Mutual last year was the largest in U.S. history. It was acquired by JP Morgan Chase (JPM). Other major acquirers of failed institutions since 2008 include U.S. Bancorp (USB), Zions Bancorp (ZION), SunTrust Banks (STI), PNC Financial (PNC), to name a few.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

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The company with a cumulative capacity of 8,000MW is the second largest nuclear power generator in the U.S. Entergy operates through five subsidiaries: Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans.
 
Entergy’s revenues fell 22.8% year over year to $2.5 billion in the quarter with Electricity (down 24%), Natural Gas (down 46.6%), and Competitive businesses (down 16.4%). Electricity revenue of Entergy in-line with the industry trend was affected most with the industrial customers. Entergy’s volume sales to industrial customers fell 9.7%, while overall volume loss was 5.9% in the quarter.

However, the company was able to improve upon the overall headcount of customers year over year by 0.7%, barring the industrial customers, which shrunk by 3.4%. With the economy in doldrums, Entergy’s industry peers reporting on Tuesday – Allegheny Energy (AYE) and Duke Energy Company (DUK) also shared the industrial customer downslide.
 
Entergy revised its fiscal 2009 EPS guidance on account of an expected slide in power prices and charges related to the planned spin-off of its non-utility nuclear business into a separate company, Enexus Energy Corporation. GAAP EPS estimate for the fiscal now stands at $6.00 – $6.60 and operational EPS estimate at $6.20 – $6.80. This is in-line with the Zacks Consensus Estimate of $6.57 for the fiscal year.
 
We currently rate Entergy shares as Neutral, expecting the stock to perform in-line with the broader market.

Entergy wants to spin off the nuclear plants as a new company – Enexus Energy Corp. The nuclear plants are Pilgrim in Plymouth, Massachusetts; Vermont Yankee in Vernon, Vermont; Indian Point in Westchester County, New York; Fitzpatrick in Oswego County, New York and the Palisades plant in Covert, Michigan.

Entergy plans to finish the spin-off of its non-utility nuclear power business by end of 2009. The spin-off will leave the company with five regulated utilities and other assets in the Gulf States region.

This news could not have come at a better time for Entergy. The company recently lowered its guidance for both the second quarter and the full year. It will release earnings for the quarter on August 4, 2009.

New Orleans-based Entergy is primarily engaged in electric power production and retail distribution operations. The company owns and operates power plants with approximately 30,000MW of electricity generating capacity. It delivers electricity to 2.7 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy Nuclear is the second-largest nuclear generator in the U.S., with interests in six nuclear plants. We maintain our speculative BUY recommendation on ETR.

Shares have jumped more than 8% in afternoon trade on higher-than-usual volume of about 1.1 million, compared to the average daily volume of approximately 706,000.

The casino operator said that revenue was largely flat at $266 million as growth in its Lumiere Place property was offset by declines in L'Auberge du Lac, Boomtown New Orleans and Belterra Casino Resort properties.

Although the full-year consensus estimate has slipped by a penny over the past month, it has moved up by 4 cents, or 25%, over the past 2 months and is currently pegged at 20 cents per share.

Pinnacle is a Zacks #3 Rank ("Hold") company.

• Goldman Sachs (NYSE:GS) added Discover Financial Services (NYSE:DFS) to its Conviction Buy List, taking off shares of Bank of New York Mellon (NYSE:BK)

• Goldman Sachs (NYSE:GS) posted positive comments ahead of Friday's forthcoming General Electric (NYSE:GE) numbers, saying it sees it earnings to beat Street estimates of 23 cents a share

• CIT Group (NYSE:CIT) warned of a possible "crisis" for 30,000 retailers should its failure to raise funds drive the firm into bankruptcy as it attempts to improve its near-term liquidity position

• Microsoft's (NASDAQ:MSFT) annual partner conference in New Orleans begins today, with reports expected on online software versions as well as plans for its "cloud" operating system, its next Office Suite software version, and pricing and plans for its Azure operating system

• Philips (NYSE:PHG), Europe's largest consumer electronics firm, surprised with second quarter earnings of $62 million, down 94% from a year ago, but ahead of Street estimates for a loss of $175 million, as well as offering optimistic comments of an improved second half helped by cost-cutting measures

• Rockwell Automation (NYSE:ROK) was upgraded by JP Morgan (NYSE:JPM), with a price target of $35, up from $29

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Here are highlights from Monday's Analyst Blog:

Amylin Update Post ADA Meeting

This past weekend, Amylin Pharmaceuticals (AMLN) presented several abstracts and oral presentations at the American Diabetes Association (ADA) meeting in New Orleans. At the meeting, Amylin presented long-term follow-up data from the 74-week open label portion of the DURATION-1 program that demonstrated clear and sustained improvement in HbA1c for patients taking exenatide once weekly long-acting release (LAR).

The data also show improvements in fasting plasma glucose and weight loss while on LAR. Data from the previously reported DURATION-2 program also demonstrate that once weekly LAR offers greater glycemic control, with an added weight loss benefit over Takeda's Actos and Merck's (MRK) Januvia. Exenatide LAR remains extremely well positioned to capture significant market share in the type-2 diabetes market if it is approved in March 2010.

"If" remains the operative word, however. Lingering concerns over the potential that exenatide causes pancreatitis, and newly found fears on potentially increased risk in C-cell malignant carcinoma of the thyroid in the GLP-1 class, have knocked Byetta (exenatide twice daily injection) significantly down off its previous growth trajectory.

Amylin management presented interim results from a retrospective safety analysis at ADA, seemingly quashing the pancreatitis risk. Data on over 25k patients taking Byetta shows no significant increased risk of developing pancreatitis at the 95% confidence interval. Still, however, the big risk to Amylin's stock is that FDA may ask for additional data on the LAR formulation prior to granting approval.

Longer-term, intense competition in type-2 diabetes market may limit Amylin's profitability. In the next few years, the potential exists that we will see up to three more GLP-1 molecules: Novo's Victoza (liraglutide), Glaxo's (GSK) Syncira (albiglutide), and Roche's Ipsen (taspoglutide), plus another DPP-IV inhibitor in Bristol's (BMY) Onglyza (saxagliptin) on the market. We note that Glaxo's Syncira, currently in the initial stages of a phase III program, is also a once weekly injection.

However, the most concerning potential competitor is Amylin's current partner on LAR, Eli Lilly (LLY). At ADA, Lilly presented positive data from a phase II program called GBCJ demonstrating the effectiveness of its own internally developed GLP-1 molecule, LY2189265. LY2189265 is a once-weekly injection a novel-engineered fusion protein, consisting of a dipeptidyl peptidase-IV (DDP-IV) protected GLP-1 analog linked to a fragment of immunoglobulin G4.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=2677

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4580.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

For an explanation of the contrarian stance that makes Schaeffer's so unique, check out a recent version of Trading Tools.

According to Zacks, put players pelted MMR on Thursday, with single-day volume soaring to nearly 19 times the norm. More specifically, the stock saw roughly 15,700 puts change hands, compared to its average daily volume of fewer than 900 contracts.

The bombardment sent the equity's Schaeffer's put/call open interest ratio (SOIR) - which measures options slated to expire within 3 months - skyrocketing overnight from 0.42 to a new pessimistic peak of 2.38.

Digging deeper into the data, we find that most of Thursday's options players honed in on MMR's May 5 put, which saw roughly 14,750 contracts cross the tape. This strike is now home to peak put open interest in the soon-to-be front-month series (April options expire after the close today), with 15,270 contracts in residence.

However, not all of Thursday's activity was bearish in nature. At 10:56 AM Eastern, a block of 13,650 May 5 puts changed hands at a bid price of 50 cents, suggesting they were sold. While put buyers hope the underlying stock's price will decline, a put seller is neutral-to-bullish on the stock. In this case, the put seller's goal is for MMR to remain above $5 before options expire on May 15, as the May 5 put would then expire worthless. This would allow the put seller to retain the entire premium received from the put sale.

But what makes the aforementioned trader so sure the shares of MMR won't decline within the next month?

He could be positioning himself ahead of the company's turn to pay the earnings piper. Unfortunately for the put seller, McMoRan hasn't performed well under the harsh rays of the earnings spotlight.

However, it's not just the aforementioned option trader who has high hopes heading into the firm's earnings release. Shares of MMR currently harbor 4 "buy" or better ratings, Zacks reports, compared to a lone "hold" and nary a "sell" in sight.

In conclusion, should McMoRan extend its streak of earnings disappointments, shares could take a hit. Plus, a discouraging earnings report or gloomy guidance from the firm could motivate the bulls in the brokerage bunch to reevaluate their positions. A round of downgrades and/or price-target cuts from this group could place additional selling pressure on the stock. And speaking of pressure, a May 5 put seller could also feel the heat should MMR fail to maintain its foothold atop the 5 level by May options expiration.

Zacks Investment Research

Monday’s open interest numbers showed another substantial decrease in gold open interest…this time 4,551 contracts. But in silver, o.i. rose 1,191 contracts to 93,757. Was it short selling? I’ll let you know on Saturday morning.

Talking about silver, here’s a graph (courtesy of Gene Arensberg) showing Comex silver stocks from October…

The European Commission forecast on Monday that the 15-country Eurozone will grow a meager 0.1% next year - at best.

The global financial crisis has hit Europe like Hurricane Katrina flattened New Orleans. And we expect this is a clear indicator of how the U.S. will fare as we approach 2009.

What this means to investors is that the major emerging markets such as China and India may indeed be the place for their money. China and India are certainly down from the commodity supercycle heyday, but their growth far outstrips what we’re seeing (and can expect to see) in Western…

The European Commission forecast on Monday that the 15-country Eurozone will grow a meager 0.1% next year - at best.

The global financial crisis has hit Europe like Hurricane Katrina flattened New Orleans. And we expect this is a clear indicator of how the U.S. will fare as we approach 2009.

What this means to investors is that the major emerging markets such as China and India may indeed be the place for their money. China and India are certainly down from the commodity supercycle heyday, but their growth far outstrips what we’re seeing (and can expect to see) in Western…

The industry received a boost when clean energy tax credits were added to the $700 bailout bill to help its passage from Congress. But fears of falling demand and oversupply have weighed on solar stocks. The Claymore/MAC Global Solar Index ETF (NYSE:TAN) fell 35% in the first eight trading days of October.

William Patalon III, however, says new mapping technology and advances that have made solar power more eco-friendly will boost solar stocks in the long run.

This from Money Morning:

The owners of homes and businesses in 25 US cities will soon be able to use a free website to determine their rooftop’s solar-energy potential – thanks to a new specialized mapping program that has the backing of the US Department of Energy.

Engineering giant CH2M Hill Cos. Ltd., an employee-owned firm with about $5 billion in annual revenue, has received a “small-but-noteworthy” contract of $6 million under the U.S. Solar America Initiative to provide raw data on solar-power potential, MarketWatch reported.

The contract will pay the expansion of the city of San Francisco’s recently posted solar energy map. It will use advanced 3-D modeling and aerial imagery and will be available for public access through a special web portal.

Punching an address into the city’s search engine pulls up data on the estimated amount of solar photovoltaic energy that could be installed on a specific roof. Additional available data includes the potential electricity-cost reduction and the potential reduction in dioxide/greenhouse gases, the company said.

The website also provides information on installing a photovoltaic system, including contact information for local solar installers.

David Herrmann, CH2M Hill’s director of client solutions, said the mapping program could potentially replace the current method of assessing solar energy potential.

“Right now, to get a solar assessment on a roof, you have to call up the solar installer, they bring their ladder, a guy wanders around on your roof, and two or three weeks later you get a report,” Herrmann told MarketWatch. “With this technology, you could do it accurately and quickly without having to roll a truck.”

Herrmann said the company’s solar maps use a format from Google's (NASDAQ:GOOG) Google Maps to display the data, but that CH2M Hill collects the images through its own proprietary process with Esri Inc. – A Redlands, Calif.-based company that’s recognized as a leader in geographic information systems (GIS) also supplying technology for the effort.

The solar map is also compatible with the Microsoft (NYSE:MSFT) Virtual Earth display, he said.

Herrmann said the Internet-mapping business remains healthy, with companies routinely paying for airplane flyovers to provide panoramic shots of streets and buildings all across the United States.

The 25 cities for which this service will be available will include: Denver, Houston, Philadelphia, San Jose, Calif.; Santa Rosa, Calif.; Seattle; Ann Arbor, Mich.; Austin, Tex.; Berkeley, Calif.; Boston, New Orleans, New York City and Tucson, Ariz.

Also, advances in technology have made solar cell production even more eco-friendly.

A recent study by the Brookhaven National Laboratory in Upton, N.Y., found that for each unit of energy produced by solar cells, the pollution that’s emitted during the cells’ manufacture is only 2% to 11% the amount produced by power plants in the United States and Europe.

In fact, newly developed solar cells can "pay back" the energy required for their production in just one to three years. And improvements in manufacturing efficiency could reduce emissions from solar power by another 50% in five to 10 years, according to a recent report by Money Morning.

There have been tremendous advances in the production and efficiency of solar technologies.

And those advances couldn’t have come at a better time. Political support for the industry is at an all-time high as oil prices and environmental awareness both continue to rise.

The Englewood, Colo.-based CH2M Hill has 23,000 employees and ranked 54 on Fortune magazine’s 11th annual “100 Best Companies to Work For” list, a ranking that was published in late January. It’s the third time the company has ranked among those top-tier companies. CH2M Hill has also been recognized as a “Most Admired Company” by Fortune for the past five years.

CH2M HILL has been repeatedly recognized for its competitive compensation-and-benefits packages, employee ownership, and reputation for landing challenging projects, some the most recent include:

• Program management for the seven-year, $5 billion expansion of the Panama Canal.

• Overseeing the design and construction of the venues and infrastructure for the London 2012 Olympic and Paralympic games.

• The engineering and construction of the Xcel Energy Inc.’s (XEL) 580-megawatt gas-fired High Bridge Power Plant near St. Paul, Minn.

• Providing program management consulting services for the $2 billion improvement program for India’s Mumbai airport.

• Engineering services for the Southern Seas Desalination Plant in Perth, Australia, which will use “green” energy to supply 20% of that city’s water needs.
• Managing a $10 billion military-base-relocation program for the U.S. and South Korean governments

Alternative Energy Update: Can Your Rooftop Lower Your Electricity Bill?

So goes the title of one of Shakespeare's plays, and as I am slowly adjusting to life in Lausanne and its beautiful environnements I am forced to admit the truthfulness of this axiom. Consequently, and while I have now settled down in a nice shared apartment I feel the need to confess my readers the tremendous difficulty with which I, finally, managed to secure housing in Lausanne. I will not belabor you with details, but merely pass on my humble advice that if you are ever going to Lausanne (indeed, the entire Vaud canton!) looking for short term rental accommodations ... bring valiums or deep pockets, and preferably both!

In any case that is now well past me and to prove that I am now safely and nicely housed I have chosen to flatter this entry with a picture, taken from my room, showing the view of the lake.

The only, and quite annoying, thing I am missing is internet at home. That should be sorted this week, but until then, I am living life like a nomad trafficking from one hot spot to another.

However, and although I have managed to emerge unscathed from occasional thoughts of throwing in the towel and returning to the solace of my Northern home, it is still too early to say whether the story written on the financial and economic year 2008 will also adhere to the adage provided by Shakespeare. Consequently and looking forward to the le fin de l'année 2008 as well as the most recent waves of market activity, I would note the following in terms of what I have been, and will be, looking at.

Paulson Fires the Bazooka

First of all it is of course impossible not to briefly note the nationalization of US mortgage giants Fannie and Freddie Mae. The fact that it is now reality is not in itself surprising. As I have argued before, I think the script of the unfolding drama was written already back when the shares of FRE and FAN plummeted and foreign holders of agencies all chimed the same choir of relative irrelevance as they considered their papers backed by the US government. When congress later shipped off the now fired Bazooka to Paulson's office it was only a question of time before a proposal was put on the table. I will leave it to more informed minds to nit pick the actual deal, but merely note that it seems that common and preferred stock holders will see nothing but the vapor of what was once portfolios of Freddie and Fannie stocks.

From a slightly more wonkish perspective I would also like to reiterate the point conveyed by David Reilly and Peter Eavison on preferred stockholders in their small WSJ piece (hat tip: Felix Salmon). You see, I was also told at my corporate finance sessions to treat preferred stock as equivalent to debt and while this may still apply for cash flow claims when the going concern is, well, still going it may not hold once the butcher's bill is to be settled.

In a more fundamental light Paulson's swan song as treasurer was of course always going to be about Fannie and Freddie's creditors. As such, it will be interesting to see how they, and especially the foreign SWF and central bank vintage, will dissect the deal. One technical point here would be the extent to which spreads will decline in any meaningful way after the nationalization. In general though, this specific debacle is nothing but a few, albeit distinctive, steps in the US's dance macabre with its creditors in the form of predominantly foreign owned state and central bank investment vehicles. One important point in this respect, as I have argued extensively, is the nature of inflows into the US and how they can be seen as a natural counter product of foreign economies’ thrift. Add to this that the US still resides over the most liquid asset market in the world and you have an important part of the equation. I still do think this is an important point to make clear in a world where Bernanke, Greenspan and other of their US ilk are exclusively blamed for the mess in which we are currently sitting. Stephen Jen appears, I think, to be right on the money in his account of how foreign central banks will see the nationalization. They don’t like it, but they got what they wanted in terms of the US government’s guarantee that whatever plug is left in the Bretton Woods II edifice it would not be pulled by allowing Fannie and Freddie to fail. What remains to be seen though is whether investors will shun agencies and buy treasuries in stead. Obviously and if we assume that the spread does not narrow, any substitution away from agencies would actually help the US finance its ongoing liabilities at a lower cost.

In general and as you might expect, the econsphere is awash with thoughts on this. I would in particular recommend John Hempton and his recapitulary post on his thoughts as well as Barry Ritholtz' presentation of some of the gory details.

Europe Deteriorates Further, Will Trichet Fold?

This is starting to look almost as de-coupling in reverse as the data from Europe now indicate that the Eurozone as well as its immediate surroundings (e.g. the UK and many parts of Eastern Europe) are faltering. The ECB chose as expected to keep rates steady and although Trichet did not have the courage to openly voice a dovish bias (which would probably have gutted the Euro) it seems clear that the ECB has left its distinctive hawkish bias that was maintained for the most part of H01 2009. This is understandable, but the key question remains whether Trichet et al. will move in already towards the end of this year with a rate cut. As always, Germany remains the key and while the Q2 slump was expected due to the above par Q1 figure I really don't see how Germany can expect to recover in any meaningful sense of the word. I think it is crucial to consider the nature of Germany's growth path as one of export dependent as well as the general slowdown in global activity.

It should be noted in particular in this regard that private consumption has actually contracted in Germany over the last three quarters. Now that exports are faltering Germany, not unlike New Orleans during the hurricane Katrina, will see its last fortification be washed away. Adding to the gloom, we learned yesterday how German exports continued to decline in July with a rate of 1.7% from June. Especially the strong trade link, on the margin, with Eastern Europe is important to watch and with all the problems brewing to the east at the moment, one cannot help but feel that Germany may be the first to take a blow.

On that note, it also appears that all those looking for a soft landing in the Baltics may now finally have to concede to the rest of us. The latest news of the region informs us that Latvia joined Estonia in seeing a recession in Q2. According to Nordea, both Latvia and Estonia are set to contract on an annual basis in 2009 and that, in my book, is a hard landing. What happens next will be an important test for many a hypothesis. First of all there is the question of the pegs. My feeling is that the pegs will come under scrutiny as per reference to the lacking mechanism for correction. Basically, Latvia and Estonia now needs to export and subsequently reduce their external balance, but that may be difficult as long as the currencies are bolted to the Euro. Ultimately though, much will depend on the ECB here and given my predictions that they too will fold in 2009 a weaker Euro may shield the pegs from too much heat. Yet, one should not be fooled. The risk and, in fact, need of substantial wage and price deflation seem imminent and it is unclear how this will play out politically.

The Dollar Smile Continues

Just as the USD was beaten like the proverbial mule in H01 2008 so is it shining like a bright start so far in H02. I think that two key points stand out. One is the recoupling of e.g. New Zealand and Australia to the US style response to the credit crisis of cutting interest rates. Obviously, the rate differential still offers much juice for potential bets on the carry trade wheel, but the it is clear that the market has moved with interest rate decisions. The Aussie consequently moved close to the $0.70s, at 0.80, the past week and the Kiwi was also scythed as it touched $ 0.67.

In terms of the Euro and Sterling the price action have also, so far in H02, been extraordinarily positive for the USD. Especially, the sentiment on the UK economy have chilled decidedly as of late with the economy posting zero growth rate in Q2 as well as a barrage of bad news. Not least the continuing black hole of value destruction that once was a burgeoning housing market is weighing heavily on markets and, by consequence the BOE’s resolve as rates were kept a 5% last Thursday. Even with the growing storm clouds over the economy, the subsequent market reaction towards the pound is still quite extraordinary. Sterling was thus absolute pummeled last week as it declined to $1.77ish against the USD; these are levels not seen since April 2006.

As regards the EUR/USD, Trichet and his council continued to hold on to their put option entitling them to raise rates even as the economic structure crumbles. With recent comments by council member Jürgen Stark that second round effects have indeed materialized, the ECB is frantically trying to throw gasoline on what must now be a dwindling blaze around those hikers still trying to catch a thrust of heat from the hawks’ camp fire. But will it work? It does not seem that investors are buying the ECB anymore and that ultimately may one of the dear lessons to be paid by the ECB in its most valiant attempt to stay vigilant on inflation.

Apart from the interest rate differential story and also what essentially prompted the invocation of the dollar smile in the first place, there is the point on how funds tend to flow back to the US in times of trouble. This would then be a plain vanilla story of safe haven currencies and how the USD naturally commands such a position, not least in the context of US domestic investors who are otherwise, and very eagerly, shipping funds abroad. Stephen Jen consequently suggests how especially US life insurers, mutual funds, and private pension funds will behave in a manner which may be conductive for the USD (i.e. by repatriating some of their non USD holdings). Elsewhere, Jen also makes the interesting point that the rally in the EUR/USD may not have ended as private investors are yet to reduce their long exposure towards the Euro. Given the ultimate argument of the USD as a safe haven unwinding of this exposure would bring further upside for the USD.

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Stephen Jen also makes the following point with respect to the JPY and the tug-of-war between risk aversion and capital outflows.

“While there might be modest safe haven flows into the JPY, we believe that the magnitude of the potential JPY rally will likely to be limited.  After the Bear Sterns crisis in mid-March, USD/JPY did sell down to 97.  However, after the GSE crisis in mid-June, USD/JPY only managed to correct to 105, disappointing many hedge fund investors.  We believe that Japanese investors have learned to keep capital outside Japan, by diverting their investments from Australia and New Zealand to the likes of Brazil and Turkey.  We expect this pattern of investment to persist, and therefore USD/JPY should stay higher than the fair value.  The key risk is that, if the global economy slows dramatically, even BRL and TRY could be jeopardised, and this could trigger a more powerful repatriation back to Japan.”

I would file this under ‘I wish, I’d said that’, and I really do think it gets to heart of the matter with respect to the JPY.

I am also intrigued to hear Jen mention Brazil and Turkey alongside the more traditional victims of Ms Watanabe’s gaze in the form of the Aussie and the Kiwi. Such flows would consequently be tantamount to the real and essentially long term de-coupling of the global economy.

However, for this to materialize we would also need a more asymmetric or, if you will, fine tuned version of the Dollar smile story to occur. In this way, and while I can see the impetus for the USD to regain some lost ground against the Euro, it is not in line with fundamentals for the USD to strengthen across the board. The external deficit and the subsequent need to re-direct the growth path of the US economy are drivers to suggest the opposite. However, it is here that many analysts loose their footing, although not I think Stephen Jen. Consequently, for re-balancing to occur in a sustained way the USD would need to stay weak against a number of key emerging markets such as precisely India, Turkey, Brazil, the Philiphines. So far, the market action does not support this with the USD strengthening significantly against major floating EM currencies as well as the JPY has also tested new highs on the decline in risk aversion.

Until something materially happens in this regard I am happy to stick with the Dollar smile scenario, but the smile needs to get a bit more uneven before true fundamentals are reflected. It is therefore precisely that the unfolding events in this crisis are crucial to watch in terms of gauging whether it is the same as before, or if something has changed.  

This is it for now in terms of my immediate thoughts for la rentrée. I see that as per usual markets are moving faster than I could ever hope to type, with Lehmann Brothers in the bushes today. Apparently, Lehmann did not manage to convince the Korean Development Bank to take part in what Brad Setser so poignantly cas referred to as the secret bail-out. This does not mean of course that a suitor won't step up, but it appears that it would take nothing short of J-LO's alter' ego in one of Hollywood's many sub-par conceptions for Lehmann to make it out alive.

For more on this, I will suggest my readers to pay Macro Man a visit if anything, then to learn that even the pros are scratching their foreheads more than normally at the moment. I will try to keep up here at Alpha.Sources but until I get my hyperspeed 20 gig internet connection at home, I will be limping a bit relative to regular services.

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Gustav

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McMoRan Exploration Co. engages in the exploration and production of crude oil and natural gas offshore in the Gulf of Mexico and onshore in the Gulf Coast area. The company was founded in 1994, has a market cap of $1.75 billion and is headquartered in New Orleans, Louisiana.

Oil prices have trade lower over the last two months, but still remain at very high levels on a historical basis. This has translated into robust profits for plenty of oil production and exploration companies, including McMoran.

Second-Quarter Results

The company's second-quarter results, reported on July 17, were excellent. Revenue from oil and gas grew to $372.3 million from $45 million in the same quarter last year. Net income jumped ahead to $60.3 million, up from a loss of $6.5 million last year.

This produced earnings of $1.25 cents per share, blowing past analyst estimates of 97 cents per share. It was the second consecutive quarter that the company produced a big earnings beat, having outpaced analyst estimates by 47% in the first quarter.

Production Capacities Way Up

The company made significant progress in boosting its production capacities, a key metric for evaluating production companies, through a combination of acquisitions, and internal, organic growth.

Daily production for the quarter averaged 294 million cubic feet of natural gas equivalents per day (MMcfe/d), compared to just 54 million MMcfe/d in the same period last year.

McMoran's proven reserves, another important evaluation metric, also jumped forward, increasing to 399 billion cubic feet of natural gas, compared to 363 Bcfe at the end of 2007.

Debt Reduction

McMoran was also able to pay down a sizeable portion of its debt (excluding senior notes), which now totals $305 million, down $280 million from the end of 2007.

Analyst Estimates

Analyst estimates have continued to creep higher, with the current-year estimate advancing to $2.69 per share from $2.21 per share 90 days ago. The next-year estimate stands at $3.42 per share, a 27% earnings growth projection.

Valuations

Based upon the current-year projection, this stock looks like a bargain, trading with a forward P/E multiple of 10.4X, a steep discount to the overall market.

The Chart

Shares of MMR have been trading in a fairly tight range over the last two months, but recently broke out from the channel and logged a higher close. With strong earnings in hand and a bullish earnings projections moving forward, this stock looks well positioned for more gains. Take a look at the chart below.

"MOXY" Free Stock Analysis: Buy? Sell? Hold?
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