Filed under: Bad news, Merrill Lynch (MER), Economic data, Housing

This morning’s report that U.S. jobless claims rebounded suggests that the economy may be slowing down. But Merrill Lynch & Co.’s (NYSE: MER) decision to clean house in its fixed income division tells us one source of future job losses.

Initial jobless claims rose by 16,000 to 317,000 in the week ending September 29, marking their highest level since September 8. Many of those job losses were undoubtedly related to the housing slowdown. Certainly an estimated $4 billion loss in housing finance — in the form of too many subprime mortgages — led to Merrill’s canning of its global head of fixed income, Osman Semerci, his deputy, Dale Lattanzio, co-head of fixed income for the Americas and their former boss, Dow Kim, the former co-head of institutional securities.

Does Merrill’s decision — coupled with some 3,400 jobs cut already — mark the beginning of a multi-year Wall Street slump? As DealBreaker posts, BreakingViews [subscription required] pointed out that more Wall Street heads could roll. 20% of New York City’s financial workforce got the boot in the two years after the 2001 downturn. A 20% decline over the next few years would litter Wall Street with the blood of “40,000 Big Apple financiers.”

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Merrill Lynch securities.

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Filed under: Bad news, Merrill Lynch (MER), Economic data, Housing

This morning’s report that U.S. jobless claims rebounded suggests that the economy may be slowing down. But Merrill Lynch & Co.’s (NYSE: MER) decision to clean house in its fixed income division tells us one source of future job losses.

Initial jobless claims rose by 16,000 to 317,000 in the week ending September 29, marking their highest level since September 8. Many of those job losses were undoubtedly related to the housing slowdown. Certainly an estimated $4 billion loss in housing finance — in the form of too many subprime mortgages — led to Merrill’s canning of its global head of fixed income, Osman Semerci, his deputy, Dale Lattanzio, co-head of fixed income for the Americas and their former boss, Dow Kim, the former co-head of institutional securities.

Does Merrill’s decision — coupled with some 3,400 jobs cut already — mark the beginning of a multi-year Wall Street slump? As DealBreaker posts, BreakingViews [subscription required] pointed out that more Wall Street heads could roll. 20% of New York City’s financial workforce got the boot in the two years after the 2001 downturn. A 20% decline over the next few years would litter Wall Street with the blood of “40,000 Big Apple financiers.”

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Merrill Lynch securities.

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Filed under: Good news, Industry, Contl Airlines’B’ (CAL), Options, Technical Analysis, Oil

Continental Airlines, Inc. (NYSE: CAL) shares are trading higher today as oil futures are sinking today, dropping below $80 per barrel and giving most airline stocks a boost on the expectation of lower fuel costs. If you think that the company won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CAL.

After hitting a one-year high of $52.40 in January, the stock dipped to a one-year low of $26.21 in August. CAL opened this morning at $35.30. So far today the stock has hit a low of $35.25 and a high of $36.98. As of 10:50, CAL is trading at $36.30, up $0.85 (2.4%). The chart for CAL looks neutral and deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $25 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just 11 weeks as long as CAL is above $25 at December expiration. Continental would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.

Continue reading Continental Airlines (CAL) higher as crude slides

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Filed under: Newsletters, Bargain stocks, Commodities, Stocks to Buy

“I predict that 2007 will end with a bang and not a whimper,” says global expert Nick Vardy, who predicts a strong a strong fourth quarter global rally.

Meanwhile, in his industry-leading Global Bull Market Alert, he notes, “Canadian mining giant Cameco Corp. (NYSE: CCJ) combines the global commodity supercycle theme with the recent turnaround in the price of uranium.”

Vardy explains, “As the world’s largest uranium producer — accounting for around 20% of global uranium production — Cameco is the closest thing to a blue chip name in what has been one of the hottest sectors in the past few years.”

Why? He states, “Blame the law of supply and demand.” In 2006, he observes, the world’s nuclear reactors used 173 million pounds of uranium. Yet uranium mines only supplied 103 million pounds. The gap, he contends, was met by dwindling U.S. and Russian government stockpiles of weapons-grade uranium from decommissioned nuclear weapons.

“And the supply and demand imbalance likely will get much worse,” says Vardy. In the past 12 months, he notes, the number of proposed nuclear reactors has risen by 67% to 256 as governments across the globe turn to nuclear as a way to cut carbon emissions quickly and painlessly.

Continue reading Cameco (CCJ): A power play in uranium

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Filed under: Good news, Industry, Contl Airlines’B’ (CAL), Options, Technical Analysis, Oil

Continental Airlines, Inc. (NYSE: CAL) shares are trading higher today as oil futures are sinking today, dropping below $80 per barrel and giving most airline stocks a boost on the expectation of lower fuel costs. If you think that the company won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CAL.

After hitting a one-year high of $52.40 in January, the stock dipped to a one-year low of $26.21 in August. CAL opened this morning at $35.30. So far today the stock has hit a low of $35.25 and a high of $36.98. As of 10:50, CAL is trading at $36.30, up $0.85 (2.4%). The chart for CAL looks neutral and deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $25 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just 11 weeks as long as CAL is above $25 at December expiration. Continental would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.

Continue reading Continental Airlines (CAL) higher as crude slides

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Filed under: Analyst reports, Apple Inc (AAPL), Dell (DELL), Motorola (MOT), International Business Machines (IBM), Nokia Corp. (NOK), Analyst initiations

MOST NOTEWORTHY: The technology and services sector, Cognizant, Infosys Technologies and Silicom Ltd were today’s noteworthy initiations:

• Wachovia initiated shares of Dell (NASDAQ: DELL), Micron (NYSE: MU) and Nokia (NYSE: NOK) with Outperform ratings and IBM (NYSE: IBM), AMD (NYSE: AMD) and Motorola (NYSE: MOT) with Market Perform ratings.
• CIBC started shares of Cognizant (NASDAQ: CTSH) and Infosys (NASDAQ: INFY) with Sector Outperformer ratings and a $100 target and $60 target, respectively. The firm views risk/reward as favorable.
• Merriman initiated Silicom Ltd (NASDAQ: SILC) with a Neutral rating, citing valuation and low visibility into the quarter.

OTHER INITIATIONS:

• BMO Capital started shares of Apple (NASDAQ: AAPL) with an Outperform rating.
• Solei initiated Lincoln Electric (NASDAQ: LECO) with a Buy rating and $114 target.
• Merrill initiated Northwest Airlines (NYSE: NWA) with a Buy rating and $23 target.

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Filed under: Newsletters, Bargain stocks, Commodities, Stocks to Buy

“I predict that 2007 will end with a bang and not a whimper,” says global expert Nick Vardy, who predicts a strong a strong fourth quarter global rally.

Meanwhile, in his industry-leading Global Bull Market Alert, he notes, “Canadian mining giant Cameco Corp. (NYSE: CCJ) combines the global commodity supercycle theme with the recent turnaround in the price of uranium.”

Vardy explains, “As the world’s largest uranium producer — accounting for around 20% of global uranium production — Cameco is the closest thing to a blue chip name in what has been one of the hottest sectors in the past few years.”

Why? He states, “Blame the law of supply and demand.” In 2006, he observes, the world’s nuclear reactors used 173 million pounds of uranium. Yet uranium mines only supplied 103 million pounds. The gap, he contends, was met by dwindling U.S. and Russian government stockpiles of weapons-grade uranium from decommissioned nuclear weapons.

“And the supply and demand imbalance likely will get much worse,” says Vardy. In the past 12 months, he notes, the number of proposed nuclear reactors has risen by 67% to 256 as governments across the globe turn to nuclear as a way to cut carbon emissions quickly and painlessly.

Continue reading Cameco (CCJ): A power play in uranium

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Filed under: Industry

Nissan Motor Co., Ltd. (NASDAQ: NSANY) really wants to come out with new hybrid and all-electric vehicles in the next few years. However, throw out the terms biodiesel and ethanol at the Japanese automaker and you’ll probably receive a scornful look back. Does Nissan want to bet on the all-electric vehicle instead of mixed-propulsion methods like combustion based on ethanol and biodiesel? You bet.

As many critics have pointed out (and there is quite a bit of validity to this), the economic returns on the uses of those two alternative fuels are not that good, even with foreign oil prices being at the level that they are currently. Nissan officials said this week that designing an ethanol or biodiesel car is fairly straightforward in a technical sense. Yet, the cost of the fuel and the resources needed to distill it into a form usable by these alternative-fuel engines would outpace regular gasoline with all variables considered.

Are you ready to actually pay more to travel in order to use a non-oil form of fuel? That’s what Nissan execs are hinting out here, even as E85 vehicles continue making inroads with competitors like General Motors Corp. (NYSE: GM) and others. The costs of using cropland for fuel production instead of food production are also on the minds of many (in the case of ethanol). But electric cars — today — are nowhere near close to replacing internal combustion vehicles in terms of performance or cost. Nissan, though, hopes that they will be in the next decade or two. Right now, the automaker sees its first mass-produced electric car in 2011 or 2012.

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Filed under: Analyst reports, Apple Inc (AAPL), Dell (DELL), Motorola (MOT), International Business Machines (IBM), Nokia Corp. (NOK), Analyst initiations

MOST NOTEWORTHY: The technology and services sector, Cognizant, Infosys Technologies and Silicom Ltd were today’s noteworthy initiations:

• Wachovia initiated shares of Dell (NASDAQ: DELL), Micron (NYSE: MU) and Nokia (NYSE: NOK) with Outperform ratings and IBM (NYSE: IBM), AMD (NYSE: AMD) and Motorola (NYSE: MOT) with Market Perform ratings.
• CIBC started shares of Cognizant (NASDAQ: CTSH) and Infosys (NASDAQ: INFY) with Sector Outperformer ratings and a $100 target and $60 target, respectively. The firm views risk/reward as favorable.
• Merriman initiated Silicom Ltd (NASDAQ: SILC) with a Neutral rating, citing valuation and low visibility into the quarter.

OTHER INITIATIONS:

• BMO Capital started shares of Apple (NASDAQ: AAPL) with an Outperform rating.
• Solei initiated Lincoln Electric (NASDAQ: LECO) with a Buy rating and $114 target.
• Merrill initiated Northwest Airlines (NYSE: NWA) with a Buy rating and $23 target.

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Filed under: Analyst reports, Analyst upgrades and downgrades, Hansen Natural (HANS)

MOST NOTEWORTHY: NutriSystem, Endo Pharmaceuticals, Corporate Express NV, Aventine Renewable Energy Holdings and BioFuel Energy were today’s noteworthy downgrades:

• NutriSystem (NASDAQ: NTRI) was downgraded to Hold from Buy at Lazard and to Buy from Strong Buy at Broadpoint following its lowered Q3 guidance.
• Jefferies downgraded shares of Endo Pharmaceuticals (NASDAQ: ENDP) to Hold from Buy after Impax Laboratories (NASDAQ: IPXL) filed a Paragraph IV challenge against Opana ER yesterday to reflect the potential for a generic version of Opana ER arriving as early as 2010 and the possibility of a similar threat against Lidoderm.
• Corporate Express (NYSE: CXP) was downgraded to Hold from Buy at ING, as they believe the new CEO’s long-term targets are overly ambitious.
• JP Morgan downgraded Aventine Renewable (NYSE: AVR) and BioFuel Energy (NASDAQ: BIOF) to Neutral from Overweight, citing weaker fundamentals in ethanol pricing.

OTHER DOWNGRADES:

• JP Morgan downgraded Charlotte Russe (NASDAQ: CHIC) and The Wet Seal (NASDAQ: WTSLA) to Neutral from Overweight.
• Goldman downgraded Monolithic Power Systems (NASDAQ: MPWR) and Hansen Natural (NASDAQ: HANS) to Neutral from Buy; Goldman removed National Semiconductor (NYSE: NSM) from its Conviction Buy List.

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