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Seasons Change, Expectations Don’t

As everybody sits down on Tuesday morning ready to crank after a summer-ending long weekend, I think it is an opportune time to gauge how realistic earnings expectations are heading into 4Q and 2009. I did this about a month ago and was startled to see how lofty expectations were headed into 2H and holiday given rising input costs, slowing consumer demand, etc… Well now those factors have intensified, and we have the added (MASSIVE) factor that is the strengthening US dollar. I don’t know if the consensus is looking…but we are 9 weeks away from the first time in almost 4 years where the yy delta in the $/Euro is negative for US multinationals.

I’ve been reminded a couple of times in my career that nothing is impossible. But missing expectations over the next 12 months is as close to a mathematical certainty as I’ve ever seen in this group.

Eye On Putin Power: Tiger Hunting?

After suiting up in camouflage and shooting a 5 year old tiger today, Putin said, "the Ussuri tiger is a unique animal -- it's the biggest cat on the planet,"...

In thinking about the USA being the proverbial tiger, this is ominous...
KM
(see CNN.com article for more)
  • http://www.cnn.com/2008/WORLD/europe/09/01/putin.tiger.shoot.ap/index.html
AP Photo

Eye on Winners vs. Losers...

Below we have attached a chart that overlays nationwide UK Housing Prices with the British Pound. As the US Dollar strengthens and starts winning again, losers emerge, globally.

The UK home owner is one of those losers. Together, nominal prices and local currency are in a downward spiral. This is ugly.
KM

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US Bank Failure Chart (1934-2008), Updated...

A picture tells a thousand words. Here it is, inclusive of the blowups of Integrity Bank, The Columbian Bank & Trust, and First Priority Bank. The names vs. reality of these said businesses are too ironic. “Integrity, Trust, and Priority” – right, right…
KM

Chart by Andrew Barber, Director
Research Edge LLC

Scaling Up The Japanese Debt Mountain

We walked through Japan's debt as a % of GDP in our Friday note. Here it is pictorially. Andrew Barber put together the Japanese bailout years overlaid with the debt mountain from 1.

This is one of the ugliest long term macro cycle charts in the world. The US Government better be very careful not to repeat this scary movie.

*Full Disclosure: I am short Japan via the ETF (EWJ).
KM

Lehman (LEH): Selling What He Can, Not What He Should...

Lehman closed up +1.4% on Friday, on low volume, and high rumor traffic. This weekend the London Telegraph is joining the band and issuing thoughts about the timing of Dick Fuld's next move.

Clearly, something needs to happen at LEH before they report the upcoming quarter. The question is what is it going to be? Fuld has compromised himself and his firm on many levels. The long term damage to the Lehman name may be irreparable - the short term decision he makes will simply expedite or stall the inevitable.

The Telegraph is speaking to the speculation that's been in the market place for basically the better part of August. Lehman's stock has actually acted OK in the last month as a result (see chart). Will Fuld sell to the Korean's, the Chinese, Abu Dhabi, Qatar, or all of the above? Who knows... what I do know is that Fuld has virtually no leverage at the ‘Monopoly’ board dealings because he levered himself up to the gills.

You know how the game of ‘Monopoly’ goes. When you're going under, you sell what you can first - not what you should.

If the stock fails here, we're going to be looking at a fast -23% worth of downside until I see any support.
  • LEH failing to break out through $16.38 is very bearish. Short Term "Trade" downside to $12.37.
    KM
chart courtesy of stockcharts.com

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