Author: ToddSullivan

We have all read about the Fed minutes released yesterday and the song out there is pretty similar. We could be or are in or about to be in a recession. In other words, growth has slowed. No kidding. As I read it, something at the end struck me.

The vote the recent rate cut was 8-2. Here is the dissent.

“Fisher and Plosser dissented because, in light of heightened inflation risks, they favored easing policy less aggressively. Incoming data suggested a weaker near-term outlook for economic growth, but the Committee’s earlier policy moves had already reduced the target federal funds rate by 225 basis points to address risks to growth, and the full effect of those rate cuts had yet to be felt. While financial markets remained under stress, the Federal Reserve had already taken separate, significant actions to address liquidity issues in markets. In fact, Mr. Fisher felt that focusing on measures targeted at relieving liquidity strains would improve economic prospects more quickly and lastingly than would further reductions in the federal funds rate at this point; he believed that alleviating these strains would increase the efficacy of the earlier rate cuts. Both Messrs. Fisher and Plosser were concerned that inflation expectations could potentially become unhinged should the Committee continue to lower the funds rate in the current environment. They pointed to measures of inflation and indicators of inflation expectations that had risen, and Mr. Fisher stressed the international influences on U.S. inflation rates. Mr. Plosser noted that the Committee could not afford to wait until there was clear evidence that inflation expectations were no longer anchored, as by then it would be too late to prevent a further increase in inflation pressures.”

This goes back to what I said the other day. The best thing perhaps for the economy at this time may be holding rates steady to stop the fall of the dollar. The effect of that would be felt immediately at the pump and in the supermarket. Aside from that, with some clarity surrounding the dollar, commodity markets would then be forced to take its continued expected decline out of the pricing equation. To the contrary, to then price in an increase in the dollar would cause a immediate contraction in commodity prices..

This now looks to be the best course of action.

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Upgrades
Nutrisystem (NTRI)- Boenning & Scattergood Market Underperform » Market Perform
Energy Transfer (ETP)- UBS Neutral » Buy
Pacific Sunwear (PSUN)- Wachovia Mkt Perform » Outperform
NuStar GP Hldgs (NSH)- Citigroup Hold » Buy
Enterprise GP Holdings (EPE)- Citigroup Hold » Buy
Corning (GLW)- RBC Capital Mkts Sector Perform » Outperform
Intevac (IVAC)- Brean Murray Hold » Buy
Kinetic Concepts (KCI)- Wachovia Mkt Perform » Outperform
Seaspan (SSW)- Wachovia Mkt Perform » Outperform
MetroPCS (PCS)- Wachovia Mkt Perform » Outperform
Metabasis Therapeutics (MBRX)- Rodman & Renshaw Mkt Perform » Mkt Outperform

Downgrades
Matsushita Elec (MC)- Citigroup Buy » Hold
Cinemark (CNK)- JP Morgan Overweight » Neutral
Garmin (GRMN)- Soleil Buy » Hold
LifeCell (LIFC)- Piper Jaffray Buy » Neutral
Infineon (IFX)- Credit Suisse Outperform » Neutral
Novartis AG (NVS)- Bear Stearns Outperform » Peer Perform
Washington Mutual ( WM)- Keefe Bruyette Mkt Perform » Underperform
Apple (AAPL)- Morgan Keegan Mkt Perform » Underperform
Flowserve (FLS)- Robert W. Baird Outperform » Neutral

Disclosure (“none” means no position):

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Upgrades
Nutrisystem (NTRI)- Boenning & Scattergood Market Underperform » Market Perform
Energy Transfer (ETP)- UBS Neutral » Buy
Pacific Sunwear (PSUN)- Wachovia Mkt Perform » Outperform
NuStar GP Hldgs (NSH)- Citigroup Hold » Buy
Enterprise GP Holdings (EPE)- Citigroup Hold » Buy
Corning (GLW)- RBC Capital Mkts Sector Perform » Outperform
Intevac (IVAC)- Brean Murray Hold » Buy
Kinetic Concepts (KCI)- Wachovia Mkt Perform » Outperform
Seaspan (SSW)- Wachovia Mkt Perform » Outperform
MetroPCS (PCS)- Wachovia Mkt Perform » Outperform
Metabasis Therapeutics (MBRX)- Rodman & Renshaw Mkt Perform » Mkt Outperform

Downgrades
Matsushita Elec (MC)- Citigroup Buy » Hold
Cinemark (CNK)- JP Morgan Overweight » Neutral
Garmin (GRMN)- Soleil Buy » Hold
LifeCell (LIFC)- Piper Jaffray Buy » Neutral
Infineon (IFX)- Credit Suisse Outperform » Neutral
Novartis AG (NVS)- Bear Stearns Outperform » Peer Perform
Washington Mutual ( WM)- Keefe Bruyette Mkt Perform » Underperform
Apple (AAPL)- Morgan Keegan Mkt Perform » Underperform
Flowserve (FLS)- Robert W. Baird Outperform » Neutral

Disclosure (“none” means no position):

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Wilbur Ross finalized his previously disclosed investment in Assured Guarantee (AGO). (

For the $250 million dollar investment, Ross received 10,651,896 share of the bond insurer.

On 4/8 Ross allocated the funds as such:
1. WLR Recovery Fund IV, L.P. (“Fund IV”), WLR Recovery Fund III, L.P. (“Fund III”), WLR IV Parallel ESC, L.P. (“Parallel Fund”) and WLR/GS Master Co-Investment, L.P. (“WLR/GS Fund”) purchased 10,651,896 shares of common stock in connection with the Issuer’s private placement pursuant to an Investment Agreement dated as of February 28, 2008, between Assured Guaranty Ltd. (“AGO”) and Fund IV (the “Investment Agreement”) for cash consideration of $250,000,000 (the “Initial Investment”). WL Ross & Co. LLC (“WLR”), the investment manager of Fund IV, is entitled to allocate purchase obligations under the Investment Agreement (and any associated rights) among the other investment funds it manages.

2. Fund IV is the beneficial owner of 1,379,400 shares of common stock acquired prior to the execution of the Investment Agreement and can be deemed to share voting and dispositive power of an additional 135,100 shares that are owned by Fund III and Parallel Fund, affiliates of Fund IV. WLR Recovery Associates IV LLC is the general partner and WL Ross & Co. LLC is the investment manager of Fund IV. WL Ross Group, L.P. is the managing member of WLR Recovery Associates IV LLC. El Vedado, LLC is the general partner of WL Ross Group, L.P. Wilbur L. Ross, Jr. is the managing member of El Vedado, LLC. Accordingly, Wilbur L. Ross, Jr., El Vedado, LLC, WL Ross Group, L.P., WLR Recovery Associates IV LLC and WL Ross & Co. LLC can be deemed to share voting and dispositive power over the shares to be held by Fund IV.

3. Fund III is the beneficial owner of 130,300 shares of common stock acquired prior to the execution of the Investment Agreement and can be deemed to share voting and dispositive power of an additional 1,384,200 shares that are owned by Fund IV and Parallel Fund, affiliates of Fund III. WLR Recovery Associates III LLC is the general partner and WL Ross & Co. LLC is the investment manager of Fund III. WL Ross Group, L.P. is the managing member of WLR Recovery Associates III LLC. El Vedado, LLC is the general partner of WL Ross Group, L.P. Wilbur L. Ross, Jr. is the managing member of El Vedado, LLC. Accordingly, Wilbur L. Ross, Jr., El Vedado, LLC, WL Ross Group, L.P., WLR Recovery Associates III LLC and WL Ross & Co. LLC can be deemed to share voting and dispositive power over the shares to be held directly by Fund III.

4. Parallel Fund is the beneficial owner of 4,800 shares of common stock acquired prior to the execution of the Investment Agreement and can be deemed to share voting and dispositive power of an additional 1,509,700 shares that are owned by Fund III and Fund IV, affiliates of Parallel Fund. INVESCO WLR IV Associates LLC is the general partner of Parallel Fund. INVESCO Private Capital, Inc. is the managing member of INVESCO WLR IV Associates LLC. INVESCO WLR IV Associates LLC and WLR Recovery Associates IV LLC have entered into a parallel investment agreement whereby Parallel Fund will invest on a pro rata basis in the same investments as Fund IV. Accordingly, INVESCO WLR IV Associates LLC, INVESCO Private Capital, Inc. WLR Recovery Associates IV LLC, WL Ross Group, L.P. El Vedado, LLC, WL Ross & Co. LLC and Wilbur L. Ross, Jr. can be deemed to share beneficial ownership over the shares to be held directly by Parallel Fund.

5. WLR/GS Fund can be deemed to share voting and dispositive power of 1,514,500 shares that were acquired by Fund III, Fund IV and Parallel Fund, affiliates of WLR/GS Fund, prior to the execution of the Investment Agreement. WLR Master Co-Investment GP, LLC is the general partner and WL Ross & Co. LLC is the investment manager of WLR/GS Fund. WL Ross Group, L.P. is the managing member of WLR Master Co-Investment GP, LLC. El Vedado, LLC is the general partner of WL Ross Group, L.P. Wilbur L. Ross, Jr. is the managing member of El Vedado, LLC. Accordingly, Wilbur L. Ross, Jr., El Vedado, LLC, WL Ross Group, L.P., WLR Master Co-Investment GP, LLC and WL Ross & Co. LLC can be deemed to share voting and dispositive power over the shares to be held by WLR/GS Fund.

6. Shares directly owned by WLR Recovery Fund IV, L.P., WLR Recovery Fund III, L.P., WLR/GS Master Co-Investment, L.P. and WLR IV Parallel ESC, L.P.

His total stake in the company is now at 12,196,366 share.

Disclosure (“none” means no position):None

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Wednesday’s Picks
Guy Adami recommends US Bancorp (USB) $32.79

Pete Najarian prefers Myriad Genetics (MYGN) $41.0

Both Jeff Macke and Karen Finerman think the Financial Select Sector SPDR (XLF) $26.22 is a buy.

Tuesday’s Picks
Jeff Macke like Microsoft (MSFT) $29.16 Close $28.78 LOSS

Karen Finerman recommends Goldman Sachs (GS) $178.73 Close $178.96 GAIN

Pete Najarian thinks Chesapeake Energy (CHK) $47.03 is a buy. Close $47.85 GAIN

2008 Records:
Brian Schaeffer= 0-1
Carter Worth= 0-1
Jon Najarian= 4-1
Jeff Macke= 25-18-1
Tim Seymore= 14-8
Guy Adami= 24-22
Pete Najarian= 27-20
Karen Finerman= 20-23-1
Joe Terrenova= 1-1

2007 Results (Since 6/21):
Guy Adami= 58-46 = 56%
Jeff Macke= 60-40 = 60%
Pete Najarian= 49-41 = 54%

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The latest Fed auction was the first since they began in which the interest rate did not decline from the last auction. In fact, this time it rose.

Here are the results from March’s auction:

On April 7, 2008, the Federal Reserve conducted an auction of $50 billion in 28-day credit through its Term Auction Facility. Following are the results of the auction:

Stop-out rate: 2.820 percent

Total propositions submitted: $91.569 billion
Total propositions accepted: $50.000 billion
Bid/cover ratio: 1.83

Number of bidders: 79

Now, those betting on more rate cuts by the Fed may be in for a bit of a disappointment. These auctions have been a great predictor of future Fed decisions. One may guess that Bernanke may feel he can help the economy more at this point by holding rates steady. This would cause the dollar to rally and by default, would put pressure on rising commodity prices (food and oil).

By taking this action he may reduce consumer prices, causing spending to pick up. That would push more growth into the system while at the same time leaving him some wiggle room should things slow in the future.

Remember, the vote last time was 8-2. Eventually, the “smaller or no rate cut” faction of the Fed will win and Bernanke will put the brakes on. My bet is that is sooner rather than later.

Look for only a 25 point cut and the statement change to more neutral at the April meeting.

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What is Greenspan doing? Ben Franklin once said “better to be thought a fool than to open ones mouth and remove all doubt”. Greenspan’s constant rhetoric is inviting a far closer scrutiny of his record and actions than would have happened had he just kept quite.

After his retirement in 2006, rather than just fading away and enjoying the years he has left, the 82 year old Greenspan decided he was going to become an author and prognosticator. His actions both spooked markets as the ordinarily unintelligible coded verbiage he used as Fed Head suddenly became crystal clear. Statements like prediction a recession with percentages of probabilities and criticisms of current head Ben Bernanke’s actions stunned investors and did nothing but add volatility to an already volatile market.

His ill-timed tomb in the midst of a crisis immediately after he left office did nothing but give those searching for a reason for it 1,000 pages of possibilities.

In the book he then went on the further denigrate his credibility when he wrote about Republican’s tax cutting as adding to the current environment. During Greenspan’s rein he was largely criticized by Democrats for his constant endorsement of tax cuts as an economic stimulus.

Now the critics attack Greenspan for being too lax on regulation and keeping rate far to low for far to long. On the first I cannot attack him. More regulation has never stopped abuses in the system. The reason is that determined people will always find a way around regulation and bubble will always exist somewhere. You cannot regulate away stupidity and yes, people who jump at “liar loans” were stupid. At least they were not as stupid as those who gave them the money.

If anything, more regulation does tend to stifle enthusiasm and innovation. Some innovation will be good and others bad, but without it, things do stagnate.

On the second charge Greenspan is guilty. Free money, given out for a long time, and that was what is was, will cause people to do dumb things with it, and they did.

One thing struck me recently. In a recent interview with the WSJ, Mr. Greenspan says he doesn’t regret a single decision. That is just not possible…

He did a job for 18 years and would not do anything different? That strikes me as an arrogance I have not seem in quite some time. Ever heard of self reflection? Greenspan is essentially saying he was perfect, either that or he is lying.

Even two members of the policy- making FOMC at the time (2004-2006) — William Poole and Robert Parry, presidents of the Federal Reserve Banks of St. Louis and San Francisco, have both recently argued that, in hindsight, rates were too low for too long. They both say this contributed to the housing bubble. On that Greenspan says, “I don’t remember a case when the process by which the decision making at the Federal Reserve failed”. He focuses not on events that followed the policy but on the thinking behind it. In other words, good intention trump bad results…

In the same interview he said “I was praised for things I didn’t do,” and “I am now being blamed for things that I didn’t do.” The question was not asked but I would love to know what things he got credit for he now thinks he did not deserve.

What Greenspan is doing is giving his critics fodder to attack him and his “would not change a thing” comment will lead him to defend decisions that were wrong (no one is perfect). This defense will taint all the decisions he made as a skeptical eye will now be cast over everything.

Alan, Ben had a point…

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What is Greenspan doing? Ben Franklin once said “better to be thought a fool than to open ones mouth and remove all doubt”. Greenspan’s constant rhetoric is inviting a far closer scrutiny of his record and actions than would have happened had he just kept quite.

After his retirement in 2006, rather than just fading away and enjoying the years he has left, the 82 year old Greenspan decided he was going to become an author and prognosticator. His actions both spooked markets as the ordinarily unintelligible coded verbiage he used as Fed Head suddenly became crystal clear. Statements like prediction a recession with percentages of probabilities and criticisms of current head Ben Bernanke’s actions stunned investors and did nothing but add volatility to an already volatile market.

His ill-timed tomb in the midst of a crisis immediately after he left office did nothing but give those searching for a reason for it 1,000 pages of possibilities.

In the book he then went on the further denigrate his credibility when he wrote about Republican’s tax cutting as adding to the current environment. During Greenspan’s rein he was largely criticized by Democrats for his constant endorsement of tax cuts as an economic stimulus.

Now the critics attack Greenspan for being too lax on regulation and keeping rate far to low for far to long. On the first I cannot attack him. More regulation has never stopped abuses in the system. The reason is that determined people will always find a way around regulation and bubble will always exist somewhere. You cannot regulate away stupidity and yes, people who jump at “liar loans” were stupid. At least they were not as stupid as those who gave them the money.

If anything, more regulation does tend to stifle enthusiasm and innovation. Some innovation will be good and others bad, but without it, things do stagnate.

On the second charge Greenspan is guilty. Free money, given out for a long time, and that was what is was, will cause people to do dumb things with it, and they did.

One thing struck me recently. In a recent interview with the WSJ, Mr. Greenspan says he doesn’t regret a single decision. That is just not possible…

He did a job for 18 years and would not do anything different? That strikes me as an arrogance I have not seem in quite some time. Ever heard of self reflection? Greenspan is essentially saying he was perfect, either that or he is lying.

Even two members of the policy- making FOMC at the time (2004-2006) — William Poole and Robert Parry, presidents of the Federal Reserve Banks of St. Louis and San Francisco, have both recently argued that, in hindsight, rates were too low for too long. They both say this contributed to the housing bubble. On that Greenspan says, “I don’t remember a case when the process by which the decision making at the Federal Reserve failed”. He focuses not on events that followed the policy but on the thinking behind it. In other words, good intention trump bad results…

In the same interview he said “I was praised for things I didn’t do,” and “I am now being blamed for things that I didn’t do.” The question was not asked but I would love to know what things he got credit for he now thinks he did not deserve.

What Greenspan is doing is giving his critics fodder to attack him and his “would not change a thing” comment will lead him to defend decisions that were wrong (no one is perfect). This defense will taint all the decisions he made as a skeptical eye will now be cast over everything.

Alan, Ben had a point…

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When I first read this yesterday I thought, “good idea”. After a minute or so I then thought, “what?”.

Home Depot (HD) announced yesterday that there will no longer be a Human Resource manager and Human Resource Supervisor in every one of the 1,970 U.S. stores it owns.

The change will affect about 2,200 employees and will result in about 1,000 job cuts.

They really had both a HR manager and supervisor at each location? Really? I can’t find anyone to help me in the paint department but it would seem there is a HR person there for employees at all hours to answer the two or three questions a month that may come up.

The problem here is that this may be indicative of the fat and waste that is still there despite the downward spiral in results for the past year and a half. I have worked in the past for companies that had multiple locations and not a one had HR managers at each of the locations.

Now HD will have 230 District Teams that will shoulder the HR duties. This is the set up I would be willing to bet 90% of corporate America has (still may be a bit too heavy). It also speaks to additional issues. If HD has gone to this length to communicate with employees at the store level and have someone there for immediate response to questions the fact that employee moral is so low is really shocking.

It means that either these people were not trained properly or that the policies enacted are so poor, efforts to right the ship are going to have to be extraordinary to fix it now that the immediate contact will be gone.

Now, HD has cut corporate HQ staff level in order to concentrate on customer service. But, aren’t most of our customer service complaints due to dealing with unhappy, poorly trained employees? If they can’t fix that issue with HR in the building, one has to question their ability to do it when they are removed…

Disclosure (“none” means no position):None

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When I first read this yesterday I thought, “good idea”. After a minute or so I then thought, “what?”.

Home Depot (HD) announced yesterday that there will no longer be a Human Resource manager and Human Resource Supervisor in every one of the 1,970 U.S. stores it owns.

The change will affect about 2,200 employees and will result in about 1,000 job cuts.

They really had both a HR manager and supervisor at each location? Really? I can’t find anyone to help me in the paint department but it would seem there is a HR person there for employees at all hours to answer the two or three questions a month that may come up.

The problem here is that this may be indicative of the fat and waste that is still there despite the downward spiral in results for the past year and a half. I have worked in the past for companies that had multiple locations and not a one had HR managers at each of the locations.

Now HD will have 230 District Teams that will shoulder the HR duties. This is the set up I would be willing to bet 90% of corporate America has (still may be a bit too heavy). It also speaks to additional issues. If HD has gone to this length to communicate with employees at the store level and have someone there for immediate response to questions the fact that employee moral is so low is really shocking.

It means that either these people were not trained properly or that the policies enacted are so poor, efforts to right the ship are going to have to be extraordinary to fix it now that the immediate contact will be gone.

Now, HD has cut corporate HQ staff level in order to concentrate on customer service. But, aren’t most of our customer service complaints due to dealing with unhappy, poorly trained employees? If they can’t fix that issue with HR in the building, one has to question their ability to do it when they are removed…

Disclosure (“none” means no position):None

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Tueday’s Picks
Jeff Macke like Microsoft (MSFT) $29.16

Karen Finerman recommends Goldman Sachs (GS) $178.73

Pete Najarian thinks Chesapeake Energy (CHK) $47.03 is a buy.

Take profits in US Steel (X) $143.72 , says Guy Adami.

Monday’s Results
Jeff Macke likes Microsoft (MSFT) $29.16 Close $29.16 PUSH

Guy Adami prefers Merck (MRK) $40.0 Close $40.78 GAIN

Pete Najarian thinks Energy Conversion Devices (ENER) $33.24 is a buy. Close $32.16 LOSS

2008 Records:
Brian Schaeffer= 0-1
Carter Worth= 0-1
Jon Najarian= 4-1
Jeff Macke= 25-17-1
Tim Seymore= 14-8
Guy Adami= 24-22
Pete Najarian= 26-20
Karen Finerman= 19-23-1
Joe Terrenova= 1-1

2007 Results (Since 6/21):
Guy Adami= 58-46 = 56%
Jeff Macke= 60-40 = 60%
Pete Najarian= 49-41 = 54%

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