Trading for the Masses

Morgan Stanley’s top short idea

Gambling, do you know the answers?

Whatever you want

82% of SP 500 above 50dma, wow

Fear and Greed Index

Breaking the news Al Qaeda style.

Teacher’s Salaries as a Percent of GDP

Holy Roman Empire

Las Vegas: September Sales Down 43% YOY, Median Down 8%

New Math, old Fundamentals

I was thinking how this market volume is just stinky from this trader’s perspective and is grinding more and more on me every day. Then I thought, bam this is exactly what the FED wants. They want dry market action where all eyes are on them. That way they control the action. Interesting how it has been working for past few years since shock and awe. When it ends only the market knows, but as we all know all momentum effects wane ultimately.

Specialty retail Sept comp preview - Cowen
Cowen expects concerns regarding Sept sales and Q3 EPS risk will likely be validated when retailers report Sept comps this week. TGT’s mid-month commentary and WTSLA’s pre-announcement are consistent with firm’s concerns that the moderate consumer has been impacted by a challenging economic environment. Further driving largely negative Sept comps were warmer weather and lighter mall traffic trends which made it difficult to sell fall product. Given this backdrop, firm recommend selective exposure to the group. Firm prefers investments in 1) transformational situations like ANF and MW, 2) compelling turnarounds like ANN, BEBE, LTD and URBN, and 3) quality brands addressing higher-end consumers where discounted valuations allow us to be patient like AEO, BBBY, TIF and WSM.

Gapping up on strong earnings/guidance: LDK +13.7% (raises Q3 revenue guidance above consensus; says no merit to allegations), YUM +5.8%, MOS +4.3%… M&A: MNG +19.2% (to be acquired by Newmont for C$6.25 per share)… China-related momentum continues: STV +23.5% (China IPO continues to run; Cramer made positive comments last night — see 8:29 comment for details), YTEC +12.7% (announces risk management consulting and implementation contract wins), RCH +11.7%, CHNR +7.5%, CSUN +6.2%, ATS +6.0%, KUN +5.3%… Other news: HOKU +17.2% (announces TCS engineering contract for Hoku Materials’ polysilicon plant), WGO +10.9% (upgraded to Outperform at RBC), VCLK +9.3% (Cramer says VCLK is the next co to be acquired), ALTI +8.1% (co and AVAV announced successful demonstration of an all-electric delivery vehicle), JAKK +6.6% (positive Cramer comments), MSFT +1.1% (estimates raised at Goldman - Bloomberg).

LDK LDK Solar raises Q3 revenue guidance above consensus; says no merit to allegations (37.50 )
LDK raised guidance for Q3 (Sep), sees Q3 (Sep) revs of $140-150 mln vs. $121.07 mln Reuters Estimates consensus, prior guidance $115-125 mln. Co said that it exceeded its original plan and shipped approximately 75 MW of wafers in the third fiscal quarter ended September 30, 2007. LDK management stands by its internal review of the inventory and does not believe there are any material inconsistencies with what LDK has disclosed in its financial statements. “As we previously indicated, we believe that there is no merit in the allegations made about our inventory accounting practices, our business operations are normal and we continue making shipments to fulfill our customers’ orders,” stated Xiaofeng Peng, Chairman and CEO. “We remain confident that we have the appropriate financial controls and procedures in place for inventory reporting, and look forward to putting this unfortunate matter behind us.”

WEN Wendy’s: Mr. Bojangles lines up behind Wendy’s franchisee - WSJ Deal Journal (34.38 )
WSJ Deal Journal reports Mr. Bojangles could end up being a minor player in the sale of the co. Joe Drury, who owned and ran the Charlotte, N.C., Cajun chicken chain Bojangles until last month, says he is willing to put up some money to help Wendy’s franchisee David Karam make a bid for the chain. He hasn’t put an investment in writing, he says. But already he says he has been advising Karam and hopes the Columbus franchisee beats out Nelson Peltz’s Triarc, which also wants to buy the hamburger chain. Drury is a former Wendy’s vice president of operations, a friend of the late Wendy’s founder, Dave Thomas. He says he considered leading his own bid for Wendy’s but decided against it, in part because selling Bojangles took longer than he had expected. He also thinks the price of Wendy’s will end up being too high.

RMBS Rambus: AmTech incrementally more bullish on litigation (21.01 )
AmTech has become incrementally more bullish due to potentially favorable litigation events in the near future. Firm’s conviction in shares increases due to the following: 1) Imminent CAFC decision — Firm believes if favorable for RMBS it removes a critical Samsung defense. 2) MU v RMBS — They believe shares will trade higher following a positive ruling. 3) Samsung Documents — Besides a potentially negative ruling from CAFC, Samsung has had its privileged documents pierced by RMBS in ways they find favorable for RMBS. 4) Final Filing of CY07 SEC Documents — Firm believes that RMBS will become current with its financials prior to this date.

BRCM Broadcom: Expands partnership with Samsung; tgt raised to $45 - AmTech (39.47 )
AmTech notes BRCM and Samsung announced an expanded partnership where BRCM will supply multiple ICs including EDGE basebands, 3G WCDMA co-processors, Bluetooth, power mgmt, and software. Firm views this announcement as a key positive as this is BRCM’s third Tier-1 cell phone baseband win with the others being Sony-Ericsson and NOK. Firm believes volumes are likely to be modest however, they would like to note that BRCM has now expanded its geographic coverage at Samsung to include Asia-Pacific, Africa, Australia, and “elsewhere”. Firm notes the expanded partnership with Samsung gives them higher conviction in their above consensus ests. Firm raises their tgt to $45 from $40.

AmTech remains bullish on solar sector
AmTech notes last week they toured Germany and visited cos from across the solar value chain. Their key takeaways are as follows. Demand remains strong at the end of Q3 and entering Q4, with follow through expected into 2008. This will likely make for a strong earnings season, but they believe that while pricing is healthy now, the growth story will need price declines to remain intact. In general, incumbent polysilicon manufacturers remain skeptical regarding the goals set by new entrants. This bodes well for those with solidified polysilicon agreements (SPWR, JASO), incumbent producers of poly (Hemlock, MEMC, Wacker), and those that do not require the use of poly (FSLR). In addition, there appears to be high conviction in new geographies for growth in the coming years, including the U.S., France, and Greece.

AAPL Apple: AppleInsider discusses yesterday’s Piper Jaffray analyst note (167.91 )
AppleInsider reports the co’s upcoming release of Mac OS X Leopard could provide a major boost to the company’s bottom line during the fall and could be bolstered even further by a new portable in January, according to a new report by analyst Gene Munster of Piper Jaffray. The researcher maintained that Apple was “on track” to release Leopard by the end of October and that its timing could result in a surge of about $240 mln to Apple’s calendar Q4 results, even if adoption rates were similar to those from Mac OS X Tiger, which launched in April 2005. Projected Mac shipments in the quarter, which he predicted would range between 2.0 and 2.1 million units thanks in part to the new aluminum iMac and the back-to-school rush. iPhone and iPod sales traffic was likewise strong at retail outlets. The Piper Jaffray expert noted that the co was most likely to expand its portable devices with at least one new system at Macworld show in January. Either a new Mac subnotebook or a multi-touch tablet was said to be ‘80 percent likely’ for the IDG-run event.

MCHP Microchip downgraded to Neutral at Amtech (36.62 ) -Update-
Amtech downgrades MCHP to Neutral from Buy noting yesterday after the close, MCHP pre-announced its FQ2 revenue would be down ~2% vs. previous guidance for flat to up 2%, and the company expects Q4 revenue to be down sequentially vs. their original estimate for 4% sequential growth. The firm says while they continue to believe shares have support at current levels from the 3.4% dividend yield, they do not see any incremental catalyst to drive shares higher in the near-term.

TIVO TiVo confirms RNWK’s Rhapsody digital music service now available on the TiVo service (7.32 )
Co confirms a deal with RNWK for consumers to experience digital music in the home by delivering instant access to the Rhapsody music service through any broadband-connected TiVo box. TiVo subscribers have access to a free 30-day trial of Rhapsody. Consumers can choose to continue their Rhapsody service beyond the trial period for $12.99 per month.

NIHD NII Holdings: Stifel reduces 3Q07 net add ests by 20K in Mexico - Stifel (69.59 )
Stifel is reducing their 3Q07 net subscriber addition ests for NII Holdings by 20,000 on a consolidated basis, due to softer net d growth than previously expected in Mexico. Firm is lowering Mexico net adds by 20k to 158k in the quarter, due largely to the storm-related impacts, as well as economic uncertainty that plagued the broader markets during much of the third quarter, which they believe may have postponed purchasing decisions by prospective Nextel Mexico customers.

BSX Boston Scientific announces European approval of next-generation implantable defibrillator (14.19 )
Co announces CE Mark approval of its Confient implantable cardioverter defibrillator. This approval represents the first Boston Scientific-branded cardiac rhythm management device to treat sudden cardiac death

STV China Digital TV trading up ~$10 in pre-mkt after Cramer made positive comments last night (39.49 ) -Update-
On Mad Money last night, Cramer says “I gotta tell you, man, I read through the prospectus…. This is as good as a Baidu (BIDU), this is as good as a China Telecom (CHA), but this thing is up…. It does feel like VMware (VMW). Could it add another 20 points? Yeah, I say BuyBuyBuy!”… See yesterday afternoon’s comment and Friday’s IPO profile for additional background on the co.

Bond Watch: Sneaking Higher
The market is modestly bid with the long end leading the way as investors find value with yields back up near Sep highs. Last week’s better-than expected jobs report knocked prices off their summer-long ascension & now the market is left to battle for longer term direction. Which means data dependency with swings to either ends of recent ranges in the meantime as sentiment is likely to shift in spurts. The 2-10-yr yield spread is in at 54.6 (-1.3) as curve trade finds its footing after unwinding its steepening bend. Bond prices in the EuroZone have fought their way back to positive after hawkish rate talk by ECB’s Trichet sent them lower overnight while in Japan, bonds were soft as fears of a recession in the US are diminished. Treasuries will have Fed-speak, both past & present to deal with today. Minutes to the pivotal Sep 18th FOMC meeting will be released later & trade is eager to get a look at the discourse. Meanwhile St. Louis’ Poole will talk on the global economy & SF’s Yellen & Cleveland’s Pianalto hit later in the day. Technicals will factor into trade as the summer price rally is in danger of suffering another wave of retracement. The market has managed to avoid much more painful losses post-payrolls with the 10-yr yield seeing buyers ahead of approaches to 4.70%. Should that level go 4.90% looks ripe for the taking while the absence of catalysts suggest further consolidation. The buck is consolidating gains after working higher since its wild flip-flop on Fri but 1.4010 is propping up the euro currently while the yen’s trying to regain the 116 handle with the dollar’s failure up at 117.6000. Spot gold is off at 729.80 (-3.50) while crude oil is down at 78.67 (-0.35). FOMC minutes are at 14 but otherwise the calendar is empty. The euro is at 1.4039 & the yen is at 117.2050 while the 10-yr is +03/32nds yielding 4.624%.

Gapping up: STV +23.5%, HOKU +17.2%, CNIC +14.4%, YTEC +12.7%, WGO +10.9%, BHIP +8.0%, CHNR +7.5%, ATS +6.9%, JAKK +6.6%, MOS +4.3%, CSUN +4.3%, BBND +3.9%… Gapping down: PLCE -16.9%. LDK -8.3%, MCHP -4.7%, CHS -4.4%, ALVR -4.0%, JBLU -3.1%, NSC -2.8%, GOLD -2.7%, S -2.7%, SLM -2.5%.

AMZN Amazon.com tgt raised to $105 from $90 at BofA (95.85 )

Wachovia says that despite dead silence from DNA regarding Altus’ (ALTU 11.72) ALTU-238 development plans, the stock should appreciate significantly when they believe this partner exercises its rest-of-world (ROW) option this quarter. The firm sees limited long-term downside at current trading levels, and would be buyers ahead of what they believe is a critical value-driving Q4 event… ThinkEquity says the picture in North America and Europe is largely stable across analog device classes. Their checks also show that distributors began to take down inventory in September post-Labor Day weekend, perhaps due to increasing caution on the part of end-customers due to emerging credit concerns. In this environment, the firm continues to like names with PC exposure, including Intersil (ISIL 32.73) and Maxim (MXIM 29.61)… Jefferies raises their CGGVeritas (CGV 63.89) tgt to $77 from $62 as they believe the co is poised to benefit from tight supply/demand fundamentals for seismic equipment, strong backlog for both services and equipment, higher pricing and improved utilization from a larger, efficient fleet

NSC Norfolk Southern issues Q3 guidance (52.95 )
Co sees Q3 EPS of $0.97, which appears to include $0.05 charge, and $0.02 gain, may not be comparable to $1.05 consensus. Co announced Illinois tax legislation enacted during Q3 and rising crude oil prices that impacted synthetic fuel- related investments will have a negative impact on Q3 EPS. Illinois legislation modifies the way in which transportation companies apportion their taxable income to the state. This change will result in an adjustment to co’s deferred income taxes in the period of enactment, and will decrease EPS by $0.05. Co’s synthetic fuel-related investments are estimated to provide less net benefit than previously reported in Q2 due to rising oil prices, co sees Q3 benefits of approx $0.02.

BSM BSD Medical announces that a new publication concludes that cisplatin plus hyperthermia therapy “results in a high response rate and acceptable toxicity in patients with recurrent cervical cancer” (6.29 )
Co announces that the newest issue of the International Journal of Hyperthermia has published an article entitled “Weekly systemic cisplatin plus locoregional hyperthermia: An effective treatment for patients with recurrent cervical carcinoma in a previously irradiated area”… This newly published study involved 47 patients with recurrent cervical carcinoma who had been previously irradiated. The patients were treated with simultaneous cisplatin and hyperthermia. The study concluded that cisplatin plus hyperthermia therapy “results in a high response rate and acceptable toxicity in patients with recurrent cervical cancer.”

Oil giants leave more than oil behind in Venezuela - WSJ
WSJ reports when XOM and COP pulled out of projects in Venezuela, they left behind more than their rights to produce oil. The oil giants also abandoned technology and know-how that could fall into the hands of competitors eager to discover how to maximize production of heavy oil. This viscous type of oil is more difficult and expensive to process and refine into fuels like gasoline than what the industry calls light crude. The two Western cos’ technical legacy in Venezuela could offer competitors a chance to acquire expertise in drilling sophisticated wells, upgrading crude-oil quality and preventing costly accidents, analysts say. Access to this knowledge could prove to be a boon for national oil cos, which control the world’s largest deposits yet often depend on technology developed by the private-sector Western cos to access their oil. The fate of any technology left behind is unclear, though any co that draws from it could invite a legal challenge.

TMA Thornburg Mortg revises estimates on asset sales and related losses announced in August; now estimates that it has sold approximately $22.0 bln vs prior est of $20.4 bln (13.46 )
Co announces the following adjustments and revisions to estimates that it had previously announced regarding certain financial developments that had taken place during the third quarter. First, the co now estimates that it has sold approximately $22.0 bln of high quality ARM assets since August 10, 2007, as opposed to the previously announced estimate of $20.4 bln in asset sales as of August 17, 2007, or an additional $1.6 bln in asset sales, during the quarter. The co also has revised its estimated aggregate loss for the third quarter resulting from asset sales to $1.099 bln, as opposed to the previously-announced loss estimate of $863 mln, or an increase of $236 mln in the estimated loss. The revision of the loss estimate is due primarily to the receipt of actual sale price documentation for asset liquidations conducted by third-party financing counter-parties as opposed to those sales conducted by the co, and to a lesser extent, to additional asset sales that occurred after August 17, 2007, as well as a $6 mln impairment charge on one mortgage-backed security backed by pay option ARMs. The realized losses on asset sales are capital losses for tax purposes and the impairment charge is an unrealized loss and thus not subject to tax. Accordingly, none of the entire $1.099 bln loss cited above will reduce the amount of taxable income available for dividend distribution in 2007. The co believes that the current credit reserves on the co’s balance sheet will be adequate to cover expected and potential future credit losses on its loan portfolio, as it has not experienced any material deterioration in the credit performance of its loan portfolio since July 31, 2007. The co estimates that seriously delinquent loans will represent 0.27% of the loan portfolio as of September 30, 2007, versus the estimate at August 17, 2007, of 0.23% of the loan portfolio as of July 31, 2007. Second, the co has now received revised market value prices for its securities portfolio as of September 30, 2007, and expects that its accumulated other comprehensive loss (a non-income statement item) will include a $286 mln unrealized market value loss on its mortgage securities portfolio as compared to a $262 mln market value loss estimated as of August 17, 2007. However, based on the co’s analysis of its mortgage securities portfolio, this unrealized market value loss is not expected to result in material actual credit losses. Rather, the co believes that the decreased market value is a reflection of the widening of risk premiums and lack of liquidity in all but the AAA-rated segment of the mortgage securities market. The co’s mortgage securities portfolio consists of 94% agency, AAA- and AA-rated mortgage-backed securities and only 6% below AA-rated mortgage-backed securities. These investments are performing consistently with the long-term historical experience of similarly rated securities and none of the ratings have been downgraded by any rating agency as a result of recent rating agency activity. Third, the co expects to report an estimated $16.0 mln loss on mortgage loans funded during the third quarter, which resulted primarily from fundings made during September 2007 for which the mortgage interest rate had been locked for borrowers prior to August 2007 and which the co was committed to fund at the locked rate. It is expected that the lower market value herein reflected will result in higher yields on these loans, which are scheduled to be securitized in the fourth quarter. This loss on the pipeline was partially offset by an estimated $4.1 mln gain on terminated hedging instruments. The resulting net loss totaled $11.9 mln in the third quarter.

HOKU HOKU Scientific announces TCS engineering contract for Hoku Materials’ polysilicon plant (9.04 )
Hoku Materials, a wholly owned subsidiary of Hoku Scientific (HOKU), established to manufacture and sell polysilicon for the solar market, and Dynamic Engineering, a process technology and engineering firm, today announced that they have entered into an Engineering Services & Technology Transfer Agreement for Dynamic Engineering to provide design and engineering services, and a technology license, for Hoku Materials to build a trichlorosilane production and purification unit at its planned polysilicon production plant in Pocatello, Idaho. The agreement announced today provides for Dynamic to provide the basic engineering package and related services for the TCS production component of Hoku’s planned polysilicon plant, which will be integrated by Stone & Webster, a subsidiary of The Shaw Group, and Hoku’s engineering, procurement and construction management firm, into the overall polysilicon production facility, and will be constructed by JH Kelly, Hoku’s general construction contractor.

Electronic Arts and Activision: Initiation details
Citigroup initiated ERTS with a Buy and a $75 tgt and ATVI with a Buy and a $29 tgt. On ERTS, the firm believes now is finally the correct part of the console cycle to own ERTS, because it’s not business as usual with the new CEO bringing in new leadership and an agenda of change that should yield revenue and EPS growth. On ATVI, the firm sees the co continuing to take market share in this console cycle on the strength of its leading franchises and the addition of the Guitar Hero and James Bond franchises. The firm also likes ATVI’s strategic plan helping to allocate capital even more efficiently this cycle and feel peak end operating margin guidance may be conservative.

RNOW Rightnow Tech tgt raised to $21 from $18 at ThinkEquity (16.98 )
ThinkEquity raises their tgt on RNOW to $21 from $18 saying checks on RightNow were generally positive and suggest that activity levels are positioned to steadily improve through the end of year, helped by sales team stabilization, stronger partner relationships, and a ramping product cycle not yet in conservative expectations.

Car bomb explodes in Northern Spain, injures 1, EFE reports - Bloomberg
The headlines don’t say who carried out the attack, but they are typically done by the ETA (a Basque separatist group).

TM Toyota Motor trims domestic sales goal - FT (117.36 )
FT reports the co cut its domestic sales target for 2007 on Tuesday amid a sharp downturn in the overall Japanese mkt, sending its shares lower. Executives at the world’s biggest automaker as recently as last week had stood by the original target of selling 1.72 mln cars, citing hopes for a late rebound with the rush of new model launches. But with less than three months to go in the year, President Katsuaki Watanabe said the co was now aiming to sell around 1.65 mln vehicles instead, 4% below the earlier goal.

AKAM Akamai Tech: LVLT’s entry into the market could further pressure AKAM’s gross margin starting in 2008 - Jefferies (33.92 ) -Update-
Jefferies says they talked with Level 3 (LVLT) yesterday and were able to confirm they are lowering the price they charge for static caching and download CDN services to match transit pricing. On the heels of AKAM’s move to price more competitively relative to Limelight (LLNW), particularly with streaming services, the firm thinks LVLT’s new pricing for static content caching and download should amount to continued price pressure. They think LVLT’s entry into the market could further pressure AKAM’s gross margin starting in 2008.

Credit crunch may hinder holiday season for LCD TVs and monitors, says iSuppli - DigiTimes

DigiTimes reports the gloom and doom in the housing mkt may have a major impact on consumer purchasing of LCD TVs and computer monitors during the holiday season, according to new data from iSuppli. Concerns are rising regarding the sub prime mess, the turmoil surrounding the financial mkts and how these issues will impact business and consumer spending in the US. The credit crunch the US is now facing as a result of rising defaults on home loans may limit consumers’ disposable spending during the holiday period of this year, noted iSuppli. “The co believes that inventory increases will result in softness in panel demand among end-product makers and channel participants, especially in the monitor market,” said Sweta Dash, director of LCD and projection research at iSuppli. “This may affect fourth-quarter pricing of large-size panels. The issue could become more of a problem if consumers stop spending and tighten their purse strings because of the mortgage problems in the fourth quarter.” Overall television prices more than likely will resume their pricing decline in the fourth quarter as OEMs start to boost holiday sales with promotions and special offers. Production of notebook panels may be impacted due to component shortages.

BSC Bear Stearns hires Lee Stettner as Global Head of Equity Capital Markets (126.64 )
Co announced that Lee Stettner will join the firm as a senior managing director and global head of Equity Capital Markets. “In this newly created position, Mr. Stettner will play a key leadership role in the firm’s Strategic Finance Group where he will focus on further developing the firm’s capital markets product offerings.”

ARBA Ariba: Cowen believes ARBA an inexpensive, under-followed name with positive catalysts (11.37 )
Cowen believes that ARBA is an inexpensive and under-followed name with positive catalysts. Near term, they expect ARBA to report a solid 4Q (Sept) that will provide an important data point on the turnaround. Longer term, firm believes that the three year business transition is virtually complete. Over time, firm expects to see steady demand for Spend Management solutions yield material leverage in the model as the on demand business becomes a prominent growth driver, and the decision to wind down the BPO business enables margin expansion.

YUM YUM! Brands: Color on quarter (36.29 )
Deutsche notes YUM posted a $0.05 beat on 3Q EPS, despite rising global commodity costs. Firm notes results came in at $0.50 (+20% y/y) vs. their est and consensus of $0.45. 2007 EPS guidance raised to $1.65 from $1.63. Firm notes YUM likely did not flow full $0.05 beat thru guidance for a few reasons: 1) co tends to guide conservatively, 2) YUM does not give qrtly EPS guidance so 3Q results may have been more in line w/ internal expectations, and 3) YUM expects further food cost pressure in 4Q07… Friedman Billings notes YUM posted impressive Q3 results, with EPS growing 20% YOY to $0.50. A lower tax rate added about $0.01 versus our $0.46 estimate (and the $0.45 consensus), but the upside was primarily driven by stronger-than-expected revenue growth in China and YRI, partially aided by a very weak dollar. Firm raises their tgt to $41 from $40 and believes YUM is well positioned in the challenging U.S. consumer environment because of its sizable and strong China and other international divisions.

CMVT Comverse Tech: Business starting to improve; margin improvement on the horizon - FBR (19.60 )
Friedman Billings says as videnced by CMVT’s recent results, coupled with their recent field checks, firm believes fundamentally speaking that CMVT is starting to see an improvement in its core CNS business, with its next-generation Insight platform leading the way into larger telecom deployments worldwide. In addition, they believe CMVT is starting to see more pipeline activity translate into deal flow on the billing front, a major positive, which should help catalyze backlog growth back to more normalized levels over the coming quarters. While CMVT has faced a number of fundamental/non-fundamental hurdles over the past few years, they believe the tide is starting to shift under the helm of newly minted CEO Andre Dahan.

DNA Genentech: Q3 preview; modest EPS upside possible - RBC (77.90 )
RBC reiterates their Outperform rating and expects an above consensus EPS for Q3 of $0.74 vs. consensus $0.72. Based on IMS sales ests firm has modestly reduced their Rituxan and Lucentis forecasts. Firm is encouraged by the strength of Avastin, which appears to continue to grow despite concerns of dose reductions in lung cancer. Firm looks forward to continued growth of Avastin assuming a positive regulatory review for metastatic breast cancer, and further upside could come from ongoing clinical trials including adjuvant colorectal cancer. Firm’s revised sales forecasts and slight increases to their expense assumptions decrease Q3 EPS to $0.74 from their prior est of $0.76.

CAT Caterpillar: 3Q07 earnings preview - Wall Street Access (81.34 )
Boutique firm Wall Street Access notes CAT will report 3Q07 earnings before the market opens on Oct 19th. To achieve just the bottom-end of its full-year earnings guidance of $5.30-$5.60 per share, firm believes CAT’s Q3 must show comparatively strong results vs. year-ago period. Firm is betting CAT will hit $1.39 vs. $1.14 in the year-ago on a modest (6.6%) rise in sales but operating margins of 11.4%, or up 100 basis points from the Sept-period a year-ago. Firm notes things to watch for: 1) Decision on technology for 2010 HD truck engines, 2) Decision to continue to make Class 8 motors and operate Mossville, 3) Indication when U.S. housing might start to perk up.

GME Gamestop tgt raised to $65 at Credit Suisse (56.65 )
Credit Suisse raises their tgt on GME to $65 from $50 as they believe that the very strong momentum, the excellent sellthrough and attachments for Halo 3, as well as the recent console price cuts should lead to a strong NPD report next week for the month of Sept and strong results for GME’s third quarter. Firm believes that they are still early in the GME earnings cycle, as the co’s strongest earnings growth tends to begin a year or two after the big hardware push, reflecting the different margin components in its business as well as its near monopoly in the used game segment. Firm believes this tgt reflects the beginning of at least two years of 30% EPS growth, implying over $2.50 in earnings power in 2009.

Stanford initiates select Med Tech stocks
Stanford initiates Abbott Labs (ABT), Atricure (ATRC), Micrus Endovascular (MEND), Northstar Neuroscience (NSTR), Volcano (VOLC), NeuroMetrix (NURO), Biomimetic Therapeutics (BMTI), and Cytori Therapeutics (CYTX) with Buys. The firm also initiates Johnson & Johnson (JNJ), St. Jude Medical (STJ), Medtronic (MDT), Boston Scientific (BSX), and Edwards Lifesci (EW) with Holds.

MNST Monster Worldwide: Job-searching sites face a nimble threat - WSJ (35.32 )
WSJ reports among the hottest Web sites of the past few years were job-search sites such as CareerBuilder.com (owned by GCI, TRB, MNI, MSFT) and Monster.com (MNST, NYT is a partner). Helped by lavish advertising, they became household names. Newspapers, eager to tap the fast-growing online-ad mkt, teamed up with them. Now, the hottest names in online recruitment are increasingly specialized job sites. That poses a threat to the growth prospects of the broad-based online job boards and their newspaper partners, analysts said. (Cos mentioned: YHOO)

PLCE Children’s Place lowers Q3, Y07 guidance; reports same store sales (24.32 )
Co reports September same store sales -3% vs +1.0% Briefing.com consensus. Co sees Q3 EPS “at least 60% below the low end of its previous guidance of $0.94-1.02″, including approx $0.07 related to severance payments to the co’s former CEO. Co sees Q4 and Y07 EPS “significantly below the low end” of its previous EPS guidance of $1.79-1.86, and $2.25-2.40, respectively. Co will also reverse amounts which have been accrued in Y06 and 1H of Y07 for its long-term management equity compensation program, which amounts to a non cash gain of approx $0.25. Co believes unseasonably warm weather put substantial pressure on the business. CEO says, “Clearly we are disappointed with current business trends and our outlook for the second half of the year. Inc. Our results primarily reflect inventory levels at both brands that are higher than we would like given current sales trends, particularly at The Children’s Place brand. As a result, we had to take a substantial amount of unplanned markdowns during September, resulting in merchandise margins well below our plans. At this time, we believe these trends are likely to continue through the remainder of the year.”

Downgrades: SunTrust downgrades Elizabeth Arden (RDEN 27.70) to Neutral from Buy, based on valuation… UBS downgrades NTELOS (NTLS 29.70) to Neutral from Buy. Miscellaneous: Calyon initiates Ford (F 8.19) with a Reduce and sets a $7 tgt… Bear Stearns initiates Wabtec (WAB 38.30) with a Peer Perform… Citigroup initiates Electronic Arts (ERTS 58.51) with a Buy and a $75 tgt… Citigroup initiates Activision (ATVI 22.91) with a Buy and a $29 tgt… Citigroup initiates Take-Two (TTWO 17.9 and THQ Inc (THQI 26.61) with Holds… J.P Morgan initiates Realnetworks (RNWK 7.00) with a Neutral… Lehman initiates Cardiome Pharma (CRME 10.65) with an Equal Weight… Lehman initiates Array Biopharma (ARRY 10.83) with an Overweight and a $16 tgt… Morgan Stanley assumes Microchip (MCHP 36.62) with an Equal Weight… UBS initiates Rohm and Haas (ROH 55.00) with a Neutral… UBS initiates DRS Tech (DRS 56.10) with a Buy.

TAP Molson Coors Brewing and SABMiller confirm to combine US operations in joint venture (50.83 ) -Update-
SABMiller and TAP confirm that they have signed a letter of intent to combine the U.S. and Puerto Rico operations of their respective subsidiaries, Miller and Coors, in a joint venture. The new company, which will be called MillerCoors, will have annual pro forma combined beer sales of 69 mln U.S. barrels (81 mln hectoliters) and net revs of approximately $6.6 bln. Pro forma combined EBITDA will be approximately $842 mln. SABMiller and TAP expect the transaction to generate approximately $500 mln in annual cost synergies to be delivered in full by the third full financial year of combined operations. The transaction is expected to be earnings accretive to both companies in the second full financial year of combined operations.

Upgrades: JMP Securities upgrades CyberSource (CYBS 11.8 to Outperform from Market Perform and sets a $15 tgt, based on valuation, more positive comments from management relating to BidPay, and incrementally positive industry checks on its fraud product… Morgan Stanley upgrades LifePoint Hospitals (LPNT 29.67) to Equal-weight from Underweight… RBC upgrades Winnebago (WGO 26.15) to Outperform from Sector Perform. Downgrades: J.P Morgan downgrades Cooper Companies (COO 49.5 Underweight from Neutral… Jefferies downgrades Cognos (COGN 50.50) to Hold from Buy and maintains their $48 tgt, as the current price appears to fully reflect take-out multiples… Merrill downgrades Mentor Corp (MNT 47.29) to Sell from Neutral… Merrill downgrades Auxilium Pharma (AUXL 23.8 to Neutral from Buy… Jefferies downgrades Business Objects (BOBJ 57.83) to Hold from Buy and raises their tgt to $59 from $52, as they don’t anticipate a counter-bid to SAP’s announced cash tender offer to acquire BOBJ.

Downgrades: Deutsche Bank downgrades Coca-Cola (KO 57.80) to Hold from Buy and raises their tgt to $60 from $57, based on valuation… Deutsche Bank downgrades PepsiCo (PEP 73.91) to Hold from Buy and raises their tgt to $77 from $74, based on valuation… Jefferies downgrades PNM Resources (PNM 24.81) to Hold from Buy and maintains their $24.50 tgt, based on valuation… UBS downgrades Omega Healthcare (OHI 17.29) to Sell from Neutral… UBS downgrades Senior Housing (SNH 22.31), Ventas (VTR 44.89), Nationwide Health Properties (NHP 31.99), and Health Care REIT (HCN 45.44) to Neutral from Buy… Citigroup downgrades Wimm-Bill-Dann Foods (WBD 110.01) to Hold from Buy… UBS downgrades Business Objects (BOBJ 57.83) to Neutral from Buy… Morgan Stanley downgrades Community Health Systems (CYH 30.82) to Underweight from Equal-weight… RBC downgrades F5 Networks (FFIV 43.4 to Sector Perform from Outperform… … HSBC downgrades Compania de Minas Buenaventura (BVN 48.89) to Underweight from Overweight… HSBC downgrades Goldcorp (GG 30.43), and DRDGOLD (DROOY 7.9 to Underweight from Neutral… HSBC downgrades Rangold Resources (GOLD 31.80), Royal Gold (RGLD 33.20), Harmony Gold (HMY 10.39, Kinross Gold (KGC 15.04), and Meridian Gold (MDG 32.86) to Neutral from Overweight.

Sensex @ 18K, up 781pts - The Business Standard
The Business Standard reports that the Sensex is now up 781 points at 18,273. All index stocks are in positive territory. Out of 2,768 stocks traded so far, 1,756 have advanced, 949 have declined and 63 are unchanged.

Asian stocks rise, led by Honda Motor on Yen; BHP declines - Bloomberg.com
Bloomberg.com reports Asian stocks gained, led by Japanese exporters, after the yen reached a two-month low against the dollar. BHP Billiton and Inpex Holdings fell after oil and copper prices extended their biggest drops in seven weeks… The Nikkei 225 added 0.6% to 17,159.90. Benchmarks also gained in Hong Kong, India, Malaysia, Thailand and Pakistan. They fell elsewhere in the region.

FTSE steady as Rock’s recovery continues - The Financial Times
The Financial Times reports that London equities remained in neutral gear in opening trade on Tuesday, with Northern Rock once more attracting the most attention. The FTSE 100 was flat at 6,543.6, with a small measure of momentum from oil companies countered by weakening mining stocks as share prices traced commodities markets. The mid-cap FTSE 250 was also flat, opening at 11,326.5, as second-tier investment companies handed back portions of their recent recovery gains.

Miscellaneous: Deutsche Bank initiates Sovran Self Storage (SSS 48.95) with a Buy and sets a $55 tgt, based on valuation, operations in FL that are normalizing, a redevelopment pipeline that is ramping and room on the balance sheet to allow for an active acquisition without issuing equity… Merriman initiates Hansen Medical (HNSN 29.84) with a Buy, as they believe the co’s Sensei System, while still early in its commercialization, may radically change the landscape of catheter-based surgery and has a $1.3 bln market opportunity… BofA initiates Alpha Natural Resources (ANR 25.00) with a Neutral and sets a $26 tgt, as they believe Alpha’s CAPP operations should benefit from low sulfur content and geographical proximity to Southeast coal-fired plants yet expect this advantage to diminish as rising cost pressures and continual production declines cause CAPP coal to become a high-cost coal source on a delivered price per Btu basis once scrubbers at coal-fired plants come online… BofA initiates MF Global (MF 30.05) with a Buy and sets a $37 tgt, as they believe MF is well positioned to capitalize on the growth potential the firm sees in global derivatives over the next 3-5 years.

Miscellaneous: BofA initiates International Coal Group (ICO 4.62) with a Neutral and sets a $5 tgt, as they expect ongoing margin pressure and high capital spending to generate negative FCF given the slower-than-expected recovery in domestic steam coal markets, thus making shareholder friendly initiatives difficult… Deutsche Bank initiates Fiserv (FISV 54.50) with a Buy and sets a $65 tgt, based on solid industry fundamentals, opportunities for acceleration in organic growth, cost initiatives that are in the early stages of deployment, and synergies with the recent CheckFree acquisition… Deutsche Bank initiates Jack Henry (JKHY 27.11) with a Buy and sets a $31 tgt, based on a strong market position, recurring revenues from mission-critical product segments, accelerating growth in non-core product segments and industry leading margins… Deutsche Bank initiates Advent Software (ADVS 51.14) with a Hold and sets a $51 tgt, based on valuation and believe the co is executing well on its strategy to refresh its core product line, re-align its sales channel and expand market share in the Capital Markets IT segment… Calyon initiates General Motors (GM 38.11) with a Reduce and sets a $31 tgt… Deutsche Bank initiates U-Store-It (YSI 14.17) with a Hold and sets a $15 tgt, as they don’t believe investor confidence will resume until either the dividend gets cut or the co starts meeting its occupancy targets… Deutsche Bank initiates Extra Space Storage (EXR 16.3 with a Buy and sets a $19 tgt, as they believe yield on developments, a stable core and potential for some accretive acquisitions aren’t fully reflected in shares.

EBAY Skype co-founder says eBay overpaid for firm - Reuters (38.16 )
Reuters reports Niklas Zennstrom, co-founder of Internet telecoms group Skype, said on Tuesday he agreed the original valuation put on the company by purchaser eBay (EBAY) was too high. “We had to chart the trajectory of growth and how fast that would run, (but) we found out that was a bit front-loaded,” Zennstrom told the annual ETRE technology conference in Hungary. “We overshot in terms of monetization,” he said. eBay said last week it would cut as much as $1.2 bln off the $4.3 bln potential price it agreed to pay for Web-based phone-calling service Skype two years ago.

JPM JP Morgan-led group pays $2.7 bln for Southern Water - Reuters (47.44 )
Reuters reports a group of infrastructure funds led by JP Morgan (JPM) agreed to buy UK water co Southern Water from Royal Bank of Scotland for about 1.3 bln pounds ($2.7 bln). JPMorgan — which beat a rival group led by Goldman Sachs (GS), according to sources — partnered with Australia’s Challenger Infrastructure Fund and other funds to buy the co, which provides water to more than 2 mln people in southern England. Including about 2.8 bln pounds in debt, the deal valued Southern Water at 4.195 bln pounds, the bidders said on Tuesday. JPMorgan will pay 360 mln pounds for a 32% stake in Southern Water and Challenger 300 mln pounds for 27%. The other investors are a group of seven Australasian pension funds advised by Access Capital, which will have an 18% stake, UBS (UBS) with 18%, Hermes 4% and Consensus Business Group 1%.

C Citigroup and Nikko to merge Japan securities business - Reuters (47.80 )
Reuters reports Citigroup (C) said on Tuesday it would merge its retail securities business in Japan with unit Nikko Cordial, as part of the U.S. financial firm’s push in the world’s second-largest economy. Citigroup said last week it would buy out minority shareholders in Nikko Cordial for $4.6 bln. Under the buyout, Nikko Cordial will be delisted from the Tokyo exchange and Citigroup will list its own shares. The two companies said in a statement they plan to bring their separate brokerage businesses together as early as May 2008.

UK throws new lifeline in bid to steady Northern Rock - Reuters
Reuters reports the British government made a fresh attempt to shore up Northern Rock on Tuesday, offering to guarantee new retail deposits and extend funding agreements, as the mortgage bank battles to secure a future. In a statement, the bank said it would repay the government and regulators with a package that, along with payments to investment banks advising it on its future, will cost it 40 mln to 50 mln pounds ($82-$102 mln) this year — almost 10% of its targeted 2007 pretax profit. The deal provides breathing space for Northern Rock as it considers its options, which include continuing talks with potential buyers as well as the possibility of remaining independent, a process which the bank said it expected to complete by February 2008. As part of Tuesday’s deal, Britain’s finance ministry will extend previous guarantee arrangements to cover all new retail deposits made after Sept 19 — the previous cut-off date.

YHOO Yahoo to buy 10% of Alibaba.com IPO shares - Reuters (28.05 )
Reuters reports Yahoo (YHOO) will subscribe for 10% of the shares to be sold by China’s largest e-commerce co, Alibaba.com Ltd, according to a term sheet, in an IPO that is expected to raise roughly $1 bln. The co plans to sell 858.9 mln shares, or 17% of its enlarged share capital, in a Hong Kong listing.

AEP American Electric Power says it will settle 8-year-old pollution suit - NY Times (47.71 )
The NY Times reports American Electric Power (AEP) is is expected to announced that it has reached an agreement to settle a long-running lawsuit over emissions from its coal-fired power plants. The suit was filed eight years ago by the EPA, 8 states and 14 environmental organizations. The co will spend more than $1 bln on improvements to its plants over the next 12 years, will pay a civil penalty of $15 mln and will spend another $60 mln on environmental mitigation, a spokesman, Pat D. Hemlepp, confirmed Monday night, after The AP carried a report on the settlement. AEP will not admit to any wrongdoing, Mr. Hemlepp said. The agreement, to be filed on Tuesday in Federal District Court in Columbus, OH, would settle a suit brought by the federal government in 1999. That suit, and similar ones filed against other companies, argued that AEP had violated a provision of the Clean Air Act called new source review.

Mad Money’ Recap: Lightning Round cont. - TheStreet.com
Cramer was bearish on Great Lakes Dredge & Dock (GLDD) and InterDigital (IDCC).

‘Mad Money’ Recap: Lightning Round - TheStreet.com
Cramer was bullish on Indevus Pharmaceuticals (IDEV), Nastech Pharmaceutical (NSTK), Foster Wheeler (FWLT), Halliburton (HAL), AT&T (T), Consolidated Edison (ED), Verizon (VZ), GameStop (GME), Transocean (RIG), Diamond Offshore (DO), China Digital (STV), McDonald’s (MCD), Yum! Brands (YUM), Intel (INTC) and ConocoPhillips (COP).

Cramer’s ‘Mad Money’ Recap - TheStreet.com
On Monday’s edition, Jim claims ValueClick (VCLK) is the next co to be acquired. Before Microsoft’s (MSFT) acquisition of aQuantive, aQuantive was in merger talks with ValueClick, Cramer explained. Now Brian McAndrews, the former CEO of aQuantive, is a “key player” in Microsoft’s online ad business, and Cramer believes ValueClick still has a chance of getting bought out. Microsoft might make this “defensive acquisition” of ValueClick, or there’s a possibility Yahoo! (YHOO) could pick it up if it wants to stay competitive, he said. Next, he suggests Jakks Pacific (JAKK) and notes the co is hosting an analyst meeting on Wednesday. He favors how they are positioned right now. The co has $83 mln in net cash and its free cash flow could reach $100 mln soon, he said. With that, Jakks could buy smaller stores or buy back shares.