DARTLINE™ – INVESTMENT MESSAGE BOARD

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9:23 am … SVNT — Oppenheimer anticipates FDA approval for Krystexxa for the treatment of refractory gout by the 9/14 PDUFA date. (1) Importantly, firm anticipates Krystexxa approval based on an overwhelmingly positive panel and resolution of issues raised in the June 2009 complete response letter (CRL). (2) Moreover, firm believes the FDA has had ample time to review Krystexxa’s application and expect no further delays. (3) The submission of stability data and completion of REMS discussions should also remove any obstacles preventing approval. (4) In addition, in the event of an acquisition, firm believes the potential for follow-on indications, including tumor lysis syndrome, for Krystexxa justifies a premium to its valuation of SVNT shares.

7:15 am … LULU – Retain Long Position: Reports Q2 (Jul) earnings of $0.30 per share, $0.06 better than the Thomson Reuters consensus of $0.24; revenues rose 55.8% year/year to $152.2 mln vs the $145.9 mln consensus. Co issues guidance for Q3, sees EPS of $0.22-0.24 vs. $0.23 Thomson Reuters consensus; sees Q3 revs of $155-160 mln vs. $151.45 mln Thomson Reuters consensus. Co issues upside guidance for FY11, sees EPS of $1.18-1.22 vs. $1.15 Thomson Reuters consensus; sees FY11 revs of $645-650 mln vs. $635.15 mln Thomson Reuters consensus.

“FLASH CRASH” —  First coined by Stocksmirf on the day it occurred has become the “mystery  meat”for the general public to shallow without regard to future consequences.
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The Flash Crash of May 6 is now under the SEC’S microscope, which plans to issue its long awaited report in a next few weeks. Wow! Four months to figure out that quote stuffing and frequency trading manipulations over a 905 second period needs so much time to discovery the truth? Indeed, the crash remains a mystery to the SEC and stub quotes will be blamed for causing the instant market’s rock drop. Meanwhile, retail investors have removed money from mutual funds on a total basis for 17 straight weeks since the Flash Crash.  In the two months preceding the crash, stock funds saw positive flows each week.  That’s not good for anybody, especially the BIG GUYS who needs the public to cover their bets with overvalued paper.  The general public is notorious of  buying into market rallies only to be left holding the BIG BAG OF BULL. The million dollar question: When the little guy is anxious to buy, who supplies the other side of the trade? Remember for every buyer  there must be a seller. …  If the SEC can provide investors some assurance the problem has been fixed, then more money stays in the market, which can only help the economy–something Washington needs badly — is the flavor of the month. … The only way to reassure the general public  is to represent all   is well in Stockville , and maybe –  to  the truth. Will the SEC do it? Hell no! BIG IS GOOD.  … The more money you have the more influence you deserve. Ask Goodman Sachs  what  that means when it negotiated  the slap on the  wrist over a near trillion dollar fraud that materially compromised the US economy.

September 9, 2010, 4:00 pm EDT … Closing Thoughts — The Standard and Poor’s 500 index close up 5.32, on bogus drop in unemployment benefits. The Labor Department reported Thursday that new claims for unemployment aid plunged last week by a seasonally adjusted 27,000 to 451,000. Economists had predicted a much smaller decline of just 2,000. Today’s report showed the number of people continuing to draw unemployment aid dipped by 2,000 to 4.5 million, the lowest since late June. Indeed, that result does not include millions of people who are receiving extended benefits under emergency programs enacted by Congress during the recession or the various states that didn’t report. More than 5 million people were on the extended benefit rolls during the week of August 28, the latest data available. When digesting the entire report and the reading all the footnotes and sub-section, the conclusions are totally opposite than what the financial media declared. So what’s the deal? … “At the moment, we can rule out a double-dip for the economy,” said Chris Rupkey, chief economist at Bank of Tokyo-Mitsubishi. “The economy is not out of the woods with today’s data, but things look better than they have in several week, and there is no danger of a new downturn in activity.” Mr. Rupkey is the same fellow who said stocks are cheap in 2008, especially in USA. … Last week, the government reported that the unemployment rate ticked up a notch to 9.6 percent in August from 9.5 percent in July, as the number of job seekers swamped the number of job openings. Private employers in August added a net total of only 67,000 jobs in August. Job gains would need to be more than three times that to drive down the unemployment rate. The unemployment rate has exceeded 9 percent for 16 straight months and is likely to extend that streak into next year. Without more jobs, consumers are likely to spend cautiously, which would keep the economy mired in its slow-growth rut. The economy’s growth has slowed sharply from earlier this year as the impact of the government’s stimulus package fades. Companies are wary about stepping up hiring because they are worried about their sales and whether the economy will continue to lose momentum. But in recent weeks, companies have shied away from resorting to even deeper layoffs.

September 9, 2010, 7:00 am EDT …The Standard and Poor’s 500 index futures up 4.30 to 1103.20, as frequency traders decided to “play” the market higher. Meanwhile, a minor debt sale by lowly Portugal received unusual positive traction. The FTSE 100 index of leading British shares was up 32.16 points, or 0.6 percent, at 5,461.90, Germany’s DAX up 21.25 points, or 0.3 percent, to 6,185.69 and he CAC-40 in France was up 13.96 points,to 3,691.17. The euro was flat at $1.2720, but the pound was down 0.5 percent at $1.5395, with sentiment further dented by news of the biggest British trade deficit since August 2005. … The dollar’s drop to 83.35 yen has re ignited talk that Japan’s monetary authorities will intervene to stem the export-sapping appreciation of the Japanese currency, especially as Japanese finance minister Yoshihiko Noda said that simulated interventions are currently being conducted. … Oil prices rose above $75 a barrel in Asia after a report showed U.S. crude inventories fell more than expected, suggesting demand may be improving. Benchmark oil for October delivery was up 41 cents at $75.08 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 58 cents to settle at $74.67 on Wednesday. —- Maintain resistance at 1107.10 and support at 1054.00.

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11:18 am … The yen carry trade is the major reason why  capital markets throughout the world are up in September, especially with 89% of all trades are from professionals, while the lowly retail investor is lost in the sauce. Stocksmirf estimates that there are several hundred billion dollars of outstanding positions in the carry trade, with more being added in the last three days — a level unprecedented.  Moreover, when the positions are reversed it would affect every single instrument imaginable and reduce liquidity to zero. … So,  what is the yen carry trade? Put simply, it is borrowing at low interest rates in yen and using the loan to buy higher yielding assets elsewhere. During the past decade, the trade has become a “staple” for big  time  investors. Perhaps the most popular form of the strategy exploits the gap between US and Japanese yields. Anyone borrowing for next to nothing in yen and putting the money into US Treasuries (US government bonds) has received a double pay-off: from an interest rate difference of more than three percentage points and from the dollar’s rise against the yen. Investors make their profit when they reverse the trade and pay back the yen loan. However, monetary authorities throughout the world are now midway through a process of normalising interest rates, which had been slashed to support growth after the dotcom bubble burst in 2000. … Britain is furthest down this track, with interest rates steady at 4.5% and inflation at 2%. The US is not far behind, with nominal rates already matching the UK and set to go higher. The tightening cycle in the eurozone may be put on hold, but not for long. Japan is a laggard – it is just approaching the “starting line”, with the country only just returning to steady growth, which might (or might not) lead to a halt to monetary easing in April and an end to zero interest rates by the end of this year. An end to Japan’s zero interest rate policy might lead to yen appreciation (low interest rates usually mean a weak currency), and so an end to those benign, “no brainer” conditions that have justified the ‘carry trade’ and been so supportive of other asset classes. Borrowing would become more expensive and foreign exchange risk would be higher. …  Japan is by far and away the most important.  …  History requires a  “new” look: Eight years ago, panic in the global financial markets sent the yen surging 20% in less than two months and other markets collapsed, particularly emerging markets, as investors rushed to repay their yen. Then, as Japan’s economy worsened, the trade became popular once again. … Meanwhile, cheap credit for speculators and investors is alive and expanding. But be careful — watch the actions of the Japan’s government  and its fiscal policies: Any material changes would cause a fallout in the global capital markets  never before experienced.  It could lead to the serial collapse of speculative bubbles all over the world, including high-yielding and second-tier currencies, trophy real estate, high-yielding bonds, art and possibly even gold. …  Stocksmirf presents this piece not to frighten you, only to inform. The same way Stocksmirf predicted the collapse  of  real estate values, sub prime slime mortgages, the current  US recession, and government bailouts. The CARRY TRADE BUBBLE would make all the others catastrophes  feel  like a Sunday Picnic.

Beware!

September 8, 2010, 4:00 pm EDT ... Closing Thoughts -– The Standard and Poor’s 500 index closed up 7.03 to 1098.87, as frequency trades decided to move the markets higher since the collective fundamentals were lacking. Meanwhile, the pundits pointed to a successful auction of Portuguese government debt that temporarily eased worries about Europe’s financial system. Total noise! ... Treasury prices bounced off their lows after an auction for 10-year notes was well received by investors. The yield on the 10-year Treasury note, which moves opposite its price, rose to 2.64 percent from 2.60 percent late Tuesday. It climbed as high as 2.68 percent earlier Wednesday. Its yield helps set interest rates on mortgages and other loans. … Consensus on jobs: 71,725 temporary workers are left on the census payrolls as of August 21, which would effect the initial jobless claims. Look for a continuous downward trend in the initial claims and private layoffs leveling off. Accordingly, expects the initial claims level to be flat at 475,000 for the week ending Sept. 4.

September 8, 2010, 7:00 am EDT … The Standard and Poor’s 500 index futures up 4.00 to 1095.50, as the yen hit a fresh 15-year high against the dollar allowing carry trade transactions to support US equities. In currencies, the euro fell to $1.2671 from $1.2682 in New York late Tuesday. The dollar fell to 83.57 yen from 83.74 yen. Meanwhile, the European Union stress tests of 91 banks in July understated lenders’ holdings of potentially risky debt. We suggested in July tat the “deferred holdings to long term status grossly underestimated the risks and the true values of such assets.” Negative sentiment driven by fears equals lower common stock values as Europe’s debt crisis marks the hot spot. Britain’s FTSE 100 down 0.6 percent to 5,376.11, Germany’s DAX down 0.6 percent to 6,083.4 and France’s CAC-40 down 0.5 percent to 3,624.88. Elsewhere, Japan’s benchmark Nikkei 225 stock index down 201.40, or 2.2 percent, to 9,024.60, with exporters pressured by the yen’s continued strength. China’s benchmark Shanghai Composite Index down 0.1 percent to 2,695.29 amid fears of new property curbs and Hong Kong’s Hang Seng index down 1.5 percent to 21,088.86. … Benchmark crude for October delivery was down 49 cents at $73.59 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 51 cents to settle at $74.09 on Tuesday. —- Maintain resistance at 1107.10 and support at 1054.00. Carry trade transactions support higher equity prices, even as fundamentals are weakening. Trade the tape and remain defensive. No need to out think the noise. With over 85% of volume generated by high frequency trading and the like, whatever the “big players” want to do will happen. Therefore, watch for the signals and act accordingly. “The market is rigged and everybody knows it.” such be your mantra.

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September 7, 2010, 4:00 pm EDT … Closing Thoughts — The Standard and Poor’s 500 index closed down 12.67 to 1091.84 on low volume and near zero retail participation. Moreover, the sharp break was blamed on the Greeks. European stocks, especially bank shares, fell following news reports that banks may have more risky government debt on their books than was disclosed during “stress tests” earlier this year. You remember? At the time the soundness of stress tests were questioned by Stocksmirf. Uncertainty about the tests and level of transparency about exactly what values were included in the test have finally received traction. From the outset, we stated the “tests were bogus and whitewashed to give investors a bit of false comfort.” When offering our honest assessment, Stocksmirf received a ton of negative e-mail; all complaining about being “too pessimistic about the tests.” Most questioned the level of our “honest reporting.” Now what? … Several reports later this week could shed more light on the U.S. economy including the “beige book” report from the Federal Reserve coming out on Wednesday and weekly unemployment numbers due out on Thursday. …    FACTOR TO CONSIDER: Federal Reserve had reported that non-financial firms borrowed another $289 billion in the first quarter, taking their total domestic debts to $7.2 trillion, the highest level ever. (Second quarter numbers due next week and should be even worse.) By Dartline’s estimates the total debt was $1.56 trillion since the first quarter of 2007; over twice the level seen in the late 1990s, and will reach $1.97 trillion for the second quarter. Moreover, debt repayments was less than $82 billion, in the second and fourth quarters of 2009. Preliminary second quarter 2010 figures also show limited repayments or other forms of reductions. What’s all the noise about Corporate American being flushed with free cash? …. The S&P 500 index was range bound between 1010 and 1130 in the S&P 500 as the tug of war between risk on and risk off continues. The final three days of last week provided gains in excess of 5.0% as economic data came in better-than-expected. On Friday, the S&P 500 tested a minor resistance line off the April highs (which coincided with the 100-day moving average), but was unable to push higher. The bulls attempted to “talk-up the market with the help of the financial media, especially CNBC (more cheerleader than honest reporters) to no avail. Indeed, the bulls claimed a convincing push above 1010 would reverse the short-term downtrend, and the ability to climb above the 1125 resistance level would send the index above 1150 to test its major trendline off the 2007 highs. All was lost today when the index failed to hold 1100.

September 7, 2010, 7:00 am EDT …The Standard and Poor’s 500 index futures down 6.70 to 1096.10, as Britain’s FTSE 100 index down 0.7 percent to 5,402.66, Germany’s DAX down 0.6 percent to 6,116.46 and France’s CAC-40 down 1.0 percent to 3,649.12. Also losses in Asia as traders worries about the pace of the global economic recovery following U.S. jobs figures stills confuse investors, especially the reaction to Obama’s new $50 billion jobs scheme. … In currencies, the dollar slipped to 83.95 yen in Tokyo from 84.11 yen in London. The euro declined to $1.2766 from $1.2833. … Overview for September: Heading into the month stocks had become oversold on major bearish sentiment. Thus, prudent valuations, such that the S&P 500 traded with a forward P/E of 11.9x, which many viewed as attractive in light of the forward P/E of 11.1x that was seen at market’s multiyear low in March 2009, when economic conduction were weaker. Meanwhile, an improved sentiment caused a rotation out of Treasuries. As a result, the yield on the benchmark 10-year Note moved back above 2.70%. Between its weekly low and its weekly high the yield on the 10-year Note climbed about 30 basis points. … The dollar also fell out of favor. Relative to a basket of competing currencies it fell 0.5% in its third straight slide.The S&P 500 rallied 5.3% as all ten sectors posted a gain. Financials (5.7%), consumer discretionary (5.0%) and materials (4.2%) led the way. Defensive sectors underperformed on a relative basis, with utilities gaining 1.6%. In Precious metals, December gold rose 1.0% to close at $1250.10 per ounce and December silver was 4.4% higher at $19.92 per ounce. During pit trade today, silver futures hit a 29-month high at $19.93 per ounce. … September crude oil futures, which fell 0.8% to close at $74.60 for the week, spent most of its week in positive territory. Crude moved into the red on Monday and traded there until Friday’s session. Lows of $71.53 per barrel were hit on Tuesday. Wednesday’s inventory data showed a build of 3425K compared to consensus, which called for a build of 1200K, caused crude to see a modest pullback to around $73.40. —- Change resistance to 1107.10 and maintain support at 1054.00. Index appears overbought with need to consolidate gains, especially since gains were done with abnormally low volume.

September 3, 2010, 7:00 am EDT …The Standard and Poor’s 500 index futures up 1.00 to 1089.90, as global markets climbed on “new normal” improvement in U.S. economic indicators ahead of a crucial employment report due this morning. August’s jobless rate is forecast to rise to 9.6 percent from 9.5 percent in July with the private sector adding only a net total of 41,000 jobs, fewest since January. Even a 1000 body improvement from the estimates will drive stocks hitter. …Japan’s benchmark Nikkei 225 stock index rose 51.29 points, or 0.6 percent, to 9,114.13 and South Korea’s Kospi edged up 0.2 percent to 1,780.02. Hong Kong’s Hang Seng index added 0.5 percent to 20,971.50. … London’s FTSE was 100 up 0.1 percent to 5,371.0, France’s CAC-40 was up 0.5 percent at 3,649.34 and Germany’s DAX was up 0.4 percent to 6,109.09. … Benchmark oil for October delivery was down 36 cents at $74.66 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.11 to settle at $75.02 a barrel on Thursday. … In currencies, the dollar rose to 84.41 yen from 84.26 yen in New York late Thursday. The euro climbed to $1.2839 from $1.2820. … Sentiment turned positive on Wall Street after the bogus and misleading National Association of Realtors report on Thursday that the number of buyers who signed contracts to purchase homes rose 5.2 percent in July after hitting a record low in June. Such “news” has compromised the value to rely on technical indicators such as the S&P 500 index. Yesterday, the S&P 500 index struggled in the 1087 area, which should have been resistance, but limited buying in the large-cap tech and large-cap financials spooked the shorts and covering was ramped before the close driving the index to close at its high. Indeed, the advance has the S&P 500 up 3.89 percent in the first two days of September, which offset what was lost in August. Meanwhile, trading volume was light. As for where to set the S&P 500 index —- Change resistance to 1098.70 and support at 1054.00. Allow the jobs report to filter through the financial media since whatever the number it will be given a positive twist: i.e. “Manufacturers have added jobs indicates growth in the economy” “The bottom has been reached with less than expected unemployment.” “The Obama Nation’s new stimulus programs will create new jobs.” “No double-dipping.” So go with the flow and only trade what’s hot. Maintain 70% cash position, except for “special situations” and short term trades. Be careful: the “noise” can win just by the level and persistence of the sound.

September 2, 2010, 4:00 pm EDT … Closing Thoughts — The Standard and Poor’s 500 index closed up 9.81 to 1090.10, as the National Association of Realtors (NAR) said pending sales of previously owned homes rose unexpectedly in July, while initial jobless claims fell for a second straight week. Still at historically low levels, the “pending sales” data requires the sales to close. What the NAR failed to state —- only 60 percent of contracts actually closed. NAR is notorious for misinformation. So what? The stock market loved it and so did we. … Trade the noise like it’s real and you cannot go wrong in a manipulated financial information environment. Only thing to remember — don’t fall in love with the noise. Merely trade it as long as you can — like a cat on a hot tin roof. ... The housing market continues to be dead in the water, with any blip meaning “the worse is over.” The housing and labor markets are the biggest headwinds facing the recovery, and the data comes a day ahead of a monthly employment report expected to confirm that jobs were lost in August. … In an encouraging sign for the consumer, US retailers posted better-than-expected sales in August as consumers sought bargains during the key back-to-school season. The Morgan Stanley Retail index (.MVR) rose 1.6 per cent while the S&P retail index (.RLX) added 1.6 per cent. … Still the fundamental problems of a troubled housing market and banks that aren’t going away. Even with the Fed stepping in, those issues are likely to remain for some time. … Tracking today’s volume with Dartline BTD statistical arbitrage index (BTD-SAI) shows further short covering as a major factor to the end of day upside surge in stock values. With limited new money added to the pile, the current rally cannot be support. However, fighting logic is a fool’s game. Trade the trend and allow the events to unfold to your advance.