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Hope Springs Eternal

Daily State of the Markets
Monday Morning – August 28, 2011

Publishing Note: I am traveling Tuesday morning and will not publish a morning missive. Daily State of the Markets reports will return on Wednesday.

Good morning. It is said that the markets travel in cycles that are driven by fear, hope, and greed. During the late-summer swoon, it was clear that the fear of what could be happening to the economy and to the global banking system was driving the action. However, it would now appear that traders have put fear aside and are functioning in a more hopeful mode in response to the commentary coming out of Jackson Hole over the weekend.

So here we go again. Since Friday morning, traders have been provided with hope that the Fed, the ECB, the EU, and the IMF will do something more than just talk and perhaps finally put the fear the fear of what might occur to bed. And while we wait for the talk to materialize into something meaningful, traders are adjusting their expectations (to the upside).

Let’s review. As expected, Mr. Bernanke didn’t say much of anything on Friday. However, analysts note that the text of his speech wasn’t too terribly different from last year. Thus, with the FOMC deciding to expand their September meeting from one day to two, the hope is that those dissenting voters on the committee might be more dovish by the time the meeting ends and that some new form of stimulus will be announced.

Lest we forget, Mr. Bernanke has thus far been adamant about not allowing a deflationary spiral to begin in the U.S. And although Bernanke admitted that there is only so much the Fed can do, you can rest assured that he will indeed fire every bullet the FOMC has access to in this particular fight.

Next up is the situation in Europe. while there is still a fair amount of angst that the Greece bailout deal could fall apart during the country-by- country approval process (at issue here is the collateral demands being made by Finland and a handful of other countries) scheduled to be completed before the end of September, commentary from the EU, the ECB, and the IMF in Jackson, WY over the weekend is also providing traders with hope this morning.

Newly elected IMF Chief Christine Lagarde told the gathering that the world economy is in a “dangerous new phase.” Not mincing words, Lagarde suggested that now is the time for action and that central bankers can only do so much.

Speaking of central bankers, the ECB’s Jean-Claude Trichet spoke of “non-standard monetary policy” during his time at the podium and suggested that the ECB is not afraid to use the tools it has at its exposure.

And finally, there is talk of a new “radical plan” being readied by the EU to backstop Europe’s banks. While the details are not yet entirely clear, it would appear that the EU is talking about providing guarantees for the debt of European banks.

So there you have it. With some big talk coming out of Jackson Hole it would appear that hope does indeed spring eternal at this time. But with resistance looming, it will be interesting to see how far hope can take stock prices.

Turning to this morning… Traders continue to hope that the ECB/EU/IMF will indeed come up with something meaningful this time around. Markets around the globe are higher (save Shanghai) and the futures are pointing to more green screens at the open.

On the Economic front… Personal Incomes rose by +0.3% in July, which was below the consensus expectations for an increase of +0.4%. Personal Spending (now called “Consumption”) for the month rose by +0.8%, which was above the expectations of -0.2%. The Core PCE (think inflation) came in up +0.2%, which was in line with expectations for +0.2%.

Thought for the day… Choose to have a mind that is open to anything and everything…

Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell…

  • Major Foreign Markets:
    • Australia: +1.47%
    • Shanghai: -1.37%
    • Hong Kong: +1.44%
    • Japan: +0.61%
    • France: +1.85%
    • Germany: +1.52%
    • Italy: +2.03%
    • Spain: +2.51%
    • London: Closed

  • Crude Oil Futures: +$1.33 to $86.70
  • Gold: +$17.20 to $1815.90
  • Dollar: lower higher agains the Yen, lower vs. Euro and Pound
  • 10-Year Bond Yield: Currently trading at 2.234%
  • Stocks Futures Ahead of Open in U.S. (relative to fair value):
    • SP 500: +13.80
    • Dow Jones Industrial Average: +118
    • NASDAQ Composite: +23.68

Wall Street Research Summary


  • Granite Construction (GVA) – BBT
  • Barnes Group (B) – BBT
  • IntercontinentalExchange (ICE) – CLSA
  • O’Reilly Auto (ORLY) – ISI Group
  • AMR Corp (AMR) – Ticonderoga Securities


  • Staples (SPLS) – ISI Group
  • Overseas Shipholding (OSG) – Estimates cut at Morgan Stanley
  • Nordic Amer Tankers (NAT) – Estimates cut at Morgan stanley
  • Adobe Systems (ADBE) Estimates and target cut at UBS

    Long positions in stocks mentioned: none

    For more of Mr. Moenning’s thoughts and research, visit

    The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.

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    The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

    The information contained in this report is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.

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    Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

  • News From the Advertising Industry


    ¶Corporation for Travel Promotion, Washington, which was established by Congress last year, named JWT, part of WPP, and several sibling WPP agencies to handle the first worldwide marketing campaign to attract international travelers to visit the United States. The budget is estimated at $200 million. The other agencies working with JWT include Brand Union, Hill Knowlton and MediaCom.

    ¶The New York State agency known as Empire State Development issued a request for proposals for a campaign, carrying the theme “New York is open for business,” that would support the state’s business development efforts. Spending for the assignment, which is new, is estimated to be at least $10 million a year and not more than $50 million. The agency is handling the review internally, without a consultant.

    ¶Carlson Restaurants Worldwide, Carrollton, Tex., hired the Richards Group, Dallas, to handle the creative and media assignments for its TGI Friday’s restaurant chain. The creative work had most recently been handled by the Culver City, Calif., office of Wong, Doody, Crandall, Wiener. The media assignment had been handled by Horizon Media, for buying, and Pohmedia, for planning. Spending was estimated at $50 million.

    ¶Coldwell Banker Real Estate Corporation, Parsippany, N.J., chose Siltanen Partners, El Segundo, Calif., as its creative agency of record. The account had been handled by McKinney, Durham, N.C. Spending was estimated at $45 million.

    ¶1-800 Contacts, Draper, Utah, selected Duncan/Channon, San Francisco, as agency of record for its contact lens store along with a new operation, The assignment had most recently been handled internally. The company spent almost $40 million on advertising last year.

    ¶Wells Enterprises, LeMars, Iowa, named Pólvora Advertising, Miami, for a new assignment, to help introduce its Blue Bunny brand of ice cream to Hispanic consumers. Billings have not been determined.

    ¶Rémy Cointreau USA, New York, part of Rémy Cointreau, consolidated the account of its Rémy Martin Cognac line at the Vidal Partnership, New York. Advertising had been handled by La Comunidad, Miami, and the digital duties had been handled by Syndicate, New York. Billings were not disclosed.


    ¶Matthew Bull, chief creative officer at Lowe Partners Worldwide, London, part of the Interpublic Group of Companies, is leaving to “pursue a personal project,” the agency said. Mr. Bull, who has been based in New York for Lowe since taking the job in 2009, will be opening his own agency; he previously ran an agency in South Africa that had the backing of Lowe. To oversee Lowe’s creative work, the chief executive, Michael Wall, said, the agency will rely on its global creative council, as senior creative executives from Lowe offices around the world take turns serving as the council’s president for a one-year term. The first president will be Jose Miguel Sokoloff, chairman and chief creative officer at Lowe’s agency in Colombia, Lowe SSP3.

    ¶Jeffrey Histed, executive vice president at Northstar Research Partners, Toronto, part of MDC Partners, was promoted to chief culture officer, a new post.

    ¶Rick Carpenter joined Quigley-Simpson, Los Angeles, as president, a new post. He has held posts like president and chief executive at the Chicago and Los Angeles offices of DDB Worldwide, part of the Omnicom Group.

    ¶Barbara Pelham joined Universal McCann, New York, part of the Mediabrands division of the Interpublic Group of Companies, as executive vice president and global managing partner for the MasterCard account. She succeeds Matt Kasindorf, executive vice president and managing director, who will focus on the other large Universal McCann accounts he oversees like ExxonMobil. Ms. Pelham had most recently been an executive group director at OgilvyOne, New York, part of the Ogilvy Mather Worldwide unit of WPP. Universal McCann’s work for MasterCard has expanded significantly recently; the agency now handles media duties in the United States along with its previous assignment of handling the media duties in overseas markets.


    ¶Pollack P.R. Marketing Group, Los Angeles, is opening an office in New York, to be led by Mike Greece. He had been managing director at the New York office of Padilla Speer Beardsley.

    ¶Revenue for advertising that runs outside the home increased 4.5 percent in the second quarter compared with the same period a year ago, according to the Outdoor Advertising Association of America. Ad revenue for out-of-home advertising has been growing since the second quarter of 2010.

    ¶Toyota Motor Sales USA, part of Toyota Motor, agreed to be the “signature sponsor” of the inaugural schedule of Bounce TV, which describes itself as the first over-the-air broadcast network for African-Americans. The network is to begin broadcasting on Sept. 26 with a presentation of the 1978 movie “The Wiz.”

    ¶The Advertising Club of New York and Google are teaming up for the Young Innovators Award, open to those under age 30. The top prize is $5,000 cash. Submissions of video clips to the club’s new brand channel on YouTube are being accepted through Sept. 12. The winners are to be announced on Sept. 22.

    Travel may take days to return to normal after Hurricane Irene

    Passengers stand in line at New York's LaGuardia Airport on Monday. East Coast airports have reopened after Hurricane Irene.

    (CNN) — Hurricane Irene has come and gone, but many travelers are still going nowhere fast in the aftermath of the storm.

    The airlines are just recovering after canceling thousands of flights over the weekend, some mass transit systems are still struggling, and train service remains sporadic in parts of the Northeast ravaged by Irene.

    “It will take a few days for everyone to get where they want to go,” said Mateo Leras, a spokesman for JetBlue.

    The airline is adding several flights Monday to take care of passengers who couldn’t fly over the weekend.

    Airlines and airports getting back to normal

    About 650,000 to 700,000 air travelers have been grounded since Friday because of flight cancellations prompted by Hurricane Irene, said Daniel Baker, CEO of, a flight tracking service.

    The good news is that many of the affected passengers made alternate arrangements, so not everyone is in the backlog that carriers are dealing with now, Baker added.

    Hundreds stranded on N.C. island

    Irene hits New York, New Jersey

    “The airlines are hoping to be back on a regular schedule this afternoon, and so at least the cancellations will dwindle down,” Baker said.

    “But it will be through the week” before the backlog is resolved, he said. “There’s no question that there’s really widespread ramifications.”

    Tuesday and Wednesday are usually the slowest air travel days of the week, which will help travelers get on the flights they want, said Todd Lehmacher, a spokesman for US Airways.

    The airline reached out to 90,000 people ahead of the weekend to reschedule their itineraries, he said.

    Most passengers were accommodated before the storm began, American Airlines spokeswoman Andrea Huguely said. The carrier is considering extra flights if there’s a lot of overflow and demand, she said.

    Airlines including American and US Airways said they don’t expect any impact on Labor Day travel.

    “This is a well-prepared(-for) and well-planned event,” Baker said. “The airlines announced it really well, they canceled flights, and they’re getting back going again. … It comes off as very organized.”

    Still, some travelers abroad are having trouble coming back to the United States.

    CNN’s Deborah Feyerick, who has been traveling in Greece, was supposed to return to New York on Sunday, but the first flight on which her airline could rebook her was Thursday.

    Meanwhile, train travel is still feeling feeling the impact of Hurricane Irene.

    All Amtrak service between Boston and Philadelphia is canceled because of the extensive flooding, debris on tracks and power issues due to the storm.

    There’s also no Acela Express service between Boston and Washington.

    New Jersey rail service is suspended until further notice, but bus and light rail service is operating on a modified schedule on Monday.

    Share this on:


    Greece’s Eurobank Takes EUR664 Million Hit From Bonds

       By Stelios Bouras 

    ATHENS (Dow Jones)–EFG Eurobank Ergasias SA (EUROB.AT), Greece’s second-largest lender by assets, said Monday it will write down EUR664 million on its holdings of Greek government bonds as part of a debt swap program, a discount of about 16.7% to their face value.

    The write down resulted in a second quarter net loss of EUR661 million, the bank said in a statement. Without the adjustment for the participation in the bond swap program, Eurobank’s profit for the second quarter would have been EUR3 million, above market expectations.

    According to analysts, Eurobank was expected to report second-quarter net profit of EUR250,000, without taking into account the impact of the bond swap program.

    Net interest income for the three month period was EUR515 million, beating forecasts of EUR505 million. “In the second quarter of 2011, amid a particularly adverse environment, our group generated operating profits with a substantial contribution from our operations in south-eastern Europe, where our results show a strongly upward trend,” said Eurobank Chief Executive Nikos Nanopoulos.

    Earlier Monday, Eurobank confirmed that it plans to merge with the country’s third-largest lender, Alpha Bank SA (ALPHA.AT) in a EUR7 billion deal to create Greece’s largest bank.

    -By Stelios Bouras, Dow Jones Newswires; +30-211-0104827; [email protected]

    Victorian State MP John Pandazopoulos’s Vision for Greek-Australian Relations

    “People don’t realise, even though we’re of Greek heritage, it’s in none of our political interests to work on issues relating to Greece. The reality is, we do this stuff at our own political expense. We do this stuff, because, in Melbourne, in the third biggest Greek city in the world, you cannot not engage on these things. They’re important to us,” states Victorian state MP John Pandazopoulos.

    Media focused on Pandazopoulos’ last visit to the Greek capital in July, and his role as President of the World Hellenic Inter-Parliamentary Association (WHIA) along with MPs from diaspora nations who are invited to attend a bi-annual conference in Greece, financed by the Greek Parliament.

    Pandazopoulos was presiding over the 8th General Assembly of the association, and the twenty-nine delegates attending (seven of whom were from Australia) had their travel and accommodation paid for by the Greek Parliament. The trip was largely discussed because it was taking place within days of the same parliament passing huge pay cuts and tax increases on its own citizens. The Victorian MP states that he is used to this kind of media attention when it comes to his passion for Australian – Greek relations.

    “The cost of democracy is having to spend money,” says the former Tourism minister, who says he was not offended by accusations of some media in Victoria about last month’s trip to Athens. “I don’t get offended by the Herald Sun, because they’ll always have a go.” The Victorian MP added that ”all this is a competitive game and that when it became a media story, some of his detractors decided to be critics and withdraw from the conference”.

    “We were guests of the Greek Government. We ran a conference that cost 80,000 euro this year, that two years ago cost 50,000 euro. Some people had business class fares, not all. Should it be economy? That’s under review. It was an offer that the Greek Government wanted to make for those travelling long-haul because the day we arrived we were starting work.”

    Despite all criticism, Pandazopolous finds that the inter-parliamentary association is worth his and others’ time, as well as the Greek Parliament’s continuing investment. “As politicians we’re facing similar issues. If you’re trying to deal with climate change, you have to talk to other politicians around the world. The Greek diaspora community are facing the same challenges. This is about politician to politician relationships. At the end of the day, politicians drive public policy. The whole idea is about knowledge building, politicians having to talk to each other, not just government bureaucracy to government bureaucracy.”


    John McAleese

    Microphones were drilled into the embassy walls; commercial aircraft flying
    overhead were ordered to travel at lower altitudes, to drown out any
    suspicious noises caused by the preparations for an assault.

    Meanwhile, the soldiers studied long-lens photographs, taken through the
    embassy windows, of the hostages in the hope that they would be able to
    distinguish them from their captors.

    Then, on the evening of May 5, a team led by McAleese stormed the building.
    The assault had been ordered by the Home Secretary, William Whitelaw, after
    the terrorists killed a hostage and threw his body outside the building.

    For the first time, an SAS operation was shown live on television as both ITV
    and the BBC (which interrupted its coverage of the final of the world
    snooker championships) broadcast footage of black-clad troops in balaclavas
    — among them McAleese — abseiling down ropes on to the balconies on the
    first floor of the embassy, where it was thought that most of the hostages
    were being held.

    In order to disorientate the terrorists, the SAS first exploded a so-called
    “distraction” charge, which they had lowered through a skylight.

    The front window of the room were blown out by McAleese and CS gas canisters
    fired in through the gap. The soldiers then stormed in amid a hail of

    The raid lasted 17 minutes. All but one of the hostages were rescued. Five of
    the terrorists were killed; the only one to survive, Fowzi Nejad, was sent
    to prison — he was released in 2008.

    Returning after the assault to their temporary London quarters at Regent’s
    Park Barracks, the SAS team was visited by the Prime Minister Margaret
    Thatcher, who told them: “Makes us proud to be British.” McAleese later
    said: “We knew what our mission was — it was to release the hostages. My
    only job at this point is to get on to the balcony, place the charge, get
    back, blow it, turn around and go back in through the window.”

    John McAleese was a Scot, originally from Laurieston, in Stirlingshire, and
    served in the Army for 23 years, including 17 in the SAS. He was awarded a
    Military Medal in 1988 for his service in Northern Ireland. After leaving,
    he worked as a security consultant in Iraq and Afghanistan, and had a brief
    media career as a host of the 2003 BBC series SAS: Are You Tough Enough?, a
    documentary in which members of the public experienced the proverbially
    gruelling SAS selection process.

    He also acted as an instructor in Airsoft, the outdoor game which offers
    people a taste of what it is like to experience battle conditions.
    Participants dressed in combat gear and carrying real weapons (loaded with
    plastic BB pellets) mimic close-quarter modern infantry fighting.

    McAleese said: “You might as well make it realistic. People read books about
    this SAS stuff and now they can do something similar.”

    The last two years of McAleese’s life were marked by the death of his son,
    29-year-old Sergeant Paul McAleese, who was serving in the 2nd Battalion the
    Rifles and hoped to join the special forces like his father before him. Paul
    was killed by an explosion in Afghanistan on August 20 2009 while attempting
    to rescue a wounded comrade.

    After his son’s death, John McAleese appealed to the Prime Minister Gordon
    Brown for better resources for the troops serving in Helmand province. He
    said that his son had complained that there were not enough troops in
    Afghanistan to monitor areas for explosive devices.

    John McAleese, who died in Thessaloniki, Greece, is thought to have suffered a
    heart attack.

    As well as his son Paul, he had a daughter with his first wife. He also had a
    daughter and a son by his second marriage.

    A Subtle Emotional Appeal to Luxury Travelers

    Created internally, the new print and online campaign adopts a tagline developed by the brand’s former agency, Atmosphere BBDO, now Atmosphere Proximity, part of the Omnicom Group: “Life is a collection of experiences. Let us be your guide.” It also features photographs of still-life vignettes that contain framed snapshots of a variety of Luxury Collection hotels, plus travel souvenirs, all displayed on a credenza.

    Paul James, global brand leader for Luxury Collection — a group of 79 hotels that comply with brand service standards, of which Starwood manages 41 and owns 10 — said the company “has not seen any immediate change in demand” in the wake of the stock market’s recent gyrations.

    “We’re confident that even if there is turbulence in the market, it’s the right time to talk about the Luxury Collection, to remind people about our great destinations,” Mr. James said. “We will keep our eye on the market, and if we see any change in our business, at that time we’ll adjust our strategy.”

    According to Jan Freitag, senior vice president for global development at Smith Travel Research, a lodging research company, “luxury hotels are alive and well.” Demand for luxury hotels in the United States is strong, he said, which has allowed them to increase rates an average of 6.4 percent in the first seven months of this year, compared with an average 3.5 percent rate increase for the industry as a whole.

    “After coming out of the ’09 recession,” he said, luxury travelers “are psychologically prepared to take the wild gyrations of the stock market in stride. We don’t expect there to be an impact on high-end leisure and business travelers because of short-term stock market changes.”

    Bjorn Hanson, divisional dean of the Preston Robert Tisch Center for Hospitality, Tourism and Sports Management at New York University, said now was a “great time” for Starwood to promote the Luxury Collection, because luxury lodging demand in the United States would increase more than 5 percent this year.

    “Volatility in the stock market has become the new norm among higher-income travelers. Their underlying wealth has not changed to the point where it would affect their lifestyle issues,” he added.


    The five full-page executions of the new campaign, by the photographer David Prince, feature different hotels in the Luxury Collection, including beach and golf resorts and others with old-world European or contemporary design.

    The ad for the golf resorts contains framed photographs of the Equinox in Vermont, the Al Maha Desert Resort and Spa in Dubai, and the Turnberry Resort in Scotland, as well as golf clubs, a golf trophy and a small wooden boat model representing activities available at the resorts.

    Another ad, meant to promote the brand in general, features all types of hotels in Mexico, Italy, India, the United States and Peru. Souvenirs and decorative items in this ad include coral, a starfish, a clock, a small statue, a glass of wine and golf tees.

    All ads also feature a selection of books whose spines face outward; instead of titles, these show the names of the hotels in the ads’ framed snapshots. Mr. Prince said the campaign “is about the trigger points that stimulate your emotions and your memories, and the moments that inspire us when we travel.”

    Most luxury hotel advertising, he added, tries “to present the big picture, your room, your bedding, where you’re going to eat,” but the new Luxury Collection campaign is “about the personal touches that make a hotel great, the elements that resonate and inspire you.”

    Starwood ran a full-page teaser version of the new advertising in the May issue of The Financial Times’s “How to Spend It” magazine and in the July issue of Departures. The ads will run this fall in both publications, and this fall and winter in Condé Nast Traveller UK, ForbesLife, Robb Report, Bentley Magazine and Luxury Travel Advisor, a trade publication.

    In addition, banner versions of the advertising will run on the Web site of the Five Star Alliance, an online travel agency specializing in luxury hotels, and on the tablet version of the 40th anniversary edition of Travel Leisure.

    Individual hotels within the Luxury Collection also have the option to customize the advertising, inserting photographs of their choice into the frames in the brand advertising. So far, hotels in Mauritius, Portugal, Argentina and Greece have opted to do this.

    The budget for the global print campaign is $400,000, while the budget for online advertising, both for the brand globally and for its North American hotels, is $300,000. Neither figure includes advertising by individual hotels.


    Promoting hotel collections like the Luxury Collection can be challenging, Mr. Hanson said, because they lack consistency in features, like design. “Therefore, themes become one of the core messages to establish the image of collections. The idea that life is a collection of experiences at the luxury level is a good theme,” he said.

    Other experts panned the campaign’s creative execution.

    Henry Harteveldt, travel analyst for Forrester Research, said the advertising was “unimpressive because it’s not distinctive. You could cover up the logo, and it could be advertising for almost any high-end luxury hotel.”

    “They talk about experience, but there are no pictures of people, no experiences shown. It’s too obtuse. This is not the kind of ad campaign that will cause Web sites to hum and phones to ring,” he added.

    Similarly, Andrew Sacks, president of AgencySacks, a New York branding and marketing agency for the affluent market, said that although “the strategy certainly makes sense, they’ve made the ads a little unemotional. It gives me a taste of what a Luxury Collection hotel looks like, but it doesn’t necessarily help me understand what the experience of staying there would be.”