EUR/USD up during the Asian session

Image via WikipediaEUR/USD was trading at 1.4123, up 0.20% at time of writing.

The pair was likely to find support at 1.4056, Thursday’s low, and resistance at 1.4453, Monday’s high.

Meanwhile, the Euro was up against the British Pound and down against the Japanese Yen, with EUR/GBP gaining 0.08% to hit 0.8677 and EUR/JPY falling 0.22% to hit 110.94.

Europe Needs a Bazooka

Remember Hank Paulson’s bazooka? Well, it turned out that the Paulson bazooka was more like the Bernanke/Paulson bazooka. The combination of monetary policy and fiscal policy during the credit crisis was highly effective in ending the solvency concerns that were unfolding in 2008. QE1 “worked” in that it shored up markets when it was needed. Combining this with the stimulus act was a potent mix. And though I believe they were not our best options at the time (I was in favor of a Swedish approach to the US banking system and a stimulus that was more focused on helping Main Street) they proved to stop the contagion. Europe must stop the contagion.

Although not entirely analogous to the American credit crisis (which was really a household debt crisis), the Euro crisis is similar. And I think it’s going to require an equally large bazooka. The only problem is that Jean Claude Trichet doesn’t have his Hank Paulson (no central Treasury in Europe). This recent piece in the FT laid out the problem superbly:

“Stopping Europe’s current crisis requires fundamental overhaul of the eurozone’s institutions. But the most important part of that overhaul is to ensure that the ECB takes on full responsibility as a lender of last resort in the government bond markets of the eurozone. Without this, the markets cannot be stabilised and crises will remain endemic.

At the same time, further steps towards political unification must be taken, without which control on national government deficits and debts cannot be implemented. Some steps in that direction were taken recently when the European Council strengthened control of national budgetary processes and on national macroeconomic policies. These decisions, however, are insufficient, and more fundamental changes in the governance of the eurozone are needed. These should be such that the ECB can trust that its lender of last resort responsibilities in the government bond markets will not lead to a never-ending dynamic of debt creation.”

I am still having trouble seeing a scenario in which Europe isn’t forced into greater unification, a Euro bond and a central treasury. The only question is whether they will wait for the entire union to collapse before trying to put it back together again or if they will be proactive?

T

Avon Products (AVP) Showing Resistance Near $26.76 With 3.45% Dividend Yield

Avon Products (NYSE:AVP) closed Monday's seesaw trading session at $25.85. In the past year, the stock has hit a 52-week low of $25.59 and 52-week high of $36.20. Avon Products (AVP) stock has been showing support around $25.14 and resistance in the $26.76 range. Technical indicators for the stock are Bearish and S&P gives Avon Products (AVP) a neutral 3 STARS (out of 5) hold rating. For a hedged play on Avon Products (AVP), look at the Jan '12 $25.00 covered call for a net debit in the $23.55 area. That is also the break-even stock price for this trade. This covered call has a duration of 172 days, provides 8.90% downside protection and an assigned return rate of 6.16% for an annualized return rate of 13.07% (for comparison purposes only). A lower-cost hedged play for Avon Products (AVP) would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the Avon Products (AVP) Jan '13 $20.00 call and selling the Jan '12 $25.00 call for a total debit of $4.40. The trade has a lifespan of 172 days and would provide 5.61% downside protection and an assigned return rate of 13.64% for an annualized return rate of 29% (for comparison purposes only). Avon Products (AVP) has a current annual dividend yield of 3.45%. [ABR-Seven Summits Research]

LBI Media, Inc. Announces Conference Call to Discuss Financial Results for the Second Quarter 2011

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BURBANK, Calif., Aug. 4, 2011 /PRNewswire/ -- LBI Media, Inc. will host a conference call to discuss its financial results for the three months ended June 30, 2011 on Friday, August 19, 2011 at 1:00 PM Pacific Time/4:00 PM Eastern Time.  Interested parties may participate in the conference call by dialing (888) 397-5335 beginning fifteen minutes prior to the scheduled start time of the call, asking for the "LBI Media Second Quarter 2011 Results Conference Call", and providing confirmation code 6266414 to the operator.  The conference call will be recorded and will be made available for replay through Friday, August 26, 2011.  Investors may listen to the replay of the call by dialing (888) 203-1112, then entering the passcode 6266414.

LBI Media, Inc. is a leading Spanish-language entertainment company and one of the largest Spanish-language radio and television broadcasters in the United States, based on revenues and number of stations.  The Company owns 21 radio stations (fifteen FM and six AM) and nine television stations in greater Los Angeles, CA (including Riverside, San Bernardinoand Orange counties), Chicago, IL, Dallas-Ft. Worth, TX, Denver, CO, Houston, TX, New York, NY, Phoenix, AZ, Salt Lake City, UT, and San Diego, CA. The Company also owns "EstrellaTV", a leading Spanish-language national television broadcast network in the United States.  The Company also owns four television production facilities that it uses to produce its core television programming.  The Company is also affiliated with television stations in various states and along with its owned and operated stations, serve 37 specific market areas, including nine each in California and Texas, four in Florida, three in Arizona, two in Nevada and one each in Illinois, Kansas, Nebraska, New Mexico, New York, North Carolina, Oklahoma, Oregon, Utah, and Washington.

SOURCE LBI Media, Inc.

U.S. Stocks Tumble on Economic Worries

U.S. stock markets are tumbling today amid fears of a weakening U.S. economy. The Dow Jones Industrial Average fell 333 points by noon, a drop of 3 percent.

Fears of a double dip recession are clearly taking hold among traders and economists.

"The market is sending a strong and clear message that the U.S. economy is in a soft patch, the question is whether the soft patch is temporary, or something more serious," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC.

Markets are reacting in particular to weekly jobless claim data from the Labor Department that shows the job market remains weak. In the week ending July 30, there were 400,000 new unemployment claims. This was a decrease in initial claims from the week earlier, but clearly not enough of a decrease to give investors confidence in the strength of the U.S. economy as whole. Jobless numbers for July are due out Friday morning before the markets open.

Fear about a spreading debt crisis in Europe are also contributing to the sharp market decline today. Last week's dismal GDP data and weak manufacturing data earlier this week are also among the factors inciting investors' worries.

The Dow managed to snap an eight-day losing streak by ending the day slightly positive on Wednesday. If today's major declines take hold the Dow will have ended the day lower in nine out of 10 days. It's set to be the worst losing streak for stocks since 2008.

On Tuesday, the Senate passed an agreement to raise thedebt ceiling and avoid a default on U.S. debt, following passage in the House on Monday evening.

"The initial increase of the debt limit by $900 billion and the commitment to raise it by a further $1.2-1.5 trillion by yearend have virtually eliminated the risk of such a default, prompting the confirmation of the rating at Aaa," Moody's stated in a report.

Moody's assigned a negative outlook to its rating, saying it could downgrade the U.S. if fiscal discipline weakens in the coming year, further "fiscal consolidation" does not take place in 2013, the economic outlook "deteriorates significantly," or there is an appreciable rise in the government's spending "over and above what is currently expected."

Fitch Ratings confirmed its AAA rating for United States debt over the short-term, but warned of more tough choices coming soon.

"While the agreement is clearly a step in the right direction, the United States, as in much of Europe, must also confront tough choices on tax and spending against a weak economic back drop if the budget deficit and government debt is to be cut to safer levels over the medium term," Fitch said in a statement.

On Tuesday, U.S. financial markets were first buoyed by the news of a possible debt limit deal in Washington, but slid after a report on manufacturing showed weak progress for the economy.

"Consumer and businesses rally need to regain some confidence and start to spend more if we're going to have a resurrection in the third quarter," Bruce McCain, chief investment strategist with Key Private Bank, said.

Moving Averages Give Structure

Federal Reserve (FED)

The Federal Reserve System is the central banking system of the United States. It was created in 1913 by the enactment of the Federal Reserve Act, largely as a response to a series of financial panics or bank runs, particularly a severe panic in 1907. Over time, the roles and responsibilities of the Federal Reserve System have expanded and its structure has evolved.

Chairman: Ben S. Bernanke

Current Voting Members: William C. Dudley, Elizabeth A. Duke, Richard W. Fisher, Donald L. Kohn, Randall S. Kroszner, Sandra Pianalto