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1. Negative Real Estate Data Hitting the Wires

Paul Rubillo
4/7/2009 2:18 PM EDT

Here is some interesting Equifax (EFX) data just released this morning:

Seven percent of homeowners with mortgages were at least 30 days late on their loans in February, an increase of more than 50% from a year earlier.

Also, 39.8% of subprime borrowers were at least 30 days behind on their home mortgage loans, up 23.7% from last year.

I'm still not sold on a housing bottom at this point, and the bottom line is that real estate rarely turns on a dime. Plenty of time to get in when it bottoms.

2. Watching IBM

Daniel Shaffer
4/7/2009 1:38 PM EDT

Watch IBM ( IBM) carefully to determine future direction of the Dow and S&P 500. It is heavily weighted in these indices, and just as it helped lead the indices up, IBM could also lead them down. IBM, technically, looks like it is failing off its 200-day down-sloping moving average with a top volume spike last Thursday and Friday. It hasn't been at the 200-day moving average since last September on its breakdown, and this could be just the first test to touch it.

3. Stocks Cheap? Maybe Not

Robert Marcin
4/7/2009 12:57 PM EDT

Stocks may be a lot of things, but "bet the farm" cheap they are not. Here is one version of the current P/E ratio using Shiller's long-term, rolling 10-year average earnings as the foundation for the calculation. At 16 times this measure, they are priced close to the long-term average of 17 times. That earnings calculation includes 2008 as well as 2009 estimates.

Source: RBC Capital Markets, Robert Shiller, Defiance Asset Management
Notes: Normalized earnings are based on a 10-year rolling average; the data set excludes the effects of the tech bubble (1991-2001); March 2009 P/E updated 3/26/09, with earnings estimated for 2009

Please note that the average and standard deviations exclude a five-year period when valuations traded above 30 times normal profits around the tech bubble. Also, the chart goes back to the 1880s, which may be a period that investors deem incomparable to today's economic/financial situation. Stocks did get down to 13 times at the March trough, and that was clearly cheaper on normalized earnings than today. But the current rally has priced them up into the fair valuation range, in my opinion.

With stocks in the midrange of valuations, fundamentals and the depression off the table, earnings/guidance should have a meaningful impact on future share prices. And that depends on the outcome of the battle between a delivering household/corporate sector vs. a massive government borrowing and spending program. This outcome is too difficult to forecast, as we have never experienced these conflicting forces in our lifetimes.

4. 'Atta-Boy'?

James Altucher
4/7/2009 12:48 PM EDT

Serious call-buying in the Atwood Oceanics ( ATW) $20 and $22.50 out-of-the-money calls for 70 cents and 25 cents respectively. Even with oil now below $50, rumors are that Transocean ( RIG) may be taking a look at Atwood.

5. Broadband Investments and Cisco

David Sterman
4/7/2009 10:10 AM EDT

A number of countries including the U.S., the U.K., Canada and Germany aim to enhance their national broadband infrastructure to expand access and boost data speeds. Australia just announced plans to spend (US)$31 billion to build a government-funded national high-speed network. As these efforts unfold, so will demand for equipment and then later, new applications -- both of which play into the strength of Cisco Systems ( CSCO).

As I noted in my column yesterday, Cisco appears positioned to post disappointing results in the April and July quarters, and any positive imminent catalysts are lacking. But any selloff could set the perfect "building into a position" play on what could well be current upside to 2010 and 2011 forecasts. Right now, the consensus forecasts expect sales to fall 9.6% in the current fiscal year, and another 3.3% in the fiscal year that begins in August.

Cisco reports in early May, at the end of earnings season, and any broad earnings-season-related selloff could take shares down to levels that a weak quarterly report already anticipates for Cisco.

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