Market Update

Set Alert

11:00 am : The major averages hold near session lows during what has been a rather uneventful session. Both the Dow and Nasdaq trade down 0.5% to lead the decline while the S&P outperforms with a 0.2% loss. 

Luxury goods maker Burberry (BURBY 37.10, -2.50) is down sharply after announcing disappointing earnings. The company announced revenues increased 11.0% for the quarter to GBP408 mln, but that number fell short of the GBP418 mln Capital IQ Consensus Estimate. U.S. rival Coach (COH 55.60, -1.32) is down 2.3% as it piggybacks the move.  DJ30 -53.78 NASDAQ -13.55 SP500 -2.49 NASDAQ Adv/Vol/Dec 817/424.8 mln/1653 NYSE Adv/Vol/Dec 1026/174.2 mln/2008

10:35 am : In the energy space, Aug crude oil is trading notably higher today and just extended their gains and hit a new session high of $85.68. Following inventory, oil was rather muted and is now trading +1.7% at $85.30/barrel. 

July natural gas is higher as well as rose as high as $2.80 a short while ago and is now just one penny below that HoD at $2.79, up 2.1%. 

In metals, August gold and Sept. silver rallied nicely in recent trade, while the dollar index only ticked lower. Gold pushed into positive territory, while silver hit a new session high of $27.22. In current trade, gold is now back in the red, currently -0.4% at $1574.20/oz, while silver has pulled back a little from its new HoD and is +0.8% at $27.09/oz. 

In agriculture, the USDA released its July WASDE report, which showed notable cuts in production and yield forecasts. Dec corn is now +2.2% at $7.33/bushel, Sept wheat is +1.6% at $8.35/bu and Nov soybeans are +1.7% at $15.64/bu.DJ30 -29.86 NASDAQ -0.94 SP500 +1.31 NASDAQ

JPMorgan Clawbacks: Step in Right Direction, But Nowhere Near Enough

Compensation clawbacks are in store for JPMorgan's (JPM) executives at the center of the bank's 'London Whale' trading losses, reports The Wall Street Journal. The bank plans to revoke millions in pay in the form of unvested stock awarded to members of the Chief Investment Office (CIO), where the risky bet was made.

Ina Drew, former head of JPMorgan's CIO, will likely face the financial penalties as will Bruno Iksil, the London trader who oversaw the trades that are estimated to have lost $5 billion (and counting). Iksil's direct bosses are also said to face forfeiture of pay.

Clawbacks are certainly a step in the right direction as recourse for the huge trading loss. But as The Daily Ticker's Aaron Task and Henry Blodget discuss in the accompanying video, revoking unvested stock certainly does not go far enough to penalize the individuals responsible for the loss, which has cost the bank nearly $25 billion in market capitalization since May.

"We still have to have a system in place for both for individuals and for the banks where there is real recognition that the downside is not going to hurt so you just don't go to Vegas and roll the dice every day and if you lose $5 billion 'so what'?" says Henry.

Last year, Drew earned more than $15 million, half of which included compensation in the form of stock. But what really shocks The Daily Ticker team is how much her contract awards her for her termination from the bank. Proxy filings show Drew is set to receive almost as much as her total compensation in all of 2011 after resigning over the trading losses, reports WSJ.

Even if she wasn't technically fired, this kind of "golden parachute" is impossible to justify given the circumstances surrounding Drew's departure, even if was part of her employment contract, Aaron says.

The news of clawbacks comes ahead of JPMorgan's second-quarter earnings call Friday when more details are to be released about the details and size of the loss, which recent reports signal have grown to $5 billion from the original $2 billion estimates.

Stay tuned for more coverage and tell us what you think: Do you believe the clawbacks go far enough to penalize the JPMorgan executives?

Facebook IPO triggers retail investor craze

By Alistair Barr and Olivia Oran

SAN FRANCISCO (Reuters) - If "Facebook For Dummies" helped you find friends and post pictures on the world's No. 1 onlinesocial network, then consider "Facebook IPO Confidential" which purports to teach you "How To Get Rich With The IPO Of The Century."

The e-book is one of about eight self-help manuals that appear to have sprung up overnight to try to capitalize on the frenzy surrounding Silicon Valley's biggest initial public offering.

With other titles such as "The Facebook IPO Pitch: Are You In?" and "How To Invest In Facebook", these books are far from bestsellers. But, along with countless online forums and news articles about the IPO, they underscore the desire of ordinary people - many of whom have never invested in stocks before - to get in on the $15.2 billion share sale.

"If you can't invent Facebook, the next best bragging rights would be to say that you had invested in the social media phenom when it was a dorm room project. If not then, perhaps the IPO," Nancy Miller wrote in a guide titled "The Facebook IPO Primer."

Many wealth managers are advising their clients to avoid Facebook, pointing to a sky-high valuation of up to $104 billion set by the IPO, and potentially much higher once it starts trading. The company also shows signs of slowing growth, has yet to figure out how to make money on mobile, and new shareholders will have little influence as nearly 56 percent of voting shares will be in the hands of one person: Chief Executive Mark Zuckerberg.

But such warnings are falling on deaf ears as many people are drawn in by Facebook's brand name and the fact that one in seven people around the globe are on the social network. Facebook Inc (FB.O) on Tuesday increased the size of its IPO by nearly 25 percent and raised the target price range.

"I can't remember another IPO that got this much attention," said Max Wolff, a senior analyst at GreenCrest Capital. "Half the people talking about the Facebook IPO probably don't know what IPO stands for."

The strong demand means that most retail investors will have to wait until Facebook begins to trade on the Nasdaq on Friday to get hold of the shares - and risk getting trampled. If the stock skyrockets, the average person might end up getting orders filled at a price much higher than they wanted and then face the possibility of losses as funds steamroll in and then zip back out, taking the price off its highs.

"I don't know if buying on the day of the IPO is the best idea, but I like the novelty factor of it and being able to say that you bought on the first day," said Micah Stubbs, a first-time investor who works in the oil and gas industry and lives in Bartlesville, Oklahoma.

Facebook's share price could surge 30 percent on debut day, said Reena Aggarwal, a professor of business administration and finance at Georgetown University's McDonough School of Business in Washington. She suggested retail investors may be better off holding off for a few weeks until the share price settles.

"The market will try to figure out the right price for the stock and it's going to open really high," Aggarwal said. "There are lots of risks - the company is high growth but also high risk, and there is a lot of uncertainty, so retail investors have to be careful."

SLIM CHANCES

Facebook is going public after accumulating almost a billion users, nearly $4 billion in annual revenue and a brand name augmented by the 2010 Oscar-winning film "The Social Network", which charted the rise of Zuckerberg who started Facebook in his Harvard University dorm room.

Most ordinary people have only the slimmest of chances of getting hold of IPO shares as Facebook's 33 underwriters, led by Morgan Stanley (MS.N), JPMorgan (JPM.N) and Goldman Sachs (GS.N), are expected to give priority to their most important clients, usually institutional investors.

Typically, only 5 to 30 percent of IPO shares are set aside for retail investors, underwriters say.

Discount broker E*Trade Financial (ETFC.O), which was added to the list of IPO underwriters at the last minute, offers some help. Last week, its home page threw up a pop-up box explaining what investors need to do to get in on IPOs.

Would-be buyers have to answer about 25 questions about their financial status and investment habits. They are then prompted to place a conditional offer for at least 50 Facebook shares and a maximum price they are willing to pay per share.

Online prediction market Intrade, which lets investors bet on major events such as the U.S. presidential election, offers another alternative. It started a contract on Tuesday for bets on where shares of the social network will close on their first day of trading.

DAY TRADERS

Facebook reported $205 million in first-quarter profit, down 12 percent from the same period a year ago. While sales leapt 45 percent year-on-year to $1.6 billion, that lagged the 55 percent growth of the fourth quarter.

On Tuesday, General Motors Co (GM.N) said it will stop advertising on Facebook, amid concerns that the ads have had little impact on consumer spending. The auto maker continues to use Facebook pages for marketing its vehicles, but the news underscored the risks Facebook faces as it tries to boost revenue from its huge user base.

RegentAtlantic Capital is among the wealth managers recommending clients stay away, without much success.

"Most clients or their children have some interaction with Facebook, so I believe the demand will be high," RegentAtlantic wealth advisor Chris Cordaro said, warning that there could be "a lot of pain" ahead for investors who buy at inflated prices on Friday.

Because of such concerns, some retail investors plan to get in and get out of the stock quickly. That may be fine if they get in at the IPO price but if they end up buying once the shares have started trading up, they may not be so lucky.

"Retail participation is associated with more speculation and noise, and because of that there is more volatility," said David Sraer, a professor of economics at Princeton University. "They tend to herd together and be on the same side of the market, which drives imbalance."

Retired chemical engineer Alvan Sweet ordered through Schwab 10,000 Facebook shares worth $380,000 at the high end of the indicative IPO price range. If he is lucky enough to get an allocation, he plans to dump the shares on day one or two.

Sweet, whose son is a senior managing partner of the IPO Boutique advisory firm, has invested in IPOs before but says this is the first time friends in his Florida condo community have pestered him about getting shares. "They were hoping that because my son is in the business I would have access," he said.

One of his friends, Lucky Bloch, admits to losing money on an IPO before. But he is confident this investment will pay off.

"Initially Over-Priced is what IPO should stand for," he complained. "If you can get in before the first day, then sell a couple of days later, there's money to be made," he told Reuters. "Can you help me get shares?"

(Additional reporting by Alexei Oreskovic and Sarah McBride, editing by Edwin Chan, Tiffany Wu and Richard Chang)

Micro Cap Report

At The Micro Cap Report we continue to look for undervalued, under-followed growth stories. Please sign up to receive a free copy of The Micro Cap Report at www.themicrocapreport.com.

Here are four micro caps to look into.

BRFH (Barfresh Food Group, Inc.)

Barfresh Food Group, Inc. manufactures ready-to-blend drinks, which the company seeks to distribute to the food-service industry. It specializes in smoothie and cocktail mixes. Barfresh’s recipes are based on those of an Australian company that Barfresh recently purchased the rights to. This Australian company was profitable and won a variety of awards for its products. There’s always a summertime market for cold beverages, and Barfresh stands to grow once it convinces more chains of the superiority of its products. LONG 5000 SHARES BRFH

For disclosure regarding Barfresh, see sec.edgar-online.com/barfresh-food-group-inc/8-k-current-report-filing/2012/01/17/section5.aspx.

SHORT DOMK (Domark International, Inc.)

We called what we believe to be the top of DOMARK on 5-8-2012 at roughly 4.50. We were unable to locate shares to short

Domark “is focused on acquiring operating entities through acquisition and then providing marketing and management services in support of the acquired entities.” They’re currently promoting a nifty, potentially profitable accessory that can be used to provide solar power to iPads. These stocks have risen in value exponentially over the last few days in the wake of heavy promotion of the iPad accessory. Their value dropped today, but it will be interesting to see if it picks back up. Disclosure EMC is long but unable to sell 25,000 of domark. We would sell if the restriction could be lifted.

XCO (EXCO Resources, Inc.)

EXCO is an energy company engaged in managing onshore oil and natural gas properties. After growth over the past week, investment experts are projecting continuing increase in value for this stock, as EXCO is on the brink of consummating transactions which should positively impact shares. For more information on recent developments in this company, see http://seekingalpha.com/symbol/xco. Disclosure EMC is long 100 call options of XCO

PFTI (Puradyn Filter Technologies Inc.)

Puradyn “owns the rights to manufacture and market its Puradyn by-pass oil filtration system for use with internal combustion engines and hydraulic equipment. The Puradyn system cleans oil by continually removing solid and liquid contaminants through a filtration and evaporation process. This maintains the oil’s viscosity and greatly reduces or even eliminates the necessity for oil changes.” It seeks to market its technology to the oil and gas, construction, transportation, marine, and hydraulics industries. The companies’ shares have decreased somewhat in value after a relative high last summer, but its products have gained high praise from industry investigators, and it stands to grow from its current low if it is successful in executing some major contracts. Disclosure EMC is long 75,000 shares of PFTI

Disclaimer

The Information is disseminated to broker-dealers, members of the general public, readers of our website, and the financial community (collectively the “Recipients”) at the direction of the Profiled Companies or third party shareholders of the Profiled Companies and should be used by the Recipients for informational purposes only and even then the Information should only be used as a beginning point for further investigation. This is because EMC: (a) only presents neutral or positive information regarding the Profiled Companies and its business prospects; and (b) does not present the risks or negative aspects associated with the Profiled Company or its securities. Therefore, the Information is in and of itself wholly inadequate to formulate any investment decision, and we strongly advise against making any investment decisions solely based on the Information. It is imperative that you consult with your professional advisor, including your financial advisor, financial planner or attorney regarding the advisability of investing in any securities, especially with regard to penny stocks. In addition, you should consult with online services that are available free of charge at www.sec.gov, www.pinksheets.com, www.finra.org, Google, or other websites that offer investment guides, valuable information pertaining to penny stocks and penny stock frauds and the risks of investing in penny stocks. Additionally, you should review the quarterly and annual financial and disclosure reports at www.sec.gov, www.otcbb.com and www.pinksheets.com.

The Importance of Investor Relations Consulting for Startup Enterprises, Part II

Last time, we discussed the importance of investor relations consulting for startup enterprises. As we recall, startups, regardless of how sure they are of their product or service, face great difficulty in establishing themselves in the market. Their offering may not yet be trusted by customers or investors, and they have to compete for market share with more established companies that possess much deeper resources. Such challenges are greatly exacerbated in a struggling economy. A skilled investor relations consultant can help startups navigate these difficulties by strategizing an effective visibility campaign, helping startups navigate the oftentimes complex world of regulations, and by putting the startup in contact with networks in the investment world.

To see the benefits of investor relations consulting in such cases, it is useful to examine case studies. Furnari Scher LLP is a firm that, among other services, provides investor relations counseling specializing in “helping clients become attractive for investors and joint venture partners.” They feature a team of consultants who have experience as both attorneys and entrepreneurs. As such, they are specially equipped to provide legal expertise to startups. A brief discussion of some of their success stories provides a glimpse into the benefits of effective investor relations consulting.

Technological and medical entrepreneurs oftentimes must pass stiff licensing requirements in order to get their products to market. For example, Furnari Scher LLP worked with a group of scientists who sought to “develop a minimally invasive tool to detect breast cancer using laser technology invented at, and patented by, a preeminent national lab.” This technology “was at least four years away from receiving the government approvals required to sell the device.” Therefore, the company needed funding to pay for further research. Furnari Scher LLP was able to introduce the client to an investor who was able to produce the money necessary “to complete a 200 patient clinical feasibility study and [to assist] the company in structuring and executing three rounds of private placement securities offerings.” This story illustrates how an effective investor relations consulting firm can take advantage of investment networks to help a startup successfully place its product or services.

Another challenge facing companies seeking funding are trading regulations. A company that gets on the wrong side of state and federal regulators can easily go under due to heavy fines and probationary conditions. Furnari Scher LLP worked with a medical technology company that faced challenges while seeking funding. Those problems included state investigations after a manager “made some technical mistakes while offering securities in a private offering.” Furnari Scher LLP helped this company by advising it regarding the removal of its rogue director and by serving as a liaison between the company and the investigation. Management was thus able to focus on company operations during a critical period, all the while Furnari Scher LLP engineered “favorable settlements with state regulators, often obtaining significant reductions (up to 80%) in fines originally contemplated by regulators.” This story illustrates the potential benefits of having access to investor relations specialists who have the knowledge and experience needed to navigate regulations.

Two years later, fish sick near BP oil spill site Scientists, fishermen troubled by sick fish caught near spill site 2 years after Gulf disaster

BARATARIA BAY, La. (AP) -- When fishermen returned to the deep reefs of the Gulf of Mexico weeks after BP's gushing oil well was capped, they started catching grouper and red snapper with large open sores and strange black streaks, lesions they said they'd never seen and promptly blamed on the spill.
Now, two years after the Deepwater Horizon rig exploded and sank, killing 11 men and touching off the worst offshore spill in U.S. history, the latest research into its effects is starting to back up those early reports from the docks: The ailing fish bear hallmarks of diseases tied to petroleum and other pollutants.
Those illnesses don't pose an increased health threat to humans, scientists say, but they could be devastating to prized species and the people who make their living catching them.
There's no saying for sure what's causing the diseases in what's still a relatively small percentage of the fish, because the scientists have no baseline data on sick fish in the Gulf before the spill to form a frame of reference. The first comprehensive research may be years from publication. And the Gulf is assaulted with all kinds of contaminants every day.

(AP Photo/Courtesy Steven Murawski)
Still, it's clear to fishermen and researchers alike that something's amiss.
— A recent batch of test results revealed the presence of oil in the bile extracted from fish caught in August 2011, a year after BP's broken well was capped and nearly 15 months after it first blew out on April 20, 2010.
"Bile tells you what a fish's last meal was," said Steve Murawski, a marine biologist with the University of South Florida who was chief science adviser for the National Marine Fisheries Service until November 2010 when he began working on oil spill studies for USF. "There was as late as August of last year an oil source out there that some of those animals were consuming."
Bile in red snapper, yellow-edge grouper and a few other species contained on average 125 parts per million of naphthalene, a compound found in crude oil, Murawski said. Scientists expect to find almost none of the toxin in fish captured in the open ocean.
"Those levels are indicative of polluted urban estuaries," he said.
— Last summer, a team of scientists led by USF has done what experts say is the most extensive study yet of sick fish in shallow and deep Gulf waters. Over seven cruises in July and August, the scientists caught about 4,000 fish — from Florida's Dry Tortugas to central Louisiana — using miles-long fishing lines dragged from close to shore out to depths of 600 feet. The work was funded with a federal government grant and help from the Florida Fish and Wildlife Research Institute.
About 3 percent of the fish they caught displayed gashes, ulcers and parasites symptomatic of environmental contamination, according to Murawski, the lead researcher. The number of sick fish rose not only as scientists moved west away from the relatively clean and oil-free waters of Florida but also as they pushed into deeper waters off the coasts of Alabama, Mississippi and especially Louisiana, near where the Deepwater Horizon sank.
About 10 percent of mud-dwelling tile fish caught in the DeSoto Canyon, to the northeast of the well, showed signs of sickness.
"The closer to the oil rig, the higher frequency was" of sick fish, Murawski said.
Past studies off the Atlantic Seaboard found about 1 percent of fish suffering from diseases, Murawski said. For now, he's taking that as a historical reference point; but he says it's not possible to directly apply that baseline to the Gulf, which is warmer and because of that an incubator for bacteria and parasites that could be the cause of lesions and sicknesses. Other important differences are that oil and natural gas have been pouring out of fissures from the floor of the Gulf for centuries, and the muddy waters of the Mississippi River flush into the same spots where scientists and fishermen are finding sick fish.
— Laboratory work over the past winter on the USF samples indicates the immune systems of the fish were impaired from an unknown environmental stress or contamination. Other researchers say they have come to similar conclusions over the past year.
"Some of the things I've seen over the past year or so I've never seen before," said Will Patterson, a marine biologist at the University of South Alabama's Dauphin Island Sea Lab. "Things like fin rot, large open sores on fish, those were some of the more disturbing types of things we saw. Different changes in pigment, red snapper with large black streaks on them."
All of this has biologists — and many fishermen — worried.
James Cowan, a reef fish expert at Louisiana State University doing long-term sampling for the Louisiana Department of Wildlife and Fisheries, received his first report of fish with what looked like ulcers in November 2010. He began reading up on what scientific literature was available on oil spills and fish.
"There is so much in the literature that links exposure to PAHs (the compounds in oil) to exactly what we are seeing: sicknesses, lesions and everything else," Cowan said.
Even if oil could be pinpointed as a contaminant, however, it's difficult to definitively tie it to BP's Macondo well. The Gulf is littered with natural oil seeps, pipelines and oil wells and pollution from passing ships. In addition, there are the discharge of the Mississippi River, salinity and temperature fluctuations and other ecological factors to consider.
These early findings with fish are not out of step with what researchers are turning up all over the Gulf two years after the spill: The oil disaster whacked the Gulf. In the past year, research has emerged showing deep-water corals, seaweed beds, inshore bait fish, dolphins and other species were injured by the spill.
"There is lots of circumstantial evidence that something is still awry," said Christopher D'Elia, the dean of LSU's School of the Coast and Environment. "On the whole, it is not as much environmental damage as originally projected. Doesn't mean there is none."
Portions of a few bays remain closed because of the spill.
For the second year, fishermen like Wayne Werner, a 53-year-old Louisiana captain who catches red snapper commercially, are calling in with reports of lesions.
He and other fishermen said they want to get to the bottom of a problem that's forcing them to take longer trips to fishing spots outside the spill zone and perpetuating their fear for their livelihoods.
"Every time we talked about bad fish, everybody kind of went nuts on us. Just like, 'You're hear-saying,' you know? And we're saying, 'Well, they're there,'" he said this week.
"They're still there. Now that the water is getting warm again, we're starting to see more and more again."

Apple Shares Back Below $600: Is a Larger Sell-Off Looming?

There's an old saying amongst Bible Belt evangelists that goes, "You gotta get 'em in the tent before you start preaching to 'em." Along those lines, Paul Schatz, president of Heritage Capital, offered some inspiring but cautionary words for the Apple (AAPL) faithful.
The past week has seen the largest stock in the world face its toughest 5-day slump in 6 months. The way forward for Apple is still fraught with nerves, as some worry that all those gains could fast become profits, should investors finally decide to realize them and exit this crowded trade.
"The fundamentals of Apple couldn't be better," Schatz says in the attached video. "Apple could go to $700, $800, $1,000 first. I'm not that ridiculous in my notion to think that Apple is going to top right here."
Yet, in the next breath, Schatz paints a treacherous picture of what a post-top exodus might look like, saying, "Whenever that bull market peaks, I think Apple is headed, minimally, 30% down, probably 50% to 60% down."
It's all part of what happens when opinion changes on the ''lone stock standing.'' Until now, virtually every fund manager in the world, depending on their style, needed to have anywhere from 5% to 25% of their assets in this one stock just to tread water. Because of the breadth of ownership (71% by institutions), plus Apple's red-hot performance and outlook, it has essentially been on the do-not-sell list whenever we hit a bit of turbulence.
But Schatz says that is always how it has been with widely-held mega-caps like IBM, GE, or Exxon.
"This is the dot-com bubble all over again. I'm sorry, I am not saying it will never recover, but when you have the whole nation in one story stock, it never never never ends well," he says, pointing to a dearth of evidence for similar soft landings.
In the meantime, his advice is to own it but keep raising your stop-loss orders, or even start lightening up a bit, because when "go-time" inevitably arrives, it's not going to be pretty.