Daily FX
Euro Sells Off as Investors Flock to the Safety of the Dollar
Tuesday July 31, 5:28 pm ET
By Kathy Lien, Chief Strategist strategist@dailyfx.com

A flight to safety has pushed the Euro lower against the US dollar today. Economic data was mixed with German retail sales increasing less than expected on a monthly basis but more than expected on an annualized basis.

The number of people unemployed also dropped, which is promising. However there is not information to tell whether the ECB will raise rates in September or October.

The difference between "onshore" and "offshore" trusts and corporations is, roughly speaking, that "onshore" means subject to a big-brother, high-tax jurisdiction that obliges trusts and corporate management to file a host of disclosure forms with the local company register (which also handles trusts). This information essentially then will be public, freely given out to anyone for the asking. In addition, annual statements must be made and any profits taxable. In countries with wealth taxes, the trust or corporation may be obliged to give a percentage of its capital to the state.

On the other hand, an "offshore" location is a country or jurisdiction The difference between "onshore" and "offshore" trusts and corporations is, roughly speaking, that "onshore" means subject to a

Smugglers and criminals have used this method for years; how to cross borders without a passport.

In most countries, there are usually one or more routes into the neighboring country that have no border stations. These unmanned crossing points are usually small backwater roads. Sometimes they are no more than dirt roads used by local farmers.

In Europe, such crossings abound. Recently The Economist ran a story on how one correspondent managed to sneak on such back roads into all 12 EU member countries with no passport at all.

All he did was to arm himself with the Goodyear road map of Europe. It shows all roads. Those with the symbol of a small flag on

Daily FX
Euro Rebounds on Dollar Weakness, Shrugging Off Softer Economic Data
Monday July 30, 5:23 pm ET
By Kathy Lien, Chief Strategist strategist@dailyfx.com

The Euro rebounded today despite weaker economic data. Both French producer prices and retail PMI for July deteriorated, providing further evidence that the strength of the Euro is finally weighing on the economy. That does not seem to matter however as speculators talk about the possibility of a surprise press conference by the ECB this week. They are expected to leave interest rates unchanged, but if the market is pricing in a good chance of a September rate hike. If the ECB plans on delivering one then, they will have to find an opportunity to reintroduce the words "strong vigilance."

Now that the EUR/USD is close to 200 pips off its highs, the economy may be able to handle another rate hike. However we still think that a surprise press conference is unlikely given the recent comments by ECB officials. Last week, ECB member Stark said the strong euro was hurting exporters while Quaden indicated that the central bank was against abrupt and excessive currency moves. Looking ahead we are expecting German retail sales, unemployment and Eurozone confidence. Switzerland on the other hand will be reporting their UBS consumption index which is barometer of consumer spending.

DETROIT (AP) -- General Motors Corp. reported a second-quarter profit of $891 million on Tuesday, a huge reversal from the $3.4 billion loss it posted in the same period last year.
It was the third straight quarterly profit for the nation's largest automaker, which cited improved sales, especially in growing markets worldwide.

The profit amounted to $1.56 per share for the April-June period in contrast to a loss of $5.98 per share in the year-ago period.

"Our heavy commitment to key growth markets around the world really paid off in strong growth and earnings," Chairman and Chief Executive Rick Wagoner said in a statement.

The automaker, though, continued to lose money in its home market, North America, where it reported a net loss from continuing operations of $39 million.

The results surpassed Wall Street expectations.

The profit came despite $520 million in charges associated with the bankruptcy reorganization of Delphi Corp., GM's former parts arm, and other restructuring costs

SAN FRANCISCO (AP) -- Sun Microsystems' third profitable quarter in a row is showing that the server and software maker has made substantial progress after a brutal downturn triggered six years ago by the dot-com implosion.

Shares of Sun Microsystems Inc. jumped 10 percent late Monday after the company reported a fiscal fourth-quarter profit that beat Wall Street's expectations and was bolstered by lower expenses and increased adoption of its open-source operating system.

Sun said it earned $329 million, or 9 cents per share, for the quarter ended June 30. That compares with a loss of $301 million, or 9 cents per share, during the same period last year.

Revenues were $3.84 billion, a slight increase from the $3.83 billion in sales the Santa Clara-based company had last year.

Excluding stock-based compensation and other one-time charges, Sun's net income was still 9 cents per share, nearly doubling the average estimate of 5 cents per

Following is a sampling of stocks that recently jumped to 5 stars. By way of background, we award a stock 5 stars when it trades at a suitably large discount--i.e., a margin of safety--to our fair value estimate. Thus, when a stock hits 5-star territory, we consider it an especially compelling value.

BioMed Realty
Moat: Narrow Risk: Avg Price/Fair Value Ratio: 0.71 Trailing 1-Year Return: -24.1%

What It Does: BioMed Realty (NYSE:BMR) is a real estate investment trust that owns and develops laboratory and office space for the life science industry. The company's tenants include biotech and pharmaceutical firms, research institutions, and government agencies. The firm's nearly 100 buildings constitute almost 9 million square feet and are located in markets recognized for life science research. BioMed also has a development pipeline and land bank that comprise about 2.4 million square feet internationally.

What Gives It an Edge: In Morningstar analyst Heather Smith's estimation, BioMed has carved out a narrow moat by focusing on an under-penetrated niche in the commercial real estate market--laboratory space in the life sciences. The firm has built a collection of premiere facilities in life sciences cluster markets such as San

It doesn't take much when you're near the tipping point. Last week Countrywide Financial said it had increased defaults on some of its home equity loans and several banks took unexpected charges against potential credit defaults. Suddenly investors reacted as if the whole world had changed. Their fears sent the popular stock averages to their biggest loss in almost five years and the bears proclaimed that the days of easy credit that has fed the bull market over the past 4 ½ years were finally over.

Valuations are Sound

But the purveyors of doom and gloom are wrong. It's true that over the past few years the interest rate spreads between the high and low-rated debt became extremely low by historical standards. Then tremors developed last February when the sub-prime mortgage crisis surfaced. These tremors turned into an earthquake last week when the private equity firms and banks wanting to acquire Chrysler and Alliance Boots failed to attract the lenders needed to finance their $20 billion buyout. All of a sudden, the stock market bears emerged from hibernation to yelp "I told you so!"

But the bull market in equities did not depend on these low spreads or on the rising tide of leveraged buyouts. Despite the fizz in a few stocks, the overall level of

Daily FX
Uptrend in Commodity Currencies Come to an End
Friday July 27, 4:42 pm ET
By Kathy Lien, Chief Strategist strategist@dailyfx.com

The trend of multi year highs in the commodity currencies have finally come to an end this week with the New Zealand, Australian and Canadian dollars suffering significant losses. The biggest losers in the currency market today were also the NZD and AUD. As warned by central bank Governor Bollard earlier this week, exporters are definitely beginning to feel the pain of a strong currency. Both imports and exports dropped significantly, turning the NZ trade surplus into a deficit.

Meanwhile there have been reports that model and momentum funds are aggressively selling the Aussie which means that they are no longer holding out the hope for a recovery in the high yielders and are instead either getting stopped out or initiating fresh short positions. Australia has retail sales next week which will be worth watching. Canada on the other hand has raw material and industrial product prices along with GDP and IVEY PMI. USD/CAD has bottomed out and we expect the bottom to hold.

Daily FX
Weak Housing Numbers Weight on British Pound
Friday July 27, 4:38 pm ET
By Kathy Lien, Chief Strategist strategist@dailyfx.com

Like the Euro, the British pound has sold off significantly today on the back of liquidation of high yielding assets as well as a broad dollar recovery. House price growth continues to be soft which could be concerning going into next week?s heavy economic calendar.

We are expecting more housing market reports as well as money supply, consumer confidence, distributive trades, manufacturing and service sector PMI. Overall the UK economy still remains healthy and the Bank of England could raise rates to 6 percent by the end of the year. The global markets just need to stabilize before these factors come into play once again.

Daily FX
EUR/CHF Sees Biggest Weekly Drop in 4 Months, EUR/USD Weakens on Dollar Strength
Friday July 27, 4:36 pm ET
By Kathy Lien, Chief Strategist strategist@dailyfx.com

Over the past 2 days, the Swiss franc has rallied significantly against the Euro as a direct result of the currency?s own safe haven status. The KoF report of leading indicators was stronger than expected which has also helped, but the move in the currency pair began on Thursday. In the week ahead, we have the UBS consumption indicator and PMI from Switzerland.

Both are expected to remain strong, illustrating the overall health of the economy. The Euro on the other hand has weakened for no other reason than dollar strength. There are a ton of PMI, unemployment and consumer spending reports due out next week, which could lead to some Euro drive action.

BEIJING (AP) -- For months, U.S. lawmakers have warned Treasury Secretary Henry Paulson that patience was wearing thin as his economic dialogue with China failed to produce breakthroughs on currency and other disputes.

Now, as he meets this week with Chinese leaders, Paulson faces new pressure in Congress, where legislators have proposed measures that would punish Beijing for manipulating its currency.

"The problem is, there is very little they can do in the immediate future that will make Congress happy," said Andy Rothman, a China strategist for investment bank CLSA.

Paulson is due to hold talks with President Hu Jintao and other officials on the "strategic economic dialogue" launched by the two governments last year to deal with tensions over China's swollen trade surplus and other issues. The secretary also is to meet with Vice Premier Wu Yi, who leads the Chinese side of the dialogue.

But Paulson's real target audience is as much Congress as Beijing.

"Paulson is going to be hoping to come back from the current trip with private whisperings and confidences that he can

Whereas cash is virtually untraceable, cheques provide investigating authorities with perhapes the most complete set of opportunities for finding out who paid what to whom, when - and by asking around, perhapes also why.

Both the face and the back of any cleared cheque is stored for posterity on microfilm, giving away the following information to those who may care to look: name and location of issuing bank, account number on which cheque was drawn, issuing date, amount, to whom the cheque was made out to, and a nice copy of the signature of the account owner.

The back of the cheque will likewise show the signature of whoever cashed or deposited the cheque plus, if applicable, the signature of the original recipient who later endorsed it and, lastly either number of the ID (passport, driving license) used to cash the cheque or the number of the account to which the cheque was deposited.

Now isn't that nice - if you write a cheque on an account later established to be owned by you, not only may any remaining funds in the account be seized, liened or attached but microfilm copies of all cheques ever drawn on the

This past Thursday was the second worst day of the year for the Dow Jones Industrial Average. But remember, it was just a week ago today that the Dow closed above 14,000 for the first (and only) time.

What it means for 401(k) investors

Fluctuations in the market shouldn't get to the 401(k) investor. Keep in mind your time horizon - most of us are going to be invested in the market until we retire, often decades from now.

On average, stocks move higher - their long term average gain is 10.8 percent each year, according to Hugh Johnson of Johnson Illington Advisors.

Over those long time horizons, stocks will move up and down. It will be nearly impossible for you to call the highs and

WASHINGTON (AP) -- Conflicts of interest may still be rampant on Wall Street, with a new study showing that nearly two-thirds of investment-firm analysts received favors from executives of companies they cover and suggesting that the companies get favorable ratings in return.

The academic study published Friday outlines a culture of blatant back-scratching on Wall Street as company executives bestow professional and personal favors on analysts -- putting them in touch with top executives of other companies, recommending them for a job -- and their companies receive positive ratings and evade stock downgrades. At the same time, executives punish analysts for negative reports by refusing to answer their phone calls or their questions.

For their study, management professor James Westphal of the University of Michigan and accounting professor Michael Clement at the University of Texas sent 4,500 questionnaires to financial analysts between 2001 and 2003 and follow-up surveys to hundreds of executives at the large and mid-size public companies covered by the analysts.

The 51-page study, to be presented at the Academy of Management's annual meeting next month, found that the more a