Smiling In The Gloom

While most stocks were plummeting last Thursday,Ford Motor Company was gaining.That is why CEO Alan Mulally was smiling.Ford had just posted its first profit after 7 consecutive quarters of losses.The soft-spoken leader said he wasn't really surprised by the results,and he was cautiously optimistic about reaching a deal with the United Auto Workers union.Although there could be setbacks ahead,by the end of 2009,Ford should be back in the black for good.The automaker is exploring the sale of its Jaguar and Land Rover divisions,and conducting a strategic review of its Volvo unit.Sixteen plants are to be closed,paring 45,000 jobs.The Ford Edge is the best-selling crossover vehicle,and 14 Ford vehicles recently won J.D. Power quality awards.Ford was the most actively traded stock on Monday.This morning,General Motors(GM) also released good second quarter numbers.

Analysts See Red

Despite the euphoria which earnings season can spark,many analysts see trouble around the bend.Bill Fleckenstein of Fleckenstein Capital says he is on red alert.Turmoil in the junk bond market may halt the buyout boom and hurt stocks.Richard Bove of Punk Ziegel is sure of his bearish scenario.The underwriting of both corporate bonds and mortgages has been very poor.This definitely trickles down to buyout bonds.With banks only willing to loan 60-70% of buyout costs,rather than 90% as formerly,deals will have to be pulled.They will slow to a trickle,and so will the boost they give to stocks.Phillip Roth of Miller Tabak sees a ragged,maturing trend in this cyclical bull market.A stock market decline will ultimately come because of higher interest rates.The tip-off will be an unexpected financial event.Zachary Oxman of Wisdom Tree Investments would avoid large equity allocations.He sees the subprime mortgage crisis peaking in late 2007-2008.Tech stalwarts such as IBM and Intel(INTC) are still worth considering,as are industrials such as Honeywell(HON) and General Electric(GE).Their global exposure makes them better prospects than companies strictly tied to U.S. consumption.

Biotech Boost

Genentech(DNA)has raised its earnings forecast for 2007.The biotech colossus has boosted its projection from 2.80-2.90 a share to 2.85-2.95 a share.In the second quarter of 2007,profits increased 41%.Sales were led by Rituxin,a treatment for non-Hodgkin's lymphoma,which brought in 582 million dollars-a gain of 11%.Its lung and colorectal cancer drug Avastin realized a 33% increase,to 564 million.Sales of Herceptin,a breast cancer treatment,rose 11%,while its macular degeneration drug Lucentis went from 10 million in 2006 to 209 million this year.With the graying of the population,there will be a considerable need for Genentech's medications in the years ahead.In addition to its cancer and blindness treatments,DNA has recently partnered with Tercica(TRCA)to develop two drugs for metabolic disorders.Chris Raymond,senior biotech analyst with Robert W. Baird and Co.,noted that the stock has been playing defense lately,because a European study shows Avastin may be better in a lower dosage;yet this may benefit Genentech in the long run,as it could quiet price critics.

Precious Metals Prospects

Kinross Gold Corporation(KGC)is on course to increase its production of gold and silver.The Canadian mining firm has exploration,construction and production projects from Brazil to Russia.The Brazilian Paracatu project will increase gold production from 174,254 ounces in 2006 to 557,000 ounces in 2008.The Buckhorn project in Washington state will yield 160,000 ounces of gold annualy beginning in 2008.In the Russian Far East,the Kupol project will yield 418,000 ounces of gold per year beginning in 2008.It also contains more than 40 million ounces of silver.Kinross acquired Bema Gold in early 2007.It is headed by CEO Tye W. Burt in Toronto.As of this morning,the price of gold was up,as were shares of KGC.

Money Men Cautious

Several leading money managers have expressed a guarded attitude toward the stock market.Brian Gendreau of ING cited credit tightening and bonds being pulled as worrisome.He looks for a tougher second half,though the market will end a little higher.There is an unquantified risk in the subprime mortgage market.In consequence,he is buying bonds and large companies,which are less dependent on credit.Christopher Ailman of CalSTRS is rebalancing the huge pension fund.He is unwilling to take risks until the subprime fog clears up.Mr.Ailman is concerned about high yield debt and alt A mortgages.Beginning in August,400 billion in loans will reset.This pressure could cause more problems such as those at Bear Sterns(BSC).Thomas Melcher of PNC's Hawthorn is waiting to see how much of the mortgage market is enveloped by distress.Consumer spending and possibly more hedge funds could be affected.A bond fund such as Lehman Brothers' TLT will be a popular haven until the fog lifts.Happy Independence Day,American readers.I am starting to feel heat because you aren't showing interest in the ad links.