Is This The Tip Of The Iceberg For Hedge Funds?

Stocks were higher, with the Dow up for a sixth
straight session ahead of Friday’s options expiration. The S&P 500 is
within 1.3% of the March multiyear highs. So far, Q2 guidance has been good, but
today’s Philly Fed reinforced the "soft patch" theory.

Year to date, the Dow is off 1.9% and the Nasdaq is off 4%.

Housing starts rose .2% to an annualized rate of 2 million, but at a
slower pace than expected. Building permits
fell 4.6% in May, the largest decline since last June. Jobless claims for
the week ending 6/11 rose 1000 to 333,000; the 4-week moving average is 335,000.
The Philly Fed index slid to -2.2 in June after a 7.3 reading in May. A
Bloomberg survey estimated a reading of 10.

After the bell, Adobe
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revenues.  KB Homes
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revenues were in-line.

Goldman Sachs
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revenues were below expectations. Trading/principal revenues fell 22%, fixed
income revenue fell 20% and investment banking revenue was also lower. It was
the first time in three years that profits at Goldman dropped. GS is up 2.5%.

Pfizer
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for $1.9 billion.

General Motors
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unless the union agrees to sot-cutting concessions, The Wall Street Journal
reports. GM is off 2.75%.

Bank of America
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Construction Bank for $2.5 billion. IT is the largest single investment to
date in the Chinese banking sector. The company plans to sell shares to the
public later this year.

A Morgan Stanley economist said that the oil market may be headed for
a massive crash. Reason cited are: slackening economic growth, alternative
energy gains and traders sensing a price peak. Recently, Goldman Sachs outlined
a super spike scenario with oil over $100 bbl. Oil prices are up 28% since
January.  A Reuters poll showed analysts expect an average crude price of
48.71 this year and 44.18 next year. Oil hit a record high April 4 at 58.28.
Saudi Arabia Oil Minister Ali al-Naimi blames a lack of refining
capacity on continued high prices. OPEC’s Al-Sabah said that heavy oil demand in
China is a major factor behind $55-a-barrel oil. China accounted for more
than a third of the increased oil demand last year. OPEC also urged
industrialized countries to build more refineries, saying that with spare
capacity the lowest in a generation, prices could spike to new record levels.
The cartel raised its price target for crude to $50/barrel, saying that prices
would have to trade above this level for seven days before they would consider
any quote increase.

Marin Capital is closing and returning $1.7 billion to investors.
Their flagship fund–the Tiburon Fund–was down 3.86% for the first 5 months
this year. The company said is closing because of weak prospects in the
convertible bond and credit arbitrage markets. Last year the fund imposed limits
on investors wanting to pull out money. Hedge Fund Bailey Coates has gone
from $1.3 billion at its peak to $470 million today. The firm was faced with
forced liquidations in April and May and is entirely in cash now and talking to
investors about raising additional funds. Trader talk: will this mean more hedge
fund shutdowns?

You think housing prices have soared in the United States? Take a look
at the 3-year appreciation in these countries (source: The Wall Street
Journal):

South Africa    +95%

China             
+68%

Spain             
+63%

Australia          +56%

U.K.               
+50%

Bulgaria           +50%

Speaking of housing, here are the estimates of when fixed mortgages will
revert to adjustable mortgages:

2005     $80 billion

2006     $300 billion

2007     $1 trillion

Tomorrow is quadruple witching.

Strong sectors were:  Gold
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+3.64%    Biotech  
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+2.43%    Computer Hardware
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+1.81%    

Weak sectors were:   Drugs

(
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Deutsche Bank upgraded Ford
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IPO news.

MedImmune
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vaccine.

Integrated Device Technology
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Circuit Systems
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Yum Brands’
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earlier guidance.

CSFB cut the tobacco sector to ‘neutral.’ Morgan Stanley said the
selloff in the sector is overdone.

Wyeth
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Potash
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The New York Times
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Carnival
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JM Smucker
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