WED. AUG. 27 THOUGHTS

Red Lobster. Olive Garden. LongHorn Steakhouse. Capital Grille. Bahama Breeze. It is highly likely – particularly if you have kids that on a road trip or even in your hometown, you stopped off at one of these fine establishments. Many people cannot afford a place like Peter Luger’s or Morton’s Steakhouse to take the kids for some steak so why not go to LongHorn? For those who have never been to any of these restaurants, they are all owned by Darden Restaurants (DRI) and all of the places are family eateries. While they don’t serve ‘fine food,’ they are a ‘step above’ the likes of McDonald’s (MCD) image-wise if nothing else thus with more variety at a Capital Grille than a Burger King, people flock to these places. Or at least they used to do so. One sector that had really not been affected tremendously by all of the market turmoil has been the restaurant sector. DRI actually traded at its high of the year as recently as two weeks ago. However, yesterday, the company indicated that growth for the next 12 months would be nonexistent with same-store growth forecasted to be down slightly. The conclusion one can draw is rather scary; consumer spending is in fact truly slowing. Consumer spending is what keeps the American economy thriving. But if people are willing to get a Big Mac over going to Bahama Breeze, it shows that discretionary spending is definitely being curtailed. For us day traders, it is more fodder to put in the back of our minds. While the next earnings season will not start until mid-October, the earnings warning season will start shortly after Labor Day. And it will likely be a brisker than usual time for warnings particularly since many companies will want to get their bad news out before earnings season when many solid companies report good results. Thus, it makes since to warn when everyone is doing it rather than standing out. It is certainly a feature to watch after everyone gets back from the beaches next month.

Markets worldwide are quiet. Everyone who is around is watching the track of Hurricane Gustav, but more relevant today is the fact that economic data out this morning was good. Furthermore, FRE and FNM are up because they are benefiting from the wide spreads in the recent coupon offering; they should lend support to the broader market for the bulk of the day.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 based on direction of the market unless specified

Good-

BGP- good earnings

FNM,FRE- benefiting from spreads on their own securities from recent auctions

IPII- Gustav play; their primary business is as a construction entity on the Gulf Coast

MNRO- on Cramer last night


Bad-

JCG- poor earnings

SOLR- bad earnings

AMLN- several people died during one of its drug trials

SOLF- warned on outlook

CEGE- horrible news at a trial as someone died; the company now has no product

MAT- won some money in its lawsuit with Bratz, but not as much as they wanted

GS- being investigated by New York State for its relationship with Fidelity

Earnings:

WED AUG 27 BEF

BWS .06/589M .68/687M 1.37/2.43B 1.68/2.59B

DLTR .41/1.08B .42/1.08B 2.43/4.64B 2.68/5.03B

PTR ? ? 10.52/145.31B 13.41/185.28B

SOLF 1.48/1.25B 1.42/1.35B 6.31/5.14B 7.98/6.80B

TLB -.33/532M .23/546M .20/2.17B .54/2.26B

WED AUG 27 AFT

GA .20/72M .21/77M .83/298M 1.02/388M

JAS -.66/403M .33/496M .94/1.96B 1.25/2.06B

MW .70/555M .53/511M 1.63/2.10B 2.02/2.21B

SEED ? ? .19/79M .28/95M


Good luck today.

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