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Tuesday’s Upgrades and Downgrades

UPGRADES

Jo-Ann Stores JAS KeyBanc Capital Mkts Hold » Buy
Ventana Medical VMSI Caris & Company Average » Above Average
Cousins Prop CUZ Wachovia Mkt Perform » Outperform
Maxygen MAXY Stanford Research Hold » Buy
SL Green Rlty SLG KeyBanc Capital Mkts Hold » Buy
Ariba ARBA Cowen & Co Underperform » Outperform
Motorola MOT RBC Capital Mkts Sector Perform » Outperform
Susser SUSS JP Morgan Neutral » Overweight
EMC Corp EMC Citigroup Hold » Buy
Optium OPTM Jefferies & Co Hold » Buy

DOWNGRADES

Mattson MTSN CIBC Wrld Mkts Sector Perform » Sector Underperform
Cubic CUB BB&T Capital Mkts Hold » Underweight
Dime Community DCOM Stifel Nicolaus Hold » Sell
F5 Networks FFIV Nollenberger Capital Buy » Neutral
Foundry Ntwks FDRY Nollenberger Capital Buy » Neutral
Kyphon KYPH Piper Jaffray Outperform » Market Perform
LDK Solar LDK CIBC Wrld Mkts Sector Outperform » Sector Perform
Sirtris Pharma SIRT JP Morgan Overweight » Neutral
Rockwell Automation ROK JP Morgan Overweight » Neutral
Red Hat RHT Credit Suisse Outperform » Neutral
Reliance Steel RS UBS Buy » Neutral

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"Fast Money" for Tuesday

TUESDAY’S PICKS

Jeff Macke expects a pull back and recommends Short Dow30 ProShares (DOG). open $58.03

Guy Adami said buy Pfizer (PFE). Open $24.42

Karen Finerman preferred NYMEX (NMX).Open $125.10

Pete Najarian liked ValueClick (VCLK). Open $22.00

MONDAY’S RESULTS

Jeff Macke recommended selling General Motors (GM). Open $34.94 Close $34.74 Gain $.20

Karen Finerman liked NYSE Euronext (NYX). Open $76.05 Close $77.81 Gain $1.76

Pete Najarian preferred BJ Services (BJS). Open $27.81 Close $27.67 Loss $.15

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)

Guy Adami= 25-17 Gain $41.04
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 30-22 Gain $9.96
Pete Najarian= 18-16 Gain $24.89
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 10-5 Gain $4.11
Stacey Briere-Gilbert= 2-0 Gain $1.61

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Monday’s 52 Week Low’s

WOS Wolseley Plc 16.43
WERN Werner Enterprises Inc 17.30
USBE US Bioenergy Corp 9.01
SEH Spartech Corporation 16.54
RYL The Ryland Group, Inc 22.64
PLCE Childrens Pl Retail S … 24.79
PIR Pier 1 Imports, Inc 5.41
PEIX Pacific Ethanol Inc 9.25
MTH Meritage Homes Corp 15.45
MNI McClatchy Newspapers, Inc 20.30
ISCA International Speedwa … 46.12
CC Circuit City Stores, … 8.11
BGP Borders Group, Inc 13.50
HHS Harte-Hanks Communica … 21.11
HAR Harman International … 79.85
GPRE Green Plains Renewabl … 13.02

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In Defense of Starbucks

I have spent the better part of a year now detailing the missteps of management at Starbucks (SBUX) and predicting their current predicament but, I have to come to their defense on this one.

The National Labor Relations Board has accused Starbucks of illegal anti-union activity at a store in Michigan. This is the second charge it has received in the past month and the company is currently on trial in New York on charges of union-busting efforts involving the International Workers of the World. Business Week recently took a look at Starbuck’s situation and compared them to Wal-Mart (WMT). Not good for a company that has long ridden the “good corporate citizen of the world” train. Here is the thing, they actually earned that title and deserve it. While I have been a bit vehement in my criticism of their business moves (or lack thereof), Starbucks does treat its workers very well.

Should Starbucks be fighting union activity? Hell yes! Can anyone think of anything positive unions have contributed to their workers since the 1940’s other than predictable layoffs, salary cuts and the eventual destruction of the businesses their “workers” are employed by? For proof one need look no further that the US Auto and Airline industries for proof. Both industries, totally unionized and strapped with impossible labor costs are perennially doomed watching one or more of its members battle with bankruptcy. The UAW has seen its ranks decimated and hundreds of thousands of its workers lose their job because they view the employer as the enemy, not a partner. In negotiations they either “win” or “lose”. The problem? when they think they “win”, they actually lose more long term.

So yes, Starbucks and Wal-Mart ought to fight the unions with every once of corporate soul they have. Not just for shareholders, not for management but for the soon to be unemployed workers they will layoff if the unions find their way into their businesses.

What unions today fail to realize is that management has a fiduciary duty to its shareholders. That means keeping labor costs in line. If the unions do “win” and get in to either location, they will get their salary increases to ridiculous levels, there will just be a whole lot less people getting a check each week. How is that good?

Just ask GM (GM). They will lose about $100 million a day when workers walk out today…. GO UNIONS!!!

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Monday’s Links

Lobbyists, UN, Killing gays ok at Columbia, Oil

– Not every time an industry lobbies congress does it work.

– Another UN scandal, who would have thought? Please detect the heavy sarcasm

– You can kill gays for being gay and get invited to Columbia University, ask them to keep quiet about it, and you get banned

– Another take similar to mine on the state of oil short term

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Sprint Nextel Merger "Almost Done"

More than two years after the acquisition that formed Sprint Nextel (S), the now nation’s third-largest wireless provider(down from #2) is about 80 percent done with integrating the two sides together, the company’s CEO Gary Forsee said last week. Let’s just ignore the fact that almost 3 year to complete the merger is just way too long.

“We have a big opportunity in front of us,” said Forsee in the meeting with analysts. He said the company should see profit margins improve as it begins next year to pare down its two wireless networks to one.

Sprint bought Nextel in August 2005 and has struggled with merging the two systems. Technical problems and a required swap of frequencies used by Nextel’s press to talk network hurt call quality and customer service fiascos lead hundreds of thousands of customers to drop the service.

This year, the company began finally selling hybrid phones that work on both the Nextel network and Sprint’s regular CDMA network, and it expects to have 2 million of the devices operating by the end of the year. Next year they will begin switching Nextel customers over to the CDMA network with a new press-to-talk system called QChat, which will go into widespread testing in Q4.

“We believe there’s a lot of growth opportunity in push-to-talk,” he said.

Sprint says having all their customers on one network will save money on operational costs and reduce investment in new cell sites and other support infrastructure.

All this is good and well but what Sprint needs to address is the fact its current customers are just not very happy. Sprint will make more than a dime a share when the network is combined and the cost savings alone will make for an improvement in results but they have yet to stop the exodus of customers to other providers. It is not the network issue(s) making them do it, it is the treatment they get when they call Sprint that is making them flee. Sprint’s firing of customers was a PR fiasco and likely gave more than a few potential customers serious pause about joining Sprint. There are plenty of providers out there for people to choose from, having an adversarial relationship with them is not the way to grow. this is the reason they have fallen far behind rivals AT&T (T) and Verizon (VZ).

Until that issue is fixed, any upside and real improvement for Sprint will be put off indefinitely.

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Goldman Sachs Pragmatism

Another day of digestion of Goldman Sachs (GS) blowout quarter sheds some light.

When the world was running around talking of the “subprime meltdown” and the “freezing of credit markets” Goldman quietly looked at the situation and placed their bets accordingly. Rather than dumping positions or just sitting tight and riding out the storm and taking huge losses like Morgan Stanley (MS), Lehman (LEH) and Bear Sterns (BSC), Goldman jumped on, rode the wave down and collected the profits.

The question for shareholders of these companies might not be “why is Goldman so good” but “what the heck were you guys doing?”

Now, the media has pumped up Goldman’s move as “stunning”, “bold” and “breathtaking” and implied they bet the farm on this. The reality is just the opposite. One of the metrics investment banks use to estimate the market risk on a their balance sheet is called Value at Risk, or VaR. This indicator for Goldman moved up only 5% in Q3 vs Q2. If Goldman was placing huge bets in volatile markets like the short trade in mortgages, VaR would have been expected to move up by much more. Since it didn’t, we must conclude that these bets were neither “bold” or “breathtaking”, just simply “savvy”.

Now the latest report out is that Goldman has $69 billion in short term debt it must rollover in relatively soon and the new debt it takes on will invariably be more expensive, hurting earnings. Here is the thing though, if the analyst who wrote this knows this, and now we know it, is there a chance in hell Goldman doesn’t? Also, if we know this now do we really think Goldman has not been aware of it for a whole lot longer? Based on their history, do we really think they have not already taken steps to offset that increase? Me either…

This is one group of people I am not willing to bet against.

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Monday’s Upgrades and Downgrades

UPGRADES

Diamond Foods DMND BB&T Capital Mkts Hold » Buy
Buckeye Partners BPL Deutsche Securities Hold » Buy
PMI Group PMI Piper Jaffray Market Perform » Outperform
The Mosaic Co. MOS Citigroup Sell » Hold
Diana Shipping DSX Bear Stearns Peer Perform » Outperform
Mattel MAT Oppenheimer Neutral » Buy
Targa Resources NGLS Wachovia Mkt Perform » Outperform
PNM Resources PNM Jefferies & Co Hold » Buy

DOWNGRADES

SCP Pool POOL Wedbush Morgan Buy » Hold
SCP Pool POOL Morgan Keegan Outperform » Mkt Perform
Topps TOPP Morgan Joseph Buy » Hold
Sanderson Farms SAFM Stifel Nicolaus Buy » Hold
Canadian Natl Rail CNI Stifel Nicolaus Buy » Hold
Diamond Offshore DO Calyon Securities Buy » Add
Transocean RIG Calyon Securities Buy » Add
Weatherford WFT Calyon Securities Buy » Add
ExpressJet XJT Soleil Hold » Sell
Buckeye GP Hldgs BGH Deutsche Securities Buy » Hold
Circuit City CC Bear Stearns Outperform » Peer Perform
Family Dollar FDO JP Morgan Neutral » Underweight

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"Fast Money" for Monday

MONDAY’S PICKS

Jeff Macke recommended selling General Motors (GM). Open $34.94

Karen Finerman liked NYSE Euronext (NYX). Open $76.05

Pete Najarian preferred BJ Services (BJS). Open $27.81

FRIDAY’S PICKS

Jeff Macke recommended Activision (ATVI). Open $20.96 Close $20.93 Loss $.03

Guy Adami said Oracle (ORCL) is a raging buy. Open $21.04 Close $21.97 Gain $.93

Pete Najarian preferred Sohu.com (SOHU). Open $38.76 Close $40.01 Gain $1.25

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)

Guy Adami= 25-17 Gain $41.04
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 29-22 Gain $9.76
Pete Najarian= 18-15 Gain $25.04
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 9-5 Gain $3.25
Stacey Briere-Gilbert= 2-0 Gain $1.61

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The Weeks Top Stories At Value Investing News

Please visit these links at this great site…

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Mattel Bends Over For The Chinese

Thank You Sir, May I Have Another!!! Kevin Bacon, Animal house

“Mattel (MAT) takes full responsibility for these recalls and apologizes personally to you, the Chinese people, and all of our customers who received the toys,” said Mattel executive Tom Debrowski. Oh do you?

I would personally love to see the “design flaw” that said “cover toys with deadly levels of lead paint”. When I first heard it I thought it was a sarcastic joke. How much pressure are the Chinese putting on Mattel to cause them to publicly cane themselves? How high were the lead levels? Tests had found that lead levels in paint in recalled toys were as high as 110,000 parts per million, or nearly 200 times higher than the accepted safety ceiling of 600 parts per million. Now, it has been pointed out that only 13% of the 21 million toys were recalled due to lead paint but, the question must be asked, why did Mattel apologize for that?

This has to be without a doubt one of the most pathetic acts a corporation has ever done in the name of the almighty dollar. China, getting sick of being bashed most likely told Mattel to apologize or get your toys somewhere else. Rather than pay a few bucks more for a Elmo doll from Thailand, Mattel promptly caved.

It is nice to see that the apology they gave the producers of the toxic toys the same sincerity they gave us consumers whose children may have played with and been damaged by them. Sweet huh? This act really does mitigate the effects of any previous ones, doesn’t it. This is like a beaten spouse saying “I deserved it, dinner is a 5pm not 5:15”. Pathetic

At least to date the other company effected, RC2 (RCRC) has yet to ask forgiveness from the Chinese for the lead coated Thomas the Tank Engine toys they sent them earlier this summer.

Mattel, world’s largest toy maker has been in China for 25 years and about 65 percent of its products are made in China. This summer it recalled 21 million toys made in China for various reason.

If you do not believe my reasoning for the apology take a look at this exchange.

Chinese product safety chief Li Changjiang publicly reminded Debrowski that “a large part of your annual profit … comes from your factories in China. He then added, “I really hope that Mattel can learn lessons and gain experience from these incidents,” adding that Mattel should “improve their control measures.”

Or, grow some stones…

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ValuePlays: Most Read Posts

Here are the most read posts for the last 30 days…

1- What Is Verizon Up To?

2- Barron’s Piece on Cramer: Be Wary of Those Defending Him

3- Marlboro Smokeless on Sale in October

4- Harley Davidson: “Below MSRP” Was A Bad Harbinger

5- Altria After The Spin: What Investor’s Can Expect

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This Week’s Dividend Hikes

Texas Instruments (TXN)= 25%

Buckle Inc. (BKE)= 25%

Corn Products (CPO)= 22%

Premier West Bancorp (PRWT)= 20%

Kamen Corp. (KAMN)= 12%

Genworth Financial (GNW)= 11%

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This Weeks Insider Buys

“There is only one reason insiders buy shares, they feel the price is going up”, Peter Lynch.

Zymogenetics (ZGEN)= $5,622,000

Halozyme Therapeutics (HALO)= $3,749,000

Barnes and Noble (BKS)= $3,295,000

General Growth Properties (GGP)= $2,888,000

World Acceptance Corp. (WRLD)= $1,544,000

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Friday’s 52 Week Lows

A small list today.

TWC Time Warner Cable Inc 31.83
TRBN Trubion Pharmaceutica l 11.30
SVN Sun-Times Media Group Inc 2.56
KFY Korn Ferry Intl 16.35
JBSS John B Sanfilippo & Sons 7.92
FFHS First Franklin Corp 12.93
FFFD North Central Bancsha re 38.00
POOL Pool Corporation 24.85
PLCE Childrens Place Retail S 25.02
PEIX Pacific Ethanol Inc 9.80