WALL STREET JOURNAL

A loss of confidence in the government sponsored mortgage firms Fannie Mae (FNM) and Freddie Mac (FRE) resulted in both companies shares plunging about 15% to 14 year lows. Because the two are the largest providers of funding for mortgages in the U.S., their troubles are significant as both may have to issue billions of dollars in stock to save themselves, diluting current shareholders, according to the Wall Street Journal…For 75 years the NFL’s Pittsburgh Steelers have been owned by the Rooney family, but that may now change as the Wall Street Journal reported that the family is seeking to sell the football team which is valued at about $1.2B. One potential buyer is Stanley Druckenmiller, a billionaire, and chairman of Duquesne Capital Management in Pittsburgh…FINANCIAL TIMES: British Prime Minister Gordon Brown yesterday raised the issue of visa problems facing BP (BP) employees in Russia with Russian President Dmitry Medvedev, but Medvedev did not make any concessions on the issue, according to the Financial Times. Some people have suggested that BP’s billionaire partners in its Russian joint venture, TNK-BP, have orchestrated the visa problems in order to gain control of the venture…

Increasing mortgage defaults send Fannie and Freddie shares to 14 year lows-WSJ

A loss of confidence in the government sponsored mortgage firms Fannie Mae (FNM) and Freddie Mac (FRE) resulted in both companies shares plunging about 15% to 14 year lows. Because the two are the largest providers of funding for mortgages in the U.S., their troubles are significant as both may have to issue billions of dollars in stock to save themselves, diluting current shareholders, according to the Wall Street Journal. One immediate result is that home buyers will have to pay even more to borrow. Another firm, IndyMac Bancorp (IMB), has said it will now stop marking almost all types of home loans.

Oil production at large Mexican field has dropped sharply-FT

Daily production at Mexico’s Cantarell oil complex, one of the world’s largest oil fields, has dropped by a third in the past year. Average daily production at the complex sank to a little over 1M barrels a day in May, versus 1.6M a year earlier. Mexico’s total oil production dropped about 10% year-over-year in May.

Repsol is still looking to Russia for desperately needed energy-FT

Even as many energy companies shy away from Russia, Spanish energy company Repsol (REP) is looking to increase its presence there, because the Spanish company’s reserves are very low. The company’s 2.4B barrels of oil equivalent will last it about six and a half years at current rates. However, Repsol’s ventures in Russia have produced minimal gains so far. Repsol is hoping its venture off the Brazilian coast proves to be more fruitful.

Pickens looks to drive political, economic agenda of the U.S.-USA Today

In an effort to help shape the political and economic agenda of the U.S., Texas oilman T. Boone Pickens will today unrwap the Pickens Plan, his plan for cutting the country’s demand for foreign oil by more than a third in under a decade. Pickens will, to promote the plan, bankroll www.pickensplan.com, what his aides say is the biggest public policy ad campaign ever and goes live today.

Swift Energy continues to diversify as it grows-IBD

Swift Energy (SFY) witnessed the oil shock of 1979 and the oil crash in the mid-1980s. It survived both, expanded into other areas and has thrived, especially with current record oil prices, giving it double digit earnings and revenue growth, according to Investor’s Business Daily’s “the New America”. Its diversity is by product, geography and geological assets. “We tend not to get too excited when things are going great, which they are, and we tend not to get too down when things turn around and go the other way,” says Paul Vincent, Swift’s investor relations manager. At the end of 2007 Swift had the energy equivalent of 134M barrels of oil in proven reserves, up 14% from the previous year. The company expects production to grow 10% to 15% this year. First quarter earnings per share jumped 79% to $1.61, as sales climbed 53% to $199M. Swift will release its second quarter numbers on August 7. Analysts see EPS surging 71% to $2.20, with estimates of a 53% jump in revenue to $243.6M. The consensus estimate calls for Swift’s earnings this year to be up 64% to $8.68.

Earnings Season: Sentiment Review and Outlook

Investor sentiment coming into Earnings Season, which is traditionally seen as starting today with Alcoa’s report, is very bearish. The reasons appear obvious given the breaks in March lows, higher than average volatility, wide credit spreads, record input prices in materials, food and energy as well as very low earnings expectations outside of Tech stocks. We had noted last week that these are ideal conditions for some form of rally to take place. Many of the bearish factors noted other than credit issues have been with us throughout the entire up move since 2004. The one key that made that up move possible was positive forward guidance. Outside of Tech stocks, expectations for earnings, especially in Financial stocks, have been crushed. For rallies in those names, all that may be needed is less than horrific news. The focus will be less on the quarter reported and more about guidance. If guidance is poorer than lowered expectations, we won’t see a rally. If it is inline or better with less uncertainty, we will likely see something start that could be traded. That may not mean we have seen index lows however. It is possible that additional write-downs in the Financial names will fail to spark conditions for a rally. We could instead see a long drag along lows. For Tech stocks, expectations may simply have been set too high with this area being a very crowded long trade. In this scenario on an index basis we might still see price declines while select sectors rally. Index declines could be exacerbated by declines in Energy if the commodity outlook dims over the next several weeks. This is contrary to equity bull expectations, but we should recall that Financials, Tech and Energy have almost equal weights in the S&P 500. The sectors that may be most likely to rally are Consumer Discretionary (short-covering), Industrials, Consumer Staples and Health Care (short-covering). Financials could see an extended short-covering rally on much better than expected news. That may be a brief respite given the fundamental backdrop. We should note that a July rally is likely to be short-lived unless surprises are positive in the extreme. Our expectation is that conditions into the election will not be favorable for higher equity prices.