Analyst Upgrades

• Bunge (BG) to buy from hold at Deutsche Bank.
• Textron (TXT) to overweight from neutral at JPMorgan.
• CSX (CSX) to buy from neutral and Pulte Group (PHM) to conviction buy from neutral at Goldman.
• Aol (AOL) to buy from neutral at UBS.
• Kohlberg Capital (KCAP) to outperform from market perform at JMP Securities.
• Owens Corning (OC) to buy from neutral at BofA/Merrill.
• Jefferies (JEF) to buy from neutral at Ticonderoga.
• Harris (HRS) to outperform from perform at Oppenheimer.

Since early September, shares of the major private equity firms Blackstone Group (BX) and KKR & Co. (KKR) have seen strong gains. Of course, part of the reason has been the bull move. But at the same time, the prospects for private equity are looking brighter. In fact, the upcoming year is shaping up to be strong for public offerings.

According to a report from Bloomberg.com, it looks like private-equity backed deals will account for roughly half the volume. And they will generally be massive transactions. Some that are on deck include HCA Holdings, Nielsen Holdings and Kinder Morgan.

"Longer term, crude will best the old highs at $145/barrel set in 2008. That is certain. Just how much higher is uncertain, but I would not be surprised at $200 plus," assert resource expert Curtis Hesler.

The editor of The Profession Timing Service reviews a trio of favorites in the energy sector: Kinder Morgan Energy Partners (KMP), Legacy Reserves (LGCY), and Northern Oil & Gas (NOG).

He explains, "The financial press has been forecasting a crash in crude oil prices for some time. Some are basing this on a resumption of the recession, some on new discoveries and energy innovation, and some on a host of other reasons.

The following list of solid dividend payers are not likely to get anyone excited about future growth prospects like some small cap tech company with a hot IPO, but in these uncertain times being able to diversify into a reliable dividend paying stock might work while you ride out the economic storm.

Bank money market accounts, CD's and treasuries are not all that compelling right now. While it is wise to keep some cash handy in these places, you need not put all your resources there.

Earlier today my colleague Steven Halpern posted a story on the safest dividend payer in the DJIA and
Verizon Communications (NYSE: VZ) paying 6.1% was his conclusion. I recently posted about this stock pointing out the benefits of the communications companies, see: Chasing Value: AT&T and VZ, high yield plus safety

It is to be expected that a utility would show up on the list, given the strong recurring revenue and cash-flow and
Duke Energy (NYSE: DUK) paying 6.39% is that company. I have written many positive posts about Duke and my view has not changed.

"Throughout the credit crisis, we've focused on Kinder Morgan Energy Partners, LP (NYSE: KMP) -- and we've not been disappointed," says Keith Fitz-Gerald in The Money Map Report.

"With the economy in the toilet and prices in the hopper, the notion of going 'long' energy right now might seem like a move that will lower our portfolio returns over the long haul. Not true. In fact, now's precisely the time that you want to establish or add to an energy position.

"Energy is not only an ideal hedge against rough markets, but more importantly, as I have noted repeatedly in recent months, one of the most concentrated upside opportunities available today.

For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.

"My favorite conservative recommendation for 2008 is Kinder Morgan Energy Partners (NYSE: KMP)," says Elliott Gue, editor of The Energy Strategist.

"Kinder has four basic business lines: oil pipelines and terminals, carbon dioxide (CO2) pipelines, natural gas pipelines and refined products pipes.

"Refined products pipelines are among the most stable assets a firm can own. Typically, they're dedicated to servicing a particular group of refineries, and volumes tend to grow at a slow but predictable rate over time. In Kinder's case, this is a simple, fee-based business. The company owns the valuable Plantation Pipeline that carries refined products from Gulf Coast refineries to the Mid-Atlantic.

"And the company's Pacific Pipeline carries refined products west to California. The West Coast is one area of the US that's chronically short of refining capacity. Pipelines carrying refined products from the Gulf are the only way California keeps moving.

"More than two years after selling Kinder Morgan Energy Partners (NYSE: KMP) for a 60% gain, we are once again buying the shares," says Bill Martin in his FindProfit advisory newsletter.

He explains, "A heavily diversified operator of pipeline and other energy-related assets and the largest master limited partnership (MLP) in the U.S., KMP currently has a 6.85% yield that we think will grow to 7.5% or greater in 2008 based on the current stock price.

"This growth will be powered by a deep portfolio of new growth projects, most notably the company's Rockies Express pipeline, Mid-Continent Express Pipeline, and Trans Mountain pipeline.

"KMP is extremely well positioned to benefit from the prime sources of North American energy supply growth over the next several years, including the Barnett Shale in Texas, the Rocky Mountains, the oil sands of Canada, and the new LNG import facilities in Texas and Louisiana.

"KMP also should benefit from higher oil prices over the next two years in its CO2 segment. Together, these projects should enable KMP to grow its distribution payout rate by 7-9% per year over the next several years.

MOST NOTEWORTHY: Melco PBL Entertainment, Helen of Troy, LHC Group and Oriental Financial were today's noteworthy initiations:

• Jefferies initiated shares of Melco PBL Entertainment (NASDAQ: MPEL) with a Buy rating and $21 target, as they believe the possibility of A-Max, a VIP junket consolidator, moving up to 10 junkets to the Crown Casino could lead to short-term gains and notes that MPEL is the only Macau pure play in the U.S. stock market.
  
• Jefferies also started shares of Helen of Troy (NASDAQ: HELE) with a Hold rating and $21 target, as they sees risks to near-term EPS from soft consumer demand and gross margin pressures.
  
• Credit Suisse expects LHC Group's (NASDAQ: LHCG) rural-focused strategy and joint venture partnerships to drive organic growth and started shares off with an Outperform rating and $26 target.
  
• Oriental Financial Group (NYSE: OFG) was initiated at B. Riley with a Neutral rating and $12.50 target. The firm does not expect significant multiple expansion from current levels given the slow Puerto Rican economy.

OTHER INITIATIONS:

• JP Morgan initiated Eagle Rock Energy (NASDAQ: EROC), Kinder Morgan Energy Partners (NYSE: KMP), MarkWest Energy Partners (NYSE: MWE) and Plains All American Pipeline (NYSE: PAA) with Neutral ratings.
  
• Bernstein initiated Sprint Nextel Corporation (NYSE: S), AT&T (NYSE: T) and Verizon Communications (NYSE: VZ) with Market Perform ratings and targets of $21, $47 and $44, respectively.

Copano Energy (NASDAQ: CPNO) - Volatility Elevated into EPS & lower energy prices. CPNO is an energy company with natural gas gathering and intrastate transmission pipeline assets and natural gas processing facilities Oklahoma & Texas Gulf coast region. WTI Crude futures are down 3.56% to $72.79 according to Track Data. CPNO will announce EPS on 8/8. CPNO August option implied volatility of 41 is above its 12-week average of 20 according to Track Data, suggesting larger risk.

Enterprise Products (NYSE: EPD) - Implied volatility of 40 above 26-week average of 17. EPD transports natural gas, NGL's and crude oil through more than 35,000 miles of onshore and offshore pipelines. EPD September put implied volatility of 40 is above its 26-week average of 17 according to Track Data, suggesting larger risk.

Kinder Morgan Energy Partners (NYSE: KMP) - September volatility Elevated. KMP owns or operates 26,000 miles of pipelines and approximately 150 terminals. KMP September option implied volatility of 50 is above its 26-week average of 14 according to Track Data, suggesting larger risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

MOST NOTEWORTHY: Leap Wireless (LEAP), Cergaon Networks (CRNT), Cinemark (CNK), Regal Entertainment (RGC) and Ocean Power Tech (OPTT) were today's noteworthy initiations:

• Leap Wireless International Inc. (NASDAQ: LEAP) was initiated with an Outperform rating and $103 target at Pacific Crest, as the firm believes the company's long-term opportunity with new-market expansion is underappreciated.
• Pacific Crest also initiated shares of Ceragon Networks Ltd. (NASDAQ: CRNT) with an Outperform rating and $12 target, as the firm believes accelerating wireless data growth is driving backhaul demand.
• Cinemark Holdings Inc. (NYSE: CNK) was initiated with an Overweight rating at Morgan Stanley, a Buy rating and $21 target at Banc of America and a Buy rating at Merrill Lynch; Banc of America believes the current box office strength could drive upside to estimates.
• Morgan Stanley also initiated shares of Regal Entertainment Group (NYSE: RGC) with an Equal Weight rating.
• Ocean Power Technologies Inc. (NASDAQ: OPTT) was initiated with a Buy rating and $24 target at Banc of America and a Neutral rating at First Albany.

OTHER INITIATIONS:

• Telanetix Inc. (NASDAQ: TNXI) was initiated with a Buy rating and $8.50 target at Kaufman Bros, as the firm believes the company's market opportunity is significant and thinks it could be an interesting acquisition target if the telepresence market development accelerates.
• Banc of America initiated shares of OceanFreight Inc. (NASDAQ: OCNF) with a Buy rating and $23 target.
• Goldman Sachs initiated shares of Kinder Morgan Energy Partners (NYSE: KMP) with a Neutral rating and $54 target and shares of Kinder Morgan Management (NYSE: KMR) with a Neutral rating and $53 target.
• Deutsche Bank initiated shares of Guess Inc. (NYSE: GES) with a Buy rating and $49 target.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

The massive $22 billion buyout of Kinder Morgan Inc. (NYSE:KMI) is certainly moving along -- despite the complexities. According to a piece in the Houston Chronicle, the company gained antitrust clearance from the Federal Trade Commission.

However, there were some interesting negotiations. You see, two of its private equity investors, The Carlyle Group and Riverstone Holdings, also have an ownership interest in a competitor to Kinder Morgan, Magellan Midstream Partners.

Interestingly enough, the private equity firms did not have to sell-off their stake in Magellan. Instead, the will have only a passive involvement with the company. This means no board representation and access to confidential information.

But, the fact remains that Carlyle and Riverstone will still have influence on Magellan because of its significant ownership. Yet, this does not appear to be a big deal for the FTC.

Tom Taulli is the author of various books, including the Compete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Private equity, in my opinion, is the juiciest of all the financial sectors. While venture capital is more baldly a gamble -- after all, something like 10% of investments actually pay out handsomely -- private equity is a quieter, stuffier, much, much larger gamble. It makes my blood gurgle with excitement.

Private equity firms have been gambling big, of late, and, according to the Wall Street Journal [subscription required] at this wee hour of the morning, they might do even more so by orchestrating an LBO of Harrah's Entertainment, Inc. (NYSE:HET). Naturally, the biggie of all private equity gamblers, Texas Pacific Group, is rumored to be involved in the talks to buy out Harrah's, which has a $12.34 billion market value and $10.2 billion in debt. Now there's some leverage.

While this would certainly be the biggest casino company ever bought out by a private equity group, it wouldn't be the first casino company -- Colony Capital, also rumored to be in on discussions, has bought several properties in Atlantic City and Las Vegas -- or the first huge gamble. After all, there's HCA Inc. ($21.3 billion), in my mind (and I was analyst on many a hospital deal in my time in investment banking) a huge hospital management company like HCA is a huge gamble. In hospitals you have two very egocentric, impossible-to-predict, and money-hungry groups pulling your cash flow this way and that: doctors and the U.S. government. Ick.

GE ended the day at $33.71, up 51 cents, a 1.54% leap in its price. What caused this leap? Certainly there doesn't seem to be too much exciting going on in the series of press releases coming out of GE's PR department that would be catching people's attention. Many had attributed GE's surge in price to the newfound confidence in a more stable Middle East and positive news on oil.

Is there something else in effect, though? GE recently announced it was acquiring Kinder Morgan, a natural gas distribution company. Certainly some seem to think that GE's getting further into the energy business is a good thing. In a period of time when energy profits have never been higher, investors might be responding to GE's latest company purchase with a vote of confidence.

The stock market is an amazing thing. On a macro level, it provides instant feedback on a myriad of things – such as inflation, interest rates and economic growth. And, as the stock market has globalized and become increasingly electronic, the responses can be brutally quick and deep – as we've seen lately.

What is an investor to do?  Well, in fast-changing markets, it's easy for emotions to take control. When markets boom, the temptation is to be greedy.  When markets tank, fear rules.

Actually, in bad markets, it's a good idea to see what smart people are doing. In fact, I think it's ironic that yesterday – when the Dow plunged 184 points – a super entrepreneur, Richard Kinder, announced he was going to buy his company, Kinder Morgan, for $100 per share and take it off the NYSE. It's a deal valued in excess of $13 billion.  Why do this unless he is bullish?