Sunday, January 28, 2007

Monday Watch

Weekend Headlines
- Broadcom Corp.(BRCM), a maker of chips for consumer devices, didn’t infringe two patents owned by Qualcomm Inc.(QCOM), a federal jury in San Diego found.
- Bank of America(BAC), blocked by federal rules from buying another big US bank, has discussed an alliance with Countrywide Financial Corp.(CFC), the nation’s largest mortgage lender.
- Israeli Prime Minister Ehud Olmert’s coalition government approved the appointment of Raleb Majadele today as the nation’s first Arab Muslim Cabinet member.
- Intel Corp.(INTTC) said it made a breakthrough in transistor technology that allows it to make faster, smaller, more efficient processors.
- The US dollar rose for a third straight week against the yen as gains in US durable goods orders and home sales suggested the economy is strengthening.
- President Bush, seeking to garner support for the key proposals in his State of the Union address this week, urged lawmakers to embrace bipartisanship on energy and health-care overhaul.
- Terrorism, a subject that has dominate recent meetings of the World Economic Forums, was largest absent as a topic at this year’s gathering as economic and political leaders turned their focus to global warming.
- Deutsche Telekom AG, Europe’s largest telephone company, unexpectedly cut its forecast for 2007 earnings, citing intensifying domestic competition and the effect of currency fluctuations.
- Institutional Shareholder Services today recommended Equity Office Properties(EOP) holders accept Blackstone Group’s $38.3 billion cash offer, the world’s biggest leveraged buyout.
- European Central Bank President Jean-Claude Trichet said the fastest money supply growth in 17 years validated recent interest rate increases.
- Richard Evans, CEO of Alcan Inc.(AL), the world’s second-largest aluminum producer, expects prices for the metal to be lower in a year.
- Japan’s retail sales fell in December, signaling consumer spending may be slow to recover from its worst slump in almost a decade.
- Energy companies stocks in the US are trading near the lowest prices relative to earnings since November 1982. However, commodity stocks historically look the “cheapest” before significant declines as their earnings are usually near peaks. The average annual price for a barrel of oil peaked in 1980 at $37.42. Moreover, oil topped in August of 1983 at about $33/bbl. and proceeded to plunge 70% to around $10/bbl. by August of 1986.
- US Treasury bond sales may fall to the lowest level in five years as economic growth boosts corporate tax revenue, reducing the government budget deficit.
- The US dollar is rising to the highest in almost four years against the yen on speculation reports this week will show the economy is improving, suggesting the Fed will refrain from lowering interest rates in coming months.
- China’s oil and gas demand and supply will be balanced this year, the nation’s top economic planner said. Tightness in coal and power supplies in China will ease in 2007. “The priority is to push for resource conservation, environmental protection and increase the quality of industrial output,” the National Development and Reform Commission said.

Wall Street Journal:
- Job creation accelerated and average pay rose in California’s Silicon Valley last year, extending technology companies’ recovery from the crash of 2000, citing an annual report by a nonprofit group. The unemployment rate fell to 4% from 5% the previous year and average pay for Silicon Valley employees rose 4% to $74,302.

Ticker Sense:
- Small/Mid-cap growth stocks are “cheaper” than their value counterparts.

NY Times:
- Gap Inc.(GPS), whose CEO Pressler resigned after two years of sales declines, needs to revamp its cradle-to-grave single-line fashion.
- The Freelancers Union, a group of 40,000 Web designers, video editors, writers, dancers and graphic artists in NY, plans to reach out to the 20 million US independent contractors.

Business Week:
- By focusing on the hours between traditional mealtimes, McDonald’s(MCD) is sizzling.
- 8 technologies to save the world. These futuristic projects promise to make the world greener, while making entrepreneurs some green.

Chicago Tribune:
- Tribune Co.(TRB) rejected two takeover offers as too low and is talking to private-equity companies including Chicago-based Madison Dearborn Partners LLC about a management buyout.

- Google’s(GOOG) YouTube will begin sharing revenue with its millions of users, citing YouTube’s co-founder Chad Hurley.

Financial Times:
- The London Stock Exchange had more than $5.88 billion of listings by hedge funds last year, surpassing Zurich as the largest market, citing research by ABN Amro Holding NV.
- Global revenue from downloads of television programs and films from Web sites is forecast to grow 1,000% within five years, to $6.3 billion , due to an increase in the use of broadband, citing Informa, a business information group.
- Most French, Italian and Spanish citizens and over half of Germans consider the single European currency to have had a negative impact on their economies, citing a Harris poll. Of those surveyed in France, only 5% said the euro has had a positive effect on the domestic economy.

Sunday Telegraph:
- London Stock Exchange Plc CEO Furse has scheduled meetings with the exchange’s largest shareholders to ask their help in fending off a hostile bid from Nasdaq Stock Market(NDAQ).
- Virgin Group Ltd., the closely held company run by billionaire Richard Branson, plans to list the shares of its US cell phone business on a US stock exchange.

- Ford Motor Co.(F) CEO Alan Mulally plans to export more cars from the company’s European plants to the US as smaller, more fuel-efficient vehicles become more popular.

El Universal:
- Venezuela may cut the work day to six hours from eight hours to give workers time for “education and instruction,” citing Labor Minister Jose Rivero. President Hugo Chavez said Jan. 25 that the government may force private companies to allow workers at least one hour a day to study “socialist thought.”

Xinhua News Agency:
- China’s crude steel production rose 18.5% last year to 419 million metric tons, citing figures from the nation’s top planning agency.

Commercial Times:
- Taiwan Power Co. plans to spend $106 million on installing solar panels in a four-year period that will start in 2008.

- Saudi Arabia’s King Abdullah warned Iran against interfering in the kingdom’s affairs, saying the Persian state’s polices must not endanger the region. The Saudi monarch said he told visiting Iranian envoy Ali Larijani last week that the oil-rich kingdom does not want any country to become its enemy or to threaten it or its Gulf Arab neighbors.

Weekend Recommendations
- Made positive comments on (MO), (TXI), (KALU) and (NAV).
- Made negative comments on (BMC).

- Despite weak demand, 4Q06 inventories for chipmakers and in other areas of the supply chain are coming down, much to our surprise. Lower-than-expected utilization rates at foundries account for this reduction. Meanwhile, signs are pointing to some component demand improvement in January, notably in the PC supply chain and the handset supply chain. We conclude that the inventory problems facing the industry are not as bad as we feared. While we recognize that 1H07 seasonal headwinds create volatility, improved inventories clear the path for much more sustainable share appreciation in 2H07.

Night Trading
Asian indices are -.25% to +.50% on average.
S&P 500 indicated -.05%.
NASDAQ 100 indicated -.03%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Conference Calendar
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
- (ATHR)/.20
- (CMI)/3.77
- (GNSS)/-.03
- (GNTX)/.18
- (GYI)/.56
- (JDAS)/.21
- (MAT)/.67
- (PD)/4.28
- (PCL)/.34
- (SGP)/.17
- (SYY)/.38
- (TSO)/1.90
- (UNM)/.44
- (TSN)/.06
- (USG)/1.30
- (VZ)/.61
- (ZMH)/.99

Upcoming Splits
- None of note

Economic Releases
- None of note

BOTTOM LINE: Asian Indices are mostly higher, boosted by commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.

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