Sunday, March 18, 2007

Monday Watch

Weekend Headlines
- Barton Biggs, who runs the $1.3 billion Traxis Partners LLC hedge fund, said US stocks may be approaching a “bottom” and the S&P will climb as much as 15% this year. “The markets are digging in here and are in the process of making a bottom,” Biggs said. “I’m bullish longer term and I’m bullish short term.” Biggs also said the slump in the so-called subprime mortgage market was “just another bubble bursting” and that a recession in the US is “unlikely.” “Big-cap stocks in the US are as cheap as they’ve been compared to everything else in the entire post-World War II era,” he said. “The best performing part of the big-cap universe is going to be big-cap tech.” Computer-related companies in the S&P 500 are valued at 24 times earnings. That’s less than half the five-year average of 50.0.
- Palestinian President Mahmoud Abbas rejected “all forms” of violence and pledged a negotiated peace with Israel as he sought the approval of lawmakers for a national unity government that would end a yearlong struggle for power.
- China raised interest rates for the third time in 11 months to curb inflation and asset bubbles. The one-year benchmark lending rate will be raised to 6.939% from 6.12%, starting March 18.
- Defense Secretary Robert Gates said the Bush administration’s strategy to stabilize Baghdad with more troops is beginning to show results.
- China, India and Russia are losing their allure for stock investors because corporate profits are showing signs of flagging. Stock markets in the three countries are among the 10 worst performers this year. Together with Brazil, they’ve fallen twice as much as developing nations as a whole.
- The Australian dollar fell on speculation the nation’s exporters will be hurt by an increase in China’s benchmark interest rate.
- The US and North Korea agreed on releasing funds frozen in a Macau bank, a move that will boost progress on implementing a six-nation accord that will end the communist state’s nuclear weapons program.
- Qualcomm Inc.(QCOM) dropped two patent infringement lawsuits that sought to prevent Broadcom Corp.(BRCM) from entering the market.
- Developers Diversified Realty(DDR), the owner of more than 500 retail properties, will replace Caremark Rx(CMX) in the S&P 500.
- US steel inventories are near a record high, and a glut in China, which makes 30% of the world’s metal, may cause prices to fall by the second half, according to UBS AG, Europe’s larges bank. Zurich-based CSFB says the risks of a drop in steel prices are mounting. Shares of the world’s 62 largest steelmakers are trading at 11 times estimated earnings, 32% more than the average during the past two years. Steel stocks have advanced a record 590% in the past four years.

Wall Street Journal:
- Blackstone Group LP will sell a 10% stake in an IPO that will value the company at about $40 billion.

Business 2.0:
- 25 startups to watch.

NY Times:
- Iran is increasingly becoming intertwined in Iraq’s economy, with many of its goods and services going to Iraq.

NY Observer:
- Neil Binder has been in New York real estate since 1979, and this is the first year that a reason escapes him when it comes to explaining a market boom. “The market is extremely strong across the board,” Mr. Binder, a principal at Bellmarc Realty said.

MIT Review:
- 10 emerging technologies.

Financial Times:
- The American Stock Exchange, the third-largest US equity market, may set up a second-tier US stock market, similar to the London Stock Exchange’s Alternative Investment market, similar to the London Stock Exchange’s Alternative Investment Market, which would avoid Sarbanes-Oxley Act rules.
- Forty-four percent of Europe’s citizens think life has become worse since their countries joined the European Union, citing an FT/Harris poll. Only 25% of people questioned judged that life in their countries had improved since they joined the EU.

Sunday Telegraph:
- Coca-Cola(KO) is developing Lumae, a tea-based drink with ingredients benefiting consumers’ skin.

Rheinishe Post:
- Germany, raisin its growth forecast for 2007, expects the economy to grow at least 1.9%, citing deputy Chancellor and Labor Minister Franz Muentefering.

Gas Industry:
- OAO Gazprom, the world’s largest natural-gas company, fully replaced its crude oil and natural gas reserves last year as it stepped up exploration, company executive Vasily Podyuk said.

Weekend Recommendations
- Made positive comments on (TXT), (R), (SWN), (BBG) and (SKS).

- Reiterated Buy on (ESRX), raised target to $96.
- Reiterated Buy on (LIZ), target $54.
- Reiterated Buy on (NT), target $35.

Morgan Stanley:
- Most investors have underestimated China’s decisiveness to tighten its still overheated economy, and have almost become blind to the messages that Beijing keeps signaling. The rate rise resumption in will bring tightening back into focus, and the already vulnerable market sentiment in China is likely to take another hit. Reiterate Cautious Chinese market view.

Night Trading
Asian indices are +.50% to +.75% on average.
S&P 500 indicated +.20%.
NASDAQ 100 indicated +.23%.

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
- None of note

Upcoming Splits
- (CSL) 2-for-1

Economic Releases
1:00 pm EST
- The NAHB Housing Market Index for March is estimated to fall to 38 from 40 in February.

BOTTOM LINE: Asian Indices are higher, boosted by technology and drug shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the week.

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