Sunday, March 23, 2008

Monday Watch

Weekend Headlines

- Commodities plunged, capping the biggest weekly drop since 1956, on speculation that slower global growth will curb demand for energy, metals and grains. “Commodities were a bubble” that is now bursting, said Leonard Kaplan, president of Prospector Asset Management. “Prices will go lower than you can believe,” said Kaplan.
- Gold and crude oil will probably decline through April as investors sell commodities to reduce risk, said Michael Lewis, Deutsche Bank’s head of commodities research.
- Commodities Drop, Rally in Dollar, Stocks Vindicate Bernanke. The biggest commodity collapse in at least five decades may signal Federal Reserve Chairman Ben S. Bernanke has revived confidence in US financial firms.

- OPEC has no plans to cut crude output after prices fell from a record, said Chakib Khelil, the president of the group that controls more than 40% of the world’s crude supply.
- Cisco Systems(CSCO) CEO John Chambers and Research in Motion(RIMM) co-founders James Balsillie and Michael Lazaridis are among the new names added to Barron’s list of the 30 best CEOs worldwide.
- The biggest investors in Concur Technologies(CNQR) are snapping up the software maker’s shares even as some analysts say the stock won’t recover from its recent decline.
- Obama Adviser Likens Bill Clinton Comments to Joseph McCarthy. A foreign policy adviser to Barack Obama accused Bill Clinton of questioning his candidate’s patriotism and said comments by the former president were reminiscent of anti-communist crusader Joseph McCarthy.
- Bank of America(BAC) may take a record $6.5 billion loan-loss provision in the first quarter to cover possible future losses in its home equity and mortgage portfolios, Punk Ziegel and Co. analyst Richard Bove wrote.
- The US dollar rose versus the euro and yen on speculation Federal Reserve moves to revive lending among banks will restore confidence in financial markets and the economy.
- Goldman Sachs(GS) and small rival Lehman Brothers(LEH) had their credit-rating outlook cut to negative by S&P, which said Wall Street bank’s profits may fall as much as 30% in the coming year.
- OAO Severstal agreed to buy ArcelorMittal’s Sparrows Point steel plant in Baltimore as Russia’s largest steelmaker bets against a prolonged economic slump in the US.
- FGIC Corp. and its bond insurance unit may have their ratings cut again by S&P.

Wall Street Journal:
- JPMorgan Chase(JPM) CEO Jamie Dimon asked other Wall Street executives, including Morgan Stanley’s(MS) John Mack, to refrain from hiring Bear Stearns(BSC) advisers for now.

- Despite the Bear Stearns(BSC) bailout and the Fed’s rate cut, a sense of foreboding is still abroad on Wall and Main Streets. Are You Ready for Dow 20,000?
- Is the Financial Crisis Over? Some Believe It May Be.
- Verizon(VZ), AT&T(T) Big Winners In US Wireless Auction.

- With the dollar rising all of a sudden, and commodity prices plunging, this would be a great time for the Treasury to get out there and buy dollars.

NY Times:
- Corporate insiders generally don’t believe that stocks are about to enter a major bear market. On the contrary, they are more bullish than they have been at any time since late 2005.
- US movie theaters are offering non-film events, such as broadcasts of baseball games, rock concerts, classic television show marathons and operas, as they seek to overcome stalled attendance.
- Insurers of Bear Stearns(BSC) and Countrywide Financial(CFC) will be released from paying on credit default swaps if the acquisitions of the companies are approved. Those who bought the insurance to speculate against the companies have seen the value of their insurance fall as the Bear Stearns and Countrywide bonds have risen to reflect the proposed takeovers.
- The private trading of derivatives including collateralized debt obligations and credit default swaps lies at the heart of the crisis that caused the collapse of Bear Stearns(BSC).

LA Times:
- Wells Fargo(WFC) plans to sell online vaults to store vital documents electronically. Called vSafe, the service will store birth certificates, passports, family photos and other important documents in digital form. The service, which will begin this summer and cost $180 a year for the largest online safe, will encrypt documents and enable customers to retrieve them from any computing device with an Internet connection.
- Clinton, Obama are Wall Street darlings. Donations to Democratic campaigns prompt concern that the candidates will go soft on regulation of the financial markets.

Arizona Republic:
- Arizona, whose US lawmakers in Washington include presumptive Republican presidential nominee John McCain, ranks last among the 50 states for so-called pork-barrel spending. Citing a report by the watchdog group Taxpayers for Common Sense, Arizona will receive $18.70 per person in federal earmarks this fiscal year. Three of Arizona’s Washington lawmakers, including McCain and House Republicans Jeff Flake and John Shadegg, refuse to seek federal funds for local projects. All say the earmark process wastes taxpayer money. According to Taxpayers for Common Sense, Alaska, with about one-tenth the population of Arizona, is to receive $506.34 per capita, the highest in the nation.

NY Post:
- Goldman(GS) to Fire 15% of Capital Markets’ Staff.

Business Week:
- Once-in-a-Blue-Moon Bargains. Whether it’s Peter Lynch loading up on Chrysler in 1982, Wilbur Ross buying steel mills in 2002, or Warren Buffett opening a bond-insurance unit in February, great investors have a habit of rushing in where others fear to tread.
- SingTel to Offer iPhone in Singapore?

USA Today:
- Flu Flattens Part of Workforce. During the second and third weeks of February, every state except Florida reported widespread flu activity.

- TJ Rodgers says many have tried, but none have succeeded in creating other Silicon Valleys around the world. The region’s unique combination of talent, money and unconventional thinkers, he says, simply can’t be replicated.
- The Worst Risks of the Credit Crisis Averted. It’s time to say goodbye to inflation as an investment theme.

- Iran inflation keeps pressure on Ahmadinejad.

Financial Times:
- Commodities prices have been falling across the board as hedge funds cut their exposure to one of the most popular asset classes so far this year, suggesting that recent record prices have been buoyed by speculative flows. The Federal Reserve has long been baffled by the strength of oil and other commodities – especially the recent step-up in prices, which has increased inflation risk and greatly complicated the decision as to how aggressively to ease monetary policy. Fed officials see no fundamental economic justification for the recent strength. Demand in China and India may be strong, they reason, but that was not news to traders. Indeed, the global growth outlook has deteriorated since the start of the year. One reason the Fed cut interest rates by 75 basis points this week – and not the 100 basis points the market expected – was in order to avoid fueling a falling dollar/rising commodity price spiral.
- EU to consider Beijing Olympics boycott.

- BMW AG will increase the amount of parts and services it gets in the US and Mexico, as the dollar’s decline cuts costs there. The X3, which is currently assembled by Magna Steyr AG in Austria, will be built entirely in the US from 2010 onwards. The Munich-based company is also planning to build a new plant outside the euro area.

Business Post:
- Banks prepare for legal action against hedge funds. Irish banks are lining up with regulators in Britain and Ireland, to pursue legal action against hedge funds suspected of spreading misleading information to profit from recent stock market falls. Market sources have identified at least four specialist hedge fund firms, based in London and the US, that are believed to have bet heavily on sharp declines in the share prices of British and Irish Banks. Regulators are expected to probe their trading patterns and any communications they may have had with other market participants to establish whether they were guilty of illegally manipulating share prices.

Daily Telegraph:
- A multi-billion dollar hedge fund based in London set up a “dirty tricks unit” to manipulate share prices and get illicit information on companies in an attempt to make millions in the stock market, an insider has revealed. Private detectives were allegedly employed to hack into executives’ emails and telephone records. Front companies were set up to allow the hedge fund traders to pose as independent researchers or journalists. Negative information on companies was then distributed to leading investment banks in the hope that rumors would spread and some share prices would fall. A German "media consultant" was also used to disseminate information. The hedge fund stood to make millions from “short-selling” the shares as they fell in value. The accusations about the hedge fund form the most detailed account yet of the illicit activity carried out by the London office of a major international hedge fund. Pressure is growing on the FSA to clamp down on the worst excesses of the hedge fund industry after a series of scandals culminating in the attempt this week to start a run on HBOS.

- A key House Democrat is calling for tougher and broader regulations of the financial system after the fall of investment bank Bear Stearns(BSC). Rep. Barney Frank, the chairman of the House Financial Services Committee, said in a prepared statement that, in exchange for access to lending from the Federal Reserve, the new regulator should have “enhanced tools to receive timely market information from market players, inspect institutions, report to Congress on the health of the entire financial sector and act when necessary to limit risky practices or protect the integrity of the financial system.”

The Independent:
- The hunt is one for the short-sellers who sought to profit on the collapse in HBOS share price after spreading false rumors. Patrick Buckingham, a partner at Herbert Evans who advises clients on market conduct, said: “If certain investors are adopting trading strategies that could lead to the collapse of a fundamentally sound bank, it is very worrying indeed. In this case it is actually creating systemic risk in the wider economy, all for individual gain over a very short term.” One financial market source said: “If some rogue traders destroy HBOS, a fundamentally sound business, where does it end? Will we see that move on to HSBC and Barclays?”
- Hydrogen fuel is the way ahead, say oligarch. Mikhail Prokhorov, Russia’s sixth-richest tycoon, has claimed that the UK is “missing a trick” in its search for clean energy and vowed to “invest billions” in hydrogen fuel cells.

Canadian Business Online:
- China might bar live television broadcasts from Tiananmen Square during the Beijing Olympics, apparently unnerved by the recent outburst of unrest among Tibetans and fearful of protests in the heart of the Chinese capital. A ban on live broadcasts would wreck the plans of NBC and other major international networks, who have paid hundreds of millions of dollars to broadcast the Aug. 8-24 games and are counting on eye-pleasing live shots from the iconic square.

TV Asahi:
- Heizo Takenaka, Japan’s former economy minister, said the country needs “strong” measures to revitalize its economy. Possible steps may include reducing corporate taxes, Takenaka said. The former minister also said he expects the US government to inject public funds to ease the impact of the subprime mortgage crisis.

- NTT DoCoMo Inc. may start employing the ‘Android’ mobile phone-operating system developed by Google Inc.(GOOG) by 2010.

- South Korean President Lee Myung Bak said he’s switching his main economic focus to fighting inflation instead of spurring growth after a surge in oil prices and financial-market instability.

Economic Daily News:
- Taiwan’s central bank may raise interest rates by at least .125 percentage point at its quarterly board meeting March 27 to help slow inflation.

- Brazil is studying ways to limit consumer credit in an effort to check inflation without having to raise the benchmark interest rate.

Weekend Recommendations
- Made positive comments on (RATE), (NVDA), (MS) and (BBY).
- Made negative comments on (V).

Night Trading
Asian indices are +.25% to +1.25% on avg.
S&P 500 futures +.69%.
NASDAQ 100 futures +.40%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
- (TIF)/1.21
- (WAG)/.67
- (SONC)/.15
- (AMB)/.54

Upcoming Splits
- (SWN) 2-for-1
- (STLD) 2-for-1

Economic Data
10:00 am EST

- Existing Home Sales for February are estimated to fall to 4.85M versus 4.89M in January.

Other Potential Market Movers
- None of note

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

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