Monday Watch

Weekend Headlines
Bloomberg:
- The US dollar rose the most in almost two weeks against the euro after Group of Seven officials expressed concern that swings in exchange rates will disrupt the global economy and financial markets.
- US Treasury Secretary Henry Paulson advised developing nations struggling with soaring commodity costs against using price controls because they may do more harm than good to long-term economic growth.
- Rupiah Weakens With Peso as Rice Feeds Asian Inflation Surge. Investors from Deutsche Asset Management to Fortis Investments are dumping their bondholdings on concern inflation will erode returns, putting further pressure on exchange rates. International investors cut their holdings of Indonesian government bonds 3.2% in March to $8.8 billion. Foreign funds sold a net $154 million of stocks in the Philippines this year, helping drive the Philippine Stock Exchange down 19.4%.
- Corn and soybeans fell on speculation that dry, warm weather next week in the US Midwest will firm soggy fields enough to run farm machinery for spring planting. “It’s been a terrific spiral higher, so it’s time to take some money out of the market,” said Robert Lekberg, a market analysts for Penson GHCO in Chicago.
- President Bush said there’s enough progress in Iraq that US forces can begin to move into an “overwatch” rose as the Iraqis take more responsibility.
- Democratic presidential candidate Barack Obama said he used the wrong words earlier this week to describe the plight of rural, impoverished Americans, remarks that rivals Hillary Clinton and John McCain assailed as condescending. “It’s not surprising then they get bitter, they cling to guns, or religion, or antipathy to people who aren’t like them, or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations,” Obama said, according to an audio recording on the Huffington Post Web site.
- China will stick with a “tight” monetary policy as the nation faces increasing pressures of inflation and over-investment amid global market turmoil, said central bank chief Zhou Xiaochuan.
- Australian home-loan approvals unexpectedly fell by the most in four years in February, adding to evidence the central bank’s four interest-rate increases in seven months are slowing the economy.

Wall Street Journal:
- Wachovia Corp.(WB), the fifth largest US bank, may announce as soon as tomorrow it’s getting a capital infusion of as much as $7 billion from an investor group. The group, which may include private equity firm Warburg Pincus LLC, would give Wachovia $6 billion to $7 billion in return for shares priced at about $23 or $24.
- Deutsche Bank AG, seeking to unload high-risk debt, is selling as much as $20 billion in leverage buyout-related debt to private equity firms and other investors. It’s in discussions with Blackstone Group, Apollo Management, TPG Inc. and Sankaty Advisors, the debt-investing affiliate of Bain Capital.

Barron’s:
- Passport Capital LLC, Goodman & Co. and Paulson & Co. each marketed hedge funds that reported three-year annualized returns of more than 50% to claim the top spots among Barron’s 75 best hedge funds in the world. Balestra Capital Partners LP and Renaissance Technologies rounded out the top five.

CNBC.com:
- US gasoline supplies should start the summer driving season at their highest level since 1999, helping to temper a surge in pump prices linked to the soaring cost of crude oil. The EIA expects this year’s summer gasoline demand in the US to shrink for the first time in 17 years.

SmartMoney.com:
- Good Time to Go Bottom-Fishing for Telecoms.

NY Times:
- Yahoo Inc.(YHOO), under pressure to accept Microsoft’s(MSFT) bid, plans to meet next week with the world’s largest software maker as well as Time Warner(TWX).
- High fuel prices, the slowing US economy and weak dollar and flight cancellations aren’t keeping people from traveling within and to the US.
- Wall Street is starting to recognize the potential value of limits on carbon emissions on stock prices as the US government considers regulations for power companies. If the caps become law, nuclear power plants, which don’t emit carbon, will be the winners and coal-burning facilities will be the losers.
- At CBS(CBS), Bad News Doesn’t End at 7. No new hit has emerged this year in the network’s prime-time schedule, which makes CBS likely to lose the crown of most-watched network to the Fox network.

IBD:
- Credit Markets See Improving Liquidity, Despite GE Shortfall.

TheStreet.com:
- Gold Is Going to $750. (video)

Dow Jones:
- Diverging trends within global oil markets may start to play out during coming months, which could undermine oil prices, according to a senior official from OPEC. Concerns about a mismatch between strong demand and struggling supply “did not materialize,” and indeed the sharp spike in oil prices over the last six months is more attributable to the decline of the US dollar and adjustments in investment portfolios to hedge against inflation risks, the official said. Supply from non-OPEC countries plus OPEC natural gas liquids and non- conventional oil could top 1.4 million barrels a day in 2008, which is above the expected demand growth of 1.2 million barrels a day this year. Demand could be slower, depending on how fast the global economy slows, he said. Scheduled refinery maintenance in the second quarter is expected to be around 500,000 barrels a day, compared with refinery outages totaling 1.5 million barrels a day last year, and ethanol production is set to increase by 150,000 barrels a day, he said. “These developments indicate that product markets this year should be less supportive of crude oil prices than in previous years,” he said.

NCGA:
- A study released today by Texas A&M’s Agricultural and Food Policy Center illustrates corn prices have had little to do with rising food costs. The report, “The Effects of Ethanol on Texas Food and Feed” also determined that relaxing the Renewable Fuels Standard would not result in lower corn prices for livestock and poultry feeders. The study points to higher oil prices as the underlying force impacting consumer prices and agriculture.

redOrbit:
- Solar Power and Wind Energy Battle for Supremcy.

Rutland Herald:
- General Motors’(GM) leading proponent of hydrogen fuel-cell vehicles will challenge the energy industry and governments to commit to developing a public hydrogen fueling infrastructure when he addresses the National Hydrogen Assoc.’s annual conference in Sacramento, Calif., Wednesday.

Business Week:
- One Place for Your Many Online Lives. FriendFeed is tearing down the walls between Web haunts such as Facebook, YouTube, Flickr, etc.

TwinCities.com:
- One ray of light in the nation’s foreclosure crisis is a short-term interest rate most Americans have never heard of. It’s the London interbank offered rate, or Libor, and it’s been falling, tossing a little badly needed water on the powder keg of “exploding ARMs.” That’s good news for tens of thousand of US homeowners because the Libor determines how high the introductory teaser rates on many subprime adjustable rate mortgages jump when their interest rates reset for the first time.

CNNMoney.com:
- Don’t forget Google!(GOOG) With all the hullabaloo about who is wooing Yahoo, it’s easy to forget an undeniable fact: Google is still the best way to cash in on the growth of online advertising. To be sure, Google's paid click volume, which measures how many times people click on sponsored ads, actually fell in January and was only up 3% in February, according to reports from research firm comScore. But a focus on just this number is incredibly short-sighted. comScore has conceded that one reason for the slowdown is that Google is doing a better job of getting rid of low-quality ads that do nothing more than boost click counts but don't really lead to added sales. What Google is attempting to do is reduce the number of ads on its site so it can actually generate more revenue per click. And that's what is really important - increasing the relevance and effectiveness of search ads should translate to higher ad rates and more revenue and profits for Google.
- BMW’s new baby. With the 1 series, BMW achieves outsized performance from the lowest-priced BMW on the market.

Reuters:
- Jimmy Carter says he likely will meet with Hamas.
- Clinton tours working-class area, blasts Obama. Democratic presidential hopeful Hillary Clinton toured a working-class neighborhood on Sunday to stress her blue-collar background and kept up the attack on rival Barack Obama’s remarks about small-town voters.
- High commodity prices? Blame Wall St. “The ugly truck is that the securitization of commodities has eased the way for money flows to raise commodity prices beyond that which the current fundamentals of the global economy can sustain over the long-term,” Michael Frankfurter, a fund manager at California’s Cervino Capital, said. Industry observers cite huge fund inflows into commodities as a reason for such rises. The surge of such funds, often called speculative or hot money, has led to high prices in everything from gasoline to bread and clothing, enraging consumers around the world. “There is an orgy of speculation in futures markets,” US Senator Byron Dorgan told Congress last week. “This is a 24-hour casino with unbelievable speculation.”

Financial Times:
- Delta Air Lines(DAL) may announce a merger with rival Northwest Air(NWA) to create the world’s largest carrier as soon as tomorrow.
- Lehman Brothers(LEH) is planning up to $1 billion in a private equity-style fund that it is launching to buy stakes in hedge fund managers ahead of a predicted wave of fund takeovers.
- Media accused of bias against Clinton. The US media have abandoned all pretence at neutrality in the Democratic presidential contest and are heavily biased towards Barack Obama and against Hillary Clinton, according to Ed Rendell, the governor of Pennsylvania.

Daily Mail:
- Leading Icelandic bank Kaupthing has taken the extraordinary step of accusing four London hedge funds, including one of the largest in Europe, of illegally trying to drive it towards bankruptcy for their own profit. In what looks likely to lead to a massive legal showdown in financial markets, the bank, which has attracted billions from UK savers to its Kaupthing Edge accounts, claimed the hedge funds deliberately spread false rumors about financial difficulties at Icelandic banks to make profits on complex financial instruments. The claims of deliberated market abuse center on the market for credit default swaps, which in effect are insurance contracts against companies going bust. These claims come less than a month after UK bank HBoS saw its shares slump, leading to claims of conspiracy – the accusations are being investigated by the FSA.

Tages-Anzeiger:
- Credit Suisse Group may write down about $4 billion in the first quarter and post a loss of between 1 billion and 2 billion francs, citing its own research.

SonntagsZeitung:
- UBS AG CEO Marcel Rohner said the Swiss bank is no longer at its lowest point in the fallout from the global credit crisis. “We’ve made enormous progress in coping with the crisis,” Rohner said. “We are in the final stage of this episode.”

Panorama:
- Silvio Berlusconi, a prime minister candidate for Italian elections that start tomorrow, criticized the European Central Bank for allowing the euro to become too strong. “It’s clear that something is wrong with the interest-rate policy of the ECB. It’s time to give politicians more power because it’s unthinkable that bankers decide the destiny of 400 million Europeans,” he said.

China Securities Journal:
- The US slowdown may cost China 1 percentage point of economic growth by reducing demand for Chinese-made goods, citing Fan Gang, an adviser to the Asian nation’s central bank. Growth in China’s exports to the US will drop 5 percentage points for every 1 percentage-point slowdown in expansion in the world’s biggest economy, he said.

Xinhua:
- The resolution on Tibet passed by the European Parliament on Thursday has rudely interfered into China’s internal affairs and seriously hurt the feelings of the Chinese people, said Foreign Ministry spokesperson Jiang Yu Friday night.
- The number of people in China defined as impoverished may double to 80 million under a government plan to bring the poverty threshold in line with international standards.

Weekend Recommendations
Barron's:
- Made positive comments on (GE), (AMAT) and (VLO).

Citigroup:
- Maintined Buy on (PII), target $56.

Night Trading
Asian indices are -2.50% to -.50% on avg.
S&P 500 futures +%.
NASDAQ 100 futures +%.

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Earnings of Note
Company/Estimate
- (ETN)/1.66
- (GWW)/1.36
- (SCHW)/.26
- (JBHT)/.30
- (INFY)/.54
- (BLK)/2.01

Upcoming Splits
- (CHDX) 3-for-2

Economic Data
8:30 pm EST
- Advance Retail Sales for March are estimated unch. versus a .6% decline in February.
- Retail Sales Less Autos for March are estimated to rise .1% versus a .2% decline in February.

10:00 am EST
- Business Inventories for February are estimated to rise .6% versus a .8% increase in January.

Other Potential Market Movers
- The Fed’s Warsh speaking and (ACOR) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are sharply lower, weighed down by retail and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.