Weekend Headlines
Bloomberg:
- Treasury Secretary Henry Paulson put the weight of the federal government behind Fannie Mae(FNM) and Freddie Mac(FRE), the beleaguered companies that buy or finance almost half of the $12 trillion of U.S. mortgages.
- SEC to Probe Manipulation Through False Information. Wall Street's biggest regulators are examining whether securities firms adequately police rumor- mongering used to manipulate stocks after shares of Lehman Brothers Holdings Inc.(LEH), Fannie Mae(FNM) and Freddie Mac(FRE) tumbled last week. U.S. regulators are already hunting for traders who may have sought to illegally profit from the credit crisis by falsely stoking panics about the stability of companies including Bear Stearns Cos.(BSC), which collapsed in March amid speculation that clients were pulling business. Finra and NYSE Regulation will join the SEC in examinations in addition to those already under way into manipulation of securities prices through rumor-mongering and abusive short selling, the SEC said. Finra and NYSE rules bar their members from spreading ``sensational'' rumors that can affect markets, even if people aren't using them to defraud.
- Short selling of Fannie Mae(FNM) and Freddie Mac(FRE) jumped last month before a slide in the stocks accelerated on concern that shareholders would be wiped out even if the government rescues the firms. The stocks have each tumbled at least 75 percent so far this year, reaping profits for those traders who bet on a drop. Short interest on McLean, Virginia-based Freddie Mac rose 22 percent to 82.8 million shares since May 30, according to data compiled by Bloomberg. Short interest on Washington-based Fannie Mae was 138.7 million shares at the end of June, up 7.5 percent.
- Fannie Mae(FNM) and Freddie Mac(FRE), the largest providers of U.S. mortgage financing, are in a ``sound situation,'' said Senator Christopher Dodd. ``They have more than adequate capital, in fact more than the law requires,'' Dodd, a Connecticut Democrat who is chairman of the Senate Banking Committee, said on CNN's ``Late Edition'' today. ``They have access to capital markets. They're in good shape.'' ``To suggest somehow they're in major trouble is not accurate,'' Dodd said.
- Commodity Investments Advanced 19% Last Quarter, Barclays Says. Commodity assets under management rose 19 percent to $270 billion in the second quarter, Barclays Capital said. Investment related to commodity indexes advanced 26 percent to $175 billion, the bank said in a report e-mailed late yesterday. Investments in commodity-linked medium-term notes and exchange-traded products climbed about 10 percent to $50 billion and $45 billion respectively, Barclays Capital said.
- The US dollar gained against the yen and snapped a three-day decline versus the euro after U.S. Treasury Secretary Henry Paulson asked Congress for the authority to buy shares of Freddie Mac(FRE) and Fannie Mae(FNM).
- Pimco’s Bill Gross Likes the US Dollar More Than Euro for 1st Time. For three years euro bulls used the prospect of higher interest rates in Europe to justify the currency's 31 percent rally against the dollar. No more. The euro is 30 percent overvalued versus the dollar, based on purchasing power parity, according to Newport Beach, California-based Pimco. That's more than any other currency among the Group of 10 richest nations.
- Crude oil fell for the first time in four days in
- Oil Brings US Closer to OPEC Dependence, Replacing Japanese. ``It's a net transfer of wealth from the United States to the oil exporting economies on a very, very significant scale,'' said Brad Setser, an economist with the Council on Foreign Relations and former acting director of the Treasury's Office of International Monetary and Financial Policy.
- AT&T Inc.(T) stores have mostly emptied out of inventory of Apple Inc.'s(AAPL) new iPhone in the U.S. two days after thousands lined up to buy the handset.
- Yahoo! Inc.(YHOO) rejected a proposal from Microsoft Corp.(MSFT) and billionaire investor Carl Icahn that would have broken up the Internet company, saying they were trying to ``coerce'' officials into selling assets.
- Israeli Prime Minister Ehud Olmert said a peace agreement with the Palestinians is closer than ever.
- Microsoft Corp.(MSFT), the world's largest software maker, will triple the storage capacity of its Xbox 360 video-game console to compete with market leaders Nintendo Co. and Sony Corp. The Xbox 360, with a suggested retail price of $349, will have 60 gigabytes of storage starting in early August at stores in the U.S. and Canada, the company said today in a statement. Microsoft will drop the price of its 20-gigabyte machines to $299 ``while supplies last,'' it said.
- InBev NV agreed to buy Anheuser- Busch Cos.(BUD) for $49.9 billion to become the world's biggest brewer, the Wall Street Journal reported, citing unidentified people familiar with the situation. The $70-a-share takeover of St. Louis-based Anheuser-Busch is the second-biggest of a U.S. consumer-goods company and ends a month of court fights and public disputes over the future of the 156-year-old maker of Budweiser.
- Prices at China's factories are rising faster than those on store shelves for the first time in more than a year. Data due this week will show the margin is widening, analysts say. ``If higher costs cannot be fully passed on to final consumers due to price controls and fierce competition among downstream players, earnings growth for industrial players may continue to slow,'' China International Capital Corp. said in a report last week. ``However, CPI inflation may be driven up further if the manufacturers manage to gradually pass on upstream costs,'' the report from Beijing said.
- The risk companies in Australia will default on their bonds fell by the most in three months after U.S. Treasury sought authority from Congress to buy unlimited stakes in the nation's two largest mortgage financers. ``The announcement is a very positive development for the credit markets, given the U.S. government's support to the government sponsored enterprises,'' Deutsche Bank AG analysts led by Gus Medeiros wrote in a research note today. Credit-default swap indexes in Australia and the rest of Asia will ``see a positive reaction in the next few days'' because of the region's ``high holdings'' of Fannie Mae and Freddie Mac debt, Medeiros wrote. The Markit iTraxx Australia Series 9 Index declined 15.5 basis points to 143.5 at 10:29 a.m. in Sydney, according to Citigroup Inc. prices. The index, which drops as perceptions of credit quality improve, fell by the most since April 2. Japan's benchmark fell 7 basis points to 133, the lowest since June 26, Morgan Stanley prices show.
CNBC.com:
- IndyMac Bancorp has been shut down and its operations will be taken over by the Federal Deposit Insurance Corp., the regulator that oversees the retail bank said. A successor institution, IndyMac Federal Bank, will open for business on Monday. "The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Democratic Senator Charles Schumer of New York [that] ... expressed concerns about IndyMac's viability," the agency said. In the 11 business days following Schumer's letter, depositors withdrew more than $1.3 billion from their accounts, the OTS said.
- More Merrill(MER) Assets May Be Up For Sale.
NY Times:
- Democratic Representative Charles Rangel, chairman of the US House committee that determines tax law, called the agreement that gives him four rent-controlled apartments in NY fair. Rangel paid $3,894 per month for the four apartments last year, compared with the current advertised rate of between $7,465 and $46,125 each month. Rangel said he would consider giving up one of them, which he sues as a campaign office, if that violates state and city laws forbidding rent-regulated apartments from being used for anything other than a residence.
- The Bush Administration May Increase the Pace of Iraq troop Pullout. The administration is considering the withdrawal of additional
- Long Protected, Fannie and Freddie Ballooned. As the Bush administration scrambles to address the sudden decline of the country’s two largest mortgage finance companies, some of their longtime critics say the crisis has been building for years.
EE Times:
- Apple(AAPL) iPhone 3G Teardown Exposes Winners and Losers.
Statesman.com:
- Semiconductor firms bask in solar’s rise. Solar’s growth potential, production similarities have chip makers seeking their place in the sun.
- Pakistan’s new civilian government wants a “partnership” with the US and is looking for signs that the Bush administration is serious about increasing aid and supporting democracy there, Foreign Minister Shah Mahmood Qureshi said.
- Treasury Department officials were working the telephones yesterday to make sure that Freddie Mac(FRE), one of the nation's two troubled mortgage giants, will be able to sell $3 billion of its securities tomorrow in a previously scheduled sale that has now become a crucial test of investor confidence.
- The number of homeowners facing an increase in their subprime adjustable-rate mortgage payments will peak this summer. Nationally, the number of subprime adjustable-rate loans resetting peaked at 7.61% of the loans outstanding last month, according to data from CoreLogic.
Seeking Alpha:
- Housing: Barron’s Calls a Bottom.
CNNMoney.com:
- Bottom Line: iPhone sales projections roll in.
Reuters:
- If the market thinks it will happen, it likely will. Say what you want about the irrationality of financial markets, but by virtue of their sheer size, what they believe does matter. If the mass market thinks something will happen, fundamentals can be bullied into fulfilling their prophecy. Remember what happened to Bear Stearns(BSC). Capital is only as adequate as the market believes it is. At Friday's intraday lows, Freddie had plunged 73 percent and Fannie had tumbled 64 percent in a week. It's natural for some to think that such a vicious sell-off has an element of capitulation, the Wall Street buzzword for the bell that rings at the bottom.
- High gold price swells ranks of illegal miners. Poor men and women in Ghana, ex-militia fighters in steamy eastern Congo and farmers in Peru are among those joining the ranks of illegal miners and risking their lives as they seek to profit from soaring gold prices. As a new gold rush spreads to the world's remotest corners, the face-off between illegal, small-scale miners and multinational firms has cost millions of dollars and claimed lives.
- U.S. authorities assured success for Freddie Mac's closely-watched debt offering after the U.S. Treasury and Federal Reserve announced sweeping plans to support the ailing company and its rival mortgage finance company Fannie Mae, Wall Street investors said on Sunday.
- US May machine tool off from April, up from year ago. Demand for the machine tools that shape metal for products such as car engines and refrigerators fell in May from April but was up from a year ago, two groups said in a joint report on Sunday.
Financial Times:
- FedEx(FDX) is in preliminary talks to acquire TNT, its smaller Dutch rival, in a deal that would bolster the package-delivery company’s parcel network throughout Europe.
- Oil at $140-plus has changed all aviation realities. While Emirates remains one of the more optimistic airlines, the overall view of our industry is dire. This year many airlines have grounded aircraft or gone bankrupt and an estimated 100,000 jobs will be cut. Some environmental ideologists would applaud this loss - but aviation, on which almost 33m jobs and 7.5 per cent of global gross domestic product depend, is vital for the world's economic future. This truth is too often lost in countries where environmental arguments have escaped all reason. We are in uncharted territory. This is the greatest crisis in aviation's history - bigger than the Gulf wars, the attacks of September 11 2001, severe acute respiratory syndrome and past oil shocks.
- The head of Mexico's intelligence service has warned that the country's democratic institutions, including the national Congress, are under threat from powerful drugs cartels.
- Hot money poses risks to China’s stability. Hot money is notoriously unstable and even more notoriously procyclical. When the economy is growing, or even overheating, inflows are likely to increase net investment and add even more fuel to the economic engine. But when conditions change and the economy begins to slow or the country face financial risks, hot money is likely to flee the country, exacerbating the very conditions it is fleeing.
Ekho Moskvy radio:
- OAO
Nikkei:
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Xinhua:
- Growth in
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Weekend Recommendations
Barron's:
- Made positive comments on (XEC), (QCOM), (NDAQ), (DEO) and (AACC).
Citigroup:
- Upgraded (GENZ) to Buy, target $91.
- Reiterated Buy on (PII), target $49, added to Top Picks Live list.
Night Trading
Asian indices are -.75% to +1.0% on avg.
S&P 500 futures +.90%.
NASDAQ 100 futures +.92%.
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