Monday, August 11, 2008

Tuesday Watch

Late-Night Headlines
Bloomberg:
- The US dollar traded near a 5 1/2-month high against the euro on speculation tumbling commodity prices will give a boost to the world's largest economy. The Australian dollar slid for an 11th day, its longest losing streak since at least 1975, and New Zealand's currency declined to an 11-month low as prices of raw materials the nations export declined. Raw materials account for 60 percent of Australia's exports, while sales of commodities including lumber make up 70 percent of New Zealand's overseas shipments. ``The trend is for commodities to weaken and the dollar to strengthen,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``We clearly have weaker growth outside the U.S.,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut, in an interview on Bloomberg Television. ``That's enough for the dollar to sustainably gain ground.''
- Short interest on the NYSE fell 1.47% from a record over the last two weeks of July to 18,337,000,000 shares.
- New NYSE Short-Selling Targets. Here are the 25 NYSE stocks with the largest increase in short interest relative to their floats over the last two weeks of July:
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Gold plunged to the lowest in more than seven months as the dollar gained against the euro, reducing the metal's appeal as an alternative investment to assets denominated in the U.S.08 at 9:57 a.m. Singapore time. currency. Gold fell to $802.34 an ounce, the lowest since Dec. 21, and 22 percent below its March 17 record of $1,032.70 an ounce. The metal traded at $807.
- With Russia's superior army overwhelming parts of Georgia, French President Nicolas Sarkozy will fly to Moscow today to try to persuade the government to end its first foreign offensive since the Cold War.
- Mexican copper production may rise 8.4% this year as capacity increases more than make up for a strike at the country’s largest copper mine, an industry group said. Output may climb to 350,000 metric tons from 323,000 tons last year, said Sergio Almazan, director of Mexico’s Mining Chamber of Commerce. Production of the metal used in pipes and wires may rise to 420,000 tons next year should Grupo Mexico restart Cananea. Mexico will reclaim its spot as the world’s largest silver producer in 2010, surpassing Peru, when Goldcorp’s Penasquito mine reaches full capacity, Almazan said. Gold output may more than double to 100 tons in 2010 as Coeur d’Alene Mine’s Palmarejo and other mines start operating, Almazan said.
- Carl Icahn's hedge funds lost 9.1 percent in the second quarter on losses of $773 million from investments in companies such as Yahoo! Inc.(YHOO) and Motorola Inc.(MOT) The funds had net investor withdrawals of $166 million during the quarter, according to a filing today with the U.S. Securities and Exchange Commission.
- Australian credit-default swaps led the cost of Asia-Pacific default protection lower on speculation the nation's banking sector is more resistant to losses from credit-market writedowns. The Markit iTraxx Australia index of credit-default swaps fell 5.5 basis points to 139.5 as of 1:17 p.m. in Sydney, JPMorgan Chase & Co. prices show. Japan's main index declined 2 to 118, Morgan Stanley prices show, and contracts in the rest of Asia also fell. Asia's index of 50 investment-grade borrowers outside Japan, including the Thai government and Hong Kong's Hutchison Whampoa Ltd., fell 3 to 142 and the region's benchmark of high-risk, high-yield borrowers declined 5 to 550, BNP Paribas prices show.
- Morgan Stanley(MS) had its long-term credit rating lowered by Moody's Investors Service, which cited the second-biggest U.S. securities firm's failed risk-management practices.
- U.K. house prices fell in July as the squeeze on credit locked out buyers and brought the property market to a ``virtual standstill,'' the Royal Institution of Chartered Surveyors said. The number of real-estate agents and surveyors saying prices dropped exceeded those reporting gains by 83.9 percentage points, the group said today in London. The reading was 94.7 percentage points in April, the most since the series began in 1978.

- LDK Solar Co.(LDK), a Chinese maker of silicon wafers used in solar cells, said second-quarter profit increased more than fivefold, beating estimates, as it expanded output faster than expected. LDK shares jumped 19.7% in extended trading.
- Gilead Sciences Inc.(GILD) won U.S. approval to sell Viread, the oldest of its AIDS medicines, as a treatment for chronic hepatitis B. Worldwide sales may grow to $810 million next year from an expected $600 million this year, according to Joel Sendek, an analyst at Lazard Capital Markets in New York.

Wall Street Journal:
- Oil Goes to the Bears. Just weeks ago the fragile commodities markets could be sparked ahead by a mere hint of bad news. That market psychology has reversed, with Monday's action showing that even war can't halt oil's current retreat. Inside the commodity-trading pits and brokerage houses, the conversation isn't whether prices are pulling back in the near term, but how far and for how long.

MarketWatch.com:
- How low can you go? Some gold timers still haven’t thrown in the towel, which is a bad sign for gold bugs.
- Amazon’s(AMZN) Kindle could be next iPod, analyst says. Citigroup doubles sales target for e-reader, predicting strong holiday demand.

CNNMoney.com:
- One month after its debut, Apple's new iPhone has hit the 3 million sold mark, according to analyst Michael Cote of the Cote Collaborative. "They are seeing unprecedented demand," says Cote, adding that there appears to be no signs of a let up yet. Cote, a former T-Mobile executive, has been extremely accurate with wireless predictions in the past. The 3 million figure is much higher than Wall Street analysts had anticipated. Forecasts called for total quarterly sales of three million to four million.
- The shorts are back. Effective Wednesday, naked short selling is fair game once again in the banking sector. Some experts have argued that the SEC needs to bring back the so-called uptick rule, which prohibits an investors from shorting a stock except when its price is moving higher to prevent massive selloffs, or "bear raids," on a stock. Last year, the rule was repealed. Any changes, however, would also likely meet with much resistance from Wall Street as well as the hedge fund community, which relies on short selling, in part, to help produce the outsized returns they have become famous for. Last month, the Managed Funds Association and the Coalition of Private Investment Companies, which represent hedge funds and other asset managers, warned the SEC that any permanent changes would not only limit legitimate short selling but also give an inaccurate representation of the real price of a stock.
- Steve Jobs: 60 million iPhone apps downloaded.

- As China makes big moves to break into the first world, US companies that manufacture there face soaring costs in a region that used to be the home of cheap, outsourced production. Here’s why prices have jumped – and how 4 small companies are being crunched.
- Gas price decline: Day 25. Gas falls to $3.81/gallon.
- Demand for high-level job talent is surprisingly robust, especially for senior managers who are willing to move.

USA Today.com:
- Study: Health costs seen rising, but smallest growth in years.

Reuters:
- Short interest rose sharply in shares of banks not included in the U.S. Securities and Exchange Commission's emergency rule to curb abusive short-selling.
- Billionaire investor Carl Icahn reported on Monday that he owns a 6.03 percent stake in the common stock of biotechnology company Biogen Idec Inc (BIIB). Icahn said in a filing with the U.S. Securities and Exchange Commission that he increased his stake "in the belief that the shares were undervalued." He said his funds may acquire additional Biogen shares, debt or other equity.
- Singapore Telecommunications, Southeast Asia's largest telecoms firm, will launch Apple Inc's (AAPL) third-generation iPhone in Singapore on Aug 22, the company said on Tuesday.


Financial Times:
- JPMorgan Chase(JPM) provided evidence of more turbulence in financial markets, warning that stormy credit conditions had forced it to take a $1.5bn writedown on mortgage-backed assets in July.
- Institutional investors expect another big financial firm will collapse within the next six months in the continued fallout from the credit crunch, new research has shown. Nearly 60 per cent of US and European institutional investors surveyed by Greenwich Associates believe there will be such a failure within the next six months. Another 15 per cent think it will happen in six-12 months. Nearly 80 per cent of institutions said banks had tightened margins or collateral requirements in the last year.

- The fighting between Russia and Georgia over the separatist enclave of South Ossetia appeared to ignite in a sequence of improvised if macho moves, fuelled by overblown rhetoric on both sides, overbidding by Tbilisi and overreaction by Moscow. But Russia - in this conflict manifestly led by the prime minister Vladimir Putin rather than Dmitry Medvedev, his successor as president - needs to consider very carefully where its wholly disproportionate action is going to leave Russia's standing in the world.

The Independent:
- In what could be the biggest ever payday for a public company executive, Fortress Investment Group(FIG), the hedge fund manager which floated in New York last year, has given one of its star traders more than $300 million to stay at the firm. Wall Street is agog at the revelation that Adam Levinson, 38, who runs one of the main funds for Fortress, has been handed a giant slug of new shares in the firm, giving him a stake of up to 7 per cent and diluting the power of existing shareholders. The award comes despite disappointing returns from his global macro fund so far this year, one of the hardest on record for the hedge fund industry. It also comes as Fortress shares languish at their all-time lows, having lost more than two-thirds of their value since they began trading in February 2007.

China Times:
- Taiwan’s consumption of energy for transportation purposes fell by a record 3.7% in the first half of the year, citing Bureau of Energy Deputy Director General Wang Yunn-ming. Individuals and government agencies have taken steps to save energy because of surging oil costs.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (TWTC), target $20.

Night Trading
Asian Indices are -.50% to +25% on average.
S&P 500 futures -.10%.
NASDAQ 100 futures -.04%.

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
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Top 25 Stories

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Today in IBD
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Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (EBIX) 3-for-1
- (TWI) 5-for-4

Upcoming Splits
- None of note

Economic Releases
8:30 am EST

- The Trade Deficit for June is estimated to widen to -$62.0 billion versus -$59.8 billion in May.

2:00 pm EST
- The Monthly Budget Deficit for July is estimated to widen to -$90.0 billion versus -$36.4 billion in June.

Other Potential Market Movers
- The (FEIC) investor meeting, (SIG) investor day, weekly retail sales reports, IDB/TIPP Economic Optimism Index, UBS Engineering & Construction Conference, EnerCom Oil & Gas Conference, CSFB Tech Communications Conference, CanaccordAdams Growth Conference and Keefe Bruyette Woods Bank Conference could also impact trading today.

BOTTOM LINE: Asian indices are slightly lower, weighed down by commodity shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

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