Late-Night Headlines
Bloomberg:
Default protection costs on Japanese corporate bonds rose, matching the record set last month, after the government said exports declined at the fastest pace in almost seven years. The Markit iTraxx Japan index of credit-default swaps traded 35 basis points higher at 330 as of 9:47 a.m. in Tokyo, matching the Oct. 27 record, according to prices from Credit Suisse Group AG. The iTraxx Australia index climbed 27.5 basis points to 345, Citigroup Inc. data show.
- Lead smelters in China, which accounts for about a third of global demand, are idling plants after battery makers slashed purchases, Xinling Refining Co. said. ``Most lead smelters have cut production or totally shut plants,'' He Yonggang, manager at Henan province-based Xinling Refining, said in an interview in Zhengzhou. Xinling has idled 60 percent of its 100,000 metric-tons capacity, he said. ``No one can tell when the market will recover.''
- Crude oil fell for a fifth day, trading near a 22-month low. U.S. fuel use during the past four weeks averaged 19.1 million barrels a day, down 7 percent from a year ago, an Energy Department report said yesterday. U.S. fuel demand fell 5.2 percent in the first 10 months of this year, the biggest drop since 1981, the American Petroleum Institute said in a report yesterday.
- U.S.
- Goldman Sachs Group Inc.(GS) closed at its lowest price since the firm first sold shares for $53 apiece to the public in 1999, as the profit outlook darkens for a company that set a record for Wall Street earnings last year. The stock fell $6.85, or 11 percent, to $55.18 in New York Stock Exchange composite trading, giving the company a market value of $26 billion. The New York-based firm's value reached a high of $105 billion, or $248 per share, on Oct. 31, 2007.
- Warren Buffett's Berkshire Hathaway Inc.(BRK/A) fell the most in at least 23 years, dropping for the eighth straight day since reporting a 77 percent decline in third- quarter profit. The stock plunged $11,550, or 12 percent, to $84,000 in New York Stock Exchange composite trading and has slipped 41 percent this year. Berkshire shareholders including Mohnish Pabrai, head of Pabrai Investment Funds, have said investors are concerned about losses on the company's $37 billion bet on world equity values more than a decade from now. Buffett sold contracts to undisclosed counterparties for $4.85 billion protecting the buyers against declines in four stock indexes including the S&P 500. Under the agreements, Berkshire will pay as much as $37 billion if, on specific dates beginning in 2019, the indexes are below the point where they were when he made the agreements. By Sept. 30, Berkshire had written down the contracts by $6.73 billion as the S&P declined for a fourth straight quarter. The cost to protect against Berkshire being unable to meet its debt payments, based on credit-default swaps, has more than tripled in two months. The swaps jumped to 475 basis points today from 129 points two months ago, according to CMA Datavision.
- Bill Clinton has sent President-elect Barack Obama’s transition team a list of more than 200,000 donors to his foundation, according to a Democrat familiar with the process, the latest sign both sides are trying to clear obstacles to Hillary Clinton’s possible nomination as U.S. secretary of state. The list of contributors ranges from those who gave a few dollars to wealthy foreign leaders and business people who donated multimillion-dollar gifts, the Democrat familiar with the matter said. If Hillary Clinton were to become secretary of state, her husband might decide to unwind his investments as the Clintons promised he would do if she were elected president. These include three Cayman Islands investment entities that Clinton joined through Yucaipa Cos. LLC, a company controlled by California billionaire Ron Burkle. Dubai Investment Group, an investment vehicle of the ruler of Dubai, Sheikh Mohammed bin Rashid al-Maktoum, has been among the partners with Burkle and Clinton in the Cayman Islands. During the primary campaign, Matt McKenna, a spokesman for Bill Clinton, said that, while the former president hadn’t then “severed ties” with Yucaipa, he “is taking steps to ensure” that “there will be an appropriate transition for those relationships” if his wife won the Democratic presidential nomination. Clinton’s office and a spokesman for Yucaipa would not say today if he has withdrawn from his Yucaipa involvement.
- Copper, the worst-performing metal since the commodities market crashed in July, may plunge to less than $1 a pound next year as global inventories swell, according to David Threlkeld, president of metals trader Resolved Inc. China The trader first got the world’s attention in 1996 when he showed that copper hoarding by Sumitomo Corp.’s Yasuo Hamanaka would lead to a collapse4, and he’s studied the market for 40 years. Copper production exceeded demand by 26,800 metric tons this year through September, the World Bureau of Metal Statistics said yesterday. Inventories monitored by the LME have more than doubled in the past six months and are at the highest since March 2004.
- The US The Fed will lower borrowing costs by 50 basis points at each of the next two policy meetings on Dec. 16 and Jan. 28, JPMorgan economist Michael Feroli wrote.
Wall Street Journal:
As Detroit's auto makers seek a government bailout, the resilience of their foreign rivals could vault the South to the forefront of the U.S. car industry. Foreign makers have been lured to South Carolina, Alabama and other Southern states over the past decade by generous tax benefits and laws that make it easier to build a largely nonunion work force. Michigan and Ohio are still dominant centers of U.S. vehicle making, producing more than 38% of all cars and trucks in 2007, but Southern states are making gains as foreign car makers add more plants in that part of the country. Four Southern states were responsible for 24% of U.S. production last year, according to Automotive News, a trade publication.
- The effort to overhaul the nation's health system will begin next year with one clear advantage over previous attempts: A wide variety of interest groups are rooting for it to succeed rather than plotting to kill it. That is a stark contrast to the last big health-care initiative in the early 1990s, when many of the same groups helped block any major change. In addition, Barack Obama's choice of Tom Daschle, a former Senate Majority Leader, as Secretary of Health and Human Services, puts a skilled navigator of Capitol Hill in charge of the president-elect's bid to establish universal health care, which he has made a top priority.
MarketWatch.com: The federal government announced plans Wednesday to modify a program to make it easier for troubled homeowners to exchange problematic mortgages for more inexpensive ones. The new expedited regulations will expand on the Housing and Urban Development Department's Hope for Homeowners program.
The changes will give lenders a greater incentive to participate, by allowing them to write off less of the loan value than under the previous rules.
BusinessWeek:
- Auto Bailout: Seeking Signs of Sacrifice. House members push for workers to give up some pay and benefits, and ask why executives still don’t seem to get the need for change.
USA Today.com:
- Ford Motor(F) will announce Wednesday that it plans to beat Toyota (TM) at its own game when it comes to hybrids. It's the latest example of U.S. automakers trying to "out-hybrid" Japanese brands that had a head start with the gas savers. Also today, South Korea's Hyundai is expected to announce that in two years it will market its first U.S. hybrids. They will use a revolutionary lithium polymer battery that the company boasts will hold 20 times the charge in half the size of rivals' present hybrid batteries.
Reuters:
- Merck & Co Inc (MRK) expects competitive earnings growth from 2010 through 2013 despite challenges facing its products and looming patent expirations of important medicines, Chief Executive Richard Clark said on Wednesday. Clark said he is interested in acquiring late-stage products next year, which could be more affordable as biotechnology companies face a cash crunch from the weak economy. He also expressed confidence in medicines being developed internally.
- After decades of solid economic growth, China is battling an unknown as falling demand for its products triggers factory closures, sparks protests and raises fears of popular unrest.
Financial Times: With stock market volatility running close to all-time highs, trading equity volatility as a separate asset class is becoming more expensive and hedge funds are turning their attention instead to the commodities markets. Derivatives based on commodity indices provide cheaper access to the "long volatility" trade that has been among the most successful equity market strategies of the past two years.
- TPG, the US private equity firm, risks losing a substantial investment in a Chinese leasing venture after a business dispute in which the company's local staff called in police to remove TPG's representatives, people familiar with the matter say. The difficulties that developed between TPG and local managers of Nissin Leasing (China), a subsidiary of Japan's Nissin Group, underscore the risks of investing in China and come at a particularly bad time for the US private equity firm.
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Earnings of Note
Company/EPS Estimate
- (PERY)/.31
- (DKS)/.06
- (BKS)/-.16
- (SSI)/-.20
- (GPS)/.34
- (HIBB)/.27
- (DELL)/.32
- (CRM)/.07
- (ADSK)/.54
- (BKE)/.63
- (GME)/.37
- (FL)/.26
- (HP)/1.18
- (DDS)/-.58
- (PLCE)/.84
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 505K versus 516K the prior week.
- Continuing Claims are estimated to rise to 3900K versus 3897K prior.
10:00 am EST
- Philly Fed for November is estimated to rise to -35.0 versus -37.5 in October.
- Leading Indicators for October are estimated to fall .6% versus a .3% gain in September.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are sharply lower, weighed down by commodity and financial stocks in the region. I expect US
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