Late-Night Headlines
Bloomberg:
- The yen fell against the euro after Asian stocks rose, encouraging investors to increase holdings of higher-yielding assets funded with Japan’s currency.
- Toyota Motor Corp., Hyundai Motor Co., and Honda Motor Co., led gains by Asian automakers after the Bush administration agreed with congressional Democrats on the broad outlines of legislation to give General Motors Corp. and Chrysler LLC federal loans to keep operating. Hyundai, South Korea's largest carmaker, jumped as much as 7.5 percent in Seoul trading Honda rose as much as 6.5 percent and Toyota added 2.6 percent on the Tokyo Stock Exchange.
- Citigroup Inc.(C) had the biggest increase in shares sold short among New York Stock Exchange companies in the second half of November as the world’s biggest financial-services company tumbled 60 percent on concern about toxic assets and a capital shortage. Citigroup short selling increased by 56.1 million shares, or 44 percent, to 182.5 million shares between Nov. 14 and Nov. 28, according to exchange data compiled by Bloomberg. Short selling of Bank of America Corp.(BAC), the nation’s third- largest lender, rose by 18.9 million shares for the second- biggest jump among stocks listed on the NYSE. Borrowed shares of Alcoa Inc.(AA), the largest U.S. aluminum producer, increased 29 percent to 61 million as the industrial metal fell to a three-year low.
- Foreign direct investment in China fell 36.5 percent in November from a year earlier as gains by the yuan stalled and the world’s fourth-biggest economy cooled.
- Rod Blagojevich today followed in the footsteps of his predecessors: He became the fourth of the past seven governors elected in Illinois to be arrested. Residents blame the sad tradition on a culture of patronage. “Government in Illinois isn’t about political ideology or helping people,” said Christopher Mooney, who teaches political science at the University of Illinois-Springfield. “It’s about which idiot brother-in-law are you going to get a job on a road crew because he helped you get into office.” The governor, a Democrat, was charged with trying to sell Barack Obama’s vacated Senate seat, according to a criminal complaint filed by prosecutors. Three previous governors were jailed for receiving bribes: Otto Kerner, governor from 1961 to 1968; Dan Walker, who held the job from 1973 to 1977; and George Ryan, who served from 1999 to 2003.
- President-elect Barack Obama said he was unaware of the criminal investigation into an alleged attempt by Illinois Governor Rod Blagojevich to trade an appointment for Obama’s Senate seat for financial gain. “I had no contact with the governor or his office and so I was not aware of what was happening, ” Obama told reporters today in Chicago. “It’s a sad day for Illinois. Beyond that, I don’t think it’s appropriate to comment.” Federal prosecutor Patrick Fitzgerald said there is “no allegation” that Obama was aware of Blagojevich’s attempt to extract benefits from his authority to appoint Obama’s successor.
- Russia “The Russian budget assumes an oil price of $70 a barrel so if oil stays around $40 or 44 5 then economic fundamentals will deteriorate rapidly,” said Nigel Rendell, emerging-market strategist at RBC in London “There is a severe risk Russia
- Short selling of Warren Buffett’s Berkshire Hathaway Inc.(BRK/A) rose to its highest level in six years on speculation that costs tied to derivative contracts will drive down the insurer’s stock price. Short-selling increased by 1,013 shares, or 29 percent, to 4,495 between Nov. 14 and Nov. 28, the most bet on Berkshire’s decline since 2002, according to data compiled by Bloomberg.
- Morgan Stanley(MS) and its gasoline distributor TransMontaigne Inc. are under investigation in Florida for price gouging during Hurricane Ike, state law enforcers said. Florida received thousands of complaints of gasoline stations charging inflated prices after a state of emergency was declared as the storm approached in September, Attorney General Bill McCollum and Consumer Services Commissioner Charles Bronson said in a release today.
- Electronic Arts Inc.(ERTS), the world’s second-largest maker of video games, said fiscal 2009 revenue and profit will be less than forecast because of slow holiday sales in North America and Europe.
- Asian money-market rates declined on expectations the Federal Reserve will cut its key interest rate and after Australian banks raised cash through share and bond sales, easing a year-end funding squeeze.
Wall Street Journal:
- Private equity investors plan to boost their exposure to the asset class despite being fully or even over-allocated, according to research released Wednesday. Plummeting equity and credit markets have left many investors with outsized allocations to private equity, but rather than sell assets the majority of investors plan to maintain or increase target allocations.
- U.S. securities regulators need to do more to curb short-selling abuses, a group of academics, business executives and former top regulators said Tuesday. The Securities and Exchange Commission should close loopholes and enforce current rules against "naked" short selling, said Harvey Pitt, former SEC chairman and now chief executive of Kalorama Partners, a Washington, D.C., consulting firm. "The agency has to make it clear that naked short selling in any form is prohibited," Pitt said at a midday press conference.
- American International Group Inc.(AIG) owes Wall Street's biggest firms about $10 billion for speculative trades that have soured, according to people familiar with the matter, underscoring the challenges the insurer faces as it seeks to recover under a U.S. government rescue plan.
NY Times: Fannie Mae and Freddie Mac engaged in “an orgy of junk mortgage development” that turned the two mortgage-finance giants into vast repositories of subprime and similarly risky loans, a former Fannie executive testified on Tuesday.
Barron’s:
- Apple(AAPL): How Many iPhones Could Wal-Mart(WMT) Sell?
- HedgeFund.net today released early estimates indicating total hedge fund assets fell an additional 5.2% in November to $2.11 trillion, largely due to investors redeeming a record $130.04 billion during the month. Hedge fund performance losses slowed in November, but remained negative for the sixth month in a row.
Financial Times: I think of it as an "oops" moment: the US goes into a recession; Europeans believe this deserved punishment has little to do with them; the European economy slows unexpectedly; the US throws everything at restoring growth; finally, the US recovers, pulling Europe behind it. Yet this is not just a slow-down. It is also a financial crisis. What if the solvency of a eurozone member came into doubt? After all, spreads over rates on German bunds and the prices of credit default swaps have risen already, the most affected countries being Belgium, Greece, Ireland, Italy, Portugal and Spain.
International Herald Tribune:
- The Mumbai police said Tuesday that the 10 men who carried out the terrorist attacks here belonged to a group of 30 recruits of the Lashkar-e-Taiba Pakistani militant organization who had been selected for suicide missions, and that the whereabouts of the other 20 were unknown. It was the first time that that the Indian police had disclosed the larger number of suicide recruits, and while they said there was no reason to believe that the other 20 were in India, they expressed concern about such a possibility.
China Daily:
- China needs to keep its urban unemployment rate below 5% next year to prevent rising joblessness among migrant workers which could spark social unrest, citing a senior legislator. An increase in the urban unemployment rate to more than 5%, from the current 4%, will “lead to a series of negative consequences,” citing Zheng Gongcheng, a member of the National People’s Congress’s Standing Committee.
Late Buy/Sell Recommendations
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Earnings of Note
Company/EPS Estimate
- (KFY)/.29
Economic Releases
10:00 am EST
- Wholesale Inventories for October are estimated to fall .2% versus a .1% decline in September.
10:35 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory increase of 1,300,000 barrels versus a -456,000 barrel decline the prior week. Gasoline supplies are expected to fall by -400,000 barrels versus a -1,534,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,500,000 barrels versus a -1,721,000 barrel decline the prior week. Finally, Refinery Utilization is expected unch. versus a -1.82% decline the prior week.
2:00 pm EST
- The Monthly Budget Deficit for November is estimated at -$171.0 billion versus -$98.2 billion in October.
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BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and real estate stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.
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