Late-Night Headlines
Bloomberg:
- “Naked” credit-default swaps may be banned under provisions in the main U.S. House legislation overhauling oversight of the $592 trillion derivatives industry, House Financial Services Committee Chairman Barney Frank said. “The question of banning naked credit-default swaps is on the table,” Frank, a Massachusetts Democrat, said during an interview on Bloomberg Television today. The legislative proposal will be released next week, Frank said. House Agriculture Committee Chairman Collin Peterson, a Minnesota Democrat, said he is helping draft the legislation, which could ban credit-default swaps where the investor doesn’t own the debt on which the contracts are based. “Frank has indicated to me he wants a total ban on naked credit default swaps,” Peterson said in a statement through a spokesman today. Under Frank’s current proposal, market makers would be excluded from the ban on naked credit-default swaps, according to Representative Melissa Bean of Illinois, a Democrat and co- sponsor of a competing bill giving the U.S. Treasury authority over derivatives. As much as 80 percent of the $26.4 trillion credit-default swap market is traded by investors who don’t own the underlying debt, according to Eric Dinallo, who stepped down this month as superintendent of the New York State Insurance Department. The New Democrat Coalition’s legislation yesterday would still give the SEC and CFTC authority to propose rules for margin and collateral requirements and determine which contracts must be backed by a clearinghouse or traded on an exchange. The Treasury would have “disapproval power” over any regulations, and could censure or suspend traders or revoke registrations, according to the bill.
- The Securities and Exchange Commission should develop a central database of stock loan information to curb abusive short sales, six U.S. senators urged in a letter to the agency’s chairman. The SEC should “urgently consider” a proposal that would stiffen rules requiring brokerages to locate a willing lender of a stock before completing a short sale, according to the letter whose backers include Republican Orrin Hatch and Democrat Robert Menendez, both members of the Senate Finance Committee. Under the proposal, investors would have to identify the actual shares they intend to borrow in a central database operated by Depositary Trust & Clearing Corp. “One share owned would be one share located -- and ultimately one share delivered on time,” the senators said in the letter. “This proposal potentially represents a great stride forward and a substantial improvement on current short sale market practices.” The SEC, led by Chairman Mary Schapiro, is weighing multiple rules to dictate when traders can bet shares will fall, after lawmakers and business groups said short-sellers fed last year’s plunge in financial shares and the collapse of Lehman Brothers Holdings Inc. The SEC last year enacted rules that have almost eliminated naked short selling, so called because a trader has shorted a stock without obtaining a loan. The proposed DTCC database would prohibit multiple investors from executing short sales relying on a single indication of an available loan. It would make them match their short sales with a specific set of shares available to borrow. “This centralized ‘hard locate’ system seems to offer a viable way to eliminate ‘over selling’ of stock inventories, in that there would no longer be multiple locates on the same shares of a security,” the senators said in the letter.
- President Barack Obama’s concession that his effort to revamp U.S. health care will miss a deadline led analysts to recommend buying shares in the industry. Obama, who once set an Aug. 7 deadline to pass health- overhaul bills in both houses of Congress, said at a White House press conference last night that he “will get it done this year.” Senate Democratic leader Harry Reid said today his chamber won’t vote on an overhaul bill until September. Every day Obama’s historic effort to curb health spending and extend coverage to an estimated 46 million uninsured Americans is delayed, “health stocks will gradually rise,” Les Funtleyder, an analyst with Miller and Tabak & Co., said today in an interview. Investors in insurance and pharmaceutical shares have “overestimated” how much Obama’s overhaul might depress earnings, Funtleyder said. “The worst of the worst for these sectors, like drug price controls or a government-run health plan, seems to have moved off the table and investors are still assuming the worst,” Funtleyder said. “That makes now a very good time to invest in the sector.”
- Issuance of collateralized mortgage obligations repackaging standard agency home-loan securities has soared to a pace typical before the “liquidity crises” of recent years, reflecting demand from banks and money managers, according to Amherst Securities Group analysts. Issuance rose to $64.8 billion last quarter, from $23.4 billion in the first quarter and $6.8 billion in the fourth quarter, the analysts led by Laurie Goodman wrote in a report yesterday. Banks, flush with deposits and lending less, are seeking to take advantage of a “quite steep” difference between short- term funding costs and higher investment yields amid a declining supply of “competing” assets such as new adjustable-rate mortgages and related bonds, the analysts wrote. “Total return” managers also have liked the debt, they said. “Hence the rejuvenation of the CMO market,” the New York- based analysts wrote.
- Microsoft Corp.(MSFT) fell as much as 8.8 percent in late trading after reporting a 29 percent profit drop and sales that missed analysts’ estimates, a sign that demand for Windows and Office software is still declining.
- JPMorgan Chase & Co.(JPM), the second- largest U.S. bank by assets, will increase salaries for investment bankers who earn half or more of their total compensation in year-end bonuses, a person familiar with the firm said. The plan, unveiled today at a meeting with investment bank co-heads Steven Black and William Winters, will be implemented in 2010 and details will be announced closer to the end of this year, the person said, declining to be identified because pay matters are confidential. The salary increase doesn’t change total pay.
- Samsung Electronics Co., Asia’s biggest maker of chips, flat-screens and mobile phones, reported an unexpected increase in profit, helped by a recovery in demand for liquid-crystal-display televisions and handsets. Higher prices of memory chips and LCDs, coupled with increasing demand for flat-panel TVs and mobile phones, may help Samsung’s profit climb to a five-year high this quarter, according to analysts’ projections.
- Amazon.com Inc.(AMZN) reported a 10 percent decline in second-quarter profit and lower revenue than analysts anticipated after the online retailer lowered prices. The stock dropped 8.6 percent in late trading.
Wall Street Journal:
- The Associated Press, taking a hard line against Web sites that run stories without permission, said it is creating a way to track and control the distribution of its articles online.
- President Barack Obama's health-care plan is in jeopardy because of serious concerns that costs will spin out of control. As much as anyone, it's White House budget director Peter Orszag's job to save it. Mr. Orszag is the administration's point man for controlling health-care spending. So when the director of the Congressional Budget Office, which Mr. Orszag used to run, testified eight days ago that none of the health plans pending on Capitol Hill would control long-term spending, Mr. Orszag knew that meant trouble.
- Just a few months ago, conglomerates Berkshire Hathaway Inc. and Leucadia National Corp. made a bid to buy parts of CIT Group Inc. CIT rebuffed the offer, according to people familiar with the matter, because the price was too low. Now CIT and its advisers are evaluating a similar break-up, this time with the threat of bankruptcy bearing down, and its shares worth less than a dollar each. CIT's aviation-finance and rail-finance operations are the units most likely to be sold, said these people, who cautioned the analysis is still in early stages.
- Federal criminal authorities are investigating whether Corey Ribotsky, a Long Island, N.Y., hedge-fund manager who has said he has $770 million under management, lied to investors about their returns and the holdings of his various funds, according to people familiar with the matter. Prosecutors from the U.S. attorney's office in Brooklyn and investigators from the Federal Bureau of Investigation and the Securities and Exchange Commission are looking at whether the 38-year-old Mr. Ribotsky and his firm defrauded investors as the stock market fell amid the credit crisis, these people said.
- How’s the economy, you ask? I have the proverbial good news and bad news, but in this case, they’re exactly the same: The U.S. economy appears to be hitting bottom. First, the good news. Right now, it looks like second-quarter GDP growth will come in only slightly negative, and third-quarter growth will finally turn positive.
CNBC.com: America’s Top States For Business ’09. Overall Rankings
NY Times:
- It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices. It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets. Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense. These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk. Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs(GS) are making so much money so soon after the financial system nearly collapsed. High-frequency trading is one answer. And when a former Goldman Sachs programmer was accused this month of stealing secret computer codes — software that a federal prosecutor said could “manipulate markets in unfair ways” — it only added to the mystery. Goldman acknowledges that it profits from high-frequency trading, but disputes that it has an unfair advantage. Yet high-frequency specialists clearly have an edge over typical traders, let alone ordinary investors. The Securities and Exchange Commission says it is examining certain aspects of the strategy. High-frequency traders often confound other investors by issuing and then canceling orders almost simultaneously. Loopholes in market rules give high-speed investors an early glance at how others are trading. And their computers can essentially bully slower investors into giving up profits — and then disappear before anyone even knows they were there. Although precise figures are elusive, stock exchanges say that a handful of high-frequency traders now account for a more than half of all trades. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee. High-frequency traders generated about $21 billion in profits last year, the Tabb Group, a research firm, estimates. “You want to encourage innovation, and you want to reward companies that have invested in technology and ideas that make the markets more efficient,” said Andrew M. Brooks, head of United States equity trading at T. Rowe Price, a mutual fund and investment company that often competes with and uses high-frequency techniques. “But we’re moving toward a two-tiered marketplace of the high-frequency arbitrage guys, and everyone else. People want to know they have a legitimate shot at getting a fair deal. Otherwise, the markets lose their integrity.”
- Big as California’s budget woes are today, so are the problems lurking in its biggest pension fund. The fund, known as Calpers, lost nearly $60 billion in the financial markets last year. Though it has more than enough money to make its payments to retirees for many years, it has a serious long-term shortfall. Meanwhile, local governments in the state are pleading poverty and saying they cannot make the contributions that would be needed to shore it up. Those problems now rest largely on the slim shoulders of Joseph A. Dear, the fund’s new head of investments. He is not an investment seer by training, but he thinks he has the cure for what ails Calpers, or the California Public Employees’ Retirement System, the largest in the nation with $180 billion in assets. Mr. Dear wants to embrace some potentially high-risk investments in hopes of higher returns. He aims to pour billions more into beaten-down private equity and hedge funds. Junk bonds and California real estate also ride high on his list. And then there are timber, commodities and infrastructure. That’s right, he wants to load up on many of the very assets that have been responsible for the fund’s recent plunge.
CNNMoney.com:
- A government watchdog raised questions about the Obama administration's estimate that up to four million people could be helped by the president's mortgage modification program. Also, the Government Accountability Office said Thursday the Treasury Department must develop better procedures to ensure loan servicers are equipped to participate in the $75 billion program and adhere to its rules. The report comes as the pressure mounts on the administration to address growing complaints about the program, including that some servicers are violating the rules.
Politico:
- The Congressional Black Caucus is blasting away at Blue Dog Democrats and other fiscal conservatives in their own party for making "spurious" claims about the high cost of the House health reform plan, POLITICO has learned. The issue isn't about race, aides tell me. It's about the CBC, which represents some of the most progressive members in the House, wanting to have a say in final negotiations -- and to prevent party conservatives from dominating. The 42-member caucus, whose support is crucial for the passage of any plan, is worried that intense talks going on between the Dogs, White House Chief of Staff Rahm Emanuel and House leaders will undermine efforts to provide quality coverage to the poor and working class.
Reuters:
- Investors bid up shares of Regeneron Pharmaceuticals Inc (REGN) and Seattle Genetics Inc (SGEN) on Thursday after Medarex Inc (MEDX) agreed to be acquired by Bristol-Myers Squibb Co (BMY) at a 90 percent premium. Analysts speculated that those two companies, which have similar specialties to Medarex, could be the next to be acquired. The $2.4 billion deal for antibody technology specialist Medarex, announced late on Wednesday, marked the latest in a string of windfalls for biotech investors this year.
- ICE Clear Europe and Eurex Clearing AG have been given permission to clear credit default swaps, a type of derivative that exacerbated the global financial crisis, the Securities and Exchange Commission said on Thursday. The SEC approved conditional exemptions that will allow ICE Clear, owned by IntercontinentalExchange Inc (ICE) , and Eurex, a derivatives exchange owned by Deutsche Boerse, to operate as central counterparties.
Financial Times:
- Daniel Mudd, appointed this week chief executive of Fortress Investment Group , plans to spearhead an acquisition strategy that could see the hedge fund buy other financial companies including banks, insurers, traditional money management groups and other hedge funds. Mr Mudd, former chief executive of Fannie Mae , joins Fortress as the hedge fund industry looks for signs that outflows, or investor withdrawals, are beginning to slow. Wes Edens, Fortress founder, told staff this week that the group could pounce on smaller rivals by buying other hedge funds and the assets of funds that are being wound down. “Did you make last year’s losses back? If you are still down by the end of the year, it is all over for you,” Mr Edens said of those hedge funds. Fortress is expected to join the group of investors extending $3bn in rescue funding to beleaguered CIT , according to people familiar with the matter.
- Moves by governments and regulators to shore up banking systems and financial markets risked a push towards financial protectionism, leading bankers warned on Thursday. The bankers, who included senior officials at Deutsche Bank , JPMorgan , Spain’s BBVA and Sweden’s SEB , said they supported “far-reaching” regulatory reforms including changes to pay practices across banks and tougher capital requirements. However, in a report on the future of financial regulation, they voiced concern about swift moves to change rules in the UK and the US that would include curbs on risky compensation practices. The report came just days after Christine Lagarde, France’s finance minister, attacked banks for a return to paying guaranteed bonuses and called on the Group of 20 nations to stop “procrastinating” and curb practices deemed to encourage excessive risk-taking. The Institute of International Finance report said: “There is a danger of a loss of global integration and co-operation, as happened between 1914 and 1945.
Shanghai Securities News:
- China
South China Morning Post:
- Chinese colleges fake jobs for graduates. Teachers sign up students to fictional companies to boost records.
Late Buy/Sell Recommendations
Citigroup:
- Upgraded .
- Reiterated Buy on (CELG), boosted target to $63.
- Reiterated Buy on (MSFT), target $28.
- Reiterated Buy on (AMZN), target $100.
- Reiterated Buy on (XRX), target $10.
RBC:
- Rated (PSYS) Outperform, target $30.
Night Trading
to +1.50% on average.
Asia Ex-Japan Inv Grade CDS Index -1.05%.
Morning Preview
US AM Market Call NASDAQ 100 Pre-Market Indicator/Heat Map Pre-market Commentary Pre-market Stock Quote/Chart Global Commentary WSJ Intl Markets Performance Commodity Futures Top 25 Stories Top 20 Business Stories Today in IBD In Play Bond Ticker Economic Preview/Calendar Earnings Calendar
Conference Calendar
Who’s Speaking? Upgrades/Downgrades Rasmussen Business/Economy Polling
Earnings of Note
Company/EPS Estimate
- (BDK)/.37
- (EXC)/.97
- (FO)/.64
- (IDXX)/.52
- (IR)/.39
- (ERIC)/.11
- (SLB)/.63
- (TROW)/.34
Economic Releases
10:00 am EST
- Final Univ. of Mich.
Upcoming Splits
Other Potential Market Movers
The Fed's Bernanke, Treasury's Geithner; FDIC's Blair Testifying on Regulatory Reform
BOTTOM LINE: Asian indices are higher, boosted by commodity and technology shares in the region. I expect US equities to open modestly lower and to maintain losses into the afternoon. The Portfolio is 100% net long heading into the day.
No comments:
Post a Comment