Late-Night Headlines
Bloomberg:
- UBS AG’s(UBS) U.S. brokerage business stopped selling exchange-traded funds that use leverage because the products don’t conform to its emphasis on long-term investing. UBS Wealth Management Americas suspended sales of inverse and leveraged ETFs immediately, citing the “short-term nature of these securities,” the New York-based brokerage said in a statement today. Edward Jones, a St. Louis-based brokerage, and Minneapolis-based Ameriprise Financial Inc. have also halted leveraged-ETF sales. The Financial Industry Regulatory Authority and Massachusetts Secretary of the Commonwealth William Galvin said in the past two months that leveraged and inverse ETFs might not be appropriate for individual investors. The funds’ assets have increased 51 percent to $32.8 billion this year, according to data from State Street Corp., a Boston-based company that sells ETFs and tracks the industry. Finra told brokers in June that leveraged ETFs might be unsuitable for individual investors who hold them for more than one day. The Investment Company Institute, a Washington-based trade group for mutual funds, asked Finra to clarify its initial statement, urging it to provide guidance “rather than defining such securities as per se unsuitable for certain classes of investors.”
- The rising number of derivatives bets on a drop in the US dollar may indicate that the greenback is poised to strengthen. The net number of contracts hedge funds and other large speculators hold betting on a decline versus a rise in the value of the dollar against currencies traded at the Chicago Mercantile Exchange is at the highest level since July 28th , 2008. Futures positions, when they reach an extreme, are many times viewed as a contrarian indicator because traders often rush to reduce positions when momentum in a currency shifts.
- The Obama administration’s economic leaders assured Chinese counterparts they will rein in a record budget deficit as China underscored its concern about preserving the value of its holdings of Treasuries. “China has a huge amount of investment in the U.S.” and “we are concerned about the security of our financial assets,” Assistant Finance Minister Zhu Guangyao said in a press briefing at the end of the first of two days of talks in Washington. Treasury Secretary Timothy Geithner said in opening remarks that the U.S. will ensure a “sustainable” deficit by 2013. In a shift from Bush administration meetings, officials indicated little sign of tension over the value of China’s yuan, which U.S. lawmakers have labeled as artificially cheap and an aid to Chinese exports.
- The wave of “option” adjustable- rate mortgages recasting to higher payments, projected by some economists to represent a looming source of foreclosures that will hurt housing markets over the next few years, will be smaller than “feared” because many borrowers will default before their bills change, Barclays Capital analysts said.
- Hedge funds and other companies using credit-default swaps would have to disclose to regulators any short positions related to those contracts, according to a legislative proposal from US Representatives Barney Frank. The bill, which may change, includes most of what the Obama administration has been pitching to curb the $592 trillion over-the-counter derivatives market, including clearinghouses and margin requirements, according to a two-page summary. Frank would also ban most “naked” credit-default swaps and require enhanced disclosures, the summary shows. Some lawmakers are regulators have said they are looking more closely into whether credit-default swaps were manipulated by short sellers to spread false rumors about financial companies such as bankrupt securities firm Lehman Brothers Holdings Inc. last year to drive down stock prices. In addition to rules on short positions, Frank’s legislation would move the most active derivatives to a regulated exchange and send them through a clearinghouse. Customized contracts, illiquid markets and smaller companies that aren’t “major market” players would be exempt, the summary shows.
- AOL, the Internet unit being spun off from Time Warner Inc.(TWX), may be worth less than $5.66 billion, based on the price Google Inc.(GOOG) received for its 5 percent stake in the company. Time Warner, based in New York, said in a regulatory filing today it repurchased the stake on July 8 for $283 million, a price that includes cash distributions owed to Google.
- Mitsubishi Heavy Industries Ltd., Japan’s biggest heavy-equipment maker, plans a wind-power generator assembly plant in the U.S. or Canada early next year to benefit from President Barack Obama’s push for cleaner energy. The proposed plant may cost as much as 10 billion yen ($105 million) and annually produce equipment capable of generating 600 megawatts of electricity, Yoshiaki Tsukuda, a director overseeing Mitsubishi’s engine and turbine business, said in an interview in Yokohama yesterday. Mitsubishi is competing with General Electric Co.(GE) to supply wind turbines and generators as the Obama administration embarks on legislation that will require utilities to get as much as 15 percent of their power from renewable sources.
Wall Street Journal:
- Google Inc.(GOOG) is teaming up with Visible World Inc., a well-known New York technology company that uses software to create multiple versions of a given ad, in its push to offer TV advertisers more targeting options. Google will combine the technology with its Google TV Ads, an automated auction-based system for buying TV ads by choosing which shows best fit the advertised product or service. The idea of such "addressable advertising" is to send a TV ad promoting a sale on minivans to a household with children, for example, and the same basic ad with a promo for a sports sedan to a childless household. "Audiences are more and more fragmented," said Mike Steib, director of Google TV Ads. "One ad with one message for one audience is not the right thing for everyone."
- Nvidia(NVDA), AMD(AMD) Push GPU Technology as Filmmakers Seek More Sophisticated Techniques; Intel(INTC) Tries Different Approach.
- An Obama administration effort to reduce home foreclosures by lowering the mortgage payments of struggling borrowers before they fall behind is failing to help as many people as expected. Among the problems: Some homeowners are being told they must be behind on their payments to receive help, which runs counter to the aim of the program. In other cases, delays are so long that borrowers who are current on their payments when they ask for a loan modification are delinquent by the time they receive one. There is also confusion about who qualifies.
- German luxury auto makers including BMW AG and Daimler AG's Mercedes-Benz are close to benefiting from a U.S. concession that will allow them and a few other foreign makers to keep selling cars that emit more greenhouse gases than those made by mass-market rivals such as General Motors Co. and Toyota Motor Corp. Under a provision of a plan to curb greenhouse gas emissions, the Obama administration has proposed to set less stringent standards for car makers that sell fewer than 400,000 vehicles a year in the U.S. That target defines the major German brands as well as a few smaller Asian manufacturers such as Suzuki Motor Corp. and Mitsubishi Motors Corp. "The German provision" -- as it is known to industry lobbyists -- resembles a California law that effectively exempts some foreign car makers from having to meet the same emissions standards as their U.S. rivals. BMW and Daimler declined to say whether they lobbied for the provision.
- A simmering dispute between the U.S. and Israel over Iran's nuclear program burst into the open on Monday, as U.S. Defense Secretary Robert Gates, on a visit to Israel, called for continued diplomatic engagement with Tehran, while Israeli officials repeatedly warned of a possible military strike against Iran's nuclear facilities. Iran's apparent pursuit of a nuclear weapon is emerging as a major source of tension between the U.S. and Israel, which are already feuding over President Barack Obama's call for a complete freeze on Israeli settlements in East Jerusalem and the West Bank.
- The Securities and Exchange Commission issued new rules to govern short-selling, promising investors new information about the volume and velocity of negative bets placed against companies, But it dropped a requirement that hedge funds disclose details of short positions to regulators. The SEC's move, which doesn't impose strong new curbs on short-selling beyond those imposed last fall, comes amid political pressure to reduce abusive use of short-selling. The SEC said self-regulatory organizations, such as the Financial Industry Regulatory Authority, or Finra, will begin posting on their Web sites "in the next few weeks" more information about short sales, including something akin to a tape that will show, on a one-month delay, the time at which a trader places a short-sale and the size of the position. Such data would enable investors and others to determine if traders are piling on a company. The self-regulatory organizations, such as Finra, will also publish daily aggregate volume information of short-selling in each exchange-traded stock. The SEC also would speed up disclosure of failed short trades across all companies from once a quarter to twice a month. Failed trades are an indication, but not evidence, that a stock has been manipulated. The SEC, however, is backing away from its earlier move to require hedge funds and other money managers to disclose their short positions to regulators on a weekly basis. Sen. Ted Kaufman (D., Del.), who has prodded the SEC to take additional steps, said in a statement that he was disappointed they didn't go further to restrict naked short-selling. "Instead of proposing action today to deal with the problem, the SEC apparently is content to let potential solutions sit on the shelf for another two months," he said.
- Cutting Repeat Hospital Trips – Simple Idea, Hard to Pull Off.
- Energy Secretary Steven Chu wants to kill research and development on cars that run on hydrogen fuel cells, but a spending bill approved by the House this month and another scheduled for a Senate vote this week would restore funding for the program.
- Ever notice that those who endorse high taxes and those who actually pay them aren’t the same people? Consider the curious case of Ways and Means Chairman Charlie Rangel, who is leading the charge for a new 5.4-percentage point income tax surcharge and recently called it “the moral thing to do.” About his own tax liability he seems less, well, fervent. Exhibit A concerns a rental property Mr. Rangel purchased in 1987 at the Punta Cana Yacht Club in the Dominican Republic.
MarketWatch.com: When Microsoft Corp. launches Windows 7 later this year, the new operating system is likely to stoke wide-ranging technology sales as big corporate customers act to uncork their pent-up demand, analysts say. In a new report, analysts at Deutsche Bank predicted that the release of Windows 7 on Oct. 22 "could trigger significant new investment across the technology value chain." That investment could outpace the same uptick in demand seen after previous operating-system launches, including the popular Windows XP as well as Windows Vista, which has been widely seen as a disappointment.
CNBC.com:
The Obama administration's move to tame the volatile commodity and energy markets gets under way with hearings this week that promise to expose a wide fissure of disagreement over how it should be done. The Commodity Futures Trading Commission will hold the first of three hearings on Tuesday to consider whether to limit holdings of energy and agricultural contracts and whether some traders should be allowed to exceed so-called position limits. The agency, which will also hold meetings on Wednesday and on Aug 5., will investigate whether players with deep pockets distort the market's traditional role of price-setting when they amass huge market positions. To protect against market manipulation, the CFTC sets limits on the amount of contracts each investor can hold in some agricultural commodities. But for energy products, such as oil, the limits are set by the futures exchanges. "My firm belief is that we must aggressively use all existing authorities to ensure market integrity and efficiency," CFTC Chairman Gary Gensler said on July 7 in announcing the review of position limits. While some in industry balk at reforms, the CFTC has found broad support in Congress and among farm groups and companies who complain their traditional hedging practices were upset by big players tossing so much money into futures. The legislation would ban "naked" credit default swaps, require over-the-counter derivatives to go through central clearinghouses and direct the CFTC to set position limits on energy traders across all markets. Trading firms, fearful of losing revenue to CFTC's proposals, are expected to tell the agency that any changes could only make the market less efficient.
- Japan's Toyota Motor plans to launch a hybrid compact for around 1.5 million yen ($15,760) in Japan in late 2011, broadening its hybrid car line-up, the Asahi newspaper reported on Tuesday.
Forbes:
- If we agree on a few basic things that we all want, breaking up Goldman Sachs(GS) and most of the other big Wall Street banks makes a lot of sense. Let's start with the wants: The taxpayer should never again be asked to save the banks from the costs of their own investment decisions; American consumers and businesses should have access to financial products, credit and financing; bank shareholders deserve a chance to make some money. This is by no means a sure thing, but it seems as if a bunch of baby Goldmans are more likely to give us all of those outcomes than the big Goldman we've got.
Politico:
- Bipartisan negotiations on the Senate Finance Committee are moving closer to eliminating two health care provisions favored by many Democrats – a mandate on employers to provide insurance or pay a penalty, and a government insurance option, a senator and health care insiders said Monday. That could bring even greater pressure on Finance Chairman Max Baucus (D-Mont.), who has been challenged by more liberal senators who say he is sacrificing key Democratic priorities on health care reform to win the votes of a few Republicans. Sen. Olympia Snowe (R-Maine) confirmed that the three Republicans and three Democrats negotiating the Senate Finance bill are moving away from a broad-based mandate that would force employers to offer insurance. The senators instead are leaning toward a “free rider” provision that requires employers to pay for employees who receive coverage through Medicaid or who receive new government subsidies to purchase insurance through an exchange. Snowe stressed the committee hasn’t reached a final agreement on any of the key provisions but said, “There is not a broad-based employer mandate. … There are approximately 170 million Americans that receive coverage through employers. That is a significant percentage of the population. We don’t want to undermine that or create a perverse incentive where employers drop the coverage because their employees could potentially get subsidies through the exchange.” On the nonprofit insurance cooperative, Snowe also said no final decisions have been reached, but “it is safe to say it is probably one that will remain in the final document.”
- Sens. Kent Conrad (D-N.D.) and Chris Dodd (D-Conn.) are fiercely denying a report that they knew they were getting sweetheart mortgage deals — accusing a Countrywide Financial loan officer of distorting their relationships with the former mortgage giant. “There is nothing new here,” Conrad spokesman Christopher Gaddie told POLITICO Monday night. “These questions have been asked and answered by the senator already, and the facts remain the same: Sen. Conrad never asked for, expected or was aware of loans on any preferential terms.” According to an Associated Press report late Monday, Robert Feinberg, who worked in the Countrywide’s “VIP” section, informed congressional investigators last month that both senators were told “who you know is basically how you’re coming in here.”
Boston Globe:
- Food scientists are hoping for big things from small particles. Disease, obesity are latest targets of nanotechnology.
USA Today.com:
- Visa (V), the world's largest credit card network, announced a management reorganization Monday that includes the departure of its president, even as it said performance is meeting or exceeds its forecast.
AP:
- Four major cities — New York, Seattle, Houston, and Pittsburgh — will get no money from a $1 billion economic stimulus program to help cities avoid laying off police officers, officials told The Associated Press on Monday. Rep. Peter King of New York, the senior Republican on the Homeland Security Committee, criticized the decision. "It is disgraceful for New York City to be shut out just because the NYPD is doing such a great job under trying circumstances and Mayor (Mike) Bloomberg is doing such a wonderful job of managing the city's finances," said King, adding that the city "is the No. 1 terrorist target and should not be penalized for its success." Bloomberg, in a statement, called the decision "disappointing, to put it mildly. To punish our police department because they have driven down crime with fewer resources shows the backwards incentive system that is sometimes at work in Washington." He said the 9/11 attacks "were attacks on the nation and we should be receiving strong federal support for the NYPD to fight terrorism in the nation's largest city."
Reuters:
- Senior U.S. housing officials and leading mortgage companies on Tuesday will make a fresh commitment to help troubled borrowers keep their homes and will promise to expand foreclosure-prevention aid, sources familiar with the plans said. Executives from 25 mortgage service companies will spend much of the day in working meetings to trouble-shoot the foreclosure crisis and brainstorm with officials from Treasury and the Department of Housing and Urban Development.
- The growing debate over "flash" orders, amplified late last week when a prominent U.S. senator weighed in, could spell trouble for Direct Edge, the fast-growing stock trading venue that has the most to lose if they are banned. Rival exchanges, some of whom also offer flashes, have been coy on whether they support the service and may quietly hope they are eliminated for good. Direct Edge was the first to start "flashing" customer orders -- for fractions of a second -- to certain market members before routing them elsewhere to all participants. The practice gives banks, hedge funds, and some dark pools, where orders are matched anonymously, an advanced look at order flow.
- Shares of companies that make vaccines and drugs for flu rose on Monday after the World Health Organization said more than 20 countries and overseas territories confirmed their first cases of the H1N1 swine flu virus. Analysts believe the headlines have spurred investors to turn their attention to a basket of drugmakers developing novel therapeutics to combat a potential flu pandemic, as these companies stand a chance of benefiting from government funding or stock-piling grants.
Financial Times:
- A cautionary tale from China.
- Germany is pursuing a "dangerous" strategy in assuming a pick-up in world growth will restore the health of its export-driven economy, a top adviser to the Berlin government has warned. Peter Bofinger, an economics professor at Würzburg university in southern Germany, compared Berlin's response to the global crisis to "waiting for Godot".
Nikkei English News:
- Sumitomo Corp. has acquired a 42.5% interest in a Texas
Shanghai Securities News:
- China Unicom has pledged to sell at least $732 million of Apple Inc.’s(AAPL) iPhone handset in China annually, citing people familiar with the situation. The Chinese carrier has promised Apple it will sell 1 million to 2 million iPhone handsets a year. China Unicom will buy the handsets from Apple for 3,000 yuan each, the report said. China Unicom will have exclusive rights to the iPhone in China for three years.
Late Buy/Sell Recommendations
Citigroup:
- Upgraded (VECO) to Buy, target $24.
- Reiterated Buy on (GLW), raised target to $21.
- Reiterated Buy on (AMGN), boosted target to $71.
Morgan Stanley:
- Upgraded (SOHU) to Overweight, target $82.70.
Night Trading
Asia Ex-Japan Inv Grade CDS Index +5.2%.
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
- (SII)/.21
- (VIA/B)/.48
- (COH)/.43
- (WAT)/.79
- (MHP)/.56
- (ODP)/-.11
- (FPL)/.97
- (ENR)/1.02
- (JEC)/.76
- (ROK)/1.9
- (CVH)/.41
- (CPO)/.30
- (X)/-3.44
- (UIS)/.00
- (BEAV)/.34
- (VLO)/-.51
- (UA)/-.02
- (WCG)/.37
- (MEE)/.19
- (WDC)/.27
- (NSC)/.63
- (PNRA)/.64
- (THQI)/-.09
- (MCK)/.86
- (HTZ)/.11
- (ADVS)/.11
- (PSYS)/.56
- (AGCO)/.53
Economic Releases
10:00 am EST
- Consumer Confidence for July is estimated to fall to 49.0 versus 49.3 in June.
Upcoming Splits
Other Potential Market Movers
weekly retail sales reports, S&P/CaseShiller Home Price Index, Richmond Fed Manufacturing Index, ABC Consumer Confidence, Keefe Bruyette Woods Community Bank Conference, (GE) Investor Webcast and the (RRI) analyst day
BOTTOM LINE: Asian indices are higher, boosted by financial and mining shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
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