Late-Night Headlines
Bloomberg:
- The size of the Federal Reserve’s balance sheet rose 2.3 percent as the central bank bought more U.S. Treasuries and mortgage-backed securities. Fed assets gained $46.2 billion to $2.06 trillion in the week that ended yesterday, the central bank said today in Washington. Holdings of mortgage-backed securities jumped $66.6 billion to $609.5 billion, and the Fed’s portfolio of U.S. Treasury securities increased $7.1 billion to $736.1 billion.
- Hynix Semiconductor Inc., the world’s second-largest maker of computer memory, had its share-price estimate raised to 25,500 won from 20,800 won by Korea Investment & Securities, which cited higher-than-expected chip prices. The brokerage reiterated its “buy” recommendation.
- BHP Billiton Ltd.(BHP) Chief Executive Officer Marius Kloppers said global demand for metals won’t rise beyond what is required to rebuild stockpiles for the remainder of this year. “We won’t see clean demand until early next year,” Kloppers, head of the world’s biggest mining company, told reporters in Johannesburg today. “Stocking events will probably play the major role for probably the next six months.” China is almost finished replenishing its inventories, he said. The depletion of stockpiles in Europe, the U.S. and Japan is coming to an end and those supplies will need to be replenished “over the next few months,” Kloppers said.
- U.S. House Speaker Nancy Pelosi said she won’t be able to pass health-care legislation in her chamber if the measure doesn’t include a government-run insurance plan to compete with private insurers. “There’s no way I can pass a bill in the House of Representatives without a public option,” Pelosi, a California Democrat, said at a press conference in San Francisco today. The idea, a central component of President Barack Obama’s effort to overhaul the nation’s health-care system, has emerged as a flash point in his party. Suggestions by administration officials in recent days that the White House might be willing to give up on the public plan drew protests from some House Democrats. Obama today reiterated his support for the proposal. “If we have a public option in there it will help keep insurance companies honest,” he told a group of community volunteers in Washington. The public-option concept has been criticized by Republicans such as Wyoming Senator Mike Enzi, who say they might be willing to support the overall legislation. Enzi is among a group of six senators working on a bipartisan compromise in the Senate Finance Committee who are scheduled to discuss the legislation by telephone this evening. “For millions of Americans, the government-run plan would turn into a bureaucratic nightmare,” Enzi wrote in a USA Today opinion piece yesterday. “In the finance committee, six of us leading the negotiations are working from the premise that there will not be a government-run plan.” Enzi and other negotiators plan to convene at 9 p.m. Washington time today for about 1 1/2 hours. The group is led by Senate Finance Committee Chairman Max Baucus, a Montana Democrat, and also includes Republicans Charles Grassley of Iowa and Olympia Snowe of Maine, as well as Democrats Kent Conrad of North Dakota and Jeff Bingaman of New Mexico. Pelosi, who spoke to reporters today after meeting with community religious leaders, said Congress has to take “comprehensive” action on the health-care issue now while it has the chance. “I don’t know how you would scale it down,” she said.
- China plans to tighten capital requirements for banks, threatening to curb the record lending that’s fueled a 60 percent rally in the nation’s stock market, three people familiar with the matter said. The China Banking Regulatory Commission sent a draft of rule changes to banks on Aug. 19 requiring them to deduct all existing holdings of subordinated and hybrid debt sold by other lenders from supplementary capital, said the people, who have seen the document. Banks have until Aug. 25 to give feedback, said the people, who declined to be identified as the matter is private. As a result, banks may need to rein in lending or sell shares to lift capital adequacy ratios to the 12 percent mandated by the regulator.
- Hezbollah Readies for War as UN Peacekeepers Can Only Observe
- New Zealand completes a referendum today on whether child spanking is a crime, a vote that may pressure Prime Minister John Key to change a 2007 law preventing parents citing reasonable force as a defense in assault cases.
- Treasuries capped their steepest rally this year as a decline in corporate bonds fueled demand for the safest debt and the government announced auctions for next week that will be less than economists expected.
- Global emerging-market equity funds posted the highest outflows of 2009 in the third week of August, while China equity funds had their worst week since early in the first quarter of 2008, EPFR Global said. Funds investing in developing nation stocks globally lost $946 million in the week ended Aug. 19, the research company said. Asia excluding-Japan funds lost $810 million, the most in 24 weeks, while Latin America and Europe, Middle East and Africa stock funds saw “modest inflows,” EFPR added. The MSCI Emerging Markets Index is set for a 1.6 percent drop this week, its worst performance since the five days ended July 10. Losses this week were paced by a 4.7 percent drop in the Shanghai Composite Index, its third straight weekly retreat and the world’s worst performer this month. Concerns over Chinese banks also prompted investors to pull funds from Taiwan, whose stock funds saw the highest redemptions in dollar terms in more than seven years, EPFR said. Investors instead added to India and Indonesia equity funds, it added.
Wall Street Journal:
- It appears Morgan Stanley (MS) has gotten Wall Street's message about punching up risk. The investment bank has embarked on a hiring binge that will add up to 400 trading and sales positions in the coming months, people familiar with the matter said. The push is designed to revive profits in areas like fixed-income trading, emerging markets, and foreign exchange.
- Federal regulators on Thursday formally opened up a debate about what "broadband" internet service should be -- starting a process that could eventually drive changes in the quality and speed of U.S. internet services.
- The Baltic region's troubles still look severe despite signs that the economic downturn is softening, the head of Sweden's financial regulator said in an interview. But Swedish banks, which are big players in the Baltic banking market, appear able to handle even the worst possible scenarios for the region, Financial Supervisory Authority General Director Martin Andersson said.
- College endowments, reeling from their worst annual performance in decades, are questioning their faith in investments that fueled huge returns before backfiring last year. The crisis of confidence has been playing out at the University of Chicago, in a previously unreported battle that divided the overseers of the nation's 10th-largest university endowment, a committee that included hedge-fund managers Sanford "Sandy" Grossman and Cliff Asness. Amid last fall's market turmoil, the committee argued over whether their portfolio's assets, $6.6 billion in June 2008 but falling fast, were too risky and volatile. The endowment's managers staged a $600 million share selloff to buy safer instruments, an unusually abrupt no-confidence vote in its portfolio model. In a late October email to committee members, Kathryn Gould, a venture capitalist who heads the college's endowment committee, and Chief Investment Officer Peter Stein, wrote: "We will no doubt look like heroes AND idiots in the next couple of months." More such judgments will be passed beginning later this month, when colleges begin disclosing how their portfolios fared over the fiscal year that ended June 30. Northern Trust Corp. estimates that, over the period, the average U.S. college endowment has a 20% decline. Harvard University has predicted the asset value of its endowment, the nation's largest, would drop as much as 30%. Yale University and Princeton University have projected declines of about 25% each. The University of Chicago has predicted a 25% decline in its portfolio value for the fiscal year. The stock market's nosedive last year showed what some see as flaws in the model. "The endowment model contained a colossal intellectual error in thinking -- that long-term investors don't need short-term liquidity," says Robert Jaeger of BNY Mellon Asset Management, a unit of Bank of New York Mellon, who advises endowments on how to structure their portfolios.
- Amid dozens of election-day Taliban attacks that claimed 26 lives, Afghans voted for president Thursday -- but reports of low turnout and fraud made it unclear whether bombs or ballots would ultimately emerge the day's victor.
- The Libyan agent convicted of the 1988 Lockerbie bombing returned home Thursday from a Scottish prison, leaving behind unanswered questions and anger among victims' families in the U.S. and the U.K. Defying intense pressure from the U.S. government, Scottish Justice Secretary Kenny MacAskill chose to release Abdelbaset Ali Mohmed al-Megrahi on "compassionate grounds," reasoning that he should be allowed to be with his family before dying of terminal prostate cancer. Within hours, Mr. al-Megrahi, 57 years old, had boarded a Libyan government jet and was on his way to Tripoli, the Libyan capital. The release of the man convicted of the worst terrorist atrocity in the U.K. elicited protests in the U.S. and elation among many Libyans, whose government had lobbied for the release. In Tripoli, where most people believe Mr. al-Megrahi to be innocent, the streets were "full of happy people," said Said Laswad, editor of the Tripoli Post, a local English-language newspaper. "We all believe he is a hero," Dr. Laswad said. Mr. al-Megrahi's release comes as Libyan leader Col. Moammar Gadhafi prepares to celebrate the 40th anniversary of the revolution that brought him to power.
- The federal government said it would end cash-for-clunkers rebates at 8 p.m. Monday, after high consumer demand threatened to drain the new-car discount program weeks earlier than expected. Obama administration officials had initially expected the $3 billion program to last through Labor Day, Sept. 7. But a big wave of summer buyers, as well as administrative bottlenecks, prompted officials to end the program early. The White House has no plans to seek congressional approval for more funding, a senior administration official said. As of Thursday, the National Highway Traffic Safety Administration said it had processed only 170,000 or so of the more than 457,000 applications from new-car dealers. Only $145 million in reimbursement checks have been sent to dealers -- a fraction of the roughly $1.9 billion they say they are owed. Many dealers have stopped participating because of the delays.
- Responding to a building wave of opposition to the "public option," the Obama administration is now signaling that it may dress up government health care in yet another set of clothes. This time, it will be called a health insurance "co-op." Sen. Kent Conrad (D., N.D.) is floating the idea, Sen. Max Baucus (D., Mont.) has offered his initial support, and Sen. Chuck Schumer (D., N.Y.) has listed three conditions it needs to meet. Mr. Schumer's conditions are a national structure, federal financing, and a ban on federal appointees who have ties to the insurance industry. This "co-op" would be federally controlled, federally funded, and federally staffed. Expressing his opposition to smaller organizations and his demand for a national "co-op," Mr. Schumer says, "It has to have clout; it has to be large." He adds, "There would at least be one national model that could go all over the country," which would require "a large infusion of federal dollars." I'm quite familiar with real co-ops. As a teenager, I filled my family's tractor with fuel purchased at a farmer's co-op, which was organized by local people to solve a common problem. My family got its electricity from a rural electric co-op. I was later a director of an "insurance reciprocal," a form of a co-op. Co-ops are a part of American culture: people uniting to solve common problems. What the Democrats are proposing bears little resemblance to this.
Fox News:
- Canadian Health Officials: Our Universal Health Care Is ‘Sick,’ Private Insurance Should Be Welcomed. Dr. Anne Doig, the incoming president of the Canadian Medical Association, said her country’s health care system is “sick” and “imploding,” the Canadian Press reported. “We know there must be change,” Doig said in a recent interview. “We’re all running flat out, we’re all just trying to stay ahead of the immediate day-to-day demands.” Canada’s universal health care system is not giving patients optimal care, Doig added. When her colleagues from across the country gather at the CMA conference in Saskatoon Sunday, they will discuss changes that need to be made, she said. “We all agree the system is imploding, we all agree that things are more precarious than perhaps Canadians realize,” she said. Ouellet has said that “competition should be welcomed, not feared,” meaning private health insurance should have a role in the public health system. Doig said she isn’t sure what kind of changes will be proposed when the conference wraps up, but she does know that changes have to come – and fast. She said she understands that universal health care, while good in some ways, has not always been helpful for sick people or their families. "(Canadians) have to understand that the system that we have right now — if it keeps on going without change — is not sustainable," Doig said. Click here to read more about this story from the Canadian Press.
NY Times:
- A state court judge has dismissed a controversial lawsuit against S.A.C. Capital Advisors, the giant hedge fund run by Steven A. Cohen, that accused the firm of allegedly spreading false information in a “short-selling bear attack” on the Canadian drug company Biovail(BVF). Judge Donald Goldman of the Superior Court of New Jersey dismissed the suit, filed by Biovail in 2006, on grounds that the company failed to state a cause of action and lack of personal jurisdiction. The judge said in a 52-page opinion that he had not evaluated the merit of Biovail’s claims against S.A.C. The research firms Gradient Analytics and Camelback Research Alliance were named as defendants in the suit. The dismissal follows a similar decision in February by Judge Stanley R. Chesler of Federal District Court in New Jersey, which threw out a similar lawsuit against S.A.C. filed by Biovail shareholders.
Business Week: After failing to reach an iPhone deal with Apple last year, China Mobile is going open-source, using Google's(GOOG) software in handsets known as OPhones.
CNNMoney.com:
- How banks really used TARP money
Forbes:
- Laurus Capital is using money raised for new funds to cash out of an old one. How much are its holdings really worth?
Politico:
- Charlie Cook, one of the best political handicappers in the business, sent out a special update to Cook Political Report subscribers Thursday that should send shivers down Democratic spines. Reviewing recent polling and the 2010 election landscape, Cook can envision a scenario in which Democratic House losses could exceed 20 seats."These data confirm anecdotal evidence, and our own view, that the situation this summer has slipped completely out of control for President Obama and Congressional Democrats. "Many veteran Congressional election watchers, including Democratic ones, report an eerie sense of déjà vu, with a consensus forming that the chances of Democratic losses going higher than 20 seats is just as good as the chances of Democratic losses going lower than 20 seats." Cook scrupulously avoided any mention that Democratic control of the House is in jeopardy but, noting a new Gallup poll showing Congress’ job disapproval at 70 percent among independents, concluded that the post-recess environment could feel considerably different than when Congress left in August. "We believe it would be a mistake to underestimate the impact that this mood will have on Members of Congress of both parties when they return to Washington in September, if it persists through the end of the Congressional recess."
Rasmussen:
- Confidence in the $787-billion economic stimulus plan proposed by President Obama and passed by Congress in February has rebounded a bit this month. A new Rasmussen Reports national telephone survey shows that 33% of U.S. voters now say the stimulus plan helped the economy. Thirty percent (30%) say the stimulus plan has hurt the economy. Another 30% say it has had no impact. Last month, just 25% thought the plan had provided a positive impact. In early June, 45% of Americans said the rest of the new government spending authorized in the economic stimulus plan should be canceled, but 36% disagreed.
LA Times:
- Reporting from Washington - How many lawmakers does it take to change a light bulb? You may soon find out, thanks to an effort underway to illuminate the U.S. Capitol dome with more energy-efficient lighting. The project stems from a push by House Speaker Nancy Pelosi (D-San Francisco) to make Congress a shining example of environmental responsibility. But like many projects in Washington, it is not without controversy. Republicans say the $1-million-plus price tag is too costly at a time of record federal budget deficits. But doing so isn't as simple as changing the bulbs. A lighting consultant was hired, at a cost of $671,900, to come up with a system that would not only save energy but also celebrate the Capitol's "unique identity" and "enliven the visual experience" of all those who view it, according to the House posting for a consultant.
Reuters:
- China's leading Internet portal, Sina Corp (SINA) is likely to call off its planned $1.4 billion purchase of Focus Media's (FMCN) core assets if the government fails to bless the marriage by a September deadline. Since Sina unveiled the deal in December -- the largest in China's opaque media sector -- China's commerce ministry has repeatedly put off reviewing the deal, asking for additional documents, frustrating both Nasdaq-listed companies. Sina and Focus have the option to either extend their talks or walk away by Sept 30, in a deal many analysts believed would bring about much needed consolidation in the crowded sector.
- U.S.business software maker Salesforce.com Inc (CRM) posted better-than-expected quarterly results and raised its outlook for the full year, sending its shares up 9 percent on Thursday. Salesforce, a pioneer in a field known as software as a service, or SaaS, said it added 3,900 new customers in the July quarter and a weakening US dollar helped it boost revenue 20 percent. Salesforce said it was seeing signs of demand stability but stopped short of predicting any recovery. It expected no change in the IT spending environment for the rest of its fiscal year. "Stabilization is improvement," Chief Executive Marc Benioff said in a telephone interview.
- Citigroup (C) shares rose nearly 9 percent on Thursday to their highest level in more than three months, leading a wider industry charge and reflecting growing confidence the embattled bank would become more profitable as it unloads troubled assets. Citi shares closed up 35 cents, or 8.47 percent, at $4.48 on the New York Stock Exchange. The stock has soared 56 percent during the past month, a bigger jump than any of its peers in the KBW Banks Index .BKX.
- Below are cash holdings for Standard & Poor's 500 companies, minus financials, utilities and transportation firms that have high cash reserves as part of their normal operating process, according to S&P:
- State-run oil giant Petrobras(PBR) said on Thursday it found light crude in reserves situated off the coast of the state of Rio de Janeiro. Preliminary studies indicate around 280 million barrels of light crude found about 120 kilometers (75 miles) off the coast of Rio de Janeiro state in the Campos basin, the company said in a statement.
- Nordson Corp (NDSN.O ), which makes precision dispensing equipment, posted better-than-expected third-quarter results, helped by rising sequential demand in its technology end markets, and forecast a strong fourth quarter, sending the company's shares up 10 percent after the bell.
Sankei:
- Toyota Motor Corp. sold 21,300 vehicles as of Aug. 18, an increase of 8% from a year earlier. Sales for the entire month may exceed those of August last year if the current pace is maintained. Toyota
Late Buy/Sell Recommendations
Citigroup:
- Upgraded (LTD) to Buy, target $18.
- Reiterated Buy on (HNZ), target $46.
- Upgraded (VAR) to Buy, target $45.
- Reiterated Buy on (COV), target $46.
- Upgraded (TECD) to Buy, target $43.
- Upgraded (PLCE) to Buy, target $37.
Goldman Sachs:
- Raised (HBC) share-price target 22% to HK$122.
Morgan Stanley:
- Rated (NFLX) Overweight, target $56.
- Rated (VPRT) Overweight, target $58.
- Reiterated Overweight on (PVH), boosted target to $38.
Night Trading
Asia Ex-Japan Inv Grade CDS Index 142.0 -8 basis points.
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- Existing Home Sales for July are estimated to rise to 5.0M versus 4.89M in June.
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BOTTOM LINE: Asian indices are mostly lower, weighed down by automaker and commodity shares in the region. I expect US
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