Weekend Headlines
Bloomberg:
- Copper rose to the highest price in almost 11 months on speculation that a revival of economic growth will spur demand for metal. Lead prices jumped to a one- year high. U.S. consumer spending rose in July, the third straight monthly gain, and European confidence in the economic outlook increased this month to the highest since October, government reports showed. Copper prices climbed for the seventh straight week, the longest rally since April 2007. “All the positive economic news is adding to the momentum of the market,” said Gijsbert Groenewegen, a partner at Gold Arrow Capital Management. “It feels like copper just can’t come down for the moment.”
- Ford Motor Co.(F), seeking labor concessions granted to U.S. rivals, is working to bridge a gap with the United Auto Workers amid union resistance to a second round of 2009 givebacks, people familiar with the talks said. Ford’s labor chief, Joe Hinrichs, was told by UAW officials when bargaining began on Aug. 25 that members would reject further concessions, said two of the people, who asked not to be identified because the sessions are private. Senior negotiators held a daylong meeting yesterday, a third person said. “Their differences are significant and difficult, but they’re talking,” said Harley Shaiken, labor professor at the University of California at Berkeley.
- China Investment Corp., the country’s sovereign wealth fund, is continuing to shift its investments away from cash and is investing billions in hedge funds and private-equity funds, Chairman Lou Jiwei said. China Investment has invested “many times” the $500 million that CIC was reported to have placed in hedge funds and private-equity firms in June, Lou said today in an interview in Beijing. He said China Investment was also investing in fund-of- funds.
- New Mexico Governor Bill Richardson won’t be charged in a yearlong investigation of an alleged pay- to-play scheme, even though “pressure from the governor’s office resulted in the corruption of the procurement process,” the state’s top federal prosecutor said in a letter. The decision against seeking charges isn’t an “exoneration” of anyone’s conduct, wrote New Mexico U.S. Attorney Gregory Fouratt in an Aug. 27 letter to lawyers for Richardson and his former top aides. The probe examined how CDR Financial Products of Los Angeles won $1.5 million of work from the New Mexico Finance Authority. CDR was hired in 2004 to provide guidance regarding interest-rate swaps and escrow funds for $1.6 billion of debt as part of Richardson’s transportation project, known as Governor Richardson’s Investment Partnership. CDR and its president, David Rubin, donated $110,000 to Richardson political committees from 2003 to 2005, including a $75,000 contribution to ¡Si Se Puede! Boston 2004 Inc., formed to help pay expenses at the 2004 Democratic National Convention in Boston, where Richardson was chairman. The probe prompted Richardson to withdraw from consideration to be President Barack Obama’s commerce secretary.
- Cairn India Ltd. today started production at its biggest oil field in Rajasthan state, as Prime Minister Manmohan Singh inaugurated a project that will help cut the nation’s dependence on energy imports. The Mangala field, operated by the unit of U.K.-based explorer Cairn Energy Plc, will have an estimated peak output of 175,000 barrels a day by 2011, equivalent to 20 percent of the country’s current oil production, and be the country’s second- biggest producer after Oil & Natural Gas Corp.’s Mumbai High.
- Asia isn’t doing remotely enough to achieve better economic balance. China is a case in point, and an important one; it may just prove to be a microcosm of what Asia will experience in the years ahead.
- Apple Inc.(AAPL) may sell more than 3 million iPhones in China during the next year as it enters the world’s largest wireless market. Of the 32.5 million iPhone sales projected worldwide through September 2010, more than 10 percent may be sold in China, according to Piper Jaffray & Co. China Unicom (Hong Kong) Ltd., the nation’s second-largest wireless carrier, said last week it will begin offering the 3G and 3GS models next quarter. “China was the last missing piece to the iPhone international story,” said Gene Munster, an analyst with Piper Jaffray in Minneapolis. He recommends buying Cupertino, California-based Apple’s shares, which he doesn’t own.
Wall Street Journal:
- Consumers are helping pull the technology sector out of one of its worst-ever slumps, and optimism is building that businesses may also start switching on their spending soon. That upbeat picture emerged as some bellwether technology suppliers issued numbers that were stronger than Wall Street expected, though still reflecting the recession's harsh effects. Their announcements point to improved demand for products such as laptop computers and flat-panel televisions -- particularly in Asia, where the Chinese government's stimulus spending appears to be sparking sales. The latest evidence came from Intel Corp., which supplies the chips that serve as electronic brains in PCs. On Friday, the Silicon Valley giant -- which earlier this year pointed to signs of recovery -- boosted its third-quarter revenue forecast by 6%. Intel's remarks came one day after Dell Inc., the No. 2 PC maker by shipments, reported results for its July-ended quarter that were well below a year earlier but showed improvement from the three previous months. Dell Chief Executive Michael Dell also expressed confidence that factors such as new Windows software from Microsoft Corp. will drive a turnaround as companies upgrade their hardware next year. "I am here to tell you there's going to be a refresh cycle next year," he said during a conference call. "It's not all going to come in the first month or the second month, but over the course of the year, there will be a big refresh cycle." Analysts say the recent activity is even more dramatic in China, which is second to the U.S. in PC sales and has a greater proportion of first-time buyers. In the second quarter, customers there bought 11.7 million computers, up nearly 14% from the year-earlier period. Corning Inc., which supplies glass used to make flat-screen TVs and computer monitors, has been unable to raise output quickly enough to satisfy surging demand for LCDs, especially in China. Corning expects LCD glass volume to rise 15% this year, even as prices continue to increase.
- Native Americans and the Public Option. After decades of government-run care, some Indians are finally saying enough. Montana Sen. Max Baucus, a leading architect of national health-care reform, visited the Flathead Indian Reservation near Pablo, Mont., in May, and he was confronted with a surprising critique. "I hope any [new health-care] plan does not forget the nation's first people," Dr. LeAnne Muzquiz told the senator. Another person in the audience, according to the newspaper the Missoulian, followed up by telling the senator that the legislation pending in Congress would in fact do just that. Native Americans have received federally funded health care for decades. A series of treaties, court cases and acts passed by Congress requires that the government provide low-cost and, in many cases, free care to American Indians.
- Almost a year since the worst market crisis in generations, some investors are embracing risk again like the crash didn't happen. But for many hedge funds, the lessons learned from the crisis are causing them to keep a tight rein on their risk management, and their traders.
- Investors in hedge funds run by Cerberus Capital Management LP, whose audacious multi-billion dollar bet on the U.S. auto industry went bust, are bolting for the door, clinching one of the highest-profile falls from grace of a superstar in the investment world. Clients are withdrawing more than $5.5 billion, or nearly 71% of the hedge fund assets, in response to big investment losses and their own need for cash, according to people familiar with the matter.
- Deep-value manager Third Avenue Management Inc. is launching its first debt fund, which will invest in a concentrated portfolio across the credit spectrum. Third Avenue Focused Credit Fund, available to investors Monday, will invest in debt with any credit rating or without a credit rating, and may invest without limitation in distressed securities or other debt that is in default or the issuers of which are in bankruptcy. It may also hold significant positions in equity or other assets it receives as part of a reorganization process. The fund will invest in below-investment-grade credits the manager believes to be undervalued, including junk bonds, bank loans and convertible bonds or preferred stock. It may also invest in debtor-in-possession financing.
MarketWatch.com:
- The Democratic Party of Japan's resounding victory in Japan's general election will likely trigger short-term gains on Tokyo's stock exchange, financial market observers said Sunday, touching off a potential weakening of the yen and sending bond yields higher.
- The chairman and chief executive of International Lease Finance Corp., an aircraft-leasing company owned by troubled American International Group, is in talks to buy a portion of the company's aircraft portfolio to start a new leasing company, according to a media report Sunday. But any potential deal between Steven Udvar-Hazy and AIG(AIG) is at the "preliminary stage," and would require government approval.
- A study published in the New England Journal of Medicine Sunday held good news for pharmaceutical giant Astra-Zeneca(AZN), finding that its Brilinta drug lowers death rates compared to that of a competing product from its top rivals. Brilinta, known as ticagrelor, "outperforms as compared with clopidogrel in patients with acute coronary syndromes significantly reduced the rate of death from vascular causes, myocardial infarction, or stroke," the study said.
CNBC.com: Facebook users enthusing about an upcoming holiday or a recently purchased high-tech gadget may not just be telling their friends but also potential burglars, warns an insurance company. A survey of 2,092 social media users by British-based Legal & General found nearly four in ten, or 38 percent, of people using social networking sites like Facebook or Twitter post details about holiday plans and 33 percent details of a weekend away. "Coupled with the finding that an alarmingly high proportion of users are prepared to be 'friends' online with people they don't really know, this presents a serious risk to the security of people's home and contents," said the insurer. In a report called "The Digital Criminal," Legal & General said people used social media sites to connect with people who were essentially strangers, which could provide potential thieves with vital, personal information.
IBD: It's been the best of times for ITT Educational Services (ESI). With the economy struggling, students have flocked to ITT's bare-bone campuses to get the nuts-and-bolts training they need to find jobs. With programs in information technology, health care and criminal justice, ITT offers a future for those who find themselves stuck in dead-end jobs. A big TV advertiser, ITT has even benefited from lower rates in a soft ad market. The growth in enrollment, revenue and profit have all been spectacular. In the quarter ended June 30, new student enrollment grew by more than 33% vs. the prior year.
NY Times:
- Representative Charles B. Rangel failed to report hundreds of thousands of dollars in income and assets on his financial disclosure forms for 2002 through 2006, including tens of thousands of dollars in rental income from a Harlem brownstone he sold in 2004, according to records filed this month with the clerk of the House of Representatives. Mr. Rangel, who is facing investigations by two House subcommittees into his personal finances and fund-raising, filed amended financial disclosure forms on Aug. 12 acknowledging that he had omitted an array of assets, business transactions and sources of income.
- SPRING came late to the Manhattan real estate market this year. After a nearly moribund stretch at the end of 2008 and the beginning of 2009, brokers are reporting that the number of signed contracts rose in June, July and the first weeks of August, traditionally a slow period. The spring selling season usually begins sometime around March, the brokers noted. This year, however, the market didn’t begin to thaw until May, when it apparently picked up enough momentum to chase away the August doldrums.
- A restive antiwar movement, largely dormant since the election of Barack Obama, is preparing a nationwide campaign this fall to challenge the administration’s policies on Afghanistan. Anticipating a Pentagon request for more troops there, antiwar leaders have engaged in a flurry of meetings to discuss a month of demonstrations, lobbying, teach-ins and memorials in October to publicize the casualty count, raise concerns about the cost of the war and pressure Congress to demand an exit strategy.
- The Sarney case has underscored concerns across Latin America that despite a decade defined by the rise of populist leaders who have promised to help the downtrodden, many judges continue to bow to the whims of the powerful in censoring journalists.
- WITH many car manufacturers preparing to hit the streets with fully electric cars in the next few years, some real estate developers are getting ahead of a possible trend by installing car-charging stations in their apartment buildings.
Washington Post:
Is Discovery Communications(DISCA) gearing up for a jump into the suddenly hot e-book space? A filing made public this week by the U.S. Patent and Trademark Office raises that possibility. According to the filing, the Silver Spring-based media company applied in February for a patent on a product it describes as an "electronic book having electronic commerce features."
- How a Detainee Became An Asset. Sept. 11 Plotter Cooperated After Waterboarding. After enduring the CIA's harshest interrogation methods and spending more than a year in the agency's secret prisons, Khalid Sheik Mohammed stood before U.S. intelligence officers in a makeshift lecture hall, leading what they called "terrorist tutorials." In 2005 and 2006, the bearded, pudgy man who calls himself the mastermind of the Sept. 11, 2001, attacks discussed a wide variety of subjects, including Greek philosophy and al-Qaeda dogma. In one instance, he scolded a listener for poor note-taking and his inability to recall details of an earlier lecture. Speaking in English, Mohammed "seemed to relish the opportunity, sometimes for hours on end, to discuss the inner workings of al-Qaeda and the group's plans, ideology and operatives," said one of two sources who described the sessions, speaking on the condition of anonymity because much information about detainee confinement remains classified. "He'd even use a chalkboard at times." These scenes provide previously unpublicized details about the transformation of the man known to U.S. officials as KSM from an avowed and truculent enemy of the United States into what the CIA called its "preeminent source" on al-Qaeda. This reversal occurred after Mohammed was subjected to simulated drowning and prolonged sleep deprivation, among other harsh interrogation techniques.
- FBR Capital Markets, the Arlington-based investment bank, said it is starting a "mini" prime brokerage business to tap demand from hedge funds with assets of less than $100 million.
Politico:
- Senate Majority Leader Harry Reid said Friday that he was not bound by a controversial deal negotiated between the White House and pharmaceutical companies, telling thousands of Nevada voters on a conference call that “I have not agreed with anybody to do that.” The drug industry told the White House this summer that it would cut future drug costs by $80 billion in exchange for assurances that any health care legislation would prevent the government from negotiating for lower drug prices. As a result of the deal, the industry is bankrolling an ad campaign touting Barack Obama’s health care overhaul. But Democrats in Congress have balked at the agreement. “I’m a Democrat in the Senate, and I haven’t agreed,” Reid told a caller.
- Sen. Orrin Hatch (R-Utah) warned on Sunday that "potential 9/11" scenarios are "happening all the time" and that Eric Holder's investigation of rough CIA interrogations could have a chilling effect. Appearing on CNN's "State of the Union," Hatch said the investigation was in part political and that "they're making it so the people at the CIA are afraid to do anything." "So we come onto a potential 9/11, and they're happening all the time – that all I can say about it," he said, adding that America needs the best people working on those without the chilling effect of later investigations.
- Sen. Dianne Feinstein (D-Calif..), the chairwoman of the Senate Intelligence Committee, criticized Attorney General Eric Holder on Sunday for moving ahead with an investigation into harsh CIA interrogation techniques. “Candidly, I wish the attorney general had waited,” Feinstein said on CBS’s “Face the Nation.”. “Every day something kind of dribbles out into the public arena. Very often it has mistakes, very often it’s half a story. I think we need to get the whole story together and tell it in an appropriate way.” Sen. John McCain (R-Ariz) also expressed his concern with Holder’s decision on the same program, saying that he was worried about the “morale and effectiveness” of the CIA. He said he supported President Barack Obama’s conclusion that “we ought to go forward and not back.”
Rasmussen Reports:
- The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 32% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-two percent (42%) Strongly Disapprove. That’s the highest level of Strong Disapproval yet recorded for this President and it gives Obama a Presidential Approval Index rating of -10 (see trends).
- If they could vote to keep or replace the entire Congress, just 25% of voters nationwide would keep the current batch of legislators. A new Rasmussen Reports national telephone survey finds that 57% would vote to replace the entire Congress and start all over again
StarTribune:
- Federal prosecutors have charged a top accounting executive at an Illinois investment firm for helping to defraud investors connected to Wayzata businessman Tom Petters. Harold Alan Katz, a vice president of finance and accounting for Lancelot Investment Management in Chicago, conspired to create fake banking transactions to make the fund's investors believing that Petters was repaying loans in a timely manner, according to documents filed with U.S. District Court in St. Paul. The documents, unsealed Friday by U.S. District Judge Paul Magnuson, indicate that Katz has struck a plea agreement and will likely cooperate with prosecutors in their criminal case against Petters and Lancelot founder and owner Gregory Bell.
Forbes:
- A burgeoning glut in U.S. natural gas supplies is moving into uncharted territory. By fall, the U.S. might find out just how much it can--and can't--store, which could depress already low prices of $3 per 1,000 cubic feet. The brim is believed to be just under 4 trillion cubic feet in the Lower 48 states, but, "We don't really know for sure because we have never been here before," says Carl Kirst, an energy analyst at BMO Capital Markets. The Energy Information Administration reported on Thursday that the amount of so-called "working gas"--the amount that can be used from storage--hit 3.258 trillion cubic feet last week, the highest on record for August, enough to meet about 54 days of average consumption in the U.S., far more than needed in summertime.
Seekimg Alpha:
- I have a particular interest in the investment results now being reported by the major university endowments. I teach a course in investment management for not for profits and one of the major themes in the class is whether the "Yale Endowment Investment Strategy" is appropriate for smaller not for profits. It seems that after the model has been subject to the real world mega stress test of the past year many large endowments have been asking that question as well. The Yale model outlined most clearly in the book by David Swensen the head of Yales' endowment: Pioneering Portfolio Management allocates large proportions of the portfolios to alternative asset classes:
Reuters:
- Chinese state-owned enterprises (SOEs) may unilaterally terminate derivative contracts with six foreign banks that provide over-the-counter commodity hedging services, a leading financial magazine said. China's SOE regulator, the State-owned Assets Supervision and Administration Commission (SASAC), has told the financial institutions that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying.
It did not name the banks or the firms in question but cited a SASAC official as saying that almost every SOE involved in foreign exchange or trade had some exposure to derivatives such as crude oil, non-ferrous metals, agricultural commodities, iron ore and coal, although only 31 SOEs were licensed to do so.
- General Motors said on Sunday it has agreed to set up a light commercial vehicle production venture with major Chinese automaker FAW Group, with total investment of 2 billion yuan ($293 million). The 50-50 joint venture, based in the northeast China city of Changchun in Jilin province, will make light-duty trucks and vans, GM said in a statement. "For us in China, this is an important complement to the rest of our portfolio," Kevin Wale, president and managing director for GM's China operations, told reporters in a conference call.
Financial Times:
- Brazil is preparing to infringe patents on US pharmaceutical products, in retaliation against subsidies for US cotton farmers, according to the Brazilian press. The World Trade Organisation is expected to rule on Monday that Brazil can contravene the drug patents, say the reports. Brazil has become increasingly frustrated by the US refusal to remove its subsidies and, under pressure from its own cotton growers, is reported to be preparing to retaliate. One option would be to raise import tariffs against US goods. But Brazil is a relatively small US market, taking $32bn out of $1,287bn of US exports last year. Instead it is preparing to take action over intellectual property, an area of much greater significance to the US. The WTO is expected to include this possibility in its ruling on Monday. According to a report in a Brazilian newspaper the government has prepared a “provisional measure” – a presidential decree that takes immediate effect, although it must later be ratified by Congress – to allow Brazilian pharmaceuticals companies to copy medicines protected by US patents.
- Activist funds have failed to shake off many of the troubles of 2008 in spite of record performances and large inflows of new capital for the hedge fund industry as a whole this year. Events over the past month have underscored the difficulties many large activist funds are facing.
- Switzerland’s top private bankers are convinced they can avoid a damaging witch-hunt over their activities by US authorities, in the wake of UBS’s tax row. In interviews with the Financial Times, senior executives of Credit Suisse and Julius Baer, the country’s number two and number three private bank businesses after UBS, both said they were sanguine.
Euro am Sonntag:
- Jan Hatzius, chief US economist at Goldman Sachs Group, said another US US
Weekend Recommendations
Barron's:
- Made positive comments on (ATVI) and (EXPD).
- Made negative comments on (VLO), (SUN), (AIG) and (TSO).
Night Trading
Asian indices are -.50% to +.25% on avg.
Asia Ex-Japan Inv Grade CDS Index 134.50 -.50 basis point.
Morning Preview
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Earnings of Note
Company/Estimate
- (JAVA)/-.19
- (FMCN)/.17
- (SINA)/.29
Upcoming Splits
- None of note
Economic Releases
9:45 am EST
- The Chicago Purchasing Manager for August is estimated to rise to 48.0 versus 43.4 in July.
Other Potential Market Movers
- The NAPM-Milwaukee report, Dallas Fed Manf. Activity, Bloomberg FCI Monthly and the Lazard Retail & Apparel conference
BOTTOM LINE: Asian indices are mostly lower, weighed down by automaker and shipping stocks in the region. I expect US The Portfolio is 100% net long heading into the week.
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