Late-Night Headlines
Bloomberg:
- Hewlett-Packard Co.(HPQ), the world’s largest personal-computer maker, reported third-quarter profit that met analysts’ estimates after job cuts and other expense reductions helped make up for sluggish technology demand. Excluding some costs, profit was 91 cents a share in the quarter ended July 31, Hewlett-Packard said in a statement today. Analysts surveyed by Bloomberg anticipated 90 cents. Hewlett-Packard, based in Palo Alto, California, was little changed in late trading after the results were released.
- Chinese stocks are “extremely frothy” and investors should have an “underweight” position in the country’s shares, said Devan Kaloo, whose Aberdeen Emerging Markets Funds has beaten 98% of peers this year. “I’m worried about a correction in a market that has been driven by cheap money,” Kaloo, who oversees $11.5 billion as head of global emerging markets at Aberdeen Asset Management Ltd., said in an interview in NY. Kaloo’s US-based Aberdeen Emerging Markets Fund has gained 46% this year, according to data compiled by Bloomberg. The declining profitability of Chinese companies and excessive bank lending will push shares in the world’s third-largest economy lower, Kaloo said. “There will be a day of reckoning for the misallocation of capital,” he said.
- Sovereign wealth funds are seeking safer investments after facing “vehement” domestic criticism over losses linked to the credit crisis and a plunge in oil prices, analysts at State Street Corp. said. “Criticism by the national media for their high-profile losses might even jeopardize their ability to take the long-term investment positions that have given them such a comparative advantage,” John Nugée, managing director and head of the official institutions group at Boston-based State Street, told reporters at a briefing in London yesterday. Sovereign funds, together worth about $3.2 trillion, operate as government-owned, special purpose investment vehicles. They are slashing risk, shoring up liquidity and investing more in their home markets after the credit crunch and a collapse in commodity prices led the value of their assets to plunge.
- When the political winds shift -- when a party is voted out of power or a policy is panned by the public -- Washington turns to its favorite pastime: the blame game. And so it is with President Barack Obama, who tripped on his sprint to the health-care-reform finish line. Voters, it seems, want to understand a little more about what ObamaCare will mean for them, what it will do to the doctor-patient relationship, and what it will cost future generations in higher taxes and, yes, rationed supply. Rather than examine the public’s concerns, the plans’ inconsistencies or the sheer irresponsibility of trying to ram something this big and complicated through Congress without a small-scale trial, the Obama administration is pointing fingers. Lots of them. Most of the targets are just plain silly:
- Exxon Mobil Corp.(XOM) will supply PetroChina Co. with liquefied natural gas annually over 20 years from the Gorgon project in Australia, which said the trade deal is worth about A$50 billion ($41 billion), the nation’s biggest. PetroChina, the country’s largest oil company, signed the agreement in Beijing today to buy 2.25 million metric tons a year of LNG from Exxon, the China unit of the Irving, Texas- based company said in an e-mailed statement. Exxon gave no pricing details on the contract.
Wall Street Journal:
- President Barack Obama, trying to regain control of the health-care debate, will likely shift his pitch in September, White House and Democratic officials said, as he faces pressure from supporters to talk more about the moral imperative to provide health insurance to all Americans. The president is expected to present a more emotional appeal during a conference call Wednesday with liberal religious groups. The new strategy envisions speeches rather than informal town-hall meetings, said a senior official. Mr. Obama has come under criticism from supporters who say the president has been mired in the details of insurance regulation, rather than promoting the lofty themes that got him elected. Obama campaign officials ridiculed Hillary Clinton's efforts to line up Washington power brokers behind her. Now, the White House boasts of having interest groups and the health-care industry -- from the AARP to drug makers to health insurers -- in support of health-care changes. But polling indicates the current White House tack is in trouble. An NBC News poll released Tuesday continues to show 41% supporting the way Mr. Obama is handling health-care reform; 47% disapprove. In April, 33% wanted a compete overhaul or the U.S. health-care system. That is down to 21%. Now, 31% said they want only minor changes, up from 21% in April.
- Large buyout firms are sitting on piles of cash these days. Blackstone Group, for instance, has some $14 billion of dry powder to invest in private equity alone. And Kohlberg Kravis Roberts & Co. said it has about $15 billion to invest globally.
- Two powerful House Democrats have sent a letter to insurance companies asking them to provide detailed information about their conferences and retreats, executive pay, and other business practices. The letter comes in the midst of a campaign by Democrats, as part of their push to build support for a health overhaul, to portray the insurance companies as the villains of the health-care system. Insurers say they are working with Congress on an overhaul and resent being cast as the bad guy. The letter is from Rep. Henry Waxman (D., Calif.), who is chairman of the House Energy and Commerce Committee, and Rep. Bart Stupak (D., Mich.), who heads the panel's Subcommittee on Oversight and Investigations. The letter, sent Monday, did not refer to the health overhaul debate, saying only that the committee "is examining executive compensation and other business practices in the health insurance industry." The letter requests the companies' help, but is not a subpoena. Mr. Waxman has a long history of using Congress's investigative powers to turn a critical eye on industry and government. Late last year he ousted Rep. John Dingell (D., Mich.) as chairman of the Energy and Commerce Committee, and he has been overseeing legislation on the Democrats' two top priorities, health care and climate change. Top Democrats have blasted the insurance industry, and they now refer to their initiative as "health-insurance reform" rather than "health reform." The Waxman-Stupak letter asks companies to provide, by mid-September, the compensation packages of any employee or officer who made more than $500,000 in any year from 2003 to 2008. It also asks the companies to list all their board members and their compensation. The congressmen also want information "listing all conferences, retreats or other events held outside company facilities from January 1, 2007, to the present." In addition, the letter demands more basic information, such as the companies' total revenues, net income, and total dividend payments, as well as premium revenue, sales expenses and profits.
- Labor Secretary Hilda Solis has spent her first few months in office focusing on handing out $46 billion in stimulus money. Now, her department is adding staff and signaling it will soon begin putting in practice the more assertive regulation of business she promised early in her tenure. Ms. Solis has begun hiring 670 new investigators to enforce labor regulations.
- Taliban insurgents shelled and bombed the Afghan capital in separate attacks that hit the presidential palace and killed eight people in a NATO convoy, in a show of intimidation that threatened to damage Thursday's presidential vote and unsettle the international coalition supporting U.S. strategy here.
- Although administration officials are eager to deny it, rationing health care is central to President Barack Obama's health plan. The Obama strategy is to reduce health costs by rationing the services that we and future generations of patients will receive. The White House Council of Economic Advisers issued a report in June explaining the Obama administration's goal of reducing projected health spending by 30% over the next two decades. That reduction would be achieved by eliminating "high cost, low-value treatments," by "implementing a set of performance measures that all providers would adopt," and by "directly targeting individual providers . . . (and other) high-end outliers." The president has emphasized the importance of limiting services to "health care that works." To identify such care, he provided more than $1 billion in the fiscal stimulus package to jump-start Comparative Effectiveness Research (CER) and to finance a federal CER advisory council to implement that idea. That could morph over time into a cost-control mechanism of the sort proposed by former Sen. Tom Daschle, Mr. Obama's original choice for White House health czar. Comparative effectiveness could become the vehicle for deciding whether each method of treatment provides enough of an improvement in health care to justify its cost.
MarketWatch.com: Toyota Motor Corp. will begin buying batteries for its hybrid vehicles from Sanyo Electric Co. in 2011, as Toyota's battery joint venture can't keep up with demand, according to a report Wednesday.
CNBC.com: Hedge funds are having their best year since 1998, yet most fund managers still are well below their peaks before the market's meltdown last year, industry analysts said. Hedge fund assets rose 2.5 percent in July, contributing to a 9.9 percent climb over the first seven months of the year, and the best year-to-date results since 1998, Credit Suisse/Tremont Hedge Fund Index said. The industry has a long way to go to recover from 2008, when funds on average suffered their worst year ever and investors redeemed record amounts of money.
- It could be this week, it could be next week, or it could even be in September. But no matter when it happens, traders remain convinced the stock market is set up for a pullback that could take it another 10 percent or so lower before it can start to really move higher.
Business Week: SanDisk Corp.(SNDK) said Tuesday that it has reconfigured its Cruzer Enterprise Secure USB flash drives to meet specific federal government requirements, such as making them waterproof and usable by the visually impaired. SanDisk said the waterproof feature will help prevent the loss of critical information if the drive is immersed or exposed to rain, which will be useful to military and health care personnel.
- A handful of interesting surveys and market research studies pertaining to Apple have landed in my in-box in the last few days, and I thought I’d summarize them all in one post.
CNNMoney.com:
- Seeking to lure more buyers at a time of intense distress, the FDIC has dusted off the oft-touted, but rarely used, plan of setting up bad banks. Will it work this time?
- More customers trading in vehicles under the Cash for Clunkers program bought cars from Toyota than any other manufacturer, according to new government statistics.
Lloyd’s List:
- European container volumes are still showing no sign of recovery, the European Liner Affairs Association has said as it released its latest statistics. There was an improvement in export volumes, but “overall the trend shows no sign of recovery”, despite some regional variations, the ELAA said.
CBS:
- CBS News has learned that up to 60,000 people have cancelled their AARP memberships since July 1, angered over the group's position on health care.
LA Times:
- Although some students already have returned to school, the average American family still has more than half of its back-to-school shopping to complete. According to the survey released today by the National Retail Federation, the average American family had completed 41.6% of back-to-school shopping as of Aug. 11; families of college students had completed 41%; and 30.5% of families with school-age children (kindergarten through high school) hadn't even started their shopping. The retail trade group said in July that total back-to-school and back-to-college spending would reach $47.5 billion this year. According to the earlier survey, families of students in grades K through 12 will spend, on average, $548.72 on school merchandise, a decline of 7.7% from $594.24 in 2008. Families of college students will spend, on average, $618.12, up slightly from last year’s $599.38.
Reuters:
- ABC News reported on Tuesday that its U.S. consumer confidence index inched up in the latest week, as many Americans continued to be less worried about their personal finances. The Consumer Comfort Index rose to -46 in the week to Aug. 16 from -47 the prior week, though the index still remains in deeply negative territory.
Financial Times:
- Global corporate bond issuance has risen above the $1,000bn mark – the first time it has broken through this threshold in a single year – with four months remaining of 2009. The boom is because of the difficulty companies face in obtaining bank loans and strong demand from investors, who can gain a big yield pick-up on corporate paper compared with government bonds. Investors have switched more of their cash into corporate bonds because they offer better returns than the low interest rates on bank deposits and savings accounts. Corporate bond issuance has risen to $1,103bn so far this year, beating the annual record of $898bn in 2007, according to Dealogic, the data provider.
- US regulators put direct pressure on Citigroup (C)to replace its finance chief only weeks before his surprise departure, according to a confidential agreement that contrasts with the two sides’ account of the episode. The document – parts of which have been seen by the Financial Times – will confirm investors’ belief that the replacement of Ned Kelly by Citi veteran John Gerspach in July after fewer than four months in the job had been triggered by regulators. It also emphasizes the extent of the authorities’ involvement in the internal workings of Citi, which recently ceded a 34 per cent stake to the government.
Telegraph:
- Germany's economics ministry is drawing up a raft of special measures with the Bundesbank to head off a fresh financial crisis, fearing that a loan squeeze by struggling banks will set off a serious credit crunch early next year.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (BAC)/(JPM) senior holding company bond..
RBC Capital:
- Rated (FDX) Outperform, target $91.
- Rated (FWRD) Underperform., target $23
- Rated (WERN) Underperform, target $19.
- Rated (ODFL) Outperform, target $45.
- Rated (LSTR) Outperform, target $44.
- Rated (CHRW) Outperform, target $70
- Rated (GWR) Outperform, target $38.
- Rated (CNW) Outperform, target $58.
- Rated (HTLD) Underperform, target $16.
Night Trading
Asia Ex-Japan Inv Grade CDS Index 140.0 -8 basis points.
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Earnings of Note
Company/EPS Estimate
- (FLO)/.29
- (BJ)/.62
- (EV)/.27
- (PVH)/.44
- (NTAP)/.20
- (PETM)/.29
- (SNPS)/.41
- (GYMB)/.38
- (HAR)/-.53
- (LTD)/.16
Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,200,000 barrels versus a +2,519,000 barrel gain the prior week. Gasoline supplies are expected to fall by -1,000,000 barrels versus a -927,000 barrel decline the prior week. Distillate inventories are estimated to rise by +700,000 barrels versus a +786,000 barrel versus build the prior week. Finally, Refinery Utilization is estimated to rise by +.1% versus a -1.06% decline the prior week.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US
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