Late-Night Headlines
Bloomberg:
- U.S. interest-rate swap spreads narrowed as the cost of three-month dollar loans in London fell for a 15th day and the government sold a record $38 billion in three-year Treasury notes. The difference between the two-year swap rate and the comparable-maturity Treasury note yield, known as the swap spread, narrowed 2.19 basis point to 33.81 basis points. The spread is based in part on expectations for the London interbank offered rate, or Libor, and is used as a gauge of investor perceptions of credit risk. Swap spreads with maturities of seven years or greater narrowed. “Libor rates have come down sharply in the past month,” wrote Joseph Abate, a money-market strategist in New York at Barclays Plc, in a note on Sept. 4. “At the same time, the Libor-OIS spread, a traditional measure of bank counterparty risk, has come in to less than 15 basis points and is returning to pre-crisis levels. We believe nearly all the compression has already occurred.”
- The slump in shipping rates signals that copper prices will decline after doubling this year as China “China We’re not seeing a pickup in real economic demand or real activities.” Copper for three-month delivery on the London Metal Exchange could drop as much as 23% to $5,000 a metric ton within a few months, Bhar said. Prices of Capesize bulk carriers have fallen by as much as 50% from a June peak and the trend will continue as inventories remain high, Eugen Weinberg, senior analyst with Commerzbank AG, wrote in an Aug. 30 report. That, combined with China
- Candidate Barack Obama pledged to stand up for workers by cracking down on imports from China. President Obama has promised to fight protectionism and trade barriers. His administration must decide which path to take starting today, in two of the biggest U.S. trade cases against China. U.S. Steel Corp. and the United Steelworkers union are behind a complaint on imported pipe. The union, an Obama political ally, is also pushing for curbs on Chinese auto tires. “These are decisions that can’t be avoided, so they’ll be perceived as setting the tone for what the Obama administration trade policy is,” said Timothy Keeler, the former chief of staff for the U.S. Trade Representative’s office. Keeler, a lawyer at Mayer Brown LLP in Washington, represents GITI Tire Pte Ltd., the largest Chinese maker of tires, in the trade case. The decisions may help shape the future of U.S.-China commercial relations. The two countries traded more than $400 billion last year, making China the second-largest U.S. trading partner after Canada. China is also the largest foreign holder of U.S. debt, with $776.4 billion.
- Carlson Capital LP, a $4.4 billion hedge-fund firm based in Dallas, hired Jason Karp, a former executive of SAC Capital Advisors LP, in the new position of co- chief investment officer, according to a letter sent to investors today. Until last year, Karp was director of research and portfolio manager of global equities at CR Intrinsic Investors, a unit of Steven Cohen’s Stamford, Connecticut-based hedge fund.
- NASA needs an extra $3 billion a year to send astronauts back to the moon or to deep-space flybys of Mars or asteroids and avoid an “unsustainable trajectory” of setting goals without adequate funding, a panel told President Barack Obama.
- California and Los Angeles County are offering $150,000 for information leading to the arrest and conviction of an arsonist who started the Station fire, which has killed two and burned an area larger than Chicago.
- With his job approval ratings slipping and his signature domestic undertaking in trouble, President Barack Obama will attempt to retake the initiative on health-care reform with a televised address to a joint session of Congress this evening. So what should the president try to achieve this evening when he attempts to enlist support for his health-care overhaul? He could start by explaining the seeming inconsistency in his plan to save money by spending money. “If I went to my board of directors with a similar proposal for ‘cost reduction,’ they would laugh me out of the conference room -- and then my job!” writes reader Michael Dunlop, vice president of operations/IT at Parts Associates Inc. in Cleveland.
- Chinese investors opened fewer new share trading accounts for a fifth week, the longest stretch of declines in more than a year, after the benchmark Shanghai Composite Index retreated. A total of 365,825 accounts were opened last week, down from this year’s high of 700,617 in the five days ended July 31, according to the China Securities Depository & Clearing Corp. Account openings slowed as the Shanghai Composite Index slumped 22 percent last month, the worst performance among 89 gauges tracked by Bloomberg worldwide.
- LG Group plans to increase this year’s hiring plan by 60% to 9,600 people, MoneyToday reported. In the second half of the year, LG Electronics Inc., LG Display Co. and affiliates will hire 4,200 people.
Wall Street Journal:
- Investors, corporate boards and managers' focus on short-term gain has become so detrimental to the economy that unless they voluntarily change their behavior, regulators should step in, according to an Aspen Institute statement to be released Wednesday that is signed by Berkshire Hathaway Chief Executive Officer Warren Buffett, Vanguard Group founder John Bogle and former International Business Machines CEO Louis Gerstner, among others. The Aspen Institute statement argues the problem is actually systemic and regulators need to change incentives to encourage long-term investing. The crux of the problem lies with changes in the investing climate, said UCLA Law School professor Lynn Stout, who helped draft the statement. "There's a bias in the system and as long as our system is biased toward short-term trading, we have to expect that's what we're going to get," she said. To encourage investors to take the long view, the statement suggests that the government could change the tax-code to reward long-term holders over short-term holders -- by, for example, setting capital gains tax rates that get gradually lower the longer an investor hangs on to a companies shares.
- Nearly one year after the collapse of Lehman Brothers sent shock waves across the globe, the world is a different place. The investment bank's messy death intensified the deepest recession since the Great Depression. It helped open the way to a bigger role for government in managing the economy. It cast doubts in the public's mind about the wisdom of relying on markets to correct themselves. But to a surprising degree, there are some big things that Lehman's demise hasn't changed. On the regulatory front, Democrats' efforts to rework the rules for finance have bogged down amid infighting between federal regulators, fury among bankers and opposition from many lawmakers who believe that further expanding the government's reach will only create new problems. The all-consuming debate over health care has damped enthusiasm for tackling such complex legislation. Meanwhile, major U.S. banks have regained their footing, and some of their swagger. Profits are off their lows. Large compensation packages are back. And so is risky business. Companies are selling exotic financial products similar to those that felled markets and the world economy last fall. And banks' appetite for risk has grown: The nation's top five banks collectively stood to lose more than $1 billion on an average day in the second quarter of 2009 should their trading bets go sour, a record level. Now, the federal government is locked in a kind of regulatory limbo. U.S. officials say they are committed to preventing history from repeating and have pleaded for fresh powers to do so. But today, they have few new options -- excepting another bailout -- should financial markets seize up again or a large institution totter. "There's no fundamental change in the way the banks are run or regulated," said Peter J. Solomon, a former Lehman vice chairman who runs an eponymous investment bank in New York. "There's just fewer of them."
- Obama and the Bureaucratization of Health Care by Sarah Palin. Writing in the New York Times last month, President Barack Obama asked that Americans "talk with one another, and not over one another" as our health-care debate moves forward. I couldn't agree more. Let's engage the other side's arguments, and let's allow Americans to decide for themselves whether the Democrats' health-care proposals should become governing law.
- The health-care debate threatens to keep energy and climate legislation on the back burner when the Congress returns from recess Tuesday and enters the final push of 2009.
- Before last year's panic, it seemed like the only thing hedge-fund investors cared about was getting into the hottest funds. Now the No. 1 goal for some of those investors is making sure they can get their money back. After learning the hard way that making a hedge-fund investment and cashing out of it are two very different things, pension funds, endowments and other investors are paying closer attention to the terms of redemption agreements -- and are tying up cash only if they are sure they won't need it anytime soon. "Assessing liquidity and the ability to get money out of hedge funds has become among the most important issues for investors," says Reid Bernstein, a veteran investor in hedge funds who helps run OneCapital Management Partners LLC in New York.
- NYSE Euronext(NYX) plans to bring in seven major Wall Street firms as partners to bolster its U.S. options-trading business. The New York Stock Exchange parent plans to announce Wednesday an agreement in principle to sell stakes in its NYSE Amex unit, which has seen its market share fall from above 30% a decade ago to about 7% now.
- The Obama administration, worried that tens of thousands of people could fall ill with H1N1 swine flu before a new vaccine is available later this fall, is urging Americans to adopt a series of preventive actions to slow the spread of the disease. The emphasis on measures such as washing hands often and staying home when sick comes as schools across the country report a surge in flu-like symptoms.
IBD:
- The CFTC seems poised to impose position limits on energy ETFs and on traders who use the regulated exchanges to buy and sell energy futures contracts.
- How do you fatten profits in a down economy? Michael McDevitt, chief executive of diet products company Medifast (MED), has found a good formula: Provide a meal plan that helps consumers shed pounds for a low price, and give them choices of weight-loss programs to meet their needs.
Forbes:
- Why Are These Health Care Fixes Ignored?
- As stimulus spending ramps up, a little-known executive order could prove a boon for America's unions.
Politico:
- As Congress waits on the president’s health care speech Wednesday, Barack Obama is in the unusual position of waiting on six senators most of the public couldn't pick out in a crowd. They’ll decide whether Obama has any hope of getting significant Republican votes for health reform — or whether he will have to go it alone with only Democrats, a politically risky path. Senate Finance Committee Chairman Max Baucus (D-Mont.) gave the bipartisan Gang of Six until 10 a.m. Wednesday to submit ideas on his compromise health reform bill. At that point, he will decide whether to continue the talks or possibly abandon hopes of a broadly bipartisan bill. The goal is to have a decision ahead of Obama’s speech to a joint session of Congress — and whatever Baucus decides could chart the course of health care reform in the Congress.
Rasmussen:
- Little has changed this week on the Generic Ballot as Republican Congressional candidates continue to hold a seven-point lead over Democrats. The latest Rasmussen Reports national telephone survey shows that 44% would vote for their district’s Republican congressional candidate while 37% would opt for his or her Democratic opponent. Support for both parties rose one point over the past week, giving Republicans their highest level of support of the past several years.
EE Times:
- Microchip Technology Inc.(MCHP) has raised its forecast for its second quarter fiscal 2010, ending Sept. 30. Microchip now expects its net sales for its second fiscal quarter to be up 12-to-14 percent sequentially. Microchip expects GAAP diluted earnings per share to be approximately 20-to-22 cents and non-GAAP diluted earnings per share to be approximately 26-to-27 cents. On Aug. 6, Microchip had provided guidance of net sales increasing 7-to-11 percent sequentially, GAAP diluted earnings per share of approximately 18-to-20 cents, and non-GAAP diluted earnings per share of approximately 23-to-26 cents. "We are experiencing strong demand for all of our microcontroller and analog product families in the quarter with out 16-bit microcontrollers providing the highest sequential growth,'' said Steve Sanghi, Microchip's President and CEO, in a statement. ''Geographically, we are seeing strong demand in Asia and the Americas. Europe is unseasonably strong with revenue in the summer quarter being sequentially up for the first time in several years,'' he said. ''We also experienced the strongest August bookings in our company's history, and consequently we are seeing strong backlog starting to build for our fiscal third quarter. We now expect inventory on our balance sheet to drop by an additional 5 days, to approximately 103 days in the second fiscal quarter ending September 30, 2009. Therefore, we are accelerating the capacity ramps in all our manufacturing facilities."
- Altera Corp.(ALTR) Tuesday (Sept. 8) increased its revenue guidance for the third quarter, saying it now expects to report sales of between $279.2 million and $287.6 million. The new range means Altera (San Jose, Calif.) expects revenue to be flat to up 3 percent compared with the second quarter. Previously Altera said it expected sales to decline 1 to 5 percent compared with the second quarter. Altera said it expects revenue from all market segments except for the telecom and wireless segment to improve sequentially. The decline in telecom and wireless revenue is expected to be more moderate than previously anticipated as a result of better than forecast demand from OEMs supplying Asian wireless networks, the company said. Third quarter sales of 40-nm products are expected to be worth around $10 million, more than double second quarter levels, Altera said.
Reuters:
- The credit-rating agency Moody's does not expect to downgrade the sovereign debt of leading triple A-rated nations despite the explosive growth of government debt, the Financial Times reported on Wednesday.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (ALTR), raised estimates, boosted target to $25.
- Upgraded (COF) to Buy, target $45.
Oppenheimer:
- Rated (DISCA) Outperform, target $31.
Night Trading
Asia Ex-Japan Inv Grade CDS Index 129.50 -3.50 basis points.
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BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology shares in the region. I expect US
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