Wednesday Watch

Late-Night Headlines
Bloomberg:

- Paulson & Co., the hedge fund firm run by billionaire John Paulson, expects Bank of America Corp.’s(BAC) stock to almost double in the next two years as writedowns abate, according to a letter sent to investors. The bank, ranked first by assets and deposits in the U.S., may rise to $29.81 by the end of December 2011, Paulson said in a quarterly letter sent to investors. Paulson expects “banks will have passed the current writedown cycle and have visibility for growth in 2012,” the letter said. Bank of America closed at $15.77 in New York Stock Exchange composite trading.

- Oil advanced for a third day in New York after an industry report showed a decline in crude stockpiles in the U.S., the largest energy consumer. The American Petroleum Institute said yesterday crude inventories fell by 4.37 million barrels last week to 333.1 million. The Energy Department will release its weekly supply report today in Washington. “If we see a drop of that magnitude in the DOE report, I think that would be perceived as fairly bullish for the market,” said Toby Hassall, a research analyst with CWA Global Markets in Sydney. “You have to take into account what’s being going on in the Gulf with regards to shut-ins after the storm activity we’ve seen there.” Energy producers in the U.S. idled about 43 percent of oil output in the Gulf of Mexico on Nov. 10 after Tropical Storm Ida made landfall, according to the Interior Department’s Minerals Management Service.

- Former Republican congressman Rob Simmons, running for a U.S. Senate seat in Connecticut, called on Treasury Secretary Timothy Geithner to resign over his role in the bailout of insurer American International Group Inc. Simmons, who is bidding to challenge Democratic incumbent Christopher Dodd in the 2010 election, cited a report issued yesterday by the watchdog of the $700 billion Troubled Asset Relief Program faulting the Federal Reserve Bank of New York for making “limited efforts” to protect taxpayer funds during last year’s rescue of AIG. Geithner was president of the bank at the time. The report “adds considerably to the lack of confidence” in Geithner’s “ability to effectively guide the nation through these troubled times,” Simmons said in a statement today. “America can no longer afford Geithner’s failed prescriptions and mismanagement.” While Geithner has been mostly praised by Democrats for his handling of the financial crisis, Simmons’s move shows that Republicans are gearing up to use the government’s Wall Street bailout as a campaign issue. Dodd, as chairman of the Senate Banking Committee, played a central role in the TARP legislation and is leading a push for overhauling financial rules. In his statement, Simmons faulted Dodd and Geithner for having a “cozy relationship” with “bailed out financial companies.” AIG, once the world’s largest insurer, was saved last year with a package of loans and investments that has swelled to $182.3 billion. Banks, including Societe Generale SA, Goldman Sachs Group Inc. and Deutsche Bank AG, received the full value on credit-default swaps purchased from New York-based AIG to protect against declines in mortgage-linked investments. The Fed’s “policy decisions came with a cost -- they led directly to a negotiating strategy with the counterparties that even then-New York Fed President Geithner acknowledged had little likelihood of success,” the TARP special inspector general, Neil Barofsky, said in the report.

- Citigroup Inc.(C) gave $11.7 million in stock awards to trading chief James Forese and two top executives a month after the bailed-out bank got approval for the payouts from the Treasury Department’s special master for executive compensation. Forese received $5.43 million of Citigroup stock, Chief Financial Officer John Gerspach got $2.92 million and Vice Chairman Stephen Volk received $3.4 million, the New York-based bank said today in a regulatory filing. Citigroup, which received a $45 billion government bailout last year, has pledged to keep paying employees competitively. Treasury paymaster Kenneth Feinberg on Oct. 22 approved a total of $118.4 million of payouts to 21 executives, or an average of $5.6 million each. The prior year, they got $390.2 million, or $18.6 million each.

- Lloyd Blankfein, chairman and chief executive officer of Goldman Sachs Group Inc.(GS), says the dollar isn’t “melting away,” and that the U.S. is a better investment than Japan or Europe.

- Lloyd Blankfein, chairman and chief executive officer of Goldman Sachs Group Inc.(GS), apologized for the firm’s role in some of the activities leading to the financial crisis. “We participated in things that were clearly wrong and have reason to regret,” Blankfein, 55, said at a conference in New York hosted by the Directorship magazine. “We apologize.” Goldman Sachs, the most profitable securities firm in Wall Street history, had a record profit in the first nine months of this year and set aside $16.7 billion for compensation expenses. The money accrued for bonuses, enough to pay each employee $527,192 for nine months, has fueled criticism because it comes one year after the firm received federal bailout funds. Goldman Sachs repaid the $10 billion it was given last year under the taxpayer-funded Troubled Asset Relief Program, plus dividends. The firm continues to benefit from federal guarantees on about $21 billion of long-term debt. It was allowed to become a bank holding company to gain Federal Reserve support and was one of the biggest recipients of funds through the government bailout of American International Group Inc.

- Allstate Corp.(ALL) Chief Executive Officer Thomas Wilson said the insurer may take advantage of the increase in takeover targets and a decline in the cost of buying rivals. “We are relatively cheap in terms of what we are prepared to pay, but there are more properties on the market,” Wilson said today in an interview on Bloomberg Television. Acquisitions “are cheaper today than they were three years ago, so we are always looking.”

- Every morning I’m confronted with more evidence that the world has gone mad. Let’s start with last week’s attention-grabbing headline in the Wall Street Journal: “White House Aims to Cut Deficit with TARP Cash.” The White House, we are told, won’t be using about $200 billion of the $700 billion authorized under the Treasury’s Troubled Asset Relief Program, a lifeline for ailing banks. Instead it plans to use money never borrowed, never spent, that nonetheless increased the projected 2010 deficit, to narrow that projection of $1.4 trillion, according to a Congressional Budget Office estimate. This un-borrowed, un-spent money qualifies as deficit reduction?

- Iran’s top general denounced Saudi Arabia’s air strikes against rebels in Yemen as the start of “state terrorism” that may have consequences throughout the Middle East. The Saudi government must realize the danger of continuing “Wahhabi terrorism,” Iran’s state-run Press TV cited Major General Hassan Firouzabadi as saying in a statement late yesterday in Tehran. Saudi Arabia two weeks ago began air attacks on Shiite Muslim rebels who seized territory on the 1,500 kilometer (930- mile) border its shares with Yemen. Saudi Arabia said Nov. 8 it regained control of its territory.

- Shanghai police detained CNN reporter Emily Chang for two hours yesterday after she filmed a T-shirt featuring President Barack Obama posing like Mao Zedong, Ming Pao reported. The T-shirt, banned from public sales in Shanghai and Beijing, caricatures the American president in a People’s Liberation Army uniform, with the Chinese words “Serve the People” written under it, the Hong Kong newspaper said. Chang, who found the T-shirt “that everybody’s talking about” in a Shanghai market, was showing it on camera when local security intervened to confiscate the garment, Ming Pao said. Police officers arrived and detained the CNN crew, demanding their journalist credentials and the T-shirt before releasing them, Ming Pao said.

- China is among the emerging markets facing risks of property and commodity market bubbles, central bank adviser Fan Gang said, joining officials from the region in expressing concern about surging asset prices.

Wall Street Journal:

- Germany's century-old universal health-care system is buckling under the weight of a growing deficit that has forced the government to explore an overhaul. Germany boasts the world's oldest publicly sponsored health-care system. Created by Bismarck in 1883, the system continues to operate on the basic premise of its founding: everyone is obliged to pay into the system and all who need care can get it, regardless of what they earn. Costs are shared between employers and workers, whose premiums are staggered according to income. Recently, however, the costs of the system have exploded. The latest figures show rising medical costs and unemployment will leave the system €7.5 billion ($11.1 billion) short next year. Germany's sinking birth rate and rapidly aging population mean the gap will only get worse. Those trends will likely leave the government with no choice in the short term but to raise mandatory employee contributions, which already take a considerable chunk out of paychecks. Germans pay 8% of their gross wages into its centralized-health-care pot, while their employers contribute an amount equal to 7% of gross wages. But steadily rising health-care costs mean raising premiums can serve only as a stop-gap solution. In the long term, analysts say Germany will almost certainly be forced to make painful cuts to a system that to many here is sacrosanct.

- The House Financial Services Committee on Tuesday approved an amendment that the committee's chairman said would curtail the powers of Federal Reserve regional bank presidents. On a unanimous vote, the committee approved an amendment introduced by Rep. Gary Peters (D., Mich.) barring the central bank's board of governors from delegating authority to regional bank presidents.

- Mall giant Simon Property Group Inc. has hired investment adviser Lazard Ltd. and law firm Wachtell, Lipton, Rosen & Katz to help it formulate a strategy for possibly bidding for all or part of rival General Growth Properties Inc., which is operating under Chapter 11 protection.

- Health ‘Reform’ Gets a Failing Grade. The changes proposed by Congress will require more draconian measures down the road. Just look at Massachusetts.

- The Senate's sweeping health bill is expected to call for a new long-term-care insurance program as Democrats move closer to unveiling the legislation. Senate Majority Leader Harry Reid could release his bill as soon as Wednesday, after spending weeks assembling it from two bills that passed through Senate committees. People familiar with the legislation said Tuesday that it would include the long-term-care program, which would pay cash to people if they become disabled. The late Sen. Edward Kennedy pushed to include the provision in the health bill that passed through the Senate health committee, and the House included a similar provision in its bill.

CNBC.com:

- Ford's(F) Fusion mid-size sedan was named Motor Trend magazine's 2010 "car of the year" Tuesday, adding to the perception that changes to the No. 2 U.S. automaker's vehicle lineup are gaining traction. The Fusion was chosen best of 23 new or significantly upgraded vehicles that were eligible for the award after a week of testing, Motor Trend said.

IBD:

- For decades, G-III Apparel (GIII) had no trouble heating up sales of coats and jackets shipped during the chilly months.

CNNMoney.com:

- Eight months after President Obama began prodding the nation's banks to increase their small business lending, the loan numbers continue to move in the opposite direction. The 22 banks that got the most help from the Treasury's bailout programs cut their small business loan balances by a collective $10.5 billion over the past six months, according to a government report released Monday.

- It's a tough time to be starting a career. Job prospects for the class of 2010 remain bleak after hiring of new college graduates plunged 40% this year to the lowest level in decades, a new report shows.

Politico:

- Sen. Susan Collins (R-Maine) is criticizing the Obama administration’s briefings on the Ft. Hood massacre, saying that information provided by the Defense Department and the FBI in a closed door meeting Tuesday “raised many troubling questions.”

- Once-potent national security issues, which have taken a back seat to economic and health care concerns in the run-up to the 2010 midterm elections, have suddenly resurfaced to unsettle some of the most closely watched congressional races in the nation. In the wake of the Obama administration’s decision to try the self-described mastermind of the Sept. 11 attacks, Khalid Sheikh Mohammed, in a civilian court in downtown Manhattan and the announcement that the administration is considering housing additional Al Qaeda terrorists in an Illinois correctional facility, Republicans are claiming that Democrats are naively placing ideology ahead of national security and undermining the war on terrorism.

The Business Insider:

- Is George Soros to blame for the decline of the dollar? Columnist Rob Binsrick says it's the popularity of the "Soros-style" investing that is driving the dollar down. What's worse, he says, is that speculative investors are damaging the U.S. economy for personal gain. Binsrick calls the threat of inflation a “utopian situation for those like Soros who enjoy betting against the U.S. dollar (and pretty much everything else to do with the U.S.)."

- Controversial research group Cambridge Energy Research Associates is out with yet another anti-peak oil report, arguing that supply will keep its glide path higher until 2030. The controversy surrounding future oil supply can be divided into two components: a determination of the factors that will drive the much-debated future of oil supply and then, longer term, a consideration of consequences and the actions required when oil supply eventually plateaus. IHS CERA identifies a number of critical observations at the core of this analysis of future supply:

USA Today.com:

- Investigators in the city raided offices for some of the nation's largest newspapers Tuesday as part of a corruption probe into a powerful union that has long faced accusations of ties to organized crime, a law enforcement official said. Police officers working with the Manhattan district attorney's office searched for paperwork related to the Newspaper and Mail Deliverers Union in circulation, production and delivery offices of The New York Times, the New York Post, the Daily News and El Diario, said the official, who spoke to The Associated Press on the condition of anonymity because the investigation is ongoing. District Attorney Robert Morgenthau said search warrants also were executed at a labor union, but he would not specify which. "The investigation solely concerns business activity and practice and is completely unrelated to the content of any publication," he said.

Reuters:

- Intel Corp(INTC) Chief Executive Paul Otellini said on Tuesday the semiconductor industry may experience possible "pinch points" in the PC production chain as manufacturers ramp up to meet higher demand next year. Otellini told Intel Capital's CEO Summit that the industry may face a component shortage in the face of a forecasted rise of 12 percent to 18 percent unit growth from 2009 to 2010. "The industry is not ready for this yet," Otellini said. "One of the things I worry about is, will everybody's capacity be there in sufficient quantities to build it?" Last month, Seagate Technology Chairman and CEO Stephen J. Luczo left open the possibility in an interview with Reuters that there could be shortages of disc drives next year if conditions keep improving.

- Apollo Management [APOLO.UL], a private equity firm headed by former Drexel Burnham Lambert executive Leon Black, is planning to list on the New York Stock Exchange, the Financial Times reported on Tuesday.

Financial Times:

- A Chinese court has ruled that Microsoft infringed a Chinese software maker’s intellectual property rights in a surprise decision that has renewed worries among foreign patent experts about China’s management of IPR disputes.

Yomiuri:

- Nippon Oil Corp., Inpex Corp., and JGC Corp. may sign an agreement with Iraq by the end of this month to develop the country’s Nashiriyah oilfield. The oilfield may produce 600,000 barrels a day when developed.

Nikkei English News:

- Sharp Corp. plan to sell handsets in Japan using Google’s(GOOG) Android operating system as early as the first half of next year, citing Executive Officer Masami Ohbatake.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (HD), target $34.

- Upgraded (PHM) to Buy, target raised to $12.

- Upgraded (SII) to Buy, target $35.

- Reiterated Buy on (MHS), target $71.

- Reiterated Buy on (FLEX), target $9.

- Reiterated Buy on (TGT), target $61.

Oppenheimer:

- Raised (GSIC) to Outperform, target $25.

Night Trading
Asian Indices are -.50% to +.75% on average.

Asia Ex-Japan Inv Grade CDS Index 104.0 -6.0 basis points.
S&P 500 futures -.09%.
NASDAQ 100 futures -.14%.

Morning Preview

BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Asian Financial News

European Financial News

Latin American Financial News

MarketWatch Pre-market Commentary

U.S. Equity Preview

TradeTheNews Morning Report

Briefing.com In Play

SeekingAlpha Market Currents

Briefing.com Bond Ticker

US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/EPS Estimate
- (BJ)/.45

- (PETM)/.28

- (NTAP)/.29

- (LTD)/-.01

- (DCI)/.36

- (JACK)/.52

- (PVH)/.89

- (CHS)/.07

- (GYMB)/1.13

Economic Releases

8:30 am EST

- The Consumer Price Index for October is estimated to rise +.2% versus a +.2% gain in September.

- The CPI Ex Food & Energy for October is estimated to rise +.1% versus a +.2% gain in September.

- Housing Starts for October are estimated to rise to 600K versus 590K in September.

- Building Permits for October are estimated to rise to 580K versus 575K in September.

10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory build of +300,000 barrels versus a +1,762,000 barrel increase the prior week. Gasoline supplies are expected to fall by -25,000 barrels versus a +2,560,000 barrel build the prior week. Distillate inventories are estimated to fall by -850,000 barrels versus a +349,000 barrel gain the prior week. Finally, Refinery Utilization is expected unch. versus a -.66% decline the prior week.

Upcoming Splits
- None of Note

Other Potential Market Movers
- The Fed’s Bullard speaking, Fed’s Plosser speaking, weekly MBA mortgage applications report, BoE minutes, (ALTR) shareholders meeting, (GWW) analyst meeting, (CBG) investor day, (CSC) analyst meeting, (SLXP) analyst meeting, (MSFT) Professional Developers Conference, Thomas Weisel Communications Conference, Oppenheimer Industrials Conference, UBS Building/Products Conference, BofA Energy Conference, Lazard Healthcare Conference, Stephens Investment Conference and the Morgan Stanley TMT Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.