Late-Night Headlines
Bloomberg:
- Investors should “stay constructive” on stocks next year as the global economy recovers and other asset classes become more costly, according to JPMorgan Chase & Co. Technology and bank shares may be the best bets because of rising demand and improving financial markets, Adrian Mowat, JPMorgan’s chief Asian and emerging markets strategist, said in a Bloomberg Television interview from Hong Kong. The global recovery also means bond yields will rise and the attraction of gold will lessen, he also said. “The outlook for equities next year is going to be very good, both in developed and emerging markets,” Mowat said. “It’s going to be a story about growth next year. It’s also a story where other asset classes are quite expensive.” “We’ve climbed this wall of worry,” Mowat said. “Now I think we are going to have a job recovery, and we’re talking about maybe adding 800,000 to 1.5 million jobs in the U.S. economy next year. Think how we’re going to feel if the employment data starts getting better in the global economy.”
- Citigroup Inc.(C), the last of the four largest U.S. banks to seek funds to exit a taxpayer bailout, raised $17 billion by selling stock for a price so low that the U.S. delayed plans to shrink its one-third stake in the lender. Citigroup sold 5.4 billion shares at $3.15 apiece, less than the $3.25 the government paid when it acquired its stake in September. The New York-based bank said the Treasury won’t sell any of its shares for at least 90 days.
- Bank of America Corp.(BAC), the biggest U.S. lender, promoted Brian Moynihan to chief executive officer, putting him in charge of repairing the company after the tumultuous takeover of Merrill Lynch & Co. pushed Kenneth D. Lewis into early retirement. Moynihan, the 50-year-old head of the consumer banking unit, takes over at year’s end, the Charlotte, North Carolina- based bank said today in a statement. Lewis, 62, said Sept. 30 he’d step down by the end of this year.
- Goldman Sachs Group Inc.(GS) should be probed for its role in the subprime mortgage crisis, according to letters sent to 10 state attorneys general by a labor union that represents 150,000 people in the U.S. and Canada. Workers United sent the letters this week urging officials to follow the example of Massachusetts Attorney General Martha Coakley. In May, Goldman Sachs agreed to a $60 million settlement to end an investigation by Coakley’s office into how the New York-based bank packaged securities containing home loans made to Massachusetts residents. In an analysis of $23.2 billion Goldman Sachs mortgage bonds offered between August 2005 and February 2007, Workers United determined that residents of the 10 states had 61 percent of the mortgages contained in Goldman Sachs’s securities, the union said.
- Top 100 Political Donors From 1989-2010(Table). Following is a comparison of the top political donors from the 1989-2010 election cycle to political party as compiled by the Center for Responsive Politics. The last column is the difference in a firm’s average percentage of donations to Democrats from the 1989 to 2010 cycles compared to its 2010 cycle only donation. For example, Goldman Sachs(GS) has increased its percentage of donations from 64 percent to democrats to 75 percent in the latest cycle only.
- The International Brotherhood of Teamsters blamed Goldman Sachs Group Inc.(GS) for making derivatives trades that would benefit from the bankruptcy of YRC Worldwide Inc., the biggest U.S. trucker by sales. “The relatively small benefit Goldman would derive for itself in fees or for clients from such a position is unconscionable given the fact that the 50,000 livelihoods could be ruined by a bankruptcy filing,” Teamsters President James Hoffa wrote in a letter dated today to Goldman Sachs Chief Executive Officer Lloyd Blankfein. Goldman Sachs “is actively soliciting bond trades for clients and underwriting credit-default swaps to benefit from a failed exchange and resulting bankruptcy,” according to the letter obtained by Bloomberg News. “We want banks to stop creating these derivatives,” Gold said. “There’s too much at stake for the employees of the company. We need to do everything we can to make the exchange successful.”
- Greece’s credit rating was cut by Standard & Poor’s and the company threatened to take further action unless Prime Minister George Papandreou tackles the European Union’s largest budget deficit. The rating was lowered by one level to BBB+ from A-, S&P said in a statement late yesterday. Fitch Ratings on Dec. 8 cut Greek debt to BBB+. Papandreou two days ago pledged “radical” measures to fix Greece’s budget. “The ratings could be further lowered if the government is unable to gain sufficient political support to implement a credible medium-term fiscal consolidation program,” S&P credit analyst Marko Mrsnik in London said.
- Hong Kong’s central bank said the city may face “sharp corrections” in asset prices should fund flows reverse, adding to concerns voiced by Japan, China and South Korea on the dangers of speculative capital. A rally in the stock market was fueled by an influx of capital as investors’ risk appetite gained and they bet on an improving outlook for China’s economy, the Hong Kong Monetary Authority said in a quarterly report yesterday. Outflows may bring “volatilities in the real economy,” the HKMA said.
Wall Street Journal:
- Over the weekend, President Barack Obama went on the offensive against Wall Street for not lending more to Main Street. On CBS's "60 Minutes," the president declared, "I did not run for office to be helping out a bunch of fat cat bankers on Wall Street." He was joined on the Sunday morning circuit by his chief economic adviser, Lawrence Summers, who echoed the message of intimidation. Wall Street fat cats are always a convenient political target, but bankers are responding to the incentives generated by the economic policies of the Treasury and the Federal Reserve. First and foremost is the Fed's policy of near-zero interest rates. What this means is that banks can raise short-term money at very low interest rates and buy safe, 10-year Treasury bonds at around 3.5%. The Bernanke Fed has promised to maintain its policy for "an extended period." That translates into an extended opportunity for banks to engage in this interest-rate arbitrage. Why would a banker take on traditional loans, which even in good times come with some risk of loss? In today's troubled times, only the best credits will be bankable. Meanwhile, financial institutions are happy to service their new, best customer: the U.S. Treasury.
- Climate change activists are right. We are in for walloping shifts in the planet's climate. Catastrophic shifts. But the activists are wrong about the reason. Very wrong. And the prescription for a solution—a $27 trillion solution—is likely to be even more wrong. Why? Climate change is not the fault of man. It's Mother Nature's way. And sucking greenhouse gases from the atmosphere is too limited a solution. We have to be prepared for fire or ice, for fry or freeze. We have to be prepared for change. We've been deceived by a stroke of luck. In the two million years during which we climbed from stone-tool wielding Homo erectus with sloping brows to high-foreheaded Homo urbanis, man the inventor of the city, we underwent 60 glaciations, 60 ice ages. And in the 120,000 years since we emerged in our current physiological shape as Homo sapiens, we've lived through 20 sudden global warmings. In most of those, temperatures have shot up by as much as 18 degrees within a mere 20 years. All this took place without smokestacks and tailpipes. All this took place without the desecration of nature by modern man.
- In its first large leveraged buyout in about two years, Apollo Management LP is expected to acquire Ohio theme-park company Cedar Fair Entertainment Co. for more than $700 million, plus the assumption of more than $1.6 billion of debt, said people familiar with the matter. Cedar Fair owns 11 theme parks in the U.S. and Canada, including Kings Island in Cincinnati and Knott's Berry Farm in Los Angeles.
- Less than a year after Inauguration Day, support for the Democratic Party continues to slump, amid a difficult economy and a wave of public discontent, according to a new Wall Street Journal/NBC News poll. The findings underscored how dramatically the political landscape has changed during the Obama administration's first year. In January, despite the recession and financial crisis, voters expressed optimism about the future, the new president enjoyed soaring approval ratings, and congressional leaders promised to swiftly pass his ambitious agenda. In December's survey, for the first time, less than half of Americans approved of the job President Barack Obama was doing, marking a steeper first-year fall for this president than his recent predecessors. Democrats' problems seem in part linked to their ambitious health-care plan, billed as the signature achievement of Mr. Obama's first year. Now, for the first time, more people said they would prefer Congress did nothing on health care than who wanted to see the overhaul enacted.
- I recently suggested that seniors will die sooner if Congress actually implements the Medicare cuts in the health-care bill put forward by Senate Majority Leader Harry Reid. My colleagues who defend the bill—none of whom have practiced medicine—predictably dismissed my concern as a scare tactic. They are wrong. Every American, not just seniors, should know that the rationing provisions in the Reid bill will not only reduce their quality of life, but their life spans as well. My 25 years as a practicing physician have shown me what happens when government attempts to practice medicine: Doctors respond to government coercion instead of patient cues, and patients die prematurely. Even if the public option is eliminated from the bill, these onerous rationing provisions will remain intact. For instance, the Reid bill (in sections 3403 and 2021) explicitly empowers Medicare to deny treatment based on cost. An Independent Medicare Advisory Board created by the bill—composed of permanent, unelected and, therefore, unaccountable members—will greatly expand the rationing practices that already occur in the program. Medicare, for example, has limited cancer patients' access to Epogen, a costly but vital drug that stimulates red blood cell production. It has limited the use of virtual, and safer, colonoscopies due to cost concerns. And Medicare refuses medical claims at twice the rate of the largest private insurers.
CNBC.com:
- Fed Chairman Ben Bernanke was named "Person of the Year" by Time magazine, but he may not feel much love from the Senate. The Senate Banking Committee Thursday is scheduled to vote on his renomination in a 9:30 a.m. hearing, a vote that is expected to pass before his confirmation goes to the full Senate in several weeks time. Bernanke is expected to be confirmed, but he has his critics, including Sen. Jim Bunning, (R-Ky.), who blasted Time's selection as a reward for failure. Some in Congress have complained about the Fed's approach to the financial bail outs and have called for curbs on the Fed's powers. Sen. John McCain (R-Ariz.) said he is leaning against voting for the Fed chairman, and Sens. Bernie Sanders (I-Vt.) and Jeff Merkley, D-Ore. both say they are definitely voting against him.
IBD:
Business Insider:
CNNMoney.com:
NY Post:
- They parted ways 20 years ago, but super secretive hedge fund king Steven Cohen’s ex-wife is back with a vengeance, saying he cheated her out of millions of dollars, engaged in illegal trading and stonewalled federal regulators. In stinging allegations filed in a Manhattan federal court today (Read the filing - PDF), the billionaire’s ex-wife Patricia Cohen smacked the 53-year-old with civil racketeering charges, saying he hid assets from her when they separated in 1989 and now owes her $300 million. To Cohen, who’s worth an estimated $5.5 billion, $300 million is chump change, but the ex-wife’s charges also take a stab at his very livelihood by alleging that he confessed to illegal trading and stonewalled the SEC when it later asked about the trades.
- It's already getting cutthroat in the young world of iPhone navigation apps. Facing increased pressure from the likes of ALK, which recently dropped its CoPilot Live North America app to $19.99, TomTom just slashed the price of its eponymous navigation app by 50 percent. Well, kind of. The new TomTom U.S.A. app ($49.99) provides maps for just the U.S. (including Alaska, Hawaii, and Puerto Rico). Missing from the picture: Canada. That's probably fine for most drivers, who'd rather not pay for unneeded extra maps anyway.
Forbes:
- The Fiction Of Climate Science.
- The Fiction Of Climate Science: Part 2.
Politico:
- Senate Majority Leader Harry Reid’s plan to pass the Senate health care reform bill by Christmas looked increasingly in doubt Wednesday, as Republicans launched an offensive to stall the legislation and Democrats had yet to strike a 60-vote compromise. Senators privately considered one scenario Wednesday that would have them casting a final vote at 7 p.m. Christmas Eve. Surprising Democrats, Republicans brought the debate to a standstill and forced the Senate clerk to read a 767-page amendment on creating a government-financed health care system. Democrats pulled the measure as the reading entered its third hour, but the move was the start of the GOP’s attempts to use every procedural tool necessary to delay the bill. Away from the floor, Reid (D-Nev.) continued wrangling with the Congressional Budget Office over a cost estimate, which Democrats had initially hoped to receive by Monday. Without the analysis, Reid has been unable to lock down votes for the bill. And Democrats on both ends of the political spectrum remained uncommitted, saying they had problems that needed to be addressed. Senators cornered Ben Nelson (D-Neb.) throughout the day, aiming to sway him. Nelson received draft language from Sen. Bob Casey (D-Pa.) of an amendment to tighten restrictions on federal financing of abortion. The amendment would segregate private funds that cover abortions from public subsidies for health insurance. “We’re looking at it,” said Nelson, who indicated that he was also waiting on feedback from anti-abortion groups. But Douglas Johnson, the legislative director for the National Right to Life Committee, said Wednesday night of the Casey language, “This proposal would break from the long-established principles of the Hyde Amendment by providing federal subsidies for health plans that cover abortion on demand. This is entirely unacceptable.” Taken together, the obstacles created rising concerns among Democrats that their self-imposed Christmas deadline was slipping out of reach.
Reuters:
- Weapons seized in Thailand from an impounded plane traveling from North Korea were likely destined for Iran, said a high-ranking Thai government security official on a team investigating the arms. "Some experts believe the weapons may be going to Iran, which has bought arms from North Korea in the past," said the official, quoting Thai government military experts who also took part in an investigation of the weapons. Speaking on condition of anonymity because he was not authorized to talk to the media, he said the Thai investigating team considered Iran a likely destination because of the type of weaponry, including unassembled Taepodong-2 missile parts. Security analysts have said North Korea's long-range Taepodong-2 is a product of joint efforts with Tehran, coinciding with Iran's development of the Shehab-5 and 6 missiles. "Some of the components found are believed to be parts of unassembled Taepodong-2 missiles," the official said.
- The U.S. House of Representatives on Wednesday narrowly approved a $155 billion measure that seeks to create jobs and blunt the impact of the worst recession since the 1930s. By a vote of 217 to 212, the House approved additional spending for "shovel-ready" construction projects and money to avoid layoffs of teachers, police and other public employees. No Republicans voted for the bill, and 38 Democrats voted against it. The Senate is expected to consider the measure early next year.
Financial Times:
- Credit Suisse moved almost $2bn through the US financial system for up to 20 years on behalf of customers from Iran, Sudan and Libya, violating US sanctions, US law enforcement officials said on Wednesday. The Swiss bank, which is to pay $536m (€369m, £328m) in penalties to settle the claims, acknowledged responsibility for its conduct as part of a deferred prosecution agreement with US and New York prosecutors. Credit Suisse may have begun processing transactions as early as 1986 when sanctions were first imposed on Libya, according to court documents. Robert Morgenthau, the Manhattan district attorney, who is also investigating other European banks for possible similar violations, said: “The message to other banks involved in similar practices should be clear: if you are engaged in sanction busting misconduct, you should self-report, clean up your shop, and give us a full accounting.” The majority of the transactions involved Iran, although there were also others that appear to have violated US sanctions on Sudan, Libya, Burma, Cuba and the former Liberian regime of Charles Taylor, according to US Department of the Treasury’s Office of Foreign Assets Control, which conducted the investigation with the Department of Justice. The bank used elaborate procedures to hide the origins of the money, including stripping out the names of sanctioned parties from payment instructions so that wire transfers would pass undetected through filters at US financial institutions. In 1998, Credit Suisse provided its Iranian clients with a pamphlet entitled, “How to transfer USD payments”, which detailed payment instructions on how to get around filters. Adam Kaufmann, Manhattan assistant district attorney, said the bank had a practice of “manually checking every Iranian payment as it came through . . . to make sure there was no reference to Iran, Iranian phone numbers or Iranian addresses”. From 2000 to 2006 a London-based Credit Suisse subsidiary also invested more than $150m belonging to a banned Libyan bank and a banned Sudanese bank using code names to hide the identities of the banks, according to court documents.
China Business News:
- China is technically ready to impose a property tax to curb rises in real estate prices, citing government officials and analysts.
South China Morning Post:
- A senior banking regulator admits that mainland banks may face a daunting bad-loan problem in the long run if most of their loans are granted to certain sectors, such as infrastructure and real estate. Wang Huaqing, the disciplinary secretary of the China Banking Regulatory Commission, told a forum in Beijing yesterday the lending spree to big customers in certain sectors would carry risks for banks for a "long time", according to a Bloomberg report. "Credit growth of this magnitude inevitably places a strain on banks' internal risk management and raises concerns about a future deterioration in loan quality," said Charlene Chu, an analyst at Fitch Ratings. "The foremost challenges facing Chinese banks and regulators in 2010 will be balancing continued brisk growth amid accelerating capital burn." Small and medium-sized firms reaped limited benefits from easy credit this year as government-controlled banks were encouraged to offer these companies massive loans to boost their industrial output. Minister of Industry and Information Technology Li Yizhong said in June less than 5 per cent of the total loans were granted to small firms. "As the construction boom continues, the chances for unprofitable projects will hugely increase," said Haitong Securities analyst She Minhua. "Ample cash doesn't necessarily guarantee a healthy economic growth."
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (AMZN), boosted estimates, raised target to $170.
- Reiterated Buy on (INTC), target $26, remains on Top Picks Live list.
Deutsche Bank:
- Binky Chadha raised his forecast for where the Standard & Poor's 500 Index will end 2010 to 1,325 from 1,260.
Night Trading
Asian Indices are -.75% to +.25% on average.
Asia Ex-Japan Inv Grade CDS Index 96.50 -.50 basis point.
S&P 500 futures -.22%.
NASDAQ 100 futures -.18%.
Morning Preview
BNO Breaking Global News of Note
Yahoo Most Popular Biz Stories
MarketWatch Pre-market Commentary
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
Who’s Speaking?
Upgrades/Downgrades
Politico Headlines
Rasmussen Reports Polling
Earnings of Note
Company/EPS Estimate
- COMS/.07
- (ACN)/.65
- (DRI)/.42
- (NKE)/.71
- (ORCL)/.36
- (PALM)/-.32
- (ZQK)/-.05
- (RIMM)/1.04
- (SCS)/.00
- (TTWO)/.09
- (FDX)/1.05
- (GIS)/1.45
- (DFS)/.12
- (ATU)/.16
- (RAD)/-.18
Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to fall to 465K versus 474K the prior week.
- Continuing Claims are estimated at 5170K versus 5157K prior.
10:00 am EST
- Leading Indicators for November are estimated to rise +.7% versus a +.3% gain in October.
- Philly Fed for December are estimated to fall to 16.0 versus a reading of 16.7 in November.
Upcoming Splits
- None of note
Other Potential Market Movers
- The weekly EIA natural gas inventory report, BoJ Rate Decision, (BCR) analyst day, (PLL) analyst day, (HLF) analyst meeting, (ONXX) analyst briefing and (AVT) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.
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