Late-Night Headlines
Bloomberg:
- The cost to protect against defaults on corporate and government debt dropped for a second day as Dubai World started talks to restructure $26 billion of debt, less than half of its liabilities, helping to damp concerns that a default could roil recovering credit markets. Contracts on Dubai dropped 110 basis points to 460 basis points, according to CMA DataVision. Swaps on DP World Ltd., Dubai World’s port operator, dropped 127 basis points to 517 basis points, CMA data show.
- Commodity funds pulled in more than $1 billion in investments for a second straight week, pushing inflows for the year to $14.6 billion, according to EPFR Global. “The demand for commodities globally is on the rise,” Durham said. “As the dollar weakens, commodity prices tend to rise.”
- Hedge funds are fighting what they call a punitive provision in the U.S. House regulatory overhaul bill that requires the private investment pools to pay into a fund for rescuing failed companies ahead of other financial firms. In a letter sent today to House Financial Services Chairman Barney Frank, the Managed Funds Association said it was “extremely troubled” by language in the panel’s systemic-risk legislation that requires hedge funds with more than $10 billion in assets to pay into a fund for winding down too-big-to fail companies. Other firms get assessed at $50 billion.
- Limits on the Commodity Futures Trading Commission’s authority over wholesale power markets must be made explicit as the U.S. Congress writes legislation that expands oversight of derivatives, energy industry groups said. The Electric Power Supply Association and Edison Electric Institute will tell a House of Representatives subcommittee tomorrow that the Federal Energy Regulatory Commission should have exclusive jurisdiction over those markets, according to their prepared testimonies. The groups represent the largest U.S. power companies, including Exelon Corp. and Southern Co.
- Iranian President Mahmoud Ahmadinejad said it would be impossible for world powers to isolate his country after the U.S. and European allies said the regime’s plan to expand its nuclear program may provoke more sanctions. “Who can isolate Iran? This is something that’s impossible,” Ahmadinejad said in an interview on state-run Press TV late yesterday. “The most strategic part of the world is the Middle East.” Iran is serious about building 10 more uranium enrichment plants, AFP cited Ahmadinejad as saying in the interview. “There is no room to bluff in this regard,” he said. “We will follow through on what we say.” Iran is serious about building 10 more uranium enrichment plants, AFP cited Ahmadinejad as saying in the interview. “There is no room to bluff in this regard,” he said. “We will follow through on what we say.”
Wall Street Journal:
- President Barack Obama announced Tuesday a surge of 30,000 troops to Afghanistan, along with plans to begin withdrawing the reinforcements in 18 months -- a potentially high-risk political and military strategy. Such a firm date for troop drawdowns was unexpected. Administration officials hope that will pressure Kabul to reform its notoriously corrupt government. At the same time, it allows the White House to begin bringing soldiers home ahead of the 2012 elections.
- The Afghan-Pakistan Solution by Pervez Musharraf.
- The British scientist at the heart of a scandal over climate-change research temporarily stepped down Tuesday as director of a prominent research group amid an internal probe that follows the release of hacked emails involving him and other scientists. The University of East Anglia in the U.K. said Phil Jones, head of the university's Climatic Research Unit, had decided to step aside from the director's post. The announcement comes less than a week before world leaders are set to meet for a climate summit in Copenhagen. The two-week conference, sponsored by the United Nations, is supposed to come up with tougher policies to curb greenhouse-gas emissions and slow global warming. The need for such action has been buttressed in large part by research by Dr. Jones and his colleagues in East Anglia and around the world. But hackers recently stole emails and documents from the East Anglia center that suggested Dr. Jones and other like-minded scientists tried to squelch the views of dissenting researchers and advocated manipulating data. The fallout from the hacked emails is spreading beyond the U.K. Also Tuesday, Penn State University confirmed that Michael Mann -- a climate scientist on its faculty who figures prominently in the emails -- is under "inquiry" by the university. The emails have led to calls for probes into the state of climate science from U.S. politicians skeptical that humans are causing global warming. They have also drawn criticism from some high-profile environmentalists. In one email, Dr. Jones suggested to Dr. Mann that they should try to keep out of scientific journals the research of scientists who challenge the idea of man-made global warming. We "will keep them out somehow -- even if we have to redefine what the peer-review literature is!" the email says. On Tuesday, Mr. Inhofe sent a letter to the chairwoman of the Senate Environment and Public Works Committee, Barbara Boxer (D., Calif.), that called for hearings on whether any U.S. laws were broken by the scientists, or "any taxpayer-funded research deliberately obscured or manipulated." A spokesman for Ms. Boxer didn't immediately respond to a request for comment.
- The Securities and Exchange Commission has sent at least three dozen subpoenas to hedge funds and brokerages within the past month in an expanding sweep of potential insider-trading violations, according to people familiar with the matter.
- At least two candidates for the top job at Bank of America Corp. told directors that the giant bank should consider breaking itself up, but board members in charge of the CEO search have rejected the idea at least for now, according to people familiar with the situation. The board's reluctance to make sweeping changes to the Charlotte, N.C., bank's structure is the latest obstacle to emerge in efforts to find a successor to Kenneth D. Lewis, who is retiring as chief executive at year's end. Several self-imposed deadlines have come and gone, with directors now working to make a decision as soon as they can, people familiar with the process said.
- Four founding partners of former Citigroup Inc. hedge fund Old Lane, including its ex-chief executive Guru Ramakrishnan, have launched a firm that is one of the biggest U.S. hedge-fund start-ups of the year. The New York-based fund, Meru Capital Group, started trading Tuesday with some $300 million in capital, more than $75 million of that belonging to Mr. Ramakrishnan and partners, say people familiar with the matter.
- U.S.'s Role Expands in the Boardroom. Frederick "Fritz" Henderson's sudden exit from the CEO suite at General Motors Co. signals a new phase in the government's role in U.S. business. Boards crammed with government appointees have prompted the departure announcements of three CEOs in the past two months: Mr. Henderson, Kenneth D. Lewis at Bank of America Corp. and Alvaro de Molina at GMAC Financial Services. The departures, and friction at other government-backed companies, raise a sticky question: Whose interests are these boards serving? Each of the outgoing CEOs clashed with directors appointed to represent the government's sizable stakes in the companies. Some corporate-governance specialists say the boards are in effect doing the administration's work without being told to do so. Boards of businesses with extensive taxpayer support "are only accountable to the government," distorting traditional corporate governance practices, observes Charles Elson, head of the Weinberg Center for Corporate Governance at the University of Delaware business school. "Politics influence decision making."Mr. Elson said that Democratic Rep. Barney Frank's demand that GM not close a Massachusetts parts-distribution center is evidence of interference. "The fact that he was pressuring GM management to keep it open is offensive," Mr. Elson says. Board decisions "are sound politically, but not necessarily sound from a business standpoint," Mr. Elson says. Mr. Henderson's resignation "seems to be the result of that dynamic," Mr. Elson added. The tensions may grow as the government deepens its involvement in certain firms. Even when government officials don't actually call the shots, boards of bailed-out businesses know they must act in the government's interests because "we have effectively nationalized these companies," says John Olson, a senior partner at Gibson Dunn & Crutcher in Washington who advises several corporate boards. "They are not being run for the benefit of any [other] stakeholders," Mr. Olson says. In effect, "private investors are left in the back seat," Mr. Olson says. He predicts some private investors may sue these boards "if something goes wrong."
CNBC.com:
- CNBC's Winners & Losers of 2009 Results.
NY Times:
- In Denmark, Ambitious Plan for Electric Cars.
CNNMoney.com:
- Best Buy(BBY) wants your electronic junk. The retailer's recycling program seems expensive to run, until you look at the benefits: a green reputation and a way to get customers into stores.
Seeking Alpha:
- Goldman's Hubris. Bethany McLean has a big 8,500-word profile of Goldman Sachs(GS) in the latest Vanity Fair, in which she somehow manages to get Lloyd Blankfein to recapitulate the famous words of GM president Charlie Wilson: “I’m charged with managing and preserving the franchise for the good of shareholders, and while I don’t want to sound highfalutin, it is also for the good of America,” he says. “I’m up-front about that. I think a strong Goldman Sachs is good for the country.” Except, really, it isn’t.
Politico:
- As Afghanistan and health care consume Washington, the economy remains foremost in the minds of many voters, creating a potential disconnect that could haunt congressional Democrats next fall. That was a clear takeaway from a focus group of Philadelphia metropolitan area residents held at the Annenberg Public Policy Center Monday, where 11 participants zeroed in on the economy above all else. Asked by Democratic polling expert Peter Hart, who conducted the session, to rank their two top concerns, nine of the 11 participants cited unemployment. The Iraq and Afghanistan wars received four votes and health care, which has dominated the Capitol Hill agenda for months, received just three votes. Only one other topic animated participants to the same degree as the economy—the performance of Congress.
Rasmussen:
The Business Insider:
- Top Goldman(GS) Quant: Quant Trading Is Dead. Many of the traditional quant strategies do not work anymore, the top quant at Goldman Sachs told a conference in Paris today.
- “Of course we do business with them. We have to. It’s like the Mob who picks up the garbage. You pay their fees, because you need your garbage picked up.” That's what a money manager told Bethany McLean, the author of a big new Vanity Fair piece, about the empire that is Goldman Sachs(GS). The claim is kind of funny given the news that just broke about Goldman execs stocking up on firearms. Of course everyone does business with Goldman. But apparently, they don't do it because they want to. McLean says word on the street is that Goldman doesn't even have clients anymore, just "counterparties," people on the other side of their trades (aka enemies, kind of).
Reuters:
- Breaking Views: Dubai confusion.
- U.S. House Democratic Leader Steny Hoyer said the chamber would vote this week to permanently extend the estate tax rates scheduled to expire at the end of 2009, but the road will be tougher in the Senate. The House will take up a bill introduced last week by Democrat Earl Pomeroy to extend the current policy of taxing estates over a $3.5 million threshold at a rate of 45 percent. "We believe that a permanent extension of the existing law is the best policy," Steny Hoyer, the chamber's majority leader, told reporters.
Financial Times:
- Bondholders and creditors have begun mobilizing in response to Dubai World’s $26bn restructuring plans, as Dubai’s ruler on Tuesday sought to reassure investors that his debt-laden emirate’s economy remained sound. The move by banks and hedge funds to form a representative group comes amid concerns among investors that a request for a six-month standstill on its debt agreement with creditors by Dubai World – one of Dubai’s flagship entities – could develop into a broader restructuring. In his first public statement since Dubai World announced a debt standstill last Wednesday, Sheikh Mohammed bin Rashid al-Maktoum, Dubai’s ruler, lauded the United Arab Emirates economy, saying it had become “stronger and more cohesive”. In a more belligerent tone, he accused the media of exaggerating Dubai’s problems. “It is the fruit-bearing tree that becomes the target of [stone] throwers,” he said. “What about someone who has seven fruit trees? It’s normal for us to be facing this campaign and this exaggerated media noise.” Investors in $3.5bn of bonds sold by Nakheel, Dubai World’s real estate arm, have formed an ad-hoc group expected to represent more than 25 per cent of the issue – enough to block any restructuring plans for the bonds. The $3.5bn Islamic bond issued by Nakheel was due to be redeemed on December 14.
- Barclays Bank will book a gain close to £1bn more than expected on the sale of its asset management arm to BlackRock(BLK)thanks to a 62 per cent rise in the US fund manager’s shares since the deal was struck. The UK bank on Tuesday completed the $15.2bn (£9.1bn) sale of Barclays Global Investors to BlackRock, which becomes the world’s biggest asset manager with more than $3,000bn in assets.
- Europe’s largest companies have accused the US of being “adamantly unwilling” to relax proposed reforms of the over-the-counter derivatives markets, exposing the first transatlantic split over how far to clamp down on the opaque markets. The comments, made by the European Association of Corporate Treasurers (EACT), raise the possibility that Europe and the US may go their own ways in implementing reform of the OTC derivatives market even as US and European policymakers have pledged to collaborate on the outcome.
Inquirer:
- After suffering quarter after quarter of volume and revenue declines, the worst may finally be over for the global semiconductor industry, according to research firm iSuppli Corp. “There was little room for anything but pessimism after the industry suffered a sequential revenue decline of 21.4 percent in the fourth quarter of 2008 and an 18-percent drop in the first quarter of 2009. However, semiconductor sales rebounded smartly after that, with sequential increases of more than 18 percent in the second and third quarters and an expected 5-percent rise in the fourth quarter. This strong rebound means 2009 will be much less painful than had been feared earlier in the year,” he added. He said higher sales of consumer electronics and wireless products, as well as strong performance in the memory market would provide the global semiconductor industry a much needed push for the remainder of the year. In an earlier interview, Semiconductors and Electronics industries of the Philippines Inc. chair Arthur Young said that with sales of personal computers and mobile phones expected to be stronger than anticipated this year, the local semiconductor industry would be given a boost.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (BMS), added to Top Picks Live list, raised target to $36.
- Reiterated Buy on (BLK), target $265.
- Reiterated Buy on (SPLS), target $29.
BNP Paribas:
- Raised (AUO) to Buy.
Needham:
- Rated (SWI) Buy, target $24.
Night Trading
Asian Indices are +.25% to +1.25% on average.
Asia Ex-Japan Inv Grade CDS Index 110.50 -4 basis points.
S&P 500 futures -.05%.
NASDAQ 100 futures -.11%.
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
- (SNPS)/.31
- (ARO)/.91
- (JAS)/.89
Economic Releases
8:15 am EST
- ADP Employment Change for November is estimated at -150K versus -203K in October.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -450,000 barrels versus a +1,019,000 barrel gain the prior week. Gasoline supplies are expected to rise by +750,000 barrels versus a +1,003,000 barrel increase the prior week. Distillate inventories are estimated to fall by -350,000 barrels versus a -529,000 barrel drawdown the prior week. Finally, Refinery Utilization is estimated to rise by +.35% versus a +.81% gain the prior week.
2:00 pm EST:
- Fed's Beige Book
Upcoming Splits
- None of note
Other Potential Market Movers
- The Fed's Lacker speaking, Treasury's Geithner on derivatives reform to Senate, Challenger Job Cuts report, weekly MBA mortgage applications report, BofA Credit Conference, Citi Basic Materials Conference, JPMorgan SMid Cap Conference, (XEL) Investor Meeting, (DWA) analyst day, (REG) analyst meeting, (NOK) capital markets day, Piper Jaffray Healthcare Conference, CSFB Tech Conference and the Goldman Steel Forum could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by commodity and technology shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
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