Wednesday, March 03, 2010

Thursday Watch

Posted by Gary .....at 11:51 PM
Evening Headlines
Bloomberg:
  • Greece Aid Plea Snubbed by Germany in 'Historic Moment' for EU. Greece’s pledge to ramp up planned budget-deficit cuts by half failed to yield commitments of financial assistance from Germany, Europe’s biggest economy, to help solve its financial crisis. German Chancellor Angela Merkel said a meeting tomorrow with Greek Prime Minister George Papandreou won’t be “about aid commitments.” Her finance minister, Wolfgang Schaeuble, said the deficit-reduction measures announced in Athens were probably enough to convince investors to buy Greek debt. While Papandreou is risking a backlash at home to meet European Union demands for more deficit cuts before allies even consider providing aid, Merkel is facing domestic opposition to tapping taxpayers to extend a financial lifeline to Greece. “There would be no understanding in Germany for bailing out Greece,” Henrik Enderlein, a political economist at the Hertie School of Governance in Berlin, said by phone. With public workers set to demonstrate in Athens today after the Cabinet yesterday backed 4.8 billion euros ($6.6 billion) of measures in the third round of deficit cuts this year, Papandreou said Greece was prepared to turn to the International Monetary Fund as a last resort. The Greek announcement “is as much about giving other EU governments more political capital in the event that they do eventually need to provide liquidity to Greece,” said Gary Jenkins, head of credit research at Evolution Securities Ltd. in London. “They can make the claim to their own taxpayers that Greece has taken further measures as suggested by the EU.”
  • Iraq Opening to BP, Exxon Mobil, Shell for First Time Since 1972. Iraq, with the world’s third- largest oil reserves, will earn about $200 billion a year. “We see this as the beginning of a long-term relationship with Iraq and will continue to look for further opportunities,” Andy Inglis, BP’s chief executive for exploration and production, said on a conference call March 2.
  • Clinton Says Iran Won't Negotiate Before Sanctions. Secretary of State Hillary Clinton, in Brazil to seek support for tougher United Nations penalties on Iran’s suspected nuclear weapons program, said the U.S. believes Iran won’t negotiate until sanctions are imposed. “Once the international community speaks in unison around a resolution, then the Iranians will talk and begin to negotiate,” Clinton said at a press conference today in Brasilia after talks with Brazilian Foreign Minister Celso Amorim.
  • Clinton Fails to Win Brazilian Support for UN Sanctions on Iran.
Wall Street Journal:
  • Paul Ryan v. the President. The Republican dissects ObamaCare's real costs. Democrats stay mute. 'Every argument has been made. Everything that there is to say about health care has been said, and just about everybody has said it," President Obama declared yesterday as he urged Democrats to steamroll his plan through Congress. What hasn't been heard, however, is even a shred of White House honesty about the true costs of ObamaCare, or its fiscal consequences. Nearby, we reprint Wisconsin Republican Paul Ryan's remarks at the health summit last week, which methodically dismantle the falsehoods—there is no other way of putting it—that Mr. Obama has used to sell "reform" and repeated again yesterday. No one in the political class has even tried to refute Mr. Ryan's arguments, though he made them directly to the President and his allies, no doubt because they are irrefutable. If Democrats are willing to ignore overwhelming public opposition to ObamaCare and pass it anyway, then what's a trifling dispute over a couple of trillion dollars?
  • With Fistfuls of Cash, Firms on Hunt. One year removed from the trough of the recession, American corporations continue to hoard more cash than ever. There are now tentative signs that they are finally comfortable using the money to do some shopping. The 382 nonfinancial firms in the Standard & Poor's 500 that have reported results for the fourth quarter of 2009 are now holding $932 billion in cash and short-term investments, according to a Wall Street Journal analysis of data from Capital IQ. That sum is up 8% from the third quarter and up 31% from a year ago. At a time of low interest rates, reopened credit markets and growing optimism about the economy, CEOs and their boards seem to be questioning the wisdom of sitting on all that cash. And with the S&P 500 still trading 29% below its October 2007 peak, companies are deciding that cash is their preferred currency for acquisitions—rather than shares they see as undervalued. The cash hoard may also be untenable to institutional investors worried the cash is being used as a buffer to insulate management from bad decisions or a sign that CEOs can't figure out what to do with it all. That management-shareholder tension may explain why recent months have brought a bump in share buybacks and increased dividends, according to data provided by Thomson Reuters and S&P. There were 62 announced share buybacks valued at $40.1 billion in February, the biggest month for announced buybacks since September 2008. S&P estimates buybacks were up 37% in the fourth quarter from the third quarter. For the past three months, there were 79 dividends increased and two reduced, compared with 58 and 41 for the same period a year ago, according to S&P.
  • Did the Hedge Funds' Euro Bet Really Break the Law? The Justice Department is investigating whether hedge funds such as SAC Capital, Greenlight Capital and Soros Fund Management improperly colluded to bet against the Euro. The DOJ sounds serious, but can build the case? For prosecutors, the challenge is proving that the hedge funds privately agreed to drive down an otherwise healthy currency. The problem with that theory is that the Euro faced fundamental weakness, such as Greece’s debt crisis, and would have likely suffered value declines regardless of the hedge funds’ negative bets. “The chief argument against the collusion charge is that of size: according to the latest survey from the Bank for International Settlements, daily volumes in global currency markets totaled $3.2 trillion. For sure, not all of that is in euros. But the common currency is part of an estimated 37% of all transactions, or about $1.2 trillion, and that’s per day. How can anybody, even a group of well-funded and successful money managers, corner this colossal, unwieldy international market?” Casey points out that the hedge fund case makes for a better Oliver Stone movie, than grounds for a criminal complaint. “Regardless of its Hollywood appeal, the Justice Department’s suggestion that these funds may have colluded to drive down the euro is flimsy at best and absurd at worst, raising the suspicion that Washington regulators are focused in the main on improving a public image severely damaged by their failings during the financial crisis,’’ he adds. “The bigger damage,’’ writes the Journal’s Dennis Berman in his recent column. “Is that Washington loses its credibility and gumption as it embarks on the truly hard stuff of reform: establishing a way to monitor systemic risk; safely winding down financial reforms, better handling the trading of credit default swaps…”
CNBC:
  • Cramer: Why Overseas Investors Are Buying American.
  • NY's Cuomo Is 'Father of Subprime Crisis:' Bove. "One of the key reasons why [Fannie Mae and Freddie Mac are] bankrupt today, and why the government is spending hundreds of millions of dollars in supporting them, is because of the edicts pushed through by Mr. Cuomo," said Bove, of Rochdale Securities, in a live interview. "It's also thought by many that the hundreds of thousands of people who are losing their homes, are [doing so] to a great degree because of the actions taken by Mr. Cuomo at HUD," Bove added. Cuomo, who was secretary of Housing and Urban Development from 1997 to 2001, has been blamed in some quarters for helping to trigger the financial crisis by pushing Fannie and Freddie to buy more subprime mortgages to increase home ownership among the poor. Many of those homeowners eventually defaulted, and the mortgage-backed securities market later collapsed. Though Cuomo has not officially announced his candidacy for the seat, he is considered by many to be a favorite in the election after Gov. David Paterson's announcement last week that he will not run for full term. But if Cuomo does decide to run and is elected, Bove said he will quickly realize that his decisions thus far have had a negative effect on the state, and he'll need to change them. "His lack of financial acumen may prevent him from doing the right things even if he wants to," he said. "You just dont want someone with that type of lack of understanding of the financial system running a state as important as New York."
IBD:
Business Insider:
zerohedge:
  • Smoking Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer Beware! There are broad indications hinting that Italy and Greece are not the only countries that have used SWAP agreements to manipulate its budget and deficit figures. France and Portugal may be two other European economies which have resorted to similar manipulations in the past in order to qualify as part of single currency member nations (Euro Zone). Below is a small subset of the research that I have been gathering as I construct a global sovereign default model.
Forbes:
SeekingAlpha:
Rasmussen Report:
  • 25% Say U.S. Heading In Right Direction, Lowest Since Obama Took Office. Just 25% of U.S. voters now say the country is heading in the right direction, the lowest level of voter confidence since early January 2009. Correspondingly, the latest Rasmussen Reports national telephone survey finds that 69% believe the nation is heading down the wrong track, the highest level measured in 14 months.
Politico:
  • Hoyer Knew of Massa Allegations. First-term Rep. Eric Massa announced Wednesday that he will not seek reelection, saying his doctors have told him that he can’t continue to “run at 100 miles an hour.” But several House aides told POLITICO that the House ethics committee has been informed of allegations that the New York Democrat, who is married with two children, made unwanted advances toward a junior male staffer.
Reuters:
  • Morgan Stanley(MS) Finds Buyer for CICC Stake. Morgan Stanley has found a buyer for its stake in Chinese investment bank China International Capital Corp, CICC Chairman Li Jiange said. Li made his comments on the sidelines of the Chinese People's Political Consultative Conference in Beijing. He declined to identify the buyer, and said the deal was awaiting regulatory approval.Sources previously told Reuters that private equity firms KKR [KKR.UL] and TPG [TPG.UL] were in late stage talks to buy Morgan Stanley's 34.3 percent stake in CICC for more than $1 billion.
  • Dendreon(DNDN): Provenge Boosts Survival by 40%.
  • Sina(SINA) Profit Falls Short of Expectations. Sina Corp, the largest Internet portal in China, posted lower than expected profit in the fourth quarter as revenue from its mobile services business declined. Shares of Sina fell nearly 5 percent to $35.69 in after-hours trade on Wednesday.
Financial Times:
  • Mandelson Knocks 'Volcker Rule' As Too Difficult. Barack Obama’s plan to limit deposit-taking banks from proprietary trading are “too difficult” to implement, Lord Mandelson said on Wednesday, as he called on the US president to refocus on G20 financial reforms. The business secretary’s strong public criticism of the Obama proposals ref­lects widespread frustrations among ministers at a “sweeping” overhaul that was conceived and announ­ced without consultation with the UK. Lord Mandelson’s comments will be especially unwelcome in the White House as they came on the day that the Obama administration sent legislative proposals to Capitol Hill that would create the so-called “Volcker rule”. Stressing that Britain’s preferred co-ordinated action on banking supervision, Lord Mandelson said: “President Obama’s proposals on banking regulation, I have to say, came as a bit of a surprise to people working on the G20 agenda and it’s important that we keep the multinational agenda firmly on track.” He argued that the so-called Volcker rule was overambitious, as he made the case for more effective regulation. “Trying to apply sweeping rules about the structure, content and range of activities of banking entities is too difficult to do,” he said. “Whatever their size, whatever their range of activities, you need good regulation. In an interview with the Financial Times, Michel Barnier, European Union internal market commissioner, also warned this week that the Volcker plan could not be imported in the same form to Europe.
Telegraph:
TimesOnline:
MailOnline:
  • Four Men Including Two British Airways Employees Arrested in 'Terror Plot' Raids. Three men were arrested in dawn raids this morning, taking to four the number being held over allegations of terrorism fundraising. It follows the arrest on Thursday of a 30-year-old British Airways employee in Newcastle. A second BA staff member was among the group arrested this morning. The three men, aged 31, 32 and 43, were seized by police at 5am today in Slough. The men are now being questioned about a plot to fund a terrorist attack. Police refused to clarify what positions the two BA employees had within the airline. Sources said the latest arrests were 'significant'.
Global Pensions:
  • Short-Selling Disclosure Proposals Raise Eyebrows. Hedge fund trade bodies have reacted with some dismay to the Committee of European Securities Regulators’ (CESR) proposal for a pan-European disclosure regime for short selling. CESR recommended short sellers be required to tell regulators when they have short economic exposure of 0.2% or more to shares listed in the European Economic Area, and when they change those positions by 0.1% or more. Once short exposure hits 0.5%, CESR said public disclosure will be necessary. In calculating their exposures, CESR said hedge funds should include exchange-traded and OTC derivatives as well as equities - a step-up in regulatory oversight, which has hitherto been largely confined to shares.
Handelsblatt:
  • Germany is considering more regulation for so-called "naked" shorting of shares, citing an internal strategy paper from the country's economy ministry. Transactions should be more transparent so regulators can intervene where appropriate and positions exceeding .5% of a company's share capital could be subject to regulatory disclosure, citing the paper.
DigiTimes:

  • Taiwan-Based Component Makers Doubt iPad Production Delay Rumors. In response to reports that initial volumes of Apple's iPad in late March will be lower than originally planned and the launch will be only in the US market because production by Foxconn Electronics has been delayed, Foxconn's component suppliers have said their supplies are on schedule and Foxconn should be able to ship 600,000-700,000 iPads in March and one million units in April. As for whether Apple will delay the launch of iPad, the sources believe plans are unlikely to change.

GulfNews.com:
Evening Recommendations
Citigroup:
  • Reiterated Buy on (ALTR), raised estimates, target $30.
Night Trading
  • Asian indices are -1.0% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 108.0 +1.0 basis point.
  • S&P 500 futures -.33%
  • NASDAQ 100 futures -.30%
Morning Preview
Earnings of Note
Company/Estimate
  • (WEN)/.02
  • (CIEN)/-.07
  • (DLM)/.21
  • (URBN)/.40
  • (COO)/.51
  • (ARST)/.16
  • (SXCI)/.43
Economic Releases
8:30 am EST
  • Final 4Q Non-Farm Productivity is estimated to rise +6.3% versus a prior estimate of a +6.2% gain.
  • Final 4Q Unit Labor Costs are estimated to fall -4.5% versus a prior estimate of a -4.4% decline.
  • Initial Jobless Claims are estimated to fall to 470K versus 496K the prior week.
  • Continuing Claims are estimated to fall to 4600K versus 4617K prior.
10:00 am EST
  • Factory Orders for January are estimated to rise +1.8% versus a +1.0% decline in December.
  • Pending Home Sales for January are estimated to rise +1.0% versus a +1.0% gain in December.
Upcoming Splits
  • (ARO) 3-for-2
Other Potential Market Movers
  • The Fed's Bullard speaking, Fed's Evans speaking, retail monthly same-store-sales, BoE rate decision, ECB rate decision, weekly EIA natural gas inventory report, (A) analyst meeting, (OMX) investor day, (BMY) business update, Keybanc Consumer Conference, Morgan Stanley Tech/Telecom/Media Conference and the UBS Gas/Power/Coal Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial stocks in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

1 comment:

Gary said...

Thanks for reading.

Thursday, March 4, 2010 at 10:20:00 AM EST

Post a Comment

Subscribe to: Post Comments (Atom)