Thursday, March 31, 2011

Thursday Watch

Evening Headlines

  • Libyan Forces Gain on Rebels as Qaddafi's Foreign Minister Defects to U.K. Troops loyal to Muammar Qaddafi forced Libyan rebels to retreat as the U.S. and U.K. said they would consider arming opposition forces and Libya’s foreign minister resigned and flew to London. Libyan foreign minister Moussa Koussa quit Qaddafi’s government, according to a statement from the U.K. foreign office. “He traveled here under his own free will. He has told us that he is resigning his post,” the statement said. The rebels, after advancing toward Qaddafi’s hometown of Sirte, withdrew in the face of artillery and rocket attacks as pro-Qaddafi forces retook control of the oil port of Ras Lanuf. The BBC and New York Times, citing reporters near the Libyan front line, said yesterday rebels were streaming away from Brega and heading northeast, back toward Ajdabiya. U.S. President Barack Obama and U.K. Prime Minister David Cameron have said they wouldn’t rule out sending arms to opposition forces. The U.S. is looking “very closely” at whether to give more assistance to opposition groups in Libya, though no decision has been made, White House press secretary Jay Carney said yesterday at a briefing.
  • Oil Heads for Third Quarterly Gain as Libya Disruptions Counter U.S. Glut. Oil rose, heading for a third quarterly gain in New York, as concern the Libyan conflict will prolong production cuts countered signs of rising supplies in the U.S., the world’s largest crude consumer. Prices advanced as much as 0.5 percent today after troops loyal to Libyan leader Muammar Qaddafi forced rebels to retreat as the U.S. and U.K. said they would consider arming opposition forces. Crude stockpiles climbed to a record last week at the delivery point for U.S. futures and fuel consumption fell, according to an Energy Department report yesterday. “Investors are torn between the inventory levels in the U.S. and event risk in the Middle East,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. “Inventory levels are continuing to build and demand continues to fall, which suggest to me that the market has ample supply.” Crude for May delivery advanced as much as 50 cents to $104.77 a barrel in electronic trading on the New York Mercantile Exchange. It was at $104.67 at 10:55 a.m. Singapore time. Yesterday, the contract fell 52 cents to settle at $104.27. Futures have increased 15 percent between January and March, the strongest first quarter since 2005.
  • Japan Weighs Entombing Nuclear Plant on Reaction Risk. Japan is considering pouring concrete into its crippled Fukushima atomic plant as the United Nations' nuclear watchdog agency warned that a potential uncontrolled chain reaction could cause further radiation leaks.
  • Sokol Resigns From Berkshire(BRK/A) After Investing in Takeover Target. David Sokol, once a candidate to succeed Warren Buffett as the head of Berkshire Hathaway Inc. (BRK/A), resigned after helping to negotiate the acquisition of a company whose shares he had purchased. Sokol, 54, bought about 96,000 Lubrizol Corp. (LZ) shares before recommending the company as a takeover target, Buffett, Berkshire’s chairman and chief executive officer, said today in a statement. Buffett said he didn’t ask for the resignation and that Sokol’s stock purchases were legal. “What Sokol did was, the only word that comes to mind, shabby, and I am shocked he did it,” Jeff Matthews, author of “Pilgrimage to Warren Buffett’s Omaha” and founder of hedge fund Ram Partners LP, said in an e-mail. “Buffett says it wasn’t illegal, but it is not how you do deals, and especially not how you do them at Berkshire.” Sokol bought 96,060 Lubrizol shares on Jan. 5, 6 and 7, less than two weeks before recommending the company as a Berkshire acquisition, Buffett said today. In their first discussion about Lubrizol, Sokol mentioned he was a shareholder, Buffett said in the statement. “It was a passing remark and I did not ask him about the date of his purchase or the extent of his holdings,” Buffett said.
  • Pimco's Gross Says the U.S. 'Out-Greeking the Greeks' on Fiscal Policies. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said Treasuries “have little value” because of the growing U.S. debt burden. The amounts the U.S. owes on its bonds, combined with obligations for Social Security, Medicare and Medicaid total about $75 trillion, Gross said in his monthly investment outlook, published on the Pimco website. The U.S. will experience inflation, currency devaluation and low-to-negative interest rates relative to consumer-price gains if it doesn’t reform its entitlement programs, Gross said in the report. Gross “has been selling Treasuries because they have little value within the context of a $75 trillion total debt burden,” he said. “This country appears to have an off- balance-sheet, unrecorded debt burden of close to 500 percent of GDP. We are out-Greeking the Greeks.”
  • Fed's Stimulus Exit May Not Wait for Global Turmoil to Pass, Bullard Says. The Federal Reserve may need to begin an exit from record levels of monetary accommodation even amid global uncertainties in Japan and the Middle East, St. Louis Federal Reserve President James Bullard said. “The process of normalizing policy, even once it begins, will still leave unprecedented policy accommodation on the table,” Bullard said at a London dinner hosted by UBS AG, Switzerland’s biggest bank. Fed policy makers “may not be willing or able to wait until all global uncertainties are resolved to begin normalizing policy.”
  • Dendreon's(DNDN) Prostate Cancer Drug Supported for Coverage by Medicare. Dendreon Corp. (DNDN)’s prostate cancer drug Provenge should be covered by the U.S. government for use in older men, regulators said. The $93,000 treatment regimen is “reasonable and necessary” for men with advanced, castrate-resistant prostate tumors who have minimal or no symptoms of the disease, the Centers for Medicare & Medicaid Services said today. The proposal matches the approved prescribing information and suggests that doctors may even expand use in some cases, said Michael Yee, an analyst at RBC Capital Markets in San Francisco.
  • Gold Heads for Longest Quarterly Winning Streak Since 1979 on Haven Demand. Gold headed for a 10th straight quarterly rise, the longest in three decades, as turmoil in the Middle East, fighting in Libya and Japan’s nuclear crisis increased demand for an investment haven. Bullion for immediate delivery traded little changed at $1,424.88 an ounce at 1:10 p.m. in Melbourne, taking the quarterly gain to 0.3 percent. The June-delivery contract in New York was also little changed at $1,425.40, heading for a 0.3 percent quarterly rise. “There is a lot of uncertainty around the globe in terms of political events,” David Lennox, a Sydney-based resource analyst at Fat Prophets, said by phone today. Fighting could escalate in Libya, while there is uncertainty surrounding Bahrain and the nuclear crisis in Japan, he said.
  • ICBC Forecasts Credit Expansion to Slow After Posting 28% Profit Increase. Industrial & Commercial Bank of China (1398) Ltd., the world’s largest lender by market value, said credit may grow at the slowest pace in three years as Chinese banks heed a government call to restrain loans.
Wall Street Journal:
Business Insider:
  • Obama Deployed CIA Agents To Libya To Aid and Supply Rebels Weeks Ago. More details are coming out about Obama's secret orders, including a "decline to comment" out of the White House. CIA operatives have been working in Libya along with MI6 agents and other spies to gather information for use in airstrikes. They are also finding out details about the rebels who may come to power after Qaddafi.
  • California's Credit Rating Hinges On Cash Management. California's credit rating will likely depend on how the state handles its cash, rather than on any overall financial improvement, Standard & Poor's said today.
  • Fed Rejects AIG's(AIG) $15.7 Billion Bid For Maiden Lane Securities. American International Group was willing to take a $15.7 billion pile of the toxic mortgage-backed securities it unloaded on the Federal Reserve Bank of New York during the crisis of 2008, but on Wednesday the Fed gave the insurer a stiff arm and said it will sell the portfolio piece by piece.
CNN Money:
  • JPMorgan's(JPM) Dimon: No Mortgage Writedowns. The head of JPMorgan Chase said Wednesday that banks would not consider writing down mortgages for homeowners who can't make payments, an idea at the center of talks aimed at fixing the mortgage mess. "Principal writedown for people who couldn't pay their mortgages? Yeah, that's off the table," JPMorgan Chase (JPM, Fortune 500) CEO Jamie Dimon said when asked about the idea after an appearance before a U.S. Chamber of Commerce forum in Washington.
Fox Business:
  • Feds Question BofA(BAC) Merrill on Rajaratnam Relationship. Federal investigators have questioned executives at Bank of America’s Merrill Lynch brokerage unit about the firm’s relationship with Galleon founder Raj Rajaratnam, who is accused of committing securities fraud by earning millions of dollars of illegal profits by trading on insider information, the FOX Business Network has learned.
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-one percent (41%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -17 (see trends).
  • Budget Deal Close With $33 Billion in Cuts. Budget talks came to life Wednesday but not without tension between the White House and Senate Democrats, worried that the administration was too quick to agree to $33 billion in spending cuts to try to move Speaker John Boehner toward what remains a very uncertain deal. Vice President Joe Biden and White House Budget Director Jack Lew came to the Capitol in the evening for a meeting with the party leadership requested by Senate Majority Leader Harry Reid (D-Nev.). Democrats fear that unless the administration takes a stronger stand now, President Barack Obama will only be nibbled to death and be weaker when he faces the Republicans again this spring over the bigger fight of raising the debt ceiling.
Real Clear Politics:
  • Mideast Nonsense: Can We Start Being Honest? If there were an award for stating the obvious when it comes to the Middle East, it would go to the New York Times. On its front page last Friday, the newspaper ran a story headlined, "Islamist Group is Rising Force in New Egypt." What group would that be? Why, the Muslim Brotherhood, of course. We have been repeatedly assured by certain pundits and members of the Obama administration that the Brotherhood are a small minority with no major influence in Egypt. They further assure us that those Cairo protesters clamoring for "democracy" that led to the downfall of President Hosni Mubarak would be the ones to chart the country's future. Each time another myth is busted, the deniers of what is happening throughout the region simply create a new myth, one they desperately cling to against all evidence to the contrary.
Financial Times:
  • Euroclear SA's U.K. and Ireland chief executive officer Yannic Weber said the proposed merger between Deutsche Boerse AG and and NYSE Euronext(NYX) could inhibit competition for settlement services, citing remarks by Weber at a conference in London. The merger could also reinforce the "vertical silo" model, in which an exchange controls both trading of derivatives and post-trade services such as clearing and settlement, citing Weber.
Die Welt:
  • U.K. Prime Minister David Cameron said Europe needs to overhaul economic structures and cut red tape or risk falling farther behind other regions in the world.
Economic Observer:
  • China plans to limit the number of automobiles in large cities with population of more than 10 million people during the five-year period from 2011 to 2015.
  • China ordered Monsanto Co.(MON) to stop producing and marketing of the two corn seeds in the country. It didn't give a reason for the halt.
Evening Recommendations
Think Equity:
  • Rated (WDC) Buy, target $42.
Night Trading
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 106.50 -3.0 basis points.
  • Asia Pacific Sovereign CDS Index 125.50 unch.
  • S&P 500 futures -.06%.
  • NASDAQ 100 futures -.15%.
Morning Preview Links

Earnings of Note
  • (KMX)/.38
  • (RBN)/.48
  • (WOR)/.27
  • (RECN)/.07
  • (GPN)/.64
Economic Releases
8:30 am EST
  • Initial Jobless Claims for last week are estimated to fall to 380K versus 382K the prior week.
  • Continuing Claims are estimated to fall to 3705K versus 3721K prior.
9:45 am EST
  • The Chicago Purchasing Manager report for March is estimated to fall to 69.7 versus 71.2 in February.
10:00 am EST
  • Factory Orders for February are estimated to rise +.5% versus a +3.1% gain in January.
Upcoming Splits
  • (FTI) 2-for-1
Other Potential Market Movers
  • The Fed's Lacker speaking, Fed's Tarullo speaking, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, the NAPM-Milwaukee, (TRI) investor day and the (TX) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

1 comment:

Atlanta Roofing said...

Sokol was reportedly a hard charging executive. He worked long hours and reportedly always keeps a ranking of his employees handy, so when cut backs needed to be done he would immediately know who to fire. Now it looks like his efforts to boost his investment portfolio may have been a little too aggressive.