Wednesday, March 30, 2011

Wednesday Watch

Evening Headlines

  • Libyan Rebels Forced to Retreat as Nations Seek Qaddafi's Fall. Libyan rebels were forced to retreat in the face of artillery and rocket fire from government troops defending Sirte, cutting short their advance as foreign ministers from alliance nations met in London to coordinate strategy for driving Muammar Qaddafi from power. “We will continue to implement the United Nations resolutions for as long as is necessary to protect the Libyan people from danger.”
  • Tepco's Damaged Reactors May Take 30 Years, $12 Billion to Scrap. Damaged reactors at the crippled Fukushima Dai-Ichi nuclear plant may take three decades to decommission and cost operator Tokyo Electric Power Co. more than 1 trillion yen ($12 billion), engineers and analysts said. Four of the plant’s six reactors became useless when sea water was used to cool them after the March 11 earthquake and tsunami knocked out generators running its cooling systems. The entire station north of Tokyo will likely be decommissioned, Japanese Prime Minister Naoto Kan said yesterday. The damaged reactors need to be demolished after they have cooled and radioactive materials are removed and stored, said Tomoko Murakami, a nuclear researcher at the Institute of Energy Economics, Japan. The process will take longer than the 12 years needed to decommission the Three Mile Island reactor in Pennsylvania following a partial meltdown, said Hironobu Unesaki, a nuclear engineering professor at Kyoto University.
  • Assad Faces a Critical Moment as Syrians Seek Freedoms, Multiparty System. Syrian President Bashar al-Assad accepted the resignation of his cabinet in advance of a speech, in which he may offer to lift the nation’s emergency law in response to the anti-government protests that pose the most serious challenge to his rule since he inherited power from his father in 2000.
  • China, India to Add Nuclear Reactors Amid Quake Disaster, Berstein Says. China and India, the world’s two fastest-growing major economies, may boost their share of global nuclear power sevenfold by 2030 to meet electricity demand and emissions goals, according to Sanford C. Bernstein & Co.
  • Bailouts Damaged Market Confidence in Banks, Salgado Tells FT. Banco Espirito Santo SA (BES) Chief Executive Officer Ricardo Salgado said Europe’s bailouts in Ireland and Greece damaged market confidence in the countries’ banking sectors and had “poor results,” the Financial Times reported, citing an interview. The interests rates “were too high” and the debt had “too short a maturity,” Salgado said, according to the newspaper. Portugal can avoid a European bailout as long as the European Central Bank continues to provide liquidity to its banks, Salgado also said, according to the FT.
  • Beijing aims to lower the average price of new homes in the city this year as compared with 2010, the municipal government said in a statement on its website.
  • Valeant Pharma(VRX) Offers to Acquire Cephalon(CEPH) for $5.7 Billion. Valeant Pharmaceuticals International Inc. (VRX), a Canadian drugmaker focused on neurology and dermatology, made a hostile bid to buy Cephalon Inc. (CEPH) for about $5.7 billion, or $73 a share in cash. The offer is a 24 percent premium to today’s closing price of $58.75 for Frazer, Pennsylvania-based Cephalon. The company’s shares jumped to $72.89 at 5:32 p.m. New York time in trading after the close of the Nasdaq Stock Market.
  • Sushi Purchases From Japan Canceled Amid Concerns About Radiation Leakage. Exports of Japanese seafood have been canceled by foreign buyers on concern that the products may have been contaminated by radiation leaking from the crippled Fukushima nuclear plant, a government official said.
  • Director of China Companies in U.S. Says Nevermind as Resume Proves False. Gene Michael Bennett, a director for at least four Chinese companies trading in the U.S., has come under the scrutiny of a short seller who says he’s not what he claims.
Wall Street Journal:
  • At Plant, a Choice Between Bad, Worse. Workers at Japan's Fukushima Daiichi nuclear complex positioned sandbags and concrete barriers around drains leading from the plant Tuesday, setting a last line of defense against highly radioactive water that has flooded reactor buildings and threatens to spill into the ocean. At the same time, Japanese officials said Tuesday they would keep dousing the plant's stricken reactors with water—a course of action that could raise those water levels further.
  • Why I Won't Vote to Raise the Debt Limit by Senator Marco Rubio. Americans have built the single greatest nation in all of human history. But America's exceptionalism was not preordained. Every generation has had to confront and solve serious challenges and, because they did, each has left the next better off. Until now. Our generation's greatest challenge is an economy that isn't growing, alongside a national debt that is. If we fail to confront this, our children will be the first Americans ever to inherit a country worse off than the one their parents were given. Current federal policies make it harder for job creators to start and grow businesses. Taxes on individuals are complicated and set to rise in less than two years. Corporate taxes will soon be the highest in the industrialized world. Federal agencies torment job creators with an endless string of rules and regulations. On top of all this, we have an unsustainable national debt.
  • Oil Prices May Complicate China's Monetary Policy - World Bank Economist. High oil and food prices may complicate China's carefully-balanced monetary policy, creating new problems for Beijing's management of the country's potential real estate bubble, one of the World Bank's top economists warned Tuesday. Hans Timmer, director of the bank's Development Prospects Group, said needed attention to rising commodity price inflation is creating difficulties for authorities attempting to prevent ballooning asset prices. If popped, those market bubbles could cause a raft of financial and economic problems.
  • Smartphone Sales to Continue Surge. The smartphone market is expected to continue its strong growth this year, with global device shipments pegged to jump at a rate of nearly 50%, technology researchers IDC predicted Tuesday.
  • Cramer Explains What's Key to This Market. Cramer on Tuesday marveled at how the market continues to push higher despite a long list of negative economic news. "For the first time in a long time we're witnessing true bull market behavior where buyers don't scare easily and are willing to massively overpay anything with growth," Cramer said. "There's a shortage of, well, fright."
Business Insider:
  • Discord at the Fed Has Bernanke Out On A Limb. The voices of dissent within the Federal Reserve are growing louder, fueled by concerns that current monetary policy could boost inflation by keeping interest rates too low for too long in a growing economy. In recent weeks at least four Fed officials have suggested that policymakers need to review the current round of quantitative easing program, or QE2. Their comments are raising questions in the financial markets about whether the Fed may cut short its plan to purchase $600 billion of Treasury securities by the end of June, as well as more fundamental questions about how and when the Fed will start to lift interest rates.
  • Poll: Mexico's Cartels Are Winning The Drug War. Six out of 10 Mexicans think the country's violent criminal gangs are winning President Felipe Calderon's war against the drug cartels, according to a new poll released Tuesday.
  • How a Chemist (Allegedly) Made $3.6 Million Through Insider Trading.
Zero Hedge:
  • US To Purchase Oil From Libyan Rebels, Thereby Funding "Flickers" Of Al Qaeda. Following recent news that the supremely organized Libyan rebels have established their own central bank and oil company (does anyone recall when rebels merely rebelled instead of immediately setting up an oil export infrastructure and a fiat counterfeiting authority... those were the days), we now learn that this impressively "impromptu" development may have actually been intended all along. From Reuters: "The United States on Monday gave a green light to sales of Libyan crude oil from rebel-held territory, giving a potential boost to forces battling Muammar Gaddafi. And the kicker: according to the US NATO leader among those profiting from this latest move of US desperation is none other than Al Qaeda.
  • Alpha Flash: For All Your Nanosecond, Collocated, Algorithmic Frontrunning Needs. Ever feel like your nanosecond algorithmic frontrunning skills are becoming obsolete? Unable to scalp even a few extra pennies from illiterate orphans, widows and kittens armed with REDIPlus 9.0? The joy in subpennying Fido and Vanguard on their block purchases of Netflix no longer there? Finding yourself quote stuffing and crashing the market just for the existential hell of it? Despair not, for Deutsche Boerse (better known as the firm that any minute now will be outbid by the Amish market in its acquisition of NYSE according to Gasparino's latest rumor) has Alpha Flash just for you.
  • TEPCO Stock Implodes as Radioactive Iodine in Fukushima Seawater Now 3,355 Above Limit.
New York Times:
  • Where the Bailout Went Wrong by Neil M. Barofsky. TWO and a half years ago, Congress passed the legislation that bailed out the country’s banks. The government has declared its mission accomplished, calling the program remarkably effective “by any objective measure.” On my last day as the special inspector general of the bailout program, I regret to say that I strongly disagree. The bank bailout, more formally called the Troubled Asset Relief Program, failed to meet some of its most important goals.From the perspective of the largest financial institutions, the glowing assessment is warranted: billions of dollars in taxpayer money allowed institutions that were on the brink of collapse not only to survive but even to flourish. These banks now enjoy record profits and the seemingly permanent competitive advantage that accompanies being deemed “too big to fail.” Though there is no question that the country benefited by avoiding a meltdown of the financial system, this cannot be the only yardstick by which TARP’s legacy is measured. The legislation that created TARP, the Emergency Economic Stabilization Act, had far broader goals, including protecting home values and preserving homeownership. These Main Street-oriented goals were not, as the Treasury Department is now suggesting, mere window dressing that needed only to be taken “into account.” Rather, they were a central part of the compromise with reluctant members of Congress to cast a vote that in many cases proved to be political suicide. The act’s emphasis on preserving homeownership was particularly vital to passage. Congress was told that TARP would be used to purchase up to $700 billion of mortgages, and, to obtain the necessary votes, Treasury promised that it would modify those mortgages to assist struggling homeowners. Indeed, the act expressly directs the department to do just that. But it has done little to abide by this legislative bargain.
The Daily Beast:
  • Where Will All The Tsunami Orphans Go? Americans clamoring to adopt children of the Japan tsunami's victims will likely be disappointed. Tony Dokoupil on what happens to orphans in a country where adoption is virtually unheard of.
Real Clear Politics:
  • Measuring Force by Thomas Sowell. You don't just walk up to the local bully and slap him across the face. If you are determined to confront him, then you try to knock the living daylights out of him. Otherwise, you are better off to leave him alone.
  • Fed's Fisher Says Opposes Extending Easing - Fox. A top Federal Reserve official said on Tuesday he would vote against any further monetary easing by the central bank after the current program is finished in June. The comments by Dallas Fed President Richard Fisher boosted the dollar across the board in early Asian trade. "I will vote against ... any further extension of that program," Fisher said in an interview on Fox Business. "I cannot foresee a circumstance where I can support any further liquidity in the economy."
  • Oxford(OXM) Q4 Tops; Sees Strong Q1 on Tommy Bahama Gains. Oxford Industries Inc's quarterly results topped market expectations and the apparel maker forecast a strong first-quarter and year ahead, spurred by strong sales at its core Tommy Bahama brand. The company, whose brands also include Lilly Pulitzer, Ben Sherman and Oxford Golf, increased its quarterly dividend 18 percent to 13 cents a share. Shares of the Atlanta-based company jumped 11 percent to $27.80 in extended trade.
Financial Times:
  • Japan's Federation of Economic Organizations, the nation's largest business lobby, will request member companies to reduce power consumption by 25% to avoid planned blackouts in the peak usage season.
Financial News:
  • More than 60% of Beijing residents will change their home purchasing plans because of the government's property control measures, citing a survey by the central bank's Beijing operations office.
Economic Information Daily:
  • Investors bought large amounts of rare earth metals from the eastern Chinese province of Jiangxi and the northern city of Baotau in the past two months, citing a rare earth company official in Jiangxi. The investors are from regions such as the city of Wenzhou in Zhejiang province, citing the company official. These buyers mainly want to hoard the rare earths instead of making use of the resources, the company official said.
21st Century Business Herald:
  • China may limit lending by trust companies by ordering them to place funds in an account as reserves with the People's Bank of China, citing a person close to the central bank. Trust companies are not "in principle" able to extend new loans. If they do make new loans, the central bank may order the trust companies to set aside reserves that are equal to 150% of the new lending.
Evening Recommendations
  • Reiterated Buy on (PVH), raised estimates, target $82.
Wells Fargo:
  • Rated (BRKR) Outperform.
Night Trading
  • Asian equity indices are +.75% to +1.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 109.50 -1.5 basis points.
  • Asia Pacific Sovereign CDS Index 125.50 unch.
  • S&P 500 futures +.35%.
  • NASDAQ 100 futures +.44%.
Morning Preview Links

Earnings of Note
  • (FDO)/.98
  • (AYI)/.50
  • (MOS)/1.08
Economic Releases
8:15 am EST
  • The ADP Employment Change for March is estimated at 208K versus 217K in February.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,500,000 barrels versus a +2,131,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,000,000 barrels versus a +7,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -2,000,000 barrels versus a -5,320,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.3% versus a +.7% gain the prior week.
Upcoming Splits
  • (FTI) 2-for-1
Other Potential Market Movers
  • The Fed's Hoenig speaking, Fed's Lacker speaking, Fed's Bullard speaking, Challenger Job Cuts report for March, $29 Billion 7-year Treasury Notes Auction, weekly MBA mortgage applications report and the (NSP) Investor Day could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by technology and financial shares in the region. I expect US stocks 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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