Monday Watch

Weekend Headlines
Bloomberg:

• Qaddafi Emissary Meets Greece's Papandreou as U.S. Extends Air Assistance. An emissary of Muammar Qaddafi met with Greece’s prime minister in Athens today and may be seeking a political or diplomatic solution for hostilities in the north African country, according to Greek Foreign Minister Dimitris Droutsas. NATO today said the U.S. would extend through the weekend its combat role in air strikes against forces loyal to the Libyan leader.
• Oil Rises for a Third Day in New York. Crude for May delivery gained as much as 66 cents to $108.60 a barrel in electronic trading on the New York Mercantile Exchange, and was at $108.45 at 8:21 a.m. Sydney time. The contract rose $1.22, or 1.1 percent, to $107.94 on April 1. Prices are up 25 percent from a year ago.
• Tokyo Electric Sawdust Solution Fails to Stop Radiation Leak. Tokyo Electric Power Co.’s attempt to clog a cracked pit with a mixture of sawdust, newspaper and plastic failed to stop radioactive water leaking into the sea from its crippled nuclear plant. The absorbent material, including the same polymer used in baby diapers, was injected into a power-cable storage pit at the plant where radiation-contaminated water is escaping through a crack, the power utility said yesterday. The company is injecting a tracer dye to try to gain more information about where and how fast the water is flowing before continuing efforts to halt it, a spokesman said at a Tokyo press conference. The leak may not pose a severe threat to the public or wildlife, said Kathryn Higley, department head and professor of nuclear engineering and radiation health physics at Oregon State University. “You’re likely to have a footprint in the soil and the sands and sediments as that material leaks out, but the impact is likely to be pretty minimal,” Higley said yesterday in a telephone interview. “Even if it does get out into that marine environment, that area around there has been pretty badly torn up, so there’s not a lot of life to be impacting.”
• Goldman Sachs(GS) Almost Doubles Blankfein Pay Package to $19 Million for 2010. Goldman Sachs Group Inc. (GS) awarded Chairman and Chief Executive Officer Lloyd C. Blankfein $19 million in compensation for 2010, almost double the prior year, and granted him the first cash bonus in three years. The total includes $5.4 million in cash, $12.6 million in restricted stock, a $600,000 salary and about $464,000 in other benefits, the New York-based firm’s proxy statement showed. Blankfein’s $9.8 million pay for 2009 included $9 million in restricted stock plus salary and other compensation. Goldman Sachs, the fifth-biggest U.S. bank by assets, boosted Blankfein’s compensation for a year in which earnings dropped 38 percent and the stock price was little changed.
• Minmetals Offers to Acquire Equinox for $6.5 Billion. Minmetals Resources Ltd. (1208), the Hong Kong unit of China’s biggest metals trader, made an unsolicited offer of about C$6.3 billion ($6.5 billion) in cash for Equinox Minerals Ltd. (EQN) to add copper assets in Africa and the Middle East.
• Sokol's Resignation Called 'Credit Negative' for Berkshire(BRK/A) in Moody's Note. Berkshire Hathaway Inc. executive David Sokol’s resignation points to “governance challenges” at the company and may affect its credit quality, Moody’s Investors Service said. “The recent developments are credit negative for Berkshire,” Moody’s analysts led by Bruce Ballentine wrote in a note yesterday. “More broadly, the events underscore governance challenges at Berkshire that could impact credit quality.”
• GM(GM) China March Sales Growth Slows for Second Month on End of Incentives. General Motors Co. (GM), the biggest overseas automaker in China, reported slower sales growth for the second straight month as the removal of government incentives cut deliveries at its local minivan venture. GM sold 233,014 vehicles in China last month, the Detroit- based company said in a statement today. Deliveries barely rose from March 2010’s 230,048 and follow a 6 percent increase in February and a 19 percent rise in January.
• Tainted Pork Adds to Pressure on China Inflation: Chart of the Day. The cost of fixing China's interest rates for five years will rise as a scandal over illegal additives in pig feed becomes the latest driver of food inflation, according to Bank of America Merrill Lynch. Wholesale pork prices in China surged 40% since late May to a 30-month high. “The inflation cycle has yet to peak in China,” said Ashok Bhundia, a Hong Kong-based rates strategist for emerging Asia at Bank of America. “There will be greater paying interest in swaps coming back into the market if we see further increases in inflation to somewhere close to 5.5 percent over the next couple of months.” The government began a probe into the use of clenbuterol in pig feed after state broadcaster China Central Television reported on March 15 that farmers in Henan province were using the illegal additive, which induces growth of lean meat and can damage the heart and lung function of consumers. Food accounts for around a third of the consumer price index. The scandal is an “accidental new inflation driver,” Bank of America said in a March 25 report, predicting the central bank will raise its one-year lending rate by a quarter of a percentage point in April and July. Pork prices may climb 8.3 percent from current levels to 22 yuan a kilogram in the fourth quarter, according to a forecast last month by Bocom International Securities Ltd.
• China Stops Ordering Japanese Scrap Steel on Radiation Risk, Umetal Says.
  

Wall Street Journal:

• Report to Detail Subprime Underside. A report by a Senate subcommittee investigating the subprime implosion is likely to cast a harsh spotlight on Wall Street's mortgage machine and detail bad blood between Goldman Sachs Group Inc.(GS) and Morgan Stanley(MS) over one of the most controversial pools of bonds, according to people familiar with the report. The Senate Permanent Subcommittee on Investigations is expected to release the report soon, and the panel's findings are expected to include previously undisclosed emails obtained from securities firms that developed, sold or bet on subprime mortgages and financial vehicles such as collateralized debt obligations, or CDO.
• GOP Aim: Cut $4 Trillion. Republicans will present this week a 2012 budget proposal that would cut more than $4 trillion from federal spending projected over the next decade and transform the Medicare health program for the elderly, a move that will dramatically reshape the budget debate in Washington. The budget has been prepared by Rep. Paul Ryan, a Wisconsin Republican and the new chairman of the House Budget Committee, and it represents the most complete attempt so far by Republicans to make good on their promises during the 2010 midterm elections to cut government spending and deficits.
• Wachovia Targeted Over Sale of CDOs. The Securities and Exchange Commission is preparing to bring civil charges against Wachovia Corp., the once-troubled bank now owned by Wells Fargo & Co.(WFC), for allegedly overpricing mortgage-bond deals, according to people familiar with the matter.
• Fed's Low Interest Rates Crack Retirees' Nest Eggs.
• Rich Are Targeted in IRS Audit Offensive. The Internal Revenue Service is stepping up audits of wealthier taxpayers as part of a multiyear effort to crack down on tax avoidance.

Bloomberg Businessweek:

• Trichet Seen Burying Ailing Nations With Rate Rise on Inflation. Jean-Claude Trichet’s shot against inflation may end up inflicting collateral damage on Europe’s most cash-strapped economies. Primed to raise its benchmark interest rate this week for the first time in almost three years, President Trichet’s European Central Bank again faces the conundrum that its monetary policy rarely suits all 17 members of the euro area, where the kaleidoscope of growth ranges from record expansion to recession paired with a sovereign-debt crisis.

CNBC:

• Charlie Sheen: From 'Winning. Duh' to 'Losing, Really'. Actor Charlie Sheen, whose assertion that he is always "winning, duh" has become a pop catchphrase, faced a new reality the day after his stage show bombed. Fans and critics said: "losing, really."
• Japan Business Mood to Worsen After Quake: BOJ Tankan. Big Japanese manufacturers expect business conditions to worsen in the next three months, responses to a Bank of Japan survey collected after a devastating March 11 earthquake showed, as rolling power blackouts and a nuclear safety crisis threaten to delay the country's return to a moderate economic recovery. But the degree of deterioration was less than analysts had expected, leaving them wondering how much stock they should put in the results.

IBD:

• Newbies: Tibco(TIBX) Leads IBD 50's 5 Tech-Biotech Newcomers.
• ViroPharma(VPHM) Drug Nears EU Approval.
  

NY Times:

• Religious Radicals' Turn to Democracy Alarms Egypt. Abboud al-Zomor — the former intelligence officer who supplied the bullets that killed President Anwar el-Sadat and is Egypt’s most notorious newly released prisoner — waxes enthusiastic about ending the violent jihad he once led. “The ballot boxes will decide who will win at the end of the day,” Mr. Zomor said during an interview in his large family compound in this hamlet on Cairo’s western edge. “There is no longer any need for me to use violence against those who gave us our freedom and allowed us to be part of political life.” In its drive to create a perfect Islamic state, his Islamic Group and other groups like it were once synonymous with some of the bloodiest terrorist attacks in Egypt. But they are now leaping aboard the democracy bandwagon, alarming those who believe that religious radicals are seeking to put in place strict Islamic law through ballots.
• China Takes Dissident Artist Into Custody. The Chinese authorities on Sunday detained Ai Weiwei, a high-profile artist and stubborn government critic, as he tried to board a plane for Hong Kong, his friends and associates said. Mr. Ai’s wife, his nephew and a number of his employees were also taken into custody during a raid on his studio on the outskirts of the capital. Rights advocates say the detentions are an ominous sign that the Communist Party’s six-week crackdown on rights lawyers, bloggers and dissidents is spreading to the upper reaches of Chinese society. Mr. Ai, 53, the son of one of the country’s most beloved poets, is an internationally renowned artist, a documentary filmmaker and an architect who helped design the Olympic stadium in Beijing known as the Bird’s Nest.
• Hole in Southwest(LUV) Jet Attributed to Cracks. The five-foot hole that ripped open midflight Friday in the roof of a Southwest Airlines jet and terrified passengers on their way to Sacramento from Phoenix was caused by fatigue cracks in the aluminum underskin of the lap joints, the National Transportation Safety Board said Sunday.

Business Insider:

• Citi(C) Bankers Who Met With David Sokol to Discuss Lubrizol Deal Were "Shocked" at His Stock Purchase.
• Red Flag #1: Aussie Banks Refuse to Acknowledge the Housing Bubble or Systemic Risk.
• Absurdly, Transocean(RIG) Execs Received a Bonus for the "Best Year In Safety Performance".
  

Zero Hedge:

• U.S. Consumer Have Big Banks to Blame for High Gasoline Prices. There is a bit of irony here in that the very same banks that taxpayers bailed out, and saved from going completely belly up, are now making you pay once again in the form of higher Oil prices, and the resultant higher gasoline prices at the pump (Fig. 1). Don`t be fooled by the rhetoric generated in the media by the Big Banks regarding the Middle East.
• Assessing The Fukushima Radiation Danger "Near and Far". The NYT has compiled a useful visual summary of the current assessment of the Fukushima radiation, distributed by either air, soil, water and food, compiled through the work of the International Atomic Energy Agency and others.
• Forget David Sokol, Is The SEC About to Tel Charlie Munger to "Suck It In"?
  

LA Times:

• 800 People Reportedly Massacred in Ivory Coast. More than 800 civilians have been killed in a western Ivory Coast town where hundreds of U.N. peacekeepers are based, the International Federation of the Red Cross said Saturday, but the U.N. military spokesman said he had no information about mass killings there. The Roman Catholic charity Caritas put the toll at more than 1,000 dead, an estimate reached by its workers who visited the town of Duekoue on Wednesday. Spokesman Patrick Nicholson said the killings occurred over three days in a neighborhood controlled by fighters loyal to internationally recognized President Alassane Ouattara, though it was not clear who the perpetrators were.
• Taliban Exploits Afghan Riots That Follow Florida Church's Burning of Koran. Officials say Taliban insurgents in Afghanistan have used the riots as cover for attacks against Western and government targets. Seven U.N. workers are among 22 who have been killed in the riots that followed the burning of the Koran by followers of Florida's Terry Jones.

Mercury News.com:

• Apple(AAPL) Makes Bid to Become Gatekeeper for Newspapers and Magazines. Apple's (AAPL) bold foray into the world of digital publishing could make it the online gatekeeper for newspaper and magazine content, just as it is for music.

ABC News:

• NATO Forces Accidentally Kill 15 Libyan Rebels, Injure 7. A Plane Enforcing the International No-Fly Zone Hit Rebel Vehicles, Including an Ambulance. NATO forces accidentally struck a convoy of five cars belonging to rebel forces west of Ajdabiyah today, reportedly killing at least 15 Libyan rebels and injuring seven. A plane enforcing the international no-fly zone hit the rebel vehicles, including an ambulance, between Brega and Ajdabiyah when an anti-aircraft gun was fired into the air, the BBC reported. The accidental hit was a result of NATO forces, who are aiding Libyan civilians, confusing forces loyal to strongman Moammar Ghadafi and rebel groups.

Pittsburgh-Tribune Review:

• Keep An Eye on InterOil & George Soros. Are Barack Obama's energy policies influenced by hedge fund billionaire and political patron George Soros? The administration is derailing oil and gas exploration and development here in America while taking steps to help foreign nations develop their own energy resources. The latest beneficiary of his efforts is the island nation of New Guinea. This effort by the administration is especially galling since the Interior Department has been blaming its delay in issuing drilling permits on lack of money and staff to process the permits. Why devote the department to helping another nation reap riches? To which one may also ask — why New Guinea? Perhaps the better question might be: Who benefits from President Obama's push to help New Guinea become an energy power?

Rasmussen Reports:

• Ratings for Obama's National Security Performance Fall to New Low. Likely Voters shows 37% give the president good or excellent ratings on his handling of national security issues. Slightly more voters (40%) say the president is doing a poor job when it comes to national security.

Politico:

• Budget Countdown: Deal or No Deal? The time frame: five days. The dollar figure: $33 billion. The stakes: The size, scope and ongoing operation of the federal government. A deal: Priceless.

Reuters:

• U.S. Drilling Agency Says No Deal With BP(BP). The U.S. Bureau of Ocean Energy Management said on Sunday it had not struck a deal with BP to allow the oil company to resume deepwater drilling in the Gulf of Mexico, refuting a press report.

Financial Times:

• US Regulators Divided on Systemic Risk List. US officials are split on how many financial institutions should be branded systemically important, say people familiar with inter-agency talks, amid desperate lobbying by non-bank financial groups to avoid the designation. The Federal Deposit Insurance Corporation is arguing for a broad approach, pulling in large hedge funds, insurers and asset managers, while the Treasury and the Federal Reserve prefer to designate only a handful.

The Independent:

• Banks Seek to Hold Back the Tide of Regulation. Banks and other financial companies claim new regulation is the biggest threat they face in the next year as industry unrest about tougher rules hits a record high, a CBI survey shows. Some leading banks have reportedly offered the compromise of "ring-fencing" their core functions that carry a taxpayer guarantee, rather than having them hived off. The moves come as the Independent Banking Commission, chaired by Sir John Vickers, prepares to release its interim report in about a week.

Sunday Business Post:

• Ireland's government will impose haircuts on the holders of subordinated debt in the country's banks as it seeks to lower the cost of rescuing its banking sector. An "aggressive" buy-back program may seek to recoup 5.5 billion euros of the total 6.6 billion euros of subordinated debt held in Ireland's banks.

Handelsblatt:

• The German government needs to reduce its role in the economy, ECB Executive Board member Juergen Stark wrote. Stark called for the amount of government spending as a percentage of the economy to return to pre-crisis levels. Germany needs to consolidate its budget because it has a stabilizing role for the euro area.

Focus:

• Egypt has started supplying Libyan rebels with guns and ammunition in the past few days, citing U.S. government officials. Iran is helping to finance vehicles for the rebels, citing information from German and other intelligence agencies.

Der Spiegel:

• The International Monetary Fund is pushing for an early restructuring of Greece's debt amid concern that planned budget reforms may be inadequate. The IMF wants Greece to reduce its debt burden, which is about 150% of the country's annual economic output. All the options under consideration would require bondholders to accept lower interest rates.

Bild am Sonntag:

• Sixty percent of Germans would be willing to accept a lower standard of living to shut down the country's nuclear power plants, citing a survey.

Berliner Zeitung:

• Deutsche Boerse AG Chief Executive Officer Reto Francioni remains committed to the German exchange's plans to merge with NYSE Euronext(NYX), even after a rival bid by Nasdaq OMX Group Inc.(NDAQ), citing an interview. "We are still firmly convinced that the planned merger with NYSE Euronext offers the best possible combination for the respective shareholders and customers," Francioni said.

Asian Investor:

• Asia Will Endure Bursting Economic Bubble, Say Hedgies. The West can’t keep blowing up bubbles that lift the global markets, opines a panel of risk-seeking investors at a roundtable. The global post-crisis recovery is being buoyed by a government-funded bubble, carrying with it the risk of a sovereign credit problem – although Asia is the best-positioned region to weather a shakeout, hedge fund managers said at a UBS roundtable in Hong Kong last week. “There’s always a bubble in something, at any time,” notes William Kay, founder of The Pacific Group which manages the Greater Asian Hedge Fund. “The next crisis is going to be a sovereign crisis and that’s going to be the lynchpin of the markets.” The underlying reason, he believes, is that the force which has lifted global markets over the past few years is merely a government-inflated bubble. “This is the phoniest recovery, globally, I’ve ever seen in my life,” says Kay. “So much has been thrown at the global economy by governments and central banks that the numbers we’re looking at, that are supposed to be celebrated, are incredibly suspicious.”

NHK:

• Radioactive iodine twice the legal limit was found in seawater 40 kilometers from the Fukushima Dai-Ichi nuclear plant, citing measurements taken by Japan's science ministry.
• Tokyo Electric Power Co.'s damaged nuclear power plant may continue spreading radiation for months before workers are able to restore reactor cooling systems, citing Hedehiko Nishiyama, a spokesman for Japan's Nuclear and Industrial Safety Agency.
  

Kyodo News:

• Tokyo Electric Power Co. was ordered by the government to cover damaged reactor buildings with special sheeting material.

China Business Journal:

• China may "gradually" invest more than $1.5 billion to stockpile rare earths as state reserves, citing a person familiar with the situation.

Weekend Recommendations
Barron's:

• Made positive comments on (GE).

Night Trading

• Asian indices are -.50% to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 104.50 -3.5 basis points.
• Asia Pacific Sovereign CDS Index 111.0 -4.75 basis points.
  
• S&P 500 futures -.20%.
• NASDAQ 100 futures -.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SCHN)/.85
• (SHLM)/.33
• (TISI)/.18

Economic Releases

• None of note

Upcoming Splits

• (SF) 3-for-2
  

Other Potential Market Movers

• The Fed's Bernanke speaking, Fed's Evans speaking, Fed's Lockhart speaking, $32 Billion 3-Month/$30 Billion 6-Month Treasury Bills Auction, Wells Fargo Tech Transformation Summit and the (ABMD) investor meeting could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.