Monday Watch

Weekend Headlines
Bloomberg:

• Osama Bin Laden, Al-Qaeda Leader, Killed in U.S. Operation Near Islamabad. Al-Qaeda leader Osama bin Laden was killed in Pakistan by a team of U.S. operatives early yesterday morning after a firefight at a house where he had been hiding, President Barack Obama said. “On nights like this one we can say to those families who have lost loved ones to al Qaeda’s terror: Justice has been done,” Obama said in a late-night televised address from the White House. Obama delivered the news to the nation almost 10 years after the Sept. 11 attacks that bin Laden orchestrated. Bin Laden was killed, along with other members of his family in a compound in suburban Islamabad, an official said. Almost 3,000 people were killed on Sept. 11, most at the World Trade Center in New York and the Pentagon in Virginia just outside of Washington.
• Commodities Beat Financial Assets in Longest Streak Since 1997. Commodities beat stocks, bonds and the dollar for a fifth straight month, the longest stretch in at least 14 years, as demand for raw materials increases with expanding economies and Federal Reserve promises to boost growth. The Standard & Poor’s GSCI Total Return Index of 24 commodities climbed 4.4 percent in April, after reaching the highest level since October 2008. The MSCI All-Country World Index of equities advanced 3.9 percent, the most since December, and the U.S. Dollar Index, a gauge against six counterparts, fell 3.9 percent, touching a 33-month low. Bonds of all types returned 0.9 percent on average, based on Bank of America Merrill Lynch’s Global Broad Market Index. Fed Chairman Ben S. Bernanke signaled last week that he will keep pumping record amounts of money into the world’s largest economy and reiterated a pledge first made two years ago to keep interest rates “exceptionally low. Gold and silver reached records in April as investors sought to hedge financial assets against a weakening dollar and accelerating inflation. Gold advanced 32 percent in the past year and is set for its 11th annual gain, while silver more than doubled as investors increased their holdings in exchange-traded products to a record 15,518 metric tons on April 26. “The key reason commodities outperformed stocks and bonds is the weak dollar,” said Evan Smith in San Antonio, who helps manage $1 billion at U.S. Global Investors Inc. “Commodities will continue to outperform stocks and bonds. Over the next three to six months, we don’t see a backstop for the dollar.” The Dollar Index had its worst month since September and the currency weakened against all 16 of its major peers, according to data compiled by Bloomberg. Bernanke said April 27 that the end of the Fed’s $600 billion bond-buying program in June probably won’t have a “significant” effect on financial markets or the economy, and the central bank will likely continue reinvesting proceeds from maturing debt after June. “He’s remarkably dovish, dismissing inflation,” said Anthony Valeri, a San Diego-based market strategist at LPL Financial Corp., which manages $293 billion. “It does keep pressure on the dollar.”
• Embassies in Tripoli Attacked After NATO Assault on Qaddafi.
  
• Republicans Pan Obama on Economy as 2012 Primary Field Forms. Five Republicans considering 2012 presidential bids leveled criticism of President Barack Obama on the economy, offering a contrast on a central election issue during a forum in the home of the nation’s first primary. At what was billed as a “presidential summit” on the economy sponsored by the Tea Party-affiliated group Americans for Prosperity, the Republican prospects yesterday sketched a small-government vision of lower taxes, less spending and lighter regulation, laying the nation’s current fiscal woes squarely at Obama’s feet. The president “says he just inherited the downturn.” former Massachusetts Governor Mitt Romney told an audience at a banquet hall in Manchester, New Hampshire. “Yeah, that’s right, but he made it worse, and he made it deeper, and longer.” He said Republicans would “have to hang the Obama misery index around his neck,” referring to the measure of unemployment rate plus inflation that was a centerpiece of Ronald Reagan’s successful campaign against then-incumbent President Jimmy Carter in 1980. Former Minnesota Governor Tim Pawlenty also went after Obama, opening his remarks by playing on discontent about high fuel prices and joblessness.
• China Growth May Moderate as Manufacturing Index Slips. A Chinese manufacturing index declined in April from March, indicating that growth may moderate in the world’s second-biggest economy after the government raised interest rates and allowed faster gains in the yuan. The Purchasing Managers’ Index fell to 52.9 from 53.4, China’s logistics federation and the statistics bureau said in an e-mail yesterday. That was below a median forecast of 53.9 in a Bloomberg News survey of 20 economists. Premier Wen Jiabao’s government aims to counter the fastest inflation since 2008 and cool a real-estate market that has been at risk of price bubbles. Credit Suisse Group AG says the nation’s fifth increase in benchmark rates since the global financial crisis may come as early as today, a Chinese holiday, less than a month after the previous move.
• Berkshire(BRK/A) May Have Underwriting Loss on Disasters. Warren Buffett said natural disasters led by the Japan earthquake in March eroded first-quarter profit at Berkshire Hathaway Inc. and may lead to the company’s first annual insurance underwriting loss in nine years. Net income dropped to $1.51 billion from $3.63 billion a year earlier, Berkshire said yesterday in a statement. The insurance segment posted an underwriting loss of $821 million. The Japan earthquake cost the firm $1.06 billion, a temblor in Christchurch, New Zealand $412 million, and flooding and a cyclone in Australia $195 million.
• Wagyu Farmers Defy Evacuation Order as Radiation Threatens Crop. Takeshi Yamada frowns as he surveys his herd of 28 wagyu beef cattle, prized for their marbled meat and fetching as much as 1 million yen ($12,320) per head. “The government told us to evacuate, but we don’t want to leave our cattle behind,” said the 62-year-old farmer in Iitate village in northern Japan. “If we’re forced to go, we are worried we won’t be able to come back and farm again.” Japan exported 677 metric tons of beef, including wagyu, in the year to March 31, 2010, government data show. Vietnam was the top buyer with 433 tons, followed by Hong Kong with 119 tons and the U.S. with 81 tons.
• Ralcorp(RAH) Said to Draw Interest From Apollo on Possible Investment. Apollo Global Management LLC is seeking an investment in Ralcorp Holdings Inc. (RAH) and plans to meet with the cereal maker’s management to discuss options, said one person familiar with the discussions. Apollo has already made an initial approach to Ralcorp management, said the person, who declined to be identified because the matter is private. Discussions may not result in a deal, said the person.
• RIM(RIMM) Longtime Bulls Turn Bearish Saying Stock Slide Could Hit 38%. Research In Motion Ltd. (RIMM)’s cut to its profit forecast has prompted some longtime bulls to lower their ratings on the shares and slash their price targets to as much as 38 percent below the stock’s close before the warning. At least five analysts dropped their ratings for the stock after RIM said earnings would be lower than what it had forecast a month before.
• Syrian Tanks Shell City's Main Square as Army Reinforces Troops. Syria’s military sent reinforcements to the southern city of Daraa and shelled the main square as President Bashar al-Assad’s regime intensified a crackdown on protesters who defied an order to not hold demonstrations. The attacks by tanks forced people to stay inside their homes, Mahmoud Merhi, head of the Arab Organization for Human Rights, said in a telephone interview. At least 60 people were killed in clashes between protesters and security forces in Daraa alone on April 29, Merhi said. Residents have been without water, power or fuel for almost a week. Deadly clashes over the past week pushed the number of deaths nationwide to more than 550 since the revolt began in mid-March, Mehri and Ammar Qurabi, head of Syria’s National Organization for Human Rights, said in telephone interviews.
• Nasdaq Tightens Oversight of Reverse Mergers Amid SEC Scrutiny. Nasdaq OMX Group Inc., the second- biggest operator of U.S. stock exchanges, said it will more closely vet reverse-merger companies before agreeing to list their shares. The decision follows Securities and Exchange Commission and short-seller scrutiny of Chinese companies that bought publicly traded shell corporations in the U.S. Since January 2007, reverse mergers have allowed about 600 corporations -- more than 150 from greater China -- to trade in the world’s largest capital market without the rigors of initial public offerings.

Wall Street Journal:

• Osama Bin Laden Is Dead. Al Qaeda leader Osama bin Laden is dead, President Obama said. The U.S. has his body in its possession, U.S. officials said late Sunday. Mr. bin Laden was killed in a joint raid in Pakistan's northwestern district of Abbottabad, some 40 miles from Islamabad, in a joint raid overnight Sunday, according to a senior Pakistani official. The town also is home to a Pakistani military academy. Two American helicopters took part in the operation, the official said. One Pakistani helicopter involved in the raid crashed after it was hit by firing from militants.
• South Struggles to Assess Toll. Federal officials on Sunday assessed the damage from last week's storms that killed more than 340 people across the South as residents continued the rebuilding process that is expected to cost billions of dollars. The death toll from the tornadoes and storms that swept across seven states on Wednesday and Thursday was the highest from tornadoes since April 5-6, 1936, when 454 people were killed, mostly in Mississippi and Georgia. Of the current toll, 250 died in Alabama. Thousands more were hospitalized, injured, or remain missing, officials said. Meanwhile, there was a "slight risk'' of more tornadoes developing in already battered Mississippi and Alabama by Monday, although thunderstorms and hail were more likely, said Jared Guyer, a weather forecaster at the federal Storm Prediction Center in Norman, Okla.
• Investors Doubt Orthodoxy on Greek Debt. Immovable object, meet irresistible force. Greek, euro-zone and International Monetary Fund officials insist a Greek debt restructuring isn't an option; some European Central Bank figures even warn it poses a Lehman-style systemic threat. They argue they have a plan to repair Greek finances. Markets don't believe them. Greek credit-default-swap prices imply a 46% probability of a restructuring over the next two years, according to Deutsche Bank.
• Treasury Move on Currency Swaps Brings Relief. Companies that deal in a $2 trillion swath of the currency market have likely avoided being ensnared in a regulatory net that they said would have driven up costs for corporations to hedge foreign-exchange transactions and unfairly lumped the products in with riskier derivatives. The U.S. Treasury Department on Friday proposed excluding foreign-exchange swaps and forwards from new rules governing derivatives.
• Spot Silver Drops 12% In 11 Minutes As Bulls Routed. Spot silver suffered one of its most severe drops on record early Monday, as bulls who have driven the metal up to 31-year records failed to carry it above $48 a troy ounce and were routed in a headlong collapse. The metal fell 12% in just 11 minutes when the fall was at its most severe. Spot silver saw its informal open at $47.863/oz before rising to a peak of $48.150/oz; it then sold off sharply to a base of $42.210 before stabilizing.
• Buffett Says He'll Retain Goldman(GS) Warrants in Wager on Bank. Warren Buffett, who invested $5 billion in Goldman Sachs Group Inc. (GS) at the depths of the financial crisis, said he plans to retain warrants in the bank in a bet its shares will increase. “We will keep them very close to their expiration,” Buffett said yesterday at a press conference in Omaha, Nebraska, where his Berkshire Hathaway Inc. (BRK/A) is based. “At some point, we’re likely to exercise the warrants.” Berkshire holds warrants, expiring in 2013, to buy $5 billion in New York-based Goldman Sachs’s common stock at $115 a share as a result of his 2008 preferred investment in the company. The bank closed at $151.01 on April 29 on the New York Stock Exchange. Buffett’s support boosted Berkshire’s profit and buoyed New York-based Goldman Sachs as the bank navigated the credit crunch and was criticized by lawmakers. Buffett, whose relationship with Goldman Sachs dates to his childhood when he met with an executive of the company, defended the firm and Chief Executive Officer Lloyd Blankfein at Berkshire’s annual meeting in 2010 after the bank was sued by the U.S. Securities and Exchange Commission for fraud.
• Kathleen Spitzer. The Administration targets a drug CEO in a troubling precedent.
  

Bloomberg Businessweek:

• Deficit Agreement Must Include Tax Hikes, Democrat Van Hollen Says. Chris Van Hollen, the top House Democrat on budget issues, said any deficit-cutting deal that is part of a U.S. debt-limit extension must be “balanced” to include higher tax revenue as well as spending reductions.

CNBC:

• Poll: Do You Believe Geithner When He Says He Wants A Strong U.S. Dollar?

IBD:

• Rubicon Technology(RBCN) Helps Light Cellphones, HDTVs.

NY Post:

• New York City Prices Up by 14% Since Last Year. In addition to skyrocketing rent and gas prices, New Yorkers are being nickel and dimed to death, shelling out 21 cents more for a box of Corn Flakes, 29 cents more for a six-pack of beer, and about a buck extra to go to the movies. It even costs more to treat a headache than it did in 2010. Costs are creeping upward for everything from a coffee-cart cup of Joe to a carton of milk to a TV dinner. A Post analysis found that rent has risen 5 percent and a sampling of New Yorkers’ common purchases have jumped about 14 percent. The average price of a regular gallon of gas in New York City was $4.21 Friday, compared with $3.08 a year ago, according to the American Automobile Association.
• AT&T(T) Caps Broadband Use. Today, AT&T becomes the second cable company in the US to start charging customers on how much broadband they use. The new charges are meant to make people limit the use of online video services like Hulu and Netflix by making heavy users pay more. Comcast, the largest cable company in the US, began charging customers extra last winter.
  

CNNMoney:

• Electric Car Boom Could Deliver a Surge in Grid Power. Here’s the bad news about electric vehicles: They’re going to be hell on the grid. The Utilities Telecom Council trade group reports that electric vehicles will require a 16-fold increase in power usage in the next decade, putting pressure on utilities to find out how to handle car charging as quickly as possible.

Business Insider:

• Three Alleged Al-Qaida Operatives Arrested In Germany Accused Of Planning Public Transport Attack.

Zero Hedge:

• The Cannibalization At The Top Escalates: Sokol's (Re)Response To The Ukulele Master.It is alarming that Mr. Buffett would be advised to so completely flip-flop and resort to transparent scapegoatism.

Seeking Alpha:

• Ken Heebner's 30 Favorite Stock Picks.

Reuters:

• Analysis: Symbolism and Sympathy: Obama's Risky Gasoline Strategy. The White House is using mostly symbolic measures to address soaring gasoline prices, but the strategy is failing to resonate with frustrated American voters.
• Facebook's Growth Exceeds Expectations - WSJ. Facebook Inc's business is growing faster than forecast several months ago and the firm is on track to top $2 billion in earnings before interest, taxes, depreciation and amortization in 2011, according to a report in The Wall Street Journal.

Financial Times:

• Nimble Long-Short Funds in Vogue. It is widely believed that the closure or scaling down of many proprietary trading desks at investment banks in response to new regulations has created mispricing opportunities. For funds in the long-short equity space – about 30 per cent of total hedge fund assets worldwide, according to Hedge Fund Research – the environment has rarely been better, particularly as the volatility that followed the financial crisis has now abated and company-specific factors are moving to the fore.

Telegraph:

• Hedge Funds Increase Bets Dollar Will Decline. Hedge funds increased their bets against the dollar to a massive $28.6bn (£17.1bn) in advance of Ben Bernanke's historic first press conference as chairman of the Federal Reserve last week.
• Should Food Be A Protected Commodity? They've already been bashed over high pay, tax avoidance and complex derivatives that helped cause the financial crisis. Now banks are under the spotlight over their agricultural trading.

Irish Independent:

• Enda Vows No Public Pay Cuts 'at all costs'. Enda Kenny and his Government will avoid cutting public sector pay "at all costs", despite the dramatic cut in the country's economic growth forecasts this weekend, according to a confidential memorandum sent to all government departments. The sharp downgrade now means cuts of up to €5bn in December's Budget will be needed -- far higher than the €3.6bn forecast at the start of the year -- casting fresh doubt on the country's ability to meet its soaring debt costs. Jim Power, chief economist with Friends First, yesterday said that the downgrade in growth forecasts meant an Irish default was now far more likely unless Europe intervenes with a genuine rescue package.

Kathimerini:

• A Greek debt restructuring is imperative and the longer one is delayed, the greater the economic and social cost, Mohamed El-Erian, CEO at PIMCO, said. Some form of restructuring is necessary if Greece is to avoid years of economic contraction, rising unemployment, falling investment and a worsening of the debt trap, he said.
  

Estado de Sao Paulo:

• The Brazilian government biggest priority is fighting inflation, even if this exacerbates the real's overvaluation in the short term, Development Minister Fernando Pimentel said at the World Economic Forum yesterday in Rio de Janeiro.

The Hindu:

• Taliban "Child Bomber" Kills Four. President Hamid Karzai is accusing the Taliban of using a 12-year-old as a suicide bomber and sending him to carry out an attack on Sunday that killed a local council member and three other civilians in eastern Afghanistan. Mr. Karzai says the bombing targeted civilians and that the use of children and youths in terrorist attacks is inhumane and un-Islamic. The attack took place in Paktika province, 260 km south of the capital. It comes one day after the Taliban announced the beginning of its spring offensive. In a statement released on Saturday, the insurgent movement announced it would step up operations against military bases, convoys and Afghan officials, including members of the peace council working to reconcile with top insurgent leaders.

Australian:

• Rio Tinto Ltd(RTP) Chairman Jan du Plessis said soaring commodity prices are unsustainable and iron ore and copper will probably fall, citing an interview with the mining executive. While long-term demand from India and China will be strong, du Plessis said Rio will use its balance sheet to protect against market volatility over the next few years. The report didn't include a forecast of when prices might fall.

Xinhua:

• Muslim Brotherhood Eyes Big Political Role. The Muslim Brotherhood, one of Egypt's most powerful political forces, aims to play a big role in Egypt's future politics after decades of oppression from the previous governments. The group announced Saturday to form its own Freedom and Justice Party, which aims to contest between 45 and 50 percent of the parliamentary seats in the upcoming elections. As the formerly ruling National Democratic Party (NDP) was dissolved in mid-April by a court, the Muslim Brotherhood is believed to be the best organized group in the country with supporters from different walks of life, from poor people to elites.

Economic Observer:

• China's Ministry of Railway has reached consensus on cutting this year's investment on high-speed railway infrastructure by more than 200 billion yuan to more than 400 billion yuan, from a planned 700 billion yuan. Some high-speed projects will be suspended and spending will be focused on projects already under construction and those deemed necessary.

China Business Journal:

• China's government has prepared further tightening measures for the nation's property market to prevent an "unreasonable rebound" in housing prices during the May 1 Labor Day holiday. The measures include increasing the minimum down payments on second-home mortgages in selected regions and policies regarding land transactions, financing of developers and home price controls.

Weekend Recommendations
Barron's:

• Made positive comments on (M), (IP) and (KND).

Citigroup:

• Reiterated Buy on (CLF), target $118.
• Reiterated Buy on (LEA), boosted estimates, raised target to $64.
  
• Reiterated Buy on (GT), raised target to $22.

Night Trading

• Asian indices are -.50% to +1.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 103.75 +.75 basis point.
• Asia Pacific Sovereign CDS Index 110.50 -.5 basis point.
  
• S&P 500 futures +.58%.
• NASDAQ 100 futures +.84%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CPO)/.89
• (HUM)/1.86
• (IRF)/.47
• (CHK)/.71
• (MEE)/.54
• (BXP)/1.09
• (HIG)/.95
• (APC)/.58
• (PPS)/.34
• (ADP)/.85
• (CNA)/.70
• (L)/.90
• (DISH)/.68
• (DNDN)/-.67
• (EIX)/.66

Economic Releases
10:00 am EST

• Construction Spending for March is estimated to rise +.4% versus a -1.4% decline in February.
• ISM Manufacturing for April is estimated to fall to 59.5 versus 61.2 in March.
• ISM Prices Paid for April is estimated to fall to 83.0 versus a reading of 85.0 in March.
  

Upcoming Splits

• (MMSI) 5-for-4
  

Other Potential Market Movers

• The 3-Month/6-Month Treasury Bills Auction and the Deutsche Bank Healthcare Conference could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and technology shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 100% net long heading into the week.