Today's Headlines

Bloomberg:
- The Federal Reserve led an unprecedented push by central banks to flood the financial system with as many dollars as banks want, backing up government efforts to revive confidence and helping to reduce money-market rates.

- France, Germany, Spain, the Netherlands and Austria committed 1.3 trillion euros ($1.8 trillion) to guarantee bank loans and take stakes in lenders, racing to prevent the collapse of the financial system. The announcements came as Britain took majority stakes today in Royal Bank of Scotland Plc and HBOS Plc.

- Money-market rates in London fell after policy makers offered banks unlimited dollar funding and European governments pledged to take ``all necessary steps'' to shore up confidence among lenders. The London interbank offered rate, or Libor, for three-month dollar loans dropped 7 basis points to 4.75 percent today, tied for the largest drop since March 17, the British Bankers' Association said.

- James Chanos, president of hedge-fund firm Kynikos Associates Ltd., said he's selling short the fewest financial shares in four years after they lost half their value and government support made it more likely the stocks will rally. ``We have the least amount of financials short in our portfolio that we've had in four years,'' Chanos said in an interview with Bloomberg Television. ``They're down quite a bit, and clearly with these kinds of rescue packages our view is the risk-reward is not great on the short side, probably selectively on the long side. We're looking elsewhere.'' Chanos, who manages $5 billion, also said he is reducing short-selling of the steel industry. The hedge-fund manager said he is betting against some areas abroad that have been rapidly increasing infrastructure growth. ``All you need to do is look at Dubai's travails all of a sudden, which we've been talking about for a while, as a microcosm of projects that were pie in the sky, built with easy credit,'' he said. ``A lot of those projects will find difficult financing. That's where we're going to see some problems.''

- Dubai may need help from Abu Dhabi and the United Arab Emirates government to finance a surge in borrowing that paid for the world's tallest tower, palm tree- shaped man-made islands and stakes in banks worldwide. Dubai's ``potential reliance'' will be ``most significant'' in coming years, Moody's Investors Service said in a report today. Government-controlled companies owe at least $47 billion, more than Dubai's gross domestic product, and they will continue to accumulate debt at a faster pace than the economy grows, the New York-based rating firm said. ``These companies that are based in Dubai have become larger than Dubai itself,'' said Giyas Gokkent, chief economist at National Bank of Abu Dhabi, the U.A.E.'s second-largest commercial bank by assets. ``If anything were to go wrong with any of these companies, Dubai does not have the wherewithal to deal with it.''

- U.S. Treasury Secretary Henry Paulson and Federal Reserve officials today will meet with executives from financial companies to discuss the government plan to restore confidence in credit markets, the Treasury said.

- The cost of protecting bank bonds from default fell as the U.K. bailed out Royal Bank of Scotland Group Plc, HBOS Plc and Lloyds TSB Group, and governments across Europe announced coordinated action to avert financial collapse. Credit-default swaps on the Markit iTraxx Financial index of 25 European banks and insurance companies dropped 11 basis points to 98, the lowest in three weeks, according to JPMorgan Chase & Co. prices at 10:45 a.m. in London. The U.S. Federal Reserve, European Central Bank and the Bank of England will offer financial institutions unlimited dollar funds for the first time in an attempt to ease tensions in money markets. The Group of Seven finance chiefs, meeting in Washington over the weekend, vowed to take ``all necessary steps to unfreeze credit and money markets.'' Germany is preparing its own rescue plan that may total as much as 400 billion euros ($540 billion). Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings decreased 30 basis points to 700, having reached a record 750 last week, JPMorgan prices show. The Markit iTraxx Europe index of 125 companies with investment-grade ratings fell 7 basis points to 131. The Markit iTraxx credit-default swap index of 50 investment-grade Asian borrowers outside Japan was down 35 basis points at 295 as of 5:30 p.m. in Hong Kong, Barclays Capital prices show. The Asian high-yield benchmark declined 75 basis points to 875.

- The European bank rescue plan laid out yesterday in Paris should enable confidence to be restored, Dominique Strauss-Kahn, the chief of the IMF, said. “What has been done over the last three days should provide elements of reassurance,” Strauss-Khan said. The worst of the financial crisis “may be behind us,” he added. The IMF will submit proposals to reform the financial system, including tighter control of hedge funds through the banks that provide them with debt, he said.

- Morgan Stanley(MS) climbed as much as 66 percent in New York trading after the firm sealed its $9 billion investment from Mitsubishi UFJ Financial Group Inc., giving the Japanese bank preferred stock that pays a 10 percent dividend. Mitsubishi UFJ, Japan's biggest lender, will get 21 percent of the New York-based company as previously agreed, the firms said today in a joint statement.

- Gold fell for the third straight session as equities worldwide rebounded, reducing the appeal of the precious metal as a haven against market turmoil. The London interbank offered rate, or Libor, for three-month dollar loans fell to 4.75 percent from 4.82 percent, the British Bankers' Association said. ``As markets may recover from now to next March, the full sense of security will come back into the market, and people will not be that interested in gold,'' Marc Faber, the managing director of Marc Faber Ltd. and the publisher of the Gloom, Boom & Doom report, said in an interview on Bloomberg Television.

Wall Street Journal:

- Eastern European countries, already financially overstretched, are facing a pullback by lenders and investors, which may threaten to burst economic bubbles in the Balkans and trigger a major slump in Hungary and the Baltic states, citing fund managers and economists. Many of those countries had borrowed heavily from overseas lenders to finance business activity and consumer spending.

- Keep Your Money in the Market. We’ve been through ups and downs before. We will have a serious recession now, but a 1930s-style depression is highly unlikely. We will not let the money supply decline by 25%, as we did in the '30s, and automatic stabilizers (like unemployment insurance) are now a significant element of fiscal policy. Don't forget that the U.S. economy is still the most flexible in the world and our "innovation machine" is alive and well. No one has consistently made money by selling America short, and I am confident the same lesson is true today.

- It may be premature to write the epitaph for funds of hedge funds, but people in the industry are giving them a less-than-glowing prognosis after a year in which the funds have on average declined in value by 11%. Fund-of-hedge-funds managers have historically decided who gets 40% of the hedge-fund industry's $1.9 trillion of assets to manage, the idea being that they can more efficiently differentiate between good hedge funds and also-rans. This year, however, their track record hasn't been good. And if, as expected, significant numbers of investors pull cash out of the funds as the opportunity arises near the end of the year, that could be enough to further hurt some funds' performances and leave others with a portfolio unbalanced by the sales needed to raise the cash.

Barron’s:
- There’s reason to believe that the stock-market averages will hit bottom sometime in the next few months, even if the economy is still in the middle of a recession. The buy-and-hold approach still applies. The fear that sent the market down so sharply last week may have driven stocks close to their ultimate lows. "I don't think this is the end of America as we know it," says Byron Wien, chief investment strategist at Pequot Capital Management. "I think it's conceivable that the markets will bottom before year end." The good news today is that stocks appear to have gotten out ahead of any recession, falling so sharply that they might already have priced in pretty horrible times ahead. The Dow is down almost as much in the past year as the 45% it fell in the 1973-1975 recession, and its 12-month decline far exceeds the 24% it lost in the period leading up to and during the 1981-1982 recession, according to Birinyi Associates.

NY Times:
- The country’s leading group of pediatricians is recommending that children receive double the usually suggested amount of vitamin D because of evidence that it might help prevent serious diseases. To meet the new recommendation of 400 units daily, millions of children will need to take vitamin D supplements each day, the American Academy of Pediatrics said. That includes breast-fed infants — even those who get some formula — and many teenagers who drink little or no milk.

NY Post:

- Sharper Image's new owners have cut a half-billion-dollar deal to catapult the brand out of bankruptcy into a global business.

USA Today:
- How Congress set the stage for a fiscal meltdown. During last week's presidential debate, John McCain and Barack Obama sparred over what caused the financial crisis. It was a classic example of Washington finger-pointing. McCain and the GOP blame Fannie and Freddie — which were taken over by the government last month — because the troubled mortgage agencies' biggest backers were Democrats who said they wanted to increase access to homeownership. Meanwhile, Obama and other Democrats highlight Republicans' longtime focus on limiting regulations for the financial industry. No single government decision sparked the crisis, but collectively the candidates had a point: Both parties in Congress played important roles in setting the stage for the ongoing financial meltdown.

Boy Genius Report:

- iPhone 3G may be coming to a Wal-mart(WMT) near you.

Loyd’s List:

- Chinese coal demand is falling and will probably cut hiring ships that haul the fuel, citing an official at China’s Ministry of Communications. Demand for electricity, coal and crude oil peaked in July and has weakened since August, citing Jia Dashan, director of the transportation research and consultant department at the Waterborne Transportation Institute. Qinghuangdao port has 8.3 billion metric tons of coal, close to its capacity of 9 million tons.

Reuters:
- Goldman Sachs (GS), the biggest oil trader on Wall Street, has been restricted from making a market in price assessment agency Platts' daily oil trading window as counterparty anxiety grows, two sources familiar with the move said on Monday. Goldman is the latest in a series of major investment banks to be placed under a so-called "review" by Platts, which has said it may sometimes need to limit the activities of some companies in its half-hour price-discovery process if their acceptability by counterparties threatens to distort benchmark prices. The review does not stop Goldman from trading oil, and there was no suggestion that the review had affected its day-to-day trade. But being restricted from making a market in the window will reduce the bank's influence on Platts' benchmark prices.

Rzeczpospolita:
- Polish central bank Governor Slawomir Skrzypek said the European Union’s largest eastern member may have to change its 2011 target date for euro-adoption due to the global financial crisis. “The current situation inclines us to rethink the euro-adoption data,” Skrzypek said.

Interfax:

- Russia’s trade surplus shrank 26% in September to $13.7 billion. Exports in September dropped 9% from the month before to $41.3 billion and imports rose 3% to $27.6 billion, citing an official.

Times of India:

- Prospects of an early ban on short-selling in Indian futures and in the cash segment has increased considerably, with evidence mounting that a group of market operators are using the present weak sentiments to hammer it further by offloading shares in huge numbers. Sources indicated that the pressure to ban short-selling has increased in the light of reports that on Friday alone operators short sold shares worth Rs 2,500 crore, adding to the bearish sentiment.

Taiwan News:

- Russian stocks dropped Monday on declining world oil prices and new struggles for control of the world's largest nickel miner, prompting regulators to suspend trading on one of the country's two exchanges. The ruble-denominated MICEX was down 5 percent when trading was halted just after 3 p.m. (1100 GMT). The other exchange, the RTS, was down 6 percent.

recast to "

ABC Radio Australia:

- Jonathan Kaufman, the Senior Editor of the Wall Street Journal and a former Beijing Bureau Chief expects a housing crisis will soon hit China. "I think there's a huge bubble in China and I think that I would be surprised if they don't face similar situations as the US has faced, because banks were lending in China purely on a whim, keeping people in homes that they really couldn't afford," he said.

Valor Economico:
- Brazilian consumers are cutting back on spending and credit-card use, citing a survey by Qualibest. 55% of respondents said the global credit crisis affected their spending patterns, according to the survey.

Investorsoffshore.com:

- "Current global market conditions in the hedge fund arena are characterized by heavy redemptions, suspensions and re-structurings coupled with much-reduced (although not zero) new fund formations. In the structured finance arena there has been severe drop-off in deal flows as a result of the freezing of the global capital markets. This situation is not expected to significantly improve until 2010. We are already seeing an impact on the public sector side, with new company registrations Jan-Sept down 10% over the same period in 2007." According to Tibbetts, some experts are forecasting that the number of hedge funds globally could contract by 20-30%, "which will obviously affect Cayman's book of business.” The Cayman Islands has rapidly become the domicile of choice for hedge funds due to its favourable regulatory regime. It is thought that about 80% of the world's hedge funds are registered in the jurisdiction, and at the last count, its financial industry regulator, the Cayman Islands Monetary Authority (CIMA), reported that more than 10,000 investment funds had registered there by the end of the second quarter of 2008.

Bear Radar

Style Underperformer:
Small-cap Value (+4.54%)

Sector Underperformers:
REITs (-.10%), Banks (+1.38%) and Gold (+3.03%)

Stocks Falling on Unusual Volume:
RGLD and DBD

Stocks With Unusual Put Option Activity:
1) SNDA 2) GIS 3) ITU 4) EOG 5) CBS

Bull Radar

Style Outperformer:
Mid-cap Growth (+6.52%)

Sector Outperformers:
Oil Service (+10.59%), Construction (+10.2%) and I-Banks (+9.4%)

Stocks Rising on Unusual Volume:
NRGY, NGLS, INFY, SAY, WYE, JNJ, PVR, HXM, SBAC, VLCCF, ICLR, BRLI, NICE, WPPGY, XTXI, MOLXA, SPTN, PSEC, OMRI, SQNM, UEPS, SWWC, RYAAY, DRYS, VPHM, BOBE, MANH, Y, ADC, PVD, IHE, MTK, PXQ, VCO, SNE, KYN, EMM, BCH, NRP and MS

Stocks With Unusual Call Option Activity:
1) SGR 2) WMI 3) HA 4) BX 5) NTES

Links of Interest

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Monday Watch

Weekend Headlines
Bloomberg:

- Asian stocks and U.S. index futures advanced as European leaders agreed to shore up banks and Asian governments said they will support their financial systems. Financial stocks jumped, accounting for more than half of MSCI Asia Pacific excluding Japan Index's 3 percent gain, after leaders of the 15 countries using the euro pledged to back new bank debt and use taxpayer money to support distressed lenders.

- The Federal Reserve will consider all policy options necessary to stabilize financial markets and limit damage to the economy, said Richard W. Fisher, president of the Dallas Fed bank. ``We can and we will restore order to the credit markets,'' Fisher said during a panel discussion sponsored by the Institute of International Finance in Washington. He said the U.S. faces a period of ``negative growth'' and pledged that the Fed would do ``whatever'' is necessary to ease strains on markets and the economy.

- Federal regulators directed Fannie Mae(FNM) and Freddie Mac(FRE) to start purchasing $40 billion a month of underperforming mortgage bonds as the Bush administration expands its options to buy troubled financial assets and resuscitate the U.S. economy, according to three people briefed about the plan. Fannie and Freddie began notifying bond traders last week that each company needs to buy $20 billion a month in mostly subprime, Alt-A and non-performing prime mortgage securities, according to the people, who asked not to be identified because the plans are confidential. The purchases would be separate from the U.S. Treasury's $700 billion Troubled Asset Relief Program.

- Prime Minister Gordon Brown said he discussed a ``comprehensive plan'' of measures with European leaders to help stem the financial crisis and the British premier believes they will press ahead with the proposals. ``Today we discussed a comprehensive plan that would involve not only cash in financial markets, but also recapitalize our financial system'' and fund mortgages, Brown told reporters in Paris after an emergency summit. ``I believe our European colleagues will move ahead with the comprehensive plan. There's common ground now.''

- Citigroup Inc. Senior Vice Chairman William Rhodes said an accounting rule requiring that a fair value be placed on company holdings, blamed for exacerbating the credit crisis, needs to change when markets are inactive. ``Nobody wants to throw that out, but I think in times of illiquid markets, sometimes you need some modifications,'' Rhodes said at an Institute of International Finance conference in Washington today. Deutsche Bank AG Chief Executive Officer Josef Ackermann, the institute's chairman, urged an ``immediate high-level dialogue'' on fair-value accounting issues.

- U.S. exchanges may seek to impose a temporary ban on short sales for individual stocks that plunge, as regulators seek to rein in a practice blamed for forcing down shares of financial companies such as Morgan Stanley. Under the plan, a stock that ends trading with a loss of at least 20 percent would be protected from short sellers for the following three days, the people said.

- Italy may push for the abolition of hedge funds when it takes over the Group of Seven presidency from Japan next year, Finance Minister Giulio Tremonti said. “They are dark and opaque,” Tremonti said. “They are demented” and do not “conform to the laws of capitalism.” Asked if that means Italy would go so far as to propose abolishing them, he said it’s “something we will talk about.”

- The cost of protecting Australian corporate bonds from default declined by the most ever after Prime Minister Kevin Rudd and European leaders pledged yesterday to guarantee bank borrowing. The Markit iTraxx Australia Index of credit-default swaps was quoted 65 basis points lower at 200 at 12:25 p.m. in Sydney, Citigroup Inc. data show. That exceeds the previous March 25 record after Bear Stearns Cos. was rescued, CMA Datavision prices show. “There’s positive sentiment all around the world,” said Mark McCarthy, a credit trader for ABN Amro Holding NV in Sydney.

- The hedge-fund industry may lose as much as one-fifth of its $1.93 trillion in assets by the end of the year as markets decline and investors withdraw their money, according to Commerzbank AG. “The amount of firepower in the form of capital deployed will be a shadow of its former self,” Mehraj Mattoo, global head of alternative investments for Commerzbank, said.

- The record 39% decline in commodities since July 3 is nowhere near finished, if history is any guide. The Reuters/Jefferies CRB Index of 19 commodities from coffee to silver would have to drop another 37% to reach the trough of the 2001 recession and 35% for the 1998 slide, when crude bottomed at $10.35 a barrel. The measure is 28% above its lowest during the economic contraction that ended in November 1982. Copper, after its biggest weekly loss in two decades last week, is still triple 2001 levels. Investors say rising stockpiles of copper and slowing energy demand mean prices will continue to fall.

- Chesapeake Energy Corp.(CHK) said its chief executive officer, Aubrey McClendon, involuntarily sold ``substantially all'' of his common shares of the company's stock over the past three days to meet margin loan calls. McClendon, 49, owned 33.5 million shares, or 5.8 percent of the company's common stock, according to a Sept. 30 filing with the U.S. Securities and Exchange Commission. He was the company's third-largest shareholder. Chesapeake, this year's worst-performing petroleum producer in the Standard & Poor's 500, fell 6.7 percent in New York trading today amid concern hedging contracts won't protect the company against a plunge in natural-gas prices. McClendon's divestiture was announced after the close of regular trading on U.S. stock markets.

- Joe Biden has been an ally of trial lawyers throughout his tenure in the U.S. Senate, opposing every effort to curb lawsuits against businesses and doctors. The lawyers are returning the favor. Five of Biden's 10 biggest lifetime campaign donors are members of law firms that specialize in bringing personal-injury cases, according to the firms' Web sites and the Washington-based Center for Responsive Politics.

- Morgan Stanley(MS) and Goldman Sachs Group Inc.(GS), the biggest independent U.S. investment banks, may reap cash infusions as part of Treasury Secretary Henry Paulson's plan to buy stakes in financial institutions, investors said.

- The U.S. removed North Korea from its list of state sponsors of terrorism, granting the communist state a long-sought prize in exchange for wider scrutiny of its nuclear-weapons program. North Korea agreed inspectors could examine facilities it has revealed as well as other locations suspected of being used for any part of its nuclear program. It also agreed to immediately resume disabling its Yongbyon reactor, a source of weapons-grade plutonium, U.S. envoy Sung Kim told reporters in Washington today.

- Asian central banks are studying ways to coordinate an effort to tackle the financial crisis that threatens to erode growth and confidence in the region, Philippine policy maker Diwa Guinigundo said.

- Russia test-fired long-range ballistic missiles today as President Dmitry Medvedev pledged to build up the country's armed capabilities.

- Mehdi Karrubi, an Iranian cleric who favors resuming relations with the U.S., said he will run in the 2009 presidential elections, becoming the first announced candidate in the race.

- The average price of regular gasoline at U.S. filling stations fell by a record amount to $3.31 a gallon, an industry survey showed. Gasoline dropped 35 cents, or 9.5 percent, in the two weeks ended Oct. 10, according to oil-industry analyst Trilby Lundberg's survey of 7,000 filling stations nationwide. Crude oil, which accounts for about 73 percent of gasoline's pump price, has fallen 46 percent from a record $147.27 a barrel reached on July 11. U.S. gasoline demand fell 9.5 percent last week, the biggest decline in more than three years, as a slowing economy may be curtailing driving, a MasterCard Inc. report showed Oct. 7. It was the 24th consecutive weekly decline, and the biggest since September 2005, after Hurricane Katrina sent pump prices to records.

- The Federal Reserve approved Wells Fargo & Co.'s $12.2 billion takeover of Wachovia Corp., clearing one of the last obstacles for creation of the largest U.S. bank branch network.

- Rio Tinto Group(RTP) and BHP Billiton Ltd.(BHP), the world’s second- and third-largest iron ore suppliers, may have to cut annual contract iron ore prices next year because oversupply may send spot prices lower, Macquarie Group Ltd. said. “Reports from China indicate that spot prices are likely to fall further amid continuing oversupply,” Macquarie analysts said today.

- Goldman Sachs Group Inc.(GS), the biggest independent Wall Street firm, lowered its price forecasts for crude oil after underestimating the depth of the global financial crisis. Goldman reduced its estimate for the US benchmark West Texas Intermediate crude for the fourth quarter to $75 a barrel from $110, and cut its year-end target to $70 a barrel from $115, Goldman’s research analysts led by Jeffrey Currie and Giovanni Serio said today. The analysts also lowered their price forecasts for 2009, with the average for the year reduced to $86 a barrel from $123, the analysts said.

Wall Street Journal:

- Spain's Banco Santander SA was in advanced talks late Sunday to acquire full control of Sovereign Bancorp Inc., a large thrift-holding company hobbled by souring loans, according to people familiar with the matter.

- Morgan Stanley(MS) may raise the dividend on preferred shares it’s offering to Mitsubishi UFJ Financial Group Inc. to encourage the Japanese lender from backing out of an agreement to buy a 21% stake. Morgan may also reduce the amount of common shares and change the conversion price of convertible shares, while retaining the general terms of the original $9 billion agreement.

- The euro zone's biggest economies prepared to unveil plans to spend tens of billions of euros in state funds to prop up their banking systems, as leaders agreed on a menu of measures to cope with the growing financial crisis. The leaders of the 15 countries that use the euro said choices on the menu, to be implemented as governments see fit, included partial nationalization of banks and provision of state-guaranteed loans. The euro-zone leaders also agreed to loosen mark-to-market rules -- which force banks to book their assets at the price they would get if they sold them now.

CNBC.com:
- The continued turmoil in the financial markets could spark a wave of mergers among banks and remaining brokerage firms in the coming weeks, even as the federal government unveils a plan to make direct investments in banks to further bolster the financial health of the financial sector, according to Wall Street executives interviewed by CNBC.

NY Times:

- General Motors(GM) is in preliminary talks about a possible merger with Chrysler, a deal that could drastically remake the landscape of the auto industry by reducing the Big Three of Detroit automakers to the Big Two, The New York Times’s Bill Vlasic and Andrew Ross Sorkin reported late Friday.

- YouTube to Offer TV Shows With Ads Strewn Through. The staggering growth of YouTube — five billion videos were viewed there in July — has come primarily from short videos that last only a few minutes. But Internet users are gradually becoming more comfortable watching longer videos online, prompting YouTube’s commitment to the format.

- eBay(EBAY) Stumbles, Amazon(AMZN) Surges Amid Economic Storm.

- In what could set an important precedent, federal officials assured a big Japanese bank late Sunday that its planned investment in the embattled Wall Street giant Morgan Stanley(MS) would be protected, according to people involved in the talks.

- Those With a Sense of History May Find It’s Time to Invest. Investors have again convinced themselves that this time is different, that the credit crisis will push economies worldwide into the deepest recession since the Depression. Fear runs even deeper today than greed did a decade ago. But in their panic, investors are ignoring 60 years of history.

IBD:
- Axsys Technologies(AXYS): Military Contractor Sets Sights On New Markets, New Products.

Reuters:

- China's largest steel maker, Baosteel Group, will cut steel production over the next three months in the face of a weakening outlook for demand, sources close to the company said on Saturday.

- Iran will ask for an oil output cut at an OPEC emergency meeting scheduled for mid-November in Vienna, Oil Minister Gholamhossein Nozari told an Iranian newspaper. "It seems that if OPEC does not take a major decision to confront falling oil prices, investment conditions in the oil industry would be faced with a serious danger."

Financial Times:

- Commodities traders are rushing their private bilateral contracts into exchanges and clearing houses as they race to reduce their counterparty risk amid a deepening financial crisis. The transfer of the opaque over-the-counter deals comes as observers warn that commodities, where trading has ballooned in the past five years, could be the next market hit by counterparty failures.

- Once the immediate crisis has passed, financial regulators are adamant that banks will not be allowed to imperil the world economy again. If the authorities are successful, financial institutions will be prohibited from ramping up as much debt with so few buffers.

- Harbinger Capital, the activist New York hedge fund that shot to fame last year with a lucrative bet against subprime mortgages, has made and lost about $5bn (€3.7bn, £2.9bn) this year after dropping by a third in the past three months. The main $14bn fund of Harbinger, run by Phil Falcone, fell 17.9 per cent last month, to leave it down 5.4 per cent for the year so far. Investors said it had given back all the gains of its first six months, when it made close to 43 per cent, and that there would be more losses from its exposure to Lehman Brothers, the failed bank. However, Harbinger's problems pale in comparison with those of many other big hedge funds. They have been having their toughest year on record, with many down 20 per cent or more.

- Amid deepening international financial panic, the World Bank has slashed its 2009 growth forecasts for Latin America and expects several countries in the region to ask it for emergency cash at its annual meeting this week. With plunging stock markets and currencies, evaporating credit lines and sinking prices for the commodities that have made many Latin American economies boom, the bank now expects regional growth of 2.5 to 3.5 per cent next year, according to Pamela Cox, vice-president for Latin America and the Caribbean. That compares with the bank's earlier estimate of 4.2 per cent, and its forecast of 4.6 per cent growth for this year.

Guardian:

- The collapse in Morgan Stanley's(MS) shares late last week has led to a wave of bets being taken on the blue-chip investment bank failing to meet its financial obligations. Investors fear that the bank's debt would return only a fraction of its face value in the event of a bankruptcy filing and are pushing up the cost of insuring its bonds against default.

International Herald Tribune:

- Europe's leaders have repeatedly pointed fingers at the United States since the latest wave in the credit crisis crossed the Atlantic this month. But the reality is that many European banks emulated the riskiest characteristics of their American counterparts, bulking up on what turned out to be toxic debt and relying on short-term loans, rather than deposits, to finance their operations. By some measures, in fact, European banks exposed themselves to even higher levels of risky debt than American banks did.

Kronen Zeitung:

- European Central Bank council member Ewald Nowotny said the ECB opened an “unlimited window” of liquidity for the market this week. A common European solution of the problem is needed, Nowotny said.

South China Morning Post:

- US private equity firm Blackstone Group LP(BX) dropped a $161 million Shanghai property purchase amid the global financial crisis and China’s real estate price slump. Blackstone, which agreed to buy the stake from VXL Capital Ltd. four months ago at almost twice the 586 million yuan the Hong Kong-listed company paid for it in March 2006, had planned to use it as a springboard to more China real estate investments.

Saudi Press Agency:

- The global oil markets are well balanced and there is no shortage of supplies, citing an interview with Finance Minister Ibrahim al-Assaf.

- The United Arab Emirates is facing “second-round effects” of faster inflation, Central Bank Governor Sultan Bin Nasser al-Suwaidi said. Inflation in the UAE accelerated to a record 11.1% in 2007 on higher rents and food costs.

Weekend Recommendations
Barron's:
- Made positive comments on (AAPL), (EPB), (BWP), (OKE), (CS), (PFE), (RNWK), (MSFT) and (PCAR).

Citigroup:

- Reiterated Buy on GOOG, target $590. How much of a severe recession outlook is in GOOG’s stock price? On our severe recession eps of $20, GOOG currently trades at 16.7x p/e, the average S&P p/e of the last two decades. Given the secular growth outlook of internet advertising, GOOG’s strong competitive position within internet advertising, and its identifiable option value, we view this as creating a very attractive risk-reward for long-term investors.

- Reiterated Buy on (AMZN), target $93. How much of a severe recession outlook is in AMZN’s stock price? We go back to the 5-year trough in AMZN’s stock(August ’06), when the macro outlook was much brighter, but AMZN’s fundamental outlook was much poorer. And we conclude that on a price/sales, price/eps & p/fcf basis, AMZN may be within a single-digit % of its recession trough valuation.

- Reiterated Buy on (MRK), target $42.

Night Trading
Asian indices are -1.75% to +1.50% on avg.
S&P 500 futures +3.19%.
NASDAQ 100 futures +2.42%.

Morning Preview
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Earnings of Note
Company/Estimate
- (FAST)/.50

- (MHK)/1.12

- (SCHW)/.25

Upcoming Splits

- None of note

Economic Releases

- None of note

Other Potential Market Movers
- None of note

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

Weekly Outlook

Click here for Wall St. Week Ahead by Reuters.

Click here for stocks in focus for Monday by MarketWatch.

There are a few economic reports of note and some significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – None of note

Tues. – IBD/TIPP Economic Optimism Index, weekly retail sales reports, Monthly Budget Statement

Wed. – Weekly MBA Mortgage Applications Report, weekly EIA energy inventory data, Producer Price Index, Advance Retail Sales, Empire Manufacturing, Business Inventories, Fed’s Beige Book

Thur. – Consumer Price Index, Initial Jobless Claims, Net Long-term TIC Flows, Industrial Production, Capacity Utilization, Philly Fed, NAHB Housing Market Index

Fri. – Housing Starts, Building Permits, U. of Mich. Consumer Confidence

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. – Fastenal(FAST), Mohawk Industries(MHK), Charles Schwab(SCHW)

Tues. – PepsiCo(PEP), Johnson & Johnson(JNJ), Altera Corp.(ALTR), CSX Corp.(CSX), Genentech(DNA), Domino’s Pizza(DPZ), Linear Tech(LLTC), Intel Corp.(INTC), Polaris Industries(PII), Adtran Inc.(ADTN)

Wed. – Coca-Cola(KO), Abbott Labs(ABT), JPMorgan Chase(JPM), Wells Fargo(WFC), AMR Corp.(AMR), JB Hunt(JBHT), Xilinx Inc.(XLNX), eBay Inc.(EBAY), Shaw Group(SGR), Piper Jaffray(PJC), Delta Air(DAL), Novellus Systems(NVLS)

Thur. – Merrill Lynch(MER), Harley Davidson(HDI), United Technologies(UTX), BB&T(BBT), Bank of NY(BK), Citigroup(C), Illinois Tools Works(ITW), Stryker Corp.(SYK), Capital One(COF), Gilead Sciences(GILD), IBM Inc.(IBM), Baxter Intl.(BAX), Google Inc.(GOOG), Southwest Air(LUV), Nucor Corp.(NUE), Hershey Co.(HSY), Intuitive Surgical(ISRG)

Fri. – Honeywell Intl.(HON), Comerica Inc.(CMA), Schlumberger Ltd.(SLB), BlackRock Inc.(BLK)

Other events that have market-moving potential this week include:

Mon. – None of note

Tue. – (JCI) analyst presentation, Lazard Alternative Energy Conference, Wachovia Consumer Growth Conference

Wed. – (UGI) analyst meeting, (GPN) analyst day, (AUY) analyst day, (EW) analyst lunch, (KR) analyst day, (UMH) investor forum, (CHK) analyst meeting, Lazard Alternative Energy Conference, Wachovia Consumer Growth Conference

Thur. – (CHK) analyst meeting, (UMH) investor presentation

Fri. – None of note

BOTTOM LINE: I expect US stocks to finish the week modestly higher on bargain-hunting, technical buying, less credit market angst, diminishing financial sector pessimism and short-covering. My trading indicators are giving neutral signals and the Portfolio is 100% net long heading into the week.