Stocks Falling into Final Hour on More Economic Fear Mongering, More Shorting, Proft-taking and Rising Credit Angst

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Computer longs, Medical longs, Financial longs, Internet longs and Biotech longs. I added (IWM/QQQQ) hedges, added to my (EEM) short, took profits in some trading longs and added to my commodity shorts today, thus leaving the Portfolio 50% net long. The tone of the market is very negative as the advance/decline line is substantially lower, every sector is falling and volume is above average. Investor anxiety is high. Today’s overall market action is very bearish. The VIX is rising 8.32% and is very high at 47.27. The ISE Sentiment Index is low at 106.0 and the total put/call is about average at .90. Finally, the NYSE Arms has been running extraordinarily high most of the day, hitting 6.53 at its intraday peak, and is currently 6.41. The Euro Financial Sector Credit Default Swap Index is rising 4.34% today to 112.33 basis points. This index is up from a low of 52.66 on May 5^th, but down from 157.81 on Sept. 16^th. The North American Investment Grade Credit Default Swap Index is rising 2.74% to 191.51 basis points. The TED spread is falling 4.37% to 92 basis points. The TED spread is now down 375 basis points in under four months. The 2-year swap spread is jumping 13.82% to 70.0 basis points. The Libor-OIS spread is falling 1.27% to 95 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 14 basis points to 1.24%, which is down 146 basis points in under seven months. The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown. The 3-month T-Bill is yielding .31%, which is up 3 basis points today. The financial sector’s reaction to Geithner’s rescue plan is a large negative. The ISE Sentiment Index hit 240.0 this morning, the highest level since September of last year, which is a negative. As well, the total put/call remains relatively subdued at .90, which is also a negative. I suspect government bonds(TLT) have reached another bottom, inflation expectations have hit another peak and the US dollar(UUP) is beginning another surge higher. On the positive side, the NYSE Arms is extraordinarily high at 6.41. As well, weekly retail sales fell -1.7% this week, up from a -2.3% decline the prior week, which is the best level in 5 weeks. Nikkei futures indicate a -160 open in Japan and DAX futures indicate a -50 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, profit-taking, rising financial sector pessimism, increasing credit market angst and more economic fear-mongering.

Today's Headlines

Bloomberg:

- The U.S. Senate approved an $838 billion economic stimulus package, clearing the way for negotiations with the House over a compromise plan lawmakers said they want to send to President Barack Obama quickly. The chamber today voted 61-37 to approve the measure.

- Treasury Secretary Timothy Geithner pledged government financing for as much as $2 trillion of efforts to spur new lending and address banks’ toxic assets, seeking to end the credit crunch hobbling the economy.

- U.S. regulators sued Finvest Asset Management LLC, Finvest Fund Management LLC and Grant “Gad” Grieve, the New York investment advisory firms’ managing principal, for allegedly defrauding investors in two hedge funds.

- Alcoa Inc.(AA), the largest U.S. aluminum producer, had its long-term debt ratings cut two levels by Standard & Poor’s to BBB-, the lowest investment grade, as falling metal prices make it more difficult to renew loans.

- Yields on Fannie Mae and Freddie Mac mortgage-backed securities held near the lowest since July 2007 relative to government notes, as the Federal Reserve’s buying pushes spreads lower and investors consider the latest U.S. government efforts to fix the financial system. The difference between yields on Washington-based Fannie’s current-coupon 30-year fixed-rate mortgage bonds and 10-year Treasuries today rose 1 basis point to 129 basis points as of 10:30 a.m. in New York, according to data compiled by Bloomberg.

- The emerging-market corporate bond rally so far this year will reverse as the global recession and tight credit markets increase defaults, JPMorgan Chase said. Default rates for high-yield corporate bonds in developing nations may rise to 5.9%, compared with an earlier forecast of 2.8%, JPMorgan strategists Warren Mar and Victoria Miles wrote in a research note dated Feb. 6.

- Crude oil fell on skepticism that the U.S. government’s bank rescue plan will revive the economy, and on speculation that a report tomorrow will show U.S. inventories climbed for the 18th time in 20 weeks.

- The US dollar and the yen rose versus most of their major counterparts on bets Treasury Secretary Timothy Geithner’s financial recovery plan will fall short of reviving lending, increasing demand for a haven. The yen gained more than 3 percent versus the Australian dollar on speculation Japanese investors will repatriate funds after Geithner pledged financing for programs that may grow to as much as $2 trillion. The dollar increased for the first time in three days against a gauge of the currencies of six major U.S. trading partners. “It’s classic risk aversion as the market expresses its disappointment to the Treasury’s plan,” said Adam Boyton, a senior currency strategist in New York at Deutsche Bank AG, the world’s largest foreign-exchange trader. “Geithner’s plan lacks a lot of details.”

- Intel Corp.(INTC), the world’s largest maker of computer chips, will spend $7 billion on new plants in the U.S. over the next two years, an effort to extend its lead in manufacturing technology. The investment will boost production of so-called 32- nanometer chips at sites in Oregon, Arizona and New Mexico, Intel said in an e-mailed statement. Chief Executive Officer Paul Otellini will talk about the plans at an event today at the Economic Club of Washington.

- Earnings estimates for small-stock companies are being revised upward at the slowest rate since at least 1988, a sign that analysts’ expectations are starting to bottom out, according to Citigroup Inc.(C). Positive revisions fell to 16% at the end of October 2008, less than half as much as a year earlier, according to Citigroup data. Since 1988, the figure has been below 20% only twice before, in October 2001 at 17% and at 19% in October 1990. The peak, 67%, came in November 1997.

Wall Street Journal:

- The early verdict on the Geithner plan: Too little, too little. Markets are down, having had an adverse reaction to Treasury Secretary Tim Geithner’s presentation detailing the Obama Administration’s plan to pull the financial system out of its current morass, which many say is still too light on specifics. Certain facets of the plan resemble those that were entertained in the previous administration — with the exception of a stress-testing mechanism to determine which financial firms need assistance.

- SanDisk Corp.(SNDK) is disclosing new details of what it believes is a big leap for data-storage chips, using an approach that may be difficult to emulate. The Silicon Valley company, working with manufacturing partner Toshiba Corp., has been racing with other companies to store more information on chips known as flash memory.

- The global economic downturn is squeezing Russian natural-gas giant OAO Gazprom as falling demand for energy forces it to cut gas sales to Europe and deprives the company of valuable export revenue. In an interview, Alexander Medvedev, Gazprom's deputy chief executive, said the price its European customers pay for gas will fall 32% to $280 per thousand cubic meters this year from $409 per thousand cubic meters last year. Exports to Europe will decline 5% to 170 billion cubic meters.

- Disease philanthropy has entered the for-profit world. Until recently, groups like the Juvenile Diabetes Research Foundation and the National Multiple Sclerosis Society spent the money they raised from donors on counseling patients, advocacy in Washington and funding university researchers in the hopes they would discover cures. But charities, increasingly frustrated with the slow emergence of new disease treatments, are pouring millions of dollars into pharmaceutical start-ups to bring new drugs to market. Starting with a $76 million partnership between Vertex Pharmaceuticals Inc.(VRTX) and the Cystic Fibrosis Foundation, the practice has become an important new source of capital for small drug companies.

- In an effort to boost sales in a tough economic environment, Dell Inc.(DELL) on Tuesday plans to announce 0% financing terms on certain personal computers and servers for small and midsize businesses. The offer, described in a Dell news release, will be available for customers buying at least $25,000 worth of equipment.

- UBS AG's (UBS) financial chief Tuesday expressed cautious optimism that the Zurich-based bank's capital ratios will improve as it returns to profitability in 2009.

- The incoming chief investment officer for Calpers, the nation's largest public pension fund, may be one of the most powerful investors in the U.S. But in choosing Joseph Dear last month, the California fund is breaking from its own past and the industry norm. Calpers's previous "CIO"s were almost always investment whizzes who papered their walls with diplomas for advanced degrees in finance. Mr. Dear's background is primarily in government, managing staff rather than managing money. Most recently, he was the executive director of the organization that invests Washington state's pension funds. His selection worries those who say the $175 billion fund could stumble further under the reign of anyone not steeped in markets.

- Hedge funds started the year on a positive note but saw net redemptions of $30 billion in January, according to private-equity company EurekaHedge.

Barron’s:

- On a forward price-to-earnings basis, P&G(PG) is now cheaper than it's been in 20 years.

NY Times:

- A plan to raise income taxes on wealthy New Yorkers is gaining momentum in the State Legislature as lawmakers continue to grapple with the state’s gaping budget deficit. A group of Senate Democrats plans to introduce a bill on Tuesday that would impose an income tax of 10.3 percent on the highest-earning New Yorkers, a rise of 3.45 percentage points, and increase taxes on all households that earn more than $250,000 a year.

- Federal investigators have raided the offices of the PMA Group, one of Washington’s biggest lobbying firms, as part of an investigation into potentially improper campaign contributions, a person briefed on the investigators’ questions said Monday night. The firm specializes in helping its clients obtain multimillion dollar earmarks, the pet items inserted by a single lawmaker into major spending bills that have played a role in several recent Washington scandals. While the firm lobbies other congressmen, it is best known for its ties to Representative John Murtha, the Pennsylvania Democrat who for decades has dominated the House defense spending subcommittee. The firm’s founder, Paul Magliochetti, previously worked for Mr. Murtha, and PMA’s executives and clients are one of Mr. Murtha’s biggest sources of campaign contributions.

Seeking Alpha:

- China and the Baltic Dry Index – What’s Really Going On? I'd like to write a comprehensive entry about the recent love for all things China and commodities in the past few days.

Google Blog:

- Over the last several months, Google’s(GOOG) engineers have developed a software tool called Google PowerMeter, which will show consumers their home energy information almost in real time, right on their computer. Google PowerMeter is not yet available to the public since we're testing it out with Googlers first. But we're building partnerships with utilities and independent device manufacturers to gradually roll this out in pilot programs. Once we've had a chance to kick the tires, we'll make the tool more widely available.

Boston Herald:

- Top White House economic adviser Larry Summers hooked a freebie flight on a posh Citigroup corporate jet mere months before he began weighing the bank’s fate with other policymakers trying to save the banking system. Summers’ decision to accept the freebie raises questions about his ability to remain impartial in those crucial deliberations, critics said. One source said Summers took a number of flights on Citi aircraft.

NorthJersey.com:

- These are good times to be selling cellphone, Internet and cable TV service, and not so good to be selling luxury handbags or high-end cosmetics, according to a survey released today by the National Retail Federation. The study found at least 60.5 percent of Americans surveyed consider cellphone service, Internet service and cable TV to be “untouchables” or off limits when they are trimming spending. Haircuts and coloring, eating out at fast-food restaurants and discount shopping for apparel also scored high on the “won’t give up” list. “The big three were the Internet, text messaging and basic cable,” said Susan Reda, executive editor of Stores magazine, an NRF publication that sponsored the survey, in a telephone interview.

LA Times:

- The collapse of the construction industry and a slump in the restaurant and food service sector have sent thousands of people back to looking for work on California farms, which not so long ago were hurting for workers.

The Detroit News:

- Automakers planning future products are trying to appease many masters, not all of whom agree. The companies are being told to build fuel-efficient models to meet federal and state conditions. Yet consumers have shown they won't buy expensive hybrids or tiny cars if gasoline prices remain reasonable. "People only change when they are hit in the pocketbook," said Aaron Bragman, an auto analyst with IHS Global Insight in Troy, "not because Congress legislates demand." But that's what Detroit's automakers are up against: Congress versus consumers. Federal legislators are mulling a number of regulations that would cost automakers billions of dollars to meet at a time when General Motors Corp. and Chrysler LLC seek federal aid to simply stay afloat. The rules, which range from potential state jurisdiction over emissions standards, to increased federal corporate average fuel economy standards (CAFE) and other conditions attached to the company's loans, increase the pressure to invest in smaller and greener vehicles. That means splitting limited resources between efficiency improvements to existing gasoline engines and new technology involving batteries, electric motors and fuel cells. But with U.S. auto sales starting the year at the weakest level in 27 years and most major automakers reporting financial losses in their North American operations, it is hard to invest in expensive technology that doesn't sell well.

Washington Post:

- Rather than engage in a spirited dialogue with members of the press corps, Obama filibustered. After an eight-minute opening statement, he got through only 13 questions in an hour -- and allowed no follow-up questions. His answers were an oddly unexciting combination of familiar talking points and wonky dissertations. It wasn't particularly good TV, and it wasn't necessarily what Obama needed, either. Worst of all, Obama engaged in one of the most frustrating rhetorical techniques: The straw-man argument. It wasn't fair for Obama to repeatedly suggest that the core opposition to his stimulus plan comes from people "who just believe that we should do nothing." The basic Republican position is considerably more nuanced than that, favoring tax cuts and opposing big-government spending. Obama told a town hall audience in Elkhart, Ind., that without a stimulus bill, "our nation will sink into a crisis that at some point we may be unable to reverse." Loven asked: "Can you talk about what you know or what you're hearing that would lead you to say that our recession might be permanent, when others in our history have not? And do you think that you risk losing some credibility or even talking down the economy by using dire language like that?"

USAToday:

- The global economic storm is hitting what once was the most profitable part of the airline industry: international travel. With demand for international trips in free fall, most U.S. and foreign airlines are cutting international service to and from the USA. They're reducing the number of scheduled flights or parking big jets and putting passengers on smaller ones to avoid flying money-losing, half-empty flights. In March, there will be about 466,000 fewer seats — about 15,000 seats a day — on scheduled non-stop flights from the Lower 48 states to foreign destinations, according to OAG-Official Airline Guide flight schedules analyzed by USA TODAY. Industrywide, that's a 5.3% March reduction year over year. Some carriers have cut capacity to and from the USA by a third.

CBCNews:

- A coalition of Canadian and U.S. environmental groups has launched a cross-border campaign ahead of Barack Obama's visit to Canada, urging the U.S. president to stick to his new energy plan amid possible pleas for him to support oil production from the Alberta oilsands. Toronto-based Environmental Defence, Washington-based Earthworks and 14 other groups have produced a newspaper advertising campaign that will start running Tuesday. They are also launching Obama2Canada.org and urging supporters to sign petitions to Prime Minister Stephen Harper and Obama, who will visit Ottawa on Feb. 19. One ad — aimed at lawmakers and running in Roll Call, a prominent Capitol Hill newspaper in Washington — says: "On February 19 Canadian Prime Minister Stephen Harper will try to sell President Obama on a North American climate pact that gives special treatment to the tarsands in Alberta, the source of the dirtiest oil on earth. Tarsands don't fit into the new energy economy."

Bear Radar

Style Underperformer:
Mid-cap Value (-4.83%)

Sector Underperformers:
Banks (-12.50%), Homebuilders (-7.56%) and REITs (-6.57%)

Stocks Falling on Unusual Volume:
CBST, LDSH, NUAN, ORLY, ZION, VRTX, NTAP, SPLS, WFC, TKC, GE, CXW, PFG, GEO, AP, CUK, DEG, TAP and TK

Stocks With Unusual Put Option Activity:
1) FRP 2) CBS 3) FDO 4) SVU 5) OMC

Bull Radar

Style Outperformer:
Small-cap Growth (-.75%)

Sector Outperformers:
Construction (-1.70%), Software (-2.09%) and Education (-2.32%)

Stocks Rising on Unusual Volume:
EXPD, UBS, MBT, WIRE, ASEI, QGEN, EXBD, ENER, PPDI, SYNT, PSYS, VOCS, POWL, JNPR, JRJC, ADVS, SPWRA, MFLX, FSLR, BECN, AFG and CRL

Stocks With Unusual Call Option Activity:
1) YGE 2) ARNA 3) CTXS 4) MCHP 5) MFE

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Tuesday Watch

Late-Night Headlines
Bloomberg:

- Treasury Secretary Timothy Geithner is seeking to draw investors into the U.S. financial-rescue program, aiming to add private funding as a new component of proposals to address the toxic debt clogging banks’ balance sheets. Aides worked through the weekend to complete the package that Geithner will announce tomorrow in Washington, which was delayed by a day. Aspects of the plan that have been settled include a new round of injections of taxpayer funds into banks, targeted at those identified by regulators as most in need of new capital, people briefed on the matter said. The toughest issue has been the one Geithner’s predecessor failed to address: the illiquid assets that caused the credit crunch. A leading proposal is a so-called aggregator bank, featuring investors such as hedge funds and private equity, that may issue Federal Deposit Insurance Corp.-backed debt, the people said. It’s unclear how big a role there will be for guarantees of securities that stay on banks’ balance sheets.

- Asian material and consumer stocks fell after President Barack Obama said the U.S. faces a “full- blown crisis.” Utility companies gained as oil traded near a three-week low. Futures on the Standard & Poor’s 500 Index dropped 0.7 percent after Obama’s comments, which were made at a news conference just hours after the Senate held a procedural vote that cleared the way for passage of its stimulus bill tomorrow.

- Private companies in Asia risk being crowded out of debt markets this year as governments in the region boost bond sales to fund economic stimulus measures, according to the Asian Development Bank.

- The euro fell, halting a three-day gain against the yen, after the Nikkei newspaper reported that Russian banks and businesses may ask foreign lenders to reschedule loans worth $400 billion. The yen gained for a second day versus the dollar on speculation the financial turmoil in Europe is worsening, prompting investors to sell higher-yielding assets. The 16-nation euro also dropped against the dollar after European finance ministers signaled increasing concern that some governments are finding it harder to borrow in financial markets.

- China’s inflation cooled to the weakest pace in more than two years and producer prices fell as growth slumped in the world’s third-largest economy. Consumer prices rose 1 percent in January from a year earlier, the statistics bureau said today, after gaining 1.2 percent in December. Producer prices fell 3.3 percent, the steepest decline in almost seven years. “This puts more pressure on the central bank to cut interest rates further,” said Peng Wensheng, head of China research at Barclays Capital in Hong Kong. “In the short term, the downward pressure is on prices.” The key one-year lending rate stands at 5.31 percent after 2.16 percentage points of reductions in 2008 that followed the collapse of Lehman Brothers Holdings Inc. The central bank is yet to make a reduction this year. Peng expects the rate to be cut a further 81 basis points this year after the economy grows as little as 5 percent this quarter.

- Roche Holding AG said it started a hostile $86.50-a-share bid for Genentech Inc.(DNA) after talks in which the biotechnology company said it wanted $112 a share, or 29 percent more.

- Chevron Corp., BP Plc and other oil producers are locked into drilling offshore wells that cost as much as $200 million each because of rig contracts that were signed when crude was soaring above $140 a barrel. Even as energy companies slash billions of dollars in spending to cope with the lowest prices in five years, deep-sea exploration continues unabated because canceling rig contracts would cost as much as finishing the projects, said Candida Scott, a senior director at Cambridge Energy Research Associates who tracks oil-development costs.

Wall Street Journal:

- Many U.S. banks will be subjected to rigorous examinations to see if they are healthy enough to lend before receiving additional federal rescue funds, according to people familiar with the matter. The "stress tests" will be part of the bailout revamp to be announced Tuesday by Treasury Secretary Timothy Geithner. The administration intends to invest between $100 billion and $200 billion more in banks.

- As the economic slump deepens and more companies teeter at the edge of bankruptcy, a number of junk-fund managers are buying riskier bonds. How to explain this paradox? They are essentially betting that the junk-bond market overshot when it plummeted in December. Now, by buying discriminately, junk-fund managers think they can scoop up debt that won't default in a shrinking economy. Managers are starting to add bonds in previously shunned sectors such as autos, retail and gambling.

- The drug and medical-device industries are mobilizing to gut a provision in the stimulus bill that would spend $1.1 billion on research comparing medical treatments, portraying it as the first step to government rationing. Mr. Obama supported research into comparative effectiveness during his campaign. Administration officials and leading Democrats in Congress say the idea will help government programs direct their dollars to treatments that are worth the money. Officially, drug and device makers don't object to that sentiment. But they warn of a slippery slope where the government ends up axing useful treatments just because they cost too much. They have lined up patient groups that get industry funding to lobby Capitol Hill. A coalition called the Partnership to Improve Patient Care includes the lobbying arms of the drug, device and biotechnology industries as well as patient-advocacy groups and medical-professional societies. Coalition spokesman David Di Martino says the research envisioned in the House bill may be used "in an inappropriate manner that may limit treatment options for patients."

- A growing number of big companies are taking advantage of the thawing credit markets to raise large sums of money at low interest rates, with Cisco Systems Inc.(CSCO) Monday selling $4 billion in bonds to bolster its war chest for acquisitions. The big Cisco offering follows a string of successful efforts just in the past five weeks to tap the market for corporate debt. The size of the offering -- and the relatively low risk premiums attached to the bonds -- indicate that investors are hungry for debt from highly rated companies that issue infrequently.

- The global downdraft is hitting the world's emerging economies with a speed and ferocity few imagined possible just months ago. The pace of the turnaround has caught policy makers and investors off guard. In a matter of months, gauges of growth in trade and industrial production in a number of countries went from passable to falling off a cliff; even domestic demand is suffering. Asia's economies have posted the starkest declines, but the slide is evident from Latin America to Eastern Europe.

Barron’s:

- Financial Executives have responded to the gloomy economy and grim global outlook by making a number of high-profile stock purchases in recent weeks. But while insiders at other banks are shelling out for shares, a Goldman Sachs Group (GS) vice chairman pocketed $3.7 million from selling the company's stock. On Friday, Michael Sherwood sold 45,000 shares for $3.7 million, an average of $83.12 a share.

NY Times:

- To rally support for his administration’s economic recovery bill last week, President Obama invited about a dozen chief executives, seven of them from technology and energy companies, to the Oval Office. Some of their industries’ top lobbyists, meanwhile, gathered in another office where Jason Furman, a top White House economic adviser, delivered a private briefing for groups expected to benefit most from the stimulus bill. While much of the sprawling $800 billion legislation consists of tax cuts and broad spending increases for existing programs, like $27 billion on highways and $8.4 billion on public transit, the biggest outlay on new initiatives is essentially a technology industry wish list: in the Senate version, about $7 billion for expanding high-speed Internet access, some $20 billion for building a so-called smart grid power network and $20 billion for digitizing health records. To many on K Street, the stimulus bill was the clearest guide to the new administration’s closest friends in the business world. What oil was to President Bush, some say, clean energy and technology are to the Obama White House.

BusinessWeek:

- An $838 billion economic stimulus bill backed by the White House survived a key test vote in the Senate on Monday despite strong Republican opposition, and Democratic leaders vowed to deliver legislation for President Barack Obama's signature within a few days. The vote was 61-36, one more than the 60 needed to advance the measure toward Senate passage on Tuesday. That in turn, will set the stage for possibly contentious negotiations with the House on a final compromise on legislation the president says is desperately needed to tackle the worst economic crisis in more than a generation. Moments before the vote, the Congressional Budget Office issued a new estimate that put the cost at $838 billion, an increase from the $827 billion figure from last week. Ironically, the agency said provisions in the bill intended to limit bonuses to executives at firms receiving federal bailout money would result in lower tax revenues for the government.

- Best Buy(BBY), Other Retailers Tap Tech to Boost Sales. Retailers are using analytics, a new breed of tracking software, to exploit how customers behave.

CNNMoney.com:
- Ford Motor Co.(F) will introduce its first all-electric vehicle in 2010, but it will be intended for business owners - not families. The electric Transit Connect, a small van, will be offered in "select" U.S. Ford dealerships. "The new Transit Connect light commercial vehicle with battery electric power represents the next logical step in our pursuit of even greater fuel economy and sustainability," said Derrick Kuzak, Ford's group vice president for global product development in a company announcement. The van will able to to travel about 100 miles on a fully charged battery, according to Ford.

Forbes:

- The federal bailout of General Motors and Chrysler, intended to help speed the restructuring of the ailing auto industry, might be doing just the opposite. With a week to go before the companies must submit new restructuring plans to the government under terms of their $17.4 billion taxpayer loans, negotiations with bondholders and the United Auto Workers union to reduce the companies' huge debt burden seem to be going nowhere. "Everybody is just looking at each other," said Sen. Bob Corker, R-Tenn., who has been briefed on the companies' progress. "There's no real action happening as it relates to restructuring."

IBD:

- With money to spare in credit-challenged times, nursing home operator Ensign Group (ENSG) is taking advantage of a buyer's market.

Politico:

- Barack Obama has a tough act to pull off. He must simultaneously petrify people and also restore their confidence. He must scare us to death and calm our fears. He must convince the nation that the times are so dire we must carry out his bold plans immediately, and then he must persuade us to be patient and give his plans time to work. He used phrases like "full-blown crisis" and "vicious cycle." And he said that unless we do something quickly, "we may be unable to reverse" the crisis we face. Nor should his stimulus and bailout plans, as massive as they are, be considered a complete fix. "Given the magnitude of the challenges we have, any single thing we do is going to be part of solution and not all of the solution," he said.

News-Leader:

- What ever happened to President Barack Obama's promise of "hope over fear" under his leadership? With public support for his $800-plus billion economic stimulus bill dwindling, Obama and his supporters have been predicting an economic meltdown if Congress doesn't shut off debate and quickly approve the massive spending package. "A failure to act, and act now, will turn crisis into a catastrophe," the Democratic president said last week. Missouri Sen. Claire McCaskill took the rhetoric to the next level, telling the right-of-center Washington Times: "If we don't pass this thing, it's Armageddon." The nonpartisan Congressional Budget Office has said the stimulus bill may do more long-term damage to America's economy than short-term good by burdening the nation with more debt, requiring more money to be taken out of the economy to pay the creditors. The rhetoric to pass the stimulus bill is a whole lot different than the platitudes of hope and promise Americans were hearing from Obama just 21 days ago. "On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord," Obama said during his Jan. 20 inaugural address.

Reuters:

- U.S. life insurers Principal Financial (PFG), Lincoln National (LNC) and Genworth (GNW) on Monday posted fourth-quarter losses, hurt by soured investments.

Financial Times:
- Quantitative investment managers suffered a net outflow of $9.3bn in the third quarter last year as they ran for cover from the financial sector in favor of information technology and materials stocks. The activities of quantitative funds, which trade using statistical models designed to identify patterns in financial markets, are increasingly important because they account for such huge trading volumes. Tabb Group, the US consultancy, predicts that by next year algorithmic trading, one aspect of quant-investing, will account for half of all US equity trading. However, “quants” have endured a torrid few years, with their reputation taking a battering after their funds lost a third of their value in days in the early stages of the credit crisis.

- It was perhaps inevitable that protectionist tendencies and raw nationalistic instincts would resurface with the deepest economic crisis in Europe since the 1930s. The key now is to ensure these dangers do not spin out of control. It is particularly worrying that the first signs of this should occur in the UK, a country that has for so long championed the open market and free flow of capital and labor. The sight of protesters outside the Lindsey oil refinery, railing against Italian and Portuguese workers, is an amber warning light that the veneer of cross-Continent consensus for single-market principles may be thinner than we had assumed.

- Investors are buying record amounts of gold bars and coins, shunning risky assets for the relative safety of bullion amid renewed fears about the health of the global financial system. The US Mint sold 92,000 ounces of its popular American Eagle coin last month, almost four times that which it sold a year ago and more than it shipped during the whole of the first half of 2007. Other countries’ mints have also reported strong sales. “Large purchases of coins are perhaps the ultimate sign of safe-haven gold buying,” said John Reade, a precious metals strategist at UBS. Inflows into gold-backed exchange traded funds surged in January, pushing their bullion holdings to an all-time high of 1,317 tons. Last month’s flows of 105 tons were above September’s previous record of 104 tons, and absorbed about half the world’s gold mine output for January, said Barclays Capital. Traders and analysts said jewelry demand, historically the backbone of gold consumption, had collapsed under the weight of the high prices. Sharp falls in demand in the key markets of India, Turkey and the Middle East have capped the potential of any price rally. But the lack of jewelry demand has not discouraged investors.

Calgary Herald:
- A fortnight is a long time in politics. It corresponds most recently to the time between Barack Obama's inauguration as the 44th president of the United States, on the final crest of the "politics of hope," and his definitive exploitation of the "politics of fear" to get a near trillion-dollar stimulus package through the U. S. Senate. In an article he at least signed, for the Washington Post on Thursday, Obama supplied a memorable quote: "This recession might linger for years. Our economy will lose five million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse." Compare, if you will, another Democrat president, Franklin Delano Roosevelt, who took office under considerably grimmer circumstances --at the very bottom of the Depression--in 1933: "This great nation will endure as it has endured, will revive and will prosper. "So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself-- nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance." While President Obama threatens, Democrats and Republicans tussle in the Senate over tankerloads of irrelevant pork. It is massive beyond reliable quantification. It consists on the one side of panic money thrown at ill-considered public works projects; and on the other of tax breaks for various vested interests. It would seem that for every $100 billion of controversial bailout, another $100 billion of "sweeteners" must be added to make the medicine go down. When he turns to the American people, the president or his pollsters will only see lines of division already written through Congress. Obama demands non-partisanship to get the bill passed. But opposition to the bill is huge, growing, and itself essentially non-partisan. Americans themselves are deeply troubled by the proposal that they should mortgage their children's future for a constantly growing bailout scheme that must, of necessity, reward the undeserving. Obama's political problem is not with the Senate Republicans, but with "blue dog Democrats" who represent the centre of the left-right political dial. They do not like the stimulus bill for the plausible reason that their affiliation with it could lead to their annihilation at the next election.

Nikkei:

- Russian banks and businesses may ask foreign banks to reschedule loans worth $400 billion, citing Anatoly Aksakov, the head of the Russian Assoc. of Regional Banks.

21^st Century Business Herald:

- China Unicom Ltd. is in talks with Apple Inc.(AAPL) about offering the iPhone in mainland China as early as May 17.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (NUAN), target $14.

- Reiterated Buy on (HEW), target $47.

- Reiterated Buy on (GILD), target $59.

Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 futures -1.24%.
NASDAQ 100 futures -.74%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
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Today in IBD
In Play
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Economic Preview/Calendar
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Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (CVH)/.60

- (DTV)/.34

- (ICE)/.83

- (PBG)/.25

- (UIS)/.08

- (OMC)/.82

- (EXPD)/.35

- (TAP)/.71

- (ARW)/.59

- (MDC)/-1.23

- (PER)/.25

- (Q)/.10

- (CSC)/1.01

- (MANH)/.24

- (N)/.00

- (CBG)/.27

- (NVDA)/-.11

- (CF)/.34

- (CERN)/.61

- (AMAT)/.00

- (VFC)/1.34

- (TRA)/1.09

- (ETP)/.68

Economic Releases

10:00 am EST

- Wholesale Inventories for December are estimated to fall .7% versus a .6% decline in November.

Upcoming Splits
- (LPHI) 5-for-4

Other Potential Market Movers
- The Fed’s Dudley speaking, Geithner’s testimony on financial rescue program, Bernanke testimony, IDP/TIPP Economic Optimism, weekly retail sales reports, Deutsche Bank Growth Conference, BIO Investor Conference, UBS Global Healthcare Conference, Barclays Industrial Conference, Sterne Agee & Leach Financial Services Symposium, Goldman Ag Conference and Thomas Weisel Tech/Telecom Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and consumer stocks in the region. I expect US equities to open modestly lower and to maintain losses into the afternoon. The Portfolio is 100% net long heading into the day.