Late-Night Headlines
Bloomberg:
- JPMorgan Chase & Co.(JPM) lists lots of assets, ranging from loans to securities to cash, on its $2 trillion balance sheet. Not to be found is one that might be its most valuable -- Goldman Sachs Group Inc. For JPMorgan, No. 1 in the too-big-to-fail bank club, Goldman has become the perfect lightning rod for populist outrage that might otherwise be directed at it. That has helped shield JPMorgan from questions about its own size, profits and payouts even as it reaps many of the same rewards as Goldman. Not a week goes by, for example, without what seems like yet another big magazine article or blog blast directed at Goldman. The latest is an 8,000-plus-word piece in the January issue of Vanity Fair magazine. JPMorgan, meanwhile, gets articles like a Fortune magazine cover story gushing over how it weathered the financial crisis. Goldman yields JPMorgan dividends in other ways. Silver- tongued JPMorgan Chief Executive Officer Jamie Dimon has found the perfect foil in Goldman’s Lloyd Blankfein, who seems to dig himself deeper with every interview.
- China won't purchase bullion on the open market and to rashly rush in and buy gold would be unrealistic, the Takungpao newspaper reported today, citing Zhang Bingnan, vice chairman of the China Gold Assoc.
Wall Street Journal:
- Federal Reserve Bank of St. Louis President James Bullard suggested Thursday conventional wisdom on monetary policy's response to high unemployment rates may need revision. Most economists now believe that as long as unemployment is rising or remains high, the Federal Reserve is unlikely to raise rates largely because the economy is unlikely to generate inflationary pressures. It's a view that also holds sway among most policy makers. But Bullard, in a gathering with Dow Jones editors and reporters, said this may no longer be the case.
- Dubai: A High Rise, Then a Steep Fall.
- Worries grew Thursday that Venezuela is on the verge of a banking crisis, causing a run on smaller lenders, sinking the country's currency and bond prices, and stoking fears that president Hugo Chávez could nationalize the banking system. Venezuelans and investors are concerned about small banks' solvency following this week's seizure of four banks run by a billionaire close to the government of President Chávez. The populist leader may have fanned the fire when he assured Venezuelans twice this week that he stood ready to stem any crisis -- not with credit lines to troubled banks, but with a promise to take over more lenders if necessary. Mr. Chávez said Thursday his government was "putting out the fire" set by "greedy capitalism."
- Publisher Hearst Corp. plans to launch next year a service called Skiff to sell digital subscriptions to newspapers and magazines in a format it hopes will be more visually appealing on electronic readers and other consumer-electronic devices. Hearst said it wants to give publishers an alternative to Amazon.com Inc.'s Kindle store, which currently dominates the burgeoning field of digital reading. Through Skiff, consumers will be able to buy digital publications that have better graphics and look more like their print counterparts than versions offered elsewhere, Hearst said.
- Federal Reserve Chairman Ben Bernanke, in a Senate hearing that could sway a clamorous debate over the power of the central bank, admitted mistakes in managing the economy but declared that his actions helped save America from another Great Depression. The hearing was to consider whether Mr. Bernanke should get a second four-year term as chairman of the Fed, but it was as much about the future of the institution as his role at the helm. The central bank steers the economy by setting short-term interest rates and providing emergency loans to banks.
- The head of China's biggest property developer warned that real-estate bubbles in some of China's biggest cities could spread elsewhere in the country, with potentially damaging consequences for the market. In an interview, Wang Shi, chairman of China Vanke Co., said government stimulus measures enacted a year ago to keep China's economy from being sucked into the global recession have helped to cause a fundamental turnaround in a property market that was severely ailing before the global financial crisis hit. "In individual cities, and in some of the main cities, there is clearly a bubble. There's no doubt about that ... I'm very concerned." Mr. Wang said he fears the trend could "infect second-tier cities, which would be similar to the nature of the Japanese bubble decade" that imploded in the early 1990s. Mr. Wang's remarks are some of the strongest cautionary statements in a growing debate about renewed dangers of speculation in the property market, which has been one of the most robust components of China's economy this year.
- China has asked big banks to raise their minimum capital adequacy ratio to 11%, China Banking Regulatory Commission Vice Chairman Wang Zhaoxing said in an essay published in the Dec. 1 edition of the central bank-backed China Finance magazine. Wang said in the essay the new minimum ratio is part of steps the bank has taken in response to "changes in the economic situation," without elaborating. The regulator has asked small- and medium-sized banks to maintain a capital adequacy ratio of at least 10%, he said. The CBRC raised the minimum CAR for all banks to 10%, from 8%, late last year. Last week, the regulator issued a stern warning to banks to strictly comply with capital requirements--rules governing the amount of capital they must hold against their loans--or face sanctions. Banks that fail to comply with those requirements by the end of the year could be punished with limits on market access, overseas investments and new branches, it said.
CNBC.com:
- “You can’t create jobs,” Cramer said during Thursday’s Stop Trading!, “when they’re busy tearing down business.” The Mad Money host was referring to Washington’s priorities, or lack thereof. Cramer said the focus right now should be on job creation and not climate change, health care and corporate taxes, even though he recognized them as important issues. For every job the White House may create, Cramer said, another would be lost to cap-and-trade legislation or health-care reform. But if jobs were the number one priority and the other issues were put on hold, “you would net to the positive.” Cramer went so far as to call Congress, led by Democratic Speaker Nancy Pelosi, “anti-business.” “Their focus is so wrong,” Cramer said, and for that reason the Democrats are “going to lose in November” 2010.
IBD:
Business Week:
- Students who have tried to get a leg up on the Graduate Management Admission Test (GMAT) by visiting Web sites carrying illegally obtained test-preparation material may soon come to regret their actions. The Graduate Management Admission Council (GMAC) is aggressively pursuing more and more Web sites that illegally provide copyrighted GMAT materials to test-takers, as well as using high-tech gadgets to catch "proxy" test-takers who are hired to take the exam in place of applicants, the organization says. A key focus of GMAC's efforts is China. Already in 2009, 32 scores from China have been revoked by GMAC, while 24 Chinese test-takers have been blocked by GMAC from retaking the GMAT exam for five years, GMAC says.
Forbes:
- Health insurance premiums for individuals will soar 54% over the next five years above the normal inflation rate if the Senate health care reform bill passes, according to a new study commissioned by the Blue Cross and Blue Shield Association. The study was dismissed as pure political maneuvering by an industry group with a stake in watering down the legislation. Yet it could provide ammunition for critics who say that health care reform bills lack meaningful cost controls--that, in effect, it does little more than dump billions of dollars into a broken system.
Politico:
- Speaker Nancy Pelosi gave her strongest endorsement yet of a global financial transaction fee Thursday after raising the issue directly with Treasury Secretary Timothy Geithner in a conversation this week. Geithner was widely seen as opposing such a levy when it was proposed by Gordon Brown, the British prime minister, at a meeting of G-20 finance ministers last month in Scotland. But after their phone conversation Wednesday, Pelosi told colleagues that the secretary indicated he was more open to some such fee than had been reported. Pelosi didn’t reveal her conversation with Geithner at her weekly press conference Thursday, but several sources confirmed the details to POLITICO based on her discussions of the matter in a Democratic leadership meeting this week.
- After a three-day impasse, the Senate moved on the first four amendments to the health care legislation Thursday, but the public option, abortion and financing the plan remained serious obstacles to negotiating a final bill. The Senate voted to keep nearly $500 billion in Medicare spending cuts in the bill, rejecting an amendment from Sen. John McCain (R-Ariz.) to send the legislation back to the Finance Committee with orders to strip it out. The measure would have eliminated the major funding source for the bill. All 40 Republicans joined Ben Nelson and Sen. Jim Webb (D-Va.) to support the McCain amendment, which failed 42-58.
LA Times:
- On Nov. 4, 2008, Americans by a lopsided margin turned over complete control of the federal government to the Democratic Party -- the House of Representatives, the Senate and the White House, where a new president promised to change the partisan tone of the nation's capital. Now, 13 months later, after a turbulent year of rancorous politics, rising war casualties in Afghanistan and unemployment now above 10%, 5% fewer Americans are calling themselves Democrats. Hardly an enthusiastic endorsement of the record so far of the incumbent president, whose approval rating has also dropped below 50% for the first time. Approval of President Obama's war handling has fallen the most, plummeting from 63% last spring to 45% this fall. A new poll by Rasmussen Reports finds that despite -- or perhaps because of -- legislative progress on Obama's 2009 keynote issue of healthcare reform, among other issues, the number of adult Americans calling themselves Democrats fell by almost 2 whole points just in the month of November. A year after hope, change and jubilation filled the party ranks, only 36% of Americans consider themselves Democrats, according to the poll. That's the lowest percentage in 48 months. The percentage calling themselves Republican is lower -- 33.1%. However, unlike the Democrats, that number is increasing, up from 31.9% the previous month. Those adults saying they're not affiliated with any party is up a half-point to 30.8%.
The Business Insider:
Financial Times:
- Top Goldman Sachs(GS) executives are likely to receive their annual bonus in stock this year rather than cash as part of a pay review that could affect thousands of the Wall Street bank's rank-and-file employees. In a bid to quell public anger over probable multi-million dollar pay-outs to Goldman's most successful bankers and traders after a bumper year for the bank, Lloyd Blankfein, its chief executive, is weighing plans to increase the share of compensation paid in equity. Senior executives including Mr Blankfein could be awarded all their annual bonus in company stock, people familiar with the bank's thinking told the Financial Times. Many of its 31,700 staff may also receive more of their annual bonus in deferred stock or options. Goldman's stunning recovery this year is expected to restore the pay of many of its bankers and traders to pre-crisis levels. The prospect of near-record pay-outs as the US emerges from its worst recession in decades has prompted a backlash that may intensify in the new year when details of salaries, bonuses and other benefits emerge.
Telegraph:
- Nigel Lawson on climate change: 'Saving' the planet will be the real disaster. Take the IPCC's predictions of what might happen 50 or 100 years hence. The idea that this can be done with any accuracy, says Lord Lawson, is "inherently absurd". "We have only to ask ourselves whether the Edwardians, even if equipped with the most powerful modern computers, would have been able to foresee the massive economic, political and technological changes that have occurred over the past hundred years," he says. But even if you accept the IPCC predictions, look what happens. The IPCC says that world temperature will increase by 2100 by somewhere between 3.2F and 7.2F. A warming of half way between these two points works out at an average temperature increase of 0.05 degrees F per year. In the last 25 years of the past century, temperature increased at the rate of 0.04 degrees per year. (In this century, it has not increased at all!) Has this proved so appalling to manage? Lord Lawson then notes that the IPCC predicts that, at this level of temperature rise, global food production will actually increase. He takes the IPCC's gloomiest prediction of the economic effects of global warming over the same period. By its own figures, the difference between what would happen with global warming and without it amounts to this: in a hundred years' time, people in the developed world would be "only 2.6 times better off than they are today, instead of 2.7 times, and their contemporaries in the developing world would be "only" 8.5 times as well off as people in the developing world are today, instead of 9.5 times better off". So this is the projected catastrophe, to avoid which the people of the present generation are being asked to curtail their carbon emissions by 70 per cent. We must tighten our belts for future generations, who even the gloom-mongers believe will be much, much richer than we are. This is not science, politics or economics, but masochism. Or rather, since our leaders will, on the whole, exempt themselves from the punishments they want to impose, it is sadism. It is immoral to restrict definite, present benefits in the name of indefinite, distant ones. India and China are currently performing economic miracles which, for the first time, have made hundreds of millions of their citizens comfortably off. They can't do this without increasing their carbon footprint. Should they be forbidden from doing so on the basis of uncertainty piled on uncertainty about what might happen a century hence? Unlike most politicians, Lawson notices that all the agreements made to control carbon emissions do not work. Sometimes this is because they are not, in fact, agreed. Sometimes it is because they are evaded (Canada, which signed Kyoto, has increased its emissions much faster than the United States, which refused to do so). Ultimately, it is because the idea of world government which lies behind such deals invariably collapses in the face of reality. But this does not mean – and here Lord Lawson is optimistic – that people will not find ways of dealing with climate change if (and it is only if) it really is happening. Stern, Gore, the IPCC etc speak as if human beings will not do the one thing most characteristic of civilization – adapt. There is no disaster facing us which we cannot mitigate by changing our behavior over time. The real disaster will be if we cede to politicians what the author calls the "license to intrude" in everything we do by pretending to "save" a planet which no one has proved will be lost.
Guardian:
- Creditors of Dubai World are expected to reject a standstill agreement proposed by the company, threatening to drag out negotiations over $26bn (£15bn) worth of the conglomerate's debt. Advisers involved in the talks tonight said that the process could take months as more than 100 accountants, lawyers, bankers and other professionals descended on Dubai from London. "There won't be a standstill agreement," one said. By rejecting the company's proposal to put interest payments on hold, creditors automatically trigger a default, leading to inevitable further wrangling. Global markets have begun to recover following initial fears that the Dubai crisis would spread but the local battle over who bears the losses has only just begun. If the standstill is rejected and a default is triggered, all parties would have to compromise to reach a restructuring agreement, sources said.
China Daily:
- China should learn lessons from the Dubai crisis and take concrete measures to prevent a similar crisis from happening in its speculation-ridden real estate sector, which could undermine the national economy. As the world's third-largest economy that has expanded overseas investment in recent years, China is greatly concerned over the negative effects the Dubai crisis might have on its economy. After the exposure of the Dubai crisis, quite a few Chinese financial bodies or conglomerates were quick to claim that they had no business dealings with Dubai World and thus are immune from the fallout. The problem is not what impact the Dubai crisis will have on the Chinese economy, but whether the crisis will prompt the Chinese government and its decision-making bodies to reevaluate bubbles in the country's real estate market and weigh the role the sector has played in the development of the national economy. Failure to do so is likely to brew a similar crisis in the country's speculative real estate industry.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (TOL), target $25.
- Upgraded (AKAM) to Buy, target $31.
- Upgraded (RAI) to Buy, target $59.
Oppenheimer:
- Rated (MA) Outperform, target $290.
- Rated (V) Outperform, target $95.
Night Trading
Asian Indices are -1.25% to unch. on average.
Asia Ex-Japan Inv Grade CDS Index 106.50 -4.0 basis points.
S&P 500 futures -.11%.
NASDAQ 100 futures -.15%.
Morning Preview
BNO Breaking Global News of Note
Yahoo Most Popular Biz Stories
MarketWatch Pre-market Commentary
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar
Who’s Speaking?
Upgrades/Downgrades
Politico Headlines
Rasmussen Reports Polling
Earnings of Note
Company/EPS Estimate
- (BIG)/.18
- (SIRO)/.51
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for November is estimated at -125K versus -190K in October.
- Average Hourly Earnings for November are estimated to rise +.2% versus a +.3% gain in October.
- The Unemployment Rate for November is estimated at 10.2% versus 10.2% in October.
10:00 am EST
- Factory Orders for October are estimated unch. versus a +.9% gain in September.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Fed's Plosser speaking and the Fed's Bullard speaking could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by commodity and financial shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.