Tuesday Watch

Late-Night Headlines
Bloomberg:

- JPMorgan Chase & Co.(JPM) Chief Executive Officer Jamie Dimon told U.K. Chancellor of the Exchequer Alistair Darling that his 50 percent tax on banker bonuses would unfairly penalize the U.S. lender, a person close to the firm said. Dimon, 53, mentioned plans to build a 1.5 billion pound ($2.4 billion) European headquarters in London’s Canary Wharf as an example of the New York-based firm’s commitment to the city, the person said. Dimon reiterated that the bank, the second- biggest U.S. lender by assets and deposits, paid British taxes and didn’t take a U.K. taxpayer bailout, the person said, declining to be identified because the conversation was private. The telephone call was made after Darling on Dec. 9 imposed a 50 percent tax on discretionary bonuses greater than 25,000 pounds at all banks operating in the U.K. JPMorgan is considering dropping plans to build its European headquarters at Canary Wharf because of the U.K. bonus tax, the Financial Times newspaper reported, citing an unidentified bank executive. The bonus tax will be a factor in the decision, the executive told the newspaper.

- China executed a British national today, ignoring pleas from the U.K. government for clemency and protests from human rights bodies that the prisoner was suffering from a mental illness and unfit to stand trial. Father of five, Akmal Shaikh, was killed today in Urumqi, the capital of China’s westernmost Xinjiang province. “I condemn the execution of Akmal Shaikh in the strongest terms,” U.K. Prime Minister Gordon Brown said in a statement released by the Foreign Office. “No mental health assessment was undertaken.” Shaikh’s execution is the first of a national from a European Union country in China in 50 years, according to the charity Reprieve, which campaigns for death row prisoners globally. China carried out more executions than the rest of the world put together last year, Amnesty International says. Shaikh was caught with 4.03 kilograms of heroin in Urumqi, certified to be 84.2 percent pure, Xinhua reported.

Wall Street Journal:

- Al Qaeda's affiliate in Yemen claimed responsibility for the attack on Northwest Flight 253, and U.S. officials said the claim appears valid -- the clearest indication yet that the attempted takedown wasn't just the work of a lone radical inspired by Islamist rhetoric, as some investigators initially believed. The development came as evidence mounted that the U.S. didn't pursue potential leads that might have brought alleged Christmas Day bomber Umar Farouk Abdulmutallab to the attention of authorities, according to Congressional investigators and U.S. officials. Homeland Security Secretary Janet Napolitano backtracked Monday from comments she made in televised interviews over the weekend, in which she said the U.S.'s security systems had worked. President Barack Obama, in his first public comments about the incident, promised the government would do everything it can to keep travelers secure. "We will not rest until we find all who were involved and hold them accountable," Mr. Obama said in remarks broadcast on television from Hawaii, where he is on vacation.

A statement attributed to the group "al Qaeda in the Arabian Peninsula" claimed it was retaliating for what it says was the U.S.'s role in a recent Yemeni military offensive on al Qaeda, according to a translation by the Middle East Media Research Institute.

- After signing a $787 billion economic stimulus and embracing two annual blowout budgets that will double the national debt over 10 years even before ObamaCare, President Obama is poised to pivot next (election) year and denounce the horrors of deficit spending. So the White House is now floating a bipartisan commission to reduce federal borrowing, and much of the political class is all for it. We only hope Republicans aren't foolish enough to fall down this trap door, though some are already tempted. A budget deficit commission is nothing more than a time-tested ploy to get Republicans to raise taxes.

- The Tipping Point in Iran. The past six months show that the democratic movement is here to stay. That movement now needs a coherent plan and more structured leadership.

- Wall Street has undergone a radical face lift this year, but finance industry recruiters are expected to stick to roughly the same formula when looking to fill entry-level positions with college graduates in the future. Wealth management, investment banking and research are expected to see a hiring surge in the coming years, according to Joseph Logan, founder and managing director of Pinnacle Group International, a New York executive recruiting firm specializing in the financial services industry. "A strong background in accounting plus financial [knowledge in] evaluation is the key—and being well-rounded will help a lot," says David Smith, an associate professor at the McIntire School of Commerce at the University of Virginia who specializes in corporate finance and banking. Strong social skills and the ability to think creatively are important to round out more technical and quantitative talents.

- Rep. John Mica (R., Fla.), one of the authors of the law establishing the federal Transportation Security Administration, called the attempted airline bombing last week "a serious wakeup call" and urged the Congress to change its method of choosing TSA administrators. "There has been no TSA administrator for nearly a year and the next one will be the fifth in eight years. Running a security agency with a revolving door is a recipe for failure," Mica said Monday in a press release. He is the ranking Republican of the House Committee on Transportation and Infrastructure and chairman of the Subcommittee on Aviation from 2001 to 2007. He also called TSA "an agency that is ineptly led from Washington, D.C., by a top-heavy, well-paid headquarters staff of 3,200 with an average annual salary of $103,000." Mica pointed out that despite being larger than the departments of education and commerce, with more than 60,000 employees, "TSA has failed to compile a reliable watch list after eight years." He suggested cutting the agency's managerial and administrative staff by 25% and transferring these positions overseas and to high-risk locations, "more in line with the Israeli model of aviation security." "With a record number of air marshals at TSA, it is unbelievable that the agency could not deploy at least one to an at-risk international flight with a suspect reportedly on at least one watch list and whose father reportedly had previously warned U.S. embassy officials," Mica added.

- Time Warner Cable Inc. (TWC) is willing to pay News Corp.'s (NWS, NWSA) Fox Broadcasting stations a retransmission consent fee for access to its programming next year, according to two people familiar with the matter, but the companies are negotiating on the size of the fee as the end of their current contract approaches.

Fox, which doesn't receive any retransmission fees from Time Warner Cable, is asking for $1 per subscriber per month--a figure that more than doubles the amount the cable company pays to other broadcast networks, like CBS Corp. (CBS).

- Morgan Stanley(MS) is poised to overhaul the way it pays its most senior executives, deferring more of their compensation over time and benchmarking their pay against rival firms, according to people familiar with the matter. But the investment bank may stop short of the approach taken by Goldman Sachs Group Inc., which said its top executives would receive only stock for 2009 bonuses. Senior Morgan Stanley executives may receive about one quarter of their 2009 pay in cash, with the rest coming as deferred stock, one of the people familiar with the matter said.

- American International Group Inc.(AIG) plans to pay its outgoing general counsel Anastasia Kelly several million dollars in severance benefits after she resigned because of federal pay curbs, according to people familiar with the matter. The move to pay out the benefits to AIG's top in-house lawyer comes amid recent scrutiny of Ms. Kelly's actions in a December pay dispute involving her and four other senior executives.

- The Man Who Wired Silicon Valley. Raj Rajaratnam liked to tell people that his first name meant "king" in Hindi, and, coupled with his last name, that made him "king of kings." He told the story with the broad, toothy smile that had ingratiated him to a generation of Silicon Valley executives. The grin softened the edge of a boss who'd call you an "idiot" or prod you into some humiliating stunt: Would you take $5,000 to be shocked with a stun gun?

- Apparently the fellows in al Qaeda took as a personal insult Secretary of Homeland Anxiety Janet Napolitano's comment Sunday that their role in the foiled Detroit airliner bombing wasn't clear but would be investigated. Yesterday, al Qaeda's ascendant franchise in the Arabian peninsula saved Secretary Napolitano the trouble of plowing through all the layers of the national-security bureaucracy for an answer. The terrorist organization put out a pointed statement not only claiming responsibility but also mocking the U.S.'s ability to stop them. Umar Farouk Abdulmutallab, they said, "dealt a huge blow to the myth of American and global intelligence services and showed how fragile its structure is." What this means is that we have to think more broadly about jihad and the potential recruitment of terrorists anywhere in the world, including inside the United States. We and our European allies have to revisit the problem of fiery imams using mosques as recruitment depots for airline suicide bombers. The close call in the airspace over Detroit gives "probable cause" new meaning. Al Qaeda has sent a message to the Obama Administration: You are in a war. Someone in our government needs to say clearly that they now understand the message.

CNBC.com:
- The U.S. Federal Reserve on Monday pressed ahead toward the creation of a new mechanism it says could be used to withdraw money from the banking system once policymakers decide to tighten monetary policy.

- The Obama administration is poised to announce loan guarantees to help kick-start the country's nuclear power industry, which hasn't built a new plant in more than three decades. Congress authorized $18.5 billion for nuclear loan guarantees in 2005, hoping to revive development of the carbon-free source of energy.

- Citi(C), The Can't Lose Trade Of 2010?

IBD:
- After months of speculation, on Dec. 22 President Obama appointed the nation's first "cybersecurity czar." Former tech executive Howard Schmidt will coordinate efforts to prevent major attacks on America's digital networks. For Tom Reilly, chief executive of ArcSight (ARST), this just underscores the demand for his network-defending software and appliances.

CNNMoney.com:

- The chief economist at First Trust Advisors, a Chicago asset manager, Wesbury has one of the most bullish assessments on the economy. His new book trumpets that optimism in its title: "It's Not As Bad As You Think." Wesbury predicts economic growth of 5% or more in the last three months of this year, nearly twice the average forecast, followed by at least 4.5% growth in 2010. He sees job growth returning as soon as December of this year. Unemployment, now at 10%, will fall to about 8.5% by the end of 2010, he believes. That's about a percentage point better than most economists' estimates. In 2011, he says, the rate will drop to about 7%. He's bullish on housing, too: He says things are improving so fast in real estate that by the third quarter of 2010, there could be a seller's market for new homes. Wesbury maintains this rosy view even though he believes government action to rescue the economy hurt more than it helped. He blames the financial meltdown not on lack of government oversight, but on mark-to-market accounting, which required banks and Wall Street firms to value the assets on their balance sheet at current market prices. Those rules, which caused massive losses when the housing bubble burst, were significantly loosened earlier this year. That easing, he argues, was the key to reopening the flow of credit and reviving the economy. Despite his policy worries, he believes the economy can overcome the headwinds caused by government intervention to post solid growth. Here now is a question-and-answer session with Mr. Sunshine, Brian Wesbury.

Business Week:
- The dollar and U.S. stocks may keep rising together as economies improve around the world, reversing the relationship that held between March and November, hedge- fund manager Barton Biggs said. The currency is undervalued against the euro and yen and the economic recovery is “gaining momentum,” he added. Gross domestic product will increase 2.6 percent next year after contracting 2.5 percent in 2009, according to the median economist forecasts in a Bloomberg survey. “After a severe economic shock like we just had, the odds are that we’re going to have a pretty good burst of growth in 2010, 2011,” Biggs, who runs New York-based Traxis Partners LP, said in a Bloomberg Television interview today. “I don’t see any reason why we can’t have a further rally in the dollar and a further rally in stocks. My guess is that the next move in both could be on the order of 10 percent.” Bullish bets that Biggs made during the worst of the credit crisis are giving his six-year-old firm its best returns ever. His view on the dollar echoes the forecast from Marc Faber, publisher of the “Gloom Boom & Doom” newsletter, who told Bloomberg Television today that currency dollar may appreciate 5 percent to 10 percent against the euro in the near term while equities advance.

- Life Science Stocks: A Growing Market in 2010. Genetic research projects for personalized medicine are drawing $10 billion in government stimulus funds. Nonmedical applications are promising, too.

Washington Post:

- A dangerous explosive allegedly concealed by Nigerian student Umar Farouk Abdulmutallab in his underwear could have blown a hole in the side of his Detroit-bound aircraft if it had been detonated, according to two federal sources briefed on the investigation. Authorities said they are still analyzing a badly damaged syringe that Abdulmutallab allegedly employed as a detonating device on Christmas Day. But preliminary conclusions indicate that he used 80 grams of PETN -- almost twice as much of the highly explosive material used by convicted shoe bomber Richard C. Reid. A day after Homeland Security Secretary Janet Napolitano said there was "no indication" the incident was connected to a larger plot, there were increasing signs that the failed bombing may have represented one of the most serious terrorist threats in the United States since the attacks of Sept. 11, 2001.

Chicago Tribune:

- Wendy's is about to test coupons sent to cell phones as text messages. Customers of the nation's No. 3 burger chain who sign up for the promotion and provide their phone number will receive a discount by showing their mobile device to a Wendy's cashier.

USA Today:

- Heart specialists on Monday filed suit against Secretary of Health and Human Services Kathleen Sebelius in an effort to stave off steep Medicare fee cuts for routine office-based procedures such as nuclear stress tests and echocardiograms. The lawsuit, filed in U.S. District Court for the Southern District of Florida, charges that the government's planned cutbacks will deal a major blow to medical care in the USA, forcing thousands of cardiologists to shutter their offices, sell diagnostic equipment and work for hospitals, which charge more for the same procedures. "What they've done is basically killed the private practice of cardiology," says Jack Lewin, CEO of the American College of Cardiology (ACC), which represents 90% of the roughly 40,000 heart specialists in the USA. George Moutsatsos, a managing partner in Cardiology Consultants of Delaware, a group of 32 heart specialists that serves half of the heart patients in the state, says heart attack patients in rural areas are likely to suffer. Moutsatsos says the money doctors make for providing imaging services helps compensate them for their round-the-clock availability to treat heart attacks with balloon angioplasty. "In rural areas, we get very little money to do this work," he says. "Those are the areas where we're going to consider cutting." Scott Smith, a cardiologist who works in rural Silver City, N.M., not far from the Mexican border, says, "The closest cardiologist to me is 150 miles away. With all these cuts coming, it will make it impossible for me to break even seeing 40 patients a day. "It's so absurd, it's kind of funny," he says. "I know ACC doesn't think it's funny. It's an efficient way of getting rid of cardiology."

- Texas' now-strong banks hold lessons for rest of US.

Politico:

- President Obama’s GOP critics have been emboldened during the past 48 hours by the stumbling initial response of Homeland Security Secretary Janet Napolitano, who spent Monday retracting her Sunday claim that “the system worked” in the aftermath of Umar Farouk Abdulmuttalab’s near takedown of a jet ferrying nearly 300 people from Amsterdam to Detroit. “In the past six weeks, you’ve had the Fort Hood attack, the D.C. Five and now the attempted attack on the plane in Detroit … and they all underscored the clear philosophical difference between the administration and us,” said Rep. Pete Hoekstra (R-Mich.), the ranking Republican on the House Intelligence Committee. “I think Secretary Napolitano and the rest of the Obama administration view their role as law enforcement, first responders dealing with the aftermath of an attack,” Hoekstra told POLITICO. “And we believe in a forward-looking approach to stopping these attacks before they happen.”

Real Clear Politics:

- Why Regular Americans Are Turning Away From Democrats.

Pittsburgh Tribune-Review:

- As I'm writing this, they're in a panic in Congress, voting in the wee hours, bribing reluctant senators with millions in slush funds for their respective states, all to ram through a health reform bill that few if any of the lawmakers have even read, let alone intellectually reflected upon or debated. They've already lost the public. In the most recent NBC News/Wall Street Journal poll, support for the Democrats' health reform bills has dropped to 32 percent. In the latest CNN poll, the public is opposed to the Democrats' health reforms by a margin of nearly 2 to 1. "Democrats are on a political suicide mission," notes Megan McArdle, economics writer at The Atlantic magazine's blog. "At this point, the thing is more than a little inexplicable," McArdle asserts, speaking of the unpopularity of the legislation and the subsequent likelihood that Democrats will lose seats in both the House and Senate in next year's elections. "No bill this large has ever passed on a straight party-line vote or even anything close to a straight party-line vote," writes McArdle. "No bill this unpopular has ever passed on a straight party-line vote." The Democrats' suicide mission is the result of their defining America's health care system as "broken," a system in such "crisis" that nothing short of an immediate and complete overhaul is required -- a task, unfortunately, that's beyond the skill levels of Barack Obama, Nancy Pelosi and Harry Reid. Rahm Emanuel, Obama's chief of staff, described the strategy for power grabbing early on: "You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before."

Minneapolis St. Paul Business Journal:

- Retailers saw traffic on their Web sites surge in November, with Target Corp. ranking second behind Wal-Mart Stores Inc.(WMT) in the department store category, according to research released Monday. Visits to sites in the toy, consumer electronics and department store categories all jumped by more than 30 percent in November compared to the prior month, Reston, Va.-based digital media tracking company ComScore(SCOR) reported. Minneapolis-based Target's (TGT) traffic jumped 43 percent to 38.8 million unique visitors in November. Wal-Mart, meanwhile, reported 46.2 million visitors, up 62 percent compared to October. Overall, online department stores saw visits to their sites grow 33 percent in November to roughly 81 million.

Reuters:

- Morgan Stanley (MS) is setting up a committee to help oversee the bank's risk management, the company said in a regulatory filing on Monday.

- Speculators ditched bets against the dollar in the latest week and were long the U.S. currency for the first time since May, according to Commodity Futures Trading Commission data released on Monday. The value of the dollar's net long position was around $700 million in the week ending Dec. 22, up from a net short position of $1.98 billion the prior week, according to Reuters calculations.

Financial Times:

- Media companies would be better off handing their online video activities to Google’s(GOOG) YouTube video-sharing site than pursuing home-grown efforts such as Hulu.com and the US cable industry’s TV Everywhere initiative, according to senior Google executives. “At some point in time it becomes an economic choice by the content owners. It’s a matter of core competences,” Nikesh Arora, Google’s president of global sales operations and business development, told the Financial Times.

Der Spiegel:

- The regime in Tehran has gone on the defensive following deadly riots on Sunday. By breaking the traditional ceasefire on religious holidays, the regime has angered many conservatives. The government in Tehran could be facing louder and more self-assured demonstrators in the coming days who see their opportunity to force regime change.

Evening Recommendations

- None of note

Night Trading
Asian indices are -.50% to +.75% on avg.

Asia Ex-Japan Inv Grade CDS Index 93.0 -2.0 basis points.
S&P 500 futures +.01%.
NASDAQ 100 futures +.05%.

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9:00 am EST

- S&P/CaseShiller Home Price Index for October is estimated to rise to 147.0 versus 146.51 in September.

10:00 am EST

- Consumer Confidence for December is estimated to rise to 53.0 versus a reading of 49.5 in November.

Upcoming Splits

- None of note

Other Potential Market Movers
- The Treasury's 5-Year Note auction, API energy inventory data, ABC Consumer Confidence reading and weekly retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are slightly higher, boosted by commodity and industrial stocks in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Slightly Higher, Boosted by Computer Service, Education, Hospital and Telecom Shares

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Stocks Slightly Lower into Final Hour on Terrorism/Iran Worries, Profit-Taking, More Shorting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Medical longs, Biotech longs, Defense longs and Retail longs. I added to my (HGSI) long and was stopped out of a trading long today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is lower, sector performance is mixed and volume is very light. Investor anxiety is high. Today’s overall market action is neutral. The VIX is rising +3.24% and is high at 20.10. The ISE Sentiment Index is below average at 109.0 and the total put/call is slightly below average at .78. Finally, the NYSE Arms has been running very high most of the day, hitting 1.51 at its intraday peak, and is currently 1.40. The Euro Financial Sector Credit Default Swap Index is falling -.03% to 66.07 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is falling -.30% to 82.15 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling -1 basis point to 20 basis points. The TED spread is now down 445 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling -2.24% to 35.19 basis points. The Libor-OIS spread is unch. at 8 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +3 basis points to 2.39%, which is down -26 basis points since July 7th. The 3-month T-Bill is yielding .05%, which is up +1 basis point today. Market leaders are substantially outperforming again today. REIT, Computer Service, Telecom, Hospital and Education shares are especially strong, rising .50%+. Despite escalating terrorism/Iran worries, stocks are holding on to recent gains. The NYSE Arms is very high again on light index volume, which shows how little conviction the bears have right now, in my opinion. It is noteworthy that oil is just mildly higher and gold is flat today despite these concerns and a lower US dollar. (GOOG) continues to position itself for a strong 2010 and I would still be a buyer of the shares around current levels as I continue to expect significant upside appreciation. I am still long these previously mentioned stocks: (AAPL), (GOOG), (CREE), (DISCA), (QSII), (ISRG), (HGSI) and (ASEI). On the negative side, cyclicals are seeing some profit-taking today and (XLF) is a bit heavy. Nikkei futures indicate an +25 open in Japan and DAX futures indicate an +3 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic fear, technical buying and seasonal strength.

Today's Headlines

Bloomberg:

- The U.S. economy next year will turn in its best performance since 2004 as spending perks up and companies increase investment and hiring, says Dean Maki, the most-accurate forecaster in a Bloomberg News survey. The world’s largest economy will expand 3.5 percent in 2010, according to Maki, the chief U.S. economist at Barclays Capital Inc. in New York. The rebound in stocks and rising incomes will prompt Americans to do what they do best --consume, said Maki, a former economist at the Federal Reserve. Faced with dwindling inventories and growing demand, companies will soon become confident the expansion will be sustained, he said. Household spending “will pick up steam as we move into the second half of 2010,” said Maki, 44, who topped all 60 forecasters in the Bloomberg News ranking of gross domestic product projections for the first three quarters of 2009. “The overall picture for 2010 will be an economy growing rapidly enough to bring down the unemployment rate” to an average of 9.6 percent.

Maki, who specialized in researching household finances at the Fed from 1995 to 2000, said the economic recovery this time will be similar to past rebounds.

- U.S. retail sales rose an estimated 3.6 percent this holiday season from a year earlier, signaling a higher-than-forecast outcome helped by an extra shopping day. A jump in purchases the week before Christmas helped year- over-year electronics sales increase 6 percent from Nov. 27 to Dec. 24, and 5.9 percent from the period starting Nov. 1, MasterCard Advisors’ SpendingPulse said in a statement yesterday. Jewelry and luxury sales also gained, it said. SpendingPulse said. Improving consumer sentiment aided holiday sales of discretionary items, said David Schick, an analyst with Stifel Nicolaus & Co. in Baltimore. Jewelry sales rose 5.6 percent for November and December, while luxury retail excluding jewelry gained 0.8 percent, SpendingPulse said. Men’s clothing sales gained 3.9 percent for the season and footwear rose 5 percent.

- The cost to protect US corporate bonds from default fell again today, trading in a benchmark credit derivatives index shows. Credit-default swaps on the Markit CDX North America Investment-Grade Index declined .2 basis point from Dec. 24 to 82.2 basis points as of 9:19 am in NY, according to CMA DataVision. The swaps have fallen every trading day since Dec. 17.

- A 26-mile-long line of idled oil tankers, enough to blockade the English Channel, may signal a 25 percent slump in freight rates next year. The ships will unload 26 percent of the crude and oil products they are storing in six months, adding to vessel supply and pushing rates for supertankers down to an average of $30,000 a day next year, compared with $40,212 now, according to the median estimate in a Bloomberg News survey of 15 analysts, traders and shipbrokers. That’s below what Frontline Ltd.(FRO), the biggest operator of the ships, says it needs to break even. Traders booked a record number of ships for storage this year, seeking to profit from longer-dated energy futures trading at a premium to contracts for immediate delivery, according to SSY Consultancy & Research Ltd., a unit of the world’s second- largest shipbroker. Ships taken out of that trade would return to compete for cargoes just as deliveries from shipyards’ largest-ever order book swell the global fleet. “The tanker market has been defying gravity,” said Martin Stopford, a London-based director at Clarkson Plc, the world’s largest shipbroker. Stopford has covered shipping since 1971. More than half of the ships are in European waters, with the rest spread out across Asia, the U.S. and West Africa. Lined up end to end, they would stretch for about 26 miles.

- The U.S. government’s expanded capital backstops and portfolio limits for Fannie Mae and Freddie Mac increase “the prospect of large-scale” purchases by the companies of delinquent mortgages out of the securities they guarantee, according to Credit Suisse Group analysts. The Treasury Department announced Dec. 24 that the two mortgage-finance companies, which were seized by the U.S. almost 16 months ago, could tap an unlimited amount of capital for three years, up from as much as $200 billion each. It reworked caps on Fannie Mae and Freddie Mac’s mortgage-asset portfolios to require the holdings to fall to $810 billion by Dec. 31, 2010, rather than about $690 billion. “This announcement increases the prospect of large-scale voluntary buyouts by removing the portfolio cap hurdle and helping funding by potentially increasing debt-investor confidence,” Mahesh Swaminathan and Qumber Hassan, the Credit Suisse debt analysts in New York, wrote in a report yesterday.

- OSI Systems Inc.(OSIS), a maker of scanning equipment for airport-security checkpoints, rose the most in 11 months in Nasdaq trading after U.S. officials said a passenger tried to blow up a plane on a Christmas Day flight. OSI jumped $2.27, or 10 percent, to $24.29 at 11:23 a.m. New York time in Nasdaq Stock Market trading. The shares climbed by as much as 13 percent, the most since Jan. 29. OSI’s Rapiscan unit makes machines that can detect liquids and other potential explosives beneath passengers’ clothing. The U.S. Transportation Security Administration placed an order valued at $25 million for Rapiscan’s imaging equipment, the Hawthorne, California-based company said in October.

- Options traders are doubling down on MGM Mirage(MGM), betting a new 67-acre (27 hectares) complex of gaming tables, hotels, condominiums and stores will restore the casino operator’s profits. Investors buying contracts to purchase MGM for twice its current stock price through January 2011 helped drive the number of bullish options on the shares to 1.5 times the level of bearish ones, the highest ratio since June 2008, according to data compiled by Bloomberg.

- Heating oil futures surged as a forecast for colder weather increased speculation demand for the fuel will improve. Heating oil prices gained as much as 2.2 percent as private forecaster Weather Derivatives predicted fuel demand in the U.S. will rise as temperatures fall. Cold weather will raise U.S. consumption of heating fuels by 6.7 percent in the next seven days, according to a forecast from Weather Derivatives. The temperature in New York may fall as low as 20 degrees Fahrenheit (minus 7 Celsius) tomorrow, 5 degrees below average, according to Weather.com.

- Iran will have the technology to build a nuclear weapon by early next year, Israeli Defense Minister Ehud Barak told a parliamentary committee today, an official said. The Israeli minister said that a newly discovered nuclear facility near the Iranian city of Qom was immune to attack by regular bombs, according to the parliamentary official, who spoke on the condition of anonymity because the meeting was held behind closed doors.

Wall Street Journal:

- Iranian opposition Web sites reported Monday the arrest of several prominent reformists, including aides to opposition leaders and a former foreign minister, a day after clashes killed at least eight, the deadliest day of protests since the summer. According to the opposition Web site RaheSabz, authorities early Monday arrested Ebrahim Yazdi, Iran's one-time foreign minister. He has led a banned but tolerated reform group. The site also reported the morning round-up of top aides to leading opposition figure Mir Hossein Mousavi, including his chief of staff, a top adviser, his presidential campaign chief and the head of Mr. Mousavi's Web site.Security forces stormed a foundation run by reformist former President Mohammad Khatami, arresting two people and carting away documents, a foundation official told the Web site Parlemannews. By nightfall Monday, Tehran's streets appeared mostly peaceful, with no reports of significant clashes.

- Computer-memory chip makers expect to see their fortunes improve next year after two tough years, allowing them to boost capital spending to improve their technology. Industry heavyweights and observers see the notoriously up-and-down industry turning positive this year. Weak capital investments over the past two years have led to a gradual decrease in global supply of dynamic random access memory chips, which are the main chips used to store data in personal computers. The decrease in supply, coupled with improving demand, has led to a recovery in prices of DRAM chips in recent months. The launch of the new Windows 7 operating system from Microsoft Corp. may also prompt consumers and corporations to replace their aging computers with new ones that require more memory storage next year, providing a much needed demand boost for DRAM makers. Daiwa Securities expects shipments of personal computers to rise 13% in 2010 and smart phones, which also use DRAM chips, to jump 55% from 2009. "We expect 2010 to be a strong year for the industry, as we forecast increases in shipments" of personal computers and smart phones, Daiwa analyst Jae H. Lee said. Researcher Gartner expects revenue in the global DRAM industry to increase by 25% next year to US$29.1 billion. That would be a sharp improvement from an 11.5% decline in global DRAM revenue of US$21.6 billion estimated for this year. Andrew Norwood, research vice president for semiconductors at Gartner, forecasts average DRAM selling prices to decline about 8% next year, much milder than the 30% decline the industry typically sees annually. The average spot price of the most widely used DRAM chip—a one gigabit double data rate two chip that runs at 667 megahertz—fetched $2.53 each early Monday, up from $2.29 each on Dec. 21, according to Taiwan-based online chip clearinghouse DRAMeXchange. In a sign of confidence in the industry's recovery, most chip makers have plans to raise their capital spending. Samsung Electronics Co. the world's biggest DRAM maker by revenue, said it plans to boost capital spending next year from an estimated 7 trillion South Korean won (US$5.95 billion) in 2009, without disclosing specific figures. Second-ranked Hynix Semiconductor Inc. plans to more than double its capital expenditure in 2010 to about 2.3 trillion won, while Japan's Elpida Memory Inc. plans to boost spending to about $600 million from almost US$500 million for its current fiscal year ending in March 2010. Citigroup estimates global memory-chip capital spending will more than double next year to about $14.8 billion as companies upgrade their technology at existing manufacturing facilities.

CNBC:

- The Unhappiest States in America.

- The Chicago Federal Reserve Bank said Monday its Midwest manufacturing index rose in November to the highest in nearly a year in a broad-based expansion that covered all of the major industry sectors. The index climbed 1.2 percent to a seasonally adjusted 84.2 — the highest since December 2008 — from an upwardly revised 83.2 in October. The October reading was originally reported at 82.9.

Barron’s:

- Apple (AAPL) moved further into uncharted territory this morning, getting a fresh boost from a pair of bullish analyst notes. As Tiernan Ray noted earlier, Thomas Weisel analyst Doug Reid lifted his target today to $250, from $245. Meanwhile, Broadpoint.AmTech analyst Brian Marshall boosted his target this morning to $260, from $235, repeating his Buy rating. Marshall’s note focused on explaining his higher-than-consensus estimate for December quarter iPhone sales: he sees 11.3 million units in the quarter, above the Street at an estimated 8.8 million. Marshall sees U.S. units down 20% sequentially, to about 2.5 million units, but with international units more than doubling sequentially to 8.8 million units. Marshall says the iPhone is now sold in about 90 countries, by more than 140 carriers. The analyst writes that Apple “remains the best technology company on the planet.”

NYPost:
- So, this is your Homeland Security Department working. A Nigerian man named Umar Farouk Abdulmutallab boards a flight in Amsterdam bound for the United States, despite, according to one passenger, having no passport. Abdulmutallab, a Muslim, boards the plane despite having been reported to the US Embassy by his own father a few months ago. The young man may be plotting an attack against the US, the father had implored. He gets on the flight despite having raised the suspicion of US intelligence officials. When he takes his seat -- after passing through every layer of security -- Abdulmutallab is still wearing a bomb made with highly explosive powder. And 20 minutes from landing, just a few thousand feet above US soil, Abdulmutallab ignites his bomb and very nearly pulls off the first terror bombing attack inside the US since 9/11.

Washington Times

- Veterans groups hailed the passage last year of the National Defense Authorization Act (NDAA), which made it easier for wounded soldiers to have their injuries rated and treated by the federal government. But less than a year after President Bush signed the bill, the Defense Department interpreted the law in a way that reduced its scope and denied many veterans the benefits they thought they had been promised. The Pentagon's interpretation, which veterans groups are challenging, is laid out in two memos written in 2008 by David S.C. Chu, who was undersecretary of defense for personnel and readiness. The effect of the memos, which have been obtained by The Washington Times, is to disqualify numerous soldiers who suffer from post-traumatic stress disorder from receiving medical benefits and to prevent others from receiving extra pay that the NDAA promised to veterans with combat-related injuries.

Pensions&Investments:

- While few of the firms that survived had to make massive changes in their investment processes or reconstruct their portfolios, executives ruefully acknowledged they learned some painful lessons in the fourth quarter of 2008 that will shape their future portfolio management. Among the lessons was the critical importance of matching the liquidity of the underlying hedge funds with that of the funds-of-funds portfolio, said James McKee, director of hedge fund research at Callan Associates Inc., San Francisco. “Over the last year, hedge funds of funds have become very shy of redemptions and very respectful of their own liquidity needs,” Mr. McKee said. One tangible result is that institutional hedge funds-of-funds managers are moving toward single-strategy hedge funds and away from a reliance on multistrategy hedge funds in their portfolios because “so many multistrats had a large proportion of their assets in credit strategies that got so hammered in 2008 and halted redemptions or closed,” said Timothy Galbraith, head of alternative investment strategies at Morningstar Associates, the consulting arm of Morningstar Inc., Chicago.

LATimes:

- The LAPD is struggling to fill vacancies in gang units as a financial disclosure rule meant to fight corruption has been received by many rank-and-file cops as an insult -- and a deal-breaker when it comes to working the tough gangland assignments. After years of contentious battles with police union representatives over the issue, Los Angeles Police Department officials pushed through a policy in April that requires gang officers to disclose details of their personal finances. Intended to help supervisors catch cops who are taking bribes or to identify officers in financial straits who might be tempted to stray, the policy has considerable reach: Officers must disclose outside income, real estate, stocks and other assets. They also have to report the size of bank accounts and debts, including mortgages and credit cards. And the disclosures apply to any financial holdings a cop shares with family members and business partners. When it went into effect, then-Chief William J. Bratton and other officials insisted that the policy would have little effect on recruiting and retaining gang cops and vowed to block efforts by officers to leave gang units en masse in protest. But erosion in the ranks is apparent. According to interviews with police officers and gang unit supervisors across the city, the number of officers dedicated to fighting gangs is beginning to drop. And top brass now acknowledge that they must do more to confront discontent and distrust. Percolating indications of trouble can be found across the city.

USA Today:

- More than $2.7 billion of stimulus aid for struggling parts of rural America has gone to the nation's biggest metropolitan areas. That's nearly a quarter of the $12 billion in rural assistance the government has paid out so far under President Obama's economic stimulus package, a USA TODAY review shows. It went to small, far-flung suburbs in metropolitan areas with more than a million residents, including growing towns around Atlanta and Phoenix. The spending reignites a longstanding debate over what "rural" really means in an increasingly urban nation.

Rassmussen:

- Sixty-seven percent (67%) of voters nationwide now expect that health care reform legislation will pass this year. That’s up from 49% before the Senate passed its version of the legislation on Christmas Eve - and by far the highest level of expectation yet measured. The latest Rasmussen Reports national telephone survey, conducted on Sunday, finds that just 22% now consider passage of the plan unlikely. However, while expectations for passage have risen dramatically, support for the plan has not. Just 40% of voters nationwide now favor it while 55% are opposed.

Politico:

- Back in early June, Utah Republican Rep. Jason Chaffetz inserted a little-noticed, widely-popular amendment into the House's massive Homeland Security appropriations bill barring the use of full-body image scans as "primary" screening tools at airports. The amendment, which died in the Senate, passed on a bipartisan 310-to-118 vote, with conservative libertarians joining liberals, all decrying the scans as a major invasion of privacy. The amendment was backed by a nearly irresistible coalition of interest groups, ranging from the ACLU to the NRA.

- The next round of the battle over climate change policy on Capitol Hill will involve more than the usual suspects — way more. Watch soup makers face off against steel companies. Witness the folks who pump gas from the ground fight back against those who dig up rock. And watch the venture capitalists who have money riding on new technology try to gain advantage in a game that so far has been deftly controlled by the old machine. An analysis of the latest federal records by the Center for Public Integrity shows that the overall number of businesses and groups lobbying on climate legislation has essentially held steady at about 1,160, thanks in part to a variety of interests that have left the fray. But a close look at the 140 or so interests that jumped into the debate for the first time in the third quarter shows a marked trend: Companies and organizations that feel they’ve been overlooked are fighting for a place at the table.

MobileCrunch:

- As predicted here on MobileCrunch earlier this month, Apple(AAPL) rocked it this holiday season, and the early numbers are showing it. According to Flurry, the biggest mobile app analytics company, iPod Touch download volume saw a nearly 1,000% jump in downloads on Christmas Day. Overall, the App Store saw a 51% increase in downloads from November to December (downloads only increased by 15% from October to November). Christmas also marked the first day that iPod Touch app downloads surpassed iPhone app downloads, which makes sense (the iPod Touch is a more common gift than an iPhone; more on that later). Furthermore, the Android Market saw a nice 20% bump in app sales as well, sparked primarily by an uptick in downloads from the Motorola Droid.

Minyanville:

- 2 Top Stocks for 2010.

TechCrunch:

- Google(GOOG) is getting serious about realtime search, adding Twitter, Facebook, and MySpace streams into results and adding a recent “updates” option which is addictive. But behind the scenes Google is also getting ready to push out an entirely new way for indexing the Web. Codenamed “Caffeine,” Google has been testing it since last summer in one datacenter, and is now getting ready to push it out across all of Google. Some SEO-minded tipsters say that they are starting to notice faster search response times, but Google is sticking to the party line that Caffeine won’t roll out until after the New Year(in part so that everybody can enjoy the holidays).

Reuters:

- Shares of American Science & Engineering Inc (AS&E) (ASEI) rose 8 percent Monday, after the U.S Army posted a notice on Thursday that it intends to negotiate solely with the company for Z-Backscatter military trailers. Also on Monday, Stifel Nicolaus' analyst Stephen Levenson said AS&E could see more orders for its cargo- and personnel-screening equipment, after a passenger on a Detroit-bound flight on Christmas day attempted to detonate an explosive device. "AS&E's SmartCheck and Analogic's eXaminer SX are among a handful of products that are capable of detecting the materials that were carried aboard and assembled during the flight," Levenson said.

- Compugen Ltd (CGEN), the Israeli drug maker which recently signed a deal with Pfizer Inc (PFE), said it discovered a drug target for treatment of a certain type of cancer, sending its shares up as much as 44 percent to a near five-year high.

- Israel's Radware Ltd (RDWR) raised its fourth-quarter outlook, citing continued sales growth and industry-high gross margins, sending its shares up to a 2-year high.

- As of December 15, short interest rose to about 13.53 billion shares, compared to 13.18 billion shares as of November 30. The NYSE's short interest amounted to 3.54 percent of outstanding shares during the period, an increase from 3.45 percent during the previous period, according to NYSE's data.

Referans:

- GE Energy, a General Electric Co.(GE) unit, plans to produce wind turbines and other equipment in Turkey to supply markets around the Mediterranean and Black Sea, citing Mete Maltepe, GE Energy’s executive for Turkey.