Tuesday, February 23, 2010

Stocks Falling into Final Hour on Rising Economic Fear, Sovereign Debt Angst, More Shorting, Tax Hike Worries

Posted by Gary .....at 3:37 PM
BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Technology longs, Financial longs and Biotech longs. I added (IWM)/(QQQQ) hedges, added to my (EEM) short and took profits in some financial longs, thus leaving the Portfolio 75% net long. The tone of the market is very negative as the advance/decline line is sharply lower, almost every sector is declining and volume is slightly above average. Investor angst is very high. Today's overall market action is bearish. The VIX is rising +8.33% and is above average at 22.60. The ISE Sentiment Index is below average at 99.0 and the total put/call is high at 1.05. Finally, the NYSE Arms has been running very high most of the day, hitting 2.64 at it intraday peak, and is currently 2.25. The Euro Financial Sector Credit Default Swap Index is rising +7.49% to 91.58 basis points. The North American Investment Grade CDS Index is rising +2.63% to 92.93 basis points. The TED Spread is down -2 basis point to 15.0 basis points. The 2-Year Swap Spread is down -3.66% to 27.70 basis points. The Libor-OIS Spread is down -1 basis point to 9.0 basis points. The 10-Year TIPS Spread is down -5 basis points to 2.21%. The 3-Month T-Bill is yielding .11%, which is up +2 basis points today. Gold, Coal, Homebuilding, Semi, Steel and Oil Tanker shares are especially weak today, falling -2.5%+. Market leading stocks are underperforming. The Western Europe Sovereign CDS Index is jumping +5.1%, which is the first meaningful increase of late. The euro continues to trade heavy and it appears another move lower in the currency is likely. As well, Shanghai continues to trade poorly after their holiday break. On the positive side, Education, Restaurant, Retail and Computer Service shares are holding up well today. The Transports are also displaying relative strength. Given the economic data today out of Europe/US and the rise in key CDS indices, I am surprised stocks aren't down more. This resiliency is a positive. Nikkei futures indicate a down -162 open in Japan and DAX futures indicate an up +6 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on tax hike worries, political concerns, rising sovereign debt worries, increasing economic fears and more shorting.
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Today's Headlines

Posted by Gary .....at 2:53 PM
Bloomberg:
  • Consumer Confidence Falls to Lowest Since April. Confidence among U.S. consumers fell in February to the lowest level in 10 months, a sign that concern about job prospects may hold back the spending needed to sustain the recovery. The Conference Board’s confidence index slumped to 46, below the lowest forecast in a Bloomberg News survey of economists, from 56.5 in January, a report from the New York- based private research group showed today. Stocks fell and Treasuries gained after the confidence report also showed attitudes about current conditions fell to the lowest level in 27 years and the outlook for wages dimmed. The Conference Board’s measure of present conditions decreased to 19.4, the lowest since February 1983, from 25.2. The share of consumers who said jobs are plentiful fell to 3.6 percent from 4.4 percent, according to the Conference Board. The proportion of people who said jobs are hard to get increased to 47.7 percent from 46.5 percent. “The vicissitudes of the political situation in Washington cannot be helping,” said Brian Bethune chief financial economist at IHS Global Insight in Lexington, Massachusetts. “There has been a lot of sizzle on job stimulus proposals but no meat is coming out of the sausage factory. Now the focus seems to be moving back to the health-care reform issue.” The proportion of people who expect their incomes to increase over the next six months declined to 9.5 percent from 11 percent. The share expecting more jobs in the next six months fell to 13.4 percent from 15.8 percent.
  • Wall Street Bonuses Rise 17%, N.Y.'s DiNapoli Says. Wall Street bonuses rose 17 percent in 2009 from a year earlier as the securities industry rebounded from the financial crisis, New York State Comptroller Thomas DiNapoli said. Financial firms disbursed $20.3 billion compared with $18.4 billion in 2008, DiNapoli’s office calculated, basing its estimate on personal income-tax collections. It doesn’t include stock options or other types of deferred pay. The bonus pool was the second-largest ever, DiNapoli said in his yearly report.
  • Secret AIG(AIG) Document Shows Goldman Sachs(GS) Minted Most Toxic CDOs.
  • Greek Bank Credit-Default Swaps Jump After Fitch Ratings Cut. “The banks’ already weakening asset quality and profitability will come under further pressure due to anticipated considerable fiscal adjustments in Greece,” Fitch said in the statement. “The required fiscal tightening that needs to be made by the Greek government will have a significant effect on the real economy, affecting loan demand and putting additional pressure on asset quality.” Swaps on National Bank of Greece rose 36 basis points to 433, Alpha Bank increased 40 to 447 and EFG climbed 42 basis points to 442, according to CMA prices. Contracts on Greek government debt rose 7 basis points to 363, the highest in two weeks, CMA prices show.
  • Rio(RTP) Concerned on Metals Demand Outlook in Second Half. Rio Tinto Group, the world’s third- largest mining company, is concerned the removal of government stimulus packages and any slowing of consumer spending may dent demand for metals in the second half. “The big concern is if the Chinese do decide to clamp down on the loans and on the money supply,” he said. “If that happens very fast, then it will almost certainly have a negative effect on the market. Whenever the market sees signals of that about to happen, even if they are the faintest of signals, you see a reaction in commodity prices.”
  • Copper Extends Declines After U.S. Consumer Confidence Drops.
  • Crude Oil Drops More Than $2 as U.S. Consumer Confidence Falls. “You’re not going to see oil stay above $80 until demand is revived, and demand won’t be revived until people go back to work,” said Michael Fitzpatrick vice president of energy at MF Global in New York. “We’re in a period of structural unemployment, and that’s going to affect oil.”
  • German Business Confidence Unexpectedly Declines. German business confidence unexpectedly fell for the first time in 11 months in February as the coldest winter in 14 years damped retail sales and construction. The Ifo Institute in Munich said its business climate index, based on a survey of 7,000 executives, fell to 95.2 from 95.8 in January. Economists expected a gain to 96.1, according to the median of 37 forecasts in a Bloomberg News survey.
  • Wyden, Gregg Propose Cutting Top U.S. Corporate Tax Rate to 24%. Two senators proposed a bipartisan overhaul of the tax code that would reduce the top U.S. corporate tax rate to 24 percent from 35 percent in exchange for eliminating special breaks. Oregon Democrat Ron Wyden and New Hampshire Republican Judd Gregg today also proposed creating three tax rates for individuals, topping out at 35 percent. They would repeal the alternative minimum tax and exempt the first 35 percent of capital gains and dividends from taxes. Wyden serves on the tax- writing Finance Committee and Gregg is the top Republican on the Budget Committee.
  • Harvard's Rogoff Sees Sovereign Defaults, Painful Austerity. Ballooning debt is likely to force several countries to default and the U.S. to cut spending, according to Harvard University Professor Kenneth Rogoff, who in 2008 predicted the failure of big American banks. Following banking crises, “we usually see a bunch of sovereign defaults, say in a few years,” Rogoff, a former chief economist at the International Monetary Fund, said at a forum in Tokyo yesterday. “I predict we will again.” The U.S. is likely to tighten monetary policy before cutting government spending, sending “shockwaves” through financial markets, Rogoff said in an interview after the speech. “Most countries have reached a point where it would be much wiser to phase out fiscal stimulus,” said Rogoff, who co- wrote a history of financial crises published in 2009. Rogoff, 56, said he expects Greece will eventually be bailed out by the IMF rather than the European Union. Greece will probably announce an austerity program “in a few weeks” that will prompt the EU to provide a bridge loan which won’t be enough to save the country in the long run, he said. “It’s like two people getting married and saying therefore they’re living happily ever after,” said Rogoff. “I don’t think Europe’s going to succeed.” Investors will eventually demand higher interest rates to lend to countries around the world that have accumulated debt, including the U.S., he said.
  • U.S. 'Problem' Banks Soar, Lending Drops, FDIC Says. U.S. “problem” banks climbed to the highest level in 17 years, signaling failures may accelerate in 2010, the FDIC said. Bank lending had the biggest retreat in more than six decades. The FDIC included 702 banks with $402.8 billion in assets on the confidential list as of Dec. 31, a 27 percent increase from 552 banks with $345.9 billion in assets at the end of the third quarter, the regulator said today in a quarterly report. “Problem” banks account for 8.7 percent of all U.S. lenders. “The growth in the number and assets of institutions on the problem list points to a likely rise in the number of failures,” FDIC Chairman Shelia Bair said today at a Washington news conference.
  • Zazi Pleads Guilty to Al-Qaeda Subway Plot in New York. Najibullah Zazi pleaded guilty to supporting al-Qaeda and conspiring to use a weapon of mass destruction in a plot to detonate bombs on New York subways around the anniversary of the Sept. 11, 2001, terrorist attacks.
Wall Street Journal:
CNBC:
NY Times:
NY Post:
  • Volcker Fooled. The Obama administration is backing off a plan to bar commercial banks from engaging in proprietary trading, favoring instead a watered-down version of a key tenet of the proposed "Volcker rule" governing how banks operate, according to people familiar with the situation. Sources told The Post that instead of issuing an outright ban on prop trading -- or trading done on behalf of only the bank itself -- the White House will propose that federally insured banks keep higher cash reserves if they want to run such trading desks.
The Business Insider:
Seeking Alpha:
City Hall:
  • Empty On Funding, ACORN Shutters Around the Country. Phone lines disconnected nationwide, reconstitutes in Brooklyn office as New York Communities for Change. ACORN, one of the largest social advocacy groups in the country, has been forced to suspend most operations as of today. The website was down on Monday morning, but the phone number for ACORN’s New York office was still connected, offering guidance on mortgage payments, first-time home purchases, general housing inquiries and ACORN housing maintenance. An operator was still answering the phones “ACORN, good morning,” and redirecting calls. By noon on Monday, the phone message had been replaced. “ACORN is not providing services in New York, but if you would like to receive information from local organizations with similar purposes, please leave your name, number and mailing address after the beep,” says the woman on the new recording, in both English and Spanish.
The Detroit News:
  • Romney Blames UAW, Feds in Book. In his upcoming book, Michigan native and former Republican presidential candidate Mitt Romney blames the United Auto Workers and the federal government for having added a $2,000 "cost disadvantage" to U.S.-made autos that had crippled the Big Three automakers' ability to compete with foreign vehicle makers. In "No Apology: The Case for American Greatness," a copy of which was provided to The Detroit News, Romney calls the "decline of the industry and of the great state of Michigan painful to watch." He adds that restructuring and getting Washington politicians out of "the management of the companies" will lead to a turnaround.
Rasmussen:
  • 41% Favor Obama's Health Care Plan, 56% Oppose. Voters still strongly oppose the health care reform plan proposed by President Obama and congressional Democrats and think Congress should focus instead on smaller bills that address problems individually rather than a comprehensive plan. A new Rasmussen Reports national telephone survey finds that 41% of voters favor the proposed health care plan, while 56% oppose it. Those figures include 45% who strongly oppose the plan and just 23% who strongly favor it.
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 23% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-two percent (42%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -19 (see trends).
Politico:
  • Sens. Susan Collins and Joe Lieberman Want to Cut Money for Khalid Sheikh Mohammed's Trial. Two key senators want to slash funding for civilian terror trials and give the money to the U.S. Coast Guard. Senate Homeland Security Chairman Joe Lieberman (I-Conn.) and Sen. Susan Collins (R-Maine), the panel's top Republican, want to use the $200 million the Obama budget proposes for the controversial civilian trials and use it to restore budget cuts for the Coast Guard. "Since I think terrorist trials should be conducted in a military, rather than a civilian, setting, the proposed $200 million set aside for security at civilian terror trials would be far better spent shoring up the critical operations of the U.S. Coast Guard," Lieberman said in a statement.
USA Today:
  • Vatican: Number of Catholics Rising Worldwide. The Vatican says the number of Catholics as a percentage of the worldwide faithful is growing slightly. The Holy See says that from 2007 to 2008 Roman Catholics grew from 17.33% of the global population to 17.4%.
Reuters:
  • New Doubts Surface Over AIG's(AIG) $2.2 Bln Nan Shan Deal. American International Group's stalled $2.2 billion sale of its Taiwan unit to a group led by China Strategic faces a new hurdle after Taiwan's regulator sought talks with parliament over the deal, raising the prospect of a chill in the nascent cross-strait M&A market. AIG agreed to sell Nan Shan to China Strategic and Hong Kong-based financial services firm Primus Financial in October, but has not been able to close the deal on concerns in Taiwan the buyers were backed by China-sourced funds.
  • Chile's SQM Halts Iodine Mine Due to Demand Slump.
  • Europe's Carmakers Says Economy Far From Stable. The European auto industry does not expect a quick recovery this year and warned sales of commercial vehicles that closely follow the economic cycle would "at best be flat" after dropping by one-third in 2009.
Repubblica:
  • International Monetary Fund Chief Economist Olivier Blanchard told la Repubblica in an interview that European countries that don't have the option of currency devaluation face an "extremely painful" recovery process. To recover competitiveness, "it's inevitable that there will have to be sacrifices in terms of salaries," Blanchard said.
Xinhua:
  • China Stresses Friendly Ties With DPRK As Its "Consistent Policy" President Hu Jintao on Tuesday pledged to push forward China's relations with the Democratic People's Republic of Korea (DPRK), saying cementing friendly ties between the two countries has been a consistent policy of China. "Under the current complicated and changeful international situation, it is in the fundamental interests of the two peoples and also benefits peace, stability and prosperity of the region and the world to further promote friendly exchanges and expand pragmatic cooperation between the two countries," said Hu when meeting with a delegation from the Workers' Party of Korea (WPK) of the DPRK.

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Bear Radar

Posted by Gary .....at 1:50 PM
Style Underperformer:
Mid-Cap Value (-1.56%)

Sector Underperformers:
Coal (-4.48%), Gold (-4.0%) and Semis (-3.55%)

Stocks Falling on Unusual Volume:
LRCX, UNT, TEO, TSU, FSLR, STD, DB, SU, IPCM, HURN, MELI, SHPGY, HITT, ASTE, HSII, MDVN, CSGP, CAGC, OTEX, CREE, TTEC, AMSC, DNDN, CSIQ, YUII, KELYA, TNC, CTV, RSH, EXR, HLS, CVA and TTI

Stocks With Unusual Put Option Activity:
1) KGC 2) ASML 3) F 4) SHLD 5) NVLS
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Bull Radar

Posted by Gary .....at 11:21 AM

Style Outperformer:
  • Large-Cap Growth (-.01%)
Sector Outperformers:
  • Papers (+.38%), HMOs (+.16%) and Restaurants (+.14%)
Stocks Rising on Unusual Volume:
  • DHR, AFFY, LMIA, HAYN, RDWR, CAAS, KMGB, SLXP, WLK, MMM and WHR
Stocks With Unusual Call Option Activity:
  • 1) IPI 2) ARM 3) HOT 4) MMM 5) ONXX

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Trading Links

Posted by Gary .....at 9:44 AM
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Monday, February 22, 2010

Tuesday Watch

Posted by Gary .....at 11:44 PM
Late-Night Headlines
Bloomberg:
  • House Democrats Seek to Revoke Insurers' Antitrust Exemption. House Democrats agreed to exclude medical malpractice insurers from legislation that would apply antitrust laws to health insurance companies, clearing the way for a vote on the measure this week. Given state regulation, the bill would have little effect on the industry and amounts to a political diversion in the broader debate over health care, said Robert Zirkelbach, spokesman for America's Health Insurance Plans, an industry trade group that represents Wellpoint Inc., Aetna Inc. and other insurers. “This is politics as usual,” Zirkelbach said in an interview. “There’s been an effort throughout this debate to shift the focus to the insurance industry rather than address rising health-care costs.” Abolishing the exemption “is likely to precipitate litigation” challenging the industry’s data-sharing practices, the Congressional Research Service predicted in a Jan. 14 report. If small insurers can’t get aggregated claims data, industry consolidation “is a likely, albeit ironic, possibility,” the report said.
  • Seidenberg, Dimon Among CEOs Said to Dine with Obama Tomorrow. Verizon Communications Inc.(VZ) Ivan Seidenberg and JPMorgan Chase & Co.'s(JPM) Jamie Dimon are among more than a dozen chief executive officers invited to dinner tomorrow night with President Barack Obama at the White House.
  • Gold may slip below $1,000 an ounce in March, historically the "worst month of the year," because of slowing jewelry demand and likely interest-rate increases, according to Credit Suisse Group AG. Stefan Graber, a commodity analyst in Singapore at Credit Suisse, said the metal will trade at $900 to $1,000 an ounce at March 31.
  • China Isn't a Realistic Candidate for IMF Gold, Council Says. China, the world’s biggest gold producer, isn’t a “realistic candidate” to buy bullion from the International Monetary Fund, the World Gold Council said.
  • Copper production outpaced demand by 75,000 metric tons in November, the International Copper Study Group said. The surplus for the first 11 months of the year was 144,000 tons, compared with a surplus of 58,000 tons a year earlier, the group said.
  • Grain stockpiles worldwide will climb to the highest level in eight years as production exceeds demand for a second year, the UN's Food and Agriculture Organization said.
Wall Street Journal:
  • Brookfield to Battle Simon for Mall Giant. Canadian property giant Brookfield Asset Management Inc. is readying a bid to take a large stake in U.S. mall owner General Growth Properties Inc., according to several people familiar with the matter, aiming to top an unsolicited bid made last week by mall rival Simon Property Group Inc. Brookfield's planned bid, which could be unveiled as soon as this week, would allow General Growth to exit Chapter 11 bankruptcy proceedings as a standalone company, with Brookfield as its largest shareholder, these people said. The Simon bid values General Growth equity at about $3 billion, or about $9 a share.
  • ObamaCare at Ramming Speed. The White House shows it has no interest in compromise. A mere three days before President Obama's supposedly bipartisan health-care summit, the White House yesterday released a new blueprint that Democrats say they will ram through Congress with or without Republican support. So after election defeats in Virginia, New Jersey and even Massachusetts, and amid overwhelming public opposition, Democrats have decided to give the voters what they don't want anyway.
  • Google(GOOG)-China Talks to Resume.
  • EPA Delays Start of New Rules on Emissions. The head of the U.S. Environmental Protection Agency said Monday the agency would delay subjecting large greenhouse-gas emitters such as power plants and crude-oil refiners to new regulations until 2011, and would raise the threshold for using the Clean Air Act to regulate carbon dioxide emissions. After an outcry from state regulators and members of Congress, EPA Administrator Lisa Jackson said the agency would also limit regulations for the first half of 2011 to emitters already required to apply for new construction and modification permits under the Clean Air Act. Between 2011 and 2013, "I expect the threshold for permitting will be substantially higher than the 25,000-ton limit that EPA originally proposed," Ms. Jackson told lawmakers in a letter. Late last week, eight Senate Democrats wrote Ms. Jackson expressing concern about the potential economic and energy impacts of the new rules the EPA is drafting. Robert Dillon, a spokesman for Sen. Lisa Murkowski, (R., Alaska), said the proposed delays didn't address concerns about what impact EPA rules would have on the economy. Sen. Murkowski is leading the effort to block the EPA curbs.
  • The Stimulus Evidence One Year On. Over five years, my research shows an extra $600 billion of public spending at the cost of $900 billion in private expenditure. That's a bad deal.
Marketwatch.com:
  • Banks Buy Time Restructuring Loans, For the Moment. More U.S. banks are restructuring troubled loans as commercial real-estate problems replace pressure from the residential housing bust. Restructuring buys more time for borrowers to get back on track and may help banks avoid bigger loan losses. However, it may only buy banks time before problems re-emerge once again.
BusinessWeek:
CNBC:
  • Morgan Stanley In Late-Stage to Sell CICC to KKR, TPG. Morgan Stanley(MS) is in late stage talks to sell its stake in China International Capital Corp to Kohlberg Kravis Roberts & Co and TPG Capital for more than $1 billion, according to three sources familiar with the situation.
  • Financial Watchdog's Power Crucial: Obama Aide. An Obama administration spokesman on Monday stressed the importance of "independent authority" for a proposed U.S. financial consumer watchdog and said where it was "housed" was another issue. The comment from Robert Gibbs, spokesman for the White House, came as two U.S. senators tried to forge a bipartisan agreement on tighter financial regulation, with analysts watching closely for signals of compromise.
NY Post:
  • Bill Loves American Health Care. With President Obama hoping this week's "bipartisan summit" will move his health-care bill out of the ICU, it's worth taking a look at a recent high-profile operation -- the heart work done on former President Bill Clinton. Clinton, of course, got the best of care -- a cardiac stent (a tiny metal cylinder) coated with a drug to help keep his artery open. Recent studies in the New England Journal of Medicine and elsewhere have shown that these drug-eluting stents are more effective than bare metal ones. But they cost two-to-four times more -- and the technology is relatively new. That combination has left government-run health-care systems slow to adopt them. The disparity between the US and Canada is striking.
Business Insider:
zerohedge:
cnet news:
DSnews.com:
  • U.S. Subprime Prices Down Nearly 6%: Fitch. Subprime is a word that’s now ostracized within the industry, but the repercussions of the housing boom days when subprime loans were commonplace are still resounding. The ratings agency’s U.S. Subprime RMBS Price Index fell by just under 6 percent month on month to 7.17 as of February 1, down from 7.62 as of January 1. All vintages dropped in value, highlighting concerns about the valuation of all RMBS subprime assets. Driving the declines was the 2007 vintage, which dropped by 17.7 percent, followed by the 2005 vintage falling by 9.5 percent month on month. Recent loan level analysis conducted by Fitch Solutions on the indices’ constituents found that the 2007 vintage showed a significant jump in 90-day plus delinquencies rising from 13.7 percent to 14.2 percent. “The rise in delinquencies is signaling a potential increase in 2007 loan defaults,” explained Thomas Aubrey, managing director at Fitch Solutions.
Twitter Blog:
  • Measuring Tweets. Folks were tweeting 5,000 times a day in 2007. By 2008, that number was 300,000, and by 2009 it had grown to 2.5 million per day. Tweets grew 1,400% last year to 35 million per day. Today, we are seeing 50 million tweets per day—that's an average of 600 tweets per second.
Rasmussen Report:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 22% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. That matches yesterday’s result as the lowest level of strong approval yet recorded for this President. Forty-one percent (41%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -19 (see trends).
Politico:
  • New Health Care Plan, But With Same Old Problems. The White House opened its last-ditch push for health reform Monday by releasing a $950 billion plan that signaled a new phase of hands-on presidential involvement. But by day’s end, President Barack Obama was staring down all the same old problems. Republicans called it a retread of the same bills Americans have panned, even though it included some GOP ideas. “Déjà vu all over again,” said Sen. Judd Gregg (R-N.H.). Democrats and labor unions didn’t rush to embrace it, either, with some disappointed by the absence of a public insurance option. Congressional Democratic aides also complained of being left in the dark by the White House, asking for a preview of the bill Friday, only to be denied by White House aides, according to multiple sources. And Obama’s plan did nothing to answer the central question facing Democrats: how to get a bill through the Senate — now one vote shy of a filibuster-proof majority — in one of the most toxic environments for incumbents in recent memory. Even with the first presidential plan on the table, there was no guarantee Democrats could pull off health reform this year.

  • Airport Scanners Still in Storage. President Barack Obama’s 2009 stimulus plan included $25 million for airport screening machines capable of detecting explosives like those carried by the Christmas Day bomber. But more than a year after passage of the stimulus, the Department of Homeland Security has yet to install a single scanner paid for by the bill. "We have not outlined our deployment schedule as yet," said Amy Kudwa, a DHS spokeswoman. "We're very actively working on a deployment plan. That process has not been completed."

Reuters:
Financial Times:
Telegraph:
  • European banks 'need €240bn a year in fund-raising' Europe's biggest banks may need to raise €240bn (£211bn) annually for the next three years to fund existing and new businesses, Citigroup analysts have warned. The analysts, who include Stefan Nedialkov, said 24 European banks – accounting for almost 70pc of the sector's assets – will face an increased need for funds due to the volatility of the bond markets and new Basel III capital regulations. The banks issued €56bn of long and medium-term funding in January, but investors' appetite for new issuance has fallen in February as concerns over the state of the European economy has grown.
Bangkok Post:
  • Supply Glut Weighs on Precious Revenue. Revenue at Precious Shipping Plc, Thailand's second largest dry-bulk carrier, has plunged sharply this year because of an expected drop in time charter rates in line with the dry-bulk supply glut, says managing director Khalid Hashim. "This year's time charter rates are expected to reach US$12,500 (414,874 baht) per day per ship on average, a drop from $13,459 in 2009. This is due to both the glut of ship supply in the overall market and also the reduction of our fleet," said Mr Hashim. He said that although there was high demand for commodities from China because of its heavy stimulus spending, the supply of ships was rising much faster than the demand. Assuming a 50% slide in new ship deliveries in 2010, he said the new supply in the world market would still show a double-digit percentage increase. "Supply looks extremely aggressive and there are new ships coming in [in the world market]," he said.
AsianInvestor:
  • China Wouldn't Survive a US Double-Dip Recession, Says Permel Chairman. Isaac Souede, chairman of $20 billion fund of hedge funds Permal, says China does not respect the euro and that an American double-dip recession would spark protectionism in the US. Permal, a stand-alone business in the Legg Mason group, is a fund of hedge funds with $20 billion in assets under management. Chairman Isaac Souede spoke to AsianInvestor while he was on a recent visit to Hong Kong.
South China Morning Post:
  • Home Prices Scary, Bank Chief Says. The head of state-owned conglomerate China Everbright Holdings has warned of the dangers of rising property prices on the mainland and said that because of market volatility the group would be cautious about investing in the sector this year. Chen Shuang, its CEO, said rising prices in some areas were "frightening" and that he believes a bubble exists in the mainland housing market. He also expects the central bank to announce an interest rate increase before the market consensus of the third quarter.
Evening Recommendations
Citigroup:
  • Reiterated Buy on (CVC), raised target to $27.
Night Trading
  • Asian indices are -.75% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 110.50 -2.5 basis points.
  • S&P 500 futures +.05%
  • NASDAQ 100 futures +.01%
Morning Preview
Earnings of Note
Company/Estimate
  • (MHS)/.75
  • (FSS)/.12
  • (TGT)/1.17
  • (LIZ)/-.20
  • (CKP)/.45
  • (JOE)/-.27
  • (SHLD)/3.70
  • (HD)/.16
  • (MDT)/.76
  • (M)/1.32
  • (CBRL)/.90
  • (ODP)/-.21
  • (ONXX)/.27
  • (ADSK)/.23
  • (BKS)/1.34
Economic Releases
8:30 am EST
  • The S&P/CaseShiller Composite-20 (YoY) for December is estimated to fall -3.1% versus a -5.3% decline in November.
10:00 am EST
  • Consumer Confidence for February is estimated to fall to 55.0 versus a reading of 55.9 in January.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Bullard speaking, weekly retail sales reports, Treasury's $44B 2-Year Note Auction, Richmond Fed Manufacturing Index, ABC Consumer Confidence reading, API energy inventory data, could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial stocks in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 100% net long heading into the day.
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