Monday, March 08, 2010

Stocks Slightly Higher into Final Hour on Falling Sovereign Debt Fear, Less Financial Sector Pessimism, Short-Covering, Technical Buying

Posted by Gary .....at 3:36 PM

Broad Market Tone:
  • Advance/Decline Line: Slightly Higher
  • Sector Performance: Mixed
  • Volume: Around Average
  • Market Leading Stocks: Mixed
Equity Investor Angst:
  • VIX 17.67 +1.44%
  • ISE Sentiment Index 120.0 -5.51%
  • Total Put/Call .95 +13.10%
  • NYSE Arms 1.04 +154.81%
Credit Investor Angst:
  • North American Investment Grade CDS Index 83.02 bps -3.74%
  • European Financial Sector CDS Index 72.65 bps -7.56%
  • Western Europe Sovereign Debt CDS Index 68.56 bps -7.01%
  • Emerging Market CDS Index 234.65 bps -2.92%
  • 2-Year Swap Spread 23.0 bps unch.
  • TED Spread 11.0 bps unch.
Economic Gauges:
  • 3-Month T-Bill Yield .14% unch.
  • Yield Curve 281.0 bps +3 bps
  • Copper Days Demand 15.25 days -.31%
  • Citi US Economic Surprise Index +23.40 unch.
  • 10-Year TIPS Spread 2.23% +1 basis point
Overseas Futures:
  • Nikkei Futures: Indicating +40 open in Japan
  • DAX Futures: Indicating +9 open in Germany
Portfolio:
  • Slightly Higher: On strength in Retail, Financial and Tech long positions
  • Disclosed Trades: None
  • Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as stocks consolidate recent gains. On the positive side, (IYR) has traded well throughout the day. Tech shares are also outperforming. The ongoing decline in credit default swaps remains a huge positive. The Libor-OIS spread is falling to 6.0 basis points today to the lowest since August 2006. On the negative side, Airline, Gold and Coal stocks are notably weak on the day. The 10-year yield is continuing its recent creep higher. Shanghai copper inventories have surged 23.5% over the last 5 days to the highest levels since Dec. 19th, 2009. As well, copper days demand remains near the highest level since January 2004, which is also a negative. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic fear, short-covering, lower sovereign debt angst, technical buying and diminishing financial sector pessimism.

2 comments

Today's Headlines

Posted by Gary .....at 3:06 PM

Bloomberg:
  • Company Debt Risk Falls to 7-Week Low on Greece: Credit Markets. The cost to protect against corporate defaults fell to the lowest in seven weeks as optimism builds that Greece’s budget crisis will be contained and Dubai moves closer to restructuring its debt. The Markit CDX North America Investment-Grade Index, linked to credit-default swaps on 125 companies, fell 2.5 basis points to 83 as of 9:41 a.m. in New York, according to broker Phoenix Partners Group. That’s the lowest since Jan. 14. A benchmark credit swaps index in Europe dropped to its lowest since Jan. 18, and Asia-Pacific credit indexes also fell. Credit-default swaps covering Dubai debt for five years fell 28 basis points to 479 basis points, the lowest in more than five weeks, according to London-based CMA DataVision. Contracts on Greece declined 11 basis points to 285, the lowest since Jan. 12.
  • EU Works on IMF-Style Lender, Curbs on Derivatives. European leaders are in talks to establish a lender of last resort and limits on credit-default swaps to bolster the euro area and prevent a repeat of the Greek financial crisis. Plans for what may become the European Monetary Fund and a German-French push to curb the use of derivatives to bet against sovereign debt are to be ready by June, officials in Berlin and Brussels said today. In Greece, tax and trash collectors walked out as a week of strikes to protest austerity measures began.
  • Papandreou Says Speculation May Fuel Spread of Crisis. Greek Prime Minister George Papandreou, drawing parallels with the 1947 fight to contain communism in Europe, called for trans-Atlantic cooperation to combat “unprincipled speculators” who threaten to bring a new global financial crisis. “Europe and America must say ‘enough is enough’ to those speculators who only place value on immediate returns, with utter disregard for the consequences on the larger economic system,” he said in a speech today in Washington. “An ongoing euro crisis could cause a domino effect, driving up borrowing costs for other countries with large deficits and causing volatility in bond and currency rates across the world.” Papandreou called the market for credit-default swaps a “scourge” that “haunts Greece and all of us.” U.S. and European regulators need to bolster regulations to curtain such activities, he said, or “a small problem could be the tipping point in an already volatile system.”
  • Corn Drops to Two-Week Low on Reduced Demand for Feed, Fuel. Corn fell to a two-week low after rain during the past two months boosted yield prospects for crops in Brazil and Argentina and a drop in ethanol prices eroded demand for grain to produce fuel.
  • Gold Futures Fall Most in a Month as Greek Debt Concerns Ease.
  • McDonald's(MCD) Sales Top Estimates on Chinese New Year. McDonald's Corp., the world’s largest restaurant company, said global sales rose 4.8 percent in February, topping some analysts’ estimates, as demand in Asia countered snow-hampered results in the U.S.
Wall Street Journal:
  • WTO Has Obstacles to Trade In Retreat. Protectionism by national governments began to decline in the fourth quarter of 2009 but remains a major threat to the global economy, according to a World Trade Organization report.
  • Energy Secretary Steven Chu on the Administration's Game Plan.
  • The View From Big Oil. These days, giant oil companies find themselves trying to balance two big pressures on their business. Governments are trying to slash carbon emissions—but the world's thirst for oil is growing by leaps and bounds. Peter Voser, chief executive officer of Royal Dutch Shell PLC, is navigating the situation by joining a business-backed effort to push for global-warming laws, and making sure Shell has a strong exposure to natural gas and alternative fuels. Mr. Voser sat down with The Wall Street Journal's Alan Murray and Kimberley Strassel to talk about the future of climate-change legislation, the company's push beyond oil, the prospects for electric vehicles and more. Here are edited excerpts of their discussion.
  • Wealth-Firm Prospects Take a Hard Line. The stock market may be up over 60% from last year’s lows, but clients are coming to wealth managers with harder questions than ever before–and some firms are retooling to meet these new demands.
  • California Receives $700 Million in Federal Housing Aid. California will receive $700 million and Florida will take $400 million in federal aid to begin designing programs to ease foreclosures, under the Obama adminstration’s latest effort to ease the housing crisis.
  • February Expected to Be a Great Month for Mac Sales. Munster continues to expect Mac sales in a range of 2.6 million to 2.8 million in first quarter of calendar 2010. That’s an 18 percent to 26 percent increase over the same period in 2009, which was down one percent year-over-year.
  • IMF Unveils Plan for Climate-Change Fund. The International Monetary Fund on Monday unveiled plans for an African "green fund," an effort that would move the group outside its traditional mandate to address what its director said is an unfilled need to help poorer nations cope with climate change. IMF managing director Dominique Strauss-Kahn said the fund would provide a potential aid buffer for countries on the continent that may bear the brunt of global climate change, and have the capacity to raise $100 billion per year by 2020.
MarketWatch:
CNBC:
  • US Fiscal Path Unsustainable: Senior Budget Analyst. While the U.S. economy has benefited from government stimulus measures, further assistance from additional stimulus would also expand the yawning budget gap, Douglas Elmendorf, director of the Congressional Budget Office, said. The budget-saving approach used in the past several decades, paying for increases in retirement and health care programs through cuts in defense spending, is not feasible in the future, Elmendorf told the National Association of Business Economists. Defense cuts alone would be insufficient to rein in the shortfall, he said, adding that significant tax increases or spending cuts are likely to be necessary. Elmendorf described the outlook for the budget under current policies as "bleak." The CBO on Friday said President Barack Obama's budget plans would rack up $9.8 trillion more U.S. debt by 2020, or $1.2 trillion more than the White House has forecast. Elmendorf also warned about rising levels of debt. "It is truly worrisome that our ratio of debt to (gross domestic product) is entering territory that is so unfamiliar to us and to other countries," he said. U.S. debt will be larger over the next decade than it has been in more than half a century, Elmendorf said. "The key choices are not whether to change course, but how quickly and in what way," he said.
  • Bull Market Survival Rate Increases After One Year.
NY Times:
  • JPMorgan(JPM) Tops List of Biggest Hedge Fund Managers. JPMorgan Chase is the king of the hedge fund castle, at least in terms of heft, according to a recent ranking by Pensions & Investment. The bank’s two hedge fund units JPMorgan Asset Management and Highbridge Capital Management came out on top with a combined $53.5 billion in assets under management as of Dec. 31, the publication said. The figure represents an 18.9 percent increase for the banks’ hedge fund assets at the end of of 2007, when Pensions & Investments compiled its last industry ranking.
NY Post:
  • Greece's Hidden Debt Soaring. The Greek debt tragedy currently unfolding -- the country's on-balance-sheet debt is 13 times its gross domestic product -- may be just the tip of the iceberg. More troubling, according to a report out last week, is the off-balance-sheet debt owed by the country, and its fellow, over-indebted nations Portugal, Italy, Ireland and Spain, the so-called PIIGS, representing the five-nation acronym. The off-balance-sheet debt, where countries guarantee the debt of private developments, many of which had gone bust, could multiply the problem many times -- putting further pressure on the euro, the report said.
The Business Insider:cnet news:
  • Google(GOOG) Launches Tool for Searching Public Data. Google is building on its partnership with the World Bank and other statistics gatherers to present an array of data in visual form within Google Labs. Google Public Data Explorer went live Monday, accompanied by the requisite blog post. The site takes public data regarding schools, population, crime, and even names to construct charts and graphs that help illustrate trends.
LA Times:
  • Interest in Buying State Offices in California is Building. Efforts to sell 24 state office buildings have drawn lots of interest from potential buyers -- as well as the ire of some former public officials who labored to get them built years ago in the belief that public ownership of the buildings would bring long-term financial benefits to taxpayers. "This seems to be very shortsighted economics," said Richard Rowe, a retired executive of the Los Angeles Community Redevelopment Agency, after he heard about plans to sell the Ronald Reagan State Building in downtown Los Angeles and other offices to investors.
    State officials last week began accepting bids on 24 office buildings on 11 sites in Los Angeles, Sacramento, San Francisco, Oakland and Santa Rosa.
The Detroit News:
  • GM CEO Whitacre Flying on AT&T(T) Jets. General Motors Co. dumped its corporate jets last year while in bankruptcy after being berated by lawmakers in late 2008 for flying top executives to Washington to ask for a bailout. But Chairman and CEO Edward Whitacre Jr. still flies private, thanks to a little-known perk negotiated with his former employer, AT&T Corp., before he joined GM in 2009. Whitacre, 68, negotiated a lifelong deal with the telecommunications giant before he retired in 2007 with a $158 million package that allows him to fly, free, on AT&T corporate jets for up to 10 hours a month. That's the equivalent of two round-trip flights between his home in San Antonio and his apartment in Detroit. The perk costs AT&T, where Whitacre was chairman and CEO, about $20,000 a month, according to a filing with the U.S. Securities and Exchange Commission.
Rasmussen:
  • 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. Forty-one percent (41%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -19 (see trends).
  • 53% Remain Opposed to Health Care Plan. As President Obama and his congressional allies search for a way to pass their proposed health care plan, most voters remain opposed to the legislative effort. The latest Rasmussen Reports national telephone survey finds that 42% favor the plan while 53% are opposed. These figures include just 20% who Strongly Favor the plan and 41% who are Strongly Opposed.
Politico:
Real Clear Politics:
Reuters:
  • Global Chip Gear Spending to Leap in 2010 - Gartner. Global chip equipment spending should grow by more than three-quarters in 2010, but companies will focus on upgrades and efficiency, keeping investment in capacity shy of pre-recession levels, two industry trackers said. Investment in chip manufacturing equipment is expected to reach roughly $30 billion this year, up more than 75 percent from a year ago, but still off the peak of about $45 billion seen before 2007, Gartner said on Monday. Another study released by the SEMI trade group, which comprises the world's leading makers of machines used to make microchips, estimated growth in chip gear spending could hit as much as 88 percent. "The semiconductor equipment industry will experience a very strong growth spurt in 2010, as we emerge from a very costly recession, and this growth is expected to continue throughout 2012," said Jim Walker, research vice president at Gartner.
  • RIM(RIMM) Stock Surges on Upbeat Analyst Forecast.
  • US Web Retail Sales to Reach $249 Billion by '14 - Study. Online retail sales in the United States could reach $248.7 billion by 2014, growing 60 percent from 2009, according to a study released on Monday. Driven by a 10 percent compound annual growth rate, the projected $248.7 billion is expected to account for 8 percent of total U.S. retail sales within five years, according to Forrester Research, which authored the study.
Financial Times:
  • Brazil and US Near Cotton Subsidies Showdown. Brazil takes another step towards a final showdown with the US in its long-running battle over cotton subsidies when it releases on Monday a list of about 50 American products it will punish with higher tariffs. Last year, Brazil won an eight-year long battle at the World Trade Organisation against the US after arguing that its cotton producers had been unfairly hurt by illegal subsidies to US cotton farmers. Brazil has already published a preliminary list of more than 200 US products on which it may raise tariffs as a result of the WTO victory, from sardines and cherries to shampoo and sunglasses to medical equipment, as well as cotton itself. On Monday, Brazil will announce a final, narrower list of 50 products – worth about $560m (€411m, £370bn) in total – that are slated for punishment. Those retaliatory measures will take effect in April. In addition, Brazil is expected this month to lay out its plans to impose a further $270m in penalties on the US through so-called “cross-retaliation”, which involves a tightening of non-tariff trade restrictions. Such a move, which is only rarely authorised by the WTO, would allow Brazil to take action over intellectual property rights, breaking patents in key sectors such as technology and pharmaceuticals. When Hillary Clinton, US secretary of state, visited Brazil last week, much of the attention was focused on the disagreement between the two countries over imposing sanctions against Iran. But in a sign that a deal over the cotton dispute was becoming urgent, Mrs Clinton said she would dispatch two high-level officials to Brazil to discuss what further concessions the US could make in order to avoid retaliation.
The Independent:
  • Stephen King: Deflation... the next big surprise? It's easy enough to argue that we're on the verge of a sustained recovery in economic activity. After all, interest rates are very low, plenty of money has been printed over the last couple of years, and governments have borrowed heavily in a bid to inject some vitality into the economic process. Yet much the same could have been said about Japan over the last 20 years. In Japan's case, how-ever, these "loose" policies just didn't work.
Handelsblatt:
  • Former German Finance Minister Theo Waigel said any aid for Greece should come from the International Monetary Fund and not the European Union and its member states, citing an interview. The IMF is a "suitable institution with expertise to help Greece," Waigel said. "The Greeks wouldn't accept the seriousness of their situation" if they relied on financial support from the EU, and the "collateral damage would be huge," he said.
Radio Television Hong Kong:
  • New World Development Co. Managing Director Henry Cheng said parts of Hong Kong's property market shows signs of "overheating."
Al-Arabiya TV:
  • Iraqi voter turnout in the parliamentary elections reached 62%.
0 comments

Bear Radar

Posted by Gary .....at 2:06 PM

Style Underperformer:
Mid-Cap Growth (+.08%)

Sector Underperformers:
Coal (-2.09%), Airlines (-1.20%) and Education (-.63%)

Stocks Falling on Unusual Volume:
CBEY, VOLC, EBIX, CIEN, APWR and TTM

Stocks With Unusual Put Option Activity:
1) YGE 2) KR 3) CHL 4) XNPT 5) ITMN


0 comments

Bull Radar

Posted by Gary .....at 11:12 AM

Style Outperformer:
Large-Cap Growth (+.31%)

Sector Outperformers:
Disk Drives (+2.40%), Restaurants (+1.59%) and Wireless (+1.43%)

Stocks Rising on Unusual Volume:
RIMM, CTEL, RDN, TEO, AIG, LGCY, CSCO, BBL, SEED, GMCR, COO, XRTX, IMAX, BCSI, TSTC, IBKC, EZCH, ASML, CLNE, CTEL, ENOC, SNDA, CAGC, WRLD, BIIB, BMC, NICE, VRSK, NUS, WGO, JCG, MET, BCE, SHI and PVH

Stocks With Unusual Call Option Activity:
1) BIIB 2) CECO 3) JCG 4) CAR 5) EMC


0 comments

Trading Links

Posted by Gary .....at 9:56 AM
0 comments

Monday Watch

Posted by Gary .....at 12:21 AM
Weekend Headlines
Bloomberg:
  • Sarkozy Says Euro Region Ready to Help Greece If Necessary. French President Nicolas Sarkozy said the euro region is ready to rescue Greece should the government struggle to fund its budget deficit, arguing that the country is “under attack” from so-called speculators. “I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” he said in Paris yesterday after a meeting with Greek Prime Minister George Papandreou. “There can be no doubt in this regard.” While Greece doesn’t need assistance right now, “we have measures, we are ready, we are determined,” he said.
  • Default Swaps Fall to Six-Week Low on Greece: Credit Markets. The cost to protect against corporate defaults fell to the lowest in more than six weeks and U.S. investment-grade bond sales rose fivefold as optimism builds that Greece’s budget crisis will be contained. The Markit CDX North America Investment-Grade Index, linked to credit swaps on 125 companies, dropped 6 basis points last week to 85.4 basis points, the lowest since Jan. 20, CMA DataVision prices show. Asia-Pacific indexes of credit-default swaps declined today. Goldman Sachs Group Inc. led $34.5 billion of investment-grade offerings in the last two weeks, compared with $6.8 billion in the previous period, according to data compiled by Bloomberg.
  • Obama Spending Plan Underestimates Deficits, Budget Office Says. President Barack Obama's budget proposal would create bigger deficits than advertised every year of the next decade, with the shortfalls totaling $1.2 trillion more than the administration projected, according to the Congressional Budget Office. The nonpartisan agency said yesterday the deficit will remain above 4 percent of the nation’s gross domestic product for the foreseeable future while the publicly held debt will zoom to $20.3 trillion, amounting to 90 percent of GDP by 2020. By then, interest payments on the debt will have quadrupled to more than $900 billion annually, the report said. Deficits between 2011 and 2020 would total $9.76 trillion, the CBO said. Economists generally consider deficits topping 3 percent of GDP to be unsustainable because that means government debt is growing faster than the ability to pay back the money. “The news today from CBO is clear: The president’s budget will continue to lead our nation into a fiscal catastrophe -- an ever worse one than the president’s own numbers suggest,” Representative Paul Ryan of Wisconsin, the top Republican on the House Budget Committee, said yesterday. The CBO report is designed to give Congress an independent assessment of the administration’s budget request.
  • Volcker Criticizes Greek Budget Derivatives 'Abuse'. White House adviser Paul Volcker said the “abuse” of derivatives to hide the size of Greece’s budget deficit highlights the need for regulation and European Central Bank President Jean-Claude Trichet said derivatives still pose risks to financial stability. “Surely the recent revelations about the use (and abuse) of complex derivatives in obscuring the extent of Greek financial obligations reinforces the need for greater transparency and less complexity,” Volcker said in the text of a speech to the American Academy in Berlin, a transatlantic research institute. Speaking at the same event, Trichet said “what I fear really is that we are currently underestimating the systemic instability which is associated with” derivatives. European and U.S. officials are examining the role that investment banks including Goldman Sachs Group Inc.(GS) may have played in Greece’s debt crisis, joining an outcry in the European Union over whether swaps contracts helped conceal the size of its deficit. Goldman Sachs helped Greek officials raise $1 billion of off-balance-sheet funding in 2002 through swaps, which EU regulators said they knew nothing about until last month. German Chancellor Angela Merkel, who said on Feb. 18 it would be a “scandal” if banks helped Greece massage its budget, called for restrictions on derivatives to halt “speculators.” “Credit-default swaps, where you insure your neighbor’s house just to destroy it and make money from it, that’s exactly what we have to curb,” she said yesterday at a press conference in Berlin with Greek Prime Minister George Papandreou.
  • Italian Finance Minister Giulio Tremonti said the International Monetary Fund could intervene to support Greece "as a bank," in a letter published in daily Corriere della Sera.
  • Steve Cohen's Trade Secrets. The founder of SAC Capital, whose first losing year was 2008, is taking in new money as hedge funds around him collapse.
  • U.S. Senator Says Bank Bonus Tax Proposal Unlikely to Get Vote. The U.S. Senate is unlikely to vote on a measure that would impose a 50 percent tax on bonuses awarded last year to executives of Wall Street firms bailed out by the government, a top Democrat said. Senate Finance Committee Chairman Max Baucus said yesterday that, while he couldn’t rule out the possibility that the tax proposal would be voted on as an amendment to a jobs bill, the “chances are low” because of opposition from lawmakers in both parties.
  • House's Frank May Scrap Overhaul Bill With Weak Consumer Powers.
  • China to Nullify Loan Guarantees by Local Governments. China plans to nullify all guarantees local governments have provided for loans taken by their financing vehicles as concerns about credit risks on such debt increases. The Ministry of Finance will also ban all future guarantees by local governments and legislatures in rules that may be issued as early as this month, Yan Qingmin, head of the banking regulator’s Shanghai branch, said in an interview. China’s local governments are raising funds through investment vehicles to circumvent regulations that prevent them from borrowing directly. A crackdown on such loans, estimated at about 11.4 trillion yuan ($1.7 trillion) at the end of 2009 by Northwestern University Professor Victor Shih, could trigger a “gigantic wave” of bad debts as projects are left without funding, Shih said this month. “By striking the fear of God into lenders, regulators hope to get them to turn off the tap,” said Patrick Chovanec, a professor at Tsinghua University in Beijing. “Banks have lent on the assumption that a lot of these infrastructure projects are risk-free, but many had no creditworthiness beside the guarantees.” Central bank governor Zhou Xiaochuan said March 6 during the National People's Congress that while “many” local financing vehicles have the ability to repay, two types cause concern. One uses land as collateral, while the other can’t fully repay borrowings, meaning local governments may be liable, leading to “fiscal risks,” he said. A few cities and counties may struggle with repayments in coming years because of debt ratios already exceeding 400 percent, a person with knowledge of the matter said in January. The ratio is of year-end outstanding debt to annual disposable fiscal income. “China’s sending a very strong signal that this kind of financing is over,” said Chovanec, an associate professor in the School of Economics and Management at Tsinghua University. “It raises the specter that China’s banking system has a lot more risk in it than people previously thought.” Jonathan Anderson, an economist at UBS AG, said March 5 he saw a “classic red herring” in arguments that “enormous, hidden off-balance-sheet liabilities” among China’s local governments could precipitate a debt crisis. “Beijing’s fiscal situation probably isn’t as good as it looks at first glance,” said Brian Jackson, an emerging markets strategist at Royal Bank of Canada in Hong Kong. “Perhaps at some stage the central government is going to have to bail out the banks or the regional governments and take it on its own balance sheet.”
  • China's Wen May Struggle to Meet 3% Inflation Target. Premier Wen Jiabao may struggle to keep inflation at his 2010 target of about 3 percent, after banks flooded the Chinese financial system with money to drive the nation’s economic rebound. Inflation may peak at 4.4 percent during the year, according to the median forecast of 14 economists surveyed after Wen gave the goal in a speech to lawmakers in Beijing yesterday. “Three percent is a fairly aggressive target and it suggests that the government will need interest-rate increases and price controls to achieve it,” said Ma Jun, a Hong Kong- based chief China economist at Deutsche Bank AG.
  • China Says Sanctions Can't Solve Iran Nuclear Issue. China’s Foreign Minister said new sanctions aren’t the solution for halting Iran’s development of nuclear weapons, two days after one of his diplomats said China may vote for such measures at the United Nations. “We believe that diplomatic efforts have not been exhausted,” Yang Jiechi said during a televised press conference today at the National People’s Congress meetings in Beijing. “Pressure and sanctions are not the fundamental way to resolve the Iran nuclear problem.” Yang’s comments come after the U.S. gave China, Britain, France, Russia and Germany a proposal in the past week to tighten restrictions on dealings with Iran’s banking, shipping and insurance industries. The plan also targets the Iranian Revolutionary Guard Corps that U.S. Secretary of State Hillary Clinton said has largely taken control of the nation.
  • N.Korea Threatens to Bolster Nukes, End Armistice. North Korea threatened to proceed with nuclear weapons development and renounce the 1953 armistice that ended combat in the Korean War, as it condemned a planned military exercise between South Korea and the U.S. “There is no reason whatsoever,” to adhere to the armistice, a North Korean military spokesman said today in a statement carried by the official Korean Central News Agency. “The process for the denuclearization of the Korean Peninsula will naturally come to a standstill and the (Democratic People’s Republic of Korea) bolster its nuclear deterrent for self-defense.”
  • FDIC Said to Encourage Pension Funds to Invest in Failed Banks. U.S. regulators are encouraging public pension funds that control more than $2 trillion to inject capital directly into the banking system by buying failed lenders, said people briefed on the matter.
Wall Street Journal:
  • Iraqi Voters Defy Violence. Despite a spasm of violence early Sunday, Iraqis flocked to the polls in what appeared to be large numbers, in a hard fought and too-close-to-call parliamentary election representing a pivotal test of the country's fledgling democracy.
  • Democrats Voice Health-Bill Doubts. Some House Democrats wavering over whether to back a health-care overhaul questioned whether it would effectively curb the country's health costs, highlighting a difficult issue that the White House and congressional leaders must address in the final negotiations on the measure. The issue is one of several that have been raised by Democrats over the bill, which President Barack Obama and Democratic leaders are pushing to pass by the end of March. Conservative Democrats have raised questions over the bill's language on abortion and tax increases, while liberals are unhappy with its failure to include a government plan that would compete with private insurers. On Sunday, two Democrats who hold swing votes said they were focusing on how much money the overhaul would actually save, both for employers and insured workers, and for the federal government. The House and Senate have passed competing bills, and leaders now are putting together a compromise version. Details on cost savings are still being worked out. "If the House and Senate can't work out cost containment, I don't see how I could support a bill that doesn't help our business community," Rep. John Adler (D., N.J.) said on "Fox News Sunday." "I'm not sure we've gone far enough in terms of fixing the underlying system to make it affordable for businesses and taxpayers." Rep. Jason Altmire (D., Pa.), also appearing on Fox, said he needed "to see a much clearer picture of the cost containment." He suggested strengthening provisions in the bill aimed at shifting the way providers are reimbursed, to be based on quality of care rather than the number of procedures performed. Critics say the government's current fee-for-service reimbursement system within its Medicare program encourages providers to offer patients unnecessary procedures. Democrats backing a health overhaul have cited cost containment as a main goal. But Republicans and some Democrats say the legislation doesn't do enough to address the issue, a concern that appears to be contributing to public doubts over the legislation.
  • China Unicom Pursues iPhones with Wi-Fi. China Unicom (Hong Kong) Ltd. is working with Apple Inc.(AAPL) to introduce iPhones with Wi-Fi wireless Internet capability to China, Unicom Chief Executive Chang Xiaobing said. Apple and Unicom, one of three Chinese state-owned telecommunications carriers, started selling the iPhone in China in October, after lengthy negotiations. Government regulations forced Apple and Unicom to disable Wi-Fi capability, which, along with relatively high prices, made the phone less attractive to many Chinese consumers than fully functional iPhones brought in for resale from other markets.
  • Battle Inside Fed Rages Over Bank Regulation.
CNBC:
NY Times:
  • The Swaps That Swallowed Your Town. As more details surface about how derivatives helped Greece and perhaps other countries mask their debt loads, let’s not forget that the wonders of these complex products aren’t on display only overseas. Across our very own country, municipalities, school districts, sewer systems and other tax-exempt debt issuers are ensnared in the derivatives mess. Like the credit default swaps that hid Greece’s obligations, the instruments weighing on our municipalities were brought to us by the creative minds of Wall Street. The rocket scientists crafting the products got backup from swap advisers, a group of conflicted promoters who consulted municipalities and other issuers. Both of these camps peddled swaps as a way for tax-exempt debt issuers to reduce their financing costs. Now, however, the promised benefits of these swaps have mutated into enormous, and sometimes smothering, expenses. Making matters worse, issuers who want out of the arrangements — swap contracts typically run for 30 years — must pay up in order to escape. That’s right. Issuers are essentially paying twice for flawed deals that bestowed great riches on the bankers and advisers who sold them. Taxpayers should be outraged, but to be angry you have to be informed — and few taxpayers may even know that the complicated arrangements exist.
CNNMoney:
  • Iceland Voters Reject Repaying $5 Billion Foreign Debt. Iceland's voters overwhelmingly rejected a deal to pay billions of dollars it owes to the United Kingdom and the Netherlands, the Foreign Ministry said Sunday. With around 90 percent of votes counted, just over 93 percent said no and just under 2 percent said yes. Not enough votes remain to be counted to change the result. Some 62.5 percent of Iceland's roughly 200,000 register voters cast ballots, the ministry said.
  • The Next Tech Goldmine: Medical Records.
Business Insider:
zerohedge:
Washington Post:
  • Billionaire Bubble: Ten players in the local tech scene look back, a decade later, at the frenzied days of the Internet boom and its fateful bust.
  • Rep. Barney Frank Warns of Fannie, Freddie Risks. An influential voice on Capitol Hill has unexpectedly called into question the safety of investing in Fannie Mae and Freddie Mac, raising the specter that investors who have lent money to the two firms or bought their mortgage-backed securities could one day suffer losses. The comments by Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, forced the Treasury Department to issue a statement Friday reaffirming the government's commitment to the companies, their creditors and their investors. If investors come to doubt that Fannie Mae and Freddie Mac debt and investments are risk-free, they would demand a higher return -- which could ripple across the U.S. housing market and cause mortgage interest rates to rise, depressing demand for homes.
  • Why Make Government the Prime Source for Student Loans? by Lamar Alexander. While health-care reform occupies the spotlight, the Obama administration is pushing for another Washington takeover -- this time of the student loan system. Last month, U.S. Education Secretary Arne Duncan made the administration's latest pitch on this page. Here is what the administration and congressional Democrats have told us about this latest attempt: Starting in July, all 19 million students who want government-backed loans will line up at offices designated by the U.S. Education Department. Gone will be the days when students and their colleges picked the lender that best fit their needs; instead, a federal bureaucrat will make that choice for every student in America based on still-unclear guidelines. They say that this will save taxpayers up to $87 billion in subsidies that now go to "greedy" banks. In gleeful anticipation, members of Congress have lined up to spend those billions on Pell Grants and almost a dozen other programs. Banks are punished. Students are helped. Members of Congress look good. Here is what they haven't told us: The Education Department will borrow money at 2.8 percent from the Treasury, lend it to you at 6.8 percent and spend the difference on new programs. So you'll work longer to pay off your student loan to help pay for someone else's education -- and to help your U.S. representative's reelection. And there are some other things the government should tell you: The estimated $87 billion in savings isn't real.
Seeking Alpha:
Crain's Chicago Business:
  • Alexi Giannoulias, Kin Could Walk Away from Broadway Bank Collapse with $15 Million. The family of Democratic U.S. Senate nominee Alexi Giannoulias stands to collect more than $10 million in federal tax refunds even if its Broadway Bank fails, which Mr. Giannoulias said this week is likely. A $75-million loss at the struggling lender last year generated tax benefits potentially worth between $12 million and $15 million to Mr. Giannoulias, his two brothers and his mother. As the sole owners of a subchapter S corporation that controls $1.2-billion-asset Broadway, they pay the taxes on the bank’s income and reap tax deductions on its losses. The possibility of family members pocketing millions in tax refunds as Broadway slides toward insolvency and federal receivership is likely to fuel more controversy for Mr. Giannoulias, who is already under fire for his role in the bank’s downfall. In an interview this week, he took some responsibility for a disastrous expansion of real estate lending when he was senior lender at Broadway in the mid-2000s, before winning election as Illinois treasurer in 2006.
Rasmussen Report:
  • Daily Presidential Tracking Polls. The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-one percent (41%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -17 (see trends).

Politico:
Reuters:
  • Iran's Ahmadinejad Calls Sept 11 "big fabrication". Iranian President Mahmoud Ahmadinejad on Saturday called the September 11 attacks on the United States a "big fabrication" that was used to justify the U.S. war on terrorism, the official IRNA news agency reported.It came amid escalating tension in the long-running dispute between Iran and the West over Tehran's nuclear program, with the United States pushing for new U.N. sanctions against the major oil producer.
  • Pakistanis "arrest American al Qaeda spokesman". Pakistani security agents have arrested an American al Qaeda spokesman wanted in the United States for treason for threatening violence unless al Qaeda demands are met, Pakistani officials said on Sunday. News of the arrest of Adam Gadahn, a California-born convert to Islam, came the day a video was released in which he called for Muslims in the United States to launch attacks to undermine the economy, according to a website monitoring al Qaeda announcements. The capture of Gadahn, believed to be in his early 30s, is the latest in a series of militant arrests in U.S. ally Pakistan that has raised hopes for more concerted action against the Afghan Taliban and al Qaeda as U.S. forces battle militants over the border in Afghanistan.
  • Duabi Debt Deal Expected This Week: Bankers. Dubai World's plan for repaying $26 billion in debt will not include a proposal to raise capital or contain any surprises, one of the bankers said, such as the repayment of Nakheel's Islamic bond in December after a last-minute bailout by Abu Dhabi.
  • Greece Won't Need Aid, Cenbank Chief Tells Paper. Greece will not need foreign help to deal with its debt problems, central bank governor George Provopoulos said in a German newspaper interview released on Monday. Provopoulos told the Financial Times Deutschland (FTD) that solid demand for a 10-year, 5.0 billion euro ($6.8 billion) bond Greece sold last Thursday showed Athens could raise the funds it needs on financial markets.
  • Talk of China Giving Up on Dollar is Nonsense-Banker. Any speculation that China might stop supporting the dollar in the next few years is absolute nonsense, a top state banker said.
Financial Times:
  • Why the Euro Will Continue to Weaken. If you want to unnerve a European, the revelation of a secret dinner of New York-based hedge funds conspiring against the euro is hard to beat. Europeans are right to worry – but not about the collusion itself. They should be much more concerned that some of the world’s smartest investors are convinced the euro has only one way to go: deep down. This is a story about what will happen to the eurozone beyond Greece. Without political and legal constraints, this would be much easier. The eurozone would prescribe itself a crisis resolution mechanism, a procedure to manage internal imbalances, and perhaps move towards a common eurozone bond. While all of this sounds sensible, none of it may ever happen because of political and legal constraints. Some member states would argue that a new European treaty would be needed to implement such proposals. The route to getting the Lisbon treaty ratified was so tortuous that Brussels would rather go to hell and back than negotiate and ratify another treaty. In any case, German constitutional law imposes such tight constraints that any dilution of the no bail-out clause in the Maastricht treaty or the price stability target of the ECB might trigger a forced German exit. The most one can hope for during the next 10 years is improved voluntary co-ordination in the European Council.So the question then becomes: what economic adjustment mechanisms are feasible against this political and constitutional backdrop? The options are limited.The one policy response we can almost take for granted will be an attempt to reduce budget deficits back towards the Maastricht treaty’s upper ceiling of 3 per cent of gross domestic product. This will be achieved, if not by 2012, then a year or two later. If we assume further budgetary consolidation as a given, how then will the eurozone economy adjust? It is an economic fact that the sum of public and private sector balances must equal the current account balance. So forcing up public sector balances implies either an offsetting fall in private sector balances, an offsetting improvement in the current account balance, or some combination of the two. In scenario one, the eurozone’s current account balance remains broadly unchanged, and all the adjustment comes through a fall in private sector balances. In a similar way, Greece last week solved its fiscal problem by creating a private sector problem of identical size. The Greek state – the sum of its public and private sectors – is just as bankrupt today as it was a week ago. This means that, by following the fiscal policy rules, the eurozone would risk a private sector depression, which would almost certainly be concentrated heavily in Europe’s south. This scenario would greatly increase the probability of a eurozone break-up at some point in the future. Investors who believe in this scenario would be very afraid to hold euros. In scenario two, all the adjustment comes through the eurozone’s current account balance, which would turn from slightly negative to strongly positive. It is difficult to see how this could be done without a significant further devaluation of the euro. The euro would join the long list of currencies that have seen their problems solved through competitive devaluation. So the consequences would be a significant devaluation of the euro against the dollar and a reversal of its appreciation against sterling. It would make life more difficult for the British. But, most importantly, it would contribute to a resurgence in global imbalances. Whichever scenario you choose, the euro is going to be weak. Even if the eurozone were to allow more serious slippage in budgetary consolidation than I have suggested, that would probably not help the euro either, as markets would start to doubt the longevity of the currency union for political reasons. We have always known that a monetary union cannot exist without political union in the long run. Those smart New York investors are betting that the long run is closer than we thought.
  • Traders Cut Iran Petrol Line. The world’s largest oil traders have quietly stopped supplying petrol to Iran in a clear sign that the threat of sanctions and Washington’s behind-the-scenes efforts to convince companies not to sell to Tehran are paying off. However, the decision by Vitol, Glencore and Trafigura is unlikely to cut Tehran off completely from the global petrol market as traders said Iran’s long-standing suppliers were being replaced by small Dubai-based and Chinese companies.
Telegraph:
  • Shoppers Could Face VAT on Food. The imposition of VAT on groceries is being actively considered by Whitehall officials as a radical means of reducing the national debt. The feasibility of introducing the food tax is being raised informally between civil servants, industry bodies and retail insiders. So politically-sensitive is the move that all the talks are occurring "under the radar", according to retail industry insiders. Basic supermarket groceries are currently immune from VAT, along with books, newspapers and children's clothes. However a VAT levy on food of between three and five per cent would raise billions of pounds in tax and help reduce Government borrowings, which are expected to hit £180 billion this year. Food sales from supermarkets are estimated to total £120 billion a year. The tax would be controversial as it would disproportionately affect poorer families. Any move to impose it would be vehemently opposed by the UK's large food retailers, who argue that it would be a 'tax on living'.
  • Green Jobs & Green Energy Are a Fraud.
TimesOnline:
  • Mobile-Phone Networks Vie for the Apple(AAPL) iPad. APPLE executives will jet into Britain this week for crunch talks with mobile-phone companies over which network will sign up its iPad tablet computer. The gadget giant said last week that its new device will go on sale in America from April 3 and come to Britain later in the month. However, unlike in 2007 when O2 was selected as the network for its iPhone, Apple is not expected to choose a single provider this time.
Deutschlandfunk Radio:
  • A default by Greece may have an "infectious effect" on countries like Portugal, Spain and Italy, forcing European governments to come to the rescue of their banks, Deutsche Bank chief economist Thomas Mayer said. Any indication that creditors will have to make writedowns on a total of more than $709 billion in claims against Greece would be "a real problem," Mayer said. The situation would be similar to what followed the collapse of Lehman Brothers Holdings Inc., he said.
Frankfurter Allgemeine Sonntagszeitung:
  • Merck KGaA is prepared to make further acquisitions after agreeing to buy Millipore Corp. for $6 billion, CEO Karl-Ludwig Kley said. "We do have a number of ideas," he said. "Acquisitions are a part of our strategy." The purchase of Millipore will strengthen Merck's profit "from year one", FAS cited Kley as saying.
The Star Online:
  • Financial Speculators are Still Causing Havoc. The past fortnight has seen new outrage against financial speculators, especially the hedge funds that are accused of undermining Greece and the euro. But will action ever be taken to curb them? Political leaders in Europe are now attacking the role of hedge funds and other financial speculators, while the European Commission is investigating their activities with a view to tighter regulation. The role of derivatives, and especially the credit default swaps, are also coming under attack, as these are found to be among the most potent speculative instruments. What is really surprising is that action against the speculators and the mechanisms they use has not been taken until now. It was financial speculation, with the use of instruments such as securitisation of debts and credit derivatives that lay the ground for the Western and global financial crisis that almost torpedoed the world economy. Despite the enormous harm they have caused, many of the speculators and the instruments have been allowed to continue their trade. The reason for this, according to many analysts, is that the financial institutions, tycoons and their lobby groups wield enormous influence over political leaders, and partly because of the contributions they make to political parties, especially in the United States.
Nikkei:
  • Panasonic Corp., the world's biggest maker of plasma televisions, will tie up with Best Buy Co.(BBY) in an effort to boost U.S. sales of 3-D TVs. Best Buy, the largest U.S. electronics retailer, aims to set up a space for customers to watch 3-D movies on Panasonic's televisions at 1,000 shops by the end of this year.
Weekend Recommendations
Barron's:
  • Made positive comments on (MBT), (AXP), (AMZN), (SEIC) and (CHRW).
  • Made negative comments on (INFY) and (WIT).
Citigroup:
  • Reiterated Buy on (TMK), target $57.
  • Upgraded (LGCY) to Buy, target $25.
Night Trading
  • Asian indices are +.75% to +1.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 98.0 -4.0 basis points.
  • S&P 500 futures +.16%
  • NASDAQ 100 futures +.05%
Morning Preview
Earnings of Note
Company/Estimate
  • (HRB)/.16
  • (THO)/.29
  • (RUE)/.30
Economic Releases
  • None of note
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Sack speaking, Cowen Healthcare Conference, CSFB Media/Communications Conference, Jeffries Tech Conference, Stifel Nicolas Consumer Conference, Raymond James Institutional Investors Conference, (PSEG) analyst day, (PEG) analyst conference, $26 Bln 1-year Treasury Note Auction and the (TXN) Mid-Quarter Update could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by technology and commodity stocks in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the week.
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