Style Underperformer:
- Small-Cap Value (+.08%)
- HMOs (-1.60%), Oil Service (-.59%) and Road & Rail (-.57%)
- AET, HUM, X, AKS, GBX, KMGB, ISSI, DGIT, SATS, CKEC, SYNA, MSB, AGM and STZ
- 1) ATHN 2) FNM 3) MBI 4) CMED 5) LDK
Friday, April 09, 2010
Bear Radar
Style Underperformer:
Bull Radar
Style Outperformer:
- Mid-Cap Growth (+.48%)
- Oil Tankers (+3.80%), Construction (+1.57%) and Computer Hardware (+1.10%)
- GEOY, DISH, STD, REP, SNP, HBC, ATLS, APL, JCP, CASY, PTRY, ISLE, LFUS, MDRX, REXX, SMSC, BOFI, WYNN, RGLD, SEED, SCHN, CEDC, WBMD, CFSG, HELE, COLM, BTH, JEC and OSG
- 1) ABK 2) CCE 3) DRYS 4) ALL 5) DISH
Friday Watch
Evening Headlines
Bloomberg:
- North-South Divide May Hurt Euro Region More Than Greek Crisis. Elina Helmanen and Minas Megalokonomos embody a widening north-south divide that may put the euro region at more risk than the Greek budget does. Helmanen, 26, lives on her own, studying politics in her native Finland while juggling a part-time job as a waitress. She expects to find a job after graduating next year. “I believe that if you try hard enough and are ambitious enough, you can get what you want,” said Helmanen. Megalokonomos is the same age and earned a degree in economics in 2007. He has yet to find work at home in Greece and lives with his parents in Athens. “Unemployment and corruption go against any potential a hard-working person has,” he said. Such diverging expectations show the gulf within the group of 16 countries sharing the euro. As growth prospects diminish in the south, the single currency may become an economic and political straightjacket, executives and analysts said.
- Former Fed President Poole Says Fed Has 'Tilted Playing Field'. Former Federal Reserve Bank of St. Louis President William Poole said the central bank played favorites when providing aid as part of efforts to stem the financial crisis. “The Fed did not provide assistance to all on an equal basis but tilted the playing field,” Poole said in remarks prepared for a lecture at the University of Delaware, where he is a scholar in residence. “Why should the Fed have had a program to buy commercial paper from large corporations and no program to help small businesses starved for funds?” The Fed’s program to purchase $1.25 trillion in mortgage- backed securities issued by government-sponsored enterprises probably contributed to the demise of the market for non- government mortgage-backed securities and will “complicate monetary policy in the years ahead,” Poole said. “Much more research is necessary to determine whether the Fed made the right choices; clearly, I have my doubts,” said Poole, 72. Poole expressed concern about “an appalling lack of economic literacy in Congress” and said that neither the House nor Senate versions of legislation to overhaul financial regulation address the most important shortcomings. Banks should be required to hold more long-term bonds, and tax deductions for interest should be eliminated, he said.
- Cornell Faces Moody's Rating Cut as Swaps Backfire. Cornell University, a member of the Ivy League, faces a credit-rating downgrade as it prepares to terminate interest-rate swaps tied to its debt, according to Moody’s Investors Service. Cornell will end the contracts linked to at least $475 million of bonds, potentially costing it $39.9 million, Moody’s said in a report today. The New York-based rating company said it lowered the outlook on the university’s Aa1 ranking, its second-highest, to negative from stable, indicating it could be downgraded. Standard & Poor’s in March 2009 cut the school’s grade one level to AA, its third-highest. The lower outlook reflects a “tightening of operating performance” and a possible cut in state aid, Moody’s analysts Kimberly Tuby and Dennis Gephardt wrote in the report. It also came amid a “decline in pledges and new gifts to the university, and financial resources providing a thinner cushion for a significant amount of debt and large expense base, as a result of investment losses and rapid pace of borrowing in recent years,” they wrote.
- Rosner Doesn't Believe Rubin Was Unaware of CDO Risk. Joshua Rosner, managing director at Graham Fisher & Co., talks with Bloomberg's Matt Miller and Carol Massar about today's testimony by former Citigroup Inc. executives Robert Rubin and Charles "Chuck" Prince before the Financial Crisis Inquiry Commission in Washington. (video)
- Treasuries Head for Weekly Gain on Concern Greece Will Default. Treasuries headed for their biggest weekly gain since February as concern Greece will default on 304.2 billion euros ($407 billion) of debt spurred investors to buy safety assets. “The Greek problem is not over, especially as they may need to fund at very high interest rates, which means that the financing costs will also be high,” said Hiromasa Nakamura, a senior investor in Tokyo at Mizuho Asset Management Co., part of Japan’s second-largest listed bank. “Investors may want to hold safer goods and Treasury yield level are very attractive.” Credit-default swaps linked to Greek bonds climbed 53 basis points to a record 468.5 yesterday, according to CMA DataVision. The yield premium investors demand to hold 10-year Greek rather than similar-dated Treasuries expanded yesterday to 3.47 percentage points, the widest since January, according to data compiled by Bloomberg. The spread between 10-year German bunds and Greek debt increased to 4.27 percentage points yesterday, the largest since the euro’s debut in 1999.
- Bullion Held in SPDR Gold ETF Surges .9% to Most on Record. Bullion held by SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, rose by 9.7 metric tons to the largest amount ever, company figures show. The fund’s holdings gained 0.9 percent, the biggest jump in more than six months, to 1,140.43 tons as of today, according to the company’s Web site. Holdings have increased 1.2 percent in the past year. The previous record was 1,134.03 tons on June 1, according to the Web site. The company listed the fund’s net asset value as $42.09 billion as of today.
- Hartford's(HIG) Ayer To Get $39.9 Million Pension Payment. Ramani Ayer, whose stock and bond bets pushed Hartford Financial Services Group Inc. into a U.S. bailout, will receive a pension payment of $39.9 million in May. Ayer stepped down as chairman and chief executive officer on Sept. 30. His pension was disclosed in a regulatory filing today. Hartford fell 28 percent on the New York Stock Exchange during Ayer’s 12 years of leadership. His expansion in equity- linked retirement products produced losses for Hartford starting in 2008 when banks failed and the stock market plummeted. The $3.4 billion of government rescue funds secured by Ayer in June ranks Hartford second only to American International Group Inc. among bailed-out insurers.
- Cusip Requests Portend Jump in Corporate Debt. Call it the Cusip clue. Corporate-debt issuance is poised to grow even more robustly into the second quarter, based on the number of companies that applied in March to issue new debt securities. The number of requests for corporate-debt-related Cusips—akin to serial numbers for new bond issues—rose 41% in March from month-earlier levels, according to Standard & Poor's. The figure was up 78.6% from March 2009, representing the biggest year-over-year jump since March 2005, according to S&P. The rise is noteworthy as it comes after a first quarter that already saw strong corporate-bond issuance—including record levels of high-yield bond issuance—and indicates that such activity could continue to grow. "It can be seen as a proxy for economic activity or capital markets activity, and it's probably another indicator of improving corporate health," said Richard Peterson, a director in the market credit and risk strategies group at S&P.
- Foreclosures Hit Rich and Famous. The rich and famous now have something in common with hundreds of thousands of middle and lower-class Americans: The bank is about to take their homes. Houses with loans of $5 million or more will likely see a sharp rise in foreclosures this year, according to a RealtyTrac study for The Wall Street Journal.
- Dick Bove: Investors Betting Goldman(GS) Bought Greek CDS. Goldman Sachs shares have been on a tear lately. They’re up 8.3% this year, 15% since the end of February and 6% so far this week, after leapfrogging their 200-day moving average on Monday. What’s behind the action? Rochdale securities analysts Dick Bove says investors have been laying bets on Goldman based on the belief that the company has been snapping up credit default swaps that would pay out in the event of a default of the Hellenic Republic. Brendan Conway of Dow Jones writes:
- States Skip Pension Payments, Delay Day of Reckoning. State governments from New Jersey to California that are struggling to close budget deficits are skipping or deferring payments to already underfunded public-employee pension plans. The moves could help ease today's budget pressures, but will make tomorrow's worse.
- Wal-Mart(WMT) Bets on Reduction in Prices. Wal-Mart Stores Inc. is cutting prices on thousands of products in an aggressive campaign to reinforce its reputation as a discount leader, as the company seeks to reverse months of slowing U.S. sales.
- Small Farms Balk at Food-Safety Bill. Congress's food-safety fight is nearing an end but small farmers still have a bone to pick with the legislation. The Senate version of a food-safety bill has attracted broad bipartisan support and is expected to pass easily soon after Congress returns from recess next week. Iowa Democratic Sen. Tom Harkin, a co-sponsor, predicted it would be "on the president's desk by May." But small farmers worry the measure's fees and inspection requirements would be ruinously expensive and are pushing for exemptions. "I know people who have been small farmers for 25 to 30 years who are looking to get out of the business because food safety is becoming so alarmist," said Mary Alionis, whose eight-acre Whistling Duck Farm in Grants Pass, Ore., sells produce to farmers markets and restaurants.
- Bank of Mom and Dad Shuts Amid White-Collar Struggle.
- Democrats Pivot to Climate Change as Election Clock Ticks. Environmentalists optimistic about passing bill, but politics complicated. Hot on the heels of the health-care reform bill, lawmakers will soon begin considering major climate-change legislation that the White House wants to get passed this year. But with a little more than seven months to go until Election Day, some are asking: can the Democrats do it?
NY Times:
Forbes:
CNNMoney:
- What is Jamie Dimon Trying to Pull? Jamie Dimon could be the most dangerous person in America. It's not that he is incompetent and likely to lead his bank quickly onto the rocks. On the contrary, Mr. Dimon threatens our economic and political system precisely because he is so good at his job, and because he is determined to translate his recent success into making his bank even bigger. Dimon represents the heavy political firepower and intellectual heft of the banking system. He runs some of the most effective -- and toughest -- lobbyists on Capitol Hill. He has the very best relationships with Treasury and the White House. And he is determined to scale up. The only problem he faces is that there is no case at all for banking of the size and form he proposes. Consider the logic he presents on p. 36 of his recent letter to shareholders.
- As Funding Pressure Grows, Local Government Officials In China Are Killing Themselves. In China, the heat is being turned up on local governments, which have been characterized as the SIVs of the country's financial bubble. Local governments are saddled with huge debts, and are desperate for the real estate bubble to continue feeding the beast. As such, we're not surprised to see stories like this, from ShanghaiDaily.com:
- Reed Targets Private Investment Pools. In an effort to throw some light on the shadowy world of private investment pools, Democratic Sen. Jack Reed of Rhode Island is working to require hedge, private equity and venture capital funds to provide information on their dealings to the Securities and Exchange Commission. Reed, a member of the Banking Committee, plans on offering an amendment to the financial regulatory reform bill when it comes to the Senate floor that would require private funds with more than $30 million in assets to register with the SEC and disclose information that would help regulators determine whether the funds pose any risk to the financial system.
- Netanyahu to Skip Obama Summit. Israeli Prime Minister Benjamin Netanyahu has abruptly canceled his plans to attend President Barack Obama’s nuclear security summit next week, creating an embarrassing distraction on the eve of a high-profile meeting the White House has sought to carefully choreograph. An Israeli official confirmed Netanyahu’s decision not to attend, which was revealed by Israeli media outlets Thursday afternoon Washington time. “In the last 24 hours, the Israeli government has learned of various reports from various sources on the intention of several states attending the conference not only to deal with the issue at hand, but to take the opportunity to make a point of grand-standing against Israel and the issue of the Nuclear Nonproliferation Treaty," the Israeli official said. "The prime minister was dismayed at this, and decided to stick to the Israeli policy that Israel is usually represented at these types of conferences at the professional-ministerial level.”
- Diplomat Was Visiting Al Qaeda Inmate. A Qatari diplomat was going to visit a convicted member of Al Qaeda when his suspicious behavior led the U.S. to scramble F-16s, sources said Thursday. Mohamed Al-Madadi, the third-ranking diplomat in the Qatari Embassy, was on his way to visit Ali Al-Marri in the Florence, Colo., Supermax prison. Al-Marri, a Qatari citizen, is serving an eight-year sentence after pleading guilty to conspiring to commit a terrorist act. Al-Madadi was scheduled to meet with Al-Marri at 11 a.m. Thursday, said Alison Bradley, a spokeswoman for the Qatari Embassy. Al-Madadi was apprehended by two U.S. air marshals after he spent a suspiciously long time in the airplane bathroom and possibly joked about igniting a bomb in his shoes, congressional sources said. The government scrambled F-16 fighter jets and escorted the plane to the Denver airport. Al-Madadi will not face charges and will leave the country later this week, congressional sources said.
- Democratic Party Image Drops to Record Low. Americans' favorable rating of the Democratic Party dropped to 41% in a late March USA Today/Gallup poll, the lowest point in the 18-year history of this measure.
- Health Care's History of Fiscal Folly. Expanding health coverage busted state budgets. Will it bust the federal budget too?
- Comcast(CMCSA) Faces Tough Regulation from FCC. Comcast’s bid to take over NBC Universal could face more stringent conditions from the Federal Communications Commission after the company’s victory in the US appeals court, according to people close to the deal. Though a court ruling this week represented a nominal victory for Comcast over the regulator, it has made the leading US cable provider more vulnerable to having rules imposed upon it over how to manage its broadband network, these people say. With its hands tied given the court ruling, people who are closely following the deal say that the FCC will be looking at the Comcast deal as an opportunity to impose conditions on the largest industry presence. They say that the biggest question now is whether the FCC would impose general net neutrality principles that Comcast could easily agree, or whether it would impose more onerous network management conditions that it would be likely to resist. “My sense is it would not be the FCC’s preferred approach but after this week they will be looking more widely for the tools they have to push their policies forward,” said Rebecca Arbogast, an analyst at Stifel Nicolaus.
- Bundesbank Attacks Greek Rescue as a Threat to Stability. Germany's Bundesbank has fired a warning shot at Chancellor Angela Merkel, attacking the joint EU-IMF rescue plan for Greece as a threat to economic stability and probably illegal. The Bundesbank document offers a withering critique of the deal agreed by EU leaders two weeks ago, saying the plan had been cobbled together without consulting central banks and will lead to monetisation of debt. "It brings problems in respect to stability policy that should not be underestimated." The joint rescue between the IMF and the EU would turn the Bundesbank into a "money-printing machine" for the purchase of Greek bonds, according to Rundschau. This would breach the EU's 'no-bail clause'. Hans Redeker, currency chief at BNP Paribas, said the report greatly strengthens the hand of EMU critics in Germany. A group of professors is already itching to file a complaint at the constitutional court to block the Greek rescue. "This reduces Merkel's room for manoeuvre to zero," he said.
- Watch Out for a Double Dip as Prices at the Pumps Soar. Are we heading for another oil price shock? I ask the question because the price of a litre of unleaded petrol at the UK pumps has today reached a new all time high, marginally surpassing the previous record set in July 2008.
- Sovereign Debt Crisis at 'Boiling Point', Warns Bank for International Settlements. The Bank for International Settlements does not mince words. Sovereign debt is already starting to cross the danger threshold in the United States, Japan, Britain, and most of Western Europe, threatening to set off a bond crisis at the heart of the global economy. "The aftermath of the financial crisis is poised to bring a simmering fiscal problem in industrial economies to the boiling point", said the Swiss-based bank for central bankers -- the oldest and most venerable of the world's financial watchdogs. Drastic austerity measures will be needed to head off a compound interest spiral, if it is not already too late for some. The risk is an "abrupt rise in government bond yields" as investors choke on a surfeit of public debt. "Bond traders are notoriously short-sighted, assuming they can get out before the storm hits: their time horizons are days or weeks, not years or decade. We take a longer and less benign view of current developments," said the study, entitled "The Future of Public Debt", by the bank's chief economist Stephen Cecchetti. "The question is when markets will start putting pressure on governments, not if. When will investors start demanding a much higher compensation for holding increasingly large amounts of public debt? In some countries, unstable debt dynamics -- in which higher debt levels lead to higher interest rates, which then lead to even higher debt levels -- are already clearly on the horizon." Official debt figures in the West are "very misleading" since they fail to take in account the contingent liabilities and pension debts that have mushroomed over recent years. "Rapidly ageing populations present a number of countries with the prospect of enormous future costs that are not wholly recognised in current budget projections. The size of these future obligations is anybody's guess," said the report. The BIS lamented the lack of any systematic data on the scale of unfunded IOUs that care-free politicians have handed out like confetti.
- David Cameron: Public Sector Chiefs Will be Forced to Take Pay Cut. Public sector chiefs earning hundreds of thousands of pounds a year would have their salaries cut back by a Conservative government under a radical scheme to link their earnings to the lowest-paid workers in their organisation, David Cameron announces today. In his first newspaper article since the general election was declared earlier this week, the Tory leader writes in the Guardian that his party has now assumed the mantle of progress as he pledges to tackle "unfair pay" in the public sector. Cameron also uses the article to launch a withering attack on Gordon Brown, describing him as an anachronism whose government is past its sell-by date, and claiming the Tories are today's radicals. A Tory government would establish a fair pay review to ensure that no senior manager in the public sector can earn more than 20 times more than the lowest- paid person in their organisation.
- Why We Must Break Up The Banks by Dean Baker. Paul Krugman says it isn't necessary - but breaking up financial giants would at least give us hope that things can change.
- China has initially passed a plan to impose a property tax on home purchases and may start a trial in the cities of Beijing, Shanghai, Chongqing and Shenzhen. The plan is likely to be approved by the State Council and Ministry of Finance.
- China's central bank may raise benchmark interest rates this month to curb property price gains and inflation which may be pushed up by the drought in southern China, citing government economist Zhu Baoliang. Zhu's center is an affiliate of the National Development and Reform Commission, the top economic planning agency.
Citigroup:
- Downgraded (SATS) to Sell, lowered target to $17.50.
- Reiterated Buy on (DISH), raised target to $24.
- Asian indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 96.0 -1.0 basis point.
- S&P 500 futures unch.
- NASDAQ 100 futures -.03%
Earnings of Note
Company/Estimate
- (BTH)/2.00
- (STZ)/.24
10:00 AM EST
- Wholesale Inventories for February are estimated to rise +.4% versus a -.2% decline in January.
- None of note
- The (ORA) analyst meeting could also impact trading today.
Thursday, April 08, 2010
Stocks Reversing Higher into Final Hour on Short-Covering, Less Economic Fear
Broad Market Tone:
- Advance/Decline Line: About Even
- Sector Performance: Most Sectors Rising
- Volume: Slightly Above Average
- Market Leading Stocks: Performing In Line
- VIX 16.38 -1.44%
- ISE Sentiment Index 178.0 +64.81%
- Total Put/Call .74 -16.85%
- NYSE Arms .56 -40.56%
- North American Investment Grade CDS Index 87.65 bps +1.47%
- European Financial Sector CDS Index 83.84 bps +3.71%
- Western Europe Sovereign Debt CDS Index 85.67 bps +.59%
- Emerging Market CDS Index 218.22 bps -.87%
- 2-Year Swap Spread 14.0 bps unch.
- TED Spread 14.0 +1 bp
- 3-Month T-Bill Yield .16% unch.
- Yield Curve 283.0 bps +3 bps
- China Import Iron Ore Spot $166.20/Metric Tonne +3.10%
- Citi US Economic Surprise Index +42.10 -1.3 points
- 10-Year TIPS Spread 2.34% +1 bp
- Nikkei Futures: Indicating +102 open in Japan
- DAX Futures: Indicating +41 open in Germany
- Slightly Higher: On gains in my Retail and Financial long positions
- Disclosed Trades: None
- Market Exposure: 75% Net Long
Today's Headlines
Bloomberg:
- Greek Bonds Drop ;a 7th Day; Bund Spread Widens on Budget Woes. Greek two-year notes slid for a seventh day and the 10-year yield premium to German bunds jumped to the most since the euro’s debut after the nation’s finance minister failed to dispel concern that the government is doing enough to avoid a default. The decline drove the yield on the two-year note up as much as 130 basis points, bringing the increase since the streak began to 367 basis points. The 10-year yield climbed 41 basis points, or 442 basis points more than bunds, the benchmark for borrowing in Europe, based on Bloomberg generic prices. Greek stocks fell and credit-default swaps on the nation’s debt rose to a record. “Greece continues to look like a slow-motion train crash,” Steve Barrow, head of Group of 10 currency strategy at Standard Bank Plc in London, wrote in a report. “The crash has not occurred yet but it is coming. Efforts to avoid a crash seem doomed to failure, whether it’s emergency loans or some other initiative. Bond spreads are likely to widen much further.” Papaconstantinou said yesterday the nation’s 2009 deficit will be at least 12.9 percent of gross domestic product, up from the previous estimate of 12.7 percent. The EU’s limit is 3 percent. The cost of insuring against a default on Greek government bonds rose above that for Iceland for the first time. Credit- default swaps linked to Greek sovereign debt climbed 53 basis points to a record 468.5 today, according to CMA DataVision prices.
- Mortgage Rates on 30-Year U.S. Loans Jump to 5.21%. U.S. mortgage rates jumped to the highest level in almost eight months, increasing borrowing costs for buyers and signaling a threat to the housing market’s recovery as government efforts to spur demand end. Rates for 30-year fixed loans rose to 5.21 percent for the week ended today from 5.08 percent, mortgage finance company Freddie Mac said in a statement. That’s the highest rate since the week ended Aug. 13. The Mortgage Bankers Association’s index of mortgage applications fell 11 percent in the week ended April 2. The portion of refinancings dropped 17 percent. Applications to purchase a home increased 0.2 percent.
- Hedge Fund Rules Are Fair to U.S., EU's Barnier Tells Geithner. Hedge-fund rules proposed by the European Union aren’t protectionist, the bloc’s financial services chief told U.S. Treasury Secretary Timothy F. Geithner. Michel Barnier, the EU’s financial services commissioner, said the law wouldn’t shut out U.S. funds and managers from the 27-nation region, according to a copy of a letter to Geithner obtained by Bloomberg News.
- China on 'Treadmill to Hell' Amid Bubble, Chanos Says. China’s property market is a bubble that may burst by as early as this year, according to hedge fund manager James Chanos. The world’s third-biggest economy may need to keep up the pace of property investment because up to 60 percent of its gross domestic product relies on construction, said Chanos. The bubble may begin to “run its course” in late-2010 or 2011, he said in an interview on “The Charlie Rose Show” that will air on PBS and Bloomberg TV. China is “on a treadmill to hell,” said Chanos, who said in January the nation is Dubai times a thousand. “They can’t afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing.” Chinese state and local governments are among the most leveraged to property-related borrowings and the nation will “ultimately” have to nationalize a lot of the bad loans that will arise from the end of the bubble, Chanos said.
- Jobless Claims in U.S. Increased Heading Into Easter. More Americans unexpectedly filed claims for jobless benefits last week, a jump that may in part reflect difficulty in seasonally adjusting the data ahead of the Easter holiday. Initial jobless applications increased by 18,000 to 460,000 in the week ended April 3, Labor Department figures showed today in Washington. The week leading up to Easter and the two weeks that follow are traditionally a volatile time for claims, a Labor Department analyst said, making it difficult to discern the underlying trend in applications.
- ECB Keeps Rates at 1% on Greek Crisis 'Wait and See'. The European Central Bank left interest rates at a record low as the Greek fiscal crisis complicates its withdrawal of emergency stimulus measures. The Frankfurt-based ECB kept its benchmark interest rate at 1 percent, as predicted by all 62 economists in a Bloomberg News survey. A separate poll shows the rate may stay there until the first quarter of next year.
- Wall Street Bonuses Should Be Taxed More, NYC Comptroller Says. New York City and state officials should consider higher taxes on Wall Street bonuses in the face of deficits and shrinking revenue, Comptroller John Liu said. Governor David Paterson and Mayor Michael Bloomberg were wrong to rule out tax increases on bonuses to employees of banks and financial companies that received federal bailout funds, Liu said at a Manhattan breakfast sponsored by Crain’s New York Business. “We’re not at a point in time where it’s prudent to exclude any options,” Liu said, citing Paterson’s prediction of a $9 billion deficit for the state and Bloomberg’s $4 billion projected city budget gap.
- Gap(GPS), Saks(SKS) Lead Largest Monthly Sales Gain in a Decade. Gap Inc., Saks Inc. and TJX Cos. posted March sales gains that exceeded analysts’ estimates as retailers benefited from an early Easter and the economic recovery to report the biggest increase in a decade.Easter fell eight days earlier this year on April 4, which drew more purchases into the reporting period. That produced more favorable comparisons with last March, when the economy was in the depths of the recession and the Standard & Poor’s 500 Index fell to a 12-year low, said David Schick, a retail analyst for Stifel Nicolaus & Co. in Baltimore. “It certainly doesn’t finish making the case that we are in recovery, because of the easy comparison,” Schick said in a telephone interview. “What we need to see is healthy numbers against comparisons that aren’t as easy.” March sales at 31 chain stores rose 9 percent, the biggest one-month gain since March 1999, the New York-based International Council of Shopping Centers said today. The early Easter accounted for 4 to 5 percentage points of the gain, said the trade group. April sales may be unchanged or fall as much as 3 percent, the council said.
Wall Street Journal:
- Mutual Funds Often Unclear on Their Use of Derivatives. The use of derivatives by mutual funds has caught the eye of regulators, concerned that these complex instruments pose risks that aren't fully understood. It's safe to say that many investors, and even their advisers, can't easily determine the extent to which the funds they choose are using derivatives, including futures, options, swaps and other instruments. While more often associated with hedge funds and the more exotic types of exchange-traded funds, such as those that use leverage, derivatives are in fact employed to some extent by many different types of mutual funds.
- Chongqing Airport, Railways Mean Hard Landing for China's Wen. “Look at the scale of this,” said Li Chongyi, an engineer, as he watched a 4-kilometer line of trucks and earth movers busy quadrupling the size of Chongqing’s Jiangbei International Airport. “This will take years.” Jiangbei, which begins work on a third terminal when the second is done next year, is one of 15 trillion yuan ($2.2 trillion) in projects begun in 2009, almost twice the economy of India. The projects and their loans are stymieing efforts by Premier Wen Jiabao to curtail investment as inflation rose to 2.7 percent in February, a 16-month high. Failure to rein in local government spending could push inflation to 15 percent by 2012, said Victor Shih, a political economist at Northwestern University who spent months tallying government borrowing. “Increasingly the choice facing the government is between inflation or bad loans,” said Shih, author of the book “Finance and Factions in China,” who teaches political science at the university in Evanston, Illinois. “The only mechanism for controlling inflation in China is credit restriction, but if they use that, this show is over -- a gigantic wave of bad loans will appear on banks’ balance sheets.” Attempts to curb borrowing by raising interest rates would boost debt-servicing costs for local governments. At the same time, tightening credit may stall projects, triggering “a build-up of bad loans,” the Basel, Switzerland-based Bank for International Settlements said in a quarterly report in December. Nomura Holdings Inc., Japan’s biggest brokerage, estimates local government projects started last year totaled up to 10 trillion yuan -- 2.5 times the official 4 trillion yuan stimulus plan. Should the boom end in a property-market collapse, even those stocks tied to the local government projects will be affected along with most other industries, said Shanghai-based independent economist Andy Xie, formerly Morgan Stanley’s chief Asia economist. “Corporate profits are very much driven by the property sector,” said Xie. “The largest sectors will be hit hard, especially banks and insurance companies.” “Policy makers may need to start thinking about how to handle the aftermath of the bust,” said Nomura’s Sun.
- Tech Industry Recovery Under Way: Forrester.
- 'Distressed' Home Sales Levels Near 2009 Peak. Sales of foreclosed or other "distressed" homes are flirting with the peaks of the housing crisis in early 2009 when heavy inventory was pressuring home prices lower, according to First American CoreLogic. Distressed sales accounted for 29 percent of all sales in January, the highest since April 2009 and just shy of the 32 percent seen in January 2009, the mortgage data company said Thursday.
- After Shorting Subprime, Eisman Says Short AIG(AIG). Equity holders could lose $23 billion, FrontPoin's Eisman estimates.
Business Insider:
zerohedge:
Wisconsin Journal Sentinel:
Lloyd's List:
- Dry Bulk Newbuilding Deliveries Hit Record High. DELIVERIES of newbuilding dry bulk carriers hit a record high of 190 vessels in the first three months of the year, equivalent to two ships entering service every day.
- Qaeda Group Threatens to Attack World Cup. The North African terror group al Qaeda in the Islamic Maghreb has threatened to attack this summer's World Cup games in South Africa. "How amazing could the match United States vs. Britain be when broadcasted live on air at a stadium packed with spectators when the sound of an explosion rumbles through the stands, the whole stadium is turned upside down and the number of dead bodies are in their dozens and hundreds, Allah willing," reads a statement the group published in a recent issue of the Jihadi online magazine Mushtaqun Lel Jannah (Longing to Paradise)."Al Qaeda, who managed to deliver 50 grams of explosives to the Detroit plane, after infiltrating dozens of U.S. security barriers, al Qaeda, who enabled brother martyr Abul Kheir (Abdullah Asiri) to get into the palace of Mohammed bin Nayef, al Qaeda, who humiliated the world's greatest intelligence apparatus through the operation of Mujahid Abu Dujana al-Khorassani (Humam al-Balawi), who shattered the pride of the CIA and the Jordanian intelligence combined," the statement says. "Al Qaeda will have a presence in the games, Allah willing." In addition to the U.S. and U.K. teams, the teams representing France, Germany and Italy are also on the group's list of targets. "All those countries are part of the Zionist-Crusader campaign against Islam," the statement says. The group says they will use some undetectable explosive that will be able to circumvent security checkpoints at the games. The statement appears to directly challenge FIFA's president Joseph Blatter. "All the security checks and X-ray machines that America will be sending after reading this article would not be capable of detecting how those explosives made it into the stadium and that for a simple reason that we will be announcing in due course," the statement says. "So are your preparations for this event up to scratch, Mr. Platter? (sic)"
- iPad Sold Out at Best Buy(BBY) Nationwide. Best Buy has sold out of the iPad at all 673 of its U.S. stores with Apple shops. In contrast, Apple stores are maintaining stock. "We expect to have iPad inventory replenished at these locations by Sunday," said company spokeswoman Paula Baldwin.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 28% 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 -14 (see trends).
- 55% Oppose Limits On U.S. Nuclear Response To Attacks. Fifty-five percent (55%) of U.S. voters oppose President Obama’s new policy prohibiting the use of nuclear weapons in response to chemical or biological attacks on the United States. A new Rasmussen Reports national telephone survey finds that just 25% of voters agree with the president’s decision to rule out a nuclear response if a non-nuclear country attacks America with chemical or biological weapons. Only 31% favor a reduction in the number of nuclear weapons in the U.S. arsenal. Fifty-three percent (53%) oppose any such reduction.
- President Obama, Dmitry Medvedev Sign Strategic Arms Reduction Treaty. Making a down payment on his goal of a nuclear-arms-free world, President Barack Obama signed a new treaty with his Russian counterpart Thursday to reduce nuclear arsenals on both sides by about one-third. In a gilded hall here at a castle in Prague’s presidential complex, Obama and Russian President Dmitry Medvedev put their signatures on a new Strategic Arms Reduction Talks treaty that calls on each country to reduce its number of warheads and long-range missiles. Obama also predicted the U.S. Senate would ratify the treaty, despite some Republicans' objections that it goes too far in reducing American military might. China and Russia are the last nations at the negotiating table that have not agreed to move forward with tougher sanctions against Iran. Obama will meet one on one with the Chinese leader during the nuclear summit. He goes into that discussion with a stronger case if he can move the Russians closer to sanctions in his meeting Thursday with Medvedev. The White House downplayed the potential for a breakthrough with Russia in Prague. Briefing reporters on Air Force One, White House press secretary Robert Gibbs said not to expect any significant developments on Iran.
- Robert Rubin Returns. Former Treasury Secretary Robert Rubin — who watched his reputation as an economic titan shatter after he left the Clinton White House — is decidedly out of favor in the nation’s capital. Except for one place — the Obama administration. Behind the scenes, Rubin still wields enormous influence in Barack Obama’s Washington, chatting regularly with a legion of former employees who dominate the ranks of the young administration’s policy team. He speaks regularly to Treasury Secretary Timothy Geithner, who once worked for Rubin at Treasury. According to Geithner’s public calendar, the treasury secretary spoke or met with Rubin at least four times in the first six months of Geithner’s tenure. Three of those chats, including an hourlong session in Rubin’s New York office, came before President Obama released his Wall Street regulatory reform proposal in June 2009. Rubin’s is a discreet kind of influence, though, because the veteran Wall Street hand is still dealing with the fallout from his post-White House career. He took a job at Citigroup, where the bank’s collapse was averted only by the injection of $45 billion in taxpayer bailout cash.
- CBO Chief Says Debt 'Unsustainable'. The nation’s fiscal path is “unsustainable,” and the problem “cannot be solved through minor tinkering,” the head of the Congressional Budget Office said Thursday morning. Doug Elmendorf, best known for arbitrating the costs of various health care proposals, added his voice to a growing chorus of economic experts who predict dire consequences if political leaders don’t scale back spending, increase taxes or both — and soon. Elmendorf noted a recent CBO report that pegged an increase in the public debt from $7.5 trillion at the end of 2009 to $20.3 trillion at the end of 2020 if President Barack Obama’s fiscal 2011 budget were to be implemented as written. As a percentage of gross domestic product, the debt would rise from 53 percent to 90 percent, CBO forecasted.
- Exclusive: U.S. Group Targets Honeywell(HON) Over Iran. A pressure group, United Against Nuclear Iran (UANI), is urging industrial conglomerate Honeywell International Inc to stop selling security technology to Iran, the group said on Thursday. Honeywell security products can be used for surveillance of oil pipelines and nuclear reactors, UANI said in a letter faxed to Honeywell it provided exclusively to Reuters. The sale of security technology, via a British subsidiary, violates company guidelines for business conduct, UANI said, adding it may sue or pressure the New York Stock Exchange to delist Honeywell if the company continues operations in Iran.
- Tech Budgets To Rise in 2010-Morgan Stanley Survey. More companies are planning to increase their technology spending in 2010, especially in hardware, a Morgan Stanley survey showed on Thursday, suggesting stronger sales for companies such as Hewlett-Packard Co(HPQ) and International Business Machines Corp (IBM). The survey of 150 chief information officers (CIOs) showed tech budgets up 3.2 percent in 2010, after a 1.8 percent decline in 2009, signaling "increasing confidence in a return to IT spending growth this year across all the major tech segments." It was also a 1.5 point increase from the same survey in January, showing CIOs gaining confidence about business conditions in recent months. Hardware spending leads the improvement with a planned 4.1 percent increase, followed by a 3.7 percent increase in software spending, it showed.
- North Korea said it will freeze a series of South Korea-owned facilities at its eastern mountain resort and expel South Korean personnel from them.
Bear Radar
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