Thursday, April 22, 2010

Thursday Watch

Posted by Gary .....at 12:45 AM

Evening Headlines
Bloomberg:
  • Greek Workers to Strike Today as Papandreou Faces Bond Rout. Greek civil servants will strike today in their fourth national walkout this year as surging bond yields put pressure on the government to activate a European Union bailout and accept more spending cuts. The strike will shutter hospital and schools and also affect ministries and government offices, according to an e- mailed statement from Athens-based ADEDY, the umbrella group for more than 500,000 state workers. It will hold a rally in central Athens at 11 a.m. local time.
  • Moody's(MCO) Dowgrades Toyota(TM) to Aa2; Outlook Negative. Moody’s Investors Service has downgraded to Aa2 from Aa1 its senior unsecured ratings of Toyota Motor Corp. and its supported subsidiaries. The rating outlook is negative.
  • Crude Oil Declines on U.S. Stockpile Increase, Gain in Imports. Crude oil declined after a U.S. Energy Department report showed supplies surged at the delivery point for the U.S. benchmark grade as imports climbed to the highest level since September. Inventories of crude at Cushing, Oklahoma, where New York- traded West Texas Intermediate oil is stored, rose 5.8 percent to 34.1 million barrels, the highest since the week ended Jan. 8. “We’re still yet to see a substantial recovery in the U.S. oil market fundamentals and that inventory report overnight was along those lines,” said Toby Hassall, a commodity analyst at CWA Global Markets Pty in Sydney. “The market reacted to the DOE numbers, which were pretty soft across the board.”
  • The world’s biggest oilfield contractors are building bases in the deserts of Iraq in a bet they’ll profit as the country strives to boost crude oil output to rival Saudi Arabia. Schlumberger Ltd.(SLB), Halliburton Co.(HAL) and Baker Hughes Inc.(BHI) are among companies this past week that said they’re expanding operations in Iraq. Weatherford International Ltd., the fourth- largest oilfield-services provider by market value, will expand staff in Iraq to more than 1,000 by July, Chief Executive Officer Bernard Duroc-Danner told investors yesterday on a conference call. The prize is a share of the billions of dollars to be spent as the war-torn country seeks within seven years to increase crude-oil production capacity to 12 million barrels a day, on a par with the world’s largest oil exporter, Saudi Arabia. Iraq’s current production is about 2.4 million. “It’s all becoming more real, in that contract awards are getting closer,” said Jeff Tillery, an analyst at investment bank Tudor, Pickering, Holt & Co. in Houston. If anything, service companies are late in positioning themselves for the “upcoming surge” in oil contracts, said Nansen Saleri, CEO at Quantum Reservoir Impact in Houston and former reservoir-management chief at Saudi Arabia’s state oil company. “Iraq is pregnant for huge growth,” Saleri said yesterday. The country has potential reserves of 200 billion to 300 billion barrels of oil, Saleri said, and “the early movers will be the big winners.”
  • Senators Back Plan to Make Banks Spin Off Swaps Desk. The Senate Agriculture Committee approved derivatives legislation that would require U.S. lenders such as JPMorgan Chase & Co.(JPM) and Bank of America Corp.(BAC) to spin off their swaps trading desks. The panel voted 13-8 to back a bill drafted by Committee Chairman Blanche Lincoln, an Arkansas Democrat. Senator Charles Grassley, an Iowa Republican, joined Democrats in approving the measure.
  • China Property Stocks Fall on Citigroup Forecast, Cancellations. China’s property stocks fell, led by China Vanke Co., after Citigroup Inc. predicted real estate prices may drop as much as 20 percent and China Business News reported record home-purchase cancellations in Guangzhou. A “turning point” in the China property market is “unavoidable,” Citigroup analysts Oscar Choi and Marco Sze wrote in a report today. They predicted home prices may fall as much as a fifth from current levels by the end of the year, as tightening measures and increased land supply take effect. The implementation of a property tax in China is “inevitable,” the only question is when and where, said Michael Klibaner, head of research at Jones Lang LaSalle Inc. in Shanghai. China has introduced “the most draconian” measures in the past week, according to Deutsche Bank AG’s Greater China chief economist Jun Ma, after earlier steps including raising the amount of bank reserves failed to prevent a record surge in property prices in March.
  • Fed Said to Press Largest Banks to Reduce Incentives. Federal Reserve supervisors are telling about two dozen of the largest U.S. banks they must do more to end pay practices that encourage excessive risk-taking and are ordering boards to step up scrutiny of incentives, according to three people briefed on the discussions.
Wall Street Journal:
  • Obama to Keep Goldman(GS) Funds. President Barack Obama won't return about $1 million that employees of Goldman Sachs Group Inc. donated to his 2008 presidential campaign, according to a spokesman for the Democratic National Committee. Lawmakers in several states who received donations from Goldman are being challenged by political opponents to return the campaign funds. In New York's Senate race, primary challenger Jonathan Tasini called on Sen. Kirsten Gillibrand, a fellow Democrat, to return donations from Goldman. Mrs. Gillibrand has accepted about $30,000 from Goldman's political action committee and from employees so far in the 2010 election, making her the third-largest recipient of donations from the firm among candidates for Congress, according to the nonpartisan Center for Responsive Politics. Mrs. Gillibrand will keep the Goldman money for now but will return donations from Goldman employees if they are later found guilty, according to her spokesman, Matt Canter. Two Senate candidates-Sen. Arlen Specter (D, Penn.) and Rep. Paul Hodes (D, N.H.)-said they would consider returning their Goldman donations if the guilty charges resulted from the government's allegations. Rep. Jim Himes (D, Conn.) faces a different political challenge. Mr. Himes has received $15,150 from Goldman-and is also a former employee of the company. No one has received more Goldman donations this election cycle than Rep. Mike McMahon (D., N.Y.). On Wednesday, Republican candidate Michael Grimm called on him to return the $51,000 he has received. "This is the time for all elected officials to stop dancing to Washington's familiar go-along-to-get-along tune," Mr. Grimm said. Mr. McMahon's office said that it didn't have any comment. Since 1989, no company has donated more to Democrats than Goldman. The company was the fourth-largest corporate source of campaign cash to Republicans during the same period. Overall, Goldman has made $31.6 million in donations from its PAC and employees since 1989, according to the Center for Responsive Politics. About two-thirds of those donations have gone to Democrats, including about $1 million given to Mr. Obama's presidential campaign.
  • The Busted Homes Behind a Big Bet. The government's civil-fraud allegation against Goldman Sachs Group Inc. centers on a deal the firm crafted so that hedge-fund king John Paulson could bet on a collapse in U.S. housing prices. It was a dizzyingly complex transaction, involving 90 bonds and a 65-page deal sheet. But it all boiled down to whether people like Stella Onyeukwu, Gheorghe Bledea and Jack Booket could pay their mortgages. They couldn't, and Mr. Paulson made $1 billion as a result.
  • Israel Rebuffs U.S. on Building. Prime Minister Netanyahu Says He Won't Freeze Home Construction in East Jerusalem.
Marketwatch.com:
  • Moore Capital Warns of Euro-Zone 'Breakdown'. Moore Capital, a leading global macro hedge-fund firm run by Louis Moore Bacon, warned of a "potential breakdown" of the European Monetary Union and criticized plans to bail out Greece, according to a recent investor letter obtained by MarketWatch on Wednesday. "Perhaps the most interesting area for the foreseeable future is in the potential breakdown of the European Monetary Union," Bacon wrote in the letter, dated April 16. "Instead of punishing the Greeks for their free-rider and fraudulent gaming of the Maastricht rules -- either by ejecting Greece from the Union to propel them to reform and come back at a competitive exchange rate or by forcing them to restructure their debt within the confines of monetary union, either of which would have eventually strengthened and solidified the euro -- the European leaders have decided to reward the prodigal Greeks with a bailout, socializing their ills and taxing once again the prodigious Northern European workers," he said. The bailout could have "disastrous consequences" for the European Union and Europe, Bacon warned. Sovereign-wealth funds have bought trillions of euros to diversify away from U.S. dollars. That's supported the euro and allowed European investors to "flee their debauched currency," he wrote. When sovereign-wealth funds "finally realize what they own, they may stand aside," Bacon went on. Bacon noted in February that tensions between better-performing economies in the euro zone and "laggards" such as Greece may signify larger issues in the region. Bacon said he's "wary of long-term investment commitments." The U.S. economy could reach "escape velocity" this summer, but markets could be worrying about "stall speed" by the end of the year, he wrote. "We should see a resumption of a bearish market amid the secular softening of U.S. economic might. The fiscal erosion in the developed markets will be a constant market negative that will upend any strong recoveries."
IBD:
Business Insider:
Forbes:
  • No More Entitlements. The great irony in the Obama administration's latest expansion of entitlements, its massive commitment to health care, is that it has created one that most Americans don't want. Poll after poll demonstrate that most Americans oppose the Democrats' radical change to the U.S. healthcare system. Not only do they find it too expensive, but they dislike the specific adjustments that shift power and control away from the individual and place them in the hands of the federal government. The plan radically changes health care in the U.S., imposing the federal government into perhaps the most personal of all segments of American life.
CNNMoney:
Washington Examiner:
  • Goldman Sachs(GS) Wants Regulation, Not Laissez-Faire. Goldman Sachs, accused of civil fraud by the Securities and Exchange Commission, may be Washington's favorite whipping boy right now as both Democrats and Republicans try to run against Wall Street in the 2010 elections. But Goldman stockholders can take heart: As indicated by their embrace of some key proposed regulations and their hiring of key Obama administration personnel, the firm is poised to come out ahead in this regulatory fight. There's a rule of thumb in Washington: Whenever politicians open up a legislative or regulatory debate, the side with the best lobbyist usually wins.
McClatchy:
  • Goldman's(GS) White House Connections Raise Eyebrows. While Goldman Sachs' lawyers negotiated with the Securities and Exchange Commission over potentially explosive civil fraud charges, Goldman's chief executive visited the White House at least four times. White House logs show that Chief Executive Lloyd Blankfein traveled to Washington for at least two events with President Barack Obama, whose 2008 presidential campaign received $994,795 in donations from Goldman's political action committee, its employees and their relatives. He also met twice with Obama's top economic adviser, Larry Summers. No evidence has surfaced to suggest that Blankfein or any other Goldman executive raised the SEC case with the president or his aides. SEC Chairwoman Mary Schapiro said in a statement Wednesday that the SEC doesn't coordinate enforcement actions with the White House or other political bodies. Meanwhile, however, Goldman is retaining former Obama White House counsel Gregory Craig as a member of its legal team. In addition, when he worked as an investment banker in Chicago a decade ago, White House Chief of Staff Rahm Emanuel advised one client who also retained Goldman as an adviser on the same $8.2 billion deal. Goldman's connections to the White House and the Obama administration are raising eyebrows at a time when Washington and Wall Street are dueling over how to overhaul regulation of the financial world.
Politico:
  • Lincoln Cancels Goldman(GS) Fundraiser as Firm Turns Toxic. Sen. Blanche Lincoln, under fire for keeping a $4,500 contribution from Goldman Sachs’s political action committee, has canceled a fundraising lunch with Goldman executives that was scheduled for Monday and would have netted many times that amount for the Arkansas Senator’s reelection campaign. The cancelled fundraiser, which was to have been held at Goldman’s Lower Manhattan headquarters, is emblematic of the investment bank’s swift fall from well-connected fundraising powerhouse to political pariah – a fate sealed Friday when the Securities and Exchange Commission charged the firm with defrauding investors. In light of the S.E.C. lawsuit against Goldman Sachs, Sen. Lincoln will schedule no future campaign-related events with the firm and will accept no further contributions from the firm's political action committee or its employees,” Lincoln’s campaign spokeswoman Katie Laning Niebaum said in a statement to POLITICO. Lincoln – whose campaigns have accepted more than $30,000 in contributions from Goldman’s PAC and executives since 2002, according to Federal Election Commission records – is far from the only politician feeling the heat from connections to Goldman’s fundraising machine, which has primarily benefitted Democrats and has given its executives regular access to some of the most powerful politicians in the country. Republicans have highlighted President Barack Obama’s connections to Goldman executives, who – according to FEC records – donated $1.2 million to his presidential campaign committee and a joint account benefitting the campaign and the Democratic National Committee. That made the Goldman Obama’s top source of Wall Street contributions, and one of his top overall sources of campaign cash.
Huffington Post:
Financial Times:
  • Bad Loans Could Take Their Toll on China's Growth. Will China have a banking crisis? Beijing’s massive credit stimulus will almost certainly lead to a future surge in bad loans, but so what? As the more optimistic of China analysts have pointed out many times, the last jump in non-performing loans a decade ago was also widely cited as a sign of impending doom, and yet nothing happened. China grew its way out of the loan mess at little apparent cost. But did it? The optimists have almost certainly failed to understand how Beijing paid for its earlier banking crises. In fact, the cost of resolving the previous surges in non-performing loans exacerbated China’s domestic imbalances. The current build-up of bad debt may very well do the same. The danger is that the cost of cleaning up the banking system will fall, as in the past, on the household sector. China must reduce its excessive reliance on exports and investment to fuel its continued growth, and the only way that can happen is if household consumption rises as a share of GDP. But since growth in household consumption has always been constrained by growth in household income, it may be unreasonable to expect a surge in consumption when households are also required to clean up a sharp increase in bad loans. Over the next few years, as trade tensions increase and the world finds it increasingly difficult to absorb China’s rising capacity, the country’s growth will rely more than ever on the growth of household consumption. If the worriers are right and non-performing loans surge, China can nonetheless easily avoid a banking collapse. But that does not mean the cost of cleaning up the banks will be negligible. On the contrary, it will put even more pressure on low-consuming Chinese households and will make the inevitable rebalancing of China’s economy much more difficult than many expect. Japan showed how difficult. Since 1990 Japanese consumption growth has limped along at between 1 and 2 per cent annually as households have been forced indirectly to clean up their own bad loans. The economy grew much more slowly. Just as Japan slowly rebalanced its economy towards consumption, so must China. If future Chinese consumption growth also slows because households are forced to foot the new bad-debt bill, we may see the real cost of the current explosion in bad loans – several years of sub-par growth.
  • US Opens Inquiry into China Metal Exports. The US launched a probe into Chinese exports of aluminium products on Wednesday night but postponed a decision on whether to include the country’s exchange rate policy in its inquiry. The investigation, announced by the commerce department, will unfold over the next few months, with an initial determination scheduled for May 17. It threatens to reignite tensions between the US and China over the value of the renminbi after a period of relative calm between the two countries on the issue. The US said the probe would centre on aluminium “extrusions”, which are used in the construction and car industries to make components of windows and doors, as well as furniture and solar panels. Investigators at the International Trade Commission, an independent agency, and the commerce department will be conducting an anti-dumping inquiry, looking into whether Chinese exports were sold below their value, as well as a countervailing duty inquiry, examining whether the exports were benefiting from unfair government subsidies. If the ITC finds that American producers have been damaged, the US could impose stiff penalties on the products.
  • Greed is Not Good for Goldman(GS). There are various ways to describe the synthetic collateralised debt obligation that Goldman Sachs constructed for John Paulson, the hedge fund manager who bet on the collapse of the mortgage bubble. Goldman itself terms it “nothing unusual or remarkable”. The US Securities and Exchange Commission describes the Abacus deal that closed in April 2007 as securities fraud. I call it short-term greedy. Goldman rose to its dominant position on Wall Street through the dictum of Gus Levy, its former senior partner, that it should be “long-term greedy”. He meant that it should forgo quick gains for enduring profits. The bank’s expression of that principle on its website is: “Whether a mid-size employer in Kansas, a larger school district in California, a pension fund for skilled workers, or a start-up technology firm, our clients’ interests come first.”
Telegraph:
  • Iran Exports 'Revolutionary Principles' to Venezuela, Report Claims. Iran has stepped up its military presence in Venezuela as part of a programme to export its "revolutionary principles" to America's enemies, according to a Pentagon report. The report on Iran's military states that paramilitaries from the Quds Force, a special paramilitary unit attached to Iran's Islamic Revolutionary Guards Corps, have "an increased presence in Latin America, particularly Venezuela". It also alleges that Iran is continuing to supply weapons and explosives to the Taliban to help them kill American and British troops in Afghanistan. Iranian-backed terrorists have conducted few attacks in the region but American intelligence officials told The Washington Times that Quds Force operatives are developing networks of terrorists in Latin America who could be activated to attack the US if there was a conflict over Iran's nuclear programme. The Quds force is said to support US enemies by giving them arms, funding and paramilitary training and is not constrained by Islamist ideology. "Many of the groups it supports do not share, and sometimes openly oppose, Iranian revolutionary principles, but Iran supports them because they share common interests or enemies," the report states Qods force operatives are stationed in Iranian embassies, charities and religious and cultural institutions that support Shia Muslims.
  • IMF and Bundesbank Fear Contagion from Greece as Bond Spreads Soar to Fresh Records. The International Monetary Fund has warned that Greece’s debt crisis risks spinning out of control, threatening to spill over across the region unless action is taken soon to restore confidence. "In the near term, the main risk is that – if left unchecked – market concerns about sovereign liquidity and solvency in Greece could turn into a full-blown sovereign debt crisis, leading to some contagion," said the Fund in its World Economic Outlook. Bundesbank chief Axel Weber echoed the concerns, saying the financial system was still very fragile and subject to a "significant risk of contagion effects. A possible default by Greece would most likely be a severe economic blow for other countries in monetary union".
21st Century Business Herald:
  • Some banks in Beijing are requiring down payments equal to 60% of a property's value for loans to buy third homes, citing an Agricultural Bank of China official. A portion of banks in the Chinese capital are also imposing interest rates that are 20% higher than the benchmark rate for third-home mortgages.
China Securities Journal:
  • China must deflate its property bubble if the country is to urbanize and develop a healthy economy, the China Securities Journal said in an editorial. The bubble could hurt social as well as financial stability, the editorial said.
China Business News:
  • The southern Chinese city of Guangzhou had a record high 804 canceled new home sales in one day on April 19, citing an official Web site under the Guangzhou Municipal Land Resources and Housing Administrative Bureau. Most of the canceled new homes are houses or high-end apartments. The main reason for the cancelations is that banks stopped approving loans, citing people from the Guangzhou Real Estate Transaction Center.
China Ministry of Commerce:
  • China will levy anti-dumping duties on "nylon6" imports from the U.S., European Union, Russia and Taiwan after an investigation found shipments from those areas had harmed local producers. The duties became effective today and will last 5 years.
Evening Recommendations
Citigroup:
  • Reiterated Buy on (EMC), raised estimates, boosted target to $24.
  • Reiterated Buy on (ELS), target $64.
  • Reiterated Buy on (OKS), raised target to $70.50.
Night Trading
  • Asian indices are -1.0% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 96.50 +4.0 basis points.
  • S&P 500 futures -.26%.
  • NASDAQ 100 futures -.22%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (GR)/.90
  • (SHW)/.40
  • (LLL)/1.77
  • (MAR)/.20
  • (ESI)/2.29
  • (CAL)/-.86
  • (UNP)/.95
  • (ABC)/.55
  • (RTN)/1.11
  • (ZMH)/1.01
  • (PM)/.93
  • (AN)/.32
  • (PEP)/.75
  • (VZ)/.56
  • (AMZN)/.61
  • (COF)/.57
  • (CAKE)/.25
  • (CB)/.97
  • (FII)/.43
  • (MSFT)/.42
  • (AXP)/.63
  • (WDC)/1.55
  • (NUE)/.06
  • (BX)/.22
  • (HSY)/.47
  • (BAX)/.93
  • (DO)/1.94
  • (DECK)/.91
  • (KMB)/1.11
  • (DV)/1.03
  • (BTU)/.41
  • (IGT)/.20
Economic Releases
8:30 am EST
  • The Producer Price Index for March is estimated to rise +.5% versus a -.6% decline in February.
  • The PPI Ex Food & Energy for March is estimated to rise +.1% versus a +.1% gain in February.
  • Initial Jobless Claims for last week are estimated to fall to 450K versus 484K the prior week.
  • Continuing Claims are estimated to fall to 4600K versus 4639K prior.
10:00 am EST
  • Existing Home Sales for March are estimated to rise to 5.28M versus 5.02M in February.
  • The House Price Index for February is estimated to fall -.2% versus a -.6% decline in January.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The weekly EIA natural gas inventory report could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by commodity and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.
1 comments

Wednesday, April 21, 2010

Stocks Slightly Lower into Final Hour on Rising Sovereign Debt Angst, Profit-Taking, China Hard-Landing Fears

Posted by Gary .....at 3:48 PM

Broad Market Tone:
  • Advance/Decline Line: Slightly Lower
  • Sector Performance: Most Declining
  • Volume: Heavy
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 16.56 +5.28%
  • ISE Sentiment Index 139.0 +.72%
  • Total Put/Call .89 -2.20%
  • NYSE Arms 1.81 +87.64%
Credit Investor Angst:
  • North American Investment Grade CDS Index 86.71 bps +1.06%
  • European Financial Sector CDS Index 88.51 bps +5.85%
  • Western Europe Sovereign Debt CDS Index 99.08 bps +9.08%
  • Emerging Market CDS Index 207.30 bps +.53%
  • 2-Year Swap Spread 15.0 bps unch.
  • TED Spread 17.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .14% unch.
  • Yield Curve 274.0 bps -5 bps
  • China Import Iron Ore Spot $186.50/Metric Tonne +3.15%
  • Citi US Economic Surprise Index +22.80 -.7 point
  • 10-Year TIPS Spread 2.35% unch.
Overseas Futures:
  • Nikkei Futures: Indicating -70 open in Japan
  • DAX Futures: Indicating +10 open in Germany
Portfolio:
  • Higher: On gains in my Retail, Financial and Tech long positions
  • Disclosed Trades: None
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is neutral as equities trade mixed despite financial sector weakness, morning profit-taking and ongoing worries over European sovereign debt. On the positive side, Education, REIT, Homebuilding, I-Banking, Disk Drive, Computer, Paper and Defense stocks are especially strong, rising 1.0%+. Small-Caps are outperforming again. (IYR) has outperformed throughout most of the day. The euro is trading near session lows and continues to trade poorly. Long-term rates continue to grind lower. On the negative side, Airline, HMO, Hospital, Drug, Biotech and Semi shares are under meaningful pressure, falling 1.25%+. The Greece 10-year/bund spread is gaining +9.0% to 509 basis points. The Greece sovereign cds is rising another +4.4% today and the Portugal sovereign cds is jumping +13.21%. Investor angst gauges are still registering near-term complacency. Tech shares are underperforming despite (AAPL)'s stellar report. However, (AAPL) is surging to session highs on volume, which should help boost the sector. The broad market continues to trade very well in the face of mounting headwinds, which is a large positive. While (AAPL) is extended near-term, I would add to my long position on any meaningful market-related pullback in the shares from current levels. I still see significant intermediate-term upside in the stock. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower long-term rates and earnings optimism.

0 comments

Today's Headlines

Posted by Gary .....at 3:18 PM

Bloomberg:
  • Euro Slips for Fifth Day on Concern Greece Talks May Fall Short. The euro dropped against the dollar for a fifth day in the longest stretch of decreases since January on concern discussions of a $61 billion aid package for Greece may fail to contain the nation’s debt crisis. The yield premium investors demand to hold Greek 10-year bonds instead of benchmark German bunds climbed to 5.01 percentage points, the highest level since at least March 1998. Canada’s dollar touched the strongest level since June 2008 versus the greenback as traders increased bets on higher interest rates. “Greece bond yields blew out, and that’s making the market nervous,” said Boris Schlossberg, director of currency research at online currency trader GFT Forex in New York. “It’s not confident that the bailout deal is enough, and the euro fell out of bed.” Credit-default swaps on Greece surged 31 basis points, or 0.31 percentage point, to a record 495, according to CMA DataVision prices. Contracts on Portugal jumped 27 basis points to 228, and those on Spain climbed 16 to 161 basis points.
  • European Stocks Retreat as Greek Credit-Default Swaps Surge. European stocks declined for the third time in four days, led by Greek, Spanish and Portuguese shares, as the cost of insuring against Greece defaulting on its debt surged to a record.
  • Freeport(FCX) Says China Copper Stocks May Weaken Demand. Freeport-McMoRan Copper & Gold Inc. Chief Executive Officer Richard Adkerson said there’s speculation that copper inventories may increase in China and damp demand for the metal later this year. “The copper market is strongly supported by China,” Adkerson said today on a conference call after releasing first- quarter earnings. “Speculation is that some of those imports are going into warehouses and that might affect imports later in the year.” Stockpiles monitored by the Shanghai Futures Exchange have surged 95 percent in 2010, raising concern that exports of the industrial metal to China may slow.
  • Morgan Stanley(MS), Goldman Sachs(GS) Raise Commodities Value-at-Risk. Morgan Stanley, which reported earnings today that beat analyst’s estimates, said the company’s average daily risk-taking in commodities rose 17 percent in the first quarter.Value-at-risk in commodity prices, a measure of how much the firm estimates it might lose in a single day, rose to $27 million in the three months ended March 31 from $23 million in the preceding quarter, the company said. Goldman Sachs Group Inc., the most profitable securities firm in Wall Street history, said yesterday that the company’s average daily risk-taking in commodities rose 29 percent in the first quarter. Value-at-risk rose to $49 million in the three months ended March 31 from $38 million in the preceding quarter, the company said. JPMorgan Chase & Co. reported earlier this month that value-at-risk in “commodities and other” fell to $15 million from $17 million in the previous quarter.
  • China Exhibits 'Danger Signals,' Marc Faber Says. China’s “excessive” credit expansion and surging real estate prices are “danger signals” that growth is peaking, investor Marc Faber said.“There are some symptoms of a bubble building in China, with the increase in foreign exchange reserves, rapidly rising property prices,” Faber, the publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview today. “From here on, the China economy will slow down regardless. Whether it will crash this year or later, I don’t know.”
  • Euro May Near Lows as Austerity Slows Growth, State Street Says.
  • New York State May Run Out of Money Before July, DiNapoli Says.
  • Senate Panel Approves Plan to Make Banks Spin Off Swaps Desk.

Wall Street Journal:
  • Hotel Chains Struggle Under Debt Burden. More than $60 billion of hotel buyouts during the recent real-estate boom saddled several name-brand hotel chains with mountains of debt. Now, many are finding it tough to restructure and reduce those complicated debt burdens with the hotel industry mired in a downturn.
Business Insider:
zerohedge:
AppleInsider:
Seeking Alpha:
  • Hedge Fund Assets Near '07 Peak. Globally, hedge funds can boast of $1.67 trillion in assets, just 2% less than they managed at their peak, according to Hedge Fund Research.
MarketFolly:
Politico:
  • Democrats Haunted by Corporate Ties. President Barack Obama and congressional Democrats are promising a climactic clash with Wall Street, but there’s a complication in their battle plan: The Democratic Party is closer to corporate America — and to Wall Street in particular — than many Democrats would care to admit. Former White House counsel Greg Craig has just signed on as an institutional Sherpa for Goldman Sachs, the iconic financial firm facing fraud charges from the Securities and Exchange Commission. Former House Democratic leader Dick Gephardt lobbies for Goldman Sachs, Visa and the coal industry. Former Senate Democratic leader Tom Daschle — Obama’s first choice to head Health and Human Services — is an adviser for a lobbying firm that represents Charles Schwab, Comcast, Lockheed Martin, Verizon and a host of other corporate interests. Attorney General Eric Holder once lobbied for Global Crossing — sometimes described as the Democratic Enron — and White House chief of staff Rahm Emanuel made eight figures in a little more than two years as the Chicago-based managing director at Wasserstein Perella & Co. between jobs as a senior aide in President Bill Clinton’s White House and as the congressman representing Illinois’s 5th District. And the Democrats rode to their majorities in the House and the Senate on a wave of cash Emanuel and New York Sen. Chuck Schumer helped them raise from Wall Street. Earlier this month, a hedge fund manager at the center of the Goldman Sachs fraud case held a fundraiser for Schumer in New York. “It’s pathetic,” Sen. Bernie Sanders, a liberal Vermont independent who caucuses with the Democrats, said of news that Goldman Sachs has hired Craig. “But it’s what goes on around here.”
Reuters:
  • Goldman(GS) Case Warrants Full French Probe - Lagarde. Accusations that Goldman Sachs acted fraudulently warrant a full probe by French regulators, Economy Minister Christine Lagarde said on Wednesday. Regulator AMF (Autorite des Marches Financiers) said it aimed to publish an update on its Goldman probe next week.
  • Goldman(GS) Charges Give Rivals New Weapon. In the cut-throat world of investment banking, rivals are looking for ways to use the fraud charges against Goldman Sachs to chip away at the firm’s armor. Investment bankers have been lobbying executives at state-owned Agricultural Bank of China and pushing officials in Beijing to drop Goldman as an underwriter for the more than $20 billion IPO the Chinese bank is preparing, sources told Reuters. Rivals are also asking officials at state-controlled Bank of Communications to ditch Goldman from its joint global coordinator role in the $6.1 billion rights issue that China’s fifth-largest bank is planning for the Hong Kong Stock Exchange.
Financial Times Deutschland:
  • IKB Deutsche Industriebank AG has asked its lawyers to prepare a civil suit against Goldman Sachs(GS), citing a person at IKB. IKB lost almost all of a $150 million investment on a portfolio of collateral debt obligations that is at the center of a SEC suit against Goldman.
0 comments

Bear Radar

Posted by Gary .....at 2:27 PM

Style Underperformer:
  • Large-Cap Value (-.78%)
Sector Underperformers:
  • Airlines (-2.88%), Biotech (-2.01%) and HMOs (-1.91%)
Stocks Falling on Unusual Volume:
  • MRK, CBEY, STD, FCX, TNE, ABT, PTR, WFC, BBL, IGTE, GILD, KMGB, CPTS, ALTR, PLXS, CREE, CSIQ, YHOO, LUFK, AINV, CELG, UTHR, STLD, NUVA, AMGN, TNB, CLS, PJC, MCO and DGX
Stocks With Unusual Put Option Activity:
  • 1) LDK 2) GILD 3) CHRW 4) MTG 5) JNPR
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Bull Radar

Posted by Gary .....at 11:14 AM

Style Outperformer:
  • Small-Cap Value (+.25%)
Sector Outperformers:
  • Education (+1.39%), Computer Hardware (+1.25%) and Banks (+1.23%)
Stocks Rising on Unusual Volume:
  • PVTB, FMBI, AAPL, BA, MTG, CYBS, ZION, CPY, PII and TUP
Stocks With Unusual Call Option Activity:
  • 1) GILD 2) HBAN 3) HOV 4) WHR 5) CHRW
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Wednesday Watch

Posted by Gary .....at 1:00 AM

Evening Headlines
Bloomberg:
  • Democratic Party, Helped by Wall Street, Outraising Republicans. Democratic Party committees entered April with $22 million more to help their congressional candidates than Republicans, a reversal of four years ago. The Democratic National Committee and the party’s Senate and House fundraising arms had $58 million to spend as of March 31, compared with $36 million for the corresponding Republican groups. Wall Street helped give a fundraising edge to Democratic committees and candidates. Employees in the securities and investment industry made $34.3 million in donations last year, about the same as in 2007, with 62 percent going to Democrats, the party’s largest share in a non-election year in the 20 years of data compiled by the Center for Responsive Politics, a Washington-based research group. One reason for the increased Democratic share is that investors aren’t unanimously opposed to proposed financial regulations making their way through Congress, said Joe Keefe, president and chief executive officer of Portsmouth, New Hampshire-based Pax World Management LLC, which manages $2.4 billion.
  • Goldman(GS) Director Gupta Dines With Obama, Deals With Rajaratnam. Goldman Sachs Group Inc.’s November 2006 announcement of Rajat Kumar Gupta’s election to its board brimmed with the India native’s achievements: worldwide managing director of McKinsey & Co.; special adviser to the Secretary- General of the United Nations on management reform, co-chairman of the American India Foundation charity, whose honorary chair is former President Bill Clinton. Goldman Sachs Chairman Lloyd Blankfein said at the time: “Our shareholders will be fortunate to have his strategic and operational expertise and judgment.” Now, with his term ending next month, Gupta is leaving the board. On March 19, without explanation, the firm announced his decision, thanking him for his service. Three days later, prosecutors said they were examining trades in Goldman Sachs shares by Raj Rajaratnam, the central figure in the largest U.S. insider-trading case ever and a onetime Gupta business partner.
  • BHP(BHP) Finds Possible Corruption as SEC Investigates. BHP Billiton Ltd., the world’s largest mining company, said it uncovered evidence of possible violations of anti-corruption laws after the U.S. Securities and Exchange Commission requested information for an investigation. BHP “has disclosed to relevant authorities evidence that it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials,” Melbourne-based BHP said today in a statement. The probe concerns the termination of minerals exploration projects and doesn’t involve the company’s business in China, it said.
  • Intel(INTC) Looking for Acquisitions in Push Beyond PCs. Intel Corp., the world’s biggest maker of chips for computers, is considering acquisitions that would help get its processors into smartphones and consumer electronics.
  • Cantor Film-Futures Market Plan Advances on U.S. Vote. Cantor Fitzgerald LP won U.S. approval for a box-office futures market, the second trading proposal cleared over objections of Hollywood studios that said the exchanges may open films to manipulation. The Commodity Futures Trading Commission voted 5-0 today in favor of a market that Cantor described as a way for movie industry participants “to create liquidity and hedge their daily business activities.” Cantor also must gain approval for the contracts before trading starts, the agency said. Cantor becomes the second box-office futures market after the commission on April 16 cleared a Veriana Networks Inc. unit to let traders bet on a film’s opening weekend ticket sales, without approving specific contracts. Cantor, the New York-based bond trader, said its market would let retail investors bet through the film’s fourth weekend of release. “I continue to have serious concerns” about trading media contracts, Republican Commissioner Scott O’Malia said in an e- mailed statement. “I support a very thorough review of all of these first-of-a-kind products to ensure they will provide a useful commercial hedging tool and are free from fraud and manipulation.”
  • AIG(AIG) Said to Insure Goldman Sachs's Board Against Investor Suits. American International Group Inc., the financial firm rescued by the U.S., is the lead insurer of Goldman Sachs Group Inc.’s board against shareholder lawsuits, said a person with knowledge of the policy.
  • Deutsche Bank Replaces Lippmann as ABS Head Trader. Deutsche Bank AG named Pius Sprenger as head of trading for asset-backed securities and collateralized debt obligations, replacing Greg Lippmann, whose bets against subprime mortgages helped the firm weather the financial crisis. Lippmann, 41, is joining an investment firm being started by Fred Brettschneider, Deutsche Bank’s outgoing head of global markets in the Americas. Lippmann helped create the market for betting against subprime mortgage bonds in 2005 and then profited along with hedge funds when home prices declined and defaults soared to records two years later, sparking the worst financial crisis since the 1930s.
  • Goldman Sachs(GS) SEC Fraud Lawsuit Makes My Eyes Burn: Ben Stein. Now for a few words about Goldman Sachs Group Inc. and the Securities and Exchange Commission complaint that accuses the firm and one of its young guns of fraud for constructing a synthetic housing-market bond that was sure to fail, selling it to a valued customer who specifically didn’t want that type of bond, conspiring with a short seller of bonds to create a vehicle for his firm to make money off of the security and tricking a rating firm into approving it. If these allegations are true, and maybe they aren’t, this is simply the worst behavior in finance by a large firm I have ever seen. But the story of how this Abacus deal happened raises some desperately important questions:
  • L.A. Mayor Axes Firefighters, Clerks to Cover Budget. Los Angeles Mayor Antonio Villaraigosa called for eliminating more than 3,500 city jobs including 61 firefighters and 443 typists to help curb a deficit estimated to reach $485 million in the coming fiscal year. The mayor today unveiled his budget for the 12 months that begin July 1. Spending from the general fund will drop to $4.34 billion, about 1.3 percent less than set aside for the current fiscal year. The mayor’s proposal next goes to the City Council for review. If all the cuts are approved, it will shorten the payroll by about 9.3 percent. “This is a budget that reflects economic realities and addresses the structural deficit,” said Matt Szabo, the mayor’s deputy chief of staff.
  • Chinese Bank Watchdog Orders Quarterly Tests on Property Loans. China’s banking regulator told larger banks to conduct quarterly stress tests on property loans and ensure the risks attached to such lending is strictly controlled after the government tightened credit rules to crack down on real-estate speculation. Financial institutions must implement the central government’s property controls and use mortgage loan policies to “strictly” limit housing speculation, Liu Mingkang, head of the China Banking Regulatory Commission, said in a statement posted on the agency’s Web site yesterday.
  • Wynn Says Obama, Economy Damping Outlook for Vegas. Billionaire Steve Wynn, on the eve of opening a second resort in Macau, said his home market of Las Vegas remains in a slump and isn’t suitable for expansion. “I don’t think the Las Vegas market at the moment beckons a large investment,” Wynn, chairman of Wynn Resorts Ltd., said in an interview televised today. “The economic outlook in the United States, the policies of this administration, which do not favor job formation, do not encourage investment at all.” “The governmental policies in the United States of America are a damper, a wet blanket,” Wynn said in Macau. “They retard investment, they retard job formation, they retard the creation of a better life for the citizens in spite of the rhetoric of the president.”
Wall Street Journal:
  • Paulson Aims to Reassure Investors. John Paulson hasn't been accused of any wrongdoing. But the hedge-fund billionaire has gone on the offensive to reassure investors that his huge firm will emerge unscathed from a case that has drawn him into a political and legal vortex. The steps, including a conference call with about 100 investors late Monday, come amid indications from some clients that they might withdraw money from his firm after a lawsuit brought by the government against Goldman Sachs Group Inc. related to an investment created at his firm's request. Investors have indicated they are concerned that scrutiny over the firm's deals may spread, including to overseas regulators. They said they wanted to protect themselves in case new information emerges that could damage the hedge fund, they say. Another issue, they say: The legal case could simply prove a distraction for Mr. Paulson. "Some of the callers asked pointed questions, almost like a court inquisition, but most people were supportive," said Brad Alford, who runs Alpha Capital Management. Even if a number of investors ask out, the firm likely will be able to sell investments without crippling their holdings, investors say. Some traders have been examining Mr. Paulson's top holdings and positions in which filings indicate he has been a substantial holder since the news, they say. When the news of the lawsuit broke on Friday, some of these stocks, including Conseco Inc., Cheniere Energy Inc. and AngloGold Ashanti Ltd., fell sharply. The hedge-fund firm has a deadline next Friday for investors who want to withdraw money on June 30. Paulson allows most investors to pull out four times a year, but they need to give at least 60 days notice.
  • Son of Sarbox. Republicans Can Oppose the Dodd Bill - and the Big Banks. Senator Chris Dodd's bill looks to us like a souped-up version of the Sarbanes-Oxley bill of 2002—that is, a collection of ill-understood reforms whose main achievement will be to make Wall Street even more the vassal of Washington, raise costs across the economy, and do little to reduce financial risks. The rush to pass it even before the Financial Crisis Inquiry Commission finishes its work is about claiming one more legislative victory before Democrats find their majorities reduced or gone in November.
  • Goldman(GS) Hires Former White House Counsel; Charged Employee Deregistered. Goldman Sachs Group Inc. retained one of Washington's most prominent Democratic lawyers as it gears up to defend itself from civil charges of defrauding investors. At the same time, the company deregistered the employee charged in the case. Greg Craig was White House counsel under President Barack Obama until January, serving as the president's top lawyer and a key player in the administration's efforts to close the Guantanamo Bay prison for terror detainees. Mr. Craig, a former aide to late Sen. Edward Kennedy, was a prominent corporate attorney at Williams & Connolly, a Washington law firm, before joining the Obama campaign. President Bill Clinton tapped him in 1998 to lead his defense during congressional impeachment proceedings. His work for Goldman was first reported by Politico.
  • Underlying Concerns in CMBS. Defaults on commercial mortgages bundled into securities are climbing to records, threatening bondholders with steeper losses and putting pressure on property owners and lenders to restructure their loans. According to Fitch Ratings, more than 11% of some $536 billion of loans packaged into commercial-mortgage-backed securities are expected to be at least 60 days past due by year's end. The late-payment rate now is about 7% and has skyrocketed in the past year because of squeezed rent payments, making it hard for property owners to continue servicing their debt and the near-paralyzed market for new commercial-mortgage-backed securities.
Barron's:
  • Greece Hedgies Chase Final Yield Spurt as IMF Looms. As the European Central Bank today warned its members that Greece’s financial needs were becoming more dire, Greek paper Banking News was reporting that hedge funds are playing a “waiting game” with Greek debt, on the expectation Greece is poised to ask the International Monetary Fund for formal assistance. Hedge funds that have been speculating on Greek debt expect to have 10 to 12 days to play Greek sovereigns while a request from the country for assistance is formally processed by the IMF. The hedge funds, the paper speculates, are hoping uncertainty over Greece’s situation keeps the spread between Greek bonds and German bunds widening. Today the ten-year Greek treasury bill was at 475 basis points above the yield on comparable German bunds, as the Financial Times’s Kerin Hope reports in Athens. Hedge funds and others shorting Greek debt are hoping that spread might widen to as much as 500 to 600 basis points before the IMF steps in, whereupon the funds will have to relinquish their speculative bets, the paper asserts.
CNBC:
  • Apple(AAPL) Earnings, Sales Easily Top Street's Expectations. Apple turned in a quarter that blew past analyst forecasts as sales of iPods, iPhones and Macs each exceeded expectations. The company's shares were up more than 5 percent in extended trading.
  • SEC Looking Into Accounting at 19 Biggest Banks. The Securities and Exchange Commission is examining whether any of the 19 largest U.S. banks are using an accounting trick that a bankruptcy examiner has said led to the collapse of Lehman Brothers, SEC Chairman Mary Schapiro said Tuesday.
Fox News:
  • SEC Probe Shouldn't Stop With Goldman Sachs(GS). You might think the breaking scandal swirling around Goldman Sachs gives Democrats one more talking point in their push for regulatory reform. However, if we look just below the surface of the scandal there are explosive revelations that implicate some of the central players who support the legislation being pushed by Senate Banking Committee Chairman Chris Dodd – who is retiring in disgrace over his connection to the earlier Countrywide scandal. It looks like hedgefund billionaire John Paulson may have helped engineer the housing collapse that made him a fortune. Paulson, along with other notorious subprime kingpins Herb and Marion Sandler, funded a North Carolina-based outfit called the Center for Responsible Lending (CRL) to the tune of $15 million, to shake down and harass banks into making bad loans to unqualified borrowers. CRL then turned around and lobbied for legislation to undermine the burgeoning subprime market they had helped create. Meanwhile, Paulson paid Goldman Sachs another $15 million to design collateralized-debt obligations comprised of specific subprime mortgages that he selected. This bucket of investments may have included loans that he knew were unsound and were made only because banks were strong-armed by the CRL. It also may have included loans that he knew would be undermined by the CRL’s extensive lobbying activities. Until there is a full investigation, we won’t know for sure, but it appears Paulson’s $30 million – split between the CRL and Goldman Sachs – financed a scheme that netted his fund a cool $1 billion dollars.
  • Hedge Funder Chanos Sees 'Perp Walks' in Lehman Collapse. Hedge fund manager Jim Chanos believes the government is handling any number of disgraced Wall Street titans with “kid gloves.” But that might be about to change, according to Chanos, the president and founder of Kynikos Associates. In an exclusive interview on the FOX Business Network, Chanos predicted "perp walks" for some executives at the now-defunct firm Lehman Brothers. Chanos, whose firm specializes in short selling, or investing in stocks or sectors poised to lose value, believes acts of “rank criminality” permeated areas of the banking sector as the nation veered toward the recent financial crisis. Nevertheless, few of the top executives at the helm of the big banks where fraud is believed to have occurred have been held accountable, he said. At Lehman, for instance, Chanos noted that losses at the once-venerable bank were twice those of Enron, the notorious energy trading company whose top executives were prosecuted criminally a decade ago. Chanos questioned why so much government energy was expended on Enron, but the same hasn't been true for Lehman.
IBD:
Business Insider: zerohedge:
ABC News:
  • Largest Hedge Fund Political Donations Go to Democrats. 5 Largest Hedge Fund Donors All Lean Toward Democrats; GOP Also Gets Donations. While hedge fund managers might be presumed to be eager to help the GOP beat back Wall Street reform, the reality is that the biggest of the big-time spenders funneled their donations primarily to Democrats, the party that holds Congress and the White House. According to an analysis done by the Center for Responsive Politics for ABC News, the five biggest hedge fund donors all gave almost all their donations to Democrats. So which hedge fund managers are making the most political contributions, and to whom are they giving? The CRP ran some numbers to help ABCNews.com find out. Curiously, George Soros, among the highest-earning managers of 2009 and a well-known Obama supporter, did not make the Top 10 list. Here's a rundown of who did make the list: *With $94,100 in contributions over the past year, Jim Simons is the single largest political donor among hedge fund managers. The founder of quantitative hedge fund powerhouse Renaissance Technologies gave almost all of that total to Democrats, including Senators Harry Reid of Nevada, Chris Dodd of Connecticut and New York's Charles Schumer. Dodd is in charge of the committee working on a financial reform bill. *Former Goldman Sachs star trader Eric Mindich, who a few years ago pulled off one of the largest hedge funds startups in history, doled out $89,600, all to Democrats, including Reid, Dodd and Sen. Kirsten Gillibrand of New York. *Michael Sacks, CEO of Grosvenor Capital Management and a big Obama supporter, donated $76,425, all to Democrats, including $1,000 to House Speaker Nancy Pelosi of California and $2,300 to Sen. Al Franken of Minnesota. *Henry Laufer, who works for Simons' Renaissance, gave $73,600, all to Democrats. Among the recipients was HILLPAC, the PAC started by Hillary Clinton to support Democratic candidates. *Scott Nathan of Boston-based hedge fund Baupost gave $73,050, all to Democratic causes, including a maximum gift of $4,800 to Alan Khazei, who ran unsuccessfully to fill the Senate seat vacated by the late Ted Kennedy.
Rasmussen Reports:
  • 58% Doubt Social Security Will Pay All Their Benefits. Voters remain concerned about Social Security and whether the system can deliver what the government has promised. A new Rasmussen Reports national telephone survey finds that only 39% of U.S. voters are even somewhat confident that the Social Security system will pay them all of their promised benefits. Fifty-eight percent (58%) lack such confidence.
  • 59% Say Scientists Disagree 'Significantly' Over Global Warming. Fifty-nine percent (59%) of Americans now believe there is a significant disagreement within the scientific community over global warming, up seven points from early December just after the so-called “Climategate” scandal involving doctored or deliberately undisclosed scientific evidence first broke. A new Rasmussen Reports national telephone survey finds that a quarter of adults (25%) think scientists do agree on global warming, showing no change from the earlier survey.
Politico:
  • Barack Obama Woos Scott Brown on Immigration. President Barack Obama called Sen. Scott Brown (R-Mass.) on Tuesday to gauge his support for a comprehensive immigration reform bill, a sign the White House is serious about pushing the issue in Congress this year. Obama’s outreach to Brown is part of a quickly hatched, coordinated effort with congressional leaders to thrust the volatile immigration debate back to the front burner. At a joint House and Senate leadership meeting late Tuesday, Senate Majority Leader Harry Reid promised to House leaders that he would put an immigration bill on the floor this year. House Speaker Nancy Pelosi, also in the Tuesday evening meeting, said the House would prioritize immigration reform, according to a Democratic leadership source with knowledge of the meeting.
Reuters:
  • Seagate(STX) Beats Street View, Shares Jump. Seagate Technology plans to add manufacturing capacity to handle increasing demand in the second half of the year and 2011, hoping to ride a recovery in corporate information technology spending. Seagate's shares shot up 3.5 percent in after-hours trading on Tuesday after having gained 5.2 percent since Intel Corp's (INTC) stellar results last week.
  • Juniper(JNPR) Beats Estimates But Shares Fall. Juniper Networks Inc's outlook disappointed investors expecting a stronger confirmation of a tech recovery and its shares dropped 7.5 percent after-hours on Tuesday despite strong quarterly results.
  • Yahoo(YHOO) Revenue Misses as Search Ad Sales Contract. Yahoo Inc posted slightly lower-than-expected quarterly revenue and indicated that current-quarter sales could again miss Wall Street estimates, as it struggles to compete in Web search against Google Inc (GOOG). Shares of Yahoo fell 3.5 percent in extended trading.
  • North American March Chip-Gear Orders Rise 2.7%.
  • Parents' Obesity, Especially Mom's, Tied to Kids' Risk. Having two obese parents may substantially raise a child's risk of becoming obese, with mom's weight playing a particularly important role, a new study suggests. UK researchers found that among more than 7,000 2- to 15-year-olds in a national study, those who had two obese parents were 12 times more likely to be obese than children with two normal-weight parents. That was with factors such as socioeconomics -- gauged by parents' jobs -- and ethnicity taken into account. Mothers' weight showed a particularly strong association with children's weight, the study found.
Financial Post:
  • Mortgage Reform Needed Most of All: Frankel. If global reforms are to be successful in preventing another major financial crisis, there's little question that U.S. policymakers, above all others, will need to play a significant role. Unfortunately, Jeffrey Frankel, the Harvard University economist and member of the National Bureau of Economic Research Business Cycle Dating Committee, thinks the clearest of regulatory changes needed to make a difference, will never see the light of day: mortgage reform. "It wasn't the only thing that caused the crisis, but it is probably the one that economists can most agree is bad policy," Mr. Frankel said during a speaking event in downtown Toronto. "It is also the one policy that will never be changed." Considered more a right than a privilege, home ownership has become something of a sacred cow south of the border, which is limiting greatly the potential to reduce the risk of another subprime bust. The very existence of Fannie Mae and Freddie Mac, the government-sponsored mortgage lenders at the heart of the crisis, supports this view, he said. So, although financial reform is now clearly the number one agenda in Washington, Mr. Frankel remains pessimistic about its impact on the overall stability of the financial system. "[President] Obama will probably get something through. It will probably be an improvement but it will be nowhere close to what we need."
Evening Recommendations
Citigroup:
  • Reiterated Buy on (OMC), raised target to $50.
  • Reiterated Buy on (ETN), raised target to $88.
  • Reiterated Buy on (ALTR), raised target to $34.
  • Reiterated Buy on (COH), raised estimates, boosted target to $51.
  • Reiterated Buy on (WWW), raised estimates, boosted target to $35.
Night Trading
  • Asian indices are +.25% to +1.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 92.50 -1.5 basis points.
  • S&P 500 futures +.29%.
  • NASDAQ 100 futures +.69%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (MAN)/-.06
  • (DGX)/.98
  • (STI)/.57
  • (EMC)/.24
  • (AMR)/-1.31
  • (ABT)/.80
  • (LMT)/1.33
  • (PJC)/.54
  • (MCO)/.44
  • (CMA)/-.55
  • (MCD)/.96
  • (LH)/1.31
  • (FCX)/1.92
  • (UTX)/.90
  • (MO)/.40
  • (BA)/.64
  • (KEY)/-.29
  • (STJ)/.68
  • (GENZ)/.34
  • (R)/.20
  • (WFC)/.43
  • (MS)/.57
  • (T)/.55
  • (QCOM)/.56
  • (CMG)/.95
  • (NFLX)/.54
  • (TER)/.23
  • (FFIV)/.54
  • (SBUX)/.25
  • (AMGN)/1.24
  • (KMP)/.42
  • (RJF)/.42
  • (MEE)/.27
  • (SNDK)/.59
  • (ADS)/1.36
  • (EBAY)/.41
  • (NVLS)/.41
  • (LRCX)/.82
  • (BJS)/.06
Economic Releases
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -750,000 barrels versus a -2,202,000 barrel decline the prior week. Gasoline supplies are expected to rise by +500,000 barrels versus a -1,036,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,000,000 barrels versus a +1,107,000 barrel rise the prior week. Finally, Refinery Utilization is estimated to rise by +.35% versus a +1.1% gain the prior week.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The weekly MBA mortgage applications report could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by technology and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
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