Today's Headlines

Bloomberg:

- U.S. stocks will rally “for another couple of years” while producing gains that will be less broad- based than in the rebound since March, Laszlo Birinyi said.

- Billionaire investors Sam Zell says home affordability is "going up" and sees the market stabilizing this summer. (video)

- Crude oil rose to a six-month high after OPEC decided today to leave production quotas unchanged and a report showed that U.S. inventories declined.

- General Motors Corp.(GM), the world’s largest automaker until its 77-year reign ended in 2008, plans to file for bankruptcy protection on June 1 and sell most of its assets to a new company, people familiar with the matter said.

- The yen fell the most in eight weeks against the dollar after a report showed demand for overseas assets among Japanese investors is growing and U.S. data added to evidence the global recession is moderating.

- Martin Whitman’s Third Avenue Management LLC increased its stake in Forest City Enterprises Inc., the property developer whose shares have tumbled 83 percent in the past year, and is investing in distressed debt while avoiding most stocks.

- The Federal Reserve may step up asset purchases to prevent its balance sheet from contracting until policy makers are convinced an economic recovery has taken hold, Fed officials and analysts said.

- European retail sales declined at a faster pace in May as rising unemployment prompted consumers to hold back spending, the Bloomberg purchasing managers index showed.

- Malaysia’s government said the economy may shrink as much as 5 percent this year, slashing its forecast as the nation nears the first recession in a decade.

- Visa Inc.(V) and First Solar Inc.(FSLR) are among the five likely candidates to replace General Motors Corp. should the automaker be dropped from the Standard & Poor’s 500 Index, Goldman Sachs Group Inc. said.

Wall Street Journal:

- Tucker Carlson announced plans to launch DailyCaller.com, a conservative-leaning news site that will aim to be an answer to the Huffington Post. Mr. Carlson told reporters and bloggers at the Heritage Foundation in Washington, D.C., that the site would focus on coverage of President Barack Obama’s administration. “There just aren’t enough people covering this administration and telling the people what’s going on,” he said. The site will take on the form of a general interest newspaper, he said, and will even attempt to be faster than the popular and speedy Drudge Report.

- While there were reports that the Time Warner board was meeting today to approve the spinoff of its AOL online unit, it actually gave the move an “enthusiastic endorsement” last night, according to sources.

- Nuclear power proponents are ratcheting up their rhetoric. Tennessee Sen. Lamar Alexander yesterday repeated his call for the U.S. to build 100 new nuclear plants by 2030, a proposal he says he’ll take to the Senate floor next week. It’s not the first time the Republican senator has argued for a big nuclear buildup; he’s been talking about 100 new reactors all spring. Last month he drew a lot of attention by contrasting France’s embrace of nuclear power with the U.S.

- U.S. Treasury Secretary Timothy Geithner heads to Beijing this weekend to urge Chinese leaders to fundamentally alter the export-oriented economy that has created years of trans-Pacific trade tensions.

- California's median price for existing homes rose 1.4% in April from March, marking the second-consecutive monthly increase and prompting some industry officials to declare the state's long swoon in housing values could be at or near the bottom.

- They're back. We refer to the global investors once known as the bond vigilantes, who demanded higher Treasury bond yields from the late 1970s through the 1990s whenever inflation fears popped up, and as a result disciplined U.S. policy makers. The vigilantes vanished earlier this decade amid the credit mania, but they appear to be returning with a vengeance now that Congress and the Federal Reserve have flooded the world with dollars to beat the recession.

NY Times:

- In the rarefied world of hedge funds, he is one of the greats — a stock-picker who managed to make money, bull market or bear, for more than two decades. But on Wednesday, Arthur J. Samberg told his investors that his long, successful run was over. Mr. Samberg, 68, said he had reached a “painful conclusion” to wind down his $3 billion investment firm, Pequot Capital Management, because a long-simmering investigation into insider trading at the fund was heating up once again.

- The stock market is again taking its cues from the bond market. Stocks turned higher Thursday after solid demand at a Treasury auction eased fears that demand for United States debt would dry up and force the government to pay higher interest rates to entice buyers. Higher rates could choke the economy’s recovery by making loans on everything from homes to cars more expensive.

NY Post:

- As Steve Rattner races to jumpstart the ailing automotive sector, the car czar's connection to a hedge fund heavily invested in the car business is raising eyebrows as a potential conflict of interest. According to sources familiar with the matter, Rattner has financial ties to Monarch Alternative Capital, a hedge fund that has made distressed investments in the auto industry, including car-parts manufacturer Delphi. A person familiar with the matter told The Post that Rattner made "a good-faith effort" to resolve his ties to Monarch before joining President Barack Obama's auto task force in February, but that he has not given up those ties thus far. The stake in question is in the form of deferred compensation that sources described as non-transferable and difficult to unwind because of the potential tax hit to Rattner as well as the difficulties Monarch has in valuing Rattner's compensation. Rattner, who has a net worth reported to be as much as $600 million, could have worked out a fix for the deferred comp issue but wanted to arrange one that didn't slam him with taxes, one source noted.

- Smart-money investors are betting that the Obama administration will start leaning more on Fannie Mae and Freddie Mac to kick-start the housing market by giving them the OK to buy mortgages worth up to $1 million. Current law prohibits the two government-run mortgage giants from buying home loans valued at more than $417,000 nationally, or up to $729,000 in areas where home prices are high. But some mortgage traders and analysts think that could soon change.

Economist:

- “LUCK”, James Simons, the founder of Renaissance Technologies, a hedge fund, once said, “plays a meaningful role in everyone’s lives.” Mr Simons, a 71-year-old former university professor and a celebrated mathematician, has been blessed with the stuff. His flagship fund, Medallion, has had average annual gains of more than 35% for 20 years. Last year he was named the best-paid hedge-fund manager in America by Alpha, a hedge-fund magazine, reportedly earning $2.5 billion. Medallion gained 80% last year, and this year is up a further 12%. But Medallion is 98% employee owned and has not accepted new money for 15 years. So to cater to outside investors, Renaissance has since 2005 marketed another “mega fund” known as the Renaissance Institutional Equities Fund (RIEF). The problem is that this has not proved anything like as successful as Medallion. Before its launch a small army of Renaissance PhDs—there are more than 70 on the payroll—back-tested RIEF’s performance with a simulated portfolio of $100 billion. From 1992 to 2005, its theoretical return was more than double that of the S&P 500, with less than two-thirds of the volatility. Investors queued up like Trekkies waiting for tickets to the new film. In the first two years RIEF raised more than $1 billion a month. With new money coming in faster than it could be invested, monthly contributions were capped at $1.5 billion. By August 2007 the fund was managing almost $28 billion. But in 2008 RIEF lost 16% and investors withdrew $12 billion from Renaissance, which was the largest prime-brokerage client of both Bear Stearns and Lehman Brothers, two investment banks that failed. The downward spiral has continued this year, with RIEF losing 17% so far. It now has less than $10 billion of assets under management. Though investors may think they are seduced by the wizardry of Renaissance’s computer-driven models, what they are really betting on is the magic touch of the man himself.

LA Times:

- The FBI and Justice Department plan to significantly expand their role in global counter-terrorism operations, part of a U.S. policy shift that will replace a CIA-dominated system of clandestine detentions and interrogations with one built around transparent investigations and prosecutions. Under the "global justice" initiative, which has been in the works for several months, FBI agents will have a central role in overseas counter-terrorism cases. They will expand their questioning of suspects and evidence-gathering to try to ensure that criminal prosecutions are an option, officials familiar with the effort said. The approach effectively reverses a mainstay of the Bush administration's war on terrorism, in which global counter-terrorism was treated primarily as an intelligence and military problem, not a law enforcement one. Behind the scenes, some intelligence officials are resisting a broader criminal justice role overseas for the FBI, contending that it could inhibit the flow of intelligence if their own agents, or foreign governments, believe top-secret sources and methods might be disclosed during criminal prosecutions.

USAToday:

- Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago — the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says.

Politico:

- President Obama exhorted his supporters on a conference call Thursday to help lobby for his health care plan, warning, “If we don’t get it done this year we’re not going to get it done.”

webmonkey:

- Google(GOOG) has set out to re-wire the e-mail inbox with a new product called Wave. Wave is a web-based application that marries multiple forms of communication and collaboration, including chat, mail and wikis, into a unified interface. Everything inside Wave happens in real time — you can even see a comment being made as the person is typing it, character-by-character. Google Wave, which was demonstrated Thursday at the Google I/O developer conference taking place here this week, is now live as a private developer preview. Conference attendees can start playing with it now, but Google has its eye on a public beta launch within a few months.

Reuters:
- Hedge fund manager David Einhorn, who questioned the health of Lehman Brothers four months before its collapse, is betting that shares of Moody's Corp (MCO) will fall because he believes the market no longer gives its ratings any credit. Einhorn, whose Greenlight Capital managed $5 billion, said on Wednesday the parent of Moody's Investors Service squandered the value of its business after giving perfect AAA ratings to now-fallen giants like struggling insurer AIG (AIG), nationalized mortgage banker Fannie Mae (FNM) and bond insurer MBIA Inc (MBI). Moody's largest shareholder, Warren Buffett of Berkshire Hathaway Inc, has said he does not rely on credit ratings, Einhorn said. Yet Einhorn noted equity investors still believe in the agencies. Moody's shares trade at 19 times estimated earnings, he said, though he said the company has a negative net worth of $900 million.

- Bill Gross, the manager of top bond fund Pimco, said he expects 1 percent to 2 percent growth in the U.S. economy in the next few years, and at the moment he only saw "green shoots, but not much more" of a recovery.

Financial Times:
- Best Buy(BBY), the largest US consumer electronics retailer, will launch an investment fund managed by former and current News Corp internet veterans that will focus on digital media as it seeks to expand beyond brick and mortar stores. The retailer, which invested $2.1bn to launch a joint venture with the UK’s Carphone Warehouse last year, purchased the Napster online music subscription service in 2008 for $121m and aims to invest deeper into the music, video, games and “personal media management” businesses.

Bear Radar

Style Underperformer:
Small-cap Value (-.15%)

Sector Underperformers:
Homebuilders (-3.77%), Education (-2.63%) and Retail (-.99%)

Stocks Falling on Unusual Volume:
RBA, RYL, DSW, KBH, FRED, MDVN, LEAP, BCSI, SIGM, UNFI, NETL, CBT, TEX, FAF and DOM

Stocks With Unusual Put Option Activity:
1) MCO 2) TEX 3) AU 4) ACH 5) ELN

Bull Radar

Style Outperformer:
Large-cap Value (+1.10%)

Sector Outperformers:
Steel (+2.84%), Oil Service (+2.66%) and Energy (+2.25%)

Stocks Rising on Unusual Volume:
SSRI, AU, SHG, IOC, PCZ, LIHR, RTP, KMX, FGP, SAFM, MAPP, DMND, RYAAY, PAAS, FUJI, ESRX, MICC, GOLD, ATI, TSL and NJ

Stocks With Unusual Call Option Activity:
1) S 2) VMC 3) MRVL 4) TIF 5) MCO

Links of Interest

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Thursday Watch

Late-Night Headlines
Bloomberg:

- Arthur Samberg, founder of Pequot Capital Management Inc., plans to liquidate his main hedge funds because a federal insider-trading investigation has “cast a cloud over the firm.” “With the situation increasingly untenable for the firm and for me, I have concluded that Pequot can no longer stay in business as an investment adviser,” Samberg wrote today in a letter to clients. Pequot, started in 1986, managed $3.47 billion as of May 15, according to a regulatory filing, down from $4.3 billion in November. Pequot’s assets peaked at about $15 billion in 2001, making it the world’s largest hedge-fund manager at the time. The firm said in April 2001 that No. 2 executive Daniel Benton was leaving to start his own hedge fund, taking about half of Pequot’s assets. Benton ran Andor Capital Management LLC until deciding in August 2008 to shut.

- Exxon Mobil Corp.(XOM), the world’s largest refiner, said the transition away from oil-derived fuels is probably 100 years away. Petroleum-based fuels including gasoline and diesel, as well as hydrocarbons such as coal and natural gas, will remain the dominant sources of energy for factories, offices, homes and cars for decades because there are no viable alternatives, Chief Executive Officer Rex Tillerson told reporters today after Exxon Mobil’s annual shareholders meeting in Dallas. In the U.S., which burns a quarter of global oil supplies, consumers probably face higher fuel prices if lawmakers impose greenhouse-gas rules that inflate fuel-production costs, Tillerson said. A plan introduced by Democrats this month would allocate a limited number of emission credits to refiners and electricity producers, with the aim of curbing greenhouse gases. “The oil-gas-refining side of the business received a very, very small amount of the allocations, which means that sector will bear more of the costs more immediately,” Tillerson said. “If we’re going to place a price on carbon, let’s do that in the most efficient way. A carbon tax is more efficient than a tax that’s applied by way of a cap-and-trade mechanism.” Tillerson, 57, said lawmakers are hurrying to restrict greenhouse gases when many scientific questions surrounding the global warming issue remain unresolved.

- Steven Rattner, head of the U.S. Treasury Department’s automotive team, has a net worth of at least $188 million and held shares in an investment fund run by the majority owner of Chrysler LLC, according to his financial- disclosure statement. Rattner, co-founder of Quadrangle Group LLC, also sold guarantees of as much as $15 million on a credit-default swaps index tied to the secured debt of 100 companies, including General Motors Corp.’s senior secured loans, the filing shows. He reported holdings of between $500,000 and $1 million in Cerberus Institutional Partners LP Series 2. The fund is managed by Cerberus Capital Management LP, the parent of Auburn Hills, Michigan-based Chrysler. Cerberus Institutional Partners has invested in two auto-parts and equipment companies and a car-rental company, all privately owned. Rattner has since sold all those holdings, according to an official at the Treasury. He was “required to comply with financial conflict-of- interest rules, including divestitures where needed, and he has done so fully,” said Jenni Engebretsen, a Treasury spokeswoman, who responded on Rattner’s behalf. The filing is for the period between Jan. 1, 2008, and Feb. 20, 2009. Rattner, 56, has directed the Treasury’s auto team since February. Chrysler, which filed for bankruptcy protection on April 30, received $4 billion from the government in January. The company, the third-largest U.S. automaker, will get $500 million more from the Treasury’s Troubled Asset Relief Program, TARP’s special inspector general said in a report. Rattner owned at least $105 million in various Quadrangle investments. He also reported holdings of between $500,000 and $1 million in Goldman Sachs Group Inc. stock, and less than $1,001 apiece in Bear Stearns Cos., Citigroup Inc., and Lehman Brothers Holdings Inc. Rattner sold $3 million to $15 million in credit-default swaps to a unit of Goldman Sachs Group Inc. on the equally weighted index known as the Markit LCDX Series 10, according to the filing. The index includes the senior secured loans of 100 companies including GM and Ford, according to the filing. An investor that sold such protection on the index would have to pay as much as $150,000 in the event of a company bankruptcy, less the value of the underlying loans. Rattner and his wife, Maureen White, raised between $100,000 and $250,000 for Barack Obama’s presidential campaign.

- Type 1 diabetes cases in young children will double by 2020, and countries should prepare for the deluge, researchers said. The number children under 15 with Type 1 diabetes will rise to about 160,000 across Europe in 2020 from 94,000 in 2005, according to a study in the U.K. journal The Lancet. Lead researcher Chris Patterson from the Queen’s University in Belfast expects the cases in children younger than 5 to double. The gain is so rapid that it can’t be explained by genetic links alone, the researchers said.

- The AFL-CIO, the largest U.S. union organization, used “creative accounting” to disguise “a crippling cash-flow situation,” according to a report by a union leader. Tom Buffenbarger, president of the International Association of Machinists and Aerospace Workers, said the labor federation masked its financial difficulties heading into last year’s presidential election campaign. Net assets of the 11 million-member AFL-CIO declined to a negative $2.3 million as of June 30, 2008, from a $66 million surplus on July 1, 2000. “A new leadership -- leaders chosen by our members, leaders held accountable by our members -- is needed,” wrote Buffenbarger, who is a member of the AFL-CIO’s finance committee and the president of one of the nation’s largest unions.

- OPEC is likely to leave production quotas unchanged at today’s meeting in Vienna in a bet that demand will recover, pushing prices as high as $75 a barrel by year’s end, ministers said.

Wall Street Journal:

- President Barack Obama wants to make a million houses a year more energy efficient as part of his goal to create thousands of "green" jobs and reduce U.S. carbon emissions. But the administration's push to expand an obscure antipoverty program into a centerpiece of that initiative is stirring debate over the best way to use a flash flood of federal stimulus dollars.

- Expedia.com(EXPE) said Wednesday it will stop charging fees when customers book airline tickets over the Internet, upping the ante in the competition among online travel agencies.

- A government program designed to rid banks of bad loans, part of a broader effort once viewed as central to tackling the financial crisis, is stalling and may soon be put on hold, according to people familiar with the matter. The Legacy Loans Program, being crafted by the Federal Deposit Insurance Corp., is part of the $1 trillion Public Private Investment Program the Obama administration announced in March as a way to encourage banks to sell securities and loans weighing on their balance sheets to willing investors. But prospective buyers and sellers have expressed reticence to the FDIC about participating for fear the program's rules will change in a political atmosphere hostile to Wall Street. In addition, some banks that might have sold troubled loans into the program earlier in the year have become less eager as they regained a sense of stability.

- Amid tighter budgets, more people are trying to save money by cutting their cable cords. In response, cable companies are beginning to experiment with new Internet services. In what's shaping up as the home-entertainment equivalent of severing a landline phone service, more people are joining the ranks of "cord cutters" by forgoing cable subscriptions that can run $60 or more a month. Instead, they're turning to free over-the-air high-definition television channels and video-game consoles, such as Playstation 3 and XBox 360. They're also watching Internet-connected TV sets, paying a basic high-speed Internet fee of about $45, as well as set-top boxes from companies like Netflix Inc. Some are also using media browsers that they can download free and run on PCs, providing access to TV shows, movies and other content directly from the Web. The number of cable cutters remains too small to threaten the pay-television industry. Still, large cable companies such as Comcast Corp. and Time Warner Cable Inc. are noticing that people are spending more time online.

- Marking a new front for Pakistan's Islamist insurgency, the Taliban and its militant allies are moving into the heartland -- targeting the nation's undertrained and poorly equipped police. In Punjab province, home to more than 50% of Pakistan's 175 million people and its major industries, insurgents have struck the police during four major attacks and a handful of smaller ones since February. An assault Wednesday was the deadliest. Suspected Islamic militants decimated a police emergency center and the office of Pakistan's military intelligence agency in the eastern city of Lahore. They killed at least 21 people, including nine police officers, and wounded hundreds more.

NY Times:

- Chinese legal authorities have threatened to delay or deny the renewal of legal licenses for 18 top civil rights lawyers, escalating use of a tactic they have used to put pressure on attorneys they consider troublesome, two human-rights advocacy groups have charged.

- Worried about heavy reliance on imported oil, Chinese officials have drafted automotive fuel economy standards that are even more stringent than those outlined by President Obama last week, Chinese experts with a detailed knowledge of the plans said on Wednesday. The new plan would require automakers in China to improve fuel economy by an additional 18 percent by 2015, said An Feng, a leading architect of China’s existing fuel economy regulations who is now the president of the Innovation Center for Energy and Transportation, a nonprofit group in Beijing. Cars with small fuel-sipping engines are now subject to a 1 percent tax, while sports cars and sport utility vehicles with the largest engines are subject to a 40 percent tax. The average new car, minivan or sport utility vehicle in China already gets the equivalent of 35.8 miles a gallon this year based on the American measurement system of corporate averages and will be required to get 42.2 miles a gallon in 2015, Mr. An said. The details of China’s new fuel economy standards may favor domestic automakers at the expense of multinationals, several auto industry officials said.

IBD:

- Last month, Defense Secretary Robert Gates proposed some serious changes to the Pentagon's spending priorities. Out with big-ticket aircraft like the F-22. In with stealthy new options like unmanned aerial vehicles. Either way, aircraft parts supplier TransDigm (TDG) has it covered.

Business Week:
- Good News on the Mortgage Mess. Mortgage bond prices have rebounded and refinancing is reducing problem securities. Now improved disclosure is identifying the worst loans.

- GPS doesn't just keep us from getting lost. From practical business applications to social-networking fun, it's transforming our lives.

CNNMoney:

- Here’s a pie chart that should warm Steve Jobs’ heart. That big blue slice covering 59% of the pie represents Apple’s (AAPL) share of the U.S. smartphone traffic in April as measured by AdMob, the world’s largest purveyor of ads on mobile apps and websites. By the same measure, Apple also had the lion’s share — 43% — of the mobile Web traffic worldwide.

Forbes:

- China’s Debt Bomb.

South Florida.com:

- Bargain hunters are having their way with South Florida's depressed housing market. Big price declines are driving sales as buyers scoop up a bevy of bank-owned properties. Broward County's median price for existing homes in April was $191,300, down 36 percent from $298,100 a year ago, the Florida Association of Realtors said Wednesday. Sales countywide jumped 33 percent, to 690 from 518. Meanwhile, few areas in the state boast cheaper condominiums than Broward. The median price for existing condos tumbled 47 percent to $79,900. Condo sales shot up 39 percent.

Washington Post:

- The government would retain significant control over the restructured General Motors under an Obama administration plan that would allow U.S. officials to directly name or influence the appointments of the vast majority of a new 13-member board that would oversee the company, sources familiar with the discussions said. The plan calls for federal officials to directly appoint five or six members to the board after GM emerges from its expected bankruptcy, the sources said. Another six would roll over from GM's existing board, but even these directors would reflect the government's influence since GM is reconstituting its board under government direction. The United Auto Workers' health-care trust would name one director to the company board, the sources said, adding that Canada is likely to appoint a board seat as well.

Reuters:

- News Corp(NWS/A) hopes to sell Google Inc access to a greater swathe of its media properties, its executives said, as an advertising deal between the two companies comes up for renewal. Senior executives at News Corp and its MySpace online service said at the All Things Digital conference on Wednesday that the company was working with Google to try and make their existing advertising deal better for both parties.

- U.S. Treasury Secretary Timothy Geithner has a chance next week to persuade anxious Chinese authorities their investments in huge and growing volumes of U.S. debt securities are safe and sound. His visit to Beijing must deal with tough economic realities: the United States is issuing new debt in record volumes as it seeks to finance an array of programs to right its economy, while China is growing nervous about whether its U.S. "nest egg" is secure.

- The Obama administration is weighing a plan that would put the Federal Reserve in charge of monitoring systemic risk and give the Federal Deposit Insurance Corp authority to unwind insolvent bank holding companies, sources familiar with the proposal said on Wednesday. The idea, which is being circulated to U.S. lawmakers as they embark upon an overhaul of financial regulation, could be announced soon after June 8, the two sources said.

- Chrysler is on the verge of a Motor City miracle: a make-over in bankruptcy that will bring in new management under Italy's Fiat SpA and its highly touted small car technology. Rescued from liquidation with $8.6 billion of emergency U.S. government loans and bankruptcy financing, Chrysler has been given a new lease on life. But what's next? The new Chrysler will be up against formidable and entrenched competitors in the small vehicle market like Honda Motor Co. It will also struggle with the aftermath of freezing product development to conserve cash, analysts said. But in what could be its biggest challenge, the No. 3 U.S. automaker has to break free of a reliance on aggressive discounting and a reputation for poor quality.

Financial Times:

- A senior European business representative has accused Beijing of deliberately locking foreign suppliers out of contracts under its Rmb4,000bn ($586bn, €421bn, £365bn) stimulus package. “All the foreigners are out of the race” for a package of 25 wind turbine orders worth more than €5bn, said Joerg Wuttke, president of the European Union Chamber of Commerce in China. “It seems that the central government has decided that this must be awarded to Chinese manufacturers and not foreigners who have invested big in China.” The complaint is a significant contrast to the message Beijing has sought to convey, that it is making a contribution to help salvage the sagging global economy.

- US Treasury yields rose to their highest level in six months ­on Wednesday, raising concern that rising mortgage rates could damp a nascent recovery in the economy. The yield on the benchmark 10-year Treasury note rose 24 basis points to 3.74 per cent, a level last seen in mid-November. The 10-year note has climbed from lows of 2.1 per cent in December. The S&P 500 stock index fell 1.9 per cent. Long-term yields have been rising as investors respond to evidence of “green shoots” in the economy, the increasing US debt burden, the risk of a revival in inflation and a flood of new Treasury issuance. While short-term yields remain stable, longer-term yields have been volatile for several days, raising questions about whether the US Federal Reserve will have to increase its planned purchases to Treasuries.

The Telegraph:

- A list of Europe's biggest 50 hedge funds compiled by New York-based trade publication Alpha Magazine shows that GLG Partners has been hit the hardest, with assets under management falling 52pc from $23.9bn (£14.9bn) in 2008 to $11.5bn this year. The fund, run by former Goldman Sachs stars Noam Gottesman and Manny Roman, has dropped from being the second biggest hedge fund in Europe to eighth position. Other long-established funds were also hit hard. Sloane Robinson, founded by Tory party donor Hugh Robinson, saw assets drop by nearly 40pc last year. The Children's Investment Fund (TCI), the famously aggressive active investor run by the philanthropist Chris Hohn, has lost nearly 28pc of its assets. Lansdowne Partners, which called the collapse of the Northern Rock and generated returns of 13pc this year, saw its assets drop by 37pc to $12bn. RAB Capital slid down the rankings from 21st to 42nd biggest fund, while Toscafund fell from 19th to 39th.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (SPLS), target $24.

- Reiterated Buy on (AEO), target $17.

- Reiterated Buy on (MYGN), target $42.

- Reiterated Buy on (BAC), target $20.

Night Trading
Asian Indices are -1.0% to -.25% on average.
S&P 500 futures -.12%.
NASDAQ 100 futures -.07%.

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Earnings of Note
Company/EPS Estimate
- (BF/B)/.48

- (PERY)/.23

- (BIG)/.40

- (COST)/.53

- (HNZ)/.55

- (NOVL)/.06

- (OVTI)/-.33

- (DELL)/.22

- (JCG)/.11

- (SAFM)/.54

- (GCO)/.05

- (FRED)/.21

Economic Releases

8:30 am EST

- Durable Goods Orders for April are estimated to rise .5% versus a -.8% decline in March.

- Durables Ex Transports for April are estimated to fall -.3% versus a -.7% decline in March.

- Initial Jobless Claims for last week are estimated to fall to 628K versus 631K the prior week.

- Continuing Claims are estimated to rise to 6745K versus 6662K prior.

10:00 am EST

- New Home Sales for April are estimated to rise to 360K versus 356K in March.

11:00 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory drawdown of -150,000 barrels versus a -2,105,000 barrel decline the prior week. Gasoline supplies are expected to fall by -1,300,000 barrels versus a -4,337,000 barrel decrease the prior week. Distillate inventories are estimated to rise by +1,000,000 barrels versus a +672,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.4% versus a -1.89% decline the prior week.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Fisher speaking, weekly EIA natural gas inventory report, Barclay’s Capital Wireline/Wireless Conference, Cowen Tech/Media/Telecom Conference, Deutsche Bank Energy/Utilities Conference, (HD) shareholders meeting, (IPG) shareholders meeting, Morgan Stanley Cloud Computing Symposium, (AMZN) shareholders meeting, (JNPR) shareholders meeting, (TGT) shareholders meeting and the (NVLS) mid-quarter update could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by automaker and mining stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Lower into Final Hour on Rising Long-Term Rates, Higher Energy Prices, More Shorting

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs. I added (IWM)/(QQQQ) hedges today, thus leaving the Portfolio 75% net long. The tone of the market is mildly negative as the advance/decline line is lower, most sectors are declining and volume is about average. Investor anxiety is above average. Today’s overall market action is mildly bearish. The VIX is rising 2.38% and is very high at 31.35. The ISE Sentiment Index is slightly below average at 130.0 and the total put/call is about average at .81. Finally, the NYSE Arms has been running around average most of the day, hitting 1.1 at its intraday peak, and is currently .97. The Euro Financial Sector Credit Default Swap Index is rising .14% today to 119.0 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is falling .38% to 143.27 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising 4.49% to 52 basis points. The TED spread is now down 411 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 9.43% to 43.50 basis points. The Libor-OIS spread is rising 1.76% to 46 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 10 basis points to 1.92%, which is down 72 basis points since July 7th. The 3-month T-Bill is yielding .16%, which is down 1 basis point today. Market-leading stocks are substantially outperforming the broad market again today. The construction, semi, gaming, steel and alternative energy sectors are also gaining on the day. The rise in the 10-year yield is pressuring the broad market this afternoon, with banks and reits seeing the most selling pressure. I expect the 10-year to stabilize soon, but stocks are unlikely to move meaningfully higher until the yield surge subsides. I would expect the Fed to announce plans to increase the size of its quantitative easing program over the coming weeks. Nikkei futures indicate a -48 open in Japan and DAX futures indicate a -33 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, higher energy prices, profit-taking and higher long-term rates.