Wednesday, September 17, 2008

Thursday Watch

Late-Night Headlines
- The U.S. Securities and Exchange Commission, responding to a market rout this week, may require hedge funds to disclose their short-sale positions and plans to subpoena the funds for their communication records. Hedge funds and other investors that manage more than $100 million in stocks would be ``required to promptly begin public reporting of their daily short positions,'' SEC Chairman Christopher Cox said in a statement today. The agency's enforcement division will obtain ``disclosure from significant hedge funds'' regarding their ``past trading positions in specific securities,'' Cox said. The SEC rule requiring hedge funds to disclose short positions must be approved by the full commission to become binding.
- Brazilian and Mexican homebuilders tumbled on Latin American stock exchanges on concern that the global financial crisis will raise the cost of capital while slowing growth and accelerating inflation slow demand for homes.
- Morgan Stanley(MS) is losing hedge-fund clients who are concerned that a record drop in the New York- based investment bank's stock threatens its finances, investors and industry executives said.

- Bonds from Argentina, Ecuador and Venezuela, the highest-yielding government debt in emerging markets, tumbled as investors shunned all but the safest securities as the credit crisis worsened.
- The cost to protect against a default by Morgan Stanley(MS) and Goldman Sachs(GS) Group Inc. rose to a record amid the credit-market seizure triggered by the collapse of Lehman Brothers Holdings Inc.
- Morgan Stanley(MS) is weighing a merger with Wachovia Corp.(WB) and several other banks as the securities firm seeks to regain investor confidence after its shares sank 42 percent this week, people familiar with the matter said.

- The People’s Bank of China must strictly control money supply as the nation still faces “serious” inflationary pressure, said Wu Xiaoling, the central bank’s former deputy governor.
- Central bankers may need to take a more global approach to stabilizing financial markets with actions that include making it easier for banks to borrow across borders.

Wall Street Journal:
- French state-run power company √Člectricit√© de France SA is considering raising its stake or even taking over U.S. joint-venture partner Constellation Energy Group Inc., which risks becoming another casualty of the radiating credit crisis, people familiar with the situation said Wednesday. The electricity company has lost more than half of its market value since Sept. 10 as concerns have grown over the liquidity needs of the company's commodities-trading business.

NY Times:
The New York Times Company(NYT) announced an agreement on Wednesday with, an independent financial publication, to provide opinion columns for the weekday issues and online versions of The New York Times and The International Herald Tribune starting on Tuesday.
- The global credit crisis and the collapse of Lehman Brothers have punished all manner of hedge funds. But in London, where a number have already been closed, the retreat has a particular resonance. The failure of Lehman Brothers, which had deep relationships with some of the largest hedge funds in the world, has unsettled an already jittery market, inciting fears that some hedge fund assets might be frozen here and thus unavailable for sale if investors want to redeem them. The list of hedge fund implosions in 2008 is growing here. It began with the precipitous fall of Peloton Partners this spring and has included others like Pentagon Capital Management. More recently, the troubles have extended to funds caught short when commodity prices began to plummet, including RAB Capital and Red Kite Capital. Worries were only compounded after Lehman’s collapse as investors tried to determine GLG’s exposure. The crux of the issue is that Lehman, as a dominant provider of both complex derivative assets to funds and a prominent insurer of credit default swaps, was an essential conduit for hedge funds investing in these esoteric areas. To the extent that such assets remain at Lehman, in the hands of administrators, large funds will have trouble gaining access to them in the event that investors choose to take out their money.

- Microsoft Corp.(MSFT), starting a new phase of a $300 million advertising campaign, will end a series of commercials featuring comedian Jerry Seinfeld.
- Morgan Stanley(MS) is in talks to possibly be acquired by China's CITIC, sources in the U.S. and China have told CNBC.
- Morgan battles short-sellers.

- Washington Mutual Inc (WM), the giant U.S. savings and loan beleaguered by mortgage losses, has put itself up for sale, sources familiar with the matter said on Wednesday.
- The chairman of the No. 2 U.S. mortgage bank said on Wednesday that his company was "buying with both hands" and, given the distressed state of financial assets, he felt "like a kid in a candy store." Wells Fargo (WFC) Chairman Richard Kovacevich declined to comment to Reuters at a conference in Beverly Hills, California, on whether the company is interested in buying Washington Mutual Inc (WM) or Wachovia Corp (WB) but indicated he was interested in buying other banks in distress.

Financial Times:
- The Russian government was facing one of the biggest tests of its market economy on Wednesday after it was forced to close its two main stock exchanges to halt a market rout that has led to the steepest declines since the August 1998 crisis. The move came after shares began to tumble again as investors faced a new wave of forced equity sales on margin calls and a dearth of cash. One senior investment banker said a mid-sized commercial bank began to fail to make payments on Wednesday morning, causing the government to pull the plug on the stock exchanges.

Jiji Press:
- Toshiba Corp. is considering bidding for SanDisk Corp.(SNDK) to counter a hostile takeover approach from Samsung Electronics Co.

The Economic Times:
- The crisis in the US financial market will hit the Indian real estate sector hard. The sector was already reeling under tremendous pressure as RBI increased the interest rates to contain inflation, besides restricting the fund flow in it. The financial crisis in the global market will affect the availability of fund for the domestic realty sector. As RBI has already put restriction on Indian banks to finance real estate companies in the country, they are depended on foreign funds through FDI route for their fund requirements. But, a senior consultant said following the development in US, many of the private equity funds are returning back to their mother countries. The source said that many of these private equity funds were launched by investment banks. But, now as the fate of these investment banks is uncertain, their capability to raise funds in their country is doubtful. This will put severe constraint on availability of funds in India. At the same time, the crisis in the global market has affected the demand for the real estate space in India. The development in US has affected the global economy, which has forced many of the global majors to either postpone or cut the expansion plan. Global consultancy firm now predict with the cancellation and postponement of the expansion plan of companies, many of the regions like NCR, Bangalore and Pune will face the situation of oversupply in the office space. The rentals in these areas are projected to fall by 25 to 30% in the next 12 months.

Late Buy/Sell Recommendations

- Reiterated Buy on (RIMM), target $160.

Thomas Weisel:
- Rated (EYE) Overweight, target $30.

Night Trading
Asian Indices are -4.0% to -3.0% on average.
S&P 500 futures +.19%.
NASDAQ 100 futures unch.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories

Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (PIR)/-.23
- (CAG)/.24
- (FDX)/1.23
- (PALM)/-.19
- (ORCL)/.27
- (CTAS)/.52
- (CCL)/1.58

Economic Releases
8:30 am EST

- Initial Jobless Claims for last week are estimated to fall to 440K versus 445K the prior week.
- Continuing Claims are estimated at 3525K versus 3525K prior.

10:00 am EST
- Philly Fed for September is estimated to rise to -10.0 from -12.7 in August.
- Leading Indicators for August are estimated to fall .2% versus a .7% decline in July.

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly EIA natural gas inventory report, DA Davidson Engineering/Construction Conference, Calyon Airline Conference, CSFB Chemical Conference, Merrill Lynch Global Real Estate Conference and the Goldman Communications Conference could also impact trading today.

BOTTOM LINE: Asian indices are sharply lower, weighed down by technology and financial shares in the region. I expect US equities 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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