Thursday, September 18, 2008

Today's Headlines

- The Democratic-controlled Congress, acknowledging that it isn't equipped to lead the way to a solution for the financial crisis and can't agree on a path to follow, is likely to just get out of the way. Lawmakers say they are unlikely to take action before, or to delay, their planned adjournments -- Sept. 26 for the House of Representatives, a week later for the Senate. While they haven't ruled out returning after the Nov. 4 elections, they would rather wait until next year unless Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke, who are leading efforts to contain the crisis, call for help. One reason, Senate Majority Leader Harry Reid said yesterday, is that ``no one knows what to do'' at the moment. the Democrats opened themselves up for attack with Reid's comments. The Republican National Committee pounced on the Nevada lawmaker for his ``despair,'' and Senator Mel Martinez, a Florida Republican, said his remarks are ``not a way to inspire confidence or begin to turn the tide.'' And there were some calls for at least a bipartisan show of leadership during the crisis.

- Andy Lipow, president of Lipow Oil Assoc. LLC, says oil prices may fall to $80 a barrel. (video)

- Morgan Stanley(MS) and Goldman Sachs Group Inc.(GS), the largest independent securities firms in the U.S., fell for an eighth day in New York trading amid a crisis of confidence in financial companies.

- New York Attorney General Andrew Cuomo is investigating short sellers of Lehman Brothers Holdings Inc., American International Group Inc. and other financial companies to see if investors spread false information to drive down stock prices.

- U.S. Treasury and Federal Reserve officials are considering a ``permanent'' plan to address the financial crisis, said Senator Charles Schumer, who proposed a new agency to pump capital into troubled financial companies.

Wall Street Journal:
- Industrial giant General Electric's(GE) success in financial services, which now provides roughly half its profits, is turning sour.

- Symantec Corp.’s(SYMC) new Norton anti-virus and security software enables computers to run faster and more smoothly while protecting them against malicious software, Walter Mossberg said.

- Lehman Brothers Holdings Inc.'s demise, already damaging to a number of Asian banks, may be inflicting losses on Asian hedge funds, too. Over the past few days, the financial woes of American International Group Inc., a company with extensive business and a long history in Asia, has sent shockwaves through the region's equity and currency markets. However, "for hedge funds, the Lehman bankruptcy is vastly more damaging," says Steve Diggle, portfolio manager at hedge fund Artradis Fund Management in Singapore.

- Studios Hope YouTube Tie Sells Movie.

- Maybe Wal-Mart(WMT) Isn’t So Bad for Small Business After All.


- Treasury Secretary Henry Paulson is working on setting up a government facility to take on bad debts from financial institutions to prevent a worsening of the global credit crisis, Wall Street sources have told CNBC.

Market Watch:

- Securities and Exchange Commission rules that went into effect Thursday designed to stop so-called "naked" short selling could prove to be a boon for a rapidly growing segment of the market for exchange-traded funds. The SEC said it is concerned "about the possible unnecessary or artificial price movements based on unfounded rumors regarding the stability of financial institutions and other issuers exacerbated by 'naked' short selling." The agency is also considering a rule that would require hedge funds to disclose their short positions. However, the more stringent rules on short selling could drive interest in ETFs that allow investors to conveniently short entire segments of the market. The funds use derivatives and other financial instruments to deliver short exposure and leverage. ProShares and Rydex Investments are ETF managers that oversee bearish funds that give the opposite daily return of market indexes, minus fees and expenses. Some of these ETFs also pile on leverage, which magnifies their volatility and results in bigger gains and potential losses for investors. For example, ProShares UltraShort Financials (SKF) is an ETF that gives leveraged, short exposure to the financial sector. Essentially, it gives twice the inverse (opposite) of the daily return of the sector. Therefore, if the tracking index lost 2% during a trading session, the ETF should rise roughly 4%. The fund has seen its trading volume spike this week as the credit-fueled problems in the financial sector have come to a head and some of Wall Street's largest institutions have disappeared overnight. Launched in early 2007, the ETF's daily volume broke through 70 million shares for the first time Monday, and again on Wednesday. ProShares Chairman Michael Sapir in an interview Thursday said the ETF saw its volume bump up earlier this summer when the SEC put a temporary rule in place geared to prevent naked short selling of key financial institutions. Short-selling ETFs allow investors to hedge against losses or profit from market declines without borrowing the underlying stocks. Traders can also get leverage without setting up a margin account.

- Clamoring For the Uptick Rule: Brokers Beg for Return of Short Selling Reins; Siebert Urges Global Margin Requirements, Disclosure.

Washington Post:

- Despite perceptions that Sen. John McCain has spent more time on the attack, Sen. Barack Obama aired more negative advertising last week than did the Arizona Republican, says a study released yesterday. Seventy-seven percent of the Illinois Democrat's commercials were negative during the week after the Republican National Convention, compared with 56 percent of the spots run by McCain. For all the talk of an expanded electoral map, both campaigns are concentrating resources in traditional battlegrounds, with slightly more than half the total spent on advertising going to Michigan, Ohio, Wisconsin, Indiana, Minnesota and Pennsylvania.


- Sales of SIM Cards Might Shuffle Deck in Wireless Services.


- Nearly one in four hedge funds surveyed said that they have a net short equities position, compared with 6% who held net short equities positions in August. At the same time hedge funds are reducing, or being forced to reduce, their leverage. The weighted average ratio of gross assets to debt fell from 1.2 times in August to 1 times in September. More than half of respondents to the question have a leverage ratio of less than 1 times. Investors have also moved to their largest underweight position in emerging market equities since 2001, thanks to falling commodity prices, global growth concerns and residual inflation fears in emerging market economies.

- The IMF cut its forecast for global economic growth in 2008 and 2009, citing an anonymous source from the Group of 10 nations. The IMF reduced its estimate for world growth this year to 4%, from the 4.1% prediction it published in July. The forecast for 2009 expansion has been scaled back to 3.7% from 3.9%. The IMF raised its estimate for US economic growth this year to 1.7% from 1.3% and kept its 2009 expansion forecast unchanged at .8%. For the euro area, the IMF lowered its growth estimate for this year to 1.4% from 1.7%. It reduced its 2009 expansion prediction to .7% from 1.2%.

- Corporate Armor to Fight Hedge Fund Bullies.

- Morgan Stanley, one of the two biggest commodity derivatives traders, told energy brokers on Thursday in Singapore not to broadcast its bids and offers via Platts' trading window, brokers said. By keeping its bids and offers out of Platts' 30-minute trading window, Morgan Stanley will have less ability to influence the benchmark prices set by Platts, whose daily assessments are widely used in oil trading contracts.

Financial Times:
- Short-selling of financial stocks is to be banned in the United Kingdom from midnight on Thursday night under rules drawn up by the Financial Services Authority.

- Short-selling: the key players.

Dagens Industri:
- The Swedish government may lower taxes and remove bureaucracy as the global credit market turmoil hits Sweden, citing Industry Minister Maud Olofsson.

- Cement prices in Eqypt have fallen 7% after supply outstripped demand, citing Ahmed al-Zini of the Construction Trade Chamber.

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