Weekend Headlines
- The cost of protecting Japanese and Australian corporate bonds from default declined, according to traders of credit-default swaps. The Markit iTraxx Japan index fell 10.5 basis points to 310.5 at 9 :21 am in Tokyo The Markit iTraxx Australia index was quoted 15 basis points lower at 375 in Sydney
- The US dollar gained the most in 16 years against the currencies of six major U.S. trading partners as a global economic slowdown spurred demand for the greenback as a haven from losses in emerging markets.
- The U.S. Treasury is considering taking stakes in insurers as it prepares a new round of capital injections targeted at regional banks and other financial companies, a person briefed on the plan said.
- Bonds of the biggest U.S. banks and high-quality mortgages are attractive because they're likely to benefit as the government intervenes to stem the credit crisis, according to Pacific Investment Management Co.
- India’s Inflation Concerns Persist, Reserve Bank of India Governor Subbarao Says.
- The Bank of Korea slashed interest rates by the most ever in an attempt to restore confidence after stocks lost a fifth of their value and the won fell to a decade low last week. Stocks rose. Governor Lee Seong Tae lowered the seven-day repurchase rate by 75 basis points to 4.25 percent, the central bank said in a statement in Seoul today.
- Investors should sell Canada's currency against the U.S. dollar as declining expectations for global growth push down prices for commodities the nation exports, RBC Capital Markets Inc. said. Canada's currency, dubbed the loonie for the aquatic bird on the one-dollar coin, is poised for its worst month since at least 1950 and on Oct. 24 touched the weakest since September 2004. Crude oil, which accounted for a 10th of Canada's export revenue in 2007, dropped 11 percent last week to $64.22 a barrel, a 16- month low.
- The Reserve Bank of Australia intervened for a second straight trading day in foreign exchange markets, buying Australian dollars as the currency traded near a five-year low against the U.S. currency.
Wall Street Journal:
- As falling gasoline prices squeeze refining profits, there are signs that refiners are ratcheting back production to pare losses.
- The global financial storm rolled across the Persian Gulf on Sunday, as Kuwait's central bank guaranteed bank deposits and cobbled together a hasty bailout for one of the country's largest banks. The Kuwait intervention is the first bank rescue in the oil-rich Gulf, which until now had seemed relatively immune to the current crisis.
- John McCain proclaimed Sunday that his presidential campaign remained viable, while Barack Obama warned his supporters against overconfidence in the home stretch of the general election. With many polls showing Democratic Sen. Obama ahead of his Republican rival by several points, each hit the stump this weekend seeking to shape expectations for the last nine days of the race.
MarketWatch.com:
- Citadel Investment Group founder Ken Griffin said on Friday that his $15 billion firm has to change some of its businesses in the face of unprecedented deleveraging and fear in financial markets. Citadel's largest hedge fund, known as Kensington/Wellington, fell 35% this year, through Oct. 17, Chief Operating Officer Gerald Beeson told holders of the firm's medium-term notes during a conference call.
- Continuing to pull out all the stops in its effort to restore stability to financial markets and cushion the economy, the Federal Reserve is expected to slash interest rates again when it meets next week -- and leave the door wide open for further cuts, analysts said Friday.
NY Times:
- If you’re in the market for a new flat panel TV, you may be tempted to get ready to pull out your credit card (if you have any credit left). In the next few weeks, LCD and plasma set prices are due to plummet.
- Hewlett-Packard(HPQ), Dell Inc.(DELL) and China’s Lenovo Group are introducing personal computers that enable users to access e-mail or a Web browser in 30 seconds or less as they seek to accelerate the start time.
IBD:
Alexion Pharmaceuticals(ALXN): Biotech Firm’s Sales Explode On Drug To Treat Rare Blood Disorder.
Washington Post:
- For a 1980 investor in gold to break even after inflation, the precious metal would have to reach $2,200. So far this year, investors have purchased 611,000 newly minted, one-ounce U.S. gold coins, compared with 315,000 in all of 2007. The yearlong run on bullion has dried up the supply of coins for immediate delivery. Everything was out of stock last week at the online dealer OnlyGold.com. Gold, by the way, is taxed as a collectible -- whether you buy it in the form of coins, ETF shares or an interest in a pool account. Your tax rate on long-term capital gains would be 28 percent, compared with 15 percent on other assets.
Forbes.com:
- Gadgets We Love.
- The 100 Best Mid-Cap Stocks In America.
Federal Reserve Bank of St. Louis
- Monetary Trends
Business Week:
Can Apple(AAPL), Gilead(GILD) and the Hot Techs Keep Growing? In tough times, technology industry leaders are showing how it’s possible to thrive – and winning slots in BW’s annual Tech Hot Growth ranking.
- Can Anything Derail Google’s(GOOG) Growth Engine?
CNNMoney.com:
- Graphic: How Apple(AAPL) is gaining on Microsoft(MSFT). Here’s a chart that should keep Steve Ballmer up at night.It compares Microsoft’s (MSFT) market share, revenue, net profit and growth rate to Apple’s (AAPL), using the numbers from each company’s most recent quarterly report.
- Gasoline prices fell again, tumbling to the lowest price in a year, according to a daily survey of credit card swipes released Sunday. The average price of unleaded regular fell to $2.699 a gallon, down three and six-tenths of a cent, according to the Daily Fuel Gauge Report issued by motorist group AAA. Prices have fallen $1.15, or 30%, in the last 39 days.
Time:
- RealtyTrac, a company in Irvine, Calif., that, thanks to its nationwide network of records collectors, has emerged as a go-to source for foreclosure data.
Economist.com:
- How are emerging markets suffering? Let us count the ways
Reuters:
- Examiners with the Federal Reserve have questioned Wall Street counterparties about their exposure to debt and other holdings of Citadel Investment Group, The Wall Street Journal said on Saturday, a report Citadel denied.
Financial Times:
- Hedge funds are being asked by their prime brokers to put up more collateral after the collapse of Lehman Brothers(LEH). Financing costs are rising and some hedge funds have already sold their “most liquid” investments to meet client redemptions.
- A lot will be said about 2008 as it lumbers on painfully in its final quarterly stretch home. By any measure, it has been an excruciating year for hedge fund managers, leaving many wondering where the industry goes from here. Many hedge funds have failed to do what they were supposed to: preserve capital and provide absolute returns, says James Rutherford, founder and investment chief of London-based Sourcecap International, an investment firm running hedge funds and long-only funds seeking absolute returns. Long/short equity managers are facing particularly dire times due to the ban on shorting of financials and some other stocks in several countries, including the UK, Germany, the Netherlands and Australia. Quantitative managers betting on momentum and volatility are also finding their computer-driven models coming seriously unstuck. With regulators clamping down on rehypothecation (the practice by prime brokers of using collateral posted by hedge funds to raise cash to lend to other hedge funds) following the debacle of Lehman Brothers, the cost of shorting is expected to rise in the short-term, Mr Rutherford says. Some governments are also mulling over making the shorting ban long-term in the interest of protecting retail investors and safeguarding financial systems. "The standard absolute return model clearly hasn't worked," says Mr Rutherford, who set up Sourcecap in May 2007. "It has raised more questions than answers." The industry's woes will take a long time to wash out of the system but eventually will be beneficial, he adds.
- According to a report from Strategic Insight, entitled Global Fund Distribution - best practices, key trends and opportunities to grow sales worldwide, hedge funds are faltering and traditional funds will gain traction as a result. Confidence in alternative funds is effectively shattered, investors say. Assets flowing out of hedge funds could be channelled into mutual funds, but the process will take time, he says. "With hedge funds you can get delayed settlements and that can take a lot more than three months to sort out." But assets will not go straight into retail funds once they have been released. "Most of the money flowing out will go into cash in the first instance," says Mr Lough. "However, during the next stage, people will be best rewarded for taking pure equity risk without the hedging element - some money will go into long-only funds.
- Lloyd Blankfein, Goldman Sachs'(GS) chief executive, called Vikram Pandit, his Citigroup (C) counterpart, last month to discuss a merger, in a dramatic example of the secret maneuvering that preceded the government bail-out of the financial sector.
Telegraph:
- Europe on the brink of currency crisis meltdown. The latest data from the Bank for International Settlements shows that Western European banks hold almost all the exposure to the emerging market bubble, now busting with spectacular effect. They account for three-quarters of the total $4.7 trillion £2.96 trillion) in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom – a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles. Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund. Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama. Broadly speaking, the US and Japan sat out the emerging market credit boom. The lending spree has been a European play – often using dollar balance sheets, adding another ugly twist as global “deleveraging” causes the dollar to rocket.
- World’s biggest hedge fund restructures amid turmoil. Highbridge Capital Management, which is majority owned by JP Morgan Chase and has $25bn under management, is axing 10 per cent of its New York-based staff and plans cuts in Europe and Asia. The volatility in global stock markets has savaged the performance of some of the world’s best-known hedge funds, raising fears of a collapse in the sector.
- Russian default risk tops Iceland as crisis deepens. Russia’s financial crisis is escalating with lightning speed as foreigners pull funds from the country and the debt markets start to price a serious risk of sovereign default.
Independent:
- RAB Capital's energy fund, once worth more than a £1bn, has banned withdrawals by investors as it struggles with the fall in the price of oil and other commodities. The flagship fund has lost more than 50 per cent of its value in the last 12 months, and in a move to shore up its standing, RAB has moved to stop investors cashing in their holdings.
AFP:
- Iran is arming "freedom armies" in the Middle East, according to a top commander of the country's elite Revolutionary Guards quoted Sunday by a military website. "Today, not only our armed forces are self sufficient but the freedom armies of the region get part of their weaponary from us," said Hossein Hamedani, deputy commander of Iran's volunteer Basij militia.
The Australian:
- Western Australia's Government says Kevin Rudd's emissions trading scheme is a "half-baked" plan that threatens the state's economy. Treasurer Troy Buswell yesterday called for the 2010 start date to be deferred until a raft of problems were resolved. Business leaders have asked for the start to be delayed because of the downturn threatening to plunge the world into recession. Mr Buswell said the federal Carbon Pollution Reduction Scheme in its present form risked driving major industries overseas, as well as causing investment in the west to slow to a trickle, with "untold implications" for jobs and families.
Weekend Recommendations
Barron's:
- Made positive comments on (AAPL), (GOOG), (SGIC), (JCI), (HMC) and (TM).
Citigroup:
- Reiterated Buy on (ROP), target $50.
Night Trading
Asian indices are -5.25% to -2.0% on avg.
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 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 Upgrades/Downgrades Rasmussen Business/Economy Polling
Earnings of Note
Company/Estimate
- (HUM)/1.47
- (ACI)/.63
- (BEAV)/.55
- (TDW)/1.83
- (FPL)/1.35
- (CNA)/.78
- (VZ)/.65
- (ATHR)/.35
- (WMS)/.25
- (CF)/3.62
- (PCL)/.39
- (RCL)/1.67
- (RCII)/.47
- (SLG)/1.41
- (WEN)/.34
- (BWLD)/.31
Upcoming Splits
- (BF/B) 5-for-4
- (BKE) 3-for-2
Economic Releases
10:00 am EST
- New Home Sales for September are estimated to fall to 450K versus 460K in August.
Other Potential Market Movers
- The BIOCOM Investor Conference, (AVID) investor day and (WMT) analyst meeting 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 The Portfolio is 75% net long heading into the week.
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