Thursday, December 11, 2008

Friday Watch

Late-Night Headlines

- Federal Reserve Chairman Ben S. Bernanke spoke twice in September with Barack Obama during the week that government officials allowed Lehman Brothers Holdings Inc. to fail and began engineering a banking industry rescue. President-elect Obama chose New York Fed President Timothy Geithner last month to serve in his administration as Treasury Secretary. Geithner was involved in the decision to let Lehman go bankrupt. Bernanke and Obama, then a senator from Illinois, talked for about 30 minutes the evening of Sept. 15 and for the same amount of time on Sept. 18. The records of meetings in September and October don’t disclose the content of the conversations. The daybook released by the Fed doesn’t list any conversations with Obama’s election opponent, Arizona Senator John McCain.

- U.S. sales of Nintendo Co.’s Wii video-game console more than doubled in November, providing a lift in an industry being pinched by the U.S. recession. Nintendo, the world’s largest maker of game consoles, sold 2.04 million Wii players last month, researcher NPD Group Inc. said today in a statement. That’s a record for consoles in any month besides December, Nintendo of America President Reggie Fils-Aime said today, and compares with 981,000 units last year.

- China, the world's second-biggest energy consumer, may face an energy oversupply in the next one or two years as economic growth slows. The country may see an oversupply in coal, fuels and power because of slowing demand and a ``sizable'' expansion in capacity, Wang Siqiang, a deputy director at the National Energy Administration, said at the China Energy and Environment Summit in Beijing today.

- China’s growth will slow more sharply in the first quarter of 2009 before stabilizing and then recovering, Liu He, vice minister of the Central Leading Group on Financial and Economic Affairs said in Beijing today.

- Commodities Head For Worst Finish in Memory in 2008. (video)

- Exxon Mobil Corp.(XOM), the world’s largest company, may raise spending on oil exploration and refineries by $5 billion next year as rival energy producers reduce budgets to cope with falling prices and a recession-driven drop in demand. The Irving, Texas-based company expects to spend as much as $30 billion in 2009 to lease drilling rigs and expand fuel plants, which would be a 20 percent increase from this year, Chief Executive Officer Rex Tillerson said today during a meeting with reporters in Chicago.

- Bernard Madoff, founder and president of a New York firm that invested funds for wealthy individuals, hedge funds and other institutions, was charged with operating what he told employees was a long-running $50 billion Ponzi scheme in what may be one of the largest frauds in history. Madoff, 70, head of Bernard L. Madoff Investment Securities LLC, was arrested today at 8:30 a.m. by the FBI and appeared before U.S. Magistrate Judge Douglas Eaton in Manhattan federal court.

Wall Street Journal:

- While layoffs are accelerating across financial services companies, the pace of recruiting is actually accelerating in wealth management. Companies including Morgan Stanley (MS) and UBS AG (UBS) are posting weeks in which they are attracting large numbers of financial advisor teams. Moreover, some of these new hires manage money for the richest of the rich.

- So Steven Chu, President-elect Obama’s likely choice to head the Department of Energy, is a proponent of energy efficiency and conservation as the first step in rejigging America’s energy mix. But since conservation alone won’t do it, what are his idea about finding new supplies of energy? Dr. Chu’s marquee work at the Lawrence Berkeley National Laboratory is the Helios Project. That’s an effort to tackle what Dr. Chu sees as the biggest energy challenge facing the U.S.: transportation. That’s because it’s a huge drain on U.S. coffers and an environmental albatross, Dr. Chu says. Helios has focused largely on biofuels—but not the bog-standard kind made from corn and sugar. The Energy Biosciences Institute, a joint effort funded by BP, is looking to make second-generation biofuels more viable. Among the approaches? Researching new ways to break down stubborn cellulosic feedstocks to improve the economics of next-generation biofuels, and finding new kinds of yeast to boost fermentation and make biofuels more plentiful while reducing their environmental impact. What about other energy sources? Big Coal won’t be very happy if Dr. Chu gets confirmed as head of the DOE—he’s really, really not a big fan. “Coal is my worst nightmare,” he said repeatedly in a speech earlier this year outlining his lab’s alternative-energy approaches.

- The pay-to-play case against Illinois Gov. Rod Blagojevich puts another Chicago political figure back in the spotlight: developer Antoin Rezko, a onetime fund-raiser for Barack Obama who was convicted in June of influence peddling. Mr. Rezko appears to be playing a key role in the case against Mr. Blagojevich, which, coupled with an unrelated, recently filed lawsuit in that state, could give Obama critics grist for their attempts to tie him to corrupt Chicago politics.

- Senate Seat Offered Blagojevich a Financial Lifeline. On Nov. 4, U.S. voters elected Democratic Sen. Barack Obama as president and presented Illinois Gov. Rod Blagojevich with an extraordinary political opportunity: the chance to choose Mr. Obama's successor. The opportunity came as federal investigators were circling Mr. Blagojevich, building a case that he allegedly spent his time in office trading jobs, contracts and other favors in return for political and financial gain. It also came as Mr. Blagojevich's campaign fund faced more than $500,000 in legal bills from the federal inquiry and he owed more than $900,000 on homes in Chicago and Washington, D.C. Ethics legislation scheduled to take effect on Jan. 1 would restrict his ability to raise campaign funds from state contractors, a steady source in the past.

NY Times:
- Global oil consumption will drop this year for the first time since 1983, as an economic downturn in the West and slower growth in China cut fuel demand, according to the world’s main energy forecaster. The International Energy Agency, an adviser to industrialized nations, said on Thursday that it projects worldwide demand to fall by 200,000 barrels a day, to 85.8 million barrels a day, in 2008. The new forecast is 350,000 barrels a day less than the agency’s last monthly report, which is widely read among energy experts. Oil demand in the United States has been particularly hard-hit this year, especially when gasoline prices exceeded $4 a gallon nationwide over the summer. Consumption is expected to fall by 6.3 percent this year compared with 2007, to 19.4 million barrels a day, and again by 1.4 percent in 2009, the energy agency said.


- The end of the year can’t come soon enough for hedge fund magnate Ken Griffin, whose main investment portfolio at Citadel Investment Group continues to pile up big losses. As of Dec. 5, Citadel two main funds were down an eye-popping 49.5% for the year, according to a posting on the hedge funds website obtained by BusinessWeek. Citadel’s main hedge funds were cruising along for much of the year until September, but they sprung a leak after Lehman Brothers filed for bankruptcy on Sept. 15.
- Charles Schwab: It will get better. When will the market roar back? A lot sooner than you think, says the veteran investor.

- Google(GOOG) releases its Chrome browser.


- Stanley(SXE): Defense Contractor Beefs Up Intelligence Work With Acquisition.

LA Times:

- California regulators today adopted the nation's first comprehensive plan to slash greenhouse gases, offering it as a model for President-elect Barack Obama, who has pledged an aggressive effort on the national and international stages to combat global warming. The ambitious blueprint by the world's eighth-largest economy would cut the state's emissions by 15% over the next 12 years, bringing them back down to 1990 levels. Manufacturers and chambers of commerce called on state regulators to lower the cost of the climate plan, saying that it will lead to billions of dollars in higher electricity costs. Automakers are also fighting California's pending rule to crack down on carbon dioxide emissions from cars, a regulation that more than a dozen states say they will also adopt.

- Claymore Securities is digging into the battered transportation sector more with plans to launch the first exchange-traded fund focusing on the airlines industry. Next month, the ETF provider says the Claymore/NYSE Arca Airline ETF should be ready to trade.


- California faces a $41.8 billion shortfall for its combined current and next fiscal years, up from a prior $28 billion estimate as its economy weakens and revenues decline, the director of the state's Department of Finance, said on Thursday.

- A proposal to bail out the U.S. auto industry and avert the threatened collapse of one or more auto companies failed in a procedural vote in the Senate on Thursday night. The White House said it would evaluate its options in light of the collapse of the bailout legislation in Congress.

- U.S. sales of video game hardware and software rose 10 percent in November from a year earlier, market researcher NPD said on Thursday, as Nintendo Co Ltd reported its Wii console and DS hand-held system both set U.S. sales records in the month.

The Economic Times:

- Export of goods from India registered an over 10% decline in November this year, the second time in a row, even as the government is readying another stimulus package for exporters, likely to be announced next week. The first quarter of the next fiscal will be especially hard for exporters,” a senior commerce department official, who did not wish to be identified said.

China Daily:

- Dinner out is going out of fashion in Beijing. Restaurants are usually the first to feel the chill of recession as Beijing's high-end eateries that depend on group reservations and banquets for business will tell you. "The number of diners has dropped by two-thirds from Monday to Thursday and by half on weekends," says Tianyi Li, deputy general manager of Yi Jin Yuan. It is a classy Muslim restaurant, where an average diner spends 150 yuan ($22). Those who venture into VIP rooms could be poorer by 500 yuan per person. "The trend seems to be to cut down dinner budgets and reduce the number of visits to restaurants," Li says. "Diners who used to splurge more than 10,000 yuan on a banquet now spend much less, and those who preferred private rooms now dine in the general area."

- China home sales fell 20.6% in the first 11 months of the year.

Australian Review:

- Australian Prime Minister Kevin Rudd will give 1.3 million small businesses a tax break to help them survive the economic slowdown.

Late Buy/Sell Recommendations

- Added (HCC) to Top Picks Live list, target $29.

- Reiterated Buy on (IRM), target $26.

Goldman Sachs:

- Downgraded (PTR) to Sell.

Night Trading
Asian Indices are -4.50% to -2.0% on average.
S&P 500 futures -4.70%.
NASDAQ 100 futures -4.10%.

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
- None of note

Economic Releases
8:30 am EST

- The Producer Price Index for November is estimated to fall 2.0% versus a 2.8% decline in October.

- The PPI Ex Food & Energy for November is estimated to rise .1% versus a .4% gain in October.

- Advance Retail Sales for November are estimated to fall 2.0% versus a 2.8% gain in October.

- Retail Sales Less Autos for November are estimated to fall 1.8% versus a 2.2% decline in October.

10:00 am EST

- Preliminary Univ. of Mich. Consumer Confidence for December is estimated to fall to 54.5 versus 55.3 in November.

- Business Inventories for October are estimated to fall .2% versus a .2% decline in September.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Harsco Corporation analyst meeting could also impact trading today.

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

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