Late-Night Headlines
Bloomberg:
- American International Group Inc.(AIG), the insurer rescued by the U.S. government, made $18.7 billion in payments tied to credit-default swaps to banks including Goldman Sachs Group Inc.(GS) and Societe Generale SA, according to a person briefed on the situation. The insurer sent the money to the banks in the three weeks after AIG’s Sept. 16 bailout, said the person, who declined to be named because the information is confidential. The banks bought the swaps from AIG as protection on mortgage securities that plunged in value.
- Asian money-market rates extended declines after the Bank of Korea slashed interest rates to a record low as policy makers seek to revive lending and counter a year-end funding squeeze. Australian financing costs fell a second day after banks including Westpac Banking Corp., the nation’s biggest by market value, raised $8 billion this week selling equity and debt. The difference between the rate Australian banks charge each other for three-month loans and the overnight swap rate, a gauge of cash scarcity, fell to 71 basis points at 12:03 p.m. in Sydney.
- China’s inflation cooled to the weakest pace in almost two years, signaling that growth is slumping and the economy is at risk of deflation. Consumer prices rose 2.4 percent in November from a year earlier, the statistics bureau said today, after gaining 4 percent in October. That was less than the 3.3 percent median estimate of 18 economists surveyed by Bloomberg News. Telecommunications prices tumbled 19 percent, pork fell 9.3 percent and garments declined 2 percent.
- The cost of protecting Asia-Pacific bonds from default declined, credit-default swaps show. The Markit iTraxx Australia index fell 10 basis points to 360 as of 11:51 a.m. in Sydney Japan was 5 basis points lower at 375 at 9:20 a.m. in Hong Kong , Barclays Capital prices show. The Markit iTraxx Japan index declined 2.5 basis points to 330 at 10:23 a.m. in Tokyo
- Connecticut State Treasurer Denise Nappier is proceeding with a plan to invest in hedge funds after market turmoil wiped out $5 billion of pension assets. Nappier, first elected treasurer in 1998, will begin allocating up to 8 percent of the $20 billion she oversees for public sector employees and teachers into hedge funds after the state’s investment advisory council approved the plan today. Connecticut, which claims to be the world hedge fund capital, is one of the few states that doesn’t invest its public pension in the asset class.
- Pfizer Inc. and Tiffany & Co. are among eight stocks that Benjamin Graham, the father of value investing and Warren Buffett’s mentor, would buy, Grant’s Interest Rate Observer said. Cooper Industries Inc., Nucor Corp., Cintas Corp., Archer Daniels Midland Co., Molex Inc. and RadioShack Corp. also meet the seven criteria Graham presented in 1973 for stocks that a “defensive investors might buy with confidence,” according to the latest issue of Grant’s, which was released today. “That there are as many as eight is a notable fact,” the newsletter said. “In March 2003, near what would prove to be the bottom of the post-Nasdaq washout, Grant’s could identify only two that met the grade.”
- Posco will make a record 6 trillion won ($4.4 billion) investment in South Korea next year, as Asia’s third-largest steelmaker takes advantage of spending cuts by rivals in Europe and Japan. The South Korea-based mill will expand capacity for products including heavy plates for ships and invest in furnace overhauls, spokeswoman Ko Min Jin said by phone today. Spending will rise from the 3.4 trillion won this year, the company said in an e-mailed statement.
Wall Street Journal:
- The scandal surrounding Illinois Gov. Rod Blagojevich's alleged attempt to sell President-elect Barack Obama's former U.S. Senate seat widened on Wednesday, threatening to taint a rising Democratic star and pull in one of the nation's biggest labor unions. An attorney for Rep. Jesse Jackson Jr. -- the son of longtime civil-rights activist and Chicago politician the Rev. Jesse Jackson -- said the congressman is likely the person referred to as "Senate Candidate No. 5" in a federal criminal complaint that alleges Gov. Blagojevich engaged in a broad range of influence-peddling and fund-raising schemes. U.S. Attorney Patrick Fitzgerald said Gov. Blagojevich was caught on a wiretap claiming that he'd been offered more than $500,000 by a representative of Senate Candidate No. 5 in exchange for Mr. Obama's Senate seat. James Montgomery Sr., attorney for Rep. Jackson Jr., denied that the congressman or his representatives sought a deal. Separately, the federal investigations cast a shadow over the Service Employee International Union, a fast-growing alliance of more than two million workers. Tuesday's complaint noted that Gov. Blagojevich spoke at least twice with an SEIU official to discuss a separate possible candidate for the vacant Illinois seat.
- The House of Representatives passed the wide-ranging rescue of the nation's auto makers, but Republican critics in the Senate raised objections that could endanger the initiative. Democrats and the Bush White House hoped for a Senate vote as early as Thursday and enactment by week's end. The legislation, approved 237-170 by the House, would provide money within days to cash-starved General Motors Corp. and Chrysler LLC. Ford Motor Co., which has said it has enough to stay afloat, would also be eligible for federal aid.
- President-elect Barack Obama has picked a Nobel laureate, a former Environmental Protection Agency administrator, and officials from New Jersey and Los Angeles to run his energy and environmental initiatives, putting heft into roles likely to dominate domestic policy in his first years in office.
MarketWatch.com: According to a valuation model from a research firm with an excellent long-term record, the stock market is likely to be significantly higher in several years' time -- regardless of whether the final low of the last year's bear market has been seen.
The firm in question is Ford Equity Research of San Diego. Ford Equity’s model shows stocks are the most undervalued since 1974.
CNBC.com: Berkshire Hathaway's(BRK/A) stake in Burlington Northern Santa Fe(BNI) is up to 19.83 percent, after Warren Buffett's holding company bought 3.3 million additional shares on Monday and Tuesday.
NY Times: Those Funny YouTube Videos Are Pulling in Serious Money.
BusinessWeek:
- Volkswagen’s Big Bet on Tennessee. Despite the industry’s travails, the German automaker expects to boost US sales with its $1 billion investment in Chattanooga factory set to make midsize cars.
CNNMoney.com: Cisco’s(CSCO) Grand Video Plan
Forbes.com:
- Green Mountain’s(GMCR) Sizzling Shares
USA Today.com:
- Ford(F) benefits from CEO’s turn to road less traveled
Reuters:
- Goldman Sachs on Thursday cut its growth forecast for China next year to 6 percent, the lowest prediction from any major bank, after a batch of extremely weak trade data across Asia. The bank had previously called for 7.5 percent expansion next year. The forecast for 6 percent growth next year comes in well below the 8 percent median estimate of a dozen institutions polled by Reuters last week. It would also mark the country's weakest growth since 1990 when the economy was disrupted by trade sanctions imposed after the Tiananmen crackdown. Chinese media have reported that Beijing is determined to "protect eight" next year, referring to the 8 percent growth that is widely thought necessary to absorb the millions of people entering the country's labor force every year.
- Money market fund assets climbed to a record $3.71 trillion in the latest week, the 11th straight weekly record, as falling yields failed to damp investors' flight to quality, according to the Money Fund Report. The same flight to quality pushed rates on three-month Treasury bills into negative territory on Tuesday amid bets that the Federal Reserve will keep cutting rates to avoid a deep, sustained recession.
Financial Times: Lippo Group, the Indonesian conglomerate that is one of Asia's leading real estate companies, has earmarked about $500m to make its first property investments in US and European cities and take advantage of tumbling valuations there.
- AIG is planning to announce more than $15bn worth of disposals before the end of the year - a move that would enable the stricken US insurer to pay back part of a $60bn government loan and ease the burden of its $150bn federal bail-out.
- Goldman Sachs (GS) is to change its retirement rules, giving long-serving employees an incentive to leave before the end of the year, in a move that could add to the 3,000-plus redundancies already announced by the Wall Street bank.
- One possible outline of the future of hedge funds is beginning to emerge from the wreckage of the industry's six-year boom, and it looks very much like the business did in the 1980s, but with lower fees. Several of the biggest hedge funds, including the venerable Tudor Investment Corp, run by Paul Tudor Jones, are returning to their roots as traders of the most liquid currency, interest rate and equity index markets. Both have split off toxic, hard-to-sell assets into special vehicles from which investors cannot withdraw their money. Other funds trading illiquid instruments - credit, structured products and complex derivatives - are stopping investors getting their money back, as they try to defer forced sales of assets. Many are likely to shut down as they eventually pay back disgruntled clients.
- The moribund market for corporate finance received a boost on Wednesday when Verizon Wireless, a joint venture between Verizon Communications (VZ) and Vodafone Group, closed a $17bn syndicated loan, the largest in the US this year. The deal, arranged by Morgan Stanley (MWD) , Bank of America (BAC) and Citigroup (C) , will enable Verizon Wireless to refinance the debt it took on in June when it bought Alltel, a regional telecoms group, for $28.1bn from TPG and Goldman Sachs (GS).
Late Buy/Sell Recommendations
Credit Suisse Group:
- South Korea The brokerage had previously forecast South Korea
Night Trading
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Earnings of Note
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- (MATK)/.27
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Economic Releases
8:30 am EST
- The Trade Deficit for October is estimated to shrink to -$53.5 billion versus -$56.5 billion in September.
- The Import Price Index for November is estimated to fall 4.9% versus a 4.7% decline in October.
- Initial Jobless Claims for last week are estimated to rise to 525K versus 509K the prior week.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and financial stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
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