Late-Night Headlines
Bloomberg:
- Heart attacks and stroke deaths dropped by a third in 2006 from 1999 as more people stopped smoking, ate better and used medications such as Bristol-Myers Squibb Co.’s Plavix to keep blood flowing freely within arteries. Heart disease accounted for 1 in 3 U.S. deaths in 2006, the latest year for which data is available, the Dallas-based American Heart Association said in a statement today. Drugs including cholesterol-lowering statins such as Pfizer Inc.’s Lipitor and the Plavix blood-thinner joined with better heart- attack treatment to lower the mortality rate, the health advocacy group said.
- Venezuela’s debt rating was lowered by Fitch Ratings on the “increased risk of financial and economic crisis” as a result of the nation’s policies.
- Ken Heinz, president of Hedge Fund Research sees hedge funds shift out of emerging markets. Heinz also discusses the investigation into Bernard Madoff’s alleged $50 billion Ponzi scheme. (video)
- Sugar fell for a second straight session in New York after Brazil, the world’s largest producer, said next year’s cane harvest will be its largest ever. The cane crop, used to make refined sugar and ethanol, will rise 11 percent in 2009, Alexandre Strapasson, sugar-cane director at Conab, Brazil’s Agriculture Ministry crop- forecasting agency, said at a news conference in Brasilia.
- Tremont Group Holdings Inc., a hedge- fund firm owned by OppenheimerFunds Inc., had $3.3 billion invested with Bernard Madoff, according to a person familiar with the matter. Tremont’s Rye Investment Management unit had $3.1 billion, virtually all of its assets, invested with Madoff, said the person, who declined to be identified because the information is private. Tremont had another $200 million invested through its fund of funds group, Tremont Capital Management. “We believe Tremont exercised appropriate due diligence in connection with the Madoff investments,” the company said in a statement. Tremont, which manages a total of $5.8 billion, is the second hedge fund company to report that more than half its assets were invested with Madoff, who was arrested Dec. 11 after he allegedly confessed to running a “giant Ponzi scheme” that may have bilked investors out of $50 billion. Fairfield Greenwich Group said on Friday it had placed $7.5 billion of its $14.1 billion in total assets with the Madoff.
- China’s spending on factories and real estate rose at a slower pace as property sales fell and export growth collapsed because of the global recession.
- The U.S. Treasury may adopt a plan that would let a car czar or the Treasury Secretary force General Motors Corp. and Chrysler LLC into bankruptcy if the automakers don’t show they can survive without government aid, a U.S. senator said. GM and Chrysler would be required to submit viability plans by March 31 or lose any further U.S. support, Carl Levin, a Democrat from Michigan, told reporters in Detroit yesterday. The Treasury plan would resemble a measure passed by the U.S. House last week that was rejected by the Senate. “I expect that the terms would be similar to the ones that were in the House bill,” Levin said. “The power rests in the hands of either the czar or the Secretary of the Treasury to force bankruptcy by March 31.”
Wall Street Journal:
- When U.S. Attorney Patrick Fitzgerald announced the arrest of Illinois Gov. Rod Blagojevich Tuesday, he suggested that he needed to act urgently because "we were in the middle of a corruption crime spree." But some members of Mr. Fitzgerald's team actually wanted the alleged scheme to sell President-elect Barack Obama's Senate seat to advance for a little longer, according to some people close to Mr. Fitzgerald's office. Had the plot unfolded, prosecutors might have gotten a rare opportunity to catch the sale of a Senate seat on tape, including the sellers and the buyers.
- President-elect Barack Obama's transition team said it had completed an internal review of contacts with Illinois Gov. Rod Blagojevich -- but wouldn't release its findings until Christmas week, at the request of federal investigators. The move comes as Mr. Obama tries to keep the news of his home state's disgraced governor from overshadowing his transition, and highlights the challenges of dispensing with the controversy in the face of a live investigation involving Mr. Obama's Senate seat.
- Illinois Gov. Rod Blagojevich was preparing to issue an executive order prior to his arrest last week that would have allowed union organizing of home-care workers that could have benefited a labor union with close ties to the governor. The existence of this executive order, though never signed, illustrates the close ties between the embattled governor and the powerful Service Employees International Union, the nation's fastest growing labor organization.
- President-elect Barack Obama is pushing to give U.S. energy policy a California-style makeover, choosing for key energy and environmental posts people who advocate more aggressive steps against climate change. Mr. Obama's picks add to the growing number of Californians poised to influence U.S. energy policy. That group includes House Speaker Nancy Pelosi, who has made addressing global warming a priority; Senate Environment Committee Chairman Barbara Boxer; and Rep. Henry Waxman, who last month defeated Rep. John Dingell (D., Mich.) for the chairmanship of the House Energy and Commerce Committee, after arguing he was better qualified to push climate-change legislation than Mr. Dingell, a longtime ally of his home state's auto makers. Mr. Obama declined to say Monday whether he would seek to resurrect a recently ended federal ban on drilling for oil and natural gas in many areas of the outer continental shelf.
CNBC.com: How Short-Sellers Almost Destroyed US Banking. Forget Bernard Madoff’s $50 billion fraud. The SEC, and the press, should be focused on short-sellers’ attempts to destroy the U.S. banking system, Cramer said. Don’t believe him? Here are the hard numbers, courtesy of a source inside the New York Stock Exchange: Just in the 12 days leading up to the Nov. 24 Citigroup(C) bailout, short selling accounted for over 49% of the total trading volume in that company’s stock. For JPMorgan Chase(JPM), it was 41%. Bank of America(BAC): 35%. Goldman Sachs(GS): 40%. Morgan Stanley(MS): 37%. Wachovia(WB): 42%. Wells Fargo(WFC): 42%. As a result, these stocks tumbled anywhere between 69% and 27% over that time period – all because of huge volumes of short selling.
- The Federal Reserve is expected to cut interest rates to close to zero on Tuesday and may point to further unconventional steps to battle a year-old recession Economists expect the US central bank to lower its target for benchmark overnight rates by at least a half-percentage point to 0.5 percent and clearly state it will deploy so-called quantitative easing measures to restore growth.
- Goldman Sachs(GS) Earnings Preview:
NY Times: Dell(DELL) Needs Acquisitions in Software, Servers, Storage
Forbes.com:
- There’s Gold In Bluetooth Chips. Even in a weak phone market, rising acceptance of connectivity technology should benefit semiconductor suppliers.
USA Today.com:
- A federal judge on Monday threw a lifesaver to investors who may have been duped in one of Wall Street's biggest alleged frauds, saying they need the protection of a special government reserve fund set up to help investors at failed brokerage firms. U.S. District Judge Louis L. Stanton ordered that clients of Bernard Madoff's private investment business seek relief under a federal statute created to rescue cheated investors. Stanton also ordered that business be liquidated under the jurisdiction of a bankruptcy court and named attorney Irvin H. Picard as trustee to oversee that process. Stanton signed the order after the Securities Investor Protection Corporation asked that steps be taken to protect investors in the scheme, which has ensnared several major banks and prominent figures as victims and could result in as much as $50 billion in losses.
- Hope builds for stock recovery in new year? Pros share predictions.
Reuters:
- Brazil’s Deputy Finance Minister Nelson Barbosa said the economy may shrink 1% in the fourth quarter. Barbosa also said it’s possible that Brazil’s gross domestic product will fall again in the first quarter.
- The Bush administration could act as early as Wednesday to approve an automaker bailout from its bank rescue fund, with conditions likely to reflect at least those approved by the U.S. House of Representatives last week, key lawmakers and other sources said on Monday.
- Sweetened terms on GMAC LLC's bond exchange offer makes it more likely the finance company will gain the support it needs to convert to a bank and gain access to government support needed to keep the company alive.
- Japan's Toshiba Corp said on Tuesday it would cut its NAND flash memory production by 30 percent from January as the global slowdown hits demand for the memory chips used in digital cameras and portable music players.
- Toyota Motor Corp plans to ask Nippon Steel Corp and other steel makers for a price cut of about 30 percent amid slower steel and vehicle demand, the Nikkei business daily reported on Tuesday.
Financial Times: Oil companies and traders are storing at least 50m barrels of oil in supertankers in a clear sign of supply outstripping demand as the global economy slows. The surge in floating storage, – enough to meet France’s oil imports for a month and the biggest since late 2001–, is likely to push the Opec oil cartel, which is due to meet on Wednesday in Oran, Algeria, to make a deeper production cut to reduce stocks. Storing oil in tankers is unusual as it is significantly more expensive than inland. Abdullah al-Badri, Opec’s secretary general, said on Monday:“Stocks are very high. We have to act. We see a very sizeable reduction [in production].” Several Opec officials have suggested a 2m barrels-a-day cut, the biggest in recent history, and were also hoping to persuade Russia – the world’s largest oil producer outside the cartel – to make a reduction. But with Russia’s oil output already declining because of a lack of investment, any commitment is likely to be seen as a political gesture rather than an actual reduction. Whatever the size of Opec’s cut, the floating storage surge is a clear sign the cartel is losing its battle to cut supplies more quickly than demand falls. Opec ministers said in November they intended to reduce developed countries’ oil stocks from the equivalent of 56 days of demand to 52. But the surge in floating storage indicates that tanks are brimming, in spite of Opec’s having announced 2m b/d in cuts. Indeed, inventories have risen to almost 57 days’ demand.
TimesOnline: Violent unrest may be sparked around the world by a prolonged global slump unless governments act with greater urgency to jump-start stalled economies, the head of the International Monetary Fund said on Monday. Dominique Strauss-Kahn sounded a stark warning over the consequences of what he argued was weak and uncertain government reaction to the economic crisis. He used a hard-hitting speech in Madrid to single out eurozone nations over what he attacked as an inadequate response.
The Independent:
- The Madoff situation is, at a time of mass redemptions and dwindling returns, what hedge funds needed least. A spectacular scandal causing huge losses that undermines trust in the industry.
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Earnings of Note
Company/EPS Estimate
- (BBY)/.23
- (GS)/-3.72
- (PAY)/.19
- (ADBE)/.57
- (HOV)/-1.71
Economic Releases
8:30 am EST
- The Consumer Price Index for November is estimated to fall 1.3% versus a 1.0% decline in October.
- The CPI Ex Food & Energy for November is estimated to rise .1% versus a .1% decline in October.
- Housing Starts for November are estimated to fall to 736K versus 791K in October.
- Building Permits for November are estimated to fall to 700K versus 730K in October
2:15 pm EST
- The FOMC is expected to drop the benchmark fed funds rate 50 basis points to .50%.
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BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing higher. The Portfolio is 75% net long heading into the day.
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