Thursday, December 31, 2009

Stocks Finish Lower, Weighed Down by REIT, Transportation, HMO, Hospital and Utility Shares

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Stocks Slightly Lower into Final Hour on Profit-Taking, Higher Long-Term Rates, Rising Energy Prices

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Financial longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly negative as the advance/decline line is about even, most sectors are falling and volume is very light. Investor anxiety is very high. Today’s overall market action is mildly bearish. The VIX is rising +4.91% and is high at 20.94. The ISE Sentiment Index is low at 94.0 and the total put/call is around average at .87. Finally, the NYSE Arms has been running high most of the day, hitting 1.37 at its intraday peak, and is currently 1.12. The Euro Financial Sector Credit Default Swap Index is rising +.42% to 62.17 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising +2.05% to 85.55 basis points. This index is also well below its Dec. 5th record high of 285.99. The TED spread is unch. at 21 basis points. The TED spread is now down 444 basis points since its all-time high of 463 basis points on October 10th of last year. The 2-year swap spread is falling -6.28% to 27.88 basis points. The Libor-OIS spread is up +1 basis point to 9 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +1 basis point to 2.41%, which is down -24 basis points since July 7th of last year. The 3-month T-Bill is yielding .05%, which is up +1 basis point today. Oil Service, Gold, Airline, Gaming, Homebuilding, Financial, Disk Drive, Ag and Alt Energy shares are higher on the day. Gauges of investor angst are fairly high again today given just mild market weakness, which is a positive. I still suspect terrorism jitters are holding stocks back a bit ahead of tonight’s festivities. The UK sovereign debt cds is falling -2.1%, which is another positive. US scrap steel is up another 2.2% over the last five days. The Bloomberg Financial Conditions Index rose again this week to .09, which is the best level since the week of July 20th, 2007. (XLF) is trading well today. Despite terrorism and rising oil worries, airlines haven’t given back much of their recent gains and are outperforming again today, rising +.4%. On the negative side, cyclicals are relatively weak and the market mostly ignored today’s positive economic report again. Nikkei futures indicate an +174 open in Japan and DAX futures indicate an +2 open in Germany on Monday. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less economic fear, technical buying, year-end window dressing, less financial sector pessimism and seasonal strength.

Today's Headlines


- Fewer Americans than anticipated filed claims for unemployment benefits last week, pointing to an improvement in the labor market that will help sustain economic growth next year. Initial jobless claims fell by 22,000 to 432,000 in the week ended Dec. 26, the lowest level since July 2008, Labor Department figures showed today in Washington. The number of people collecting unemployment insurance fell in the prior week to 4.98 million, and those receiving extended benefits jumped. “It’s boding well for outright job growth,” said Stephen Gallagher, chief U.S. economist at Societe Generale in New York, who forecast claims would drop to 430,000. “It seems that some of the layoffs that took place in the early part of the year were excessive.” “What we’ve seen is definite stability and just a hint toward things trying to get better,” Jeffrey Joerres, chief executive officer of Manpower Inc., said in a Bloomberg Television interview today. The world’s second-largest provider of temporary workers, is experiencing “slow but steady increases in people who are out on assignment,” he said. “It’s a little in every office, which is a good sign because it’s broad-based.” The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.8 percent in the week ended Dec. 19, today’s report showed. The four-week moving average of initial claims, a less volatile measure, dropped to 460,250 last week from 465,750 the prior one. Claims are down from a 26-year high of 674,000 in the week ended March 27.

- US consumers are becoming more confident, suggesting the retail sales rally in November probably accelerated this month, according to Dennis Gartman, an economist who publishes the daily Gartman Letter market report. “When December’s retail sales figures are finally released sometime next month, they shall register a strong year-on-year comparison.”

- The Mayo Clinic, praised by President Barack Obama as a national model for efficient health care, will stop accepting Medicare patients as of tomorrow at one of its primary-care clinics in Arizona, saying the U.S. government pays too little. More than 3,000 patients eligible for Medicare, the government’s largest health-insurance program, will be forced to pay cash if they want to continue seeing their doctors at a Mayo family clinic in Glendale, northwest of Phoenix, said Michael Yardley, a Mayo spokesman. Obama in June cited the nonprofit Rochester, Minnesota-based Mayo Clinic and the Cleveland Clinic in Ohio for offering “the highest quality care at costs well below the national norm.” Mayo’s move to drop Medicare patients may be copied by family doctors, some of whom have stopped accepting new patients from the program, said Lori Heim, president of the American Academy of Family Physicians, in a telephone interview yesterday. “Many physicians have said, ‘I simply cannot afford to keep taking care of Medicare patients,’” said Heim, a family doctor who practices in Laurinburg, North Carolina. “If you truly know your business costs and you are losing money, it doesn’t make sense to do more of it.” The Mayo organization had 3,700 staff physicians and scientists and treated 526,000 patients in 2008. It lost $840 million last year on Medicare, the government’s health program for the disabled and those 65 and older, Mayo spokeswoman Lynn Closway said. Mayo’s hospital and four clinics in Arizona, including the Glendale facility, lost $120 million on Medicare patients last year, Yardley said. Reid Cherlin, a White House spokesman for health care, declined comment on Mayo’s decision to drop Medicare primary care patients at its Glendale clinic.

- Gold may rise as investors buy futures to reflect the metal’s increased weighting in a benchmark raw-materials index.

- The dollar advanced to a three-month high against the yen as a government report showed U.S. initial jobless claims unexpectedly fell last week. The greenback was headed for its first monthly gain since June versus the currencies of major U.S. trading partners on speculation the Federal Reserve is moving closer to withdrawing stimulus measures as the economy recovers, pushing Treasury yields higher. “There’s a good labor market recovery coming through,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “Bond yields have gone up, and that should give the dollar a boost.”

- AT&T Inc.(T), with $6.63 billion of debt coming due, may be the biggest beneficiary of the record rally in U.S. corporate bonds in 2009. Borrowing costs have fallen to almost a five-year low, meaning the Dallas-based phone company and the rest of corporate America with $429 billion of debt maturing are poised to shave $17.4 billion off annual interest expense in 2010, according Moody’s Investors Service and data compiled by Bloomberg.

- Iran’s chief prosecutor threatened to put the country’s opposition leaders on trial for “supporting apostates” if they don’t distance themselves from anti-government protests earlier this week. The comments by Prosecutor General Gholam Hossein Mohseni Ejei regarding Mir Hossein Mousavi and Mehdi Karrubi were published in the state-owned Iran newspaper today. Thousands of government supporters massed in the capital Tehran yesterday, some calling for the death of Mousavi and Karubbi, whose supporters have rallied in protest since the disputed June 12 election won by President Mahmoud Ahmadinejad. The authorities warned they will crush any further anti-regime demonstrations.

- Leveraged loans posted record returns this year while buyouts such as Blackstone Group LP’s purchase of Anheuser-Busch InBev NV’s amusement-park business helped fuel more than $150 billion of new debt financing. The Standard & Poor’s/LSTA U.S. Leveraged Loan 100 Index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, recorded a total return of 52.03 percent this year as of yesterday, an all-time high since the inception of the index in January 2002, according to data provided by S&P.

- Taxpayer losses from supporting Fannie Mae and Freddie Mac will top $400 billion, according to Peter Wallison, a former general counsel at the Treasury who is now a fellow at the American Enterprise Institute. “The situation is they are losing gobs of money, up to $400 billion in mortgages,” Wallison said in a Bloomberg Television interview. The Treasury Department recognized last week that losses will be more than $400 billion when it raised its limit on federal support for the two government-sponsored enterprises, he said. The U.S. seized the two mortgage financiers in 2008 as the government struggled to prevent a meltdown of the financial system. The debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks grew an average of $184 billion annually from 1998 to 2008, helping fuel a bubble that drove home prices up by 107 percent between 2000 and mid-2006, according to the S&P/Case- Shiller home-price index.

- President Barack Obama is being urged to strengthen anti-terrorism efforts as he awaits initial results of an investigation into the Dec. 25 attempted bombing of a U.S. airliner. Senate Intelligence Committee Chairwoman Dianne Feinstein asked the president in a letter yesterday to change a 2008 policy that limits the government’s ability to place people on a watch list requiring extra screening or banning them from flying. “The U.S. government should watch-list, and deny visas to, anyone who is reasonably believed to be affiliated with, part of, or acting on behalf of a terrorist organization,” Feinstein, a California Democrat, said in the letter. Obama has requested the criteria used for placing people on watch lists as part of the examination of anti-terror policies.

- AT&T Inc.(T) ended its sponsorship deal with Tiger Woods after his admissions of marital infidelity, becoming at least the third company to scale back ties to the professional golfer.

Wall Street Journal:

- An 11-person European Parliament delegation is scheduled to visit Tehran next week, drawing a rebuke from U.S. lawmakers concerned the visit could legitimize Iranian President Mahmoud Ahmadinejad's government. The Jan. 7-11 mission marks the first visit by a Western parliamentary body to Tehran in more than a year. It comes as Mr. Ahmadinejad's security forces have accelerated a crackdown on Iran's political opposition. The trip, set to occur a week after the expiration of President Barack Obama's deadline for Iran to respond to international calls for negotiations over its nuclear program, is feeding debate among the U.S. and its European allies over how long to keep open the window for diplomacy with Tehran. "We believe that a visit from the EP would send the wrong message to the Iranian government and undermine the international efforts to end their nuclear program," 15 U.S. House members wrote European Parliament President Jerzy Buzek last week. "We urge you not to authorize the visit at this time."

- In 2009, consumers flocked to the new smartphones hitting the market, and the world's wireless operators felt the pressure to upgrade their networks in response. 2010 will be the year that the carriers - and maybe even consumers - start placing orders for network-boosting products, investors and entrepreneurs say. And among the gizmos that will be in high demand are femtocells, the small base stations that boost coverage. Long a subject of debate in the telecom world, femtos are poised to become a household word, as some of the barriers to widespread deployment will fall away with the end of 2009 and the beginning of 2010. "In the latter quarter of 2009, we were shipping a few thousand units per month," said Tom Hussey, the head of American sales and business development at venture-backed Ubiquisys Ltd. "It's going to go to tens of thousands per month after the first quarter of 2010." U.K.-based Ubiquisys is one of several privately held femto companies that will be competing with well known public companies that are making a play in the same market. But rather than settling for the crumbs that fall off the table, Ubiquisys and other start-ups will go head to head with major manufacturers in 2010. "No operator wants just one source" for this kind of technology, Hussey said, indicating that the market will be big enough for several players to prosper. The company, which has raised nearly $50 million from Accel Partners, Advent Venture Partners, Atlas Venture, Google and T-Mobile Venture Fund, expects to break even in 2010. Ubiquisys also expects to sell femtos directly to consumers, having reached the "magic number" of $100 per unit, he said. Femtocells - a cousin technology to picocells and macrocells - are small boxes that function like miniature cell towers. The devices, also called access-point base stations, plug directly into the broadband connection in a home or business, ironing out glitches in coverage. Inside a femtocell is a system of chips and antennas that can rout voice and data traffic over the Internet rather than a carrier's main cell network. This capability makes femtos a good business proposition for the operators, who want to handle increasing amounts of traffic without building new towers. "It's ten times cheaper" to use femtos instead of building towers, said John Bayless, a general partner at Sevin Rosen Funds who holds a board seat at AirWalk. "The operators are beginning to have firm plans" to deploy them. As CDMA operators beef up their networks, they are turning to well-known manufacturers like Samsung, Motorola (MOT) and Ericsson for femtocells. UMTS operator AT&T has placed femto orders with Cisco Systems Inc.

- The market for full-body scanners, now being considered for wider use in airport security, includes many more potential end users, according to manufacturer L-3 Communications Holdings Inc. (LLL). In an interview, Tom Ripp, president of Security and Detection Systems at L-3, said 200 of the company's SafeView body scanners have been deployed worldwide. The potential market includes thousands of airport locations as well as courthouses, prisons, border crossings and rail facilities. L-3 and OSI Systems Inc. (OSIS) are the only two companies certified to make full-body scanners for the U.S. government.

- In a brutal year, technology companies responded by hunkering down and developing new products at a faster rate as they tried to wrest sales from one another. While 2010 isn't expected to be a blockbuster, consumers have shown they are still willing to spend on gadgets, at least for hot products like Apple Inc.'s iPhone and Inc.'s Kindle. There are also signs that frozen corporate budgets are thawing—driven by aging equipment, falling hardware prices and new offerings, notably Microsoft Corp.'s Windows 7.

- New Year’s Resolutions for Washington.

- What to expect in 2010. Commentary: Winners and losers to watch in the tech industry.


- China on Thursday decried a U.S. decision to impose duties of 10 to 16 percent on Chinese-made steel pipe, the biggest U.S. trade case to date against China, and said it had been made a scapegoat of protectionist interests. The Ministry of Commerce said it was "strongly dissatisfied with and resolutely opposed" to the vote of the U.S. International Trade Commission for countervailing duties, which Washington said were needed to balance out unfair state subsidies to Chinese makers of pipes for oil wells. The global financial crisis and fall in demand for oil, not Chinese policies, were to blame for pressures on U.S. manufacturers, said a statement issued on the ministry's website.

- Billionaire investor Carl Icahn plans to pump more money into his bid to buy Donald Trump's bankrupt casinos. In court papers filed in U.S. Bankruptcy Court in New Jersey, the billionaire's investment company says it will commit $125 million more in financing to buy struggling Trump Entertainment Resorts.

NY Times:

- The United Nations is moving as many as 60 foreign employees, or about one-quarter of its international staff, out of Pakistan for at least six months out of safety concerns, a United Nations official said Thursday.

The Business Insider:

- The 50 Worst Gadgets Of The Decade.


- According to analysts at Kaufman Brothers, form factor innovation across computing and mobile devices would drive additional growth for semiconductors. Kaufman Brothers expects the semiconductor product cycles to be driven further by content access and the concept of connected living rooms. New products are likely to be launched during 2010, driven by processor innovation from Intel (INTC), Qualcomm (QCOM), Texas Instruments (TXN [FREE Stock Trend Analysis]), NVIDIA (NVDA) and Marvell Technology (MRVL), the analysts add. Some companies, particularly Intel and Broadcom (BRCM [FREE Stock Trend Analysis]), are likely to benefit significantly from the form factor innovation around computing and living room. This trend also creates opportunities for newer players, such as MRVL and NVDA, the analysts say.


- Signal Hill analyst Mayank Tandon initiated coverage of MasterCard(MA) with a buy rating on Dec. 31, saying the second-biggest credit-card company "is positioned at the heart of the global shift from paper to plastic". Tandon expects a return to low double-digit revenue growth for MasterCard on a global consumer recovery in fiscal 2010. "Combined with continued operating margin gains, we see MasterCard growing earnings at a 20-30% pace over the next 3-5 years," the analyst wrote in a note. Tandon noted that after seeing a decline in payment volumes as consumers cut back on spending, MasterCard "is seeing early signs of life". Better payment volumes, favorable currency effects, and easier comparisons should all translate into accelerating revenue trends through fiscal 2010 and into fiscal 2011, acting as a catalyst for the shares, the analyst said. "As one of the premier companies in the payment space, with strong secular tailwinds, we believe MasterCard is a core holding name for investors", Tandon wrote. The analyst sees upside in the share price to $325 within 12-18 months.

San Francisco Chronicle:

- Trans fat will become oil non grata in California restaurants on New Year's Day, when the state becomes the first in the country to ban the use of the artery-clogging, partially hydrogenated vegetable substance. Gov. Arnold Schwarzenegger signed the bill outlawing trans fats in July 2008, but the measure gave restaurants until Friday to comply. Bakeries will have until Jan. 1, 2011.

Washington Post:

- In sign of rebound, D.C. population set to surpass 600,000. The District is on the verge of a watershed in its turnaround, with the city's population set to break 600,000 for the first time in almost two decades. Demographer William H. Frey of the Brookings Institution attributed the growth to three factors: Fewer people are moving to the exurbs because of the mortgage meltdown; fewer people are leaving the region for former Sunbelt growth magnets during the recession; and more newcomers are moving to the nation's capital to join the Obama administration. The most recent population count is the District's highest since 1991, when it was almost 601,000. From a high-water mark in the years after World War II, when the population exceeded 800,000, it began slipping in the 1950s as residents started moving to the suburbs, a trend that continued unabated through the 1990s. The population hit its lowest modern point of 565,230 in 1998. "It's a real benchmark," Frey said. "Now we can start dreaming about 700,000."

- New Jersey Senate President and acting Gov. Richard Codey today waded into the national furor over the attempted airline bombing on Christmas Day, firing off a letter calling for the resignation of U.S. Homeland Security Secretary Janet Napolitano. "Based on the handling of this entire affair, I think it’s time for you to consider stepping down and making room for an individual with more law enforcement and counterterrorism experience to take the reins at the Office of Homeland Security," Codey (D-Essex) wrote. "The entire episode was handled poorly, from start to finish."


- CES 2010 preview: Six trends to watch for at this year’s show.


- Fifty-eight percent (58%) of U.S. voters say waterboarding and other aggressive interrogation techniques should be used to gain information from the terrorist who attempted to bomb an airliner on Christmas Day. A new Rasmussen Reports national telephone survey finds that just 30% oppose the use of such techniques. Seventy-one percent (71%) of all voters think the attempt by the Nigerian Muslim to blow up the airliner as it landed in Detroit should be investigated by military authorities as a terrorist act. Only 22% say it should be handled by civilian authorities as a criminal act, as is currently the case.

- The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-two percent (42%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -18 (see trends). Twenty-nine percent (29%) now say the country is heading in the right direction.


- Lawmakers are calling for an investigation of the Treasury Department's decision to lift the cap on government cash for Fannie Mae and Freddie Mac, a move that essentially gives unlimited aid to the mortgage giants for the rest of President Barack Obama's term. Rep. Dennis Kucinich (D-Ohio) said Wednesday that his subcommittee of the Oversight and Government Reform Committee will launch a probe. Separately, Reps. Scott Garrett (R-N.J.) and Spencer Bachus (R-Ala.) requested that the Financial Services Committee hold a hearing on the matter. On Christmas Eve, the Treasury announced that the government would be able to exceed the $400 billion cap on emergency aid without the consent of Congress, adding another dose of controversy to an already unpopular bailout. While many Wall Street firms have repaid their bailout assistance, Fannie and Freddie, which have together received $111 billion, are unlikely do so. And their executives have received multimillion-dollar compensation packages even as the public rages against lavish executive payments at firms that have received taxpayer money.

- Apple(AAPL) updated an existing patent application today that describes the implementation of a previously dubbed "Magic Wand" remote control to provide a more natural control experience when navigating a product like the Apple TV. Readers will recognize that many of the described technologies work like the Nintendo Wiimote. Similarly, Apple describes the use of a accelerometers as well as fixed points of reference to determine the movement of the remote. Other patent applications in the past have shown us more of this research coming out of Apple. Naturally, the use of this "Magic Wand" could be used to browse media, fast forward/rewind, rotate images and even zoom in and out by moving the wand closer or further from the screen.

- Southridge/Technology Insight Reseach put out an interesting sensitivity analysis on Apple’s (Nasdaq: AAPL) highly anticipated, though still rumored, tablet device.
The firm suggests the most important datapoint that has been reported is that Apple has already started negotiations with Disney (NYSE: DIS) and CBS (NYSE: CBS) to offer subscriptions on the device. They believe buy-ins from the TV industry could place Apple's tablet into a class of it own. They said based on an iPod-like adoption profile, the NPV of an the tablet ranges from $4 to $24 billion, or 2-14% accretive to AAPL's market cap (pre-tablet speculation runup)
. The firm sees the tablet addoption more likely to mimic that of the iPod rather than the iPhone since the e-reader/MID space is in the nascent 5 million number phase rather than the 80+ million unit stake that the smartphones were already in at the end of 2006. That said, the firm said since actual functionality is still a big unknown, addressable market is the biggest variable in assessing the NPV of a potential iTablet launch. The firm has an Outperform rating and 12-month price target of $245 on Apple, based on a 21x multiple on their non-GAAP CY10 EPS estimate of $10.06 (from $9.82) plus $37 in net cash/share AAPL reported at the end of the Sept Q.

USA Today:

- After $787 billion in stimulus spending and $700 billion in bank bailouts, 2010 is fast shaping up to be the year of the federal budget diet.Bipartisan support is growing in Congress for action to stabilize the nation's bulging debt, which is now $12.1 trillion. Influential experts from former Federal Reserve Board chairman Alan Greenspan to former comptroller general David Walker have joined the cause. The public debt is the amount owed to individual investors, including foreign countries, but excluding money the government owes to its own trust funds. It has soared from $5.8 trillion to $7.6 trillion this year alone — and is more than half the size of the nation's economy for the first time since 1956. Without action to reduce that unprecedented rise in red ink, lawmakers and experts say, Washington risks a fiscal crisis. The Congressional Budget Office projects annual interest on the public debt would be about $800 billion by 2019, but the Heritage Foundation's Brian Riedl and other analysts estimate it could surpass $1 trillion by then. Foreign creditors could refuse to buy more Treasury securities. The focus is on the White House as President Obama prepares his State of the Union address and 2011 budget.


- A weekly gauge of future U.S. economic growth edged higher in the latest week, and though its yearly growth rate slipped, recent patterns in the index still point to a steady recovery and growth in the job market as well, a research group said on Thursday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to a 77-week high of 131.2 for the week ended Dec. 25, from a downwardly revised 130.3 the prior week, which was originally reported as 130.4. The index's annualized growth rate ticked down to a three-week low of 24.2 percent from 24.4 percent the previous week. Recent steady growth in the leading index "points to continuing improvement in economic activity and the jobs market in coming months," said Lakshman Achuthan, Managing Director at ECRI.

- New York City business activity expanded in December for the fifth consecutive month, though at a slower rate than November, while a gauge of business optimism was at its highest in more than three years, according to an industry report on Thursday.

- Camulos Partners LP, launched by a former Soros Fund Management trader, was sued by an investor seeking to recover $67 million that was "unlawfully seized," according to a Delaware court filing. The fund and Richard Brennan, who controls Camulos, used a "calculated scheme and brazen abuse of power" to force William Seibold out of the Camulos partnership and deprive him of his investments, according to the suit, which was filed on Wednesday in Delaware's Court of Chancery.

Les Echos:

- German carmakers plan to focus on sales in China, India and the US next year to offset an anticipated drop at home after government-funded trade-in incentives are terminated, citing Matthias Wissmann, president of the VDA industry group.

Bear Radar

Style Underperformer:
Mid-Cap Value (-.42%)

Sector Underperformers:
Coal (-1.04%), Road & Rail (-.89%) and Utilities (-.73%)

Stocks Falling on Unusual Volume:


Stocks With Unusual Put Option Activity:
1) MDVN 2)YRCW 3) ACL 4) DIS 5) ANR

Bull Radar

Style Outperformer:
Small-Cap Growth (-.21%)

Sector Outperformers:
Disk Drives (+.61%), REITs (+.42%) and Banks (+.37%)

Stocks Rising on Unusual Volume:

Stocks With Unusual Call Option Activity:
1) NOK 2) KMB 3) NTRS 4) NTAP 5) AXL

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Wednesday, December 30, 2009

Thursday Watch

Late-Night Headlines

- GMAC Gets $3.79 Billion Boost in Third US Bailout Package. GMAC Inc., the auto and home lender bailed out twice by the U.S. government, received a third rescue package valued at $3.79 billion that gives taxpayers a majority stake in the Detroit-based company. The infusion will bolster lending at GMAC as it absorbs $3.8 billion in new pretax charges and decides what to do with its loss-plagued home mortgage unit, according to statements from the agency and the company yesterday. The aid comes on top of about $13.5 billion previously earmarked for GMAC, which regulators have said is crucial to the U.S. auto industry. Chief Executive Officer Michael Carpenter is struggling to return the lender to profitability amid losses at the Residential Capital mortgage unit, known as ResCap, which GMAC may close or sell. GMAC is the primary lender to General Motors Co. and Chrysler Group LLC, the automakers that went into bankruptcy during the recession.

- American International Group Inc.(AIG) general counsel Anastasia Kelly, who resigned after a dispute over government-imposed pay limits, will reap about $3.8 million in severance, said people familiar with the matter. AIG concluded that Kelly, 60, was owed the money after the New York-based insurer hired a law firm to review her conduct, according to the two people, who declined to be identified because the company hasn’t announced the decision. Kelly resigned for “good reason” after her salary was cut, AIG said today in a statement. Suzanne Folsom, the company’s chief compliance officer, also left, AIG said. Kelly told at least four other executives last month how to protect their pay and hired outside attorneys for advice, the people said. The five leaders wrote in Dec. 1 letters to AIG that they were prepared to resign if their pay was cut by Kenneth Feinberg, the Obama administration’s special master for executive compensation. AIG, once the world’s biggest insurer, received a taxpayer-funded bailout valued at $182.3 billion, placing the company under Feinberg’s jurisdiction. “General counsel are supposed to be setting a prime example of good ethics at a company, not acting as carpetbaggers as they leave,” Frank Glassner, chief executive officer of Veritas Executive Compensation Consultants LLC, said today in an interview. “This severance pay is ridiculous.” Folsom, a former director of the World Bank in charge of an anti-corruption unit who was hired by Kelly in April 2008, will collect more than $1 million in severance, the people said.

- President Barack Obama or top administration officials met at the White House with Goldman Sachs Group Inc.(GS) Chairman Lloyd Blankfein, Microsoft Corp.(MSFT) co- founder Bill Gates and World Bank President Robert Zoellick, records show. Blankfein and Gates met with economic adviser Lawrence Summers, while Zoellick met with the president. The visits were among more than 27,000 added to the White House Web site as part of a periodic release of visitor logs that the Obama administration and its predecessors had sought to keep private. Steven Rattner, the former private equity executive and automotive adviser to the Obama administration, visited the White House more than 50 times between the January inauguration and mid-July, often to visit Summers. The watchdog group Citizens for Responsibility and Ethics in Washington pressed for release of records showing who was meeting with administration officials. In July, the group sued to force the Secret Service to release information about visits by coal company executives since Obama took office in January. The information is being made public at the end of each month.

- Pacific Investment Management Co., the world’s largest manager of bonds, filed with U.S. regulators to start a stock mutual fund that can also invest in bank loans, junk bonds and distressed securities. Pimco Global Opportunities Fund will buy securities and financial instruments “economically tied” to at least three countries, one of which may be the U.S., according to a registration statement filed today with the U.S. Securities and Exchange Commission. The fund will be able to purchase shares in companies of all sizes.

- News Corp.(NWS/A) said it’s not likely to reach an agreement with Time Warner Cable Inc. and expects to pull Fox broadcasting from the cable system when their deal expires tomorrow. “We deeply regret that millions of Fox customers will be deprived of our programming,” Chief Operating Officer Chase Carey said today in a memo to employees. “We need to receive fair compensation from Time Warner Cable to go forward.”

- The Federal Deposit Insurance Corp. plans to seek stakes in the companies bidding for seized banks, aiming to gain when the shares rise and helping recoup the costs of closing lenders. The arrangement would let the agency share any profits from an increase in the buyer’s stock after a takeover, said James Wigand, the FDIC’s deputy director of resolutions and receiverships.

Wall Street Journal:

- Behind the drama unfolding in the streets of Iran, the regime is quietly clamping down on some of the nation's best students by derailing their academic and professional careers. On Wednesday, progovernment militia attacked and beat students at a school in northeastern Iran. Since last Sunday's massive protests nationwide, dozens of university students have been arrested as part of an aggressive policy against what are known as Iran's "star students." In most places, being a star means ranking top of the class, but in Iran it means your name appears on a list of students considered a threat by the intelligence ministry. It also means a partial or complete ban from education. The term comes from the fact that some students have learned of their status by seeing stars printed next to their names on test results. Mehrnoush Karimi, a 24-year-old law-school hopeful, found out in August that she was starred. She ranked 55 on this year's national entrance exam for law schools, out of more than 70,000 test-takers. That score should have guaranteed her a seat at the school of her choice. Instead, the government told her she wouldn't be attending law school due to her "star" status.

- Eight Americans, including officers of the Central Intelligence Agency, were killed in a suicide attack on a U.S. compound in Afghanistan, current and former U.S. officials said, in what could be the biggest loss of American intelligence personnel since the war here began. "There was some tremendous talent lost," a former intelligence official said.

- A Cold-Blooded Foreign Policy by Fouad Ajami.

- A Honolulu television station is reporting that conservative radio talk show host Rush Limbaugh was taken to a hospital with chest pains. KITV reported Wednesday that paramedics responded to a call at 2:41 p.m. from the Kahala Hotel and Resort where Mr. Limbaugh is vacationing. The station, citing unnamed sources, said paramedics treated Mr. Limbaugh and took him to The Queen's Medical Center in serious condition.

- Anwar al-Awlaki, a radical American-born Yemeni cleric who has surfaced in multiple terror probes, is emerging as a central part of the Christmas Day airline bomber investigation, as authorities focus attention on a network of extremists in Yemen who may have helped radicalize the young Nigerian accused in the failed plot.

- Holdings of U.S. dollars by foreign central banks bounced back to more "normal" levels in the third quarter, according to data released Wednesday by the International Monetary Fund. The IMF's Composition of Official Foreign Exchange Reserves data, known as COFER, is reported voluntarily by 140 countries. Of those who report their holdings, adjusted for currency valuation effects, the share of U.S. dollars bounced up to 62% in the third quarter after an unusual drop to 37% in the previous period, according to Barclays Capital.
- Have Faith in Free-Market Capitalism, Will Prosper.

NY Times:

- YouTube, the video site owned by Google(GOOG), is about 10 times more popular than its nearest competitor. But Hunter Walk still thinks of it as an underdog. For Mr. Walk, director of product management at YouTube, the competition is not other Web sites: it’s TV. “Our average user spends 15 minutes a day on the site,” he said. “They spend about five hours in front of the television. People say, ‘YouTube is so big,’ but I really see that we have a ways to go.” To that end, Mr. Walk leads a team of about a dozen engineers, designers and project managers who are fine-tuning YouTube to give its users what they want, even when the users aren’t quite sure what that is. The goal is to get them to spend a few more minutes on the site every day.


- Investors Could Only Lose in Goldman's(GS) Cayman Deals. When financial titan Goldman Sachs joined some of its Wall Street rivals in late 2005 in secretly packaging a new breed of offshore securities, it gave prospective investors little hint that many of the deals were so risky that they could end up losing hundreds of millions of dollars on them. McClatchy has obtained previously undisclosed documents that provide a closer look at the shadowy $1.3 trillion market since 2002 for complex offshore deals, which Chicago financial consultant and frequent Goldman critic Janet Tavakoli said at times met "every definition of a Ponzi scheme." The documents include the offering circulars for 40 of Goldman's estimated 148 deals in the Cayman Islands over a seven-year period, including a dozen of its more exotic transactions tied to mortgages and consumer loans that it marketed in 2006 and 2007, at the crest of the booming market for subprime mortgages to marginally qualified borrowers. In some of these transactions, investors not only bought shaky securities backed by residential mortgages, but also took on the role of insurers by agreeing to pay Goldman and others massive sums if risky home loans nose-dived in value — as Goldman was effectively betting they would. Some of the investors, including foreign banks and even Wall Street giant Merrill Lynch, may have been comforted by the high grades Wall Street ratings agencies had assigned to many of the securities. However, some of the buyers apparently agreed to insure Goldman well after the performance of many offshore deals weakened significantly beginning in June 2006. Goldman said those investors were fully informed of the risks they were taking. These Cayman Islands deals, which Goldman assembled through the British territory in the Caribbean, a haven from U.S. taxes and regulation, became key links in a chain of exotic insurance-like bets called credit-default swaps that worsened the global economic collapse by enabling major financial institutions to take bigger and bigger risks without counting them on their balance sheets. The full cost of the deals, some of which could still blow up on investors, may never be known.

- had the happiest customers this holiday season, according to a survey from ForeSee Results released Wednesday. The Seattle-based e-commerce giant scored the highest in a customer satisfaction report from online retail consulting firm ForeSee, followed by Netflix (NFLX) and QVC. Apple (AAPL, Fortune 500) and outdoor-gear retailer Cabela's rounded out the top 5 in the survey, which polls 10,000 visitors to the top 40 U.S. retail sites by revenue each November and December.

Business Insider:

- The activist hedge fund Trian Fund Management became the largest shareholder of fund management company Legg Mason(LM), after picking up two million shares on Monday. The New York firm now owns 5.6% of Legg Mason, ahead of Dodge & Cox's (a mutual fund) 5.5%.

- How To Game Cap And Trade, Destroy Jobs, Make Money, And Provide No Environmental Benefit. Conceptually, carbon credits are fine and could have potential, but their current application is horribly flawed. Metal Miner highlights how Cap & Trade can be gamed whereby it destroys developed nation jobs and doesn't protect the environment either.

Business Week:

- Not So Radical Reform. How New Democrats and Wall Street are watering down financial regulation in Congress.

- Five Ways Apple's(AAPL) Tablet May Change the World. The iPad is on the way, and it just might reduce calling costs, cut your commute, and, to the delight of journalists everywhere, pull print media back from the brink.


- Thirteen Republican state attorneys general are threatening to file a lawsuit challenging the constitutionality of the Senate health care bill. In a letter sent to House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid Wednesday, South Carolina Attorney General Henry McMaster said he had “grave concerns” about the deal Senate leaders cut with Nebraska Democrat Ben Nelson to secure his crucial vote for the health care package. “The current iteration of the bill contains a provision that affords special treatment to the state of Nebraska under the federal Medicaid program,” writes McMaster. “We believe this provision is constitutionally flawed. As chief legal officers of our states we are contemplating a legal challenge to this provision and we ask you to take action to render this challenge unnecessary by striking that provision.” “In addition to violating the most basic and universally held notions of what is fair and just, we also believe this provision of H.R. 3590 is inconsistent with protections afforded by the United States Constitution against arbitrary legislation,” writes McMaster. Under the terms of the agreement with Nelson, the federal government will pick up the full tab for all new Medicaid enrollees in Nebraska, a deal that’s expected to cost about $100 million over the next 10 years.

- President Barack Obama promised a “thorough review” of the government’s terrorist watch-list system after a Nigerian man reported to U.S. government officials by his father to have radicalized and gone missing last month was allowed to board a Northwest Airlines flight to Detroit that he later tried to blow up without any additional security screening. Yet the individual Obama has chosen to lead the review, White House counter-terrorism adviser John Brennan, served for 25 years in the CIA, helped design the current watch-list system and served as interim director of the National Counterterrorism Center, whose role is under review. In the three years before joining the Obama administration, Brennan was president and CEO of The Analysis Corp., an intelligence contracting firm that worked closely with the National Counterterrorism Center and other U.S. government intelligence, law enforcement and homeland security agencies on developing terrorism watch-lists.

Rasmussen Reports:

- Belief that the bad guys are winning the War on Terror is now at its highest level in over two years, and nearly half of U.S. voters say America is not safer than it was before 9/11. The latest Rasmussen Reports national telephone survey finds that 30% of voters think the terrorists are winning the War on Terror. That’s the first time the number holding that pessimistic view has reached 30% since October 2007. Just 18% believed the terrorists were winning the week President Obama took office in January. At that time, 55% said America and its allies were on top. Now, just 36% say the United States and its allies are winning the War on Terror. Only once since July 2007 have voters had less confidence.

- claims to have received confirmation from a "source inside Apple" that the company will in fact be holding a media event on January 26th in San Francisco. According to the source, the "big" event will focus on the "mobility space", suggesting an iPhone, iPod touch, or, as many people expect, tablet announcement. Anticipation has continued to build as Apple appears to be coming closer to the long-rumored release of its tablet device. While the company has remained silent about any possible launch of such a device, rumors and tidbits of information, including recent discoveries suggesting that the device may be called the iSlate or iGuide, have fed the frenzy of anticipation. Earlier this week, Cloned in China pointed to a Chinese-language article[Google translation] about a blog post apparently from former Google China president Kai-Fu Lee claiming that device will in fact be introduced in January at a price point of under $1000 and will carry a 10.1" multi-touch screen and offer an "amazing user interface", video conferencing capabilities, and e-book offerings in a package described as a "large iPhone". Lee also claims that Apple is expecting first-year sales of 10 million units, far above most observers' expectations at this time. Lee theoretically could be in a position to have information about the Apple tablet, as his current venture capital company has attracted Apple manufacturing partner Foxconn as an investor. Furthermore, Lee was an executive at Apple during the early 1990s and oversaw development of the Apple Newton handheld device among other projects. Later in the decade, after a stint at SGI, Lee was reportedly personally invited back to Apple by Steve Jobs despite the two never having spoken before, an offer Lee declined in order to return to his native China with Microsoft.


- Risk Manager. Caught in the cross fire between Main Street and Washington, BlackRock's(BLK) Larry Fink must protect his profits and his firm's reputation.

- Monsanto's(MON) first round of attackers said its seeds were evil. Now the charge is that Monsanto's seeds are too good.

- Genomics is just starting to improve human health. But it has revolutionized dairy farming.


- Expect Senate majority leader Harry Reid to lose his effective 60-seat supermajority and Nancy Pelosi to hand the House back to the Republicans. Here’s why 2010 is looking like 1994 all over again:

- U.S. health officials released standards for electronic medical records on Wednesday, seeking to spur the technology in hopes of cutting health costs and reducing medical errors. Congress required the standards, partly as a condition of about $19 billion in February's economic stimulus bill that is aimed at encouraging doctors and hospitals to convert paper records into digital files.

- Venture capital investors spent 36 percent less this year on clean technology for a total of nearly $5 billion, an industry group reported on Wednesday.

- U.S. chicken producer Pilgrim's Pride Corp PPC.DE said on Wednesday it will pay $4.5 million over three years to settle U.S. government allegations that it employed illegal workers at some of its plants.

Financial Times:

- The alleged Christmas day terrorism plot has complicated plans by Barack Obama, US president, to shut the Guantánamo Bay prison camp. Following reports that two former inmates who took refuge in Yemen were behind the botched plot, senators from his own party were among those calling for detainee transfers to be halted pending an investigation into the links between Guantánamo and the Arab nation. “Guantánamo detainees should not be released to Yemen at this time,” said Dianne Feinstein, the senior Democrat on the Senate intelligence committee. “It is too unstable.” Kit Bond, the top Republican on the committee, went further, calling for a rethink of the entire policy. “The question is: are we going to take every step possible to keep our country safe? That means stop releasing Gitmo detainees now,” Mr Bond told The Hill newspaper. As it seeks to fulfill his pledge to close down the prison camp, Mr Obama’s administration has been sending detainees back to their home countries, including six Yemenis who were repatriated the week before Christmas. Even before the Christmas day incident, the administration was wary about transferring Yemenis because of concerns about the country’s instability. About 90 of the 198 inmates still in Guantánamo are from Yemen. Fears increased after a Yemen-based group calling itself al-Qaeda in the Arabian Peninsula (AQAP) said it planned the attack in retaliation for US support of a Yemeni military strike on one of its bases, which killed up to 60 of its members. Umar Farouk Abdulmutallab, the 23-year-old Nigerian charged over the alleged plot, told investigators he was given explosives by al-Qaeda operatives in Yemen, where he had been studying Arabic. The suspected masterminds of the alleged plot were Muhamad al-Awfi and Said Ali al-Shihri, Guan-tánamo inmates who were sent to Saudi Arabia in November 2007 but fled to Yemen in 2008, ABC News reported, quoting US officials. Three senators – Republicans John McCain and Lindsey Graham, and independent Joseph Lieberman – who this week wrote to the White House saying that the transfers were “highly unwise and ill-considered”, described Mr Shihri as “AQAP’s longstanding deputy”. He is thought to have orchestrated a 2008 car bombing of the US embassy in Yemen but could have been killed in a December 24 air strike. The senators said: “Many of the other leaders of AQAP were previously held in Yemeni government custody. However, they escaped in February 2006 from a maximum-security prison in Sana’a.”

- The global hedge fund industry turned in one of its best years of performance in close to a decade in 2009, according to industry data, though managers have yet to fully shake off many of the problems of 2008. The average hedge fund returned 19 per cent to investors in 2009, according to Chicago-based data provider Hedge Fund Research. Other leading hedge fund indices report average returns of between 12 and 18 per cent, after fees. On average, only dedicated short-biased funds, which aim to profit from declines in companies’ share prices, lost money this year, down 20 per cent. But many funds have yet to recoup the losses they suffered in 2008.

- At the peak of the financial crisis late in 2008, a common refrain from bankers and traders was that credit markets were enduring a calamity seen once in a hundred years. In 2009, it appears the returns from three credit strategies also represent a once in century event. ”The magnitude of the markets’ reaction to a crisis gets bigger each time,” says Jason Brady, portfolio manager at Thornburg Investment Management.“The frequency of so-called 100 year events seems to be increasing because the leverage has increased and news flow is very high now,“ he adds. Investors this year have been rewarded handsomely for betting on a normalization in specific parts of the credit markets in the US and Europe, which imploded last year and nearly sank the global financial system. For US financial bonds, the return since their nadir in March is 31 per cent, compared to a gain of 22 per cent for all investment-grade corporates, according to indexes calculated by Barclays Capital.

- The US will impose tough new duties on Chinese steel piping imports, raising tensions with its biggest trading partner and emerging geopolitical rival. With Chinese piping imports worth $2.8bn in 2008, the case is the biggest against China brought before the International Trade Commission, a US trade body.


- Harbinger Capital, the hedge fund run by billionaire Philip Falcone, must answer accusations of fraud and civil conspiracy, a judge in Delaware has ruled.

Evening Recommendations

- None of note

Night Trading
Asian indices are +.25% to +1.0% on avg.

Asia Ex-Japan Inv Grade CDS Index 98.0 +3.50 basis points.
S&P 500 futures +.13%.
NASDAQ 100 futures +.25%.

Morning Preview
BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Asian Financial News

European Financial News

Latin American Financial News

MarketWatch Pre-market Commentary

U.S. Equity Preview

TradeTheNews Morning Report In Play

SeekingAlpha Market Currents Bond Ticker

US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
- None of note

Economic Releases

8:30 am EST

- Initial Jobless Claims for last week are estimated to rise to 460K versus 452K the prior week.

- Continuing Claims are estimated to rise to 5100K versus 5076K prior.

Upcoming Splits

- None of note

Other Potential Market Movers
- The NAPM-Milwaukee, Bloomberg Financial Conditions Index, weekly EIA natural gas inventory report and the bond market's early close could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and commodity stocks in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.