Weekend Headlines
- New restrictions on executive pay at U.S. banks receiving federal aid may cause talented managers to flee to hedge funds and foreign-owned banks, say critics of the measure. The limits, championed by Senate Banking Committee Chairman Christopher Dodd, were tucked into a $787 billion fiscal stimulus bill approved yesterday by Congress. President Barack Obama plans to sign the measure early next week. The provisions go beyond the $500,000 cap announced by Obama last month, by restricting bonuses for senior executives and next 20 highest employees at companies that receive more than $500 million from the Treasury Department’s Troubled Asset Relief Program. “The soon-to-be-law prohibits paying commissions, which are the lifeblood of a salesperson’s income,” said Scott Talbott, vice president for government affairs at the Financial Services Roundtable, a Washington trade group that lobbies on behalf of banks. “Non-TARP companies, like hedge funds and foreign firms, don’t have this restriction, so it will be easier for them to hire the top producers away.”
- Japan’s economy, only months ago forecast to be the best performing among the world’s most advanced nations, has become the worst. Gross domestic product shrank an annualized 12.7 percent last quarter, the Cabinet Office said yesterday. The contraction was the most severe since the 1974 oil crisis and twice as bad as those in Europe or the U.S.
- Asian stocks, down 60 percent from their peak, may decline further as the deepening global slump weakens corporate earnings and drives up funding costs, Deutsche Bank said. The brokerage lowered its year-end forecast for the MSCI AC Asia excluding Japan Index by 9 percent to 240.7, said Niklas Olausson, a Kuala Lumpur-based analyst. That’s a retreat of about 14 percent from the index’s close on Feb. 13.
- The yen may weaken 13 percent against the dollar this year as Japanese exporters lose competitiveness and the nation’s economic slump deepens, according to Asia Genesis Asset Management Pte. The decline in Japan’s currency may wipe out more than half its gains from 2008 that were spurred by the flight into haven currencies due to the global financial crisis, said Chua Soon Hock, managing director of the Singapore-based hedge fund.
- The euro probably won’t rise from its current price over concern some European governments may miss out on a recovery, according to UBS AG.
- The rising cost of insuring against default by a “peripheral” European government is likely to weigh on the euro, according to Merrill Lynch. “This remains an important background negative for the euro,” Steven Pearson, a strategist in London Eastern Europe , often via foreign currency lending, is an additional euro negative story that is gaining air-time.”
- The euro fell to a 10-week low against the US dollar after Moody’s Investors Service said it may downgrade a number of banks with units in Eastern Europe, reigniting concern about financial turmoil in the region. The euro also weakened against 14 of the 16 major currencies on speculation its recent declines triggered the execution of automatic sell orders. The pound dropped versus the yen on concern a U.K. report today will show inflation slowed due to the economic slump, giving the Bank of England more room to cut interest rates.
- Russia
- ASM International NV, Europe’s second-largest maker of semiconductor equipment, rose the most in more than a week in Amsterdam ASMI surged 9.54% to 6.9 euros. The brokerage firm predicts order trends in the semiconductor packaging industry will “stabilize” in the first half of this year.
- Oil prices won’t rise above current levels of $40 a barrel even if OPEC decides to cut output by more than 2 million barrels a day at its next meeting in March, Annahar said, citing a Kuwati oil official. Prices are affected by a huge surplus because of non-compliance to quotas by many members of OPEC, citing Mussa Maarafi, a member of Kuwait
- Crude oil fell below $37 a barrel in New York on speculation a deepening recession in Europe and Asia will stifle demand for fuels. World oil demand may not rebound until 2010, when it may begin rising by about 1 percent a year through 2013, International Energy Agency Executive Director Nobuo Tanaka said in London yesterday.
- The United Auto Workers union is objecting to proposals from General Motors Corp. and Chrysler LLC to modify a retiree health-care fund as required by the U.S. so the automakers can keep $17.4 billion in aid. The UAW stopped negotiations with GM last night, a person familiar with the talks said. Chrysler still is talking to the union, though the talks haven’t been substantive, said another person briefed on those discussions. A delay in the talks could risk the automakers missing a Feb. 17 deadline to show progress in a government-ordered plan to cut labor and debt costs. It’s not clear what that would mean.
- Chinese companies may be using record bank lending to invest in stocks, fueling a rally that’s made the benchmark Shanghai Composite Index the world’s best performer this year, according to Shenyin & Wanguo Securities Co. “Part of the liquidity flowing into the stock market could be from companies using borrowed funds to invest in the stock market instead of working requirements,” said Li. The brokerage was voted the best in the country for research by the national pension fund, China’s largest investor.
Wall Street Journal:
- While much of the investment-banking community looks on the current crisis with a mixture of horror and bemusement, technology bankers have been here before. When the dot-com bubble burst at the beginning of the decade, hundreds of technology companies folded and the flow of deals dried up. Those hard times seem to have returned, but bankers in the sector suggest the prognosis for technology is better than for other sectors, largely because tech companies learned some valuable lessons from the first crash.
- Vodafone, HTC Close to Pact on Use of Google(GOOG) Software
- Brokerage firms are reducing financing and other services to hundreds of hedge funds, in a move that could accelerate the shakeout among these heavy-hitting investors. Under financial pressure, securities firms are dividing their hedge-fund clients into lists of those they consider best able to weather the financial turmoil and those they're less sure of. The result is that more funds may have to merge, find other financing at higher cost or close. The squeeze, described by a range of brokerage-firm and hedge-fund officials, takes different forms.
NY Times:
- US Survey Shows 90% Don’t Like New Economic Policy.
- There’s an eclectic group of smaller high-tech players that have managed to keep posting double-digit growth and attract new business.
- One distinction this year may turn out to be significant: the various sectors of the stock market have not all been moving in tandem. “The market is starting to sort between the winners and the losers, rather than pushing everything down as if it were a monolithic asset,” said Jeffrey N. Kleintop, chief market strategist at LPL Financial in Boston. While investors lost significant sums in every sector last year, they’re finding some pockets of opportunity now, which could be a sign that pure panic is being wrung out of the market, and that fundamental factors for specific stocks and sectors are beginning to strongly influence investors’ thinking once again.
- US Coal Industry Faces Increased Oppostion
- What Convergence? TV’s Hesitant March to the Net
- Zagat Guide to Review Doctors for Wellpoint(WLP) Customers
Financial News Online:
Cracks are widening in the $600bn fund of hedge funds business as some of the biggest listed funds face pressure to liquidate and return cash to investors after poor performance. Listed funds of hedge funds represent only a small part of the industry, but analysts warn they face extinction, with potential knock-on effects to the rest of the sector.
NY Post:
- New York Gov. Paterson has secretly granted raises of as much as 46 percent to more than a dozen staffers at a time when he has asked 130,000 state workers to give up 3 percent pay hikes because of the state's fiscal crisis, The Post has learned. The startling pay hikes, costing about $250,000 annually, were granted after the governor's "emergency" declaration in August of a looming fiscal crisis that required the state to cut spending and impose a "hard" hiring freeze. One raise was approved as recently as last month - when Paterson claimed the budget deficit had reached an unprecedented $15.5 billion. The raises, which have stunned the few state workers who know about them, are outlined in data obtained from the office of state Comptroller Tom DiNapoli, prepared at The Post's request.
Chicago Sun-Times:
- State lawmakers are calling for a criminal investigation into whether U.S. Sen. Roland Burris committed perjury before a state impeachment panel, in the wake of a Sun-Times exclusive story published online Saturday. The development comes after the Chicago Democrat failed to initially disclose under oath to a House panel that he was hit up for campaign cash by former Gov. Rod Blagojevich's brother.
Detroit Free Press:
- Dow Chemical Co.(DOW) says it aims to start selling power-generating roof shingles by 2011.
G2Weather Intelligence:
- Long Global Warming? It Might be Time to Rethink. “In general, the climate regime no longer resembles the recent warm spell of the last 25 years. The persistence of the very cold Pacific Ocean of the last couple of year has resulted in…patterns more similar to the 1950s-1970s. If this “old-school” pattern persists much longer, the global oceans will continue to cool off, and we will likely head into a cooler multi-decadal climate regime.” – Dr. Todd Crawford, WSI Seasonal Forecaster
Reuters:
- General Motors Corp(GM), nearing a Tuesday deadline to present a viability plan to the U.S. government, is considering as one option a Chapter 11 bankruptcy filing that would create a new company, the Wall Street Journal said in its Saturday edition.
- Mobile telephones are seen as "a basic necessity" around the world and should enjoy persistent strong demand throughout an economic downturn, a United Nations agency said in a report published on Monday. "With or without a recession," millions of people in India, China, Nigeria, and other emerging markets will seek out mobile phones, according to the International Telecommunication Union (ITU). Increasingly cost-conscious households in Europe and North America are also expected to keep up their mobile use, and many will drop their fixed-line telephones as a way to save money, the ITU said in a report released for the Mobile World Congress trade show in Barcelona.
- Adobe Systems(ADBE), which popularized the use of video and animation on the Web, is introducing a new version of its Flash software that runs not only on computers but also on the latest high-end mobile phones. Adobe, which makes Acrobat, Flash and Photoshop software, plans to bring a full PC version of its Flash video player to smartphones next year, but has no imminent deal to announce for Apple's influential iPhone, it said.
Financial Times:
- IntercontinentalExchange(ICE), the operator of futures exchanges and over-the-counter trading platforms, plans to set up a European clearer for credit default swaps in an effort to establish the first transatlantic clearing mechanism for such products.
TimesOnline: If, like John Maynard Keynes, you believe that spending, any spending, will revive a flagging economy, the freshly minted, 1,000-page American Recovery and Reinvestment Act of 2009, calling for $504 billion in deficit-financed spending, is for you. Well, not quite. It seems that most of the money will not be spent very soon. About 30% won't hit the economy until 2011, and the balance is likely to be tied up in the procurement processes of the federal and state governments until well into 2010, and beyond. Besides, much of the spending will end up boosting other economies — subsidies for wind machines will benefit workers in the other countries in which such machines are manufactured, not our very own horny-handed toilers. And much of the spending will not create jobs for the unemployed: laid-off car workers do not have the skills to design the software to manage the "smart grid" that is the apple of the greens' eye.
- ARM Holdings(ARMH) believes its strength lies in sharing.
- Ireland ‘could default on debt’
Die Welt:
- Deutsche Telekom AG’s T-Mobile division is doing “solid” business in the US
WirtschaftsBlatt:
Haaretz.com:
- Israeli officials are putting together a position paper on talks between the United States and Iran for the new administration in Washington, Israeli officials say. The paper will include a list of reservations about the state of international efforts against Iran's nuclear program. One worry is that negotiations will go on for too long. The paper states that talks between the United States and Iran should be limited to a short period of time. It also recommends that harsh sanctions be imposed against the Islamic Republic if negotiations fail. U.S. President Barack Obama, who appointed envoys to the Middle East and Afghanistan within days of his inauguration, has not done so with Iran. An Israeli official in Jerusalem told Haaretz that "this procrastination is very disconcerting."
Weekend Recommendations
Barron's:
- Made positive comments on (VFC), (MRK), (GOOG), (JNJ), (WMT), (ABT), (IACI) and (RAI).
- Made negative comments on (MON), (CVS) and (EBAY).
Citigroup:
- Reiterated Buy on (CELG), target $73.
Night Trading
Asian indices are -2.25% to -.75% on avg.
Morning Preview
US AM Market Call NASDAQ 100 Pre-Market Indicator/Heat Map Pre-market Commentary Pre-market Stock Quote/Chart 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 Earnings Calendar
Conference Calendar
Who’s Speaking?
Upgrades/Downgrades Rasmussen Business/Economy Polling
Earnings of Note
Company/Estimate
- (FOSL)/.68
- (RIG)/3.68
- (LPX)/-.46
- (UTHR)/.53
- (WMT)/.99
- (GGC)/-.95
- (MDT)/.70
- (A)/.31
- (JACK)/.52
- (CGNX)/.05
- (CHK)/.75
- (GPC)/.56
- (FTI)/.68
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Empire Manufacturing for February is estimated to fall to -23.75 versus -22.20 in January.
9:00 am EST
- Net Long-term TIC Flows for December are estimated to rise to $20.0B versus -$21.7B in November.
1:00 pm EST
- The NAHB Housing Market Index for February is estimated at 8.0 versus 8.0 iun January.
Other Potential Market Movers
- The Fed’s Bullard speaking, (OMTR) analyst meeting, Morgan Stanley Basic Materials Conference and Roth Growth Stock Conference could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by financial and automaker shares in the region. I expect US The Portfolio is 100% net long heading into the week.
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