Tuesday, February 17, 2009

Wednesday Watch

Late-Night Headlines

- The U.S. Treasury said bank lending rose in December after dropping the previous month, in its first survey of the 20 banks that received the most capital from the government’s $700 billion rescue program. “Overall, loan origination and underwriting activities were weak from October through November 2008 but picked up from November to December, fueled by falling mortgage interest rates” and also the Federal Deposit Insurance Corp.’s debt-guarantee program, the Treasury said today in a statement.

- President Barack Obama’s chief spokesman said the administration can’t rule out a restructuring through bankruptcy for struggling automakers, while adding the industry is “tremendously important” to the economy.

- Investors should sell yuan-denominated Chinese shares after the benchmark Shanghai Composite Index rose above 2,300 points because gains are not backed by fundamentals, HSBC Holdings said. It is a “worrisome development that exceptional loan growth has yet to drive up M1 growth, which is a better indicator of aggregate demand, pricing power, corporate profits and therefore market performance,” the note said. The Hang Seng China Enterprises Index, which measures the so-called H shares of Chinese companies traded in Hong Kong, has declined 8.9% this year and is valued at 9.1 times reported earnings, less than half the 18.3 times for the Shanghai index.

- Iranian President Mahmoud Ahmadinejad said his country is waiting for the U.S. to show “signs of real change” under the Obama administration, calling it “a necessity” for improving relations between the two countries.

- Goldman Sachs Group Inc.(GS) said co- President and co-Chief Operating Officer Jon Winkelried, who led cost-cutting that eliminated more than 10 percent of the company’s jobs in the past year, is retiring March 31. Winkelried, 49, joined the company in 1982 and has been a director since June 2006. Co-President and co-Chief Operating Officer Gary Cohn, 48, will assume both jobs, spokesman Lucas Van Praag said. Winkelried won’t accept severance, and plans to spend time with his family and on his Colorado ranch, Van Praag said.

- President Barack Obama said the war in Afghanistan is “still winnable” as he signed an order increasing U.S. troops there by 17,000 combat and support personnel. Military force alone cannot adequately deal with the threat posed by a “resurgent” Taliban, Obama said in an interview with Canadian Broadcasting Corp. The war is “still winnable -- in the sense of our ability to ensure that it is not a launching pad for attacks against North America.”

- T. Boone Pickens, the billionaire hedge-fund manager who forecasts oil will more than double in the next 10 months after being driven down by the global recession, shed energy-related shares as their value declined, a public filing showed today. Pickens, who held 26 energy companies in his BP Capital Management LP fund as of a Nov. 14 filing, had nine in today’s filing. As Pickens sold positions, the worth of the holdings in the fund tumbled 97 percent in the final three months of 2008 to $40 million from $1.29 billion on Sept. 30, a comparison of the filings showed. “It looks like a big commodity dump,” said Gianna Bern, president of Flossmoor, Illinois-based Brookshire Advisory & Research Inc., an energy research and consulting firm. Pickens reduced his holdings in Los Angeles-based oil producer Occidental Petroleum Corp. from 2 million shares to 100,000, the filing showed. He pared his holdings in Geneva-based Transocean Ltd., an offshore oil driller, from 1.1 million shares to 300,000. And he reduced his position in Calgary-based Suncor Energy Inc., an oil-sands producer, from 2.53 million shares to 100,000 shares. Pickens sold all holdings in 19 companies including Schlumberger Ltd., Halliburton Co. and Calgary-based Talisman Energy, the filing showed.

- Australia’s currency may drop to as low as 50 US cents as it is “overvalued” considering the global recession and the central bank’s decision to slash borrowing costs, Stephen Koukoulas, London-based head of global foreign exchange and fixed-income strategy at TD Securities, said in a note to clients.

- The cost of protecting investors in Japanese corporate bonds from default rose to a record on concern company failures will increase as the economy worsens. The Markit iTraxx Japan index of credit-default swaps on the debt of 50 investment-grade borrowers rose 15 basis points to 585 at 9:50 a.m. in Tokyo, Barclays Capital prices show. The benchmark has jumped more than 200 basis points this month, double the rise on the Asia iTraxx index excluding Japan, according to CMA DataVision.

- Germany and France may be forced to contemplate the bailout of entire nations rather than just individual banks as European government budgets buckle under the weight of recession. German Finance Minister Peer Steinbrueck became the first senior policy maker to broach the topic this week, saying some of the 16 euro nations are “getting into difficulties” and may need help. French officials are also concerned about market tensions as the cost of insuring Irish, Greek and Spanish debt against default rises to records and bond spreads widen. The nightmare for Angela Merkel and Nicolas Sarkozy is that widening deficits will prompt investors to shun the debt of some countries, sparking a region-wide crisis. While few investors are yet forecasting any defaults, the mere risk of it may prompt the bloc’s two richest economies to ignore the European Central Bank and announce their willingness to come to the rescue. “When push comes to shove Germany, France, the larger players will bail out those smaller peripheral players,” said Alex Allen, chief investment officer of Eddington Capital Management. “You can’t let one part of the system fail because it leads to failure of the whole system.” Allen’s betting that the risk at least one nation will leave the bloc is higher than the market currently expects.

- The euro traded near a 10-week low against the dollar on concern the region’s banks will disclose increasing losses due to the deepening financial crisis in central and eastern Europe. The European currency may weaken for a third day versus the greenback as Commerzbank AG, Germany’s second largest, and ING Groep NV, the biggest Dutch financial company, are forecast to report combined losses of more than 4 billion euros ($5 billion) when they release earnings today, according to Bloomberg News surveys.

- Hedge-Fund Firms Pressed to Consolidate After Losses Erode Fees.

- Taiwan’s economy shrank 8.36% in the fourth quarter from a year earlier, citing an official. The main reason for the contraction was a 32.23% drop in private investment. The economy was expected to shrink 6.82%.

Wall Street Journal:

- Numerous accounting firms missed the alleged fraud at Bernard L. Madoff Securities LLC as they inspected the investment company's books or those of so-called feeder funds that helped steer money to it. As a result, those accountants could now be legally vulnerable to claims that they should have uncovered red flags, according to legal and accounting experts.

- Texas businessman R. Allen Stanford, whose multibillion-dollar investment empire was ordered seized Monday by a federal judge, has long enjoyed big influence in Washington thanks to a steady supply of campaign contributions, Caribbean trips for lawmakers and fees to lobbying firms. Mr. Stanford and his affiliated companies have spent more than $5 million on lobbying fees since 2000, federal records show. The businessman and his top executives have also contributed at least $2 million to candidates, including key lawmakers, and additional thousands of dollars on jets and resorts. Among the recipients of Mr. Stanford's largesse is House Ways and Means Committee Chairman Charles Rangel (D., N.Y.), who has long advocated lenient tax policies toward Virgin Islands residents and in 2007 introduced a bill enforce a statute of limitations on IRS scrutiny of islanders' old tax returns. That year, Mr. Rangel traveled to Antigua for a development conference partly sponsored by Mr. Stanford, who also donated $28,300 to Mr. Rangel in 2008. Mr. Stanford wrote two $250,000 checks to the Democratic Party in 2002.

- General Motors Corp.(GM) and Chrysler LLC told the federal government they may need up to $21.6 billion more combined in bailout loans to put them on the road to recovery, and outlined possible scenarios if either auto maker should have to file for bankruptcy protection.

- The Decline of California. They still think they can tax their way out of this one.

NY Times:

- Former CNBC news anchor Ron Insana appears to be done with his foray into the hedge fund business. Mr. Insana has decided to leave his post at SAC Capital just six months after he was hired as a managing director, a person briefed on the matter told DealBook. Mr. Insana’s last day at the hedge fund giant, run by billionaire Steven A. Cohen, will be Feb. 27. Mr. Insana is planning to return to the media industry, this person said, but it’s unclear if he will be rejoining CNBC.

- Live television programming is on its way to Apple's (AAPL) iPhone.


- U.S. Sen. Roland Burris now acknowledges attempting to raise money for ousted Gov. Rod Blagojevich - an explosive twist in his evolving story on how he landed a coveted Senate appointment from the man accused of trying to sell the seat. Burris made the admission to reporters late Monday, after releasing an affidavit over the weekend saying he had more contact with Blagojevich advisers about the Senate seat than he had described under oath to the state House panel that recommended Blagojevich's impeachment. The Democrat also said in the affidavit, but not before the panel, that the governor's brother asked him for fundraising help.


- Verizon Communications)VZ) sees the weak economy helping sales of an on-demand computer hosting service it plans to launch this summer, an executive for the telecom service provider said on Tuesday. Verizon said it would let customers order computing capacity for applications such as retail websites on-the-fly instead of having to commit to rent computer space longer term under Verizon's current hosting service model.

- Japan's Trend Micro Inc, the No 3 maker of computer security programs, introduced a new line of software on Tuesday that runs on home networking gear, protecting groups of PCs from viruses. The company, which touted the product as the first of its type, is also getting ready to unveil software that protects USB flash drives from infection, said Trend Micro Vice President Carol Carpenter.

- Billionaire investor Wilbur Ross said on Tuesday he would invest in the U.S. government's private-public investment fund designed to help mop up banks' troubled assets, provided that low-cost funding, as well as guarantees in sharing investment losses, are involved. "Part of the reason this fund needs to be leveraged is simply the scale of this thing," Ross told Reuters in an interview. "If they are going do it, they should be doing it on a very big scale. Otherwise it doesn't solve anything."

Korea Economic Daily:

- Samsung Electronics Co. plans to cut its capital expenditure by 35% to around $4.8 billion this year, citing a survey of South Korea’s 600 biggest companies. Samsung plans to reduce investment in the semiconductor and liquid-crystal-display businesses.

Herald Business:

- South Korea’s total debt may be at $471 billion, or 75% of GDP, instead of 33% announced by the government. South Korea classifies state debt differently from other advanced countries, which may have caused the discrepancy in calculations, citing a parliamentary report.

Late Buy/Sell Recommendations
- Reiterated Buy on (NKE), target $63.

- Reiterated Buy on (BEAT), target $29..

Night Trading
Asian Indices are -2.0% to -.25% on average.
S&P 500 futures +.38%.
NASDAQ 100 futures +.36%.

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 Futures
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (OC)/.15

- (GT)/-1.14

- (CMCSA)/.23

- (ITTRI)/.72

- (DBRN)/.01

- (ADI)/.16

- (CBS)/.26

- (OII)/.92

- (HPQ)/.93

- (AAP)/.37

- (SNPS)/.41

- (IM)/.36

- (WFMI)/.17

- (CEG)/1.18

- (PCLN)/1.06

- (OMX)/.14

- (DE)/.62

Economic Releases

8:30 am EST

- The Import Price Index for January is estimated to fall 1.2% versus a 4.2% decline in December.

- Housing Starts for January are estimated to fall to 529K versus 550K in December.

- Building Permits for January are estimated to fall to 525K versus 547K in December.

9:15 am EST

- Industrial Production for January is estimated to fall 1.5% versus a 2.0% decline in December.

2:00 pm EST

- Minutes of Jan. 27-28 FOMC Meeting

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Pianalto speaking, Fed’s Bernanke speaking, Fed’s Evans speaking, Kaufman Bros. Green Tech Conference, Morgan Stanley Basic Materials Conference, Roth Growth Stock Conference, weekly retail sales reports and weekly MBA mortgage applications report could also impact trading today.

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

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