Tuesday, March 31, 2009

Stocks Finish Higher, Boosted by Financial, REIT and HMO Shares

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Stocks Rising into Final Hour on Less Financial Sector Pessimism, Short-Covering, Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Financial longs and Medical longs. I covered all my (IWM)/(QQQQ) hedges this morning, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is below average. Investor anxiety is above average. Today’s overall market action is bullish. The VIX is falling 6.17% and is very high at 42.73. The ISE Sentiment Index is below average at 118.0 and the total put/call is about average at .82. Finally, the NYSE Arms has been running low most of the day, hitting .13 at its intraday trough, and is currently .63. The Euro Financial Sector Credit Default Swap Index is rising 1.72% today to 175.33 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 1.79% to 195.16 basis points. This index is still below its Dec. 5th record high of 285.99. The TED spread is falling 8.39% to 99 basis points. The TED spread is now down 364 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 4.04% to 58.0 basis points. The Libor-OIS spread is falling 1.29% to 97 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 6 basis points to 1.31%, which is down 133 basis points since July 7th. The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown. The 3-month T-Bill is yielding .20%, which is up 7 basis points today. Weekly retail sales came in this week at the best level since the first week of January and have continued to improve since bottoming the week of Feb. 3rd, which is a large positive. As well, the TED spread is rolling over again, which is also a huge positive. While some of today’s sharp gains in the financials are likely a result of short-covering, portfolio managers that didn’t want these stocks on their books at quarter’s end may step in tomorrow on the long side. Nikkei futures indicate an +331 open in Japan and DAX futures indicate an +40 open in Germany tomorrow. I expect US stocks to trade mixed into the close from current levels as short-covering offsets profit-taking.

Today's Headlines


- Stocks in the U.S. and Europe rose, extending the biggest monthly rally for global equities since 2003, as banks surged after a gauge of their health reached the best level in a month. Citigroup Inc., Bank of America Corp., HSBC Holdings Plc and Banco Santander SA gained at least 5 percent after the TED spread, the difference between what lenders and the Treasury pay to borrow for three months, fell to 0.99 percentage point. Alcoa Inc., the largest U.S. aluminum producer, jumped 11 percent on takeover speculation. The Standard & Poor’s 500 Index has surged 19 percent since March 9, the biggest 16-day rally since 1982, according to the firm’s index analyst Howard Silverblatt.

- Banks may report first-quarter earnings that are better than the “quite miserable” fourth quarter, reflecting gains in home sales, said John Dugan, U.S. Comptroller of the Currency. “We have seen some glimmers of hope in the economy, recently, as home sales have picked up and some banks have pointed to a better first quarter than the quite miserable fourth quarter of last year,” Dugan said today at an American Bankers Association conference in Washington.

- Apollo Global Management LLC, the private-equity firm run by Leon Black, and Colony Capital LLC may start funds to participate in the Obama administration’s program to buy distressed mortgage debt from U.S. banks. The firms are among buyout groups that are considering raising as much as $1 billion each to invest in government- backed deals, said people familiar with the matter who asked not to be identified because the discussions are private. Apollo and Colony may reduce their usual fees to lure investors who might otherwise be wary of betting on a recovery in real estate markets, the people said.

- French President Nicolas Sarkozy will walk out of this week’s Group of 20 summit if his push for stricter international financial regulation flops, Finance Minister Christine Lagarde told the British Broadcasting Corp. Sarkozy will refuse to sign any statement if he feels “the deliverables are not there,” Lagarde said in the interview. “I think he is very determined.” “It’s a bomb shell to be honest,” said Philip Whyte, senior research fellow at the London-based Center for European Reform. “If such a high-profile leader would walk out the summit, it likely would be seen as very negative on the stocks and bond markets. It would highlight the disunity among the leaders when the times require a show of unity, concrete actions and stabilization.” Failure to find an international consensus would deal a blow to the April 2 summit in London that aims to find ways to end the global recession and avoid a repeat of the financial crisis that caused it. France has resisted U.S. calls to boost fiscal stimulus while pushing for crackdowns on tax havens, executive compensation and hedge funds.

- The German economy will contract 5.3 percent this year, the Organization for Economic Cooperation and Development said, urging Chancellor Angela Merkel to adopt more measures to combat the recession. While Europe’s biggest economy will see “slow” recovery next year, growing 0.2 percent, the jobless rate will jump to 11.6 percent from 8.9 percent in 2009, the Paris-based OECD said today in an e-mailed report. The fiscal deficit will widen to 6.8 percent of gross domestic product from 4.5 percent, it said. “Given the rapid deterioration in activity, further stimulus measures are needed and should be implemented quickly,” the OECD said.

- Cerberus Capital Management LP, the $27 billion investment firm founded by billionaire Stephen Feinberg, may use stakes in a new fund to pay investors seeking withdrawals from a hedge fund after redemptions surged. Setting up a so-called special purpose vehicle to meet redemption requests from Cerberus Partners LP, which capped withdrawals in December after its assets slumped, is one option being considered by the New York-based firm, according to a March 27 letter to investors. The company may also pay withdrawals in cash within the one-year suspension period. Cerberus, founded by former Drexel Burnham Lambert Inc. banker Feinberg in 1992, limited withdrawals from the hedge fund after it lost 16 percent in the year through November. The fund fell 3 percent to $1.99 billion in the first two months of 2009, according to the letter, a copy of which was obtained by Bloomberg. The surge in withdrawals and the creation of the new fund may result in investors waiting years to get their money.

- Bank of America Corp.(BAC), Wells Fargo & Co.(WFC) and BB&T Corp.(BBT) are all expected to turn higher operating profits than earlier estimated on the banks’ mortgage and trading businesses, Friedman, Billings, Ramsey Group Inc. said. Bank of America’s estimate for operating earnings was raised to 10 cents a share from a loss of 50 by Paul Miller, an analyst with FBR. The Charlotte, North Carolina-based bank should benefit from its mortgage and capital markets trading business, Miller said in a research note to investors today. Wells Fargo’s operating earnings were raised to 25 cents a share from 5 cents, which “reflects stronger mortgage banking income.”

- Mark Carhart and Raymond Iwanowski, co-heads of Goldman Sachs Group Inc.’s quantitative investment- management group and Global Alpha hedge fund, retired. The pair left the New York-based firm today along with senior portfolio manager Giorgio De Santis. Andrea Raphael, a spokeswoman at Goldman Sachs, confirmed the departures and declined to comment further.

- US steel prices fell 5.6% in March as demand for the metal continues to weaken, Purchasing Magazine said. The average price of hot-tolled steel sheet, the benchmark product used in cars and appliances, dropped to $471 a ton from $499 in February, the magazine said today.

- Commodities headed for a third quarterly drop, the longest losing streak since 2001, as demand for raw materials from crude oil to nickel shrank and producers failed to cut output fast enough. The Reuters/Jefferies CRB Index of 19 commodities fell 5.8 percent this quarter, adding to a 50 percent drop in the second half of 2008. Natural gas, nickel and wheat led the declines, overwhelming advances in gasoline, copper and hogs. The contraction in global oil consumption this year will be the first since the early 1980s and the steepest since the mid- 1970s, according to Nobuo Tanaka, executive director of the International Energy Agency. The Paris-based adviser to 28 nations has cut its 2009 demand forecast seven times. An earlier rebound above $50 a barrel was “not sustainable because near-term fundamentals are still very bearish, and the focus is about to switch back to the global recession, weak demand and still-high stocks,” said Mike Wittner, head of oil- market research at Societe Generale SA in London. Copper demand will drop 9.2 percent in 2009, leaving a supply surplus this year and next, according to Macquarie Group Ltd. Copper has advanced 31 percent this year, buoyed by China adding to state reserves and dwindling supplies of scrap, used to make about 40 percent of the world’s refined metal. Aluminum production will outpace demand through 2012, while zinc and lead won’t move back into a shortfall until 2011, Macquarie estimates. Nickel will fare worse, remaining in surplus until at least 2012, the bank forecast. Money into commodity exchange-traded products will likely reach $19 billion this quarter, $4 billion more than for all of 2008, Barclays Capital estimates.

- China’s 4 trillion yuan ($585 billion) fiscal stimulus spending won’t create enough jobs, making unemployment the nation’s “most pressing issue,” the Asian Development Bank said. “Investment projects in the stimulus package will generate jobs, but not enough to absorb the growing labor surplus,” the ADB said. “Infrastructure projects are generally less labor- intensive than export-oriented manufacturing.” The ADB cut its forecast for China’s economic growth this year to 7 percent from 9.5 percent in a report released in Hong Kong today.

- North Korea’s government vowed to wage war against Japan if Japanese defense forces try to shoot down a missile that the communist nation says will carry a communications satellite. “Should Japan dare recklessly to intercept the DPRK’s satellite, its army will consider this as the start of Japan’s war of reinvasion more than six decades after the Second World War,” the official Korean Central News Agency said today in an e-mailed statement.

- Crude oil is set to drop to $28 a barrel in New York in the second quarter, according to technical analysis by Societe Generale SA. “The market can continue to bounce, but in the next month the bear-trend will resume,” Aymes said in a telephone interview from London yesterday.

Wall Street Journal:

- Eli Lilly & Co.(LLY) Chief Executive John Lechleiter said the drug maker is looking for acquisitions of as much as $15 billion now that it has digested ImClone Systems. "I got hungry again about three weeks after ImClone got closed" in late November, Dr. Lechleiter said in an interview. Major drug makers are snapping up large rivals after failing to develop lucrative new drugs to replace their aging blockbusters. Analysts estimate that drugs with $30 billion in sales will go off patent and face competition from cheaper generics in the next several years.

- Iraq has tendered to build 50,000 barrel a day crude oil production facility at one of the world's largest oil fields in southern Iraq, according to a document seen by Dow Jones Newswires Tuesday. It said foreign companies bidding for the degassing, dehydration, and desalination plants must submit their offers by April 23. The underdeveloped West Qurna oil field, near Basra has estimated proven reserves of 8.6 billion barrels and is producing 300,000 barrels a day, while its potential production capacity could reach up to 650,000 barrels a day. Earlier this month, Missan Oil Co., also in southern Iraq, issued a tender for building a similar facility at the giant Halfaya oil field. The two giant oil fields are part of a "crush plan" recently adopted by the Iraqi government to increase the country's production by 500,000 barrels a day within two years. Iraq, in desperate need of cash to rebuild its infrastructure, is seeking to boost oil production and renew an industry that has been hobbled by years of war, sanctions, underinvestment and violence. Iraq, with oil reserves exceeding 115 billion barrels, the world's third largest, produces only 2.4 million barrels a day.

- On Monday, the markets started to question whether International Business Machines and Sun Microsystems will really get a deal done. It was on March 19 that The Wall Street Journal reported that IBM was in talks to acquire Sun Micro. But it wasn’t until Monday that stock prices of the two companies really started to diverge, a sign perhaps that traders suddenly believed the deal could be endangered.

- Genentech Inc. (DNA) officials on Tuesday said they are "confident" that data the company submitted to federal regulators are sufficient to support approving Avastin to treat an aggressive type of brain cancer. Genentech made its pitch to support expanding approval of Avastin, already approved to treat advanced breast, lung and colorectal cancers, in patients with glioblastoma multiforme before a U.S. Food and Drug Administration-sponsored panel of medical experts.

- MySpace plans to announce that it has struck a deal with IAC/InterActiveCorp's(IAC) CitySearch to collaborate on local online business advertising, among other initiatives, according to people familiar with the matter.


- GM Chief Financial Officer Ray Young told me in a phone discussion Tuesday that the previous offers extended to the company’s union and bondholders are no longer valid. They are going to get new offers, and they will be harsher, per order of the White House. He went on to say that the White House did not give the company a new specific set of terms, but that the administration’s new goal is a “maximum conversion of debt to equity.” In other words, instead of giving the UAW and bondholders cash or new debt, they should be forced to take as much stock as possible.

- Warren Buffett's official biographer calls Byron Trott a "perfect candidate" to eventually take over at Berkshire Hathaway, now that Buffett’s favorite investment banker has left Goldman Sachs.

- Monthly sales reports due out from more than 50 retailers this week should show signs of stabilization in the sector, said Dana Telsey, Telsey Advisory Group chief research officer. “I think we’re going to hear from some of the companies a little bit about sales stabilization,” said Telsey. “We’re finally seeing inventory levels come down so much that you can’t have sales continue to weaken at the dramatic pace that they had been.”

- Poll: Is Obama’s tactic of strong-arming business good for the economy?

- Should a bridge that would connect two campuses at Microsoft's headquarters be funded with $11 million from the federal stimulus package? Critics of using stimulus money for the bridge say it would give the software giant a break on a pet project. They also say it serves as a warning sign of how some stimulus money is not being used to finance new projects but is being diverted to public works already under way.

CBS News:

- The top Taliban commander in Pakistan promised an assault on Washington "soon" - one he says will "amaze" the world. "Soon we will launch an attack in Washington that will amaze everyone in the world," Baitullah Mehsud told The Associated Press by phone. Mehsud also claimed responsibility for Monday's attack on a police academy outside the eastern Pakistani city of Lahore, saying it was in retaliation for U.S. missile strikes against militants along the Afghan border.


- The FBI and federal prosecutors are reportedly closing in on the AIG executive whose suspect investments cost the insurance giant hundreds of billions of dollars. The government is investigating whether or not 54-year old Brooklyn-native Joseph Cassano committed criminal fraud in virtually bankrupting the company. "He almost single-handedly is responsible for bringing AIG down and by reference the economy of this country," said Rep. Jackie Speier (D-Ca.) Cassano, who lives in London, made more than $300 million running the infamous Financial Products Division of AIG where he, with about a dozen others, committed AIG to insure what turned out to be more than a trillion dollars worth of junk quality loans held by banks. "He is the golden boy of the casino," said Rep. Speier. "They basically took peoples' hard earned money and threw it away, gambled it and lost everything. And he must be held accountable for the fraud, for the dereliction of his duty, and for the havoc that he's wrought on America."

The Detroit News:

- Michigan State's entry into the NCAA Final Four has sent ticket prices soaring on the resale market. After MSU's pivotal victory against Louisville on Sunday, tickets to Saturday's semifinal game at Ford Field against Connecticut fetched as much as $2,500 each on StubHub.com, an online ticket marketplace. On eBay, a seller hoping to profit from the post-game frenzy posted tickets for $1,750 a pair.

- The Chevrolet Volt will not save General Motors Corp., the U.S. government said Monday in its Viability Summary of GM. "While the Volt holds promise, it will likely be too expensive to be commercially successful in the short-term," the report said. The electric car "is currently projected to be much more expensive than its gasoline-fueled peers and will likely need substantial reductions in manufacturing cost in order to become commercially viable."

CEP News:

- U.S. retailers saw a rebound in weekly chain store sales for the week ending March 28, according to a survey from ICSC that showed more spending compared to the previous week. ICSC and Goldman Sachs reported that U.S. chain store sales increased 1.1% on a weekly basis following a 0.4% contraction previously. On an annual basis, sales were down 0.2% compared to the previous week's 1.4% contraction. "This solid weekly increase is a good omen for the retail sector and economy -though demand improvement has a long road back," said Michael P. Niemira chief economist at the ICSC.

Washington Post:

- After ousting General Motors' chief executive, President Obama warned Monday that bankruptcy may be unavoidable for two American automotive giants. The administration's display of authority sent U.S. stocks tumbling and raised questions about whether the government would take similar steps against top executives at U.S. banks that are also receiving government bailout funds.

- Morgan Stanley (MS) is close to raising $6 billion for a new global property fund, falling short of its earlier target of $10 billion, sources with direct knowledge of the plan said.

- China Investment Corp (CIC), the country's $200 billion sovereign wealth fund, has committed $800 million in a new $6 billion global real estate fund to be managed by Wall Street bank Morgan Stanley (MS), according to a person who has direct knowledge of the deal.

- The euro zone will sink deep into recession this year with inflation below one percent this year and next, the OECD forecast on Tuesday, as it called for more European Central Bank rate cuts and quantitative easing. The Organization for Economic Cooperation and Development said the euro zone economy would shrink 4.1 percent this year and a further 0.3 percent in 2010 -- the most pessimistic outlook of all institutional forecasters so far.


- The number of anti-Semitic incidences in Europe through the first three months of this calendar year exceeds the total number of such occurrences from all of 2008, according to a report issued by the European Jewish Congress.

Bear Radar

Style Underperformer:
Large-cap Value (+1.76%)

Sector Underperformers:
Homebuilders (-2.16%), Tobacco (-.75%) and Oil Service (-.74%)

Stocks Falling on Unusual Volume:

Stocks With Unusual Put Option Activity:
1) AMLN 2) BDK 3) AEP 4) ERTS 5) ATHR

Bull Radar

Style Outperformer:
Large-cap Growth (+1.45%)

Sector Outperformers:
Banks (+5.35%), REITs (+4.04%) and Software (+3.50%)

Stocks Rising on Unusual Volume:

Stocks With Unusual Call Option Activity:
1) BDK 2) ADSK 3) ALTR 4) FITB 5) ABC

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Monday, March 30, 2009

Tuesday Watch

Late-Night Headlines

- American International Group Inc., the insurer bailed out by the U.S., received an $800 million loan from its money-losing consumer lending unit after pumping $600 million of capital into the business. American General Finance Corp. will charge AIG 0.5 percentage point more than the overnight London interbank offered rate for the loan, the Evansville, Indiana-based unit said today in a filing with the Securities and Exchange Commission.
- Cia. Siderurgica Nacional SA, Brazil’s third-largest steelmaker, said the price of Brazilian iron ore will probably fall 20% in annual contract agreements this year. Prices for iron ore from other countries may fall 30%, CSN Mining Director Jayme Nicolato said.

- United Auto Workers membership fell 7.3 percent to 431,000 at the end of 2008 as union diversification efforts beyond U.S. automakers didn’t keep up with job cuts at those companies. The union peaked at 1.5 million members in 1979.

- Ford Motor Co.(F) bonds gained 38 percent this month on average as the second-biggest U.S. automaker asked investors to swap debt at a premium to trading prices to help it avoid bankruptcy or a government bailout.

- A Cayman Islands court may decide tomorrow to put Dynamic Decisions Capital Management Ltd.’s main hedge fund under the protection of an outside firm after investors accused the manager of “gross mismanagement and misfeasance,” according to people familiar with the case.

- JPMorgan Chase & Co.(JPM) is winning twice as much work as its nearest competitor, Goldman Sachs Group Inc., in the busiest year for European rights offers.

- Neptune Orient Lines Ltd., Southeast Asia’s biggest container carrier, fell in Singapore trading after reporting its second straight drop in rates amid slowing global trade. The shipping line dropped for a third day in a row, slipping as much as 5.2 percent to S$1.09 at 9:50 a.m. Average revenue per 40-foot box fell 16 percent to $2,382 in the four weeks ended March 6, the company said yesterday. The shipping line’s volume fell 21 percent, the fifth straight fall.

- Asian economies will expand at the slowest pace since 1998 as a global recession hurts trade and government stimulus plans take time to revive growth, the Asian Development Bank said. Asia excluding Japan will grow 3.4 percent this year, less than half of a September estimate of 7.2 percent, the Manila- based institution said in a report today. “The short-term outlook for the region is bleak as the full impact of the severe recession in industrialized economies is transmitted to emerging markets,” ADB’s acting chief economist Lee Jong-Wha said in a statement. Exports by developing Asian economies may shrink 10.3 percent this year, after growing 14.7 percent in 2008, the ADB said. Imports will probably contract 11.9 percent. “Across the region, factory closures and job losses are rising, weighing on consumer sentiment and forcing households to cut back on spending,” the ADB said. “Slowing demand and the uncertain economic environment are discouraging investment. As business sentiment continues to degenerate, capital spending will be restrained.” China will expand 7 percent this year, from a September forecast of 9.5 percent and last year’s 9 percent, the ADB predicts. India’s economy will grow 5 percent this year, down 2 percentage points from the earlier estimate, it said. In Southeast Asia, the ADB expects the economies of Thailand, Malaysia and Singapore to shrink this year, dragging growth in the region to 0.7 percent in 2009. The East Asian economies of South Korea, Taiwan and Hong Kong will also contract, it said.

- Australia’s economy will probably contract this year for the first time in almost two decades amid slumping global demand for exports, central bank Deputy Governor Ric Battellino said. “There are limits on how much we can insulate ourselves from what is happening abroad, and therefore there are probably still some difficult times ahead,” Battellino told a conference in Brisbane today. Gross domestic product is “likely to fall in 2009,” he said. In February, the bank tipped 0.5 percent growth.

- Morgan Stanley(MS) Chief Executive Officer John Mack told employees at Morgan Stanley and Citigroup Inc.’s Smith Barney unit that 2009 will be a “difficult year” and that profitability isn’t near the bank’s long-term targets. This year, “even though flows of business are good, is nowhere near what we need on a long-term basis,” Mack, 64, said on an internal conference call today with the brokers. The year “will be a difficult year for all of our firms, mainly because of some of the legacy positions that we continue to have, and they drag on all of us.” “As much as we’d like to give the money back and just focus on not having government involvement, being totally a public entity, we think and I think that it’s the wrong time to do it now,” he said on the call. “The Treasury’s plan to help banks get rid of bad assets is promising,” Mack said. The firm is “talking about how can we participate as one of the firms that can buy these assets and package them where your clients will have access to them. Simply say we’re all over it.” Mack told employees the American people are upset about the loss of jobs and homes, and that their anger is being directed at Wall Street. He said some anger is justified and “we’ve all made mistakes.” At the same time, he said, Obama, Treasury Secretary Timothy Geithner and Lawrence Summers, Obama’s senior economic adviser, recognize that efforts to tax or otherwise curb Wall Street compensation is a concern for employees. “I know there’s been a lot of talk about compensation and taxes, I just want to assure you we’re all over that,” Mack said. “The president and his financial team and Larry Summers and Secretary Geithner understand it.” Morgan Stanley’s brokerage joint venture with Smith Barney, announced in January, is making progress and “there is a chance we can close this sooner than later,” Mack said on the call. He also said the venture should benefit from Morgan Stanley’s recently agreed venture with Mitsubishi UFJ Financial Group Inc.

Wall Street Journal:

- Airline executives have little more to go on than a feeling, but based on very preliminary numbers, they're expecting ticket sales to climb as the summer travel season approaches. That could mean that after several months of fare declines, prices will reverse and begin rising for the summer months as newly confident consumers book summer trips. From mid-February on, bookings have improved, said Scott Kirby, president of US Airways Group Inc. Sales are still worse than a year ago, "but things seemed to bottom in February, at least in the near term," Mr. Kirby said. "Hopefully we've seen the worst of it."

- Procter & Gamble Co.(PG) Chief Executive A.G. Lafley has publicly criticized an Obama administration proposal that would increase taxes on the foreign profits of U.S. multinationals, saying it would hurt corporate profits and job creation in the U.S.

- The Obama's administration's leading plan to fix General Motors Corp.(GM) and Chrysler LLC would use bankruptcy filings to purge the ailing companies of their biggest problems, including bondholder debt and retiree health-care costs, according to people familiar with the matter. The move would in essence split both companies into their "good" and "bad" components. The government would like to see the "good" GM to be a standalone company, according to an administration official. The "good" Chrysler would be sold to Fiat SpA, assuming that deal is completed, this person said.

- Inside a windowless, ornate room Thursday just across from the Oval Office, President Barack Obama and a group of senior economic advisers began the job of remaking the American automobile industry. The first order of business: Oust General Motors Corp.(GM) Chief Executive Rick Wagoner.

- Abbott Laboratories(ABT) held preliminary discussions with Wyeth(WYE) in mid-December about acquiring the company but decided not to pursue a deal amid concerns over price and other issues, according to people familiar with the matter.

- The federal government is proposing to forgive disaster loans made to coastal communities that have faced budget problems in the years after hurricanes Katrina and Rita. Rules proposed Monday would let local governments avoid repaying some or all of their loans if revenue for three fiscal years since the disasters hasn't met operating costs.

- Intel Corp.(INTC) on Monday introduced its much-anticipated new microprocessor for business computers, a new chip that analysts say highlights the industry-wide bid to build more power-efficient data centers.

NY Times:

- A concept embraced by President Obama on Monday as part his effort to save General Motors and Chrysler from collapse would provide cash to buyers of new fuel-efficient cars — if they traded in a clunker. Similar incentive programs overseas have lifted automobile sales despite the awful economy.

- A quintessential General Motors(GM) man, the former head of a military contractor, the Fiat chief executive, and a supporter of Barack Obama’s presidential campaign are to play significant roles in the bailout of GM and Chrysler.

The Washington Post:

- Key House Democrats will unveil legislation Tuesday that aims to cut the nation's greenhouse gas emissions 20 percent from 2005 levels by 2020, according to sources familiar with the bill who asked not to be identified. The measure, co-sponsored by House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) and Edward J. Markey (D-Mass.), who chairs the panel's Energy and Environment Subcommittee, will serve as the main vehicle in the House for climate legislation. It would establish a cap-and-trade system for carbon dioxide that would allow cleaner facilities to sell their pollution permits to dirtier operations. While the bill remains silent on some key issues, such as what portion of pollution allowances would be auctioned off and how the money raised through such an auction would be spent, sources said, it would establish both a national renewable energy standard as well as an energy-efficiency-resource standard that would reduce electricity demand by 15 percent by 2020. By 2050, the bill would cut national greenhouse gas emissions by 80 percent compared to 2005 levels.

- Two American journalists detained at North Korea's border with China two weeks ago will be indicted and tried, "their suspected hostile acts" already confirmed, Pyongyang's state-run news agency said Tuesday. "The illegal entry of U.S. reporters into the DPRK and their suspected hostile acts have been confirmed by evidence and their statements," the report said, referring to the country by its official name, the Democratic People's Republic of Korea. Euna Lee and Laura Ling, reporters for former Vice President Al Gore's San Francisco-based Current TV media venture, were detained by North Korean border guards March 17.

Editor & Publisher:

- U.S. Internet advertising revenue climbed in the fourth quarter in spite of the poor economy, but the growth rate was sluggish compared to previous years, according to an analysis released Monday. In the most recent quarter, revenue from search ads, which make up the largest segment of the online advertising market, rose 13 percent to $2.8 billion. Revenue from graphical "display ads," the second-largest segment, fell 4 percent to $2 billion. David Silverman, a partner at PricewaterhouseCoopers, called the year-over-year growth "remarkable." For the full year, online ad revenue totaled $23.4 billion -- up $2.2 billion, or a bit less than 11 percent, from 2007.The report said revenue from search advertisements rose 20 percent in 2008 to almost $10.6 billion. Display ad revenue rose 8 percent to $7.6 billion. Though still a small segment within the category, digital video ads -- such as those you might see when watching a TV show on Hulu -- were a bright spot, more than doubling in 2008 to $734 million from $324 million in 2007. About 10 percent of all money spent on advertising in 2008 went toward ads on the Internet, according to U.K.-based advertising company ZenithOptimedia. While that is still a small portion of the total, it rose from 8.6 percent in 2007, while the money spent on newspaper and magazine ads declined over the same period.


- The Obama administration has agreed to release another Guantanamo detainee, but officials aren't saying yet where he'll go.

Chicago Tribune:

- The head of Citadel Investment Group's equities market-making division is leaving the Chicago-based hedge fund operator, the company said Monday. Matt Andresen was president of Citadel Execution Services, a business that under his responsibility grew to represent as much as 9 percent of the stock and 30 percent of the option volume trading daily in America.


- Anyone looking for a single clue to both the success and high cost of U.S. health care need look no further than Alexion Pharmaceuticals (ALXN).


- Tim Kaine, the Virginia governor and President Barack Obama's hand-picked choice as the head of the Democratic National Committee, infuriated abortion-rights groups Monday by signing legislation that gives abortion foes a long-sought victory. Kaine brushed off intense lobbying by abortion rights supporters in Richmond to sign a bill that allows Virginia motorists to advertise their anti-abortion views by sporting "Choose Life" specialty license plates.


- Super-chemo targets cancer spreading to the liver.


- Shares of the world's three big iron-ore miners slumped on Monday after a Chinese official claimed steel mills in his country have wrested a 40.0% price cut from them. One of the miners denied the assertion, while the other two would not comment, but shares of the trio fell more sharply than the overall market.

- 10 Cities Where Americans are Relocating.


- At Wireless 2009, it’s all about the apps.

- Amazon(AMZN): thinking beyond the Kindle.


- Malaysia's stock exchange plans to launch a platform to facilitate regulated Islamic short-selling and hedge fund activities towards the end of the year, the bourse's head said on Monday. Short-selling -- the sale of borrowed stock with a view to buying it back more cheaply later -- is controversial among Islamic scholar, as some believe that sharia does not permit selling what one does not own.

- Walt Disney and Google's(GOOG) YouTube said on Monday they have reached a pact to offer sports highlights, clips of television shows and other short-form content on the hugely popular video-sharing site. The deal will see videos from sports network ESPN from April and the Disney/ABC Television networks such as ABC Entertainment and SoapNet become available on YouTube from May. Disney Media Networks will have the option to sell its own advertising inventory within those channels. While the deal does not entail full-length programing, analysts said it represents an important validation for YouTube as it seeks to present itself as an outlet for professionally-made, premium video content.

Financial Times:
- The US and Europe are united in their desire for far-reaching regulatory reform to strengthen the global financial system, Tim Geithner, the US Treasury secretary, has told the Financial Times. Mr Geithner said ahead of the G20 summit that the “US has a huge interest in acting quickly and comprehensively to use this opportunity to develop an international consensus on how to make the system more robust and stable”. He rejected the notion that the US is only interested in fiscal stimulus while continental Europeans want regulatory reform. He said all G20 nations agreed on the need for a strong regulatory response to the crisis and on the broad shape it should take. “Relative to where we were in 1998 during the Asian crisis, there is a much stronger degree of consensus,” he said. “The gap between where the French are, where the Germans are, where the Americans are, where the Chinese are – it is a very small gap.” The Treasury secretary said regulation would remain a sovereign issue. “We are not going to give anyone else the responsibility for deciding what balance between stability and efficiency is right for our markets.” But national reforms “will not work unless we are able to bring others along with us”. Mr Geithner said the “philosophy is to make both the core institutions and the markets more robust”. The US is focused above all on strengthening capital requirements and market infrastructure. Mr Geithner favors what some call a “systemic risk surcharge” – tougher requirements for the most systemically important companies. The “crucial test of a financial system” is its ability to withstand failure. “That requires core institutions to hold more capital against risk. It also means market infrastructure in all these markets – in derivative markets, in securities lending, in the repo market – has to be able to absorb failure and contagion.” Mr Geithner said there would be no global systemic risk regulator. “The home country authority has to have responsibility for consolidated supervision of its institutions.”

- The head of Germany’s powerful BDI industry federation launched a vitriolic attack on the US fiscal stimulus on Monday, saying aid to the motor industry amounted to a “car war” that could distort competition to the detriment of Europe. “What the US is doing right now is highly problematic in terms of competition. One day we in Europe will wake up with a big headache because of it,” Hans-Peter Keitel told the Financial Times in an interview.

Australian Financial Review:

- Australian company profits will drop 10% in fiscal 2010 as the global slump deepens and unemployment rises. Profits will return the worst result in 30 years, citing UBS Australia Ltd. chief economist Scott Haslem

Late Buy/Sell Recommendations

- We are adjusting our estimates for fertilizer producers (POT), (MOS) and (AGU) to reflect weaker expected 1H volumes for Potash, partially offset by more robust Nitrogen volumes and pricing. We believe 1Q ’09 potash volumes could be down 70% y/y as farmers sit on the sidelines and inventories build at the retailer and producer level. For the fertilizer year ending June 30, we now estimate Potash volumes could be down 35%, Phosphate volumes could be down 30%, and Nitrogen could fall 10%. We maintain our Hold ratings on POT and MOS, as we believe there is downside risk to potash prices, and our Sell rating on AGU, given its less attractive retail exposure.

Deutsche Bank:

- Cut (FCX) to Sell.

Night Trading
Asian Indices are -.75% to +1.75% on average.
S&P 500 futures +.83%.
NASDAQ 100 futures +.90%.

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Earnings of Note
Company/EPS Estimate
- (LEN)/-.64

- (APOL)/.65

Economic Releases

9:45 am EST

- The Chicago PMI for March is estimated to rise to 34.4 versus 34.2 in February.

10:00 am EST

- Consumer Confidence for March is estimated to rise to 28.0 versus 25.0 in February.

Upcoming Splits
- None of note

Other Potential Market Movers
The Fed’s Stern speaking, Fed’s Plosser speaking, (CPN) analyst meeting, (KMT) analyst meeting, S&P/CaseShiller Home Price Index, weekly retail sales reports and the NAPM-Milwaukee report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by financial and technology stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

Stocks Finish Lower, Weighed Down by Commodity, Financial, REIT and Homebuilding Shares

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