Late-Night Headlines
Bloomberg:
- U.S. hedge funds are buying more of the nation’s stocks than they’re selling for the first time since October, while mutual funds and most other investors remain net sellers, according to UBS AG. In the four weeks ended March 13, net purchases of equities by hedge fund clients of UBS averaged $140 million, according to a March 18 report by David Bianco, the New York-based chief equity strategist at Switzerland’s biggest bank. The inflows into stocks followed 22 straight weeks of outflows. “Those who are supposedly experts at assessing and managing risk are more confident putting capital to work than they were in October and November,” said Peter Kenny, managing director in institutional sales at Knight Equity Markets LP Jersey City, New Jersey. “That’s an indication that the market has made some constructive moves toward building a base.” Mutual funds and other long-only investors such as pension funds and insurance companies, so-called because unlike hedge funds they don’t usually engage in short selling to bet on stock price declines, were net sellers of an average $144.8 million of U.S. shares over the same four-week period.
- Intel Corp.(INTC), the world’s largest chipmaker, had its 2009 profit estimate increased to 30 cents a share from 20 cents at Goldman Sachs Group Inc.(GS), which cited “an uptick in shipments and lower underutilization charges.”
- BlueMountain Capital Management LLC, the New York-based firm overseeing $4.6 billion, began a new fund that will buy high-yield, high-risk corporate loans, betting that the worst of a sell-off in the market is over.
- BlackRock Inc.(BLK), the manager of the world’s largest mining funds, said it’s “too early” to talk of a recovery in metals consumption. Users this year have been “restocking,” or rebuilding inventories, said Evy Hambro, managing director of BlackRock’s $5.2 billion World Mining Fund.
- Oil’s rally above $50 may encourage OPEC members to start releasing more crude into the market before production cuts have had a chance to reduce stockpiles, causing prices to fall again, PetroMatrix GmbH said. Oil’s recovery to a three-month high hasn’t been accompanied by a decline in US Stockpiles are at a two-year high as fuel consumption drops and refiners reduce output. “The current rally could become OPEC’s worst nightmare as it is occurring before oil stocks have been sufficiently reduced,” said Olivier Jakob, managing director of the Zug, Switzerland-based consultant Petromatrix.
Wall Street Journal:
- President Barack Obama reacted coolly to a House bill that would use the tax system to try and confiscate nearly all the bonuses paid to American International Group Inc. employees. It's important, he said, not to "lurch from thing to thing" in trying to address the nation's big problems. "Look, I understand Congress' frustrations," he said on "The Tonight Show with Jay Leno." But he suggested that legislators were being more vindictive than constructive. "Everybody's angry... but I think that the best way to handle this is to make sure that you close the door before the horse gets out of the barn. And what happened here was the money's already gone out, and people are scrambling to try to find ways to get back at them," he said. From there, he went on to pitch his long-stated proposals to change the tax code by increasing taxes on all upper-income Americans, specifically families earning more than $250,000 a year and individuals earning more than $200,000 annually.
- The Federal Reserve's decision this week to pump an extra $1.15 trillion into the financial system was driven in part by a worry that the U.S. economy has become plagued by increasing slack in the economic chain. From empty hotel rooms to idle factory equipment to workers in part-time jobs, the economy is stuck with excess capacity. This signals that even if the economy turns around tomorrow -- and there have been glimmers of stability in recent weeks, including higher stock prices -- the economy is likely to be operating well below its potential for many months, if not years, to come. Signs of slack are everywhere. The number of vacant homes dotting American neighborhoods was 19 million in the fourth quarter of 2008, up more than three million over three years. Hotel occupancy rates have fallen from 65.5% a year ago to 55.2% in early March, according to Smith Travel Research, a Tennessee firm that tracks the industry. Manufacturing plants ran in February at 67.4% of their capacity, the lowest utilization rate since the Fed began keeping records in 1948. One example of the slack comes from Union Pacific Railroad, the nation's largest railroad. It has the capacity to run 200,000 carloads weekly, but is running only 150,000. "As volumes remain soft, we are acting aggressively to right-size our resources, furloughing 3,600 employees, storing over 1,400 locomotives, and parking 53,000 freight cars," Rob Knight, the firm's chief financial officer, told investors in a conference call last week. The clearest signs of slack are in the job market. On Thursday, the Labor Department reported that new claims for unemployment benefits slid last week by a seasonally adjusted 12,000 to 646,000, but the four-week average rose slightly to 654,750, a 26-year high. The total number of Americans drawing weekly benefits jumped to nearly 5.5 million, a new high.
- The acting chairman of the Federal Energy Regulatory Commission says the nation should have a new network of power lines to carry wind power across the country, providing a rationale for Democratic legislation that would give the agency authority to permit power lines where it sees fit even over state and local objections. FERC Chairman-designate Jon Wellinghoff says he envisions a new grid system that can carry electricity from the wind-rich Midwest to New York, Washington DC, Atlanta, and other eastern cities. Longer term, he says, wind turbines off the Atlantic coast that could generate wind energy that would flow in the other direction, from east to west. One way to avoid controversy over the location of new power lines could be to run them along railroad rights of way, Mr. Wellinghoff said in an interview.
- Opposition from the banking industry and moderate Senate Republicans and Democrats has stalled a proposal to allow judges to modify mortgages in bankruptcy court. The measure known as "cramdown," is endorsed by President Barack Obama and Congressional Democratic leaders as part of a sweeping administration plan to help strapped homeowners. But with Congress due to start a two-week spring recess April 6, Senate negotiators have been unable to lure a handful of moderate votes needed to pass the bill in the Senate.
- Amid the global downturn, a number of intrepid investors are dipping their toes into the waters of an unlikely haven: Iraq. Energy investors have long been sounding out opportunities in the oil-rich country. But as security here continues to improve, nonoil investors are giving Iraq a first serious look.
MarketWatch.com: Responding to the anger over $165 million in bonuses paid to AIG traders, the House approved a bill Thursday that would impose a punitive 90% tax on bonuses paid by American International Group Inc. and other financial companies that receive federal help. The vote was 328-93, with about half of the Republicans joining almost all Democrats voting in favor. Meanwhile, Treasury Secretary Timothy Geithner acknowledged in an interview with CNN late Thursday that he knew recently-passed stimulus legislation included a loophole that could allow AIG (AIG) to keep its controversial bonuses. Criticism had recently been leveled at Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, for including language in the stimulus bill that restricted bonuses and golden parachutes, but allowed AIG to retain its particular bonuses thanks to a "grandfather" clause.
- Sales of video game software in the U.S. saw modest growth during the month of February -- largely in line with Wall Street's estimates -- as action titles such as "Street Fighter" and "Killzone" drew in customers. For the month, sales of game software rose 9% to $733.5 million, according to data from NPD Group on Thursday. Analysts were expecting sales growth of 5-10% for the month.
CNBC.com: The White House and Congress are rushing to write legislation that allows the federal government to take over and unwind the businesses of a large financial institution—such as AIG(AIG) or Citigroup(C)—the way it now can with commercial banks, CNBC has learned.
- British luxury carmaker Jaguar surged to the top of J.D. Power and Associates' closely watched vehicle dependability study this year, tying Buick for the No. 1 spot and dethroning Lexus for the first time since the Japanese luxury brand has been a part of the survey.
NY Times:
- The question was direct and prescient. Representative Joseph Crowley, Democrat of New York, asked the Treasury secretary in an open hearing what could be done to stop American International Group from paying $165 million in bonuses to hundreds of employees in the very unit that had nearly destroyed the company. Timothy F. Geithner, the Treasury secretary, responded by saying that executive pay in the financial industry had gotten “out of whack” in recent years, and pledged to crack down on exorbitant pay at companies like A.I.G. that were being bailed out with billons of taxpayer dollars. The exchange took place before the House Ways and Means Committee on March 3 — one week before Mr. Geithner claims he first learned that the failed insurance company was about to pay a round of bonuses that have since caused a political uproar. Interviews with senior Federal Reserve and Treasury officials, as well as members of Congress, leave little doubt that the bonus program was a disaster hiding in plain sight. Mr. Geithner is not the only one who appears not to have understood the populist fury the bonuses would set off. Career staff officials at the Treasury, Fed and Federal Reserve Bank of New York exchanged e-mail messages about the A.I.G. bonus program as early as late February, according to a person familiar with the matter. A.I.G. itself revealed the bonus plan in regulatory filings last September. In early February, Mr. Geithner opposed a provision in the economic stimulus bill that would have slapped a steep tax on the kind of bonuses that A.I.G. was about to pay. If A.I.G.’s plan to pay out an additional $165 million in bonuses came as a surprise to Mr. Geithner, it did not come as a surprise to staff at the Treasury, the Federal Reserve in Washington or the New York Fed.
BusinessWeek:
- Iraq’s Oil Minister Speaks to BusinessWeek. Hussein Al-Shahristani is trying to persuade global oil giants to invest $35 billion to move Iraqi oil production to 6 million barrels a day. Iraq's Oil Minister, Hussein Al-Shahristani, finds himself in a crucial role. Iraqi oil production has been stuck at around 2 million to 2.5 million barrels per day since the ouster of Saddam Hussein. That's considered well below the country's capability.
IBD:
- Americans have cut back sharply on new auto purchases. But that only means they're driving their old cars longer. And that translates into more sales of batteries, fuel pumps and other replacement parts sold by O'Reilly Automotive (ORLY).
Financial Times: Barack Obama stepped out from behind his teleprompter on Thursday for an off-the-cuff question-and-answer session with voters in California. But the spontaneity failed to quell growing criticism of his heavy use of the electronic speech aid, after a technical glitch this week highlighted its fallibility. US presidents have used teleprompters since their invention but Mr Obama relies on them more than his predecessors, reading from the see-through screens for even the briefest statements. Some critics have even labelled him the Teleprompter President. Perhaps it is not surprising that, at a time of economic crisis, the White House wants to ensure the president is word-perfect, in contrast to the frequent verbal slips made by his predecessor, George W. Bush. But Maureen Dowd, the influential New York Times columnist, argued on Thursday that the device was stripping Mr Obama of authenticity at a time of mounting populist anger over the economy. “Barack Obama even needs a teleprompter to get mad,” she wrote.
Shanghai Securities News:
- Ren Xingzhou, a researcher at the State Council’s Development Research Center , said China
Late Buy/Sell Recommendations
Citigroup:
- Upgraded (EXPE) to Buy, target $14.
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BOTTOM LINE: Asian indices are mixed, as losses in financial stocks are offset by gains in commodity stocks in the region. I expect US
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