Late-Night Headlines
Bloomberg:
- Berkshire Hathaway Inc.(BRK/A) may lose its AAA rating from Moody’s Investors Service or Standard & Poor’s, Citigroup Inc. analysts wrote in a report today. Downgrades “should be expected” after Fitch Ratings cut Berkshire ’s issuer default rating to AA+, according to the report.
- Gary Gensler, President Barack Obama’s choice to head the Commodity Futures Trading Commission, was endorsed by a Senate committee, clearing the way for a full Senate vote on his nomination. Gensler, 51, was a Treasury official during the Clinton administration and is a former Goldman Sachs Group Inc. partner. Harkin and others on the committee had questioned Gensler’s role in 2000 legislation that exempted credit-default swaps from regulation by the agency. Credit-default swaps are blamed in part for the current financial crisis.
- Goldman Sachs Group Inc.(GS) cut its forecast for the price of European steel this year by 14 percent because users of the metal are taking longer than the bank had expected to run down inventories. So-called destocking may only be finished by the end of the next quarter, two to three months later than previously estimated, Peter Mallin-Jones, an analyst at Goldman Sachs in London, wrote today in a note. The price of European hot-rolled coil has slid 57 percent to 350 euros a ton since peaking at 815 euros on June 18, data compiled by Metal Bulletin shows.
- Alcoa Inc.(AA), the largest U.S. aluminum maker, plans to sell stock and convertible notes, slash its dividend and cut costs to conserve cash as the company braces for its second straight quarterly loss. The quarterly dividend will be reduced to 3 cents a share from 17 cents, New York-based Alcoa said today in a statement. Capital spending in 2010 will be $850 million, about half of this year’s spending, the company said.
- Australia’s central bank policy makers said they have scope to cut interest rates further after pausing this month to assess the impact of record reductions in benchmark borrowing costs and increased government spending. Board members saw “reasonable cases” for both pausing to evaluate the economy and cutting the official cash rate target from a 45-year low of 3.25 percent, the Reserve Bank of Australia said in minutes of its March 3 meeting, released in Sydney today.
- Holders of bonds from banks receiving US Senior and senior subordinated creditors of Bank of America Corp., Bank of NY Mellon Corp., Citigroup Inc., JPMorgan Chase(JPM) and Wells Fargo(WFC) have only a “very modest” chance of taking losses because the companies benefit from systemic support, Moody’s senior vp Sean Jones said today.
- It took a decade and more than $65 billion of acquisitions for Alessandro Profumo to turn a regional Italian lender into the nation’s biggest bank, UniCredit SpA, with operations stretching from Poland to Kazakhstan. Now that expansion, which swelled UniCredit’s market value to almost 85 billion euros ($111 billion) in October 2007, is alarming analysts who say loan defaults in eastern Europe, where the bank focused its growth, are set to balloon. The stock fell 77 percent in the past 12 months, the second-biggest decline among Italian banks. “Eastern Europe is the new bogeyman,” said Massimiliano Romano, an analyst at Concentric Italy in Milan.
- The cost of protecting against a default by banks fell after the Group of 20 nations pledged to help rid toxic assets from lender balance sheets. Credit-default swaps tied to Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. fell to the lowest in about two weeks on optimism government leaders will be able to purge devalued loans and securities clogging the financial system. A benchmark U.S. credit-swaps index regained some of the decline as a rally in stocks reversed and investors clamored for more details on how government leaders will act.
- Ford Motor Co.(F), whose Focus is the top-selling western car in Russia, cut its industry forecast for the country, saying sales may plummet as much as 50 percent this year in what used to be the second-fastest growing auto market. “All the indications are that even now demand is continuing to soften,” Nigel Brackenbury, Ford’s managing director for Russia, said in a telephone interview yesterday from Moscow. “There is substantial inventory in the market place that was built in 2008.”
Wall Street Journal:
- Congress is increasing pressure on the Securities and Exchange Commission to reinstate a rule aimed at limiting bearish bets on stocks as their prices fall. Sen. Ted Kaufman, a Delaware Democrat, and Sen. Johnny Isakson, a Georgia Republican, were set to introduce a bill late Monday that would require the SEC to restore the “uptick” rule. Some investors hope it will limit selling frenzies in stocks, especially financial ones. The SEC has scheduled a meeting for April 8 to vote on proposing a return of the Depression-era rule. The SEC is also expected to propose alternatives, such as circuit breakers if a stock falls by a certain amount. If triggered, a trader wouldn’t be able to short the stock for some determined period of time.
- As Washington wrestles with a once-in-a-generation financial meltdown, Sen. Chris Dodd has as much riding on the outcome as anyone on Capitol Hill. As Senate Banking Committee chairman, the Connecticut Democrat will be able to claim credit for new financial regulations the public wants. But he also is a longtime friend of Wall Street, making him a convenient scapegoat if voters sour on the government's handling of the economic crisis.
- A videogame publisher called Gazillion Entertainment, which aims to specialize in mass-market online games, reached an exclusive 10-year agreement with Marvel Entertainment Inc.(MVL) to make multiplayer online games using Marvel's characters.
CNBC.com:
Tension is rising between General Motors bondholders and the U.S. government as they move toward a March 31st deadline to restructure GM's $27.5 billion of debt.
- General Electric(GE) expects "very high" write-offs at its GE Capital this year, but spinning off the finance arm is an "unthinkable" option, Chief Executive Jeff Immelt said in an interview published by the ArabianBusiness.com website. "Our assets are shrinking, and I would say the write-offs will be very high this year. We are in a very, tough commercial cycle," Immelt said, according to the report.
NY Times:
- Stimulus Money Puts Clean Coal Projects on a Faster Track.
- Allergan’s(AGN) Botox Is Used to Treat Stroke Patients .
BusinessWeek:
- Another Credit Crunch: National Regulators Tighten the Screws. As governments step in to help, bureaucrats in Europe are imposing rules that can make even the safest debt harder to sell.
Forbes.com: Several large Wall Street firms say they're on track for a profitable first quarter. Now they may get another boost, thanks to the Financial Accounting Standards Board. Under a new proposal, so-called mark-to-market accounting rules would be tweaked, allowing financial companies more leeway in pricing assets rendered near worthless by the lack of buyers in the market. FASB's proposal is now open for comment and will be voted on during the April 2 board meeting, just in time for banks' first-quarter earnings season. FAS 157, the current mark-to-market rule, has been blamed by critics for the enormous destruction of bank capital--and the need for massive government bank rescue programs--over the last year.
IBD:
- Haemonetics ( HAE) is a different story, according to analysts and company officials. The Braintree, Mass.-based maker of devices and disposable products for blood processing has continued to grow even in the recession.
AP:
- Mexico said Monday it will increase tariffs on about 90 U.S. products in retaliation for last week's decision to end a pilot program that allowed some Mexican trucks to transport goods in the United States. Economy Secretary Gerardo Ruiz Mateos said the U.S. decision violates a provision of the North American Free Trade Agreement that was supposed to have opened cross-border trucking by January 2000. "We consider this U.S. action to be wrong, protectionist and a clear violation of the treaty," Ruiz Mateos told reporters. "By deciding to protect their trucking industry, they have decided to affect other countries and the region."
- Freedom of the press has deteriorated in the Americas, with Mexico among the most dangerous countries in the region to be a journalist, the Inter American Press Association said Monday. "Press freedom has worsened in the hemisphere in the last six months," the IAPA said as the association's four-day midyear meeting drew to a close in the Paraguayan capital.
Reuters:
- Goldman Sachs Group Inc(GS) and a parade of European banks were the major beneficiaries of $93 billion in payments from AIG -- more than half of the U.S. taxpayer money spent to rescue the massive insurer. The revelation on Sunday by American International Group Inc was another potential public relations nightmare, coming on the same weekend that the Obama administration expressed outrage over AIG's plan to pay massive bonuses to the people in the very division that destroyed the company by issuing billions of dollars in derivatives insuring risky assets. AIG, an embattled insurance giant that has received federal bailouts totaling $173 billion and is now paying $165 million in employee bonuses, is at the heart of a global financial crisis that President Barack Obama is trying to address with plans for trillions of dollars in spending. The revelations that billions of U.S. taxpayer dollars were funneled through AIG to Goldman Sachs -- one of Wall Street's most politically connected firms -- and to European banks including Deutsche Bank, France's Societe Generale and the UK's Barclays could stoke further outrage at the entire U.S. bank bailout. "It doesn't to me seem fair that the American taxpayer has got to bear the 100 percent of the downside," said Campbell Harvey, a finance professor at Duke University. "A hedge is not a hedge if you did not factor in the counterparty risk. And the U.S. taxpayer should not be obligated to make people whole for hedges that were not properly executed." Goldman Sachs, formerly led by Henry Paulson who was treasury secretary at the time of the original AIG bailout, said, as it has in the past, that its AIG positions were "collateralized and hedged."
- JPMorgan Chase & Co (JPM) must allow shareholders to vote on measures that would tie executive bonuses to the bank's long-term stock performance, U.S. regulators have ruled. The AFL-CIO Reserve Fund, a union investment fund, had sought a shareholder vote to add the measures to JPMorgan's bylaws.
Financial Times: Goldman Sachs Group Inc.(GS) expects to shift much of the uninvested money in its $15 billion private equity fund into distressed debt and has asked holders of the fund for approval, citing a statement from the bank to investors. The firm expects “private-equity like returns at an even more senior position in the capital structure,” the report said. In some cases, Goldman will potentially be pitting itself and its investors against some of its best clients, the private equity firms controlling these highly indebted companies. Often, the goal of buyers of distressed debt is to ultimately control the issuing company when it cannot meet all its obligations.
AFP:
Edge Financial Daily:
- Malaysia
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Economic Releases
8:30 am EST
- The Producer Price Index for February is estimated to rise .4% versus a .8% gain in January.
- The PPI Ex Food & Energy for February is estimated to rise .1% versus a .4% gain in January.
- Housing Starts for February are estimated to fall to 450K versus 466K in January.
- Building Permits for February are estimated to fall to 500K versus 531K in January.
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Other Potential Market Movers
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and commodity 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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