Late-Night Headlines
Bloomberg:
- Barton Biggs, the former chief global strategist for Morgan Stanley, said U.S. and emerging- market stocks will rise and that large technology companies are attractive. Biggs, who runs New York-based hedge fund Traxis Partners LP, said the Standard & Poor’s 500 Index may rally between 30 percent and 50 percent from the 12-year low reached on March 9. The index climbed 7.1 percent to 822.91 today, extending its two-week rally to more than 20 percent, meeting the common definition of a bull market. (video)
- The cost of protecting Asia-Pacific bonds from default plunged after the Obama administration announced a $1 trillion plan to help remove toxic assets from U.S. banks’ balance sheets. The Markit iTraxx Japan index of credit-default swaps dropped 40 basis points to 367, the biggest one-day fall since Dec. 12, Credit Suisse Group AG prices show. The Markit iTraxx Australia index fell 15 basis points to 355 as of 11:55 a.m. in Sydney, Citigroup Inc. data show. The new program “should support asset values and liquidity,” Deutsche Bank AG Sydney-based analysts Gus Medeiros, Colin Tan and Ken Crompton said in a note to clients today. The new mechanism for asset purchases removes some uncertainty and “may prevent banks from hoarding assets to avoid writedowns.” The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan was 10 basis points lower at 360 as of 9:10 a.m. in Singapore, Barclays Capital data show. The cost to protect South Korean government debt from default for five years fell 10 basis points to 350. Contracts on the senior debt of Macquarie Group Ltd., Australia’s largest investment bank, fell 50 basis points to 700, according to Citigroup. That’s the swaps’ biggest one-day decline since Jan. 2, according to CMA DataVision prices.
- Juniper Networks(JNPR) and McAfee Inc.(MFE) are among small technology companies that may be acquired because their valuation gap relative to bigger rivals such as Oracle Corp.(ORCL) has narrowed, UBS AG said. The 16 takeover targets, as identified by UBS, have on average an enterprise value 2.3 times their sales, compared with 1.7 times sales for the largest technology companies, according to the brokerage’s data. In November 2007 the ratios were 7.4 and 3.6, respectively. “Given current valuation, we would not be surprised if tech firms use the current dislocation to add growth or scale via M&A,” analyst Nikos Theodosopoulos wrote. Oracle and Cisco Systems may be seeking acquisitions, the analyst said. The following companies were identified by UBS as likely takeover targets: (BSCI), (CHKP), (CTXS), (EPIC), (FFIV), (INFA), (JNPR), (MFE), (NTAP), (NUAN), (QSFT), (RHT), (CRM), (TIBX), (VMW) and (WBSN).
- Goldman Sachs(GS) forecast a recession in Latin America this year as a deepening global slowdown erodes demand for the region’s exports. Latin America ’s economy will shrink 1% this year, analysts led by Paulo Leme wrote. The analyst had previously expected zero growth for the region this year. Mexico Brazil
- Samsung Electronics, the world’s biggest computer-memory maker, had its share price estimate raised 21% by Deutsche Bank AG, which said cost cuts have improved the company’s earnings outlook. The brokerage reiterated its “buy” recommendation.
- Goldman Sachs Group Inc.(GS) would win investor support for selling a portion of its 4.9 percent stake in the Industrial & Commercial Bank of China Ltd. to raise more than $1 billion, two shareholders said. The New York-based company is mulling a possible sale of the shares, valued at about $7.5 billion, the Wall Street Journal reported yesterday, citing unidentified people familiar with the matter. Michael DuVally, a spokesman for Goldman Sachs in New York, declined to comment.
- U.S. Treasury Secretary Timothy Geithner speaks about the need for financial markets to take more risk at a Wall Street Journal conference in Washington.
- Contract iron ore prices will drop for two years, undermined by a “whopping oversupply” of the steelmaking raw material, Citigroup Inc. said. Global demand may decline 7.5 percent this year, while supply rises 7 percent, Citigroup analyst Alan Heap told a conference in Perth, Australia. Contract iron ore prices may drop 30 percent this year and 20 percent in 2010, he said.
- The U.S. plan to relieve banks of real estate debt won initial support from investors, who set aside for now questions about asset pricing and whether they will be demonized for profiting from the financial crisis. “This is not a panacea; it is not a silver bullet,” Laurence Fink, chairman of BlackRock Inc., the largest publicly traded U.S. asset manager, said today in an interview. “But this will take some of the overhang out of the marketplace. It is incrementally a really good thing.”
Wall Street Journal:
- The Obama administration, after months of criticizing Wall Street, has been scrambling to woo top bankers and financiers to back its latest bailout plan. In recent days, in spite of public furor over huge bonuses paid at American International Group Inc., the administration has concluded that it needs the private sector to play a central role in fixing the economy. So over the weekend, the White House worked to tone down its Wall Street bashing and to win support from top bankers for the bailout plan announced Monday, which will rely on public-private investments to soak up toxic assets. But weeks of searing criticism by politicians and the public had left bankers leery of working with the government. After brainstorming about what to do about that problem, the White House resolved to try to take control of the debate, according to several administration officials. In weekend television appearances, President Barack Obama and other administration officials tempered their criticisms of the financial sector. Meanwhile, Treasury Secretary Timothy Geithner and his colleagues worked the phones to try to line up support on Wall Street for the plan announced Monday. They told executives they don't favor using the tax code to retroactively penalize specific individuals who had received bonuses, according to people familiar with the calls. They asked officials to sign on "in pencil, not ink," and to "validate" or "express support" for the plan, these people say. Some bankers say they turned the conversations into complaints about the antibonus crusade consuming Capitol Hill. Some have begun "slow-walking" the information previously sought by Treasury for stress-testing financial institutions, three bankers say, and considered seeking capital from hedge funds and private-equity funds so they could return federal bailout money, thereby escaping federal restrictions.
- Unable to sign up enough new cellphone subscribers, Sprint Nextel Corp.(S) is increasingly trying to use the excess capacity on its wireless network to power other consumer gadgets. Sprint, which has spent billions rolling out a high-speed data network, already handles wireless book downloads for Amazon.com Inc.'s popular Kindle reader, though Sprint's involvement is largely hidden from the public. The Overland Park, Kan., company is now talking with companies like GPS device maker Garmin Ltd., Eastman Kodak Co. and SanDisk Corp., which makes storage devices, about delivering wireless Internet service for their products, according to a person familiar with the matter.
- New York Attorney General Andrew Cuomo said late Monday that 15 of the top 20 recipients of $165 million in retention bonuses from American International Group Inc.'s Financial Products unit have agreed to give back their bonuses -- amounting to in excess of $30 million in cash. Mr. Cuomo's office said, in all, AIG FP employees agreed to return about $50 million in bonuses thus far.
- Big companies including General Electric Co. will likely profit from the billions of federal stimulus dollars going to doctors who buy and use electronic health records. But little-known niche players could be among the biggest winners.
MarketWatch.com: An index that tracks subprime mortgage-backed securities on Monday made its biggest one-day jump since early February, rallying after the Treasury Department released details of a plan to encourage investors to buy banks' illiquid assets. The index jumped to 25.29, up more than a percentage point from 24.20 on Friday, said publisher Markit late Monday. The index, known as ABX.HE.AAA, series 7-2, tracks bonds originated in late 2006 and the first half of 2007 that contain subprime mortgages and carry triple-A bond ratings.
- Goldman Sachs(GS) warrants held by Warren Buffett's Berkshire Hathaway are close to becoming a lot more valuable after a sharp rally in the investment bank's shares in recent months. In early October, Berkshire (BRKA) invested $5 billion in Goldman (GS) , getting 50,000 cumulative perpetual preferred shares in the investment bank that pay 10% a year. As a sweetener, the deal also included warrants giving Berkshire the right to buy 43,478,260 shares of Goldman common stock. The warrants expire in 2013 and can be exercised for an aggregate cost of $5 billion, or $115 a share.
CNBC.com: President Barack Obama on Monday named a longtime real-estate industry executive to head the Federal Housing Administration, which during the U.S. housing market's bust has become the main provider of loans to borrowers with weak credit. The White House on Monday named David Stevens as assistant secretary at the Department of Housing and Urban Development. Stevens is currently president and chief operating officer of Long and Foster Cos., a Chantilly, Va., based real estate brokerage. He previously worked at Wells Fargo & Co., mortgage finance company Freddie Mac and World Savings Bank, a California-based lender.
- Investors looking for any reason to drive stocks higher found their elixir in the government's bailout plan for toxic assets, and some think it could be only the beginning. The Treasury plan "may be a game-changer, because it's been sprinkled with some better-than-expected economic data," says Tom Sowanick, chief investment officer at Clearbrook Financial in Princeton, N.J. "If the tea leaves all start to line together I think this will be the beginning of a major bull market."
NY Times:
- Goldman Sachs(GS) is planning to give back its TARP money soon. Very soon, actually — ideally within the next month, according to people involved in the process That’s a much quicker timetable than the end-of-year goal previously set out by Lloyd C. Blankfein, Goldman Sachs’s chief executive. Goldman’s sudden urgency to return the money stems, in part, from the uproar over A.I.G.’s bonuses last week, and the criticism of Goldman over revelations that the firm had been the largest recipient of government money as a counterparty of bets placed with A.I.G. It’s also paying a hefty 5 percent interest payment to taxpayers for that money. “It’s just impossible to run our business in this environment,” said one senior Goldman executive who insisted on not being quoted by name for fear of crossing the Treasury Department. Of course, another factor in Goldman’s decision to return the money is that it can: the firm is known to be sitting on a balance sheet with about $100 billion of available cash, so a mere $10 billion should be no problem. If Goldman succeeds in returning our money, it could put pressure on other banks to give their money back, too, lest they appear weak. Goldman would also like to put an end to the whisper campaigns about ties between it and Mr. Paulson (and Timothy F. Geithner, too, for that matter). Paying back the TARP money would probably give Goldman Sachs a bigger lead over its rivals. With a Yankees-like payroll, it will continue to be able to steal the best talent from weaker firms that still have TARP money and are subject to restrictions on pay and the like. Perhaps the only firm besides Goldman that analysts feel confident can give the money back is JPMorgan Chase, which has expressed its own desire to return the cash.
IBD:
- That's what the founders of ArcSight (ARST) were told in 2000 when they went around asking chief information officers about their unmet needs. While security software could nab individual attacks, the CIOs wanted the equivalent of an air traffic control tower, a place to monitor the comings and goings and see any suspicious patterns.
Reuters:
- U.S. securities regulators are working on an updated version of the so-called uptick rule to regulate a type of trading blamed for dramatic declines in stocks, three sources familiar with the matter told Reuters on Monday. The updated version of the Depression-era rule is expected to account for changes in the market, including the advent of decimalization, which allows stocks to be traded in much smaller increments, the sources said. The sources also cautioned that the proposal was still in preliminary stages and could change before the April meeting. The proposal must be approved by a majority of the five SEC commissioners before the agency can solicit public comment and move on to the final rule-making stage. The agency is also examining whether there is a need for a circuit breaker on stocks. In such a scenario, if a stock drops by a certain percentage over a certain period of time, investors would be prohibited from shorting that stock for a specified time frame. One circuit breaker option includes setting thresholds for individual stocks -- based on a percentage decline -- beyond which "aggressive" shorting would be banned, said one source familiar with the situation. "There is some political pressure to get something done on the short sale rules so we're trying to come up with something that would satisfy the political pressure, but also not be too onerous on the market participants," the source said. Another source said the SEC is also considering a price test in which investors would only be allowed to short a stock if the bid for the stock was rising.
Financial Times:
Goldman Sachs(GS) is working on a bid for iShares, the fast-growing asset management business that is being auctioned by Barclays . Bids for the business, which are due by the end of next week, could put a valuation as high as $6.5bn (£4.5bn) on the manager of exchange traded funds – the listed investment vehicles that track a market benchmark, an asset or a basket of shares, according to one person close to the process.
- A Lasting Rescue Rally? If the Treasury’s plan works, we may have seen the market’s bottom.
- Hedge fund investors believe the industry will see even bigger withdrawals this year than last, when record levels of cash were pulled from the sector. A survey of investors by Deutsche Bank found a third expect more than $200bn to be withdrawn, after a net $155bn was taken out last year, according to calculations by Chicago consultancy Hedge Fund Research. Only a quarter of investors expect net inflows into the industry, and 82 per cent of the 1,000 surveyed said redemptions were the biggest issue hedge fund managers face. Deutsche found that most investors expected more than a fifth of hedge funds to go out of business this year, following a record year for closures last year, when performance was its worst on record. However, Sean Capstick, head of capital introductions at Deutsche’s prime brokerage, said the big managers were likely to survive as they could afford the expensive systems and controls investors increasingly demand. The survey, which covered investors with $1,100bn invested in alternative assets, found they were increasingly demanding better transparency and rating risk management as more important than a manager’s pedigree for the first time. As part of this trend managed accounts, where investors have their own account run by a manager, rather than putting money into a fund, are expected to grow sharply. Several big managers who have historically rejected managed accounts have recently begun accepting them.
Business Times:
- Prime office rents in Singapore Vacancies increased to 2.9% in the first quarter from .9% in the fourth quarter last year. Average monthly rents will probably fall below S$10 in the second-half of this year, citing Moray Armstrong, a CBRE executive director.
Beijing Times:
- China Fuel stockpiles reached 14.85 million metric tons at the end of February, an in increase of 11.4% from January, citing “weak” demand.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (AAP), target $45.
- Reiterated Buy on (AZO), target $183.
- Reiterated Buy on (MDCO), target $29
- Reiterated Buy on (NILE ), target $36.
Night Trading
Morning Preview
US AM Market Call NASDAQ 100 Pre-Market Indicator/Heat Map Pre-market Commentary Pre-market Stock Quote/Chart Global Commentary WSJ Intl Markets Performance Commodity Futures Top 25 Stories Top 20 Business Stories Today in IBD In Play Bond Ticker Economic Preview/Calendar Earnings Calendar
Conference Calendar
Who’s Speaking? Upgrades/Downgrades Rasmussen Business/Economy Polling
Earnings of Note
Company/EPS Estimate
- (CCL)/.18
- (CMC)/.03
- (WSM)/.16
- (JBL)/.12
- (RBN)/.41
Economic Releases
- The House Price Index for January is estimated to fall .9% versus a .1$% gain in December.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are higher, boosted by financial and technology stocks in the region. I expect US
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