Late-Night Headlines
Bloomberg:
- 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. Brazil
- 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.
MarketWatch.com: 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
- 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.
DCexaminer.com: 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.
Theday.com:
- 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.
IBD:
- 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).
Politico:
- 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.
TheAdvocate:
- Super-chemo targets cancer spreading to the liver
Forbes.com:
- 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 .
CNNMoney.com:
- At Wireless 2009, it’s all about the apps.
- Amazon(AMZN): thinking beyond the Kindle .
Reuters:
- 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
Citigroup:
- 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.
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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
Other Potential Market Movers
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.
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