Wednesday, September 30, 2009

Thursday Watch

Late-Night Headlines

- The Obama administration pledged to press Japan and Taiwan over subsidies to Elpida Memory Inc., Japan’s biggest computer memory-chip maker, following complaints from U.S. rival Micron Technology Inc.(MU).

- Kenneth R. Feinberg, the Treasury Department’s special master on compensation, said he is reluctant to impose “clawbacks” to recoup pay from executives when their company’s financial performance falters. “I have an assumption in my mind that it’s not a great idea” to recover money “already paid and maybe already spent and already taxed,” Feinberg said today via video conference at a meeting of the Chicago Bar Association. “I’m wary of exercising that authority in too many cases.”

- General Motors Co. will close Saturn, the brand created 24 years ago to mirror Japanese companies’ carmaking, after Penske Automotive Group Inc. broke off discussions to buy the unit. Penske, operator of 310 auto retailers, backed out because of concern it wouldn’t have access to cars and sport-utility vehicles after 2011 when GM was due to stop supplying them, Penske said in a statement. “This is very disappointing news and comes after months of hard work by hundreds of dedicated employees and Saturn retailers who tried to make the new Saturn a reality,” GM Chief Executive Officer Fritz Henderson said in a statement on the company’s Web site. “I’m a little surprised that there was no plan B here,” said Stephen Spivey, an auto analyst with Frost & Sullivan in San Antonio. “It’s surprising to me that Penske had no idea that this might not be accepted.” Closing Saturn could create a public-relations problem for GM, as it deals with consumer concerns about the sudden death of one of its brands, said auto-retail analyst Paul Melville of Grant Thornton LLP in Southfield, Michigan. “You’ve got a lot of people driving around in Saturn cars wondering how am I going to get this serviced and what’s going to happen to my Saturn dealer?” Melville said.

- Bank of America Corp.(BAC) Chief Executive Officer Kenneth D. Lewis, his credibility battered by the Merrill Lynch & Co. takeover, plans to step down at the end of this year. No successor was named for Lewis, who will also retire as a director, according to a statement today from Bank of America, the biggest U.S.Charlotte, North Carolina- lender by assets and deposits. The resignation ends Lewis’s 40-year career at the based company, including the last eight as CEO.

- The U.S. Environmental Protection Agency proposed greenhouse gas regulations today for power plants, oil refineries and factories. The agency came up with the rules as Senate Democrats unveiled a “cap-and-trade” plan that would limit emissions through a system of pollution rights, or allowances, that companies could buy and sell. Republicans say the EPA is trying to pressure the Senate into passing a cap-and-trade bill after the House approved its own plan in June. Under the proposal released today, the EPA said it won’t target small sources despite the way the Clean Air Act is written because doing so would lead to “absurd results.” State-level environmental regulators who implement much of the Clean Air Act “would be paralyzed by permit applications in numbers that are orders of magnitude greater than their current administrative resources could accommodate,” the EPA said. For six years, the agency will use the higher threshold out of “administrative necessity” while it studies the workability of regulating industrial, or “stationary,” sources of greenhouse gas emissions through the Clean Air Act. Murkowski, who said EPA is using regulation of stationary sources as a “thinly veiled threat” to pressure lawmakers into supporting cap-and-trade legislation, said Republicans will keep trying to stop the regulation of industrial sources while letting the agency continue with plans to cut emissions from new cars and trucks. With today’s proposed regulations, the agency is “charging ahead, regardless of the ongoing debate in Congress and the economic consequences of their actions,” Robert Dillon, a spokesman for Murkowski, said in an e- mail. “She does not believe the EPA’s efforts to limit the Clean Air Act to an arbitrary 25,000 ton threshold will withstand legal challenge.” The proposed EPA regulation of large industrial sources is a “slippery slope” that may “discourage a lot of investment” in the U.S., said Bryan Brendle, energy and resources policy director for the National Association of Manufacturers, in a phone interview. The EPA may be taken to court by “any citizen group” that wants to use the Clean Air Act to stop the development of a project, such as a shopping mall, by arguing the project needs a greenhouse gas permit, Brendle said. While industry is “thankful” for EPA’s efforts to exempt small businesses from greenhouse gas regulation, today’s proposal is on “shaky legal ground,” William Kovacs, vice president of environment, technology and regulatory affairs at the U.S. Chamber of Commerce, said in an e-mailed statement.

- The People’s Republic of China celebrates its 60th anniversary today by staging a military paradeBeijing to demonstrate the country’s rising global influence. Hundreds of missiles and tanks and thousands of troops from the world’s largest standing army will parade past Tiananmen -- the Gate of Heavenly Peace -- where Mao Zedong on Oct. 1, 1949, declared the Communist Party’s victory in a civil war and took the reins of government. China now produces in a day the equivalent of a year’s output five decades ago, and is poised to surpass Japan as the world’s second-largest economy by 2010. The Communists, who lifted 300 million citizens from abject poverty and raised the country’s international influence, must now satisfy increasing demands for domestic freedom and accountability. The celebration “is a show-off to beef up confidence in, and support to, the regime,” said Huang Jing, visiting professor at the National University of Singapore’s Lee Kuan Yew School of Public Policy. “Serious questions need to be asked how such a show of strength can translate into” tolerance, transparency and “inclusiveness in ethnic, cultural and religious diversity.” The country’s rise to global prominence gives credence to Napoleon Bonaparte’s prediction two centuries ago that “China is a sickly, sleeping giant. But when she awakes the world will tremble.” through the heart of

- The yen may weaken to around 100 against the dollar over the next “few months” given that there are few reasons for it to advance further, said Makoto Utsumi, a former top currency official at Japan’s Finance Ministry. “There aren’t really any particular reasons for the yen to strengthen,” Utsumi, 75, who led Japan’s currency policy from 1989 to 1991 as vice finance minister for international affairs, said in an interview in Tokyo Sept. 29. “I don’t expect the currency to extend its recent gains.”

Wall Street Journal:

- Investors have agreed so far to plow more than $1.13 billion into a long-awaited Treasury Department program to buy the toxic assets at the heart of the financial crisis. The Treasury announced that two of the nine investment firms tapped earlier this year to participate in the Public-Private Investment Program have raised at least $500 million -- a precursor to obtaining government financing.

- The Department of the Interior expects to approve seven major, renewable-energy transmission projects on western federal lands by the end of next year, part of the administration's effort to step up use of wind and solar power. Finding sites for new grid infrastructure has been a major obstacle to the Obama administration's plans to expand renewable-energy production. Many people and local governments oppose placing transmission projects, which help channel electricity generated by renewable-energy sources to consumers, in their backyards, citing environmental, safety and other concerns. The Interior Department is accelerating the construction of transmission projects on federal lands in an effort to streamline the permitting process, through there are still state, local and other federal regulatory hurdles that companies have to overcome.

- A new wave of financial alchemy is emerging on Wall Street as banks and insurers seek to make soured securities look better. Regulators are pushing back, saying the transactions don't have enough substance and stand to benefit bankers and ratings firms. The deals come as Wall Street firms, buoyed by surging markets, are seeking to profit from the unwinding of the complicated securities that helped fuel the credit crisis. Regulators, meanwhile, are struggling to prevent a recurrence of the crisis. The popular deals are known as "re-remic," which stands for resecuritization of real-estate mortgage investment conduits.

- So our top commander in Afghanistan, Gen. Stanley McChrystal, has told CBS's "60 Minutes" that he has spoken with President Barack Obama only once since June. This is a troubling revelation. Right now, our commander in chief is preparing to make one of the most important decisions of his presidency—whether to commit additional troops to win the war in Afghanistan. Being detached or incurious about what our commanders are experiencing makes it hard to craft a winning strategy.

- Two Senate Democrats Wednesday unveiled climate legislation that aims to drastically cut greenhouse-gas emissions beginning in 2012, starting an effort that threatens to divide the party amid opposition from coal, manufacturing and oil interests. Senate Environment and Public Works Committee Chairman Barbara Boxer and Senate Foreign Relations Committee Chairman John Kerry outlined the measure, which would cut emissions from 2005 levels 20% by 2020 and more than 80% by 2050. Republicans took issue with the Boxer-Kerry bill, calling it a new national energy tax. "The last thing American families need right now is to be hit with a new energy tax every time they flip on a light switch, or fill up their car -- but that's exactly what this bill would do," Senate Minority Leader Mitch McConnell said in a statement. In the House, Speaker Nancy Pelosi called the legislation a "strong foundation" to work on, while Republican Leader John Boehner said the measure was a "dangerous proposal."

- Nvidia Corp.(NVDA) announced its next major leap in technology, vowing to deliver chips that speed up an array of computing chores as well as advancing its traditional stronghold in graphics.

- A government effort to get badly needed cash into the hands of struggling small business owners is slowly gaining momentum, but entrepreneurs seeking the scarce loans are still in for a frustrating ride.

- Most people think they pay too much to Uncle Sam, but for some people it simply is not true. In 2009, roughly 47% of households, or 71 million, will not owe any federal income tax, according to estimates by the nonpartisan Tax Policy Center. Some in that group will even get additional money from the government because they qualify for refundable tax breaks.

The Wrap:

- Comcast(CMCSA), the nation’s leading provider of cable, entertainment and communications products and services, is in talks to buy the entertainment giant NBC-Universal from General Electric(GE), according to knowledgeable individuals. Deal points were hammered out at a meeting among bankers for both sides in New York on Tuesday, executives familiar with the meeting said. Two individuals informed about the meeting said that a deal had already been completed at a purchase price of $35 billion. A spokeswoman for NBC-Universal had no comment. A spokeswoman for Comcast also had no comment. The NBC-Universal division of GE, a premium content company, is a likely fit for the cable giant with its massive distribution pipeline. That is especially the case when the division's potential price tag has dropped significantly from a year ago.Comcast’s market cap is $48.44 billion. NBC-Universal has fallen in value to an estimated $35 billion in value, from about $55 billion a year ago.

NY Post:

- Sugar is the new crude oil for investment-hungry hedge funds, which are pushing sugar prices near 30-year highs and ushering new global shortages. After their infamous and massive bets on crude oil sent prices doubling and brought $5-a-gallon gasoline a year ago, hedge funds are now pouring their billions into raw sugar. Sugar prices have doubled since springtime, causing US officials to consider lifting tariff barriers so that more imported sugar can reach food and candy makers. Analysts say hedge funds are in search of high profits on commodity gambles, since returns on stocks and bonds are meager and less certain. In trading here yesterday, raw sugar surged as much as 4.4 percent to 25.15 cents a pound before settling at 25 cents, up 3.5 percent, the highest close since 1981. Betting by hedge funds and large speculators that sugar futures will jump has soared 77 percent this year, said the US Commodity Futures Trading Commission.


- House Minority Leader John Boehner torched President Barack Obama Wednesday for his European trip to pitch the Chicago Olympics bid, criticizing the president for "going to go off to Copenhagen when we've got serious issues here at home that need to be debated." Obama's trip has been maligned by most Republicans as the health care overhaul remains in a continued state of flux in Congress and the top general in AfghanistanDenmark awaits word on a troop increase. The White House first said it was unlikely that Obama would go to because he thought it important to help push health care through Congress.

- Two days after the release date of Sarah Palin’s book was announced, it's already become the top seller at both and Palin’s publisher announced Monday that the former governor of Alaska and Republican vice presidential candidate had finished her memoir, "Going Rogue: An American Life," early and was moving the release date up from the spring to November 17.


- For the second straight week, just 33% of likely voters say the United States is heading in the right direction, according to the latest Rasmussen Reports national telephone survey.

Washington Post:

- U.S. officials signaled Wednesday that they would seek a rare one-on-one meeting with Iranian diplomatsIran and other major powers on Tehran's nuclear program. The talks, expected to last through the day, have been structured to allow both for group meetings and informal one-on-one discussions with Iran, which a senior administration official said would be "an opportunity to reinforce the main concerns we will be making in the meeting." He spoke on condition of anonymity because of the diplomatic sensitivity ahead of the talks. President Obama has sought to make engagement with the Islamic Republic and other antagonistic nations a central part of his foreign policy, but until now Iran has spurned his efforts. during talks here on Thursday between

The Business Insider:

- Steve Jobs said people don't read any more. But Apple (AAPL) is in talks with several media companies rooted in print, negotiating content for a "new device." And they're not just going for e-books and mags. They're aiming to redefine print.


- Michael Vick is back with Nike(NKE) two years after the company severed ties over the quarterback's involvement in a dogfighting ring. "Mike has a long-standing, great relationship with Nike, and he looks forward to continuing that relationship," his agent, Joel Segal, said Wednesday. Segal would not reveal terms of the agreement. Nike declined a request for comment.


- Higher margins, the ability to collect and use information about customers, more revenue and greater willingness to share content with Internet operators is prompting Hollywood to join forces with the likes of Google's (GOOG) YouTube or set up its own Internet portals. Online video streaming and digital downloads should nearly triple to a $753 million North American market in 5 years, still a 5 percent sliver of DVD sales in 2008. But, analysts said, with disc sales dwindling and online viewing exploding, that gap will shrink.

- Unemployment rates rose in all cities across the United States in August from a year earlier, with 16 recording jobless rates of 15 percent or higher, according to the Labor Department. At the same time, only 11 metropolitan areas said they had gained jobs in August, while 356 had lost positions. For the eighth consecutive month, all 372 cities that the department surveys had year-on-year increases in jobless rates. The largest rise was in Detroit, where the rate rose by 7.9 percentage points, followed by its Michigan neighbor Muskegon, where it increased 7 percentage points. Detroit also has the highest unemployment rate in the country at 17 percent. But Los Angeles lost the most jobs in August from a year earlier, followed by Chicago and Detroit.

- A U.S. Senate panel on Wednesday adopted a measure aimed at rewarding healthy behavior in a sweeping healthcare overhaul sought by President Barack Obama as lawmakers pushed to complete the legislation. The Senate Finance Committee voted for an amendment offered by Republican Senator John Ensign and Democrat Thomas Carper that would allow health plans to provide financial incentives for people to quit smoking, exercise more and engage in other healthy activities. "I believe that the key to achieving savings is to provide rewards for people who engage in healthy behaviors," Ensign argued. The measure passed on a 18-4 vote despite concerns expressed by some Democrats as well as committee Chairman Max Baucus that it could raise insurance premiums for people who do not participate in wellness programs.

Financial Times:

- China has issued a stark warning about the risk from rising overcapacity in the economy, saying it could hamper recovery and lead to a surge in non-performing bank loans. The State Council, the country’s cabinet, issued a new plan to combat overcapacity in seven industries, barring new aluminum smelters for three years and criticizing “blind expansion” in parts of the steel and cement industries. The cabinet statement, which came late on Tuesday evening in Beijing, follows a crescendo of warnings from senior officials. It also outlined measures to restrict manufacturing of equipment for “green” industries of wind and solar power. over the past three months many government officials have begun to publicly warn that the credit binge could create overcapacity in heavy industry, which could produce a new round of bad bank loans. “Some regions act illegally, give approvals in violation of regulations or allow building before approval is granted,” the State Council said. The unusually blunt statement said that, without efforts to restrain production, it would be “hard to prevent vicious market competition and increase economic benefits, and this could result in factory closures, lay-offs and an increase in banks’ bad assets”.Prolonged overcapacity in industries such as steel and aluminum could also aggravate tense trade relationships with the US and Europe because of the risk that Chinese mills would dump inventories on to world markets at cheap prices. Government officials are also concerned that continued expansion of heavy industry such as aluminum and cement, which use a lot of power, will complicate efforts to meet energy efficiency targets ahead of the Copenhagen climate conference. The State Council said manufacturing capacity for wind power would be twice the actual installed generating output of 10m kilowatts by next year.


- Carphone is understood to be close to agreeing terms with Vodafone over the sale of Apple's hugely popular device. At present Carphone has exclusive retailer rights to sell the iPhone through an agreement with Apple and O2, which until this week held the sole network rights to the iPhone. Charles Dunstone, chief executive of Carphone Warehouse, has credited the iPhone with enabling the company to increase its market presence at the expense of rival Phones4U.

Late Buy/Sell Recommendations


- Rated (CHK) Outperform, target $35.

Deutsche Bank:

- Rated (FDX), (UNP), (CSX), (HTLD), (NMM), (CPLP), (DSX), (NSC), (ODFL), (GWR), (KNX) and (JBHT) Buy.

- Rated (FRO) and (EGLE) Sell.

Night Trading
Asian Indices are -1.0% to +.50% on average.

Asia Ex-Japan Inv Grade CDS Index 112.50 -3.0 basis points.
S&P 500 futures -.22%.
NASDAQ 100 futures -.28%.

Morning Preview

BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Asian Financial News

European Financial News

Latin American Financial News

MarketWatch Pre-market Commentary

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TradeTheNews Morning Report In Play

SeekingAlpha Market Currents Bond Ticker

US AM Market Call
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Who’s Speaking?

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/EPS Estimate
- (STZ)/.41

- (RECN)/-.04

- (GPN)/.65

- (BLUD)/.25

- (SMSC)/.00

- (TSCM)/-.06

- (ZLC)/-.78

- (ACN)/.63

Economic Releases

8:30 am EST

- Personal Income for August is estimated to rise +.1% versus unch. in July.

- Personal Spending for August is estimated to rise +1.1% versus a +.2% gain in July.

- The PCE Core for August is estimated to rise +.1% versus a +.1% gain in July.

- Initial Jobless Claims for last week are estimated to rise to 535K versus 530K the prior week.

- Continuing Claims are estimated to rise to 6170K versus 6138K prior.

10:00 am EST

- ISM Manufacturing for September is estimated to rise to 54.0 versus a reading of 52.9 in August.

- ISM Prices Paid for September is estimated to rise to 66.0 versus 65.0 in August.

- Construction Spending for August is estimated to fall -.1% versus a -.2% decline in July.

- Pending Home Sales for August are estimated to rise +1.0% versus a +3.2% gain in July.


- Total Vehicle Sales for September are estimated to fall to 9.5M versus 14.09M in August.

Upcoming Splits
- None of note

Other Potential Market Movers
The Fed’s Bernanke speaking, Fed’s Lockhart speaking, Fed’s Pianalto speaking, Challenger Job Cuts report, weekly EIA natural gas inventory report, Bank of America Global Real Estate Conference, Thomas Weisel Consumer Conference, Deutsche Bank Leveraged Finance Conference, (OC) analyst meeting and the (TRI) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and automaker shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Slightly Lower, Weighed Down by HMO, Road & Rail, Alt Energy, Gaming and Homebuilding Shares

Evening Review
BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer In Play

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WSJ Today’s Markets
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CNN PM Market Call

After-hours Stock Commentary

After-hours Movers

After-hours Stock Quote
After-hours Stock Chart

Stocks Slightly Lower into Final Hour on Profit-Taking, Higher Energy Prices

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Biotech longs and Defense longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is heavy. Investor anxiety is very high. Today’s overall market action is mildly bearish. Nikkei futures indicate a -43 open in Japan and DAX futures indicate a -2 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on investment manager performance anxiety, short-covering and bargain-hunting.

Today's Headlines


- Mutual-fund investors are mostly sitting out the stock-market rally that lifted share prices 57 percent since March, helping bond manager Pacific Investment Management Co. increase sales while American Funds loses assets. Bond funds attracted net deposits of $209.1 billion in the first eight months of the year while stock funds drew $15.2 billion, according to Morningstar Inc., the Chicago-based research firm that tracks the $10.6 trillion industry. Nine of this year’s 10 best-selling funds buy bonds and only one, Vanguard Total Stock Market Index Fund, focuses on equities. By putting money into bond funds in 2009, investors missed an opportunity to increase their stock fund holdings during a rally that added $3.5 trillion in market value to the Standard & Poor’s 500 Index since it reached a 12-year low on March 9. Michael Kim, an analyst who follows asset-management firms for Sandler O’Neill & Partners LP in New York, said investors are likely to shift money into stocks as they become more comfortable taking on risk. “They will come back into equities in a much bigger way,” he said in a telephone interview. Investors pulled $173.9 billion from stock funds in 2008, Morningstar data show.

- New York Senator Charles Schumer and fellow Democrats vowed to keep fighting for a government- run health-insurance program on the U.S. Senate floor after the finance committee defeated the proposal yesterday. The panel rejected amendments offered by Schumer and West Virginia Senator Jay Rockefeller to create a “public option” that would compete with private insurers such as Indianapolis- based WellPoint Inc. Panel chairman Max Baucus and two other Democrats joined with all of the committee’s Republicans to vote against both amendments. While Baucus said he was voting against the program because it couldn’t pass the Senate “at this point,” Schumer said he sees growing support.

- When it comes to paying for takeovers, stock is the new cash. Some 36 percent of this year’s acquisitions involved at least some stock, the highest proportion in eight years, data compiled by Bloomberg show. Kraft Foods Inc. and Xerox Corp. are using their shares for proposed takeovers. Inc. and Marvel Entertainment Inc. demanded equity instead of cash when they sold themselves.

- A New York man pleaded guilty to facilitating the transfer of $152,000 with the understanding the money would be used to buy night vision goggles and other equipment for a terrorist training camp in Afghanistan. Abdul Tawala Ibn Ali Alishtari, 56, of Ardsley, New York, pleaded guilty yesterday to charges of terrorism financing and conspiracy to commit wire fraud, U.S. Attorney Preet Bharara in New York said in a statement.

- Chicagoans are angry about Mayor Richard M. Daley’s deal to lease the city’s parking meters to Morgan Stanley investment funds. So angry that Daley’s popularity is at a record low, according to a Chicago Tribune/WGN poll. So angry that the 20- year mayor may not have taxpayer support to lease or sell more assets and bolster the city’s budget. That means Daley is under even more pressure to abide by his pledge that residents won’t pay anything for staging the 2016 Summer Olympics, which organizers say will cost $4.8 billion. The winning site is to be announced Oct. 2 in Copenhagen. “When they see the city get it so wrong, voters rightfully get very skeptical,” said Ralph Martire, executive director of the Center for Tax and Budget Accountability, a nonprofit public policy group in Chicago.

- Wyndham Worldwide Corp(WYN), the franchiser of Days Inn hotels and Super 8 motels, plans to buy more brands or acquire the operations of struggling competitors, Chairman and Chief Executive Officer Stephen Holmes said. “There’s quite a bit of distressed real estate,” said Holmes, 52, in a Sept. 28 interview at Wyndham’s Parsippany, New Jersey, headquarters. “It’s an opportunity to add new brands or convert underperforming hotels” to a Wyndham brand.

- Ameriprise Financial Inc.(AMP) agreed to buy the Columbia stock and bond funds from Bank of America Corp. for as much as $1.2 billion in cash, the biggest purchase by the investment and insurance company since its spinoff from American Express Co.

- Companies in the U.S. cut 254,000 jobs this month, more than forecast, a private report based on payroll data showed today. The estimated drop, which was the smallest since July 2008, compares with a revised 277,000 decline the prior month, figures from ADP Employer Services showed. The ADP report was forecast to show a decline of 200,000 jobs, according to the median estimate of 33 economists in a Bloomberg survey. Projections ranged from decreases of 300,000 to 133,000.

- The U.S. Environmental Protection Agency is withholding 79 permits to mine coal by removing mountaintops in four Appalachian states, a move that delays projects and may reduce supply.

- Best Buy Co.(BBY), the world’s largest electronics retailer, plans to hire more seasonal holiday workers this year to help meet demand for Internet-connected flat-panel televisions and mobile phones. Best Buy expects to sell more merchandise this holiday season than last, Chief Executive Officer Brian Dunn said at a briefing in New York. The chain sold more flat-panel TVs in July than last December, he said.

- Federal Reserve Vice Chairman Donald Kohn said tight credit, low inflation and slack demand for labor and products mean the central bank can keep interest rates at around zero “for an extended period.” “Exceptionally low interest rates are likely to be warranted for an extended period,” Kohn said today in remarks at a conference sponsored by the Cato Institute and the Shadow Open Market Committee in Washington. “Resource utilization is quite low, inflation is subdued and continuing restraints on credit are likely to constrain the speed of recovery.”

- Crude oil futures topped $70 a barrel and gasoline surged after a U.S. government report showed an unexpected decline in supplies of the motor fuel.

- Steel prices in the U.S. rose 13 percent in September as inventories hit record lows after producers cut output, Purchasing Magazine said. The average price of hot-rolled steel sheet, the benchmark product used in cars and appliances, climbed to $535 a ton from $475 in August, Purchasing said today in a monthly update. Cold- rolled sheet increased 10 percent to $625 a ton from $568. Steel prices began to rebound in July after producers slashed output in response to falling demand from the auto and construction industries. Buyers may begin to resist higher prices by making fewer purchases in November and December, Purchasing said.

Wall Street Journal:

- Senators writing a health-care overhaul bill on Wednesday rejected a bid to strengthen anti-abortion provisions already in the legislation, in a vote that could erode support for the legislation among some Catholics who back its broad goal of expanding insurance coverage. Meanwhile, Senate Majority Leader Harry Reid said Wednesday that he expects the Senate will take up health-care legislation on the week of Oct. 12.

- No state's economy, with the exception of Michigan, has careened into a deeper ditch than California in this recession. The state now has the fourth-highest unemployment rate (12.2%), the third-highest rate of mortgage foreclosures, and for two years has had the biggest budget deficit in the history of the 50 states. So it is very good news that yesterday Governor Arnold Schwarzenegger's bipartisan tax commission recommended a road out of this mess. The heart of the new plan is to broaden the tax base and slash tax rates on personal income, business and sales. California currently ranks at or near the top in all three categories. This has, paradoxically, contributed to the state's inability to pay its bills by driving men and women from the state and leading to revenue boom and bust. We don't agree with everything in this report, but there's no question it would be a huge improvement over the current tax code in its economic incentives, simplicity, revenue stability and fairness.
- The Federal Reserve Bank of Minneapolis has named economics professor Narayana Kocherlakota as president of the bank, replacing Gary Stern, who retired a month ago after 24 years.


- The holiday season is prime time for HDTV bargain hunters. Retailers, looking to draw people into the stores on "Black Friday," regularly offer impossibly low prices—and the sale of those discounted sets is often a quick barometer of the overall mood of consumers. This year won’t be much different, but as buyers focus on the current models (which analysts say could fall as low as $300 at some stores) manufacturers are looking down the road to the next big thing.

- U.S. President Barack Obama announced a plan Wednesday to spend $5 billion on medical and scientific research, medical supplies and upgrading laboratory capacity, which he said would create tens of thousands of new jobs.

- SO, is this how Goldman Sachs(GS) does it? "It," of course, is making gobs of money even when nobody else on Wall Street can. And those profits then go into outrageous bonuses to employees, which cause rancor on Capitol Hill and on Main Street. You've heard the old saying, "it's not what you know, but who you know." Goldman Sachs knows lots of important people. That fact is indisputable, mainly because former Goldman employees are scattered around the country, and the globe, in important, decision-making financial positions. But I'd like to make an addendum to that old saying, which I'll explore for you today: Who you know is only important if you can get them on the phone anytime you want. Today's column is about Thursday, Sept. 18, 2008. It's also about the unparalleled access that Goldman Sachs had to Treasury Secretary Hank Paulson. No matter how you slice, dice or excuse it, Blankfein by 9 a.m. would have had information that was not available to anyone else who makes their money trading securities. And, as you can imagine, there is a whole lot of value in that kind of inside access.

Washington Post:

- Senate Democrats introduced legislation Wednesday establishing mandatory, nationwide limits on greenhouse gases, hoping to spur political momentum on the issue before negotiators meet in Copenhagen in December to try to forge a new international climate pact. The bill would cut the nation's greenhouse gas emissions 20 percent compared to 2005 levels by 2020 and cover roughly 7,500 coal-fired plants, oil refineries and other facilities across the country.

Vanity Fair:

- The government secretly tried to orchestrate a deal involving Goldman Sachs in the week following Lehman Brothers’ collapse and considered using the Federal Reserve to help support such a transaction, Andrew Ross Sorkin reports in the new issue of Vanity Fair. In an excerpt from his forthcoming book, Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, Sorkin reports that the deal, which was nearly consummated, would have merged Goldman Sachs and Wachovia. Henry M. Paulson, the Treasury secretary and former C.E.O. of Goldman, was deeply involved in the process, contacting both Lloyd Blankfein, Goldman's current C.E.O., and a Wachovia board member, and strongly urged both to consider it. Wachovia’s C.E.O., Robert Steel, was a former vice-chairman at Goldman Sachs and Paulson’s former number two at the Treasury Department. Sorkin reports that Warren Buffett was also contacted about investing in the merged company, but told a banker at Goldman that it would never happen. “By tonight the government will realize they can’t provide capital to a deal that’s being done by the former firm of the Treasury secretary with the company of a former vice-chairman of Goldman Sachs and former deputy Treasury secretary,” Buffett said. “There is no way. They’ll all wake up and realize, even if it was the best deal in the world, they can’t do it.”


- Eighty-three percent (83%) of U.S. voters say legislation should be posted online in final form and available for everyone to read before Congress votes on it.

- The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 28% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-nine percent (39%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -11 (see trends).

- While majority Democrats in Congress struggle to put together a final health care reform plan, just 22% of U.S. voters believe that most members of Congress will understand what is in the plan before they vote on it.


- Congress is on the verge of giving itself a bump in its annual budget — even as local governments, families and businesses across the country are tightening their belts in the worst recession in decades. Under a House-Senate conference measure, approved by the House last week and poised for passage in the Senate on Wednesday, spending for the legislative branch will increase 5.8 percent this year, boosting Capitol Hill’s annual budget to $4.7 billion.

The Detroit News:

- Bob Kruse, who recently led a critical Chevrolet Volt team and devised the automaker's long-term electric vehicle strategy, has resigned months before the vehicle's debut, The Detroit News has learned. Kruse's resignation, effective today, comes at a crucial time for General Motors Co., which is banking on the Volt to change public perceptions of the company and also help meet stringent new fuel rules.

- House Majority Leader Steny Hoyer this afternoon kicked off a day-long series of meetings aimed at resolving the long-simmering controversy over plans to close more than 2,000 auto dealers. The Maryland Democrat is meeting with about 20 dealers and officials from four groups representing dealers, including the National Automobile Dealers Association and the top lobbyists for General Motors Co. and Chrysler Group LLC. He is seeking "an equitable solution" for both sides.

- OPEC's spare capacity would lessen the impact on oil prices of any disruption to Iran's oil supply if the dispute over Tehran's nuclear program escalates, a Kuwaiti OPEC delegate said in a newspaper column. The nuclear dispute is supporting oil prices [O/R]. The potential for escalation is among factors that could affect the market in the near future, Mohammed al-Shatti said in a column for Kuwait's al-Rai newspaper on Wednesday. "But the presence of OPEC spare capacity of above 5 million barrels per day (bpd) would lessen the negative effect on the prices if any cut happened to oil supplies from Iran," Shatti wrote. A combination of a sharp fall in demand due to recession and the completion by top OPEC exporter Saudi Arabia of crude capacity expansion has left the producer group with the largest supply cushion in years. Saudi Arabia alone has around 4 million barrels per day of capacity idle, more than enough to cover for any disruption of Iran's exports of around 2.1 million bpd.

- The Obama administration's pay czar joked Wednesday that he might have to move to Pluto to escape the fallout from his first batch of compensation decisions, which are expected in October. Feinberg, a Washington lawyer appointed by President Barack Obama in June to decide on pay for the highest-paid employees of companies that received extraordinary government assistance, told a Chicago Bar Association event that he does not expect his rulings to be universally applauded. "I'm not sure there will be any type of result here that is going to be praised ...," said Feinberg, who appeared via teleconference. "Likely, I'll be criticized from both ends."

- Environmental activists said on Wednesday they canoed into Suncor Energy Inc's (SU) Alberta oil sands operation, blocking equipment in a second protest action in as many weeks aimed at disrupting crude production. Greenpeace said 23 of its activists entered Canada's second-largest oil sands operation, stopping conveyor belts that carry bitumen from the mine to an upgrading plant that processes the tar-like crude into light oil.

Financial Times:
- The confidence of US finance chiefs in their companies' near-term fortunes surged this past quarter, even as many of them forecast that a full-scale economic recovery might not begin until 2010, a survey has shown. US companies were expected to show an 11 per cent increase in net earnings in the next 12 months, according to a poll of 262 chief financial officers conducted by Financial Executives International, a corporate finance lobby group, and Baruch College. Those surveyed also expected that revenue would increase 5.8 per cent in the next year. For the first time in more than a year, CFOs forecast that capital budgets would rise in the next 12 months, as would hiring.

- London’s position as the world’s number two city for hedge funds is beginning to slip after almost a decade of gaining ground. New York, meanwhile, is reasserting itself in spite of the Madoff scandal, the fall of Lehman Brothers and a series of high-profile fund liquidations. According to a report from International Financial Services London – a promotional body run in conjunction with the City of London and the UK government – London’s share of the world’s hedge fund assets fell by 2 percentage points in 2008, while New York’s portion grew by the same amount.

- The US and its allies are at odds over tactics for high-profile talks with Iran on Thursday, with Washington adopting a more cautious approach than London and Paris and Europeans expressing concern that the administration of President Barack Obama may be moving too slowly and asking too little. In particular, Washington has downplayed longstanding calls for Iran to suspend uranium enrichment – as Tehran is required to do by a series of United Nations resolutions – focusing instead on calls for the Islamic Republic to “come clean” about the secret nuclear facility revealed last week at a Revolutionary Guards base near the city of Qom.

Globe and Mail:

- A deal to exempt Canada from Washington's controversial “Buy American” stimulus package clause is imminent, as Canadian and American officials continue to negotiate the details, the CBC reported Tuesday evening. If an agreement is reached, it would come as a relief to Canadian manufacturers who have been shut out of lucrative American procurement contracts that are funded by American federal stimulus dollars and, as such, are restricted to American suppliers.

Les Echos:

- France’s budget, which will be presented today, predicts deficits of 8.2% of GDP this year and in 2010. The budget forecasts that debt will reach 84% of GDP next year.


- Worldwide semiconductor equipment sales are forecast to reach US$21 billion in 2010, up 50% from US$14.1 billion in 2009, according to SEMI speaking during the SEMICON Taiwan 2009 (September 30-October 2) pre-show press conference. The growth was previously estimated at 47%. Manufacturing capacity utilization has improved, paving the way for a market recovery in 2010, said SEMI. Industry-wide wafer fab capacity utilization climbed to 77% in the second quarter, up from 56% in the first. Citing continued improvement in equipment bookings, the association suggested that many indicators imply better conditions for both semiconductor and equipment companies. SEMI expects chip fab spending, which already hit bottom in the second quarter of 2009, will manage sequential growth over the next few quarters. In the fourth quarter of 2010, the spending is expected to surpass the level seen in third-quarter 2008. SEMI earlier this month revised upward its fab spending forecast to 64% for 2010, following a 50.7% decline this year.

Bear Radar

Style Underperformer:
Large-Cap Value (-.57%)

Sector Underperformers:
HMOs (-1.81%), Tobacco (-1.42%) and Utilities (-.83%)

Stocks Falling on Unusual Volume:

Stocks With Unusual Put Option Activity:
1) CIT 2) XRX 3) SD 4) LLY 5) DTV