Friday, September 18, 2009

Friday Watch

Late-Night Headlines

- The U.S. Securities and Exchange Commission proposed banning flash orders after lawmakers said the practice may give hedge funds an advantage over other investors. SEC commissioners unanimously voted today to seek public comment on a rule barring exchanges and trading platforms from giving clients access to information about stock orders a fraction of a second before the market. The proposal requires a second vote at a later public meeting to become binding. “Investors that have access only to information displayed as public quotes may be harmed if market participants are able to flash orders and avoid the need to make the orders publicly available,” Chairman Mary Schapiro said.

- The Federal Reserve’s balance sheet expanded for a sixth straight week as the central bank purchased housing debt in a program aimed at reducing mortgage rates. The Fed’s assets rose $51.9 billion, or 2.5 percent, to $2.14 trillion, the highest since May, in the week ended yesterday, the central bank said today in Washington. Mortgage- backed securities increased by $59.8 billion to $685.1 billion. One year after Lehman Brothers Holdings Inc.’s bankruptcy prompted the Fed to begin doubling its balance sheet with emergency credit programs, U.S. central bankers are trying to determine when to withdraw that stimulus. The Fed’s policy- setting Open Market Committee meets in Washington Sept. 22-23.

- The U.S. House of Representatives voted today to cut off all federal funding for the Association of Community Organizations for Reform Now after reports that some of the group’s employees gave tax and housing advice to people who said they ran a prostitution business. The motion passed 345-75 during debate on legislation to end federally subsidized private student loans. The bill now goes to the Senate. “Acorn’s abuse of the public trust and disregard for the responsibilities that come with receiving taxpayer funding are disturbing,” said Representative Roy Blunt, a Missouri Republican. Acorn, a nonprofit organization that provides housing and other assistance for low- and moderate-income families, has received more than $53 million in federal funds since 1994, according to a report by House Oversight and Government Reform Committee Republicans. Jerry Schmetterer, a spokesman for Brooklyn District Attorney Charles Hynes, said his office is conducting a criminal investigation of Acorn. He declined to elaborate. New York Attorney General Andrew Cuomo is monitoring that probe and will ensure any taxpayer money related to Acorn was used correctly, according to his spokesman, Richard Bamberger. California Attorney General Jerry Brown told reporters that he is “looking into” the allegations against Acorn. In addition, the Internal Revenue Service said Sept. 15 that it was conducting a “thorough review” of its agreements with Acorn, which helps low-income people prepare their tax returns. The group said it has helped prepare about 150,000 free tax returns since 2004 that have generated $190 million in tax refunds. “The IRS has partnered with hundreds of community and volunteer organizations, including Acorn, to provide free tax assistance to low- and moderate-income Americans,” IRS spokesman Frank Keith said in a statement released by the agency. “We are aware of recent events, and we are conducting a thorough review of our relationship with Acorn.” Johanns has asked Attorney General Eric Holder to investigate Acorn, and Representative Lamar Smith of Texas, the top Republican on the House Judiciary Committee, has made a similar request of the Federal Bureau of Investigation. “It is clear there exists significant justification for federal law-enforcement officials to conclude that Acorn should be investigated for potential criminal conduct, including the question of whether the organization itself is a criminal enterprise,” Smith wrote in a letter. Smith also asked the Justice Department’s inspector general whether Acorn has received money from the agency. Smith hasn’t yet received responses, said Kim Smith, a spokeswoman.

- Australian Prime Minister Kevin Rudd warned against complacency in the fight against terrorism after Indonesian police killed militant leader Noordin Mohammad Top, the alleged mastermind of bombings in Bali and Jakarta. Al-Qaeda and its Southeast Asian affiliate Jemaah Islamiyah remain “alive and well,” Rudd told Australian Broadcasting Corp. radio today. “We cannot afford to be complacent.”

- Copper fell in New York and London after two days of gains as swelling inventories fueled concern that this year’s rally lifted prices too high to reflect demand. Stockpiles tallied by the London Metal Exchange expanded for a 15th day to 324,375 metric tons, the most since May 26. Inventories have increased 8.5 percent this month after rising 6.4 percent in August and 5.6 percent in July. In Shanghai, stockpiles rose 12 percent last week to 97,396 tons, the highest level since June 2007. “The price should adjust to the high inventories and a looming oversupply,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said by phone. “We have had huge increases in stocks on the LME and in Shanghai, and there are probably undisclosed inventories in China as well.”

- US oil refiners, which lost almost two-thirds of their market value since the recession began in December 2007, won’t emerge from the “Dark Ages” of falling demand and disappearing profit margins until they shut their oldest plants, Credit Suisse Group AG analysts said. When margins began to fall along with demand at the end of 2007, refining capacity continued rising because of expansion projects that were already in the works. Any rebound in refining stocks based on expectations an economic recovery will lift fuel demand probably will be short-lived because of the overhang in production capacity, CSFB analysts Mark Flannery and Rakesh Advani said in a note to clients. “The real issue in US refining is overcapacity, and even the biggest of demand bounces will not be able to overcome this,” Flannery and Advani wrote. “The only lasting way out of the Dark Ages is for US refiners to start to shutter their weaker plants, and that part of the cycle has yet to begin.”

- Bank of America Corp.(BAC) knew about Merrill Lynch & Co.’s impending losses and plan to award bonuses when the lender made its takeover bid last year, said John Thain, the brokerage’s former chief executive officer.

- Aiful Corp., the Japanese consumer lender whose shares have lost 36 percent in the past month, plans to reschedule debt payments after being shut out of credit markets by the financial crisis. Aiful, which hasn’t sold bonds since March 2007 according to Bloomberg data, is seeking to delay repayments on 280 billion ($3 billion) of its 915 billion yen of debt, said spokesman Hirofumi Haruguchi. The company’s stock was poised to fall the most since its 1998 stock market listing on the Tokyo exchange.

Wall Street Journal:

- Penn National Gaming Inc.(PENN) is negotiating with the bankrupt Fontainebleau Las Vegas to buy the troubled casino and resort, according to a source with knowledge of the negotiations. The two parties have been in talks for three months and have not reached a deal, the source said. Talks could still fall apart at any moment. The $3 billion, 4,000-room hotel and casino development on the remote northern end of the Las Vegas Strip halted construction last spring when banks cut off around $800 million in funding. Around 3,000 construction workers were laid off when the funding dried up. The project is about 70% complete.

- Shoppers soon will be able to buy everything from meat to moccasins based on a number that purports to tell them the products' environmental impact. Manufacturers and retailers across the globe are working to measure their products' carbon footprints for a variety of reasons, and all of the efforts have one thing in common: The results have the appearance of precision. But all the decimal points in the world can't hide the fact that measuring carbon footprints is inexact. It is clouded by varying methodologies and definitions -- not to mention guesses. "There are no clear rules for the time being," says Klaus Radunsky, who co-chairs a group within the Geneva-based International Organization for Standardization that is producing a guideline for measuring products' environmental impacts. "It depends very much on how you do the calculations."

- Senate Finance Committee Chairman Max Baucus unveiled his long-awaited health-care compromise this week to the sound of one hand clapping. You wouldn't know it from the White House, which soothingly spun the Baucus bill as a breakthrough on the forced march to reform. We were told it was a good thing that the only person in Washington who liked Max Baucus's bill was . . . Max Baucus. That everybody was unhappy meant we were getting somewhere. What matters is that the Senate now has a "common sense" product to serve as a "building block" for bipartisan legislation. Uh-huh. Mr. Obama has the same problem he's had since the start, only magnified. That would be the left wing of his party, which is about to rip up the Baucus bill, making an ugly product grotesque.
- A proposed regulatory change in how companies recognize revenue of certain products could provide a boost for several tech firms, and Apple Inc. in particular. Several leading tech companies, including Hewlett-Packard Co.(HPQ) , IBM Corp.(IBM) and Cisco Systems Inc.(CSCO) had lobbied for the change. However, the most high-profile beneficiary could be Apple(AAPL) . In particular, the change is expected to improve how the company accounts for the sales of its wildly popular iPhone as well as products such as its Apple TV set-top box. For Apple, the impact of the accounting change can be seen in how the company reported its fiscal third-quarter results in July. Apple said it earned $1.23 billion, or $1.35 a share, on sales of $8.34 billion. However, when sales and costs of good sold for iPhones and Apple TV were, as Apple put it, "adjusted over their economic lives," the company's adjusted earnings for the quarter would have been $1.94 billion and sales would have climbed to $9.74 billion.

- Venezuela's President Hugo Chavez announced that China will invest $16 billion in an oil exploration project in the Orinoco River region, according to media reports. The news comes only a few days after Venezuela signed a $20 billion joint venture agreement with a group of Russian oil companies to develop the Junin 6 deposit in the Orinoco basin, reports said. Chavez reportedly said the two deals will increase Venezuela's oil production by about 900,000 barrels a day.


- "In good times, people get sick. In bad times, people get sicker." Bill Sanger, chief executive officer of Emergency Medical Services (EMS), figures there's a lot of truth in that old saw. And he should know. His firm provides ambulance service and also staffs and manages emergency rooms. Business during these stressed times is flourishing.

- Afghan President Hamid Karzai on Thursday warned Western observers not to "delegitimize" the results of his country's presidential election, which has been marred by allegations of fraud.

NY Post:

- The Obama administration secretly estimated that its cap-and-trade plan to fight pollution would cost Americans up to $200 billion a year -- or $1,761 per family. The stark assessment of the administration's top environmental priority was made in an unreleased Treasury Department analysis that contradicts much lower figures cited by Democratic supporters. The House passed the bill by a narrow 219-212 vote in June. Cap-and-trade would be a government program designed to combat global warming by setting an annual cap on the amount of pollution companies can emit. To stay under their cap, firms could buy extra allowances in a government auction. Economists say that cost would be passed on to consumers. How much cost? An internal Treasury Department memo said, "Given the administration's proposal to auction all emission allowances, a cap-and-trade program could generate federal receipts on the order of $100 to $200 billion." Translation: $100 billion to $200 billion in what amounts to a "carbon tax," which could fall on everyone who uses energy. The higher figure amounts to $1,761 per US household.


- At Stagg Capital, investor money may have drifted off into an outside business and/or romantic relationships.


- The Senate has rejected an amendment that would have killed funding for the John Murtha Airport in Johnstown, Pa., turning back an effort by fiscal conservatives to yank earmarks from a largely deserted airport named after a controversial lawmaker. The vote was 43-53, as Democrats decided to retain funding for an airport that has only three flights a day and is named after Rep. John Murtha (D-Pa.), a powerful appropriator who has come under increasing scrutiny for earmarks and his relationships with defense contractors in his district. The Murtha airport has received a total of $150 million in funding and currently receives about $1.5 million a year. The three daily flights — all to Washington — leave the Johnstown airport, and quite often the airplanes are half-empty.

- In the war on the czars, Glenn Beck and the GOP are picking up reinforcements from an unlikely source: the Democratic Party. The Fox News host and leading Republican lawmakers have been hammering President Barack Obama for weeks over a proliferation of policy “czars” — presidential appointees who don’t have to be confirmed by the Senate and aren’t easily held to account by Senate oversight committees. Democratic Sen. Russ Feingold of Wisconsin joined the anti-czar chorus Wednesday, asking Obama to detail the roles and responsibilities of all of the czars in his administration and to explain why he believes the use of czars is consistent with the Senate’s constitutional power to offer advice and consent on top-level executive branch officials. “To the extent that this undercuts that role and people are put in the place of Cabinet people and really are the key authorities and you can’t question them, that’s something worth talking about,” Feingold said. “I think it’s a fair point.” Feingold says he doesn’t know if there are any constitutional violations, but he suggested that he may hold an oversight hearing on the matter. Although the czar charge has come mostly from the right, Feingold isn’t the only Democrat to voice concerns about the issue.


- Robust sales of the Pre smartphone helped Palm Inc post a smaller-than-expected loss, but a tepid second-quarter sales forecast and a plan to sell more shares helped snuff out a rally and sent its shares down nearly 2 percent on Thursday.

- A U.S. energy information company has brought a James Bond approach to the otherwise bland job of gathering oil inventory data, hoping high-tech detective work will attract the business of petroleum traders hungry for accurate supply figures. Kentucky-based Genscape Inc, which has been selling power supply data since it was founded in 1999, has been flying a helicopter over the nation's top oil storage hub in Cushing, Oklahoma, every Friday since January, snapping photos to see how full the tanks are.

Financial Times:

- After five years of scanning books electronically, Google(GOOG) is finally entering the print publishing business for the first time. Through an arrangement with a printing company unveiled on Thursday, Google will offer 2m out-of-copyright books that can be picked up or shipped from libraries, universities and other spots around the world. It has struck the deal with On Demand Books, makers of the Espresso Book Machine that can print a 300-page book in less than five minutes, complete with a cover and a bound edge. The editions are likely to cost about $8, with Google keeping a dollar, On Demand Books keeping a dollar and the retailer keeping $3. The remaining $3 should cover the cost of materials and labor. “Google’s mission is to make the world’s books more available,” said Jennie Johnson, spokeswoman for the internet search leader. The alliance is timed to help Google demonstrate the public benefit to its broader initiative in books, which includes text searches and a proposed legal settlement of a class-action copyright case.

- Barack Obama’s decision to scrap Bush-era plans for a missile defence shield on Thursday triggered dismay in central Europe and among Republicans on Capitol Hill, amid claims that it amounted to a major security concession to Russia. Unveiling one of the biggest reversals on national security since coming to office, the US president said that he would abandon predecessor George W. Bush’s plans for ground-based interceptors in Poland and a related radar site in the Czech Republic, deploying instead a new system that could hit shorter-range Iranian missiles. US officials deny the move is a quid pro quo for Russian support for tougher UN sanctions on Iran – an idea previously floated by Mr Obama’s advisers. Russia’s foreign ministry on Thursday denied that there was any private deal behind the US decision. The Polish and Czech governments voiced no immediate concern, amid US reassurances that it would later deploy land-based defence systems in eastern Europe. But politicians in warned that the move would undermine US relations with Nato allies who fear a resurgent Russia. Mirek Topolanek, a former Czech prime minister, said: “This is bad news. After 20 years of our path into Euro-Atlantic structures and our very active involvement there, the process is being halted.”On the 70th anniversary of the Soviet invasion of Poland, Lech Walesa, former president, said: “I can see what kind of policy the Obama administration is pursuing towards this part of Europe. The way we are being approached needs to change.’’ “It would be a defeat for the long-term thinking of the American administration regarding this part of Europe,” Aleksander Szczyglo, head of the Polish national security bureau, told Poland’s TVN television.


- Lloyds Banking Group has been forced to abandon its plan to withdraw from the Government's toxic debt insurance scheme after failing to raise enough capital to meet the Financial Services Authority's strict requirements.

Economic Daily News:
- Nanya Technology Corp. raised the prices of DDR2 dynamic random memory chips to $2 because of shortage for the semiconductors, citing Pei-lin Pai, vice-president at Nanya.

The Economic Times:

- Infosys Technologies, Wipro and HCL Technologies are among the software service providers that are laying foundation for the next round of multi-million dollar orders from the big US corporations, by pitching for low-value, but politically important US state governments’ orders. Infosys, which counts JP Morgan and Morgan Stanley as clients for its services, bids for Arizona Public Service’s (APS) 400 positions, who work in its information-services department, and another 400 or so contractors to raise the staff strength for undisclosed amount. Nine other US states, some from where politicians opposed offshoring work, are looking to outsource their healthcare operations worth over $2 billion, said Wipro chief strategy officer KR Lakshminarayana, and the company hopes to get a slice of these.

Late Buy/Sell Recommendations

- Upgraded (PG) to Buy, target $66.

- Reiterated Buy on (LMT), target $90.

SunTrust Robinson:

- Rated (GCO) Buy, target $28.


- Reiterated Outperform on (CKR), target raised to $13.

William Blair:

- Rated (MFE) Outperform.

- Rated (ARST) Outperform.


- Rated (AMT) Outperform, target $41.

- Rated (CCI) Outperform, target $35.

Night Trading
Asian Indices are -.75% to +.25% on average.

Asia Ex-Japan Inv Grade CDS Index 113.50 +3.50 basis points.
S&P 500 futures -.32%.
NASDAQ 100 futures -.19%.

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

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MarketWatch Pre-market Commentary

U.S. Equity Preview

TradeTheNews Morning Report In Play

SeekingAlpha Market Currents Bond Ticker

US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
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WSJ Intl Markets Performance
Commodity Futures
IBD New America
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Conference Calendar

Who’s Speaking?

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/EPS Estimate
- None of note

Economic Releases

- None of note

Upcoming Splits
- None of note

Other Potential Market Movers
The Morgan Keegan Industrial/Transport Conference, DA Davidson Engineering/Construction Conference and the (AGP) Investor Day could also impact trading today.

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

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