Monday, December 14, 2009

Tuesday Watch

Late-Night Headlines

- The decision to hold trials for several alleged members of Al Qaeda in Manhattan federal court isn’t final, a U.S. spokesman said, leaving open the possibility that the cases will be heard in another jurisdiction. U.S. Attorney General Eric Holder announced Nov. 13 that Khalid Sheikh Mohammed, the self-proclaimed mastermind of the Sept. 11, 2001, attacks on New York and Washington, and four others accused of conspiring with him will be tried in federal court in Manhattan, just blocks from the site of the World Trade Center.

- Ford Motor Co.(F), which failed to win additional concessions from union members last month, told salaried employees it is reinstating raises, 401(k) matches and tuition assistance next year as business improves. Ford has set aside funding for merit raises and will resume matching 401(k) retirement savings for as much as 5 percent of base pay in 2010, Mark Fields, the automaker’s president of the Americas, told employees in a Dec. 10 memo. The Dearborn, Michigan-based automaker also is reinstating tuition assistance for its 17,000 U.S. salaried employees. “Clearly our One Ford transformation plan is not complete, but our plan is working,” Fields told employees in his e-mailed memo, which was reported earlier in the Detroit Free Press. “In this challenging business environment, it is more important than ever that we remain focused.”

- Bank of America Corp.(BAC) is more likely to promote someone from its own ranks to be chief executive officer after the leading outside candidate withdrew, according to a person familiar with the matter. No other outsider is actively engaged in talks with the company now that Bank of New York Mellon Corp. CEO Robert Kelly has dropped out, said the person, who declined to be identified because the search is confidential.

- The Obama administration will announce tomorrow that it has picked the Thomson Correctional Center in western Illinois to house some detainees now held in Guantanamo Bay, Cuba, an administration official said. President Barack Obama has directed the federal government to proceed with the acquisition of the prison 150 miles west of Chicago to house federal inmates and a limited number of Guantanamo Bay prisoners, the official said.

Wall Street Journal:

- Senate Democrats on Monday evening dropped a plan to expand Medicare, winning the support of moderates and the reluctant acquiescence of liberals, in another major step toward building enough support to pass a health-care overhaul. The idea of letting people ages 55 to 64 buy into Medicare, announced just last week, had threatened to explode the Democrats' hopes of getting a bill through the Senate when Sen. Joseph Lieberman came out against it. At an evening caucus of all 58 Democrats and the two independents who sit with the party, including Sen. Lieberman, Majority Leader Harry Reid (D., Nev.) and other party leaders made clear they wanted to head off the dispute.

- The Tehran-Caracas Nuclear Axis. Here's one from the Department of We Are The World: Hugo Chávez and Mahmoud Ahmadinejad will address the U.N.'s climate summit in Copenhagen. Say what you will about these two gentlemen—the support for terrorists, the Holocaust denial, the suppression of civil liberties—at least nobody can accuse them of being global warming "deniers." On the contrary, the two leaders, who met in Caracas last month for at least the 11th time, have been nothing if not cooperative when it comes to environmentally friendly and carbon-neutral technologies. Bicycles, for instance: In 2005, Chávez directed his government to "follow seriously the project of manufacturing Iranian bicycles in Venezuela." An Iranian dairy products plant (no doubt ecologically sensitive) also set up shop hard on the Colombian border, in territory controlled by Colombia's terrorist FARC.

- AIG(AIG), in its current form, is also too large and needs to shrink, Mr. Benmosche said in an interview Monday. "I feel strongly that AIG is too big today--it is extremely complex to manage and we need to make sure it's more transparent, that it's smaller, and that we can make it on our own," he said, in his first public comments to the media in months.

- Citigroup(C) and Wells Fargo(WFC) said they were paying back funds to the U.S. government, in transactions that will end taxpayers' capital support of the biggest U.S. banks much sooner than had been expected.

- A bipartisan group of former lawmakers and budget officials called on Congress and President Barack Obama Monday to commit to reining in trillion-dollar plus budget deficits to avoid dragging down the economy. Policymakers must take steps next year to enact policies to stabilize the debt at 60 percent of the size of the economy to avoid higher interest rates or crisis in global markets with disastrous implications for the U.S. economy, according to a report by the Peterson-Pew Commission on Budget Reform, a bipartisan group of deficit hawks. The bipartisan group includes former lawmakers and directors of both the Congressional Budget Office and the White House budget office.

New York Times:

- With only a few weeks left to go, this year has turned out far better for the global hedge fund industry than the debacle of 2008. But assets under management, the key measurement of hedge fund growth, are still on average 32 percent below their peak levels, according to a new study from Barclays Capital.

- China and the United States were at an impasse on Monday at the United Nations climate change conference here over how compliance with any treaty could be monitored and verified. China, which last month for the first time publicly announced a target for reducing the rate of growth of its greenhouse gas emissions, is refusing to accept any kind of international monitoring of its emissions levels, according to negotiators and observers here. The United States is insisting that without stringent verification of China’s actions, it cannot support any deal. The stalemate came on a day of public and private brinkmanship as the talks moved into their second and final week. Earlier Monday, a group of poor nations staged a brief walkout from the bargaining table, and a chaotic registration system left thousands of attendees freezing outside the conference hall and forced the temporary closing of the subway stop near the Bella Center, where the meetings are being held. The slow progress of the climate negotiations could pose problems later in the week, when the heads of government begin arriving.

- 4 tech trends to watch.

Seeking Alpha:

- Below is a chart of an investment grade CDS (credit default swap) index coupled with the S&P 500 Financial sector. While default risk just made a new low, the Financial sector has not made new 2009 highs. The bulls are hoping this drop in CDS prices is a leading indicator that means financial stocks are on the verge of a resurgence. (Click to enlarge)


- Online display advertising, viewed as inefficient and time-consuming for many marketers, has been a tough sell in recent years. Google(GOOG) aims to change that.


- One-hundred-and-seventy-four House Republicans warned House Speaker Nancy Pelosi Monday that they won’t vote for the Defense Department’s spending bill if a hike of the debt ceiling is tacked on. “Unfortunately, there seems to be pattern developing this year of using legislation that supports our men and women in uniform to pass other contentious proposals that are extraneous to our troops,” the Republicans said in a letter to Pelosi. "House Republicans stand ready to help the majority enact a defense bill that meets the need of our troops, but we will not assist your effort to use the troops to enact an increase in our national debt limit so as to finance the irresponsible spending of your party," they continued. It’s a stark threat from Republicans, who are generally supportive of funding the military and one that could throw passage of the massive spending bill into jeopardy.

- Video: Obama gives himself a B+.

- Sen. Jim DeMint (R-S.C.) is putting Capitol Hill on a "Code Red" alert Tuesday in an effort to stop the Senate's health care reform legislation. In a release from his office Monday, DeMint announced he will speak at what is being billed as an "emergency rally" coordinated by several groups, including the American Conservative Union and the Susan B. Anthony List. "The event has 'tea party' trimmings and plenty of muscle, including grass-roots support from six states," according to the GOP senator's Web site. Also on the bill for Tuesday afternoon's rally in Upper Senate Park are Sen. Tom Coburn (R-Okla.), radio talk show host Laura Ingraham and Rick Scott, chairman of Conservatives for Patients Rights. “We can expose them and confront them in the classic American spirit – a public gathering on their doorstep,” Ingraham told the Washington Times. “We will put every politician who supports this travesty on notice. Enjoy your remaining time in the U.S. Capitol because we’re coming for your seat.”


- The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-two percent (42%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -18. That’s a one point improvement from yesterday when Obama’s Approval Index rating fell to the lowest level yet recorded. Prior to the past three days, the Approval Index had never fallen below -15 during Obama’s time in office (see trends).

Real Clear Politics:

- Rep. Ryan Denounces "Crony Capitalism." This morning, Rep. Paul Ryan (R-WI) discussed the Congressional agenda and says the Democrats' plan is to turn America into "a European welfare state." He called the financial regulatory bill "crony capitalism" and said it was "big business in bed with big government." (video)

The Business Insider:

- Matt Taibbi gave a very good interview on CNN this afternoon, discussing his recent Rolling Stone piece on Obama's sellout. One of the more interesting points came when Taibbi was asked about some criticism from Andrew Ross Sorkin. Taibbi's response, basically: sorry mainstream journalists, I don't have to be evenhanded. Good answer. (video)

- Congress Is Blowing It Again: Where Are The Limits On Leverage?!?


- Gasoline prices fell to their lowest level in eight weeks, the Energy Department said Monday, as cheaper crude oil costs pushed pump prices lower. The national price for regular unleaded gasoline dropped to $2.60 per gallon, which was still up 94 cents from a year ago, the department's Energy Information Administration said in its weekly survey of service stations. The latest lower motor fuel price reflects the drop in crude oil prices, which account for about half the cost for making gasoline.

- Toyota showed its new plug-in hybrid Monday, available for leasing this month in Japan, the U.S. and Europe, and promised the green vehicle for sale to regular consumers in 2011 at an "affordable" price.


- LUKOIL, the big Russian winner at Iraq's weekend oil auctions, expects a "revolution" in world oil markets when enough crude to add 20 percent to global supply starts to flow from the country's supergiant fields. Billionaire LUKOIL shareholder Leonid Fedun told Reuters on Monday he expected a fivefold rise in Iraqi production to cap oil price growth, while also deterring investors from pursuing more difficult and costly projects in other parts of the world. "A top manager at a leading Western firm said the modern history of the oil business will be split into the pre-Iraq and post-Iraq periods. I agree," Fedun said in an interview. "We're witnessing a revolution in oil production." Iraq, emerging from the shadows of war, has deals on the table to raise oil capacity to 12 million barrels per day from 2.5 million bpd today, a level that would eclipse second-ranked Russia and leave the country behind only Saudi Arabia. "Investment will be in the billions of dollars. The project is colossal," said Fedun, a vice-president of LUKOIL whom Forbes magazine this year ranked Russia's eighth-richest businessman. Fedun said the ministry's target of reaching 12 million bpd was realistic and that, as these plans are realized, the effects on the world market would be widespread. "World oil supplies will rise by a minimum 20 percent and demand won't increase at the same rate over the same period. This raises questions over the long-term oil price," he said. "Despite terrorist acts, the country is politically stable. Yes, there are risks, but the regions where the big companies are working are comparatively stable and located not far from the export infrastructure."

- Goldman Sachs Group Inc (GS) is being sued by an institutional investor who claims the firm is preparing to pay out improper bonuses. The lawsuit, filed with the New York Supreme Court by the Security Police and Fire Professionals of America Retirement Fund, names chief executive Lloyd Blankfein and other executives and board members as defendants.

Financial Times:

- Three Steps to a Safer Financial System by Phillip Purcell. Americans have grudgingly supported the use of their taxes to save the financial system and economy. Unfortunately, this required rescuing many companies considered “too big to fail” that individually did not deserve to be saved. Taxpayers resent their money being used to keep these companies out of bankruptcy and, in some cases, protect the multi-million dollar compensation packages of those who caused the crisis. In short, Americans understand the need to protect the financial system, but do not want the events of a year ago to happen again. So one would think that we would be putting in place changes to prevent future catastrophes or at least substantially reduce the cost to taxpayers. But to date, there have been only short-term, stop-gap measures. There are three areas where action could be taken right now: new capital requirements, profit-based compensation and greater board control over risk management and pay.

- Alistair Darling has warned banks that he will not water down his 50 per cent supertax on bonuses or offer special deals in a standoff in which brokers and banks have threatened to move key staff out of the UK. The chancellor has been deluged with claims by banks that the tax would raise far more than the £550m he predicted. They have demanded that he make the levy less onerous. But an aide to the chancellor said: “The solution to their problem is that they pay less in bonuses. The banks don’t seem to realize this tax is about changing their behavior, not raising revenue.”


- Copenhagen: support for a global tax on shipping and aviation grows. Support for a global tax or emissions trading scheme for shipping and aviation is growing at the Copenhagen climate change talks, according to two sources close to European Union negotiators.

South China Morning Post:

- China banned the registering of personal Internet domain names and people who have their own Web sites could lose them, citing a government regulation that came into effect yesterday. Under the regulation, Internet service providers can no longer host individually owned Web sites and only businesses or government-authorized organizations can have them.

Late Buy/Sell Recommendations

- Reiterated Buy on (CME), boosted target to $385.

- Reiterated Buy on (MOT).

- Reiterated Sell on (RIMM) and (PALM).

- Reiterated Buy on (AVT), target $33.

- Reiterated Buy on (IR) and (UTX).

- Reiterated Buy on (AA), target $17.

- Reiterated Buy on (NTRI), boosted estimates, raised target to $42.


- Raised (RTP) to Overweight.

Sanford Bernstein:

- Rated (LEAP) Outperform, target $23.

- Rated (PCS) Outperform, target $10.

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

Asia Ex-Japan Inv Grade CDS Index 103.0 -3.0 basis point.
S&P 500 futures +.13%.
NASDAQ 100 futures +.12%.

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

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
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/EPS Estimate
- (FDS)/.74

- (ADBE)/.37

- (BBY)/.43

- (AIR)/.30

Economic Releases

8:30 am EST

- The Producer Price Index for November is estimated to rise +.8% versus a +.3% increase in October.

- The PPI Ex Food & Energy for November is estimated to rise +.2% versus a -.6% decline in October.

- The Empire Manufacturing Index for December is estimated at 24.0 versus 23.51 in November.

9:00 am EST

- Net Long-term TIC Flows for October are estimated to fall to $37.1B versus $40.7B in September.

9:15 am EST

- Industrial Production for November is estimated to rise +.5% versus a +.1% gain in October.

- Capacity Utilization for November is estimated to rise to 71.1% versus 70.7% in October.

1:00 pm EST

- The NAHB Housing Market Index for December is estimated to rise to 18 versus a reading of 17 in November.

Upcoming Splits
- None of note

Other Potential Market Movers
The weekly retail sales reports, weekly API energy inventories, Deutsche Bank Biotech Confab, Raymond James Supply Chain Conference, (PBI) guidance call, (BRCM) analyst day, (ABC) analyst meeting, (ARG) analyst meeting, (DAL) investor day, (GOOG) educational webcast, (GE) annual outlook, (HANS) analyst meeting, (GNW) investor day and the ABC consumer confidence reading could also impact trading today.

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

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