Tuesday, December 15, 2009

Wednesday Watch

Late-Night Headlines

- Some of the biggest buyers of gold may be sending the strongest signal to sell it, if past performance is indicative of future results. Central banks, holding about 18 percent of all gold ever mined, are expanding their reserves for the first time in a generation as a nine-year bull market drives prices to a record. The banks will buy 13.8 million ounces (429 metric tons) this year, worth $15.5 billion, for the first net expansion in reserves since 1988, New York-based researcher CPM Group estimates. Gold fell 15 percent that year and took another 15 years to trade again at the same price as central banks from Switzerland to the U.K. cut their holdings. India, China and Russia are now adding to reserves as gold nears its longest winning streak since at least 1948. They’re joining a rush as investors in exchange-traded funds amass holdings to rival the biggest central banks. “This is late in the game to be buying gold,” said Peter Morici, a professor of business at the University of Maryland in College Park and former economic adviser to the U.S. government. “Central banks are not known for their investment acumen. What it reflects is a lack of confidence in the U.S. economy and the long-term durability of the dollar as a store of value.” Countries were also increasing their holdings in 1980 when gold peaked at $850 an ounce, data compiled by the London-based World Gold Council show. The record was exceeded 28 years later.

- Investors should sell bearish options on Yahoo! Inc.(YHOO) because increasing advertising sales and economic growth are poised to boost its profit margins, Jefferies Group Inc. said. “Increased display and search revenue as well as improvements in the broader online advertising space should help Yahoo exhibit meaningful margin expansion over the short-term,” equity derivatives strategist Scott Becker wrote in a note to clients today.

- Adobe Systems Inc.(ADBE), the world’s biggest maker of graphic-design programs, reported a bigger profit than analysts estimated after the company cut jobs and a slump in orders eased. Excluding some costs, fourth-quarter profit was 39 cents a share, the company said today in a statement. Analysts in a Bloomberg survey had estimated 37 cents on average for the period, which ended Nov. 27. A sales forecast for next quarter also topped projections.

Wall Street Journal:

-Lending by the top 22 recipients of U.S. government rescue funds declined by 1% for the seventh straight month in October, the Treasury reported Tuesday. Meanwhile, total originations of new loans remained flat in October after increasing 2% in September. In October, the top 22 TARP recipients originated $240 billion in new loans. New originations of mortgages and commercial loans increased, while new lending fell across all other loan categories, including home equity loans, credit cards and commercial real estate lending. Total outstanding balances of small-business loans remained flat in October, while small-business originations grew by 7%. New mortgage originations increased by 4%, fueled by a spike in refinancings.

- UBS AG's (UBS) U.S. brokerage plans to announce a new recruiting deal to attract financial advisers from its competitors, people familiar with the situation said Tuesday. UBS Wealth Management Americas will offer top-tier advisers as much as 280% of their annual production to join the firm if they meet certain asset transfer guidelines, according to two people familiar with the package.

- How Facebook Is Making Friending Obsolete.

- The Case for Optimism on the Economy. The credit markets are healing and net job creation may be only a month or two away.

- A new generation of mobile-phone software is helping consumers shop smarter this holiday season.

- Congress Travels More, Public Pays. Lawmakers Ramp Up Taxpayer-Financed Journeys; Five Days in Scotland.
- The Surge in Electric Cars.

- At least someone in America isn't feeling a credit squeeze: Uncle Sam. This week Congress will vote to raise the national debt ceiling by nearly $2 trillion, to a total of $14 trillion. In this economy, everyone de-leverages except government. It's a sign of how deep the fiscal pathologies run in this Congress that $2 trillion will buy the federal government only one year before it has to seek another debt hike—conveniently timed to come after the midterm elections. Since Democrats began running Congress again in 2007, the federal debt limit has climbed by 39%. The new hike will lift the borrowing cap by another 15%. There is surely bipartisan blame for this government debt boom.

- The White House will announce plans Wednesday to provide another $5 billion in tax credits for manufacturers of wind, solar, electric vehicle and other renewable energy products.


- Wells(WFC) Raises $12.25 Billion As Share Offering Is Expanded.

New York Times:

- Just over a week ago, on the evening of Dec. 7, Lloyd C. Blankfein hosted a reunion of one of the most elite clubs in American finance: former partners of Goldman Sachs(GS), the Wall Street giant he has led, with remarkable and controversial success, since 2006. The gathering, held at the venerable New York Athletic Club, both celebrated Goldman’s past and looked toward its future. What, Mr. Blankfein was asked, did he want his legacy to be? Mr. Blankfein replied that like his predecessors, he hoped to position Goldman Sachs to capitalize on whatever opportunities might arise during his tenure. Interviews with nearly 20 current and former Goldman partners paint a portrait of a bank driven by hard-charging traders like Mr. Blankfein, who wager vast sums in world markets in hopes of quick profits. Discreet bankers who give advice to corporate clients and help them raise capital — once a major source of earnings for Goldman — have been eclipsed, these people said. Mr. Blankfein has surrounded himself with a tight circle of executives drawn from Goldman’s trading operation. Many of these executives, like Mr. Blankfein, cut their teeth in the commodities division, J. Aron & Company. After first guiding Goldman through the near collapse of the nation’s financial system and then deftly extricating his bank from a federal bailout, Mr. Blankfein is now presiding over one of the richest periods in the bank’s 140-year history. Mr. Blankfein has accelerated a decade-long decline of Goldman’s old partnership ethos, which was built around the principle that its bankers and traders can do well — indeed, very well — while putting their customers first, former partners said. Some Goldman alumni worry that Mr. Blankfein is jeopardizing the culture of success that defined the bank for much of its modern history. They wonder if Goldman will become, as one former partner put it, “just like every other bank on Wall Street” — that is, focused on short-term profits rather than long-term gains. Publicly, Mr. Blankfein espouses the Goldman Sachs way. But privately, current and former partners say that he has fundamentally changed the way Goldman views its customers and the broader marketplace. The changes began when Goldman went public in the late 1990s, but have accelerated under Mr. Blankfein, they say. Given Goldman’s plans to pay out billions of dollars in bonuses this year, many outsiders might think the bank pays little attention to its public image. In fact, current and former executives say, Goldman is acutely aware of its diminished public standing. But even people close to Goldman acknowledge that as long as the bank is making a lot of money, public opinion does not matter all that much. Goldman’s tarnished reputation has become a hot topic inside the bank. A few months ago, at a meeting of Goldman’s in-house leadership program, known as the Pine Street Group, the bank’s image came up. The group of 30-odd people wrestled with questions like how to talk to family members about Goldman and its role in the financial world. Another question that came up was what to do if someone at a cocktail party started criticizing Goldman. Mr. van Praag, who ran the meeting, suggested that the executives should explain how Goldman made its money. But another Goldman executive offered a different answer: change the subject.

- Morgan Stanley(MS) has named a longtime company executive to run its United States prime brokerage business, which offers services ranging from clearing trades to lending money to hedge funds. The executive, Edward Keller, who currently runs equity finance sales in the Americas, will also be responsible for the prime brokerage business in the United States. Morgan Stanley told employees about the appointment on Tuesday in an internal memo that was obtained and confirmed by Reuters.

- In the last two months, SAC Capital Management has turned into a $13 billion piñata. Since federal prosecutors began making arrests in a major insider trading investigation in October, SAC, which is based in Stamford, Conn., and owned by Steven A. Cohen, has been linked to the case.


- Inverness Medical Innovations (IMA) is a company built on speed.

Business Insider:

- Here's Mary Meeker's amazing 424-page Mobile Internet Report. If you don't feel like reading all of it, check out the 92-slide "setup" or the 694-slide "key themes". If you just want the gist, meanwhile, check out our 4.5-word version.

Business Week:
- Natural Gas: New Environmental Rules Could Cloud Prospects. Concerns about the impact of methods used to extract gas from shale deposits could lead to tough restrictions - and crimp output for some producers. After years of talk about improved energy security for the U.S.—and a smaller carbon footprint for U.S. industry—natural gas seized the spotlight on Dec. 14 after ExxonMobil (XOM) announced a deal to acquire XTO Energy (XTO), one of the largest independent natural gas producers. The all-stock deal is worth $31 billion, plus the assumption of $10 billion in debt. But could environmental concerns about the methods used to extract gas from its hiding place in the depths of shale deposits spoil the party?


- Seven Looming Financial Bubbles.

- Tech Stock Trends For 2010.


- More than anything else in Barack Obama’s presidency so far, health reform has exposed a get-a-deal-at-any-cost side of Obama that infuriates his party’s progressives. And as Democrats tried to salvage health reform Tuesday, some liberals could barely hide their sense of betrayal that the White House and congressional Democrats have been willing to cut deals and water down what they consider the ideal vision of reform. “The Senate version is not worth passing,” former Democratic National Committee Chairman Howard Dean told POLITICO, referring to plans to strip the latest compromise from the bill, a Medicare buy-in. “I think in this particular iteration, this is the end of the road for reform.” Dean said there are some good elements in the bill, but lawmakers should pull the plug and revisit the issue in Obama’s second term, unless Democrats are willing to shortcut a GOP filibuster. “No one will think this is health care reform. This is not even insurance reform,” he said.

- House Democrats Tuesday unveiled major legislation to overhaul the nation’s immigration laws, pegging its passage to the fulfillment of a campaign promise by President Barack Obama. Rep. Luis Gutierrez (D-Ill.), who has shepherded the bill, enjoyed chants of “yes we can” from a horde of onlookers in a packed room in the Rayburn House Office Building. But the future of the bill is more uncertain. The Congressional Hispanic Caucus, including Chairwoman Nydia Velazquez (D-N.Y.) and its most senior member, Rep. Solomon Ortiz (D-Texas), lauded the bill, saying it’s long overdue and would help integrate undocumented immigrants into U.S. society. But with the nation’s unemployment in double-digits and massive health-care overhaul legislation slogging through the Senate, the timing and prospects of the legislation are in question. Still, Gutierrez indicated that Senate Majority Leader Harry Reid (D-Nev.) has given his word the measure would see time on the Senate floor.


- Republican candidates have bounced back to a seven-point lead over Democrats in the latest edition of the Generic Congressional Ballot. The latest Rasmussen Reports national telephone survey shows that 44% would vote for their district’s Republican congressional candidate while 37% would opt for his or her Democratic opponent.


- Defense contractor L-3 Communications Holdings Inc (LLL) is in talks to buy a company for slightly more than $500 million and plans to make more acquisitions in the intelligence surveillance business next year, the company's chief executive said on Tuesday.

- A U.S. grand jury on Tuesday indicted Galleon hedge fund founder Raj Rajaratnam and co-defendant Danielle Chiesi on charges of securities fraud and conspiracy in an insider trading case involving employees of some of America's best-known companies. The indictment in Manhattan federal court, two months after the pair were charged along with others in a coast-to-coast probe on Oct. 16, lists 17 counts of conspiracy to commit securities fraud and securities fraud. Sri Lankan-born Rajaratnam and Chiesi, who worked with New Castle LLC hedge fund, are the only indictments returned so far in the case, which expanded in November to include 20 people facing criminal and civil charges.

- The U.S. government "quietly" agreed not to collect billions of dollars in potential taxes from Citigroup Inc (C) as part of its deal to allow the bank to repay its taxpayer bailout, The Washington Post reported. At the end of the third quarter, Citi said its past losses were valued at about $38 billion, allowing it to avoid taxes on its next $38 billion in profits, but under normal IRS rules, a change in control would have sharply reduced the amount the company could shelter from taxes, the newspaper said.

- Chip maker Broadcom Corp (BRCM) raised its revenue guidance for the current quarter on Tuesday, citing better than expected demand in the broadband and enterprise networking segment. Broadcom now expects current quarter revenue to grow sequentially by 5 percent to $1.32 billion compared with its October guidance for $1.25 billion. Analysts on average had expected revenue of $1.26 billion for the quarter, according to Thomson Reuters I/B/E/S. "Our increased guidance reflects stronger than expected demand for products in our broadband and enterprise networking markets," Chief Executive Scott McGregor said in a statement. The company also said it now expects product gross margins be up 100 basis points, or 0.1 percent, from the third quarter. This compares with its previous expectation for an increase of 20 to 50 basis points.

- U.S. securities regulators may reduce the number of investment advisers who would have to undergo an annual surprise audit under a proposal to ensure that their clients' assets are safe, two sources familiar with the plan said on Tuesday.

- U.S. sales of Toshiba Corp's personal computers are on track to rise about

50 percent year-over-year in the fourth quarter, the company said on Tuesday. Toshiba, the world's No. 5 PC vendor, said it expects to ship more than 1.6 million units in the United States in the fourth quarter. Jeff Barney, general manager of digital products for Toshiba America, said the company's newest netbooks and PCs have been selling well, and have been boosted by the release of Microsoft Corp's (MSFT) new Windows 7 operating system launched at the end of October. In the first two weeks following the launch, Toshiba saw its U.S. retail sales double from the same period a year ago. The bulk of the company's U.S. PC sales is made to consumers. But despite strong demand, Toshiba said it was again hampered by supply issues on some components, such as LCD screens. "Demand has continued to come back, but late last year all the component guys really furloughed everybody and closed down lines. So getting that capacity back in the industry, there's been a few rough patches," Barney said. Consumers make up roughly three-fourths of Toshiba's U.S. PC sales. Consumer PCs industry-wide have been much stronger during the economic downturn than sales to businesses, helped by rapidly falling prices. Barney added that he expects to see a flattening of the downward curve of PC prices in the industry. "I think Q4 and Q1 price erosion is going to be a little more moderate because you're reaching a point at which I think structurally it's difficult to get any lower."

- Environmental and Alaska Native groups on Tuesday filed petitions in federal court seeking to overturn the Obama administration's approval of Royal Dutch Shell's plan to drill two wells next year in the Beaufort Sea.

Financial Times:

- Energy prices will have to rise if companies are to make the investments needed to cut carbon dioxide emissions, the head of the world’s largest wind power company has said. Ignacio Galán, the chief executive of Iberdrola , the number one generator of wind power in Europe, and number two in the US, through its subsidiary Iberdrola Renovables, said consumers should “pay more [but] consume less”. He also said the Spanish energy utility hoped for about another $470m in stimulus funding for renewable energy projects in the US next year, having received $600m this year, making it the single biggest recipient. Speaking on the fringes of the Copenhagen climate change talks, intended to agree a new global framework for curbing carbon dioxide emissions, he said the industry had to make huge investments to deliver the changes that politicians wanted. These changes include the development of low-carbon generation such as wind and nuclear power, and equipment to raise energy efficiency such as “smart” grids and meters, he said. “Those things cost money. What is the price of energy needed? The one that will transform the energy mix in the country.” He cited the estimated need for £200bn ($324bn) of investment in the UK’s energy infrastructure as an example. “Unless the companies expect a proper return, no bank is going to invest, and the country is going to have a problem.” He argued that energy bills were still a very small proportion of household costs.

- The US plans to move as many as 100 suspected terrorists held at Guantánamo Bay to a specially-acquired detention centre in Illinois and try them there, the White House said on Tuesday, as president Barack Obama starts delivering on his promise to close the prison camp. The decision to move detainees on to American soil is highly controversial but the Obama administration said it would help prevent future attacks. Republicans immediately criticised the plan on Tuesday. “The administration has failed to explain how transferring terrorists to Gitmo North will make Americans safer,” said Mitch McConnell, minority leader in the Senate. The prospect of having Guantánamo detainees in such close range had been greeted with mixed feelings by the residents of towns on the shortlist. Some have expressed concern about having suspected terrorists in their midst, fearing escape or attacks being planned. Officials on Tuesday said extra security measures, including a new perimeter wall, would be put in place to make the facility the most secure in the US.


- Britain and other countries with fast-rising government debts must steel themselves for a year in which “social and political cohesiveness” is tested, Moody’s warned. In a sombre report on the outlook for next year, the credit rating agency raised the prospect that future tax rises and spending cuts could trigger social unrest in a range of countries from the developing to the developed world.

Nikkei English News:
- The Basel Committee on Banking Supervision has agreed to give major banks a transition period of at least 10 years to meet new capital adequacy rules.

Late Buy/Sell Recommendations

- Reiterated Buy on (AXP) and (COF).

Deutsche Bank:

- Raised (WFC) to Buy, target $36.

- Rated (H) Buy, target $34.

Morgan Stanley:

- Rated (SCHW) Overweight, target $23.

- Rated (CME) Underweight, target $311.


- Rated (CB) Outperform, target $64.

- Rated (PGR) Underperform, target $15.

Night Trading
Asian Indices are -.50% to +.25% on average.

Asia Ex-Japan Inv Grade CDS Index 97.0 -6.0 basis points.
S&P 500 futures -.05%.
NASDAQ 100 futures +.03%.

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

Briefing.com In Play

SeekingAlpha Market Currents

Briefing.com 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
- (JOYG)/1.02

- (HOV)/-1.75

- (PAYX)/.33

- (ABM)/.38

- (MLHR)/.19

- (APOG)/.19

- (NDSN)/.89

- (COMS)/.07

Economic Releases

8:30 am EST

- The Consumer Price Index for November is estimated to rise +.4% versus a +.3% gain in October.

- The CPI Ex Food & Energy for November is estimated to rise +.1% versus a +.2% gain in October.

- The Current Account Deficit for 3Q is estimated to widen to -$107.5B versus -$98.8B in 2Q.

- Housing Starts for November are estimated at 574K versus 529K in October.

- Building Permits for November are estimated at 570K versus 551K in October.

10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,000,000 barrels versus a -3,823,000 barrel decline the prior week. Gasoline supplies are expected to rise by +1,300,000 barrels versus a +2,253,000 barrel gain the prior week. Distillate supplies are estimated to fall by -500,000 barrels versus a +1,619,000 barrel increase the prior week. Finally, Refinery Utilization is expected to rise by +.3% versus a +1.39% gain the prior week.

2:15 pm EST

- The FOMC is expected to leave the benchmark fed funds rate at .25%.

Upcoming Splits
- None of note

Other Potential Market Movers
The weekly MBA mortgage applications report, Bloomberg Global Confidence reading, (FSLR) guidance call, (DHR) investor day, (HON) 2010 guidance announcement and (GAS) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

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