Friday, November 07, 2008

Today's Headlines

Bloomberg:
- Ambac Financial Group Inc. has a stable business model, is ``extremely solvent'' and is unlikely to need direct help from the federal government, Chief Executive Officer David Wallis said.

- The cost of borrowing dollars for three months in London fell to a four-year low after central banks around the world cut benchmark borrowing costs and kept the financial system flooded with cash to restore lending. The London interbank offered rate, or Libor, that banks say they charge one another for loans fell 10 basis points to 2.29 percent today, the lowest level since November 2004, the British Bankers' Association said. The overnight rate held at a record low of 0.33 percent and the TED spread, a gauge of bank cash availability, dropped under 200 basis points for the first time since the day before Lehman Brothers Holdings Inc. collapsed.

- At least 20 percent of the vessels most commonly hired to haul coal and ore are sitting empty as steelmakers cut output and dwindling trade credit halts deliveries, Lorentzen & Stemoco A/S shipbroker Kjetil Sjuve said.

- Goldman Sachs Group Inc.(GS) and Morgan Stanley, the U.S. investment banks that converted to bank holding companies in September, had their fourth-quarter and 2009 earnings estimates cut by JPMorgan Chase & Co.(JPM).

- Business schools should teach empirical analysis and drop risk-management models that failed to foresee the worst market declines since the Great Depression, according to “Black Swan” author Nassim Taleb. Universities teach mathematical theories such as the Black- Scholes model of pricing options that don’t express risk properly, Taleb said in a Bloomberg Radio interview. Options are derivatives that give the right but not the obligation to buy an underlying security at a set price and date. “Recent events have proved that all risk management was wrong,” Taleb, a former options trader, said. “We need to do something drastic immediately to stop quantitative risk managers from inflicting more damage.” Academic teaching resists change because tenured professors aren’t forced to adapt or subject to the same standards that the market imposes on Wall Street, Taleb said.

- General Motors Corp.(GM), seeking federal aid to avoid collapse, said it may not have enough cash to keep operating this year and will fall ``significantly short'' of the amount needed by the end of June unless the auto market improves or it raises more capital. The largest U.S. automaker reported a $4.2 billion third- quarter operating loss today and said its available cash fell to $16.2 billion on Sept. 30 from $21 billion at the end of June. Merger talks with Chrysler LLC were suspended.

- Qualcomm Inc.(QCOM), the biggest maker of mobile-phone chips, rose as much as 10 percent in Nasdaq trading after investors predicted earnings growth can't get any worse.


Wall Street Journal:

- After October's massive equities sell-off, intrepid investors are picking over the investment landscape, figuring there must be some bargains amid the rubble. If it seems like a buying opportunity for stocks, it's shaping up to be an even better one for high-yield bonds and leveraged loans. Risk premiums in both asset classes have surged past previous all-time highs, even as default rates remain below historic norms.


NY Observer:
- YouTube is trying to make nice with major studios so they can offer feature films on their site. CNet announced the news yesterday that the Google-owned company is in negotiations to launch an ad-supported, streaming movie service.


NY Post:

- Citadel Investment Group founder Ken Griffin continues to be haunted by the Wall Street meltdown horror show, as October proved to be more challenging than September. The Chicago-based hedge fund lost about 22 percent last month, which followed a 16 percent loss in September. October's loss was Griffin's biggest setback since he launched the now $18 billion fund nearly 20 years ago with $1 million in capital. Year to date, Griffin's Wellington and Kensington flagship multi-strategy hedge-fund vehicles are down 38 percent, according to people familiar with Citadel's performance.


Bespoke Investment Group:

- Table: Country Default Risk As Measured By CDS Prices.


Reuters:
- Apple Inc's(AAPL) new iPhone, already racking up blockbuster sales with consumers, appears to be making small but steady inroads into the coveted U.S. corporate market dominated by Research in Motion Ltd's BlackBerry.

Folha Online:
- Brazil may have as many as 100 billion barrels of oil in the country’s so-called pre-salt fields, citing Haroldo Lima, director general of Brazil’s National Petroleum Agency. Brazil has at least 50 billion barrels of oil and as many as 80 billion barrels in blocks that have been auctioned, Lima said. The country’s oil reserves may top 100 billion barrels including blocks that haven’t been auctioned.

El Nacional:
- Venezuela’s annual inflation rate will end 2008 at about 28%, missing the government’s target of 27%, citing comments by Finance Minister Ali Rodriguez.

Bear Radar

Style Underperformer:
Small-cap Value (-1.70%)

Sector Underperformers:
Homebuilders (-4.38%), Airlines (-1.88%) and Banks (-1.62%)

Stocks Falling on Unusual Volume:
YHOO, TRLG, ATHN and CQB

Stocks With Unusual Put Option Activity:
1) TLB 2) AU 3) DIS 4) PCLN 5) MAS

Bull Radar

Style Outperformer:
Mid-cap Growth (+2.37%)

Sector Outperformers:
Construction (+6.65%), Alternative Energy (+4.26%) and Drugs (+3.2%)

Stocks Rising on Unusual Volume:
CHA, TKC, BBL, OSIP, FSYS, GXDX, LMNX, KNSY, DISCA, AFAM, SINT, QGEN, ONXX, MIDD, PCLN, HURC, QCOM, EBIX, UEPS, WPPGY, FWLT, ANSS, TISI, GHL, SRX, FNF, SCX, NAT, FAF, DCO, KNM, WST and NJ

Stocks With Unusual Call Option Activity:
1) KBR 2) IR 3) FLR 4) MBI 5) PCLN

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
Exchange Volume vs. Average

NYSE Unusual Volume

NASDAQ Unusual Volume

Hot Spots

Option Dragon

NASDAQ 100 Heatmap

DJIA Quick Charts

Chart Toppers

Real-Time Intraday Quote/Chart
Dow Jones Hedge Fund Indexes

Thursday, November 06, 2008

Friday Watch

Late-Night Headlines
Bloomberg:

- Platinum Grove Asset Management LP, the hedge-fund firm co-founded by Nobel laureate Myron Scholes, temporarily stopped investor withdrawals from its biggest fund after it lost 29 percent in the first half of October. The decline left Platinum Grove Contingent Master fund with a 38 percent loss this year through Oct. 15, according to investors.

- Carl Icahn is putting more money into his $6.6 billion of hedge funds as losses mount and outside clients abandon the activist investor. Investors plan to withdraw about 15 percent of the fund's total assets at year-end, according to regulatory filing yesterday by Icahn's New York-based holding company.

- Before Barack Obama takes the oath, he should read ``The Great Inflation and Its Aftermath,'' Robert J. Samuelson's timely history of how good political intentions stoked an inflationary hell in the 1970s -- and how only bold, painful action smothered the flames. The Great Inflation refers to the period when U.S. inflation rose from negligible levels in the mid-1960s to double digits in the early 1980s. Though the episode scarred a generation, our memory of the fire has faded, says Samuelson, an award-winning columnist for Newsweek and the Washington Post.

- Independent Senator Joe Lieberman's backing of the Republican presidential ticket raises ``serious concerns'' about his status in the Democratic caucus, Senate Majority Leader Harry Reid said.

- Eliot Spitzer, who quit as governor of New York in March, won't face criminal charges for patronizing a ring of high-priced prostitutes, federal prosecutors said.

- Rio Tinto Group(RTP), the world's third- largest mining company, had its rating outlook cut by Moody's Investor Services because of global market turmoil, falling metal prices and slow progress in asset sales.

- Investors should sell Australia’s currency against the US dollar because it may lose 29% as it slumps toward a record amid a global recession, Morgan Stanley said.

- Global ship orders tumbled 90 percent last month as the credit crunch damped world trade and made it harder for shipping lines to borrow money, according to Lloyd's Registers Group.

- Microsoft Corp.(MSFT), which previously offered as much as $47.5 billion for Yahoo! Inc.(YHOO), may have partnership deals with the Internet company and isn't planning to make another bid, Chief Executive Officer Steve Ballmer said.


Wall Street Journal:
- House Speaker Nancy Pelosi called for a two-stage effort to boost the shaky U.S. economy: a $60 billion-to-$100 billion stimulus package this month, followed early next year by a companion measure that would include a "permanent tax cut."

- President-elect Barack Obama's choice of Rep. Rahm Emanuel as chief of staff drew fire Thursday from Republicans, and a few Democrats, who noted that a candidate elected on a call for change had turned to a veteran partisan pugilist for his first appointment. The Republican National Committee called the choice Mr. Obama's first "broken promise." "This is an ironic choice for a president-elect who has promised to change Washington, make politics more civil, and govern from the center," said House Minority Leader John Boehner (R., Ohio). Some Democratic aides on Capitol Hill were similarly struck by the partisan nature of the appointment -- and even more so by the extended rollout.

- Hedge funds are selling billions of dollars of securities to meet demands for cash from their investors and their lenders, contributing to the stock market's nearly 10% drop over the past two days. One of the biggest funds, $16 billion Citadel Investment Group, is being asked by several major banks to post additional collateral to cover big losses on its investments, according to people familiar with the situation. Citadel, which is run by Kenneth Griffin, was until recently considered a possible savior for troubled Wall Street firms. But his biggest hedge fund has fallen nearly 40% this year.


CNBC.com:

- This is a stunner for Apple(AAPL) and its iPhone, and just goes to show why Research in Motion and its BlackBerry have a little more to worry about: JD Power and Associates ranked the iPhone highest in customer satisfaction, not for everyday consumers as you might expect. But for "business wireless smartphone users."


NY Times:
- Once Sizzling, China’s Economy Shows Rapid Signs of Fizzling.


USA Today.com:

- Mortgage rates dropped this week, providing a dose of welcome news to prospective home buyers. Freddie Mac, the mortgage giant, reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.20% for the week ending Nov. 6. That was down sharply from 6.46% last week.

Reuters:

- Al Gore's Alliance for Climate Protection has some environmental advice for the incoming Obama administration: focus on energy efficiency and renewable resources, and create a unified U.S. power grid. On Thursday, the group Gore founded rolled out a new media campaign to push for immediate investments in three energy areas it maintains would help meet Gore's previously announced challenge to produce 100 percent clean electricity in the United States in a decade. Pegged to Obama's election victory on Tuesday, the Gore group's ads on television, in newspapers and online, pose the question, "Now what?"

- The love affair between U.S. pension funds and hedge funds is cooling. After helping the hedge fund industry double their assets to $1.7 trillion over the last three years, pensions funds, in their search for plump returns, are reconsidering their commitments. In September, the School Employees System of Ohio, which had planned to invest 10 percent of its $11 billion portfolio in hedge funds, decided to stop investing directly with them for a time, according to fund spokeswoman Laurel Johnson. Florida's government workers, who have already put money into private equity and real-estate investments and are permitted to put money into hedge funds, have shied away. Other pension funds that have already committed money are pulling some cash out, managers familiar with their negotiations have said. Ever since the California Public Employees' Retirement System, the largest U.S. pension fund known as Calpers, picked a handful of hedge funds in 2002 to help invest $1 billion, dozens of funds that manage retirement money for public employees such as teachers, police officers and transit workers have followed suit. With other parts of their portfolios tumbling, some pension funds have exceeded the percentage their trustees permit them to allocate to hedge funds, consultants said.

TimesOnline:
- Blackstone Group(BX) calls bottom after loss of $509M. Blackstone Group posted much wider than expected losses yesterday, but the world’s second-biggest private equity company has called the bottom of the credit crunch.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (BX), target $15.

- Reiterated Buy on (GLBC), target $16.

- Reiterated Buy on (PCLN), target $83.

- Reiterated Buy on (GT), target $21.


Night Trading
Asian Indices are -2.0% to +1.0% on average.
S&P 500 futures +1.63%.
NASDAQ 100 futures +1.57%.


Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Upgrades/Downgrades
Rasmussen Business/Economy Polling


Earnings of Note
Company/EPS Estimate
- (BID)/-.16

- (ED)/1.00

- (GM)/-3.51

- (EIX)/1.54

- (SUP)/-.06

- (S)/.03

- (RRI)/-.06

- (LPNT)/.61

- (F)/-.93

- (DISCA)/.18

- (CEP)/.28


Economic Releases
8:30 am EST

- The Change in Non-farm Payrolls for October is estimated at -200K versus -159K in September.

- The Unemployment Rate for October is estimated to rise to 6.3% versus 6.1% in September.

- Average Hourly Earnings for October are estimated to rise .2% versus a .2% gain in September.


10:00 am EST

- Wholesale Inventories for September are estimated to rise .3% versus a .8% gain in August.


11:30 am EST

- Pending Home Sales for September are estimated to fall 3.4% versus a 7.4% gain in August.


3:00 pm EST

- Consumer Credit for September is estimated to fall to $0.0 billion versus -$7.9 billion in August.


Upcoming Splits
- None of note


Other Potential Market Movers
- The Fed’s Lockhart speaking could also impact trading today.


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

Stocks Finish at Session Lows, Weighed Down by Commodity, Gaming and Construction Shares

Evening Review
Market Summary

Top 20 Biz Stories

Today’s Movers

Market Performance Summary

WSJ Data Center

Sector Performance

ETF Performance

Style Performance

Commodity Movers

Market Wrap CNBC Video
(bottom right)
S&P 500 Gallery View

Timely Economic Charts

GuruFocus.com

PM Market Call

After-hours Commentary

After-hours Movers

After-hours Real-Time Stock Bid/Ask

After-hours Stock Quote

After-hours Stock Chart

In Play
Evening Review
Market Summary

Top 20 Biz Stories

Today’s Movers

Market Performance Summary

WSJ Data Center

Sector Performance

ETF Performance

Style Performance

Commodity Movers

Market Wrap CNBC Video
(bottom right)
S&P 500 Gallery View

Timely Economic Charts

GuruFocus.com

PM Market Call

After-hours Commentary

After-hours Movers

After-hours Real-Time Stock Bid/Ask

After-hours Stock Quote

After-hours Stock Chart

In Play