Between the Hedges

Portfolio Manager's commentary on investing and trading in the U.S. financial markets

Sunday, July 05, 2009

Monday Watch

Weekend Headlines
Bloomberg:

- Crude oil fell to the lowest in five weeks on a stronger dollar and speculation U.S. fuel inventories will increase as the recession curbs demand in the world’s biggest energy-consuming country. Oil and commodities including gold fell as the dollar climbed against the euro, limiting investor appetite for assets to hedge against inflation. Eighteen of 37 analysts surveyed by Bloomberg News, or 49 percent, said oil futures will decline through July 10. “Oil is softer despite news of further disruptions to supply in Nigeria,” Moore said. U.S. gasoline stockpiles climbed 2.33 million barrels to 211.2 million last week, an Energy Department report on July 1 showed. Inventories of distillate fuel, a category that includes diesel and heating oil, climbed 2.9 million barrels to 155 million, the highest since 1987. Total daily fuel demand averaged over the four weeks ended June 26 was down 5.8 percent from a year earlier, the Energy Department said. Distillate-fuel demand over the period fell 9.4 percent to 3.4 million barrels a day.

- Crude oil may extend this week’s decline after falling below its 34-day average, according to technical analysis from PVM Oil Associates Ltd. “So long as we do not move and close back above here, the market is in bear mode,” Robin Bieber, a London-based director for PVM, said in a note to clients.

- Iranian authorities have charged an employee of the British Embassy in Tehran with threatening national security, his lawyer said, escalating tensions with the European Union. Hossein Rassam, a senior political adviser of the British Embassy “has been accused of endangering national security,” lawyer Abdolsamad Khorramshi said by phone today in Tehran. Rassam is in detention, and it’s not clear when his trial will start, Khorramshi said.

- China needs to promote domestic consumption to make up for weak global demand because its economic recovery isn’t firm, a government researcher said. “Global demand won’t recover to the pre-crisis levels within two to three years,” Xia Bin, head of the financial institute at the State Council Development and Research Center, said today at a forum in the southern Chinese city of Shenzhen. The central bank should send a signal for stable money supply in the second half or “early next year” to guard against the risks of asset-price inflation, Xia said. “Wealth effects from stock and property investments can help consumption in the short term but it won’t last,” Liang Futao, a research manager at Changjiang Pension Insurance Co. in Shanghai, said by phone. “Rising asset prices can form a bubble, which will hurt the economy when it bursts.” China’s central bank Governor Zhou Xiaochuan said yesterday that boosting the nation’s consumer spending to redress global imbalances is “easier said than done.”

- North Korea test fired seven short- range missiles, two days after launching four rockets, spurring condemnations from the U.S., South Korea and Japan. The launches took place between 8 a.m. and 5:40 p.m. today, from Kitdaeryong in Kangwon province, the South’s Joint Chiefs of Staff said in statements.

- Vice President Joseph Biden said Iraqi officials are concerned that Iraq isn’t one of President Barack Obama’s top priorities as his administration deals with other pressing foreign policy issues. An Iraqi leader, who Biden didn’t identify, expressed concern that with U.S. attention focused on Afghanistan, Pakistan and North Korea, Iraq was moved to “the bottom of the shelf,” the vice president said, according to a pool report released yesterday.

- Vice President Joseph Biden told Iraqi leaders that the path to a secure peace lies in uniting ethnic and sectarian groups and said the U.S. might disengage from their country if it reverts to sustained violence.

- Vice President Joe Biden said Israel has a “sovereign right” to take military action to prevent Iran from developing nuclear weapons. Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, said separately that a military strike by any nation against Iran would be “destabilizing.” He also said a nuclear-armed Iran and military action against that country both “are really, really bad options.” Biden, in an interview with the ABC News program “This Week” taped in Iraq and broadcast today, said a U.S. offer to meet with Iran about its nuclear program remains “on the table” after protests there over disputed election results were subjected to a government crackdown.

- Vice President Joe Biden said the Obama administration “misread the economy” when it forecast unemployment would peak at 8 percent if Congress enacted a $787 billion fiscal stimulus.

- China doesn’t support the idea of creating a supranational reserve currency and expects the U.S. dollar to remain the main reserve currency for “many years to come,” Deputy Foreign Minister He Yafei told reporters in Rome. It was only “natural” that China has concerns about its U.S. dollar-denominated assets, he said. China appreciates the U.S. efforts to maintain the stability of the dollar, he said.

Wall Street Journal:

- When it was deciding where to build its new compact car, General Motors Corp. made a point of saying it would push politics aside and use strictly commercial criteria. So Tennessee's three top officials were astonished last month, in a meeting with GM, when they were told the first two criteria were "community impact" and "carbon footprint" -- or how the choice would affect unemployment rates and carbon-dioxide emissions. "Those didn't strike us as business criteria at all," said Tennessee Sen. Lamar Alexander, who was joined in the meeting by fellow Republican Sen. Bob Corker and the state's Democratic governor, Phil Bredesen. Those factors, Mr. Alexander said, "seemed odd for a company struggling to get back on its feet." On June 26, after a monthlong competition, GM tapped an existing factory in Orion, Mich., pushing aside competing plants in Spring Hill, Tenn., and Janesville, Wis. All the sites had merits, but the Michigan plant had additional attractions. It is embedded in a struggling state that is a Democratic stronghold. The Orion site, 35 miles from GM's Detroit headquarters, is also close to tens of thousands of current and former United Auto Workers union employees, whose pressure previously helped persuade GM to scrap plans to build the car overseas.

- The EPA Silences a Climate Skeptic. The professional penalty for offering a contrary view to elites like Al Gore is a smear campaign.

- Tilting at Windmill Jobs. The 'stimulus' promised a jobless peak of 8%; it's now 9.5%.

- The U.S., European Union and 12 of the world's largest nations plan to embrace "an aspirational goal" of reducing emissions of global-warming gases by 50% by 2050, according to a draft declaration by world leaders set for release next week in Italy. The draft, seen by The Wall Street Journal, sets up a framework for detailed negotiations on the issue ahead of a United Nations climate conference in December. But it leaves key areas in the climate-change debate in dispute.

- US Retailers Find New Ways To Fine-Tune Discounts.

- While debt markets are inching back to normal after last year’s credit crisis, they are far from there yet. And many companies’ bonds are trading at depressed prices due to worries they won’t be able to make their debt payments. To some professional investors, that spells bargains. Some new mutual funds are targeting opportunities in credit markets, particularly among higher-risk debt. Many established funds, meanwhile, are trying to do the same thing—although their strategies vary wildly.

- As speculation swirled about Gov. Sarah Palin's reasons for deciding to step down, some Republicans here said she was increasingly troubled by growing criticism in her home state since she returned from her run as vice-presidential nominee. Over recent months, her tenure has been marked by sparring with local bloggers and other citizen activists in the state, some of whom bombarded her office with public-records requests. In all, Gov. Palin has faced 16 ethics inquiries of one sort or another in Alaska since last year. All but one have since been resolved. Still, they appear to have weighed on the Republican governor in the days before her decision, announced Friday, to hand over the reins to Lt. Gov. Sean Parnell. Mr. Parnell said on "Fox News Sunday" that her decision was primarily prompted by her concern over $2 million a year the state has spent on records requests and the ethics inquiries.

- Ousted Honduran President Manuel Zelaya tried to fly to this Central American nation on Sunday to reclaim his post, accompanied by a small flotilla of other Latin leaders and journalists, in a move filled with political theater but also certain to raise tensions in Honduras's political crisis.

- Lawmakers return to the Capitol on Monday for a five-week blitz that will help determine the fate of President Barack Obama's agenda. The Senate will be occupied for much of the summer with confirmation hearings on Supreme Court nominee Sonia Sotomayor, beginning July 13, followed by a floor debate on her nomination. Democratic leaders also hope to push health plans through the House and Senate before their summer break begins Aug. 8.

- Best Buy Co., best known as a vendor of giant televisions, is veering in a new direction: selling green vehicles. America's largest consumer-electronics retailer by sales has quietly begun offering electric-powered scooters, bicycles and Segway Inc. transporters in 19 locations in California, Oregon and Washington.

CNBC.com:
- They have been reviled as the bad hats of Wall Street, nefarious traders who cashed in on the market collapse and, some insist, helped precipitate it. The Securities and Exchange Commission appears poised to reverse itself and reinstate rules that would make shorting stocks — that is, betting their prices will decline — somewhat more difficult. Whether the SEC will go far enough to satisfy the many critics of short-sellers is far from certain. Many banks, whose stocks came under attack last autumn, maintain that unfettered short-selling is dangerous. The shorts, their argument goes, helped bring down Bear Stearns and Lehman Brothers last year.

- Package delivery giant and U.S. economic bellwether FedEx(FDX) is seeing signs for a potential turnaround in the second half as production seemed to be picking up again, German magazine WirtschaftsWoche reported.

- The Washington Post's publisher apologized to readers Sunday for a plan to charge business leaders and lobbyists for intimate dinner discussions with government officials and the newspaper's journalists. A flier surfaced last week promoting a plan to charge $25,000 to sponsor one of a series of dinner parties that would include off-the-record conversations with Post journalists and access to Washington insiders. The series was canceled Thursday.

NY Times:

- The federal immigration agency sent American Apparel a written notice that it faced civil fines and would have to fire any workers confirmed to be unauthorized. The treatment of American Apparel, which has more than 5,600 factory employees in Los Angeles alone, is the most prominent demonstration of a new strategy by the Obama administration to curb the employment of illegal immigrants by focusing on employers who hire them.

- The extreme volatility that has gripped oil markets for the last 18 months has shown no signs of slowing down, with oil prices more than doubling since the beginning of the year despite an exceptionally weak economy. The instability of oil and gas prices is puzzling government officials and policy analysts, who fear it could jeopardize a global recovery. It is also hobbling businesses and consumers, who are already facing the effects of a stinging recession, as they try in vain to guess where prices will be a year from now — or even next month. These gyrations have rippled across the economy. The automakers General Motors and Chrysler have been forced into bankruptcy as customers shun their gas guzzlers. Airlines are on pace for another year of deep losses because of rising jet fuel costs. And households, already crimped by falling home prices, mounting job losses and credit pressures, are once more forced to monitor their discretionary spending as energy prices rise. While the movements in the oil markets have been similar to swings in most asset classes, including stocks and other commodities, the recent rise in oil prices is reprising the debate from last year over the role of investors — or speculators — in the commodity markets. Unlike last year, when the economy was still not in recession and demand for commodities was strong, the world today is mired in its worst slump in over half a century. The World Bank warned the recession would be deeper than previously thought and said any recovery next year would be subdued. The International Energy Agency held out the prospect that energy demand was unlikely to recover before 2014. Yet the indicators that would traditionally signal lower prices — like high oil inventories or OPEC’s large spare production capacity — do not seem to hold much weight today, analysts said.

- The memory chip business has destroyed many companies with its vicious price wars. But Micron Technology(MU), a veteran of previous battles, is hunkered down, betting that major cost-cutting and a new high-speed chip will help it survive this bloodbath.

- Landfills, coal beds and cattle feedlots all produce methane, which is often either flared — that is, burned off — or released into the atmosphere as a greenhouse gas. Prometheus Energy, a five-year-old company based in Redmond, Wash., has developed a technology to turn that waste methane into liquid natural gas. And the company this week raised $20 million from the Shell Technology Ventures Fund, a fund related to the petroleum company Royal Dutch Shell and Black River Asset Management, a subsidiary of the agriculture giant Cargill.

- An important group of religious leaders in Iran called the disputed presidential election and the new government illegitimate on Saturday, an act of defiance against the country’s supreme leader and the most public sign of a major split in the country’s clerical establishment. A statement by the group, the Association of Researchers and Teachers of Qum, represents a significant, if so far symbolic, setback for the government and especially the authority of the supreme leader, Ayatollah Ali Khamenei, whose word is supposed to be final. The government has tried to paint the opposition and its top presidential candidate, Mir Hussein Moussavi, as criminals and traitors, a strategy that now becomes more difficult.

- In the depths of the cold war, in 1983, a senior at Columbia University wrote in a campus newsmagazine, Sundial, about the vision of “a nuclear free world.” He railed against discussions of “first- versus second-strike capabilities” that “suit the military-industrial interests” with their “billion-dollar erector sets,” and agitated for the elimination of global arsenals holding tens of thousands of deadly warheads. The student was Barack Obama, and he was clearly trying to sort out his thoughts. In the conclusion, he denounced “the twisted logic of which we are a part today” and praised student efforts to realize “the possibility of a decent world.” But his article, “Breaking the War Mentality,” which only recently has been rediscovered, said little about how to achieve the utopian dream. Twenty-six years later, the author, in his new job as president of the United States, has begun pushing for new global rules, treaties and alliances that he insists can establish a nuclear-free world.

Washington Post:
- President Obama, strategizing yesterday with congressional leaders about health-care reform, complained that liberal advocacy groups ought to drop their attacks on Democratic lawmakers and devote their energy to promoting passage of comprehensive legislation. In a pre-holiday call with half a dozen top House and Senate Democrats, Obama expressed his concern over advertisements and online campaigns targeting moderate Democrats, whom they criticize for not being fully devoted to "true" health-care reform. For his part, the president vowed to use his strong approval rating with voters to continue making the case for sweeping reform, according to one congressional staffer with knowledge of the conversation. Obama also hinted that efforts are under way to discourage allies from future attacks on Democrats, according to the source, who did not have permission to speak on the record about the discussion. In recent weeks, liberal bloggers and grass-roots groups such as MoveOn.org, Democracy for America, Service Employees International Union and Progressive Change Campaign Committee have targeted Democratic Sens. Ben Nelson (Neb.), Mary Landrieu (La.), Arlen Specter (Pa.), Ron Wyden (Ore.) and Dianne Feinstein (Calif.). A fundraising video produced by Democracy for America suggests Landrieu is a "sellout" because she has received $1.6 million in campaign contributions from the health-care industry and has yet to endorse the concept of a government-run health insurance plan to compete against the private companies. The public-option concept, which Obama supports, has become a litmus test for many pro-reform activists who accuse the insurance industry of failing to deliver affordable, accessible care. Founded by former Vermont governor Howard Dean, Democracy for America argues that inclusion of a Medicare-style public option in health-care legislation is "non-negotiable." MoveOn, a Web-based political action committee that works to elect "progressive" leaders, intended to run commercials over the Fourth of July holiday criticizing Sen. Kay Hagan (D-N.C.) for her silence on the public option. But after she endorsed legislation crafted by Democratic colleagues on the Senate Committee on Health, Education, Labor and Pensions that includes that provision, the group dropped its plans. Health Care for American Now, a labor-based coalition of 1,000 groups, has organized a petition pressuring Feinstein to support legislation that includes a public option. Feinstein said in an interview last week that she does support health reform but has concerns about the cost of legislation and the impact on her home state.

CNNMoney.com:

- Survey: The iPhone is No. 1 in Japan.

Business Week:
- The iPhone was just the start. To offset slowing growth, AT&T(T) is seeking devices that will expand the way people use its wireless network.

Washington Times:

- Workers who lose their jobs if the pending climate change legislation becomes law could get a weekly paycheck for up to three years, subsidies to find new work and other generous benefits -- all courtesy of Uncle Sam -- under a little-noticed provision of the bill. Touted by its House Democratic authors as a jobs engine, the bill offers extraordinary compensation for those who would lose their paycheck as a consequence of its passage. Adversely affected employees in oil, coal and other fossil-fuel sector jobs would qualify for a weekly check worth 70 percent of their current salary for up to three years. In addition, they would get $1,500 for job-search assistance and $1,500 for moving expenses from the bill's "climate change worker adjustment assistance" program, which is expected to cost $4.2 billion from 2011 to 2019. The bill passed the House a week ago in a hotly contested 219-212 vote, with supporters arguing that a principal reason to support the bill is that it would create millions of new jobs. But analyses from the political left and right argue that potentially millions of jobs in industries tied to traditional fossil fuels would be lost and, at least initially, not enough "green" jobs would be created to replace them. Critics of the legislation seized on the unemployment compensation provision as proof that jobs would be lost.

The Detroit News:

- Volkswagen AG hopes to introduce its first electric cars on the market in 2013, the German automaker's chief executive said Friday.

Politico:

- With Sen. Chris Dodd (D-Conn.) facing an uphill battle to win reelection next year after a series of Washington scandals battered his popularity back home, President Obama and other national Democrats are sparing no effort to help him. Despite the scandals which left his ethics called into question, the three-decade Senate veteran is not trying to shake his Beltway image. Instead, Dodd is working furiously to show the impact of his long service by racking up big legislative accomplishments - including, potentially, a health care reform bill - before the midterm elections. And some of the national Democratic Party's biggest names are coming in to back him up.

- Former Secretary of State Colin Powell cautioned President Obama to slow down his ambitious agenda, out of concern for spiraling budget deficits. Obama is hoping to pass legislation that would overhaul the health care system and implement a cap-and-trade energy program -- in the face of a recession and significant budget deficits. "I think one of the cautions that has to be given to the president — and I've talked to some of his people about this — is that you can't have so many things on the table that you can't absorb it all. And we can't pay for it all," Powell said on CNN's "State of the Union." "I think the president, as he moves forward with his initiatives, has to start really taking a very, very hard look at what the cost of all this is," Powell said. "And how much additional bureaucracy and will it be effective bureaucracy be needed to make all of this happen." More Powell: "I never would have believed that we would have budgets that are running into the multi-trillions of dollars, and we are amassing a huge, huge national debt that, if we don't pay for in our lifetime, our kids and grandkids and great grandchildren will have to pay for it." Powell said he met with Obama "not too long ago" and said he holds a "very good" relationship with the president. Powell added that he hasn't decided whether he will be supporting Obama for re-election in 2012.

New York Post:

- Lee Ainslie of hedge fund Maverick Capital is joining the ranks of hedgies looking to soothe investors shaken by the recent spate of frauds by hiring an independent auditor to verify its funds' trading activities, The Post has learned. "In the post-Madoff world, investors are understandably seeking methods of independent verification of balances and pricing," the Dallas-based asset manager wrote in an investor letter that was obtained by The Post.

LA Times:

- A rare public protest in the northwestern Chinese city of Urumqi turned violent today as thousands of Uighurs took to the streets to vent grievances about discrimination. The official New China News Agency said rioters were "attacking passersby and setting fire to vehicles," but representatives for the Uighurs, a Muslim minority, described a peaceful demonstration that turned ugly because of government brutality. Witnesses reported that riot police arrived on the scene in armored personnel carriers, dispersing the crowd with water cannons and tear gas, and firing warning shots into the air. At least 300 people were reported to be arrested. There were unconfirmed reports of deaths and injuries.

World Health Organization:

- We are in phase 6 – that is, we are in the early days of the 2009 influenza pandemic. As we see today, with well over 100 countries reporting cases, once a fully fit pandemic virus emerges, its further international spread is unstoppable.

Reuters:

- Major countries should support the dollar as the key international currency, although emerging nations may discuss a new global reserve currency on the sidelines of the G8 summit next week, a Japanese official said on Friday. China has asked for debate on a new global reserve currency when leaders from the Group of Eight (G8) meet with the G5 emerging economies next week in Italy, G8 sources told Reuters. News of the Chinese request pushed the dollar down to a three-week low on Wednesday. But Japan thinks it would be difficult for another currency to replace the dollar as the world's reserve currency and it is against any move that would unnecessarily weaken the status of the dollar, said Yoichi Suzuki, director-general of the Japanese foreign ministry's economic affairs bureau. "It won't benefit any country to talk about ideas for a new global key currency, which would weaken the dollar," said Suzuki. An idea, which China's central bank has floated, that the International Monetary Fund's Special Drawing Right (SDR) could eventually displace the dollar as the principal reserve currency was unrealistic, he added.

- China’s central bank governor Zhou Xiaochuan said the country’s economic stimulus plan has led to some projects that are wasteful, raising the risk that investors face difficult repaying bank loans. Zhou's comments underscored government worry about risks from the torrent of spending helping to shore up economic growth. He said China should formally allow local governments to issue bonds to replace the current irregular practices. "As the front gate is still closed, many local governments had to launch fund-raising platforms, which makes it harder to control, and there may be big problems in future," he warned.

- Samsung Electronics Co Ltd, the world's top maker of memory chips and flat screen TVs, said on Monday it expected to post a consolidated operating profit of 2.2 trillion-2.6 trillion won ($1.74 billion-$2.05 billion) in the April-June quarter. Second-quarter consolidated sales are estimated at 31 trillion-33 trillion won, Samsung said in a filing to the Korea Exchange. Shares in Samsung Electronics were up 3.83 percent at 624,000 won as of 0014 GMT, outpacing the wider market's 0.15 percent rise.

- Did someone try to steal Goldman Sachs' secret sauce? While most in the United States were celebrating the Fourth of July holiday, a Russian immigrant living in New Jersey was being held on federal charges of stealing secret computer trading codes from a major New York-based financial institution. Authorities did not identify the firm, but sources say that institution is none other than Goldman Sachs(GS). The charges, if proven, are significant because the codes that the accused, Sergey Aleynikov, tried to steal are the secret sauce to Goldman's automated stock and commodities trading business. Federal authorities contend the computer codes and related-trading files that Aleynikov uploaded to a German-based website help this major financial institution generate millions of dollars in profits each year. The platform is one of the things that gives Goldman an advantage over the competition when it comes to the rapid-fire trading of stocks and commodities. The case against Aleynikov may explain why the New York Stock Exchange moved quickly last week to stop reporting program stock trading for its most active firms. Goldman was often at the top of the chart -- far ahead of its competitors. It's possible Goldman had asked the NYSE to stop reporting the number after it discovered that someone may have infiltrated the proprietary computer codes it uses. One question investors need to ask is whether this incident will have any impact on Goldman's second-quarter earnings. The alleged wrongdoing by Aleynikov took place at the beginning of June--although it's not clear if it had any material impact on automated trading.

Financial Times:

- Financially troubled shipowners could be facing a wave of ship seizures after two high-profile foreclosures suggested financiers’ and creditors’ patience was wearing thin. Seizures are expected to increase over the year as shipowners struggle to pay shipbuilders’ instalments due on new vessels. However, the extent of seizures might depend on whether a recovery in the rates earned by dry bulk ships, one of the most troubled sectors, is sustained.

- Beijing on Friday joined a growing clamor of complaint about US plans for a carbon tax on imports from countries without their own emission caps, warning it could set off a global trade war. The warning follows the passage of a cap-and-trade bill in the US House of Representatives last weekend, which contained tough provisions to impose carbon tariffs to ensure that American companies would not lose competitive advantage. A recent report by the World Trade Organization and the UN said such taxes could in theory be crafted to be compatible with WTO law, but it would be hard to prove they were not an illegal disguised restriction on international trade. “It has always been China’s position that the international society should fight climate change together, but the proposal of some developed countries to slap a carbon tariff on some imported products violates the WTO’s basic principles and is trade protectionism in the disguise of environmental protection,” said Yao Jian, spokesman for China’s ministry of commerce. Earlier this week, Jairam Ramesh, the Indian environment minister, described carbon tariffs as “pernicious” and flatly rejected the idea of negotiating climate change at the WTO. The bill now moves to the Senate, where it is likely to receive an even rougher ride from moderate Democrats concerned about imposing more costs on US businesses. Beijing’s comments reflect the tough initial negotiating stance China has taken for the Copenhagen talks in December aimed at working out a follow-up deal to Kyoto. China has rejected any emission caps for developing countries. It also wants developed nations to cut emissions to 40 per cent below 1990 levels by 2020 and pay for clean technology in developing countries.

- The boss of Steve Perkins, the broker at the heart of a rogue trading scandal that rocked oil markets this week, issued a bullish report suggesting prices could go higher only hours after Mr Perkins made the unauthorized trades that caused prices to spike. The disclosure raises further questions about internal controls at PVM Oil Associates, the world’s largest oil brokerage. The London-based firm, which revealed on Thursday it had lost $10m (€7.1m, £6.1m) as a result of trades by Mr Perkins, one of its senior brokers, said the trading report was sent to clients at 08.44 in London on Tuesday, and it did not discover the rogue trading until 10.10 that morning. In a widely read daily note, the brokerage told clients: “There’s some serious upside momentum building.” It added that “the upshot of all this is that higher numbers are likely, and we are already approaching recent highs on the crudes, which are the initial targets for this next leg higher”. Mr Perkins traded in the Brent futures market from his home using an internet-based access to the exchange at about 02.00 in the morning, one of the most illiquid times of the trading day. He amassed a huge position in Brent futures that pushed prices to $73.5 a barrel, the highest price so far this year.

- The strength of the euro is forcing European companies to step up cost-cutting to compete with rivals from the US and elsewhere amid fears that it could slow their recovery when demand picks up. Economists are concerned that, even when demand picks up, the strong currency will penalise European groups, many of them reliant on exports. “It is going to weigh on the recovery,” Julian Callow, chief European economist at Barclays Capital, said. “The aircraft industry is very much priced in dollars, so it hurts them – the motor industry, steel and chemicals as well. It is a problem.” Andrew Watt, senior researcher at the European Trade Union Institute, expressed concern for companies in Italy and Germany. “Where can they export to? What can they use to get out of the crisis? The real answer is that they can’t as the euro has risen against sterling and the dollar.”

- Bank of America(BAC) has overtaken UBS in the private banking league tables following its tie-up with Merrill Lynch. It is now the world’s largest wealth manager, overseeing $1,500bn in assets, according to a survey by Scorpio Partnership, a London-based market research group monitoring the wealth management sector.

- Gordon Brown will take a gloom-laden message to the G8 summit in Italy this week, saying there are “warning signs around the world” that the fledgling recovery is in peril. Among Mr Brown’s fears is a return of rising and volatile oil prices, a preoccupation shared by Nicolas Sarkozy, the French president, who will on Monday host a Franco-British summit in Evian. Mr Sarkozy has long argued for some form of international dialogue to reduce the volatility of oil prices. He intends to discuss French proposals for setting an agreed price guideline at the G8 summit. On a visit to Abu Dhabi in May, Mr Sarkozy called for agreement between producer and consumer countries on a “general price guideline to give to the market, I would say even a price range that would ensure the sustainability of investment but would not kill consumer economies”. The British prime minister is also worried about the poor state of some bank balance sheets, falling trade, protectionism and rising unemployment.

- The financial industry’s vaunted belief in trust and long-term relationships is being challenged by research showing that before the crisis US mortgage brokers fed loans of deteriorating quality to the banks they did most business with. By questioning the prevailing wisdom that dealing with well-known counterparties is more fruitful and less risky than venturing into new relationships, the academic study puts in doubt one of the banking sector’s most enduring beliefs. Whether in takeovers, capital markets deals or simple consumer loans, bankers often claim their guiding principle is “know your customer”, arguing that long-standing ties create a symbiotic relationship. But the study found that brokers – agents that connect borrowers with lenders for a fee – presented to banks mortgages of decreasing quality, partly because banks had grown to trust them and were less careful in monitoring performance. It also found that brokers produced lower-quality loans as their volume of loan origination for a bank grew and the loans worsened as the distance between the broker and a bank’s headquarters increased. The research, by Mark Garmaise, finance professor at UCLA Anderson management school, sheds light on one of the catalysts of the financial turmoil: the billions of dollars in broker-originated toxic loans on bank books.

TimesOnline:
- The head of Mossad, Israel’s overseas intelligence service, has assured Benjamin Netanyahu, its prime minister, that Saudi Arabia would turn a blind eye to Israeli jets flying over the kingdom during any future raid on Iran’s nuclear sites. “The Saudis have tacitly agreed to the Israeli air force flying through their airspace on a mission which is supposed to be in the common interests of both Israel and Saudi Arabia,” a diplomatic source said last week. Although the countries have no formal diplomatic relations, an Israeli defense source confirmed that Mossad maintained “working relations” with the Saudis.

- Health records could be transferred to Google(GOOG) or Microsoft(MSFT) under a Tory government, The Times has learnt.

Die Welt:

- More than two-thirds of Germans prefer the government cut subsidies and benefits rater than raise taxes to cope with the financial cost of the economic crisis, citing an Infratest Dimap survey. The poll found that 68% of those questioned said the government should reduce subsidy and benefit spending, while 18% said taxes should be increased. The preference for spending cuts over higher taxes stretched across supporters of all political parties.

NRC Handelsblad:

- Russia challenges some of NATO’s member states and that s a matter for the whole alliance, US ambassador to the North Atlantic Treaty Oraganization Ivo Daalder said. Russia’s action during the war in Georgia in August was “not acceptable” to any NATO state and the current situation in Georgia is “insufferable,” Daalder said.

Nikkei English News:
- Toyota Motor Corp. will start commercial production of plug-in hybrid cars in 2012, the first time such vehicles will be mass-produced.

Economic Daily News:

- Flat-panel display prices rose this month from late June as customers stocked up for the peak season in the third quarter, citing research by DisplaySearch LLC. Monitor prices climbed between $3 and $7 this month from late June, television-panel prices gained $5 to $15, and notebook-computer panel prices advanced $3 to $5.

Straits Times:

- SINGAPORE can expect unemployment to remain at current levels or to rise further, Manpower Minister Gan Kim Yong said on Friday. In remarks suggesting a turnaround is not imminent, he said that with the economic outlook still uncertain, the labor market 'will remain soft for next one to two quarters at least'.

Emirates Business 24/7:

- Arab states such as Saudi Arabia, Iraq and the UAE have 198 billion barrels of crude oil that have not been discovered or can’t be extracted with current technology, citing a report by the Organization of Arab Petroleum Exporting Countries. It put the total Arab extractable oil reserves at 672 billion barrels and gas at 54 tcm at the beginning of 2009 but said massive quantities are either undiscovered and untapped or inaccessible by present technology. The Persian Gulf and North African states also have 43 trillion cubic meters of untapped natural gas and 68.2 billion barrels of condensates still to be discovered or accessed. "Assuming an extraction rate of 35 per cent, the Arab oil deposits in place could reach 2,738 billion barrels. This means the oil quantities that cannot be extracted by present technology are around 1,809 billion barrels, which are nearly 645 billion barrels above the world's proven oil resources… these quantities, if they can be extracted, will meet the world needs for 60 years," it said.

Weekend Recommendations
Barron's:
- Made positive comments on (DNEX), (SCHW), (FL), (DBA), (PETM) and (MSFT).

- Made negative comments on (IMAX), (MIDD) and (CMP).

Citigroup:

- Reiterated Buy on (GLW), target $20.50.

Night Trading
Asian indices are -1.25% to +.25% on avg.

Asia Ex-Japan Inv Grade CDS Index +1.70%.
S&P 500 futures -.76%.
NASDAQ 100 futures -.85%.

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- None of note

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- None of note

Economic Releases

- The ISM Non-Manufacturing Index for June is estimated to rise to 46.0 versus 44.0 in May.

Other Potential Market Movers
- President Obama Visiting Russia could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and shipping stocks in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 75% net long heading into the week.

Posted by: Gary / 6:46 PM

Weekly Outlook

Click here for Wall St. Week Ahead by Reuters.

Click here for US Equity Preview for Monday by Bloomberg.

There are some economic reports of note and just a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – ISM Non-Manufacturing

Tues. – Weekly retail sales reports

Wed. – Weekly EIA energy inventory report, weekly MBA mortgage applications report, Consumer Credit

Thur. – Initial Jobless Claims, Wholesale Inventories, ICSC Chain Store Sales

Fri. – Trade Balance, Import Price Index, Univ. of Mich. Consumer Confidence

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. – None of note

Tues. – Ruby Tuesday(RT)

Wed. – Family Dollar(FDO), Pepsi Bottling(PBG), Alcoa(AA)

Thur. – Shaw Group(SGR)

Fri. – Progressive Corp.(PGR)

Other events that have market-moving potential this week include:

Mon. – President Obama Visiting Russia

Tue. – None of note

Wed. – G8 Annual Summit, the Fed’s Evans speaking, Morgan Stanley Deepwater Conference

Thur. – The Fed’s Duke speaking, (CTX) shareholders meeting, (CTX) shareholders meeting, (SMSC) analyst day

Fri. – (MRVL) shareholders meeting

BOTTOM LINE: I expect US stocks to finish the week modestly lower on rising financial sector pessimism, more shorting, profit-taking and increasing economic pessimism. My trading indicators are giving mixed signals and the Portfolio is 75% net long heading into the week.

Posted by: Gary / 9:59 AM

Saturday, July 04, 2009

Market Week in Review

S&P 500 896.42 -2.59%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Posted by: Gary / 1:01 AM

Friday, July 03, 2009

Weekly Scoreboard*

Indices
S&P 500 896.42 -2.59%
DJIA 8,280.74 -2.26%
NASDAQ 1,796.52 -1.80%
Russell 2000 497.21 -2.35%
Wilshire 5000 9,118.50 -2.29%
Russell 1000 Growth 401.97 -2.13%
Russell 1000 Value 451.38 -2.75%
Morgan Stanley Consumer 547.74 -2.02%
Morgan Stanley Cyclical 543.49 -2.02%
Morgan Stanley Technology 443.44 -1.58%
Transports 3,158.74 -3.14%
Utilities 350.69 -2.07%
MSCI Emerging Markets 32.11 +.89%

Sentiment/Internals
NYSE Cumulative A/D Line 34,222 +1.11%
Bloomberg New Highs-Lows Index -82 -18.84%
Bloomberg Crude Oil % Bulls 27.0 +28.0%
CFTC Oil Large Speculative Longs 201,463 unch.
Total Put/Call 1.05 +17.98%
OEX Put/Call 1.52 +12.59%
ISE Sentiment 148.0 +54.17%
NYSE Arms 3.54 +331.71%
Volatility(VIX) 27.95 +6.03%
G7 Currency Volatility (VXY) 13.28 -7.65%
Smart Money Flow Index 8,030.34 -1.22%
AAII % Bulls 37.84 4+35.14%
AAII % Bears 44.59 -8.63%

Futures Spot Prices
Crude Oil 65.63 –5.49%
Reformulated Gasoline 175.37 -6.68%
Natural Gas 3.60 -12.60%
Heating Oil 166.89 -6.76%
Gold 932.50 -.71%
Base Metals 150.40 -1.96%
Copper 226.45 -1.26%
Agriculture 302.97 -4.37%

Economy
10-year US Treasury Yield 3.50% -4 basis points

U.S. Sovereign Debt Credit Default Swap 36.0 -14.29%

10-year TIPS Spread 1.66% -3 basis points
TED Spread 41.0 -2 basis points
N. Amer. Investment Grade Credit Default Swap Index 137.63 -2.53%
Emerging Markets Credit Default Swap Index 388.61 -5.14%
Citi US Economic Surprise Index +35.80 -29.80%
Fed Fund Futures imply 76.0% chance of no change, 24.0% chance of 25 basis point cut on 8/12
Iraqi 2028 Govt Bonds 64.19 -.53%
4-Wk MA of Jobless Claims 615,300 -.40%
Average 30-year Mortgage Rate 5.32% -10 basis points
Weekly Mortgage Applications 444,800 -18.86%
Weekly Retail Sales -4.40%
Nationwide Gas $2.63/gallon -.03/gallon
US Cooling Demand Next 7 Days 7.0% below normal
ECRI Weekly Leading Economic Index 117.60 unch.
US Dollar Index 80.44 +.66%
Baltic Dry Index 3,672 -.84%
CRB Index 245.86 -2.17%

Best Performing Style
Mid-cap Value -2.12%

Worst Performing Style
Large-cap Value -2.75%

Leading Sectors
Semis +1.61%
Computer Hardware +.98%
Disk Drives +.54%
Restaurants -.46%
Education -.57%

Lagging Sectors
Construction -4.67%
Road & Rail -4.73%
Insurance -4.74%
Oil Service -6.60%
Coal -6.91%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Posted by: Gary / 4:10 PM

Thursday, July 02, 2009

Stocks Finish Sharply Lower, Weighed Down by Commodity, Transportation, Construction, Healthcare and REIT Shares

Evening Review
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In Play

Posted by: Gary / 4:03 PM

Stocks Sharply Lower into Final Hour on More Shorting, Profit-Taking, Rising Economic Fear, Increasing Financial Sector Pessimism

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Technology longs and Financial longs. I added to my (IWM/QQQQ) hedges, added to my (EEM) short and took profits in my (MS) long this morning, thus leaving the Portfolio 50% net long. The tone of the market is very negative as the advance/decline line is substantially lower, every sector is declining and volume is below average. Investor anxiety is high. Today’s overall market action is very bearish. The VIX is rising 6.56% and is high at 27.94. The ISE Sentiment Index is high at 162.0 and the total put/call is above average at 1.04. Finally, the NYSE Arms has been running high most of the day, hitting 2.48 at its intraday peak, and is currently 2.40. The Euro Financial Sector Credit Default Swap Index is rising .80% today to 105.60 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is jumping 5.76% to 137.0 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising .27% to 43 basis points. The TED spread is now down 421 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling 4.20% to 41.38 basis points. The Libor-OIS spread is rising 1.38% to 37 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 8 basis points to 1.66%, which is down 98 basis points since July 7th. The 3-month T-Bill is yielding .15%, which is down 2 basis points today. REIT, Healthcare and Commodity shares have been under significant pressure throughout the day. The (XLF) has weakened slowly throughout the day and is now trading at session lows. The AAII % Bulls rose to 37.84% this week, while the % Bears fell to 44.59%, which is a mild negative. A number of sectors are being turned back right near their 200-day moving averages. It is also a negative that the ISE Sentiment Index has been high throughout the day. On the positive side, a number of tech leaders are relatively firm and the SOX Index is just slightly lower. As well, the NYSE Arms has been running very high on low volume, which is a positive. Nikkei futures indicate a -136 open in Japan and DAX futures indicate an +5 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, increasing economic worries and rising financial sector pessimism.

Posted by: Gary / 2:58 PM

Today's Headlines

Bloomberg:

- U.S. Senator Mark Warner expressed concern that President Barack Obama’s proposed Consumer Financial Protection Agency, centerpiece of a rules overhaul, is “divorced” from markets and would be a “gotcha” enforcer. “Is this going to be some kind of poor cousin, located across town, that will always be struggling to have the resources, personnel and expertise?” Warner, a Democrat on the Senate Banking Committee, said yesterday in an interview with Bloomberg News. Another concern is that the agency, “divorced from the reality of the market and the reality of the financial institution, becomes so focused on a gotcha mentality that it overdoes,” Warner said.

- Senator Edward Kennedy’s health committee released a new health-care overhaul plan that would cover almost all Americans, in part by assessing fees on companies that don’t offer insurance, and cost almost $400 billion less than an earlier proposal. The plan, which includes a government-run insurance program as an alternative to private coverage, drew praise from President Barack Obama. Kennedy, a Massachusetts Democrat, and Senator Chris Dodd, a Connecticut Democrat, said in a letter to committee members the plan would cost $611.4 billion over 10 years, according to an analysis by the non-partisan Congressional Budget Office.

- Foreign direct investment in China faces “unprecedented difficulties” after falling for eight months, the longest stretch of declines this decade, Vice Commerce Minister Chen Jian said. The government will announce policies to stabilize investment “soon,” Chen pledged at a briefing in Beijing today. Multinationals have reduced spending as they grapple with the global crisis, adding to drags on growth in the world’s third-biggest economy after exports collapsed. Direct investment in China slid 17.8 percent to $6.38 billion in May from a year earlier. Foreign-invested businesses account for 30 percent of industrial output, 55 percent of trade and 11 percent of urban jobs, according to the commerce ministry.

- Grosvenor Group Ltd., the real-estate company of Britain’s third-wealthiest man, said commercial- property prices in Spain need to fall by as much as 40 percent before it will consider investing there again.

- Ireland had its top credit rating lowered one step by Moody’s Investors Service, which cited the country’s rising debt burden and a “sudden and brutal economic and financial adjustment.”

- The Treasury will hold four auctions next week for the first time to sell $73 billion of notes, bonds and inflation-protected securities as the U.S. accelerates debt sales to finance a record budget deficit. The auctions represent the first time the government will sell three so-called coupon issues and a TIPS maturity in a single week since the Treasury started issuing securities regularly in 1976.

- Boeing Co.(BA), which indefinitely delayed its new 787 Dreamliner last week to reinforce the wing section, said it lost orders for 73 of the jets this year after Qantas Airways Ltd. dropped 15 planned purchases last week.

- North Korea fired four short-range missiles off its eastern coast today in defiance of United Nations sanctions imposed after a nuclear test, South Korea’s military and a U.S. official said. The communist state launched the devices from South Hamgyong province at 5:20 p.m., 6 p.m., 7:50 p.m. and 9:20 p.m. local time, said an official at South Korea’s Joint Chiefs of Staff who declined to be identified for security reasons.

- Security officials raised the terror threat in Germany amid concerns terrorists may seek to influence the outcome of Sept. 27 national elections, Deputy Interior Minister August Hanning said. Islamist terrorists may target Germany because of its contribution to NATO operations against Taliban insurgents in Afghanistan, Hanning told reporters in Berlin today.

- Och-Ziff Capital Management Group LLC lost about 3.7 percent of the money it manages in June because of investor withdrawals from its hedge funds. Assets under management declined $800 million in the month to $20.7 billion, the New York-based company said today in a filing with the U.S. Securities and Exchange Commission. Investors had withdrawn a record $5.1 billion in the first quarter, when rival hedge funds restricted redemptions.

- PVM Oil Futures Ltd., a unit of the world’s biggest broker of over-the-counter oil derivatives, said a rogue trader lost almost $10 million. The trades may have caused London oil prices to jump almost $2 a barrel to an eight-month high in the early hours of June 30, according to exchange data. “Commodities trading, together with futures and options, is under quite a lot of scrutiny,” Jones said. “We would expect the regulated exchanges, including ICE, to have adequate systems and controls” against possible rogue trading.

- Mortgage rates in the U.S. fell this week, easing concern that a Federal Reserve plan to lower the cost of home loans had lost momentum. The average 30-year rate dropped to 5.32 percent from 5.42 percent, mortgage buyer Freddie Mac of McLean, Virginia, said today in a statement. The 15-year rate was 4.77 percent. “We’re back to where we were a month ago,” said Donald Rissmiller, chief economist at New York-based Strategas Research Partners.

- The cost of delivering Middle East crude to Asia, the world’s busiest route for supertankers, fell for a sixth session in London amid a lack of demand for vessels. “Owners are struggling to maintain rates,” Nikos Varvaropoulos, an official at Optima Shipbrokers Ltd. in Athens, said today. “Unless we see some cargoes, I do not think that rates can be maintained.”

- A benchmark gauge of corporate credit risk in the U.S. rose for the first time in four days after a government report showed employers cut more jobs last month than economists were estimating. Credit-default swaps on the Markit CDX North America Investment-Grade Index, linked to 125 companies in the U.S. and Canada, increased 7.5 basis points to a mid-price of 138 basis points as of 11:25 a.m. in New York, according to Barclays Capital.

- Crude oil fell and gasoline slipped to a five-week low on a report showing the U.S. unemployment rate rose last month, a signal that fuel demand in the world’s largest energy-consuming country will be slow to rebound. Oil dropped more than $2 a barrel after the Labor Department said that employers cut 467,000 jobs in June. The jobless rate jumped to 9.5 percent, the highest since 1983, from 9.4 percent. U.S. fuel supplies increased last week by more than analysts forecast. Kuwaiti Oil Minister Sheikh Ahmed al-Sabah said oil prices above $100 would fuel another recession, and he hopes prices won’t increase to that level this year. The group increased output for a third month in June, a Bloomberg News survey showed. Members pumped an average 28.23 million barrels a day last month, up 55,000 from May. U.S. gasoline stockpiles increased 2.33 million barrels to 211.2 million in the week ended June 26, the Energy Department said in a report yesterday. Inventories of distillate fuel, a category that includes diesel and heating oil, climbed 2.9 million barrels to 155 million, the highest since 1987. Total U.S. daily fuel demand in the four weeks ended June 26 was down 5.8 percent from a year earlier, the Energy Department said. Distillate-fuel demand over the period fell 9.4 percent to 3.4 million barrels a day.

- The euro fell against the dollar after the European Central Bank kept its benchmark interest rate at a record low. ECB President Jean-Claude Trichet will discuss the decision at a press conference at 2.30 p.m. in Luxembourg. The dollar was also buoyed after a Chinese Foreign Ministry official said he was “not aware” of a plan to discuss a new reserve currency at next week’s Group of Eight meeting. Unemployment in the 16-member euro region rose to the highest in a decade in May, the European Union statistics office in Luxembourg said today. Spanish unemployment rose to 18.7 percent, the highest in the EU, the report showed.

- Soybeans fell for the fifth time in six sessions on speculation that demand from oilseed processors is dropping. Corn futures also declined, heading for the biggest weekly drop in seven months. “During the first half of the week, corn was hammered by the acreage report and the last half by the reversal in crude prices,” Holaday said. “Oil’s made major reversals, and that’s going to weigh on corn.

- U.S. consumers made 675,351 bankruptcy filings in the first half, a 36.5 percent increase from a year ago, according to the American Bankruptcy Institute. June filings by consumers totaled 116,365, up 40.6 percent from the same period in 2008, the ABI said in a release. The monthly rate of consumer filings slowed, however, declining by 6.8 percent from May 2009.

- The Federal Deposit Insurance Corp. recommended private-equity firms that buy failed banks hold the lenders for three years, double the length imposed in the latest transaction, aiming to prevent from “flipping” the investment for a short-term profit. The new rule was among a half-dozen guidelines announced by the FDIC in Washington today to address congressional concern over the role played by buyout firms such as Blackstone Group LP and Carlyle Group in the banking industry. The changes would include requiring buyers to be well-capitalized for three years and to maintain a Tier 1 capital ratio of at least 15 percent.

- Barclays Capital recommended clients sell gasoline futures after prices broke below a “bearish continuation flag” pattern. Gasoline “looks particularly vulnerable” and “could well overshoot conventional downside targets in the weeks ahead,” Barclays analysts including NY-based MacNeil Curry said today.

Wall Street Journal:

- The board of the Federal Reserve Bank of New York is packed with powerful executives. But the selection process leading up to January's promotion of William Dudley to president underscored the lack of clout among the Fed's regional directors as the central bank navigated the crisis. Mr. Dudley, a 56-year-old former Goldman Sachs Group Inc. economist who ran the New York Fed's markets division, got the top job after a two-month search, succeeding new Treasury Secretary Timothy Geithner. Behind the scenes, the hiring process triggered concerns with some New York Fed directors, including General Electric Co. Chief Executive Jeff Immelt and PepsiCo Inc. CEO Indra Nooyi, according to people familiar with the situation. One reason: Mr. Geithner took an active role in recommending his successor, lobbying hard for Mr. Dudley and against other candidates, attendees said. It isn't unusual for outgoing Fed presidents to provide such input. But Mr. Dudley's case is different, some observers said, because Mr. Geithner was a political nominee at the time. Injecting a White House appointee's views into the process, they suggested, may have meddled. "The right thing for the Treasury secretary to do is to allow the central bank to be independent and not have a say in who gets chosen," said Allan Meltzer, a Fed historian.

- Venture-capital firms had their quietest six months since the turn of the millennium as they struggled to sell or list their European portfolio companies. There have been no initial public offerings of venture capital-backed European companies since the third quarter of last year, according to preliminary data from Dow Jones VentureSource.

- Many American supporters of Israel who voted for Barack Obama now suspect they may have been victims of a bait and switch. Jewish Americans voted overwhelmingly for Mr. Obama over John McCain in part because the Obama campaign went to great lengths to assure these voters that a President Obama would be supportive of Israel. This despite his friendships with rabidly anti-Israel characters like Rev. Jeremiah Wright and historian Rashid Khalidi.

- General Motors can survive bankruptcy far more easily than it can survive President Barack Obama's ambitious fuel economy standards, which mandate that all new vehicles average 35.5 miles per gallon by 2016. The actual Corporate Average Fuel Economy (CAFE) results will depend on the mixture of fuel-thrifty and fuel-thirsty vehicles consumers choose to buy from each manufacturer -- not on what producers hope to sell. That means only those companies most successful in selling the smallest cars with the smallest engines will, in the future, be allowed to sell the more profitable larger pickups and SUVs and more powerful luxury and sports cars.

CNBC:

- California's controller will start paying many of the state's bills with IOUs as soon as Thursday after lawmakers failed to close the state's worsening budget deficit, adding a new measure of indignity to a state sinking deeper into dysfunction.

- The oil market is over-supplied, said Joe Petrowski, the CEO of Gulf Oil on Thursday. As oil stocks approach a 29-year high, the fundamental supply-side of the market has never been more bearish, he said. "It will be almost impossible for gasoline prices to go up," he said.

NY Times:

- Manhattan apartment prices fell sharply during the second quarter of 2009, as the limited number of deals struck during the darkest months of the economic downturn began to close, according to a series of market reports released Wednesday. The number of closings fell more than 50 percent, and prices in some categories were reported down as much as 25 percent, compared with the same quarter in 2008. Sale prices were also down from those reported in the first quarter of 2009. One report, by Brown Harris Stevens and Halstead Property, put the average price of a Manhattan apartment in the second quarter at $1.26 million, a decline of 24 percent from the same period in 2008, and 16 percent below the previous quarter. It put the median sale price at $795,000, 19 percent below the figure in the first quarter of 2008.

Business Insider:

- Ron Insana’s New Newsletter Has Some Shady Numbers.

Rassmussen:

- The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 33% of the nation's voters now Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-five percent (35%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -2. This is the third straight day the Approval Index has been below zero (see trends).

Politico:

- Washington Post publisher Katharine Weymouth said today she was cancelling plans for an exclusive "salon" at her home where for as much as $250,000, the Post offered lobbyists and association executives off-the-record access to "those powerful few" — Obama administration officials, members of Congress, and even the paper’s own reporters and editors. The astonishing offer was detailed in a flier circulated Wednesday to a health care lobbyist, who provided it to a reporter because the lobbyist said he felt it was a conflict for the paper to charge for access to, as the flier says, its “health care reporting and editorial staff."

eFinancialCareers:

- Hedge funds are suddenly doing ok: returns are up, redemptions are down and they’ve had the best start to the year in a decade. Unfortunately this does not mean that they will be paying large bonuses. Following closely on from last year’s disastrous performance, many hedge funds are still below the high water mark at which they can charge the 20% performance fees that become bonuses. Deprived of these, they’re having to make do with 2% management fees, which are themselves being compressed to 1.5%. None of this is good news for people hoping to get rich at established funds. “A lot of people are just deciding to give up and sit on beaches,” says John Godden at hedge fund consultancy IGS Group. Examples of such behavior apparently include Julian Barnett, who left hedge fund Polar Capital earlier this year for ‘family reasons.’ Instead of hanging on until the high water mark is reached and performance fees are available again, junior traders are leaving established funds and joining new set-ups without high watermark issues. “Some managers are calculating that it could take 1-2 years to recover and they’re therefore better off jumping ship and setting up at a new fund that can afford to pay them,” says Christopher Miller, chief executive of Allenbridge HedgeInfo.

Washington Times:

- U.S. missile defenses are prepared to try to knock down the last stage of a Taepodong-2 missile that North Korea is expected soon to launch if sensors detect the weapon threatens U.S. territory, the commander of the U.S. Northern Command told The Washington Times.

Financial Times:
- Mr Trichet was cautious about eurozone growth prospects, saying activity would “remain weak” for the rest of this year even if the rate of decline had slowed since the start of the year. But he warned of a “stronger or more protracted negative feedback loop between the real economy and the turmoil in financial markets”. Although the ECB sees current negative eurozone inflation rates as temporary, it expects price pressures to remain “dampened”. Concern has intensified about the threat to the eurozone’s economic recovery of a weakened banking system, with industrial lobby groups urging more forceful measures to help businesses – including the purchase of corporate debt.

ET Now:

- India’s inflation for the week ended June 20 was seen at -1.4%.

Emirates Business 24/7:
- UAE banks have exposure of more than $3 billion (Dh11bn) through syndicated and bilateral transactions to the two embattled Saudi groups – Saad and Algosaibi – and their banking outfits, according to people involved in these deals. The Saudi groups have raised finance through at least eight syndications in the past four years – three by Saad Group, two each by Awal Bank and Algosaibi Group and one by The International Banking Corporation (TIBC), they said. Other financial institutions with exposure through syndicated and bilateral financing deals include Arab and global lenders. "I think many banks may not have bothered to verify their aggregate exposure built up to these groups over the past few years," said a banking analyst.

- Dubai Investments Real Estate Company (DIRC), the real estate arm of Dubai Investments, is giving a 100-per cent refund to its investors on the Mirdiff Hills project, which it has put on hold due to unavailability of mortgage financing. The Mirdiff Hills project, located in Mirdif, is a Dh2 billion mixed-use development comprising 680 apartments, 380 offices and 129 retail outlets. The project was launched in July last year with completion scheduled for 2010. "We have put the Mirdiff Hills project on hold because of a lack of availability of mortgage financing on the project. Investors have got back to us saying they cannot pay up for their units," Khaled Kalban, Managing Director and CEO, Dubai Investments, told Emirates Business in an exclusive interview.

Haaretz.com:

- The U.S. administration has not been successful in securing commitments from Arab countries to take steps toward normalizing relations with Israel, a senior source in Jerusalem said Wednesday. The source said U.S. President Barack Obama's recent meeting with King Abdullah of Saudi Arabia did not produce a commitment to encourage the other Arab states to begin normalization. "In such a situation, the Americans can't continue demanding gestures only from Israel, such as the demand that Israel freeze settlement construction," the source said.

Posted by: Gary / 1:19 PM

Bear Radar

Style Underperformer:
Small-cap Value (-3.18%)

Sector Underperformers:
REITs (-4.30%), Oil Service (-4.16%) and HMOs (-3.72%)

Stocks Falling on Unusual Volume:
MANH, MBT, HES, TSO, GSK, ILMN, EZCH, UBNK, SEPR, GXDX, AFAM, FUQI, PLCE, VSAT, BOOM, BCPC, BIIB, USTR, GKSR, FWRD, CSGP, HRBN, TOWN, CYBX, NJ, NRG, KYN, IEZ, AYI, ASI and RPV

Stocks With Unusual Put Option Activity:
1) USU 2) MOT 3) FTO 4) HOT 5) ETN

Posted by: Gary / 1:13 PM

Bull Radar

Style Outperformer:
Large-cap Growth (-2.0%)

Sector Outperformers:
Semis (-.52%), Banks (-.80%) and Education (-.94%)

Stocks Rising on Unusual Volume:
POT, QSFT, ADTN, IPCR, ENER, OSK, MSM and VAR

Stocks With Unusual Call Option Activity:
1) SEPR 2) AU 3) MI 4) HOT 5) ELN

Posted by: Gary / 11:08 AM

Posted by: Gary / 10:35 AM

Wednesday, July 01, 2009

Thursday Watch

Late-Night Headlines
Bloomberg:

- U.S. retail gasoline prices have peaked and won’t go higher during this year’s summer driving season, AAA said. The average price for regular gasoline won’t rise above the June 21 high of $2.693 a gallon, Geoff Sundstrom, a spokesman for AAA said today in an telephone interview. AAA, the nation’s biggest motoring organization, estimated after the Memorial Day holiday in May that summer prices would reach $2.75 a gallon. “When you see consumer confidence sliding again and no improvement on the job front, barring any major geopolitical or catastrophic event like a hurricane, it looks like prices have topped,” Sundstrom said. Sundstrom added that average prices this summer may fall as low as $2.50 a gallon.

- Iran’s state-run Fars news agency said a Newsweek magazine reporter who was detained last month has “confessed” that Western media helped stir unrest following the disputed June 12 presidential election. Newsweek said today it “strongly disputes” the allegations against Maziar Bahari and called for his immediate release. Iranian officials arrested Bahari, a Tehran-based journalist of Iranian-Canadian citizenship, about two weeks ago as the Iranian capital was rocked by daily protests over the officially declared victory of President Mahmoud Ahmadinejad.

- Officials made available $4 billion in the first release of funds under a $7.2 billion U.S. program to expand high-speed Internet service, Vice President Joe Biden said today. The program is part of the $787 billion stimulus package Congress passed in February.

- As General Motors Corp. prepares to sell its best assets to a streamlined new entity, the worst of what it owns will be auctioned off in bankruptcy court, including contaminated factory sites, parking lots in Flint, Michigan, and a nine-hole golf course in New Jersey.

- The European Central Bank will keep interest rates at a record low for more than a year and may yet need to expand its use of unconventional tools as it battles the worst recession since World War II, economists said.

- The U.S. doesn’t see any indication North Korea is poised to test-launch a long-range ballistic missile capable of landing near the Hawaiian Islands, according to four government officials. The officials, who are privy to information about North Korean launch preparations, said there are no signs of the work necessary to launch a long-range missile during the U.S. July 4 Independence Day celebration. The officials don’t rule out the firing of short- and medium-range missiles capable of reaching Japanese waters.

- Dow Chemical Co.(DOW), the largest U.S. chemical maker, is permanently closing three Louisiana factories that make ethylene and derivatives to meet cost-reduction targets following the acquisition of Rohm & Haas Co.

Wall Street Journal:

- President Barack Obama, after picking fights with rivals over health care during the election campaign, is signaling flexibility on many of his previous stances as he tries to put a health-care deal together. As a candidate, Mr. Obama criticized Democratic opponent Hillary Clinton for proposing that all Americans be required to get health insurance. Now he says he is open to the idea. He ran some 47,000 TV ads criticizing Republican candidate John McCain for wanting to tax employee health benefits and cut Medicare spending. Mr. Obama has now signaled openness to taxing such benefits, and has proposed his own Medicare cuts -- in both cases on a smaller scale. In addition, the White House isn't ruling out the possibility that families earning less than $250,000 a year might see higher taxes if they have generous health benefits that become subject to new taxes. During the campaign, Mr. Obama had vowed not to raise taxes on any families earning less than $250,000.

- Barclays PLC (BCS) plans to hire up to 200 high-end investment representatives over the next four years in a move to expand its new wealth management foothold in the Americas. Following the collapse of Lehman Brothers Holdings Inc. (LEHMQ) into bankruptcy, Barclays acquired Lehman's private investment management unit to gain a presence in the coveted U.S. market. Since then, the U.K. bank has recruited roughly 50 representatives - the firm's name for financial advisers. Nearly half of the new additions were top producers, who had an average annual production of roughly $2.9 million and managed more than $350 million in client assets.

- After several years of heavy losses, Bill Miller's diehard investors are breathing a tentative sigh of relief. The famous Legg Mason value investor, who stumbled so badly during the stock market turmoil of the past few years, is off to a much more promising 2009. Indeed, it's been the best first half for his mutual funds since 2003, when his 15-year streak of beating the Standard & Poor's 500 still had 2 1/2 more years to run. Mr. Miller's flagship Legg Mason Value Trust is up 15% through the halfway mark, about two percentage points ahead of the U.S. market overall. And his smaller, more flexible, and more volatile Legg Mason Opportunity Trust is up 33%.

- Business is back on Wall Street. If the good times continue to roll, lofty pay packages may be set for a comeback as well. Based on analysts' earnings forecasts for 2009, Goldman Sachs Group Inc.(GS) is on track to pay out as much as $20 billion this year, or about $700,000 per employee. That would be nearly double the firm's $363,000 average last year, and slightly higher than the $661,000 for the average Goldman employee in fiscal 2007, according to analyst estimates reviewed by The Wall Street Journal. the comeback in compensation so far this year shows how hard it is for Wall Street to break its old habits. Repaying last year's capital infusions from the government freed Goldman, Morgan Stanley and other big financial firms from curbs on compensation.

- Polo Ralph Lauren(RL) has reached a deal with the U.S. Olympic Committee to dress the American team at the Games in Vancouver this winter and in London in 2012, betting a blend of sports and patriotism will help propel its brand amid a falloff in consumer spending.

- The U.S. military launched a major operation in southern Afghanistan, an early test of the Obama administration's new strategy for beating back the resurgent Taliban and stabilizing the country in advance of this summer's presidential elections. Operation Khanjar, or "strike of the sword," began shortly after 1 a.m. local time when close to 4,000 Marines, backed by about 700 Afghan security personnel, moved by air and ground into villages in the Helmand River Valley, a major opium-producing region and Taliban stronghold. U.S. commanders said the forces would build an array of small patrol bases designed to forge closer ties with local people and better protect them from militants, borrowing an approach used in Iraq that is central to the administration's new counterinsurgency strategy for Afghanistan.

- The Obama administration announced a crackdown Wednesday on hundreds of companies suspected of employing illegal immigrants, signaling a shift in strategy: going after employers instead of workers. U.S. Immigration and Customs Enforcement, a unit of the Department of Homeland Security, said that it had begun an audit of 652 U.S. companies to verify whether their employees were eligible to work. Violations could lead to fines, as well as civil and criminal charges.

MarketWatch.com:
- Big pension and endowment funds that invest in commodities by modeling their exposure on popular indexes have increased their purchases of crude rapidly in recent months, an analysis of regulatory data shows. This stake has likely contributed to the doubling in oil prices this year, a swift advance that has brought the role of financial speculators back onto the radar of policy-makers -- some of whom say financial investments in commodities should be curbed. Passive investors increased their crude-oil holdings to the equivalent of more than 600 million barrels in June, up more than 30% from the end of last year, a MarketWatch analysis of Commodity Futures Trading Commission data and the most popular commodities indexes shows. The correlation between rising oil prices and increased index investment has reawakened calls to restrict the ability of financial investors to take large stakes in commodities. Unlike in past decades, though, shadowy hedge funds and secretive financiers aren't getting the major blame. Instead, it's long-term investors like California's biggest public-employee pension fund and Harvard University's endowment that have gradually widened to include assets beside stocks and bonds. "Institutional investors such as country funds and pension funds are basically pushing prices where they shouldn't go," said Steve Briese, author of "The Commitments of Traders Bible." On Tuesday, Rep. Peter DeFazio, D-Ore., introduced a bill that would give the CFTC new authority to prohibit "excessive speculation." CalPERS, the biggest U.S. public pension fund, now has about $600 million in commodities that track the 24-component S&P GSCI commodity index, one of the two most popular commodities indexes. Funds like CalPERS typically get their exposure to commodities by engaging in trades with big derivatives dealers such as J.P Morgan Chase & Co.(JPM) and Goldman Sachs Group(GS) . Trading between funds and dealers takes place over the counter and doesn't get reported to the futures regulator. At the peak of oil prices last year, index fund holdings in oil had surpassed 700 million barrels. They then slid to near 400 million barrels in December. Index holdings in oil have since rebounded. This analysis also shows that the dollar value of total commodity index investment rose more than 60% this year to above $140 billion. Mark Gilman, an analyst at research firm Benchmark Co., said the current oil-market environment has a "strong and almost eerie resemblance" to oil's boom during the first half of last year. He anticipates oil could fall again to the $40 to $50 level. "Recent history is likely to repeat itself with a sharp price decline," Gilman added.

CNBC.com:
- Google(GOOG) will to stick to its core business and continue developing technologies to monetize search, CEO Eric Schmidt told CNBC on Wednesday. Specifically, the company plans to expand its advertising expertise to television and mobile phones, which will serve as "primary drivers" of revenue over the next few years, Schmidt said.

NY Times:

- Last year, after the financial crisis, Morgan Stanley(MS) made a decision that its biggest rivals avoided: burned by the crisis, it would take far fewer risks in its trading. That decision is costing it — at least for now. Unlike earnings at Goldman Sachs and JPMorgan Chase, which quickly returned to profitability by taking on risk in trading for their customers, Morgan Stanley’s earnings from those operations are predicted to be less in the second quarter. As a result, these profits will not be high enough to offset some unusual charges and expenses, and Morgan Stanley is expected to post a loss for the quarter, while its Wall Street rivals post robust quarterly profits.

IBD:

- Cerner Corp. (CERN) has been enjoying strong vital signs for most of the decade, especially since recovering from a case of the blahs in 2003.

Politico:

- In the end, there’s only one person who really matters when it comes to getting a health care overhaul done this year – President Barack Obama – and he’s been maddeningly vague about what he can live with in a plan. So as Obama heads to Virginia for a health care town hall meeting Wednesday, POLITICO did a little imaginary spelunking in the caves of the presidential mind and came up with this take on what Obama might really be thinking when it comes to health care.

Rasmussen:

- Fifty-six percent (56%) of Americans say they are not willing to pay more in taxes and utility costs to generate cleaner energy and fight global warming. A new Rasmussen Reports national telephone survey, taken since the climate change bill was passed on Friday, finds that 21% of Americans are willing to pay $100 more per year for cleaner energy and to counter global warming. Only 14% are willing to pay more than that amount.

Vanity Fair:

- For years, administrators at Harvard University could throw money at anything that tickled their fancy. A new medical school building for $260 million? Sure. A massive, Robert A.M. Stern—designed addition to Harvard Law School? No problem. One of the most sweeping financial aid initiatives ever undertaken? Consider it done. Of course, that was before the money dried up. Now, Vanity Fair’s Nina Munk finds America’s oldest university suddenly at risk of not being able to keep the lights on. Over the past year, Harvard’s endowment has collapsed (it lost $8 billion between last July and October), its fundraising has declined, and its construction cranes have been idled. Gripped by the worst economic crisis in its history, Harvard is in trouble, and no one can decide who’s to blame.

Reuters:

- Many hedge fund investors burned by last year's market meltdown will likely demand a system of checks and balances in which outsiders keep a closer watch over assets, data released on Wednesday show. Pension funds, endowments and wealthy investors that have long funneled money into loosely regulated hedge funds will want to see more data detailing how their investments are valued and priced, researchers at State Street Corp found. One problem last year was that many hedge funds invested in illiquid securities where they were unable to exit quickly when investors asked for their money back. Many investors will also begin insisting on having outsiders such as State Street, the world's second-largest administrator for hedge funds, review positions.

- Auto seating supplier Lear Corp said on Wednesday it would file for Chapter 11 in a reorganization supported by key secured lenders and bondholders and had obtained $500 million in bankruptcy financing.

- Vice Foreign Minister He Yafei said on Thursday he had not heard about reports that China had requested a debate about global reserve currencies. Asked about the matter by a reporter during a news briefing, He said, "I have not heard that China has this request".

Financial Times:

- Governments around the world have continued to push up trade barriers in spite of high-profile pledges at the G20 summit and other forums to resist protectionism, according to a World Trade Organization report to be published on Thursday. Over the past three months, the WTO recorded 83 trade-restricting measures undertaken by 24 countries and the European Union – more than double the number of trade-liberalizing measures enacted during the same period. However, the report noted that the worst abuses had largely been contained.

TimesOnline:

- Long arm of the US taxman must be resisted.

Late Buy/Sell Recommendations

Deutsche Bank:

- Rated (CSCO) Buy.

Night Trading
Asian Indices are -.25% to +1.0% on average.

Asia Ex-Japan Inv Grade CDS Index +2.26%.
S&P 500 futures -.16%.
NASDAQ 100 futures -.19%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Global Commentary
WSJ Intl Markets Performance
Commodity Futures
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (AYI)/.57

Economic Releases

8:30 am EST

- The Change in Non-farm Payrolls for June is estimated at -365K versus -345K in May.

- The Unemployment Rate for June is estimated to rise to 9.6% versus 9.4% in May.

- Average Hourly Earnings for June are estimated to rise .1% versus a .1% gain in May.

- Initial Jobless Claims for last week are estimated to fall to 615K versus 627K the prior week.

- Continuing Claims are estimated to rise to 6740K versus 6738K prior.

10:00 am EST

- Factory Orders for May are estimated to rise .9% versus a .7% gain in April.

Upcoming Splits
- None of note

Other Potential Market Movers
- The (DDUP) shareholders meeting could also impact trading today.

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

Posted by: Gary / 9:17 PM

Stocks Finish Higher, Boosted by Restaurant, Hospital, Airline, HMO and Networking Shares

Posted by: Gary / 4:18 PM

Stocks Higher into Final Hour on Lower Energy Prices, Stable Long-Term Rates

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs and Defense longs. I added (IWM/QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is below average. Investor anxiety is high. Today’s overall market action is mildly bullish. The VIX is falling 1.56% and is high at 25.94. The ISE Sentiment Index is below average at 125.0 and the total put/call is slightly below average at .78. Finally, the NYSE Arms has been running above average most of the day, hitting 1.34 at its intraday peak, and is currently 1.13. The Euro Financial Sector Credit Default Swap Index is falling 1.51% today to 104.50 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is falling 2.2% to 129.54 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising 1.12% to 42 basis points. The TED spread is now down 422 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 9.46% to 43.38 basis points. The Libor-OIS spread is falling 4.46% to 36 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 4 basis points to 1.74%, which is down 90 basis points since July 7th. The 3-month T-Bill is yielding .17%, which is unch. today. The Banks feel a bit “heavy” today and a number of market-leading stocks are lower despite gains in the major averages. Despite a weaker US dollar, larger-than-expected US inventory decline, Iran concerns and a better-than-expected PMI report from China, oil has reversed lower again. On the positive side, small-caps are outperforming substantially and the US sovereign debt credit default swap is falling another 12.5% to 35.0 basis points, which is the lowest since May 13^th. Transportation shares are also relatively strong as they try and penetrate the 200-day moving average. Nikkei futures indicate an +135 open in Japan and DAX futures indicate a -13 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, increasing economic worries and financial sector pessimism.

Posted by: Gary / 3:23 PM

Today's Headlines

Bloomberg:

- The Commodity Futures Trading Commission will use all of its regulatory power to ensure fair operations of futures markets for oil, agriculture, currencies and interest rates, the agency’s chairman said. “It’s important that the CFTC use all of its current authorities to vigorously fulfill its mission that markets are free of fraud and manipulation,” Gary Gensler, who was sworn in as chairman on May 26, said in an interview yesterday. In his first week, he “asked the staff here to report up options and recommendations with regard to these markets, particularly as it relates to the markets for physical commodities.” Gensler, 51, is reviewing his agency’s powers as U.S. lawmakers urge a crackdown of market speculators that they say caused last year’s record-high prices for oil, wheat, corn and other goods. Senator Bernie Sanders, a Vermont independent, introduced legislation that would make the CFTC invoke emergency authority to stop oil speculation. Representative Bart Stupak, a Michigan Democrat, has sought limits on credit derivatives. Gensler said this year that speculators contributed to an asset bubble in commodities in 2008. He broke ranks with the former acting chairman of the CFTC, Walter Lukken, who testified to Congress on Sept. 11 that there wasn’t “strong evidence” index traders were driving up prices. Gensler wouldn’t say in the interview if he thought the same thing was happening this year. Oil prices “appear to have been divorced from the underlying fundamentals of weak demand, ample supply and high inventories,” Adam Sieminski, chief energy economist in Washington for Deutsche Bank AG, said in a June 5 note. Sieminski cited three “major macro-economic indicators” to explain the rise in prices -- optimism in the global economy, a weakening in the U.S. dollar and more money being invested in commodity index funds. Total assets under management for one company’s group of commodity exchange-traded funds “is now greater than it was at the peak of 2008,” Sieminski wrote. “Fundamentals do not support the price spike,” Nobuo Tanaka, the executive director of the Paris-based International Energy Agency, told reporters yesterday in Washington. Gensler was asked about Stupak’s proposal to ban “naked” credit-default swaps, a derivatives agreement where the investor doesn’t own the underlying debt on the contracts being purchased. “I do believe that it’s appropriate, given their unique nature, to consider additional rules for credit-default swaps, and by additional, I mean additional to what we do for all swaps,” Gensler said.

- President Barack Obama’s $12.8 trillion commitment to stimulate credit markets will ensure economic recovery in the US outpaces Europe’s “anemic” revival, according to Goldman Sachs Group Inc.(GS). A profit can be made from buying credit-default swaps on the Markit iTraxx Europe Index of 125 investment-grade companies and selling default protection on the Markit CDX North America Investment Grade Index, said Alberto Gallo, a credit strategist at Goldman. “US credit will outperform as Europe faces a deeper recession and more anemic recovery,” NY-based Gallo said.

- Federal Reserve Bank of San Francisco President Janet Yellen said the prospect that policy makers will leave the benchmark U.S. interest rate near zero for the next several years is “not outside the realm of possibility.” “We have a very serious recession, we have a 9.4 percent unemployment rate,” and inflation possibly falling over time below the Fed’s preferred level, she told reporters yesterday after a speech to the Commonwealth Club of California in San Francisco. Given the recession’s severity, “we should want to do more. If we were not at zero, we would be lowering the funds rate.”

- U.S. mortgage applications fell last week by the most since February, defying efforts by President Barack Obama’s administration to revive the housing market. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan dropped 19 percent to 444.8 in the week ended June 26 from 548.2 the prior week. The group’s refinancing gauge declined 30 percent to the lowest in seven months, while the index of purchases fell 4.5 percent.

- Companies in the U.S. cut more jobs than forecast in June, according to a private report today, showing the labor market will be slow to improve even as other parts of the economy indicate the recession is abating.

- Ford Motor Co.(F) and Nissan Motor Co. reported June U.S. sales that were better than estimates, as analysts predicted a stabilizing U.S. economy may have led the auto industry to its strongest month this year. Deliveries at Ford slid 11 percent from a year earlier, according to a statement today from the Dearborn, Michigan-based company. Nissan posted a 23 percent decline. Toyota Motor Corp. said its sales fell 32 percent. Chrysler Group LLC reported a 42 percent drop after it ended most sales to fleet customers.

- Fannie Mae and Freddie Mac will begin refinancing mortgages with loan-to-value ratios of as much as 125 percent as the Obama administration seeks to boost participation in its anti-foreclosure programs.

- Mir Hossein Mousavi, the main challenger in the June 12 presidential election, said Mahmoud Ahmadinejad’s government lacks “political legitimacy” for the majority of Iranians. Former President Mohammad Khatami said the country faces a “velvet coup against the people.”

Wall Street Journal:

- Credit Suisse and Deutsche Bank ranked as the best prime brokerages of 2008 in a closely followed survey due out this week, a copy of which was reviewed by Dow Jones Newswires. The annual survey of hedge funds, conducted by Global Custodian magazine, had about 25% fewer respondents than last year -- not surprising considering the global economic meltdown and shrinking of the hedge-fund industry.

- Consumers looking for a flat-screen TV deal these days should head straight to one place: the plasma-TV aisle.

- China is expected to ban imports of U.S. chicken in coming days, a move likely to deliver a blow to the struggling American chicken industry and escalate trade tensions between the two nations.

NY Times:

- Car sales in the United States are in a funk. Even with a strong June, the current annualized rate of about 10 million vehicles sold will not be enough to compensate for scrapped cars and population growth. Yet the best investment play on an American recovery may not be a car company or parts maker. Instead, it may be Sirius XM, the company that operates the subscription satellite radio service.

- Bank Woes Deepening in Europe.

MarketWatch:
- Macy's may not tell Gimbels, goes the old adage, but Citigroup analysts aren't shy about recommending a rival's shares: They told clients Wednesday that Bank of America's stock is the best bank buy going.

NY Post:

- Ruth Madoff is in the clear -- for now. Ruth will not be prosecuted for the massive Ponzi scheme that won her husband Bernard Madoff a 150-year prison sentence, sources told The Post yesterday.

AppleInsider:

- An aggressive back-to-school promotion and a more affordably-priced overhaul to Apple's MacBook Pro notebook line are boosting Apple's personal computer shipments to levels not seen since last October, shortly before the economic climate caught up with the Mac maker in earnest. Huberty also provided a graph based on weekly data from market research firm NPD that points to a "steady acceleration of Mac shipments over the last few weeks" since the MacBook Pro line saw its refresh. But even prior to that launch, "Apple began to outperform the broader commercial PC segment -- with commercial Mac shipments up 25% month-over-month in May versus market growth of just 1%," she wrote.

Washington Times:

- When House Democratic leaders were rounding up votes Friday for the massive climate-change bill, they paid special attention to their colleagues from Ohio who remained stubbornly undecided. They finally secured the vote of one Ohioan, veteran Democratic Rep. Marcy Kaptur of Toledo, the old-fashioned way. They gave her what she wanted - a new federal power authority, similar to Washington state's Bonneville Power Administration, stocked with up to $3.5 billion in taxpayer money available for lending to renewable energy and economic development projects in Ohio and other Midwestern states. House Energy and Commerce Chairman Henry A. Waxman, California Democrat, included the Kaptur project in a 310-page amendment to the legislation unveiled at 3 a.m. Friday, just hours before the bill was to be debated on the House floor. The amendment was packed with other vote-getting provisions, both large and small, that had been sought by dozens of wavering Democrats. The wheeling and dealing proved successful. Mr. Waxman and House Speaker Nancy Pelosi, California Democrat, backed by the personal lobbying of President Obama, won over enough lawmakers to pass the bill narrowly Friday evening, 219-212.

- Rep. John Conyers Jr. reversed his opposition to a controversial hazardous waste project in his district, writing a letter of support to the federal government with the help of his wife, former Detroit City Council member Monica Conyers, whose aide later linked her to receiving money from the contractor in the project. The letter, sent in July 2007, was written in support of permit transfers for a hazardous waste injection well project in the city of Romulus, Mich., which was operated by a company with ties to Mrs. Conyers, who has pleaded guilty to conspiracy to commit bribery in a federal investigation unrelated to the hazardous waste project. In his letter to the Environmental Protection Agency, the Michigan Democrat, chairman of the House Judiciary Committee, said many things had changed in favor of the project since he stood in opposition along with fellow Michigan congressman, Rep. John D. Dingell, in 2003.

- Republican lawmakers, coming off a loss Friday in their attempt to block passage of a massive climate bill, have seized on a global warming memo they say was suppressed by the Obama administration. The memo, drafted by two environmental economists, is highly critical of the science behind an Environmental Protection Agency memo that found carbon dioxide to be a greenhouse gas. Sen. James M. Inhofe of Oklahoma, the ranking Republican on the Senate Environment and Public Works Committee, and Sen. John Barrasso, Wyoming Republican, said the memo shows that the EPA did not have accurate information when it completed its finding.

Reuters:
- China has asked to debate proposals for a new global reserve currency at next week's Group of Eight summit in Italy and the issue could be referred to briefly in the summit statement, G8 sources said on Wednesday. One G8 source who was involved in the negotiations said China made the request during preparatory talks about a joint statement to be issued on the second day of the summit in L'Aquila by the G8 plus the G5 (Brazil, India, China, Mexico and South Africa) and also Egypt. This forum, the so-called "G14", meets on July 9 to discuss the financial crisis, trade and climate change and for the first time a G8 summit will also produce a joint G14 statement.

- The Baltic Exchange said on Wednesday it had changed the way its chief sea freight index .BADI was calculated in a move aimed at boosting freight derivatives trading. The daily index, which gauges the cost of shipping resources including iron ore, cement, grain, coal and fertilizer, is compiled from data provided by members of the exchange from international ship broking companies.

- Oil fell on Wednesday after government data showed a build in U.S. gasoline inventories ahead of the Independence Day holiday, traditionally the peak of the summer driving season. Gasoline stockpiles in the world's top consumer rose by 2.3 million barrels last week, above analysts forecasts, data from the U.S. Energy Information Administration showed. "The fact that gasoline stocks are up 2.3 million barrels ahead of the Fourth of July weekend is huge," said Stephen Schork, editor of The Schork Report, adding, "Demand is low." Total U.S. product demand fell 5.8 percent over the four weeks to June 26 compared to year-ago levels, according to the EIA report. Further pressure on crude came after a Reuters survey showed OPEC output rose in June, with members' compliance with agreed cuts at 72 percent last month, a fall from 75 percent in May.

- General Motors Corp n Wednesday reported a 34 percent drop in monthly U.S. sales or June, its first sales results since it filed for bankruptcy n a restructuring funded by the Obama administration.

DigiTimes:

- The supply of Intel's(INTC) entry-level G31 IGP chipset, which currently accounts for 50% in Intel's total shipments to the channel, has fallen far short of demand, according to sources at motherboard makers.

Lusa:

- Macau’s casino revenue fell 17% in June from a year earlier, citing data from casino operators. For the first six months of this year, revenue declined 12% from the year-earlier period.

Posted by: Gary / 2:54 PM

Bear Radar

Style Underperformer:
Mid-cap Growth (+.42%)

Sector Underperformers:
Education (-2.08%), Biotech (-.47%) and Banks (-.25%)

Stocks Falling on Unusual Volume:
ADY, FSLR, MAR, HOT, MYGN, ACOR, LEAP, CBST, BOOM and ALXN

Stocks With Unusual Put Option Activity:
1) USU 2) KFT 3) SLM 4) OSK 5) NDAQ

Posted by: Gary / 2:07 PM

Bull Radar

Style Outperformer:
Small-cap Value (+2.53%)

Sector Outperformers:
Airlines (+3.05%), Networking (+2.64%) and Restaurants (+2.44%)

Stocks Rising on Unusual Volume:
AIG, BLKB, KTC, FCX, BBL, E, PTR, IBKC, AMAG, FELE, FUQI, PRAA, SCHN, VECO, PWRD, RDEA, STEC, WERN, PLCE, CRMT, BIIB, CYOU, ADTN, HURN, ZRAN, CENT, UFCS, TPL, SNX, OSK, EVY, LNN, UNF, SNY, SWM, DTG, WHI, STZ, AXE, FCN and GIS

Stocks With Unusual Call Option Activity:
1) KLAC 2) NVLS 3) SLE 4) OSK 5) UTX

Posted by: Gary / 11:11 AM

Links of Interest

Posted by: Gary / 9:21 AM

Tuesday, June 30, 2009

Wednesday Watch

Late-Night Headlines
Bloomberg:

- Steel prices in the U.S. fell 3.1 percent in June, the 11th straight monthly decline, as a global recession prevents steelmakers from charging more for their products. The average price of hot-rolled steel sheet, the benchmark product used in cars and appliances, dropped to $380 a ton from $392 in May, Purchasing Magazine said today in a monthly update. Cold-rolled sheet slipped 2.1 percent to $467 a ton. Hot-rolled steel prices have plunged 64 percent from a record $1,068 a ton in July as the slowing global economy reduced demand for automobiles, appliances and homes. “The steel market continues to be sluggish, despite protestations by some analysts that recovery has begun,” the magazine said. Prices for hot-rolled steel were the lowest in June since the spot-market price averaged $350 in January 2004, according to data published last month by the trade magazine. “U.S. end-user purchasing is expected to remain weak for remainder of 2009,” the magazine said. “The steel makers admit very little marketplace impact from the government’s fiscal stimulus package is expected this year.”

- Sentiment among Japan’s largest manufacturers rose less than economists estimated in June, signaling the economy may be slow to recover from its deepest postwar recession. An index of confidence among large makers of electronics, cars and other products climbed to minus 48 from a record minus 58 in March, the Bank of Japan’s Tankan survey showed today in Tokyo. Economists surveyed by Bloomberg News predicted minus 43.

- The U.S. Treasury Department is set to name eight to 10 asset managers for the Public-Private Investment Program as soon as this week, a person familiar with the matter said today. Once the asset managers have signed deals with Treasury, they each will be expected to raise at least $500 million of private capital within 12 weeks, according to Treasury program documents. Pacific Investment Management Co. and BlackRock Inc. have been among the leading candidates for the slots. Other companies that have said they applied include Bank of New York Mellon Corp.’s Boston-based Standish bond unit; Atlanta-based Invesco Ltd. and its affiliate, WL Ross & Co.; Baltimore’s Legg Mason Inc.; and TCW Group Inc. in Los Angeles.

Wall Street Journal:

- Some of the states worst hit by the recession are getting far less federal economic-stimulus money per person than states faring better. Nevada, where unemployment stood at about 10% when the plan was passed, is getting $541 for each resident from the stimulus money allocated so far, a Wall Street Journal analysis found. Wyoming, where the 3.9% jobless rate was the lowest in the country in February, is getting $1,074 per person. Florida, North Carolina and Oregon are among the other states with relatively low per-capita payouts, despite battling double-digit unemployment. North Dakota and South Dakota, meanwhile, are also receiving large quantities of stimulus money relative to their small populations -- even while unemployment remains about half the national average.

- The Federal Deposit Insurance Corp. on Thursday is expected to propose tough new guidelines for private-equity investors seeking to buy failed banks, people familiar with the matter said. The issue is a tricky one for the FDIC. It wants to open the door for more types of investors to buy failed banks, reducing the potential cost to the agency of bank collapses. At the same time, it wants to prevent largely unregulated private-equity firms from acting too aggressively. The proposal is expected to deter private equity investors from buying and flipping failed banks and could include a mandatory investment period. The proposal is also expected to require private-equity investors to hold higher capital reserves than traditional banks would be required to hold. The proposal could require private equity investors that own several banks to offer some sort of cross-guarantee, so that one bank owned by the investors might have to serve as a source of strength to the other banks. And there could be another requirement that the private-equity investors remain a behind-the-scenes source of capital, beyond their initial investment. It's unclear how private equity investors will react to the proposal, in part because the full details haven't been released. Some investors said overly stringent regulations could kill private-equity interest.

- Gannett Co.(GCI), the largest U.S. newspaper publisher by daily circulation, will cut more than 1,000 jobs in response to continuing revenue declines, according to a person familiar with the company's thinking. The cuts will come from the U.S. Community Publishing division, which consists of Gannett's more than 80 local dailies, the person said.

- On top of the lumps taken from the credit crisis, stock-market declines and the recession, hedge-fund and private-equity firms now have a real-estate problem. After loading up on lavish office space near the top of the market, some firms are trying to sublease what they don't need for as much as 30% less than their rental rate. New York hedge-fund firm Trafelet & Co. and Duff Capital Advisors, a Greenwich, Conn., hedge-fund firm started last year, have paid their landlords to take back office space. It is a classic buy-high, sell-low squeeze with no end in sight. In midtown Manhattan, a record 8.9 million square feet of high-quality, class "A" office space -- equivalent to more than three Empire State Buildings -- is available for sublet, according to brokerage Jones Lang LaSalle.

- Obama administration officials will announce rules Wednesday for handing out $7.2 billion in broadband stimulus funds, but some companies already are raising concerns about how long it could take to award the money. Officials are expected to detail how they plan to distribute $4.7 billion in broadband money from the Commerce Department in grants and $2.5 billion from the Agriculture Department in grants or loans. Commerce Department officials will still be doling out the first of three rounds of broadband grants in December. Such a delay, business groups and some states say, could push back construction of some projects in northern states to next summer or 2011.

- The odors, respiratory complaints and corrosion blamed on drywall from China used in American homes may have been caused by the failure to remove sulfur and other contaminants from synthetic gypsum, some Chinese experts in building materials say. The U.S. Consumer Product Safety Commission in recent months has received more than 550 reports from people in 19 states and the District of Columbia involving odors, health symptoms and corrosion problems they blame on imported Chinese drywall.

- The U.S. International Trade Commission recommended imposing punitive duties of as much as 55% on low-cost Chinese tire imports because they are disrupting the U.S. market, in a move that could sharply increase costs for consumers.

NY Times:

- The trend of cable news viewers moving away from CNN continued in the second quarter of 2009 with MSNBC beating CNN in weeknights for the first time ever for a full quarter of a year. Neither was anywhere near the Fox News Channel of course, which, as it has all year, posted enormous audience gains in the second quarter. On weeknights in prime time, Fox averaged 2.5 million viewers for the quarter, while MSNBC averaged 954,000 and CNN had 941,000. The real growth among the news networks continues to be posted by Fox, which completed the best 6-month period in its history. For the second quarter Fox News Channel was up 50 per cent from the previous year. Mr. O’Reilly was up 31 per cent. Glenn Beck, though not in prime time, improved his time period by 110 per cent.

- YouTube confirmed on Tuesday that Steve Chen, a co-founder and most recently YouTube’s chief technology officer, was no longer working at the company. Mr. Chen left some time ago to work on unspecified engineering projects at its parent, Google.

IBD:

- Taleo Corp. (TLEO) markets software that helps customers recruit and retain employees. But right now it's winning business because it's not slashing its own payroll, CEO Michael Gregoire says.

Politico:

- Republican Norm Coleman has conceded to Democrat Al Franken in the Minnesota Senate race, ending one of the longest Senate races in American history and clearing the way for Democrats to hold a 60-seat supermajority in the Senate.

Rasmussen:

- Americans have mixed feelings about the historic climate change bill that passed the House on Friday, but 42% say it will hurt the U.S. economy. A new Rasmussen Reports national telephone survey shows that just 19% believe the climate change bill passed by the House on Friday will help the economy. Fifteen percent (15%) say it will have no impact, and 24% are not sure. A majority of both Republicans (56%) and adults not affiliated with either major political party (52%) think the bill will hurt the economy. Among Democrats, however, 30% say it will help the economy, 23% that it will hurt and 21% say it will have no impact.

Washington Post:

- U.S. securities regulators are considering changing how companies are required to disclose stock options awarded to executives, people familiar with the Securities and Exchange Commission's thinking told Reuters on Tuesday. At an SEC meeting on Wednesday, the commissioners also will propose giving investors a greater voice in setting executive pay at companies that were given taxpayer funds under the U.S. government's Troubled Asset Relief Program. Among the possible changes is a revision to how companies value equity awards in the "summary compensation table" for top executives that they file with the commission each year. The SEC is considering requiring companies to include the estimated value for stock options granted during the year, the people said.

CommonDreams.Org:

- General Electric(GE), the world's largest industrial company, has quietly become the biggest beneficiary of one of the government's key rescue programs for banks. At the same time, GE has avoided many of the restrictions facing other financial giants getting help from the government. The company did not initially qualify for the program, under which the government sought to unfreeze credit markets by guaranteeing debt sold by banking firms. But regulators soon loosened the eligibility requirements, in part because of behind-the-scenes appeals from GE. As a result, GE has joined major banks collectively saving billions of dollars by raising money for their operations at lower interest rates.

TheDeal.com:

- Registering venture capital firms -- along with hedge funds and private equity firms -- with the Securities and Exchange Commission, as President Obama's administration plans to do, would be "very burdensome" for small VC firms, said Michael Stark, co-founder and general partner at Crosslink Capital. "I think registering with the SEC would kill a three-partner VC firm," said Stark. The National Venture Capital Association is actively lobbying the Obama administration to not tarnish the VC industry with the same brush as leverage-backed asset classes, such as hedge funds, as it embarks on a sweeping overhaul of financial regulations. "There are enough smart people in the Obama administration to figure out the differences between asset classes," Stark concluded confidently.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (GLW), target $20.50.

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

Asia Ex-Japan Inv Grade CDS Index unch..
S&P 500 futures -.03%.
NASDAQ 100 futures +.03%.

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (STZ)/.32

- (GIS)/.81

- (NS)/.98

Economic Releases

8:15 am EST

- The ADP Employment Change for June is estimated to shrink to -395K versus -532K in May.

10:00 am EST

- ISM Manufacturing for June is estimated to rise to 44.6 versus 42.8 in May.

- ISM Prices Paid for June is estimated to rise to 47.0 versus 43.5 in May.

- Construction Spending for May is estimated to fall .6% versus a .8% gain April.

- Pending Home Sales for May are estimated unch. versus a 6.7% gain in April.

10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,000,000 barrels versus a -3,868,000 barrel decrease the prior week. Gasoline supplies are estimated to rise by +2,000,000 barrels versus a +3,871,000 barrel gain the prior week. Distillate inventories are expected to rise by +1,500,000 barrels versus a +2,077,000 barrel increase the prior week. Finally, Refinery Utilization is estimated to rise by +.05% versus a +1.16% gain the prior week.

Afternoon:

- Total Vehicle Sales for June are estimated at 9.8M versus 9.9M in May.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Evans speaking, weekly MBA mortgage applications report and the Challenger Job Cuts report could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by insurance and commodity 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.

Posted by: Gary / 10:10 PM

Stocks Finish Lower, Weighed Down by Hospital, Commodity, Airline and Financial Shares

Posted by: Gary / 4:06 PM

Stocks Lower into Final Hour on Profit-Taking, Global Growth Worries

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Medical longs, Internet longs and Financial 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 falling and volume is below average. Investor anxiety is very high. Today’s overall market action is mildly bearish. The VIX is rising 5.92% and is high at 26.85. The ISE Sentiment Index is below average at 113.0 and the total put/call is high at 1.08. Finally, the NYSE Arms has been running very high most of the day, hitting 2.76 at its intraday peak, and is currently 2.51. The Euro Financial Sector Credit Default Swap Index is falling 6.31% today to 106.0 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is falling 2.41% to 132.46 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising .76% to 42 basis points. The TED spread is now down 422 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 10.82% to 42.06 basis points. The Libor-OIS spread is rising .56% to 38 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 8 basis points to 1.78%, which is down 86 basis points since July 7th. The 3-month T-Bill is yielding .17%, which is down 1 basis point today. Despite the headline losses in the major averages, many market leading stocks are just slightly lower or even higher on the day. As well, breadth isn’t too bad as small-caps hug the flatline. It is also a positive to see below average volume with a very high NYSE Arms reading. REITs have been a source of strength throughout the day. Finally, the large drop in the euro financial sector credit default swap index is a big positive. I wouldn’t be surprised to see some short-covering into the close as the bears fail to gain downside traction despite a poor consumer confidence reading. Nikkei futures indicate a -68 open in Japan and DAX futures indicate an +3 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, declining credit market angst, quarter-end window dressing, lower energy prices and investment manager performance anxiety.

Posted by: Gary / 3:32 PM

Today's Headlines

Bloomberg:

- India said it will reject any new treaty to limit global warming that makes the country reduce greenhouse-gas emissions because that will undermine its energy consumption, transportation and food security. Cutting back on climate-warming gases is a measure that instead must be taken by industrialized countries, and India is mobilizing developing nations to push that case, Environment Minister Jairam Ramesh told the media today in New Delhi. “India will not accept any emission-reduction target -- period,” Ramesh said. “This is a non-negotiable stand.” “We are not re-negotiating the U.N. Framework Convention on Climate Change,” Ramesh said, referring to the treaty that entered into force in 1994 and laid the groundwork for emissions cuts by richer nations. “There is no way India is going to accept any emission reduction target, period, between now and the Copenhagen meeting and thereafter.” “We reject the use of climate as a non-tariff barrier,” the minister said. “We comprehensively and categorically reject any attempt to introduce climate change” as part of World Trade Organization talks.

- Confidence among U.S. consumers slipped unexpectedly in June, reflecting a weak labor market and rising energy costs. The Conference Board’s sentiment index decreased to 49.3 from a revised 54.8 in May, the New York-based research group said today. “Consumers are feeling the heat this summer from rising gasoline prices to seized-up labor markets,” said Jeffrey Roach, chief economist at Horizon Investments in Charlotte, North Carolina. That “could keep third-quarter consumer spending muted,” slowing an economic recovery, he said. Economists forecast confidence would rise to 55.3 from 54.9 in the prior month, according to the median of 70 forecasts in a Bloomberg News survey. The Conference Board’s measure of present conditions decreased to 24.8 from 29.7 the prior month. The gauge of expectations for the next six months fell to 65.5 from 71.5. The share of consumers who said more jobs will be available in the next six months fell to 17.4 percent from 19.3 percent. The proportion of people who said they expect their incomes to rise over the next six months decreased to 9.8 percent from 10.8 percent. The share of consumers who said jobs were plentiful fell to 4.5 percent, the lowest since February 1992, from 5.8 percent. Those saying jobs were hard to get increased to 44.8 percent from 43.9 percent.

- Delinquency rates on the least risky mortgages more than doubled in the first quarter from a year earlier as U.S. efforts to help homeowners failed to keep pace with job losses that pushed more borrowers toward foreclosure. Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said today in a report. First-time foreclosure filings on the loans rose 22 percent from the fourth quarter, the report said.

- Simon Young, deputy director of research and development for China Cosco Holdings Co., Asia’s biggest container-shipping line, said, “There is too much speculation. There are too many financial institutions involved in this sector.”

- Corn plunged by the Chicago Board of Trade’s limit after a government report showed U.S. farmers planted more acreage with the grain than estimated in March. Wheat and soybeans also tumbled on signs of increasing supplies.

- Commodity assets under management expanded by $34 billion this quarter, the second-largest increase on record, Barclays Capital said. The assets total about $210 billion at the end of the second quarter, Barclays said in a report e-mailed today. The biggest jump was $43 billion in the second quarter last year, said Amrita Sen, a Barclays analyst in London. New inflows were $7 billion at the time, compared with $15 billion this quarter, she said. “Price increases are likely to flatten out” in the next two quarters, Sen said. “Then investment flows are also likely to stabilize rather than grow at the pace they have been growing” this year.

- Gains by commodity currencies may peter out in the second half amid waning risk appetite, Royal Bank of Scotland Group Plc said. “We remain skeptical that the Australian dollar and commodity currencies have all that much further to run,” Greg Gibbs, a strategist in Sydney at RBS, wrote today in a report. “As we head into the second half of the year, global data disappointments are expected to increase. Asset markets will appear to have run out of upside potential and risk of a correction in global risk appetite will increase.”

- Rates to ship coal, iron ore and other goods will fall 15% in the third quarter compared with the previous three months as China imports less ore to make steel, UBS AG said. “There is no doubt the last months have been unprecedented and unsustainable” when it comes to China’s iron-ore imports, Peter Hickson, a global strategist for basic materials at UBS said at a conference.

- The U.K. economy shrank more than previously estimated in the first quarter in the biggest contraction since 1958 as the recession choked industries from construction to services. Gross domestic product fell 2.4 percent from the final three months of 2008, compared with the prior measurement of a 1.9 percent drop, the Office for National Statistics said today in London. The median prediction in a Bloomberg survey of 28 economists was for a 2.1 percent decline. Construction activity plunged almost three times as much as originally estimated.

- German unemployment rose to the highest since 2007 in June as falling demand and rising bankruptcies forced companies to cut jobs.

- European consumer prices recorded their first annual decline this month as energy costs fell and the economic slump pushed unemployment to a 10-year high. The 0.1 percent drop in euro-region prices is the first since compilation of the data began in 1996, the European Union statistics office in Luxembourg said in an initial estimate today. Loans to households and companies in Europe grew at the slowest pace on record in May, a separate report from the European Central Bank showed today.

- Al-Qaeda threatened revenge against France for President Nicolas Sarkozy’s comments that the burqa garment is “not welcome” in his country, Agence France-Presse reported, citing the SITE Intelligence group, which tracks terrorist Web sites.

- A car bomb in the northern Iraqi oil hub of Kirkuk killed at least 41 people and wounded 120 others on the day U.S. forces withdrew from all the Middle Eastern country’s cities.

- BP Plc and China National Petroleum Corp. won the right to develop Rumaila, the largest Iraqi oil field in today’s licensing round, as the war-torn country seeks to more than double production over the next six years. The six oil and two gas fields in today’s bidding round may yield $1.7 trillion in profit over 20 years for the country, Oil Minister Hussain al-Shahristani said in a speech broadcast on live television. “It’s a great move forward for Iraq and the revenue is enormous,” Peter McGuire, managing director of Commodity Warrants Australia, said in a Bloomberg TV interview yesterday. “So it’s a massive amount of money for Iraq, huge.” Holder of the world’s third-largest oil reserves, Iraq is struggling to raise output and revenue from crude sales after six years of conflict and prior sanctions destroyed the economy and infrastructure. The government aims to boost oil output to 4 million barrels a day within the next five years, from about 2.4 million barrels. Rumaila, which now produces 956,000 barrels of oil a day, is the largest field on offer and the first awarded today. The BP group proposed to boost Rumaila’s output to a plateau of 2.85 million barrels of oil a day at an average cost of $3.99 a barrel, according to the initial bid presentation. Iraq later this year plans to hold a second auction round for 11 oil and gas fields with the aim to boost production to about 6 million barrels a day by 2015. Saudi Arabia, the world’s biggest oil exporter, produces 8 million barrels a day.

FINalternatives:
- Austin Capital Management, a fund of hedge funds shop that had some 7.5% of its assets invested with Ponzi scheme mastermind Bernard Madoff, is going on the defensive against a lawsuit filed on behalf of two New Mexico state funds. The firm, which is based in the Texas capital, said last week that it would “vigorously” defend itself against the lawsuit, filed by the National Education Association of New Mexico, a teachers union, over $25 million in losses suffered by state’s Educational Retirement Board and State Investment Council. The union lawsuit alleges that Austin ignored several red flags because of its longstanding relationship with Madoff, who was sentenced to 150 years in prison for running a $65 billion Ponzi scheme yesterday.

Business Insider:

- Tax Hikes, Coming Soon! Every politician (except Michael Dukakis) has campaigned on some version of "no new taxes" and most ended up breaking that promise. It's how we do things in America, and as voters we've come to accept how it works. We're masochists. We like to be lied to. Obama said he wouldn't raise taxes on anyone making under $250,000, a promise that's technically already been violated by new taxes on cigarettes and his pledge to sign cap & trade if it gets through The Senate. His aides would say those don't count. But evens setting those aside, real tax hikes are almost certainly in the works, if only due to the massive amount of new spending (particularly on healthcare) this government has planned. The idea that it can all be financed on the (dwindling) $250k+ crowd is absurd. Altman believes that sometime next year the Congress will be forced to bring up a new tax, possibly some kind of Europe-like VAT scheme. Others have suggested that Obama will wait until after the 2012 election, when he's a lame duck though that may be too long a wait if the budget situation continues to deteriorate. Bear in mind, this isn't all coming from Wall Street or conservative publications eager to undermine Obama's presidency. Liberal commentator Matthew Yglesias penned a highly praised piece for the American Prospect arguing that liberals needed to embrace taxes sooner rather than later, and that selling Americans on the idea of higher taxes should be part and parcel with selling Americans on the idea of a more active role for government in life -- which Obama has done pretty well, both in the campaign and since taking office:

NY Post:

- JPMorgan Chase(JPM) boss Jamie Dimon is considering jacking up base salaries for his investment bankers as bailed-out rivals like Citigroup(C) and Bank of America(BAC) move to sweeten their compensation packages to lure talent.

LA Times:

- Reporting from Washington -- The Environmental Protection Agency will announce today that it is granting California's request to impose tough restrictions on greenhouse gas emissions from cars and trucks -- reversing the Bush administration's position and opening the way for the state to take the lead on global-warming policy. California developed the standards in 2004 but was barred from implementing them. EPA officials say granting California the waiver from federal standards gives the state wide latitude to promulgate stricter rules, restoring a 40-year interpretation of the Clean Air Act.

Rassmussen:

- The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 31% of the nation's voters now Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-three percent (33%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -2. That matches the lowest level yet recorded (see trends).

Politico:

- Republicans believe a handful of junior House Democrats may have taken a career-ending vote by supporting the controversial energy bill last week and are planning to launch an ad campaign in targeted districts to try to seal their fate. The National Republican Congressional Committee is planning to air TV and radio commercials and unleash robocalls against Democrats who hail from districts that could be adversely affected by the narrowly passed legislation, are GOP-leaning or both. Those likely to find themselves with targets on their back after the 219-212 vote: freshman Reps. Harry Teague of New Mexico, Betsy Markey of Colorado, John Boccieri of Ohio, Thomas Perriello of Virginia and Alan Grayson of Florida and second-termer Zack Space of Ohio. “There’s a reason why over 40 Democrats in swing districts voted against this,” said NRCC spokesman Ken Spain.

Washington Times:

- Former Vice President Dick Cheney on Monday expressed concern that the pending pullout of U.S. troops from Iraq's cities could reverse the military progress made by American and Iraqi forces there since the George W. Bush administration's 2007 surge. "I hope the Iraqis can deal with it," Mr. Cheney told The Washington Times' "America's Morning News" radio show. "At some point, they have to stand on their own, but I would not want to see the U.S. waste all the tremendous sacrifice that has gotten us to this point."

USA Today:

- Trying to attract passengers in a recession, airlines are selling tickets much cheaper than a year ago. Fares for travel next month are as much as 63% lower than last summer, according to an analysis by FareCompare.com.

Reuters:
- Nigeria is currently pumping 1.739 million barrels per day (bpd) of crude oil and 560,000 bpd of condensate, the state-run Nigerian National Petroleum Corporation (NNPC) said on Monday. The total amount of production shut in by years of militant attacks and funding shortfalls currently stood at 1.26 million bpd, NNPC spokesman Levi Ajuonoma told Reuters. Industry experts say Nigeria has never been able to produce at its full installed capacity of 3 million bpd, due to violence in the Niger Delta and to funding problems.

- Cisco Systems Inc(CSCO) is considering offering Web-based alternatives to Microsoft Corp's(MSFT) popular Office software as the networking giant expands on the Internet.

- U.S. investigators believe 10 or more people associated with imprisoned swindler Bernard Madoff could be criminally charged in the coming months or beyond, a law enforcement source said on Tuesday. The source, who asked not be identified because of the ongoing investigation into the multibillion-dollar Madoff fraud, said the FBI was "closer to the beginning than the end" of the probe.

- General Electric Co (GE) is teaming up with U.S. biotech company Geron Corp (GERN) to use stem cells to develop products that could give drug developers

an early warning of whether new medicines are toxic. The venture is the largest U.S. conglomerate's most direct attempt to make a commercial products from human embryonic stem cells.

Financial Times:
- Beijing’s order that all new PCs should include internet filtering software is about to be put to the test, with personal computer makers set to miss a deadline on Wednesday for supplying all new machines with the program. s a practical matter, it would be several weeks before most new machines available to Chinese purchasers could carry the software, even if China pushes ahead with the order in spite of international consternation, say retail and PC industry experts. That delay could serve to defuse the issue and provide more time for a face-saving compromise to be found, some observers say. The Chinese authorities “are kind of embarrassed about this, finding a graceful way out of it would be very welcome”, said Rob Enderle, a US PC industry analyst.

The Jerusalem Post:
- Israel rejected as "scandalous" a highly critical report released by the International Committee of the Red Cross on Monday marking six months since Operation Cast Lead, saying it was inconceivable that the document would chastise Israel for the situation in Gaza while ignoring the continued detention of IDF soldier Gilad Schalit or the "intransigent belligerence" of Hamas.

Posted by: Gary / 2:49 PM

Bear Radar

Style Underperformer:
Large-cap Value (-1.42%)

Sector Underperformers:
Gold (-3.05%), Hospitals (-2.59%) and Oil Tankers (-2.56%)

Stocks Falling on Unusual Volume:
SFLY, ASBC, TNE, PTR, SNP, SCHN, RBCN, IBKC, PWRD, SNDA, BIIB, CYOU, SAFM, DXPE, SBUX, TTES, CRTX, DRIV, ADSK, NTES, VCLK, TKG, COO, EE and TGI

Stocks With Unusual Put Option Activity:
1) ELX 2) CBS 3) CIT 4) NVDA 5) AIG

Posted by: Gary / 1:28 PM

Bull Radar

Style Outperformer:
Small-cap Growth (-.25%)

Sector Outperformers:
Education (+5.44%), REITs (+.56%) and Semis (+.17%)

Stocks Rising on Unusual Volume:
HRB, APOL, ESI, RPT, FUJI, FDX, XCO, TEO, EQIX, JOSB, XNPT, ERTS, LNCR, CPLA, CECO, STRA and PKG

Stocks With Unusual Call Option Activity:
1) CAVM 2) GERN 3) APOL 4) ALU 5) STT

Posted by: Gary / 11:28 AM

Links of Interest

Posted by: Gary / 9:20 AM

Monday, June 29, 2009

Tuesday Watch

Late-Night Headlines
Bloomberg:

- The cost to protect against defaults on U.S. corporate bonds fell to the lowest in two weeks, tracking a rally in stocks, before data this week that may bolster speculation the recession has bottomed. Swaps on the Markit CDX North America Investment-Grade Index Series 12, which is used to speculate on the creditworthiness of 125 companies in the U.S. and Canada or to protect against losses on their debt, fell 5 basis points to 135 basis points as of 4:30 p.m. in New York, according to CMA DataVision. “The improved economic outlook, favorable relative value versus other asset classes and a propitious technical backdrop will unite to keep performance positive through year-end,” Barclays Capital credit strategists led by Ashish Shah in New York wrote in a June 26 note to clients. Credit-default swaps on Black & Decker Corp.(BDK), the largest U.S. power-tool maker, dropped the most in four weeks, signaling an improvement in investor confidence. The contracts fell 10 basis points to 163 basis points, according to CMA. Swaps on American Express Co.(AXP), the biggest credit-card company in the U.S. by purchases, fell 9 basis points to 231 basis points, the most since June 2, CMA data show.

- Admiral Timothy Keating, the U.S. commander in the Pacific region, said the military is ready to handle any orders it might receive in response to North Korea’s threatened missile launches and potential illicit shipments. “North Korea’s activities are very disturbing and unsettling to all of us,” said Keating, head of the U.S. Pacific Command, to an audience at the Atlantic Council policy analysis group in Washington late today in response to a question. The military is prepared to protect “American property, American citizens and American territory,” Keating said. “We don’t want to tip our hand too much.” The U.S. has been tracking a North Korean vessel on grounds that it may be carrying nuclear or missile technology barred from transfer under two United Nations Security Council resolutions.

- Venezuelan President Hugo Chavez said Honduran military leaders supporting the ouster of President Manuel Zelaya should “take great care” because any assault on his country’s embassy would be a “cause for war.” “If anything happens to the Venezuelan ambassador or if the embassy is raided, that’s cause for war. Cause for war.” Chavez said on state television.

- China, the world’s second-biggest energy consumer, will increase fuel prices by as much as 11 percent today, allowing the nation’s refiners to pass on climbing crude oil costs. Prices for gasoline and diesel will rise by 600 yuan ($87.80) a metric ton, the National Development and Reform Commission said yesterday, the third increase this year. Jet fuel costs will rise by 620 yuan a ton.

Wall Street Journal:

- The securities firms still standing on Wall Street are about to close the most lucrative quarter since the credit crisis erupted. And instead of relying on risk and leverage to drive profits, companies such as J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley and Bank of America Corp. are getting back to basics, with a strong performance from trading and underwriting. Investor confidence in the debt markets fueled issuance of $1.5 trillion globally from the start of the second quarter through Monday, according to Dealogic. That was slightly lower than in the first quarter, but the latest results showed a rebound in high-yield issuance. Equity offerings reached nearly $260 billion during the second quarter, which ends Tuesday. That is almost four times the amount recorded during the first quarter, and the highest since 2008's second quarter, Dealogic said. In trading, the gap between bid and offer prices on fixed-income assets remained wide through most of the quarter, boosting profits from buying and selling these securities. Fixed-income trading is one of the main earnings drivers for big Wall Street firms. "The banks are making money the old-fashioned way, by making markets," said Douglas Sipkin, an analyst with Pali Capital in New York.

- The beleaguered auto industry could see signs of strengthening demand when auto makers report U.S. sales for June on Wednesday, according to auto makers and analysts. Buoyed by fewer jobless claims and improved consumer confidence, annualized U.S. sales could hit 10 million this month for the first time in 2009, Ford Motor Co. analyst George Pipas said on Monday. The deep discounts that General Motors Corp. and Chrysler Group LLC have offered to boost sales are also likely to bolster June sales. Those factors suggest "the worst is behind us," Mr. Pipas said.

- A House committee is investigating the recent resignation of Amtrak's inspector general, citing concerns about oversight at the publicly funded corporation at a time when it is set to spend more than $1 billion in federal stimulus funds. Reps. Edolphus Towns (D., N.Y.) and Darrell Issa (R., Calif.), the chairman and ranking member of the House Oversight and Government Reform Committee, launched an investigation Monday following the resignation this month of Fred Weiderhold, Amtrak's longtime inspector general.

CNBC.com:
- The U.S. Treasury is planning to roll out its long-awaited Public-Private Investment Program (PPIP) plan, aiming to unveil it on Wednesday. The program should include as many as nine participants. CNBC has confirmed that two firms will be Wilbur Ross's Distressed Real Estate/debt fund and a joint venture between GE Capital and private investor Angelo Gordon & Co. As many as seven other firms will likely participate. Other firms widely expect to be named include PIMCO and Blackrock.

Business Week:
- A European Central Bank report predicts that euro-zone banks could record as much as $398 billion in new writedowns by 2010.

Forbes:

- Bernie’s Gang: Who’s Next To Go Down? Bankruptcy trustee Irving Picard says some friends of Bernie got excessive phantom profits from Bernie's fund. There are many questions unanswered in the wake of the sentence to jail of Bernie Madoff for 150 years, an appropriate eternity for such a scoundrel. For justice to be properly served, we must find out and prosecute those persons who played a role, any role, in the destruction of ordinary people's lives and wherewithal.

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Sunday, July 05, 2009

Monday Watch

Weekly Outlook

Saturday, July 04, 2009

Market Week in Review

Friday, July 03, 2009

Weekly Scoreboard*

Thursday, July 02, 2009

Stocks Finish Sharply Lower, Weighed Down by Commodity, Transportation, Construction, Healthcare and REIT Shares

Stocks Sharply Lower into Final Hour on More Shorting, Profit-Taking, Rising Economic Fear, Increasing Financial Sector Pessimism

Today's Headlines

Bear Radar

Bull Radar

Links of Interest

Wednesday, July 01, 2009

Thursday Watch

Stocks Finish Higher, Boosted by Restaurant, Hospital, Airline, HMO and Networking Shares

Stocks Higher into Final Hour on Lower Energy Prices, Stable Long-Term Rates

Today's Headlines

Bear Radar

Bull Radar

Links of Interest

Tuesday, June 30, 2009

Wednesday Watch

Stocks Finish Lower, Weighed Down by Hospital, Commodity, Airline and Financial Shares

Stocks Lower into Final Hour on Profit-Taking, Global Growth Worries

Today's Headlines

Bear Radar

Bull Radar

Links of Interest

Monday, June 29, 2009

Tuesday Watch

Blogs That Link to
Between the Hedges