The U.S. economy will begin to recover by the end of the year but unemployment is another matter, fund managers speaking at the Morningstar conference said.
As the market soars, the bears stick to their position. Joining this week’s fray: TrimTabs’ Charles Biderman, JPMorgan’s David Kelly, Clearbrook’s Tom Sowanick, BlackRock’s Bob Doll and Curtis Arledge, GMO’s Jeremy Grantham. Plus: the week’s most important reports
While index funds already have a place in the lineup of most 401(k) plans, a proposed federal mandate to require at least one index fund option in these plans is being called intrusive and unnecessary.
The Securities and Exchange Commission charged 10 financial advisors today with fraud for falsely marketing risky collateralized mortgage obligations to retirees.
The Dow Jones U.S. Economic Stimulus Index will list 50 companies that are expected to receive stimulus money from the American Recovery and Reinvestment Act of 2009.
A hedge fund firm that reaped huge rewards betting against the market last year is about to open a fund premised on another wager: that the massive stimulus efforts of global governments will lead to hyperinflation.
The firm, Universa Investments L.P., is known for its ties to gloomy investor Nassim Nicholas Taleb, author of the 2007 bestseller "The Black Swan," which describes the impact of extreme events on the world and financial markets.
Funds run by Universa, which is managed and owned by Mr. Taleb's long-time collaborator Mark Spitznagel, last year gained more than 100% thanks to its bearish bets. ...
HONG KONG--Goldman Sachs Group Inc. is raising up to US$1.9 billion from the sale of a portion of its stake in Industrial & Commercial Bank of China Ltd. in a placement Monday, according to a term sheet seen by Dow Jones Newswires.
Goldman has made no secret of its desire to repay the $10 billion in capital it received from the U.S. government in October, and the ICBC stake sale will help the bank bolster its cash position without dipping into current cash reserves.
Goldman declined to comment.
The 3.03 billion Class H shares, representing 3.7% of ICBC's H shares, are being sold at 4.80-4.90 Hong Kong dollars (62 to 63 U.S. cents) each, a 4%-6% discount to their closing price Monday of HK$5.11, the term sheet said.
Class H shares are Hong Kong-listed shares issued by a company registered and based in China.
Goldman Sachs, a strategic investor in ICBC with a 4.9% holding, had pledged this year not to sell 80% of its stake before April 28, 2010. But that left open the sale of the remaining fifth of that stake in China's largest bank by assets, or the 3.03 billion shares being sold Monday.
Foreign investors, including Bank of America Corp., Royal Bank of Scotland Group PLC, and the Li Ka Shing Foundation have sold billions of dollars worth of Chinese bank shares since the beginning of the year to shore up their balance sheets.
In late April, Allianz SE and American Express Co. sold half the shares they owned in ICBC in a private placement, raising a total of US$1.91 billion.
China suggested world oil demand may fall off now that oil inventories are brimming, even as it said it will start the second phase of its own strategic petroleum reserves program.diter
Geithner said in a speech to students in Beijing that a sustained global recovery depends on the combined efforts of the U.S. and China to overhaul their economies.
Private equity firm Kohlberg Kravis Roberts posted a substantial loss in 2008 as the global economic downturn took its toll on the firm's investments.
KKR lost $1.19 billion before taxes last year, compared with pre-tax economic net income of about $815 million in 2007, according to a presentation by the private equity firm on Sunday.
"Economic net income" generally excludes the impact of income taxes, noncash charges related to vesting of equity-based compensation and amortization of intangible assets.
KKR said its averaged adjusted pretax economic net income from 2004-07 was $926 million.
The private equity industry has been struggling with numerous problems -- absence of leverage for new deals, troubled portfolio companies and investors hurt by equity market falls.
KKR, co-founded by "buyout king" Henry Kravis, has the added problem of having announced plans to take itself public just prior to the markets plunging.
KKR said total annual fee income fell 27 percent to $640 million in 2008. Total assets under management dipped to $48.5 billion from $53.2 billion.
The New York firm said it has $15.4 billion of uninvested capital across its three geographic funds: Europe, U.S. and Asia.
KKR released the information to provide investors with an update on its financial condition as it continues to consider buying out its Amsterdam-listed fund, KKR Private Equity Investors. The deal would be key to KKR's plans for a U.S. stock listing.
KKR's plans to become a publicly traded company hinge on the deal to buy the KPE fund. If that transaction is scrapped, the listing would be thrown into question.
KKR announced the complicated transaction in July 2008, saying it would buy KPE, delist it from Euronext and launch the combined new company on the New York Stock Exchange under the stock symbol "KKR". KKR had previously considered a more conventional initial public offering.
Treasury debt prices fell Monday, with the 30-year long bond off well over a point as Wall Street opened more than 1 percent higher and sapped the safe-haven appeal of government debt.
Stock futures were bolstered by stronger Chinese economic data, which boosted investor optimism even on the day that General Motors filed for bankruptcy protection.
Data showing a fall in consumer spending in April was also bearish for bonds, with expectations the U.S. government will have to issue even more debt to stimulate the economy.
"It's a rebalancing into stocks from bonds," said T.J. Marta, chief market strategist at Marta on the Markets in Scotch Plains, N.J.
Benchmark 10-year Treasury notes fell over a full point in price. The notes were trading 1-8/32 lower in price for a yield of 3.62 percent, up from 3.47 percent late Friday, while the 30-year bond was 2-10/32 lower for a yield of 4.48 percent from 4.35 percent.
The Commerce Department said U.S. consumer spending fell 0.1 percent in Aprilafter a revised 0.3 percent fall in March, even through personal income rose by the most in 11 months.
"The consumer doesn't seem convinced that it's an ongoing benefit with the income increase. After careful consideration, the consumer is retrenching with the decline in spending. That means the government has to stimulate the economy more," Marta said.
Investors are now looking to April construction spending and May manufacturing data later Monday morning.
1) The continuing strength of the China/commodity play. Both the Chinese PMI (mostly state enterprise) and the CLSA PMI (mostly private sector weighted) continued their expansion for the third straight month.
China's Shanghai Index is up 3.4 percent to its highest level since August; Russia RTS Interfax Index is up 6.6 percent, at its highest level since October.
Also helping commodity-based marketsis the weak dollar, which is down again today. The Dollar Index is breaking through its December lows and is now at its lowest level since September of last year.
As a result of the Asian rally and the weak dollar, commodity stocks that trade in the U.S. are up this morning: Rio Tinto up 8 percent, ArcelorMittal, CNOOC and Aluminum Corp of China up 6 percent
European banks like Lloyds are also trading up mid-single digits.
3) The U.S. stock market's attempt to break out of its trading range and over its 200-daymoving average. While the S&P moved sideways for most of May, that is enough to bring it right to the door of the elusive 200-day moving average.
The S&P closed Friday at 917, the 200 day moving average is 928.60, but with futures up strong it could blow through that this morning. It has not been at the 200-day moving average since May 2008 and according to Miller Tabak has not closed above that since December, 2007.
With the futures up this morning, be on the watch for a technical milestone this week. Both the S&P [.SPX941.1121.97(+2.39%)] and the Dow Jones Industrial Averages [.DJIA8693.88193.55(+2.28%)] are poised to cross over their 200-day moving averages. This bullish indicator could push the markets even higher.
On Friday, the S&P 500 closed at 919.14 while its 200-day moving average was at 928.60 according to data from ThomsonReuters. With the futures pointing to a 13 point gain on the open, we could see a breakthrough this morning.
Similarly, the Dow closed at 8500.33 on Friday with its 200-day moving average at 8761.28, less than 261 points away from the cross over.
The announcement Monday of the changes to the 30 stocks that make up the best-known barometer of Wall Street comes as GM [GM0.900.15(+20%)] enters bankruptcy protection, a move that was widely expected.
Dow Jones said in a statement that Travelers [TRV42.261.60(+3.94%)], the property and casualty insurer and one-time division of Citigroup[C3.7380.018(+0.48%)], would replace its former parent. Cisco [CSCO19.280.78(+4.22%)], which makes computer networking gear, is filling the role left by GM after 83 years as part of the Dow.The changes take effect June 8.
LONDON -(Dow Jones)- Prospects for global economic recovery may be damaged if oil prices rise too quickly, the head of the International Energy Agency told Dow Jones Newswires Monday.
IEA Executive Director Nobuo Tanaka said he couldn't give a price that would damage the world economy, but added that it was the speed of a rise in prices that would have an impact.
"If current oil prices move up very fast in a spike, then it could have an impact on economic recovery," Tanaka told Dow Jones Newswires on the sidelines of a Chatham House coal conference in London.
Oil prices have been rising recently, partly due to the Organization of Petroleum Exporting Countries' output reductions, which began nearly nine months ago and have removed around 3.4 million barrels a day from world markets in recent months.
Although still well below the record high of $147 a barrel hit last July, prices are still up around $40 since OPEC's last meeting in March.
Last week, Saudi Oil Minister Ali Naimi said oil prices could top $75 a barrel in coming months as excess supply in the market is mopped up.
"To OPEC, we say watch the market carefully, make flexible decisions and keep the economy on the path to recovery," Tanaka said.
However, the head of the Paris-based watchdog for the world's major energy- consuming nations added that it would be good if the price was at a high enough level to stimulate investment in energy efficiency, renewable energy, while not impacting economic recovery so climate change targets can be met.
"There are many different elements that need to be taken into account when looking at oil prices," he said.
At 1140 GMT, the front-month July Brent crude contract on London's ICE futures exchange was up $1.59 at $67.11, having earlier hit a seven-month high of $ 67.69.
As has long been expected, General Motors (GM) filed for Chapter 11 bankruptcy protection on Monday morning.
The struggling automaker employs 235,000 people worldwide and saw its stock price fall below $1 last week in advance of the news.
"GM going through bankruptcy is a very positive thing for the auto industry. They should emerge as a reasonable competitor. The only thing that’s been holding GM back is labor contracts and relationships with debtors and franchisees. All that should be cleansed in a bankruptcy," Len Blum of Westwood Capital was quoted as saying in a Bloomberg News report.
Bloomberg noted that GM has lost about $88 billion since 2004 and that it and its most valuable assets are expected to be largely government-owned during the bankruptcy process.
According to a New York Times report, the company said in its bankruptcy filing that it has $82.3 billion in assets and $172.8 billion in liabilities.
The news means that in the last month, two of the "Big Three" U.S. automakers have declared bankruptcy, with Chrysler having done so at the end of April.
(RTTNews) - The UK's sterling surged up against the Swiss Franc during early New York trading on Monday. The pound rose to 1.7509 against the franc by 8:30 am ET and this set the highest mark for the pair since January 13. The next upside target for the pound-franc pair is seen at the 1.776 level. The pair that closed Friday's deals at 1.7286 is currently quoted at 1.7484.
NEW YORK (MarketWatch) -- While the U.S. government and electricity producers get ready to spend hundreds of billions to upgrade the nation's power lines and electricity infrastructure, the so-called smart grid may not be clever enough to escape economic uncertainty.
After Congress OK'd $30 billion for the electric grid, advanced battery manufacturing and energy efficiency projects, much of the money included in the $787 billion economic stimulus bill signed into law on Feb. 18 remains unused. See full story.
As utility companies prepare for the peak summer season of 2009, new efforts to update the power grid remain in limbo in the face of a new regulatory landscape and other changes affecting long-term plans for the electric generation and transmission business.
Fewer hurricanes are likely to gather over the Atlantic during the tropical storm season that starts Monday, but it would only take one or two aimed at key facilities to fan already rising oil and gas prices, analysts say.
SHANGHAI (MarketWatch) -- China will increase gasoline and diesel prices by CNY400 per metric ton each, effective Monday, an official with a sales unit under PetroChina Co. /quotes/comstock/13*!ptr/quotes/nls/ptr (PTR116.29, +1.15, +1.00%) in northern China said late Sunday.
The official, who declined to be named, said he had seen an official document released by the National Development and Reform Commission, the nation's top economic planner.
Nothing regarding the price adjustment is yet available on NDRC's official Web site.
The move represents increases of around 6% to 7% over current average gasoline and diesel retail ceiling benchmarks of CNY6,530 and CNY5,790 per ton, according to Dow Jones Newswires calculations.
The price hikes, which are already overdue under the nation's new oil product pricing mechanism, came as crude oil futures rose to a fresh six month high Friday on hopes of a recovery in global oil demand.
Light, sweet crude oil futures for July delivery on the New York Mercantile Exchange settled $1.23, or 1.9%, higher at $66.31 a barrel on Friday.
China's latest price increases will likely benefit China Petroleum & Chemical Corp. /quotes/comstock/13*!snp/quotes/nls/snp (SNP82.00, -0.72, -0.87%) and PetroChina Co., the country's major fuel suppliers, whose margins have been squeezed by having to buy crude oil at relatively high international prices but who have been unable to pass on the higher cost of this feedstock to gasoline and diesel end users.
SAN FRANCISCO (MarketWatch) - The specter of a potential bankruptcy from General Motors Corp. has given rival Ford Motor Co. a leg up in recent months as new-car shoppers have leaned toward the more stable of the two companies.
NEW YORK (MarketWatch) -- Senior officials in the Obama administration said late Sunday the U.S. government will provide $30 billion in financing to General Motors Corp. to allow it to continue to operate through a historic Chapter 11 bankruptcy, expected to last an estimated 60 to 90 days.
Officials confirmed that a majority of GM /quotes/comstock/13*!gm/quotes/nls/gm (GM0.75, -0.37, -33.04%) bond holders approved the deal to allow the ailing car maker to restructure $27 billion in debt. See full story on GM bondholders.
"For the better part of a century, the General Motors Corporation has been one of the most recognizable and largest businesses in the world," one senior U.S. official said in a prepared statement to reporters. "Today will rank as another historic day for the company -- the end of an old General Motors, and the beginning of a new one."
Describing the process as "painful but necessary," officials said GM will move ahead with plans to close 11 facilities will idle three more. Specific numbers of layoffs will come from GM, officials said.
The U.S. government will own 60% of equity in the new General Motors, with little or no control over day-to-day affairs. The U.S. government will receive approximately $8.8 billion in debt and preferred stock and will name some of the new company's board members.
Officials did not confirm or deny reports that Al Koch, a turnaround specialist, will serve as chief restructuring officer.
An additional $9.5 billion will be lent to GM by Canada and the Province of Ontario, with the Canadian government in line to own 12% of the new GM and receive approximately $1.7 billion in debt and preferred stock. The Canadian government will also have the right to select one initial director.
President Barack Obama is expected to speak about the GM bankruptcy on Monday, with the company also planning a formal announcement before the stock market opens.
SAN FRANCISCO (MarketWatch) -- The state of the U.S. job market will come into sharp relief over the next week, starting with lay-offs connected to General Motors Corp.'s likely bankruptcy and ending with the government's May jobs report.
In between, markets will absorb testimony from Federal Reserve Chairman Ben Bernanke, car sales for May, quarterly results from homebuilders and moves in benchmark U.S. bonds.
Stock investors are likely to lump all these varied data points into two piles: one that supports the idea that the U.S. economy has already started to recover, and one that says this recovery will take longer and incur more pain than prices for stocks, oil and some currencies reflect.
U.S. week ahead: GM bankruptcy looms
The week is likely to start off with the widely expected bankruptcy of General Motors. Jobs will be in focus later in the week, with the ADP data on Wednesday and the payrolls number Friday.
"Up until the middle of May, less-bad data fueled the rally. What we need to see is some good data starting to come out," said Brad Sorensen, director for market and sector analysis at Charles Schwab.
Traders are likely to start off the week with the news that GM /quotes/comstock/13*!gm/quotes/nls/gm (GM0.75, -0.37, -33.04%) has filed for bankruptcy after the 101-year-old company and a recent big creditor -- the U.S. government -- look to the legal system to restructure the auto maker's heavy liabilities.
With such an action floated by the Obama administration for weeks, the broader market has had plenty of time to factor in the major ramifications of a filing.
Tens of thousands more workers will likely seek first-time jobless claims, potentially halting a recovery in this leading indicator of job growth.
But the U.S. government's financial support for GM and its suppliers has quelled fears that a Ch. 11 reorganization filing could cause the entire sector to collapse.
"The market is anticipating they'll continue to build cars, make cars -- that's already priced in," Sorensen said.
Stocks in the week ahead will be coming off a month of healthy gains, even though the rally that started in March stumbled in recent weeks.
In May, the S&P 500 index /quotes/comstock/10u!spx.x (SPX919.14, +12.31, +1.36%) gained 5.3%, the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (INDU8,500, +96.53, +1.15%) rose 4% and the Nasdaq Composite /quotes/comstock/10y!i:comp (COMP1,759, +22.54, +1.30%) advanced 3.3%.
The judge's ruling comes as General Motors /quotes/comstock/13*!gm/quotes/nls/gm (GM0.75, -0.37, -33.04%) is expected to file under the bankruptcy laws on Monday.
Judge Arthur J. Gonzalez of U.S. Bankruptcy Court for the Southern District of New York approved the plan after ruling that the only alternative to the $2 billion sale of Chrysler's assets was liquidating the company, media reports say.
Under the plan, Chrysler will be controlled 68% by a health-care trust from the United Auto Workers union, 20% by Fiat (FIAT.Y10.64, -0.40, -3.62%) (IT:F7.58, +0.07, +0.87%) and 12% by the U.S. and Canadian governments.
Fiat will have the ability to raise its stake to 35% if it meets certain goals and to 51% as Chrysler pays back its government-provided loans, The Wall Street Journal reported.
Chrysler had filed to reorganize under the bankruptcy laws at the end of April. Cerberus Capital Management, the private-equity firm that bought Chrysler in 2007 for $7.4 billion, will see its equity in Chrysler wiped out by the agreement, The Wall Street Journal reported.
Judge Gonzalez rejected arguments from groups that objected to the sale, including Indiana state investment funds, Chrysler dealerships that will close as a result of the deal and others, media reports said.
The new company will be known as Chrysler Group LLC.
Executives and guests from InsideVenture Inc. will visit the New York Stock Exchange on Monday June 1 to announce a new IPO product. InsideVenture is unveiling changes to the initial public offering process that aims to open the IPO market to a greater number of growth companies and increase opportunities for long-term small cap investors.
To mark this special occasion, Mona DeFrawi, CEO, InsideVenture, Inc. will ring the Opening Bell, joined by David Weild, Executive Chairman, InsideVenture, Inc. and top executives of late-stage venture capital-backed companies. The late-stage venture-backed company executives participating in this bell ringing are:
Financial Engines Ray Sims, CFO
GlobalLogic Peter Harrison, CEO
IntraLinks, Inc. Andrew Damico, President & CEO
CONTACT:
Media interested in covering this NYSE bell ringing MUST contact Christiaan Brakman at 212.656.2094 or cbrakman@nyx.com.
Media interesting in phone interviews from the NYSE with InsideVenture CEO Mona DeFrawi, InsideVenture Executive Chairman David Weild, or one of the participating executives, please contact: Matthew Stotts at 415.786.2231or matthew@tenorcom.com
As previously communicated in prior client notices, the NYSE has completed its transition of Cash Equity order flow from CMS to CCG. Additionally, with the successful migration of NYSE Amex Options to the NYSE Arca trading platform, CMS will no longer be used for Options order flow. Effective start of business Monday, March 23, 2009 all CMS connections currently enabled for order flow will be decommissioned. Firms should ensure that their job streams are updated to reflect these changes and that their systems are not impacted.
For any questions, please contact your RM or our Service Desk at 1.866.873.7422.
Effective April 1, 2009 the transaction fee applicable to NYSE floor brokers taking liquidity in NYSE Amex listed securities when routing via the hand held or BBSS will be $0.0020 per share.
The Exchange is modifying the 2009 NYSE Amex Price List to clarify that floor brokers are NOT charged a fee in connection with all agency cross trades.
On March 16th, 2009, the NYSE began the implementation of its new SDBK database and has successfully deployed approximately 120 NYSE and NYSE Amex symbols to the new environment. The new database has dramatically improved performance and reduced system latencies to approximately a 5 millisecond turnaround for automatic executions. Considering the magnitude of change and the resulting latency reductions achieved only a few issues have surfaced.
To date several of these issues have been addressed. With the implementation of the next release, targeted for 5/21, the following remaining issues will be addressed:
Cancels and reports for prior day GTC Orders previously entered into SDOT will now be correctly sent back to firms via CCG.
When a cancel request is submitted for an order that is already executed, a 'Cancel Reject' will be sent instead of a 'Replaced' message and the ClientOrderID will always be populated.
The contra firm for the Odd Lot portion of a Market on Close (MOC) Partial Round Lot will be sent back to firms via CCG with the correct DMM Clearing Mnemonic.
When the Round Lot portion of a Partial Round Lot order is executed, but the Odd Lot portion is cancelled, firms will receive a 'Partial Fill' rather than a 'Full Fill'.
Duplicate Turnaround numbers will no longer be created on post trade output.
On May 12, 2009, the NYSE corrected an issue to allow the Odd Lot portion of a Partial Round Lot to be cancelled once the Round Lot portion has been fully executed.
Note: additional stocks will not be deployed on SDBK until the above release has been implemented.
MARIA BARTIROMO: The proposals coming out of the Obama Administration are the talk of the business world, particularly the tax on international profits. What are you hearing about this new proposal to tax profits differently?
DUNCAN L. NIEDERAUER: I was in Texas and California in recent weeks and probably met with 100 company executives. The reactions among many could be summarized in the following two observations. No. 1: Doesn’t the Obama Administration recognize that most [big] U.S. companies are multinationals that happen to be headquartered in the U.S.? No. 2: Doesn’t the Obama Administration appreciate that a multinational headquartered in the U.S. doing business overseas does not mean the company is evading taxes? If somebody who’s operating in the U.S. has an overseas business with a mailbox in a tax haven then obviously that is bad behavior and should be dealt with. Companies that have overseas businesses in legitimate tax jurisdictions, who pay taxes in those jurisdictions on the business they do there, that is not in the same category. And what I’m hearing from executives is that this proposal suggests we’re all behaving badly, when, in fact, I would imagine very few of us are.
