Monday, August 22, 2011

Morning Note & Options Flow Recap

August 22, 2011

US Equity futures are pointing to a higher opening in hopes of lower oil prices after news that rebel forces have taken control of Libya's capital. Rebel forces reported they had captured Moammar Kadafi’s son, Seif Islam Kadafi. Also in the spotlight, anticipation of the Fed's annual Symposium held later this week in Jackson HoleWyoming. Last year it was where the Fed announced its second round of asset purchases (QE2) which ignited a 28% rally in th S&P500. Some traders feel Treasury yields are already pricing in $500-600B in bond purchases.

Goldman Sachs reduced US GDP forecast Friday for Q3 and for Q4 to 1% and 1.5% respectively. Previously, the GDP forecast for both quarters had been 2%. The firm notes the economy is losing additional momentum, noting the recent weaker economic data.

Libor fixings 

- Overnight Libor: Dollar: 0.143% vs prior 0.142% ; Sterling: 0.580% vs prior 0.579%; Euro: 0.834% vs prior 0.831%
- 1-month Libor: Dollar: 0.217% vs prior 0.215% ; Sterling: 0.654% vs prior 0.653%; Euro: 1.293% vs prior 1.291%
- 3-month Libor: Dollar: 0.308% vs prior 0.303% ; Sterling: 0.872% vs prior 0.867%; Euro: 1.478% vs prior 1.478%

WTI +$1.25 to $83.51

Natural gas ($0.03) to $3.91

Spot Gold +$18.42 to $1870.50

10-year yield 2.1215%
30-year yield 3.4297%

Asian Markets

Asian markets rose early, but most gave up their gains and closed lower today. A 2% rise by heavyweight HSBC Holdings outweighed losses elsewhere, leading Hong Kong to a gain. Cement and construction stocks pressured Taiwan into a slight drop. Large caps dragged China down on worries about the global economy. Property shares fell, but outperformed the market, on hopes of monetary easing by the Bank of Japan. South Korea fell, though tech stocks rose on bargain-hunting. Carmakers lost 5-6% on global economic fears. Seen as defensive plays, utilities jumped 6-7%. The yen is trading at 76.47 to the US dollar.

European Markets

European equity markets opened lower in line with pre-market indications, following weaker Asian markets, a disappointing close on Wall Street and comments from German Chancellor Merkel over the weekend that EuroZone eurobonds are not the answer to the regions problems. Her comments come ahead of the second German Chancellor/ French President meeting to discuss the regions debt crisis on 24-Aug. With the end of Gaddafi's rule of Libya seemingly in sight as rebels entered and battled in the Capital, oil prices were pressured, led by Brent's declines on hopes Libyan production would shortly be back on stream, German Finance Ministry says the German economy has suffered an unexpected and obvious slowdown in growth that may continue for the remainder of 2011, though Finance Minister Schaeuble said a recession was not in sight at the moment. See below under other news for a breakdown of Euro sovereign debt crisis weekend overview. No major we economic releases scheduled. The pound and the euro are trading at $1.6471 and $1.4412 respectively

No key economic releases scheduled today.

Monday's Key Events (Eastern Time)

08:30 Seattle Genetics discusses the launch and commercialization of
Adcetris: 877.941.8609
13:00 Energen Investment Community Meeting
—:— American Society of Retina Specialists ~ ASRS
—:— Global Hunter Securities with Lihua International
—:— Global Hunter Securities with Nu Skin Enterprises

Company Specific News


DTG (Dollar Thrifty sends letter to Hertz and Avis advising of intent to solicit best and final proposals. Dollar Thrifty (DTG) announced that it has sent a letter to Hertz Global Holdings (HTZ) and Avis Budget Group (CAR) advising them of Dollar Thrifty's intention to solicit for submission in early October 2011Best and final definitive proposals regarding a potential business combination with Dollar Thrifty.)

Other News

Eurozone sovereign debt crisis:
Merkel pushes back against market pressure: The FT noted that German Chancellor Merkel urged Europe on Sunday to stand firm in the face of market pressure and the crisis gripping the Eurozone, arguing that the best solution was for states to slash public debt and boost competitiveness. She added that "politics cannot and will not simply follow the markets". She also reiterated her opposition to Eurobonds, highlighting legal hurdles such as the lengthy ratification of an amended EU Treaty and potentially difficult changes to the German constitution.
Van Rompuy opposed to Eurobonds: A number of media outlets, including Bloomberg and the WSJ, have highlighted comments from EU President Herman Van Rompuy opposing the use of Eurobonds to address Europe's debt crisis. Von Rompuy argued that there is not enough budgetary convergence in Europe for Eurobonds.
Germany warns Eurobonds would create "inflation community": Bloomberg reported that German Finance Minister Wolfgang Schaeuble said that Europe would become an "inflation community" if member countries decide to sell bonds without unifying their fiscal policies. He noted that selling Eurobonds with a single interest rate would fuel inflation and destabilize the euro as long as the euro area does not have a single budget policy.
Germany warns against Eurozone transfer union: The FT said that Germany's Bundesbank stepped up its criticism of an aid deal for Greece agreed by Eurozone leaders last month, arguing that it weakened incentives for pursuing orderly fiscal policies. It added that secondary market bond purchases did the same.
Nowotny worried about EFSF timeline delay: Reuters reported that ECB Governing Council member Ewald Nowotny recently told the Austrian magazine Profil that he is concerned that Eurozone countries will not push through parliamentary approval of changes to the EFSF bailout fund as quickly as planned. He noted that he is concerned that the end of October timeline may not hold. He reiterated that the ECB's bond buying program was "a sensible and effective instrument but not a long-term facility".
New rift threatens Greece aid: The WSJ noted that the European Commission last Friday pressed Eurozone members to resolve the latest complications surrounding the next Greek rescue package quickly or risk disrupting the bailout efforts. The article discussed how Finland's push for special treatment (ie collateral) has drawn criticism from other Eurozone members, including Austria, the Netherlands, Slovakia, Slovenia and Estonia. It also noted concerns about the complications from a deeper-than-expected recession in Greece.
Greek banks move to avert small lender failure: The FT reported that Greece's four largest banks agreed to take up a €50M convertible bank to help recapitalize Proton Bank. The paper added the deal came ahead of an expected announcement this week that several Greek lenders plan to seek emergency liquidity assistance from the Greek central bank.
Spain confident EU won't need to buy its bonds: Bloomberg reported that Spanish Finance Minister Elena Salgado said in a recent interview that she is confident that the country's deficit-reduction efforts will restore investor confidence and end the need for European authorities to support Spanish debt. She noted that “We trust the markets will give us that vote of confidence so that by our own means we will be capable of stabilizing the Spanish debt market.”
Fears over Ireland's fragile recovery: The FT noted that Ireland's main business organization, the Irish Business and Employers Confederation (Ibec), warned last week that the country's fragile recovery could be at risk if calls for more aggressive austerity measures were to gain traction.

Newspaper Articles / Headlines

All Things Digital
Skype paying about $85M for GroupMe

- The Trader: Last week Europe and U.S. concerns sent stocks down for the fourth straight week; discusses whether or not to count on QE3 if the market goes below 1100
- International Trader (Europe): France's financial stocks are struggling due to the inability of euro-zone officials to end the region's debt crisis
- International Trader (Asia): Google (GOOG) and Motorola's (MMI) deal will force Samsung (05930.KS) to become more aggressive and adopt a multi-pronged strategy.
- Current Yield: For the first time in over 50 years the Treasury 10-year slid briefly under the 2% mark last week
- The Striking Price: Suggests "buying fear" in volatile markets like Warren Buffet; suggests options.
- Commodities Corner: Weather threatens U.S. rice supply while Thailand and India's government policies increasingly favor not exporting it to global markets
- Up and Down Wall Street: Discusses the upcoming Jackson Hole Summit
- StreetWise: Discusses the economy's gloomy outlook, the possibility
of QE3 and highlights company's stronger balance sheets, specifically Corning (GLW)
- TechTrader: Hewlett-Packard (HPQ) explores the sale of its PC division and dumps the TouchPad
- Plugged In: Drops in pricing for photovoltaic products hurt solar stocks last week.
- Gadget of the Week: BMW's (BMW.GR) K 1600 GTL motorcycle.
- ETF Focus: Positive on WisdomTree Investments (WETF).
- Fund of Information: Jeffrey Gundlach and Patrick Galley's Features
RiverNorth DoubleLine Strategic Income Fund (RNDLX).
- Electronic Investor: Highlights websites that allow you to see which companies are attracting the most purchases among other things.
- Economic Beat: Discusses why Philadelphia Fed's August index of manufacturing activity might be a false positive
- Barron's interviews Ed Hyman and Bijal Shah of ISI Group. Barron's interviews Ed Hyman and Bijal Shah of ISI Group who think that the U.S. will avoid another recession, and the global economy will carry on. Hyman and Shah highlight U.S. corporate earnings, specifically companies selling to consumers in the developing world and argue that the U.S. might even outperform emerging markets over the next few years. ISI's top picks include: Adidas (ADS.GR), Polo Ralph Lauren (RL), Tiffany (TIF), Starwood Hotels & Resorts (HOT), Parker Hannifin (PH), Timken (TKR), ConocoPhillips (COP)
Barron's profile features Chip Reed co-manager of the $1.5B Eaton Vance Atlanta SMID-Cap fund. According to Barron's, Reed focuses on smaller companies with market caps rarely top $8B, which he thinks gives the fund an important edge. Barron's notes that, according to Reed, the companies tend to be easier to understand than the larger corporations and are less likely to be followed by Wall Street. Barron's reveals Eaton Vance Atlanta Capital SMID-Cap/A's (EAASX) top 10 holdings, which include: Markel Corp. (MKL), Affiliated Managers Group (AMG), Morningstar (MORN), O'Reilly Automotive (ORLY), Dentsply International (XRAY), HCC Insurance Holdings (HCC), Henry Schein (HSIC), John Wiley & Sons (JW.A), Kirby Corp. (KEX), Ansys (ANSS)
- Barron's feature discusses Ron Paul and his investment portfolio. Barron's notes that over the past 16 years Texas Republican congressman, Ron Paul, invested heavily in gold-mining stocks as his hedge against what the calls "The Great Inflation," which he has long preached is inevitable, given the extravaganceof the federal government and the easy monetary policies of the Federal Reserve. The article notes that Ron Paul's investment strategy seems to be paying off since gold and gold futures prices have been hitting record highs. The article highlights that in Paul's most recent financial disclosure, which covers the year 2010, Paul had $1.6M to $3.5M in gold- mining stocks and stake in three bear-market, is a super bearish bet against the U.S.economy. Barron's discloses that Ron Paul's top 10 holdings include: Goldcorp (GG), Barrick Gold (ABX), Newmont Mining C Stock (NEM), Agnico Eagle Mines (AEM), AngloGold Ashanti (AU), IAM Gold (IAG), Mag Silver (MVG), Pan American Silver (PAAS), Silver Wheaton (SLW), Virginia Mines (VGQ)
-  Barron's feature cautious on Sanderson Farms. Barron’s argues that Sanderson’s (SAFM) looks too high despite strong management and notes that high corn and soybean prices, low chicken prices, low chicken demand as well as an upcoming slack season could mean an uncertain future for the company. The article notes that Sanderson Farms is most exposed to the turmoil because they are the nation's fourth-largest chicken producer and the biggest pure-play company. According to Barron’s, Mike Cockrell, Sanderson's CFO, says he wouldn’t be surprised to see deeper cuts in Q4 and doubts the 5% to 6% production cuts targeted by the industry will be enough to return it to profitability, especially with the recent market volatility and low consumer confidence. The article cites Morgan Stanley's Vincent Andrews who expects the stock to drop by nearly 25% within the next 12 months, from $42 a share to $33.
- Barron's feature recommends frontier and emerging-market funds. Barron's argues that frontier and emerging-market funds are a way to buy into growth markets without having to worry about currencies and trading on overseas bourses and suggests 10 funds that could lead to gains, including: Wasatch Emerging Markets Small Cap (WAEMX), Virtus Emerging Markets Opportunities (HEMZX), Aberdeen Emerging Markets (GEGAX), Templeton Developing Markets Trust (TEDMX), Templeton Frontier Markets (TFMAX), Goldman Sachs Emerging Markets Equity (GEMAX), Vanguard MSCI Emerging Markets ETF (VWO), PowerShares DWA EM Technical Leaders (PIE), T.Rowe Price Africa & Middle East (TRAMX), BlackRock Latin America (MDLTX)
- Barron's cover highlights emerging markets. arron’s argues that a smart way to avoid the economic slowdown in Europe and the U.S. is to buy stocks in emerging markets. Barron’s points out that emerging market’s currencies have held up very well against developed economies in recent weeks and notes that healthy balance sheets have contributed to this stability. Barron’s cites Daniel Grana, PM of Putnam Emerging Markets Equity fund, who thinks that emerging market companies are more profitable, faster growing and cheaper than their developed counterparts and notes that he thinks the group is near the bottom now. Barron’s recognizes that there is risk in emerging markets such as inflation and the fact that export economies, like South Korea,Taiwan and China, would suffer if the U.S. slides back into recession. The article cites Geoffrey Dennis, who tracks emerging markets for Citigroup Global Markets, who thinks here will be a 15% to 20% gain in emerging markets between now and the end of the year. Barron’s notes that the markets they now like best are Brazil, which trades at less than eight times next year's earnings estimates; China, at 10 times; South Korea, at 7.6; India at 11.5; and Taiwan, at 10.7. Barron’s highlights stocks including: Companhia de Saneamento Basico do Estado de Sao Paulo (SBS), ADRs for Femsa (FMX), Samsung (005930.KS), ICICI Bank (IBN), iShares MSCI Taiwan index ETF (EWT) and China Mobile (CHL).

Die Welt
- Skandinaviska Enskilda Banken seeks to sell up to 90% of shares in Potsdamer Platz. The bank has only admitted up to now that it is seeking a JV partner to take 50% of the shares.

- DRAM prices headed down; unlikely to reverse course anytime soon

Economic Times
- Infosys to look at acquisitions. In an interview, new chairman KV Kamath tells the Economic Times that he would like the company to change without abandoning the ethos bred by founder NR Narayana Murthy. No specifics or even guidelines are laid out for possible purchases beyond the boilerplate "good opportunity" idea.

Financial Times
- Large Greek banks take up €50M convertible bond to recapitalize Proton Bank. The central bank announced this weekend that National Bank of Greece (ETE.GA), Alpha Bank (ALPHA.GA), EFG Eurobank (EUROB.GA), and Piraeus Bank (TPEIR.GA) took up the bond. A banker tells the FT that it was seen as essential to prevent Proton from collapsing; other bankers say the expect several banks to ask the Greek central bank for emergency liquidity assistance this week.
- Beyond Oblivion prepares to launch Boinc music service. The FT reports: If things go as planned, a full launch is expected by the end of the year. Beyond Oblivion is looking for extra money to meet the four major record labels' upfront-payment terms for access to their catalogs. The company says it is close to signing up a large PC maker and a large smartphone maker as distributors.
- Qinetiq wants Ministry of Defence to ease rules on who can own its assets. Sources close to the discussions tell the FT that Qinetic would like the government to make its rules similar to those that Rolls-Royce (RR.LN) and BAE Systems (BA.LN) are subject to, such that no one foreign investor can take more than 15% of them. Relaxed restrictions would enable Qinetic to more easily raise funds overseas or sell units. The article does not give a sense of how likely Qinetic is to achieve what it wants.
- Report says Wal-Mart passes Sony (6758.JP), Amazon (AMZN) in providing online movies in US. The FT reports that IHS Screen Digest -- whose study seems to include digital downloads and online movie rentals, but exclude subscription services like Netflix (NFLX) -- finds that in H1:
Wal-Mart's market share was 5.3% vs year-ago 1%, with the gain coming largely from Sony's share Apple (AAPL) remains solidly in first place, with 65.8% vs year-ago 64.9%. Microsoft (MSFT) was second, with 16.2% vs year-ago 18.5%.
- British banks moving hard-to-sell assets from balance sheets into staff pension funds. The FT reports that HSBC (HSBA.LN) and Lloyds (LLOY.LN) have played the game, as revealed with minimal detail in their annual reports, and Royal Bank of Scotland (RBS.LN) is thought to have considered a similar move, though it has not yet carried it out. The idea reduces pension fund deficits as well as getting the hard-to-sell assets off the banks' books.
- Hewlett-Packard executives defending company's new strategy to shareholders. In an interview, CEO Leo Apotheker tells the FT that spinning off the company's PC line will lead to better margins, and the $40B in revenue will be recovered -- though he appears not to give any timelines.
- VTB Bank gives up acquisition plans. The FT reports that CEO Andrei Kostin says the bank will follow suggestions from shareholders that it focus on what it has. He says there are now "no plans to make acquisitions in the countries where we are already present or in new countries.” The context of his comments is unclear.

- Motorola (MMI)-Google (GOOG) deal has handset makers thinking about Windows Phone 7 (MSFT). The CEO of INQ (13.HK) tells GigaOm that vendors are "very seriously considering" adopting Windows Mobile rather than maintaining their dependance on Android.

Globe and Mail
- HSBC Holdings trying to sell its Canadian retail brokerage. Without citing sources, the Globe and Mail reports that at least one interested party is looking at the books, and a formal deal could come soon. The sale flies in the face of comments made by CEO Stuart Gulliver, that the bank's Canadian operations would be untouched by HSBC's global revamp. The article says that National Bank Financial (NA.CN) is thought to be interested in the unit, which manages more than C$30B of investors' funds. HSBC's personal banking operations in Canada are not up for sale.

LA Times
- Grocery workers union overwhelmingly authorizes strike against Ralphs (KR), Vons (SWY), and Albertsons (SVU)

New York Post
Apollo Management (APO) to bid for 99 Cents Only. Sources tell the NY Post that other private-equity firms could become involved as NDN exits the exclusive talks with Leonard Green regarding a $19.09/share going-private transaction and opens itself up to other potential buyers. A source says the company has set a mid-September bidding deadline, and Leonard Green is still welcome to participate.

- Japanese mobile-phone companies bringing investments in high-speed networks forward. Without citing sources, the Nikkei reports that NTT DoCoMo (9427.JP) may move ¥20-30B it had planned to invest next FY into this FY, when it had already planned to spend ¥100B to expand its Xi LTE network. KDDI (9433.JP) will spend ¥300B over four years to catch up to NTT DoCoMo.

South China Morning Post
MetLife banking on Snoopy to help with Asian expansion. Chairman Robert Henrikson tells the SCMP that the insurer plans to have people dress as the iconic beagle and meet Hong Kongcustomers in Citi (C) and Fubon Bank (636.HK) branches. He says MetLife is focused on growing organically, though acquisitions -- including of ING Group's (INGA.NA) insurance business -- are possible.

The Independent on Sunday
- JD Sports Fashion looks to expand into France. The Independent on Sunday reports that JD Sports is planning a serious expansion into France, adding at least 100 stores. The article notes that in 2009, JD bought French sportswear brand Chausport, which has 75 stores throughout France. The Independent on Sunday notes that JD Sports has hired Cushman & Wakefield to look for more sites for the chain.

The Mail on Sunday
- BP in talks with EnQuest to acquire assets worth up to £400M. The article notes that last year, BP (BP) put several ageing oil and gas fields in the region up for sale, including the first ever commercial discovery in the British sector of the North Sea at West Sole.

The Sunday Times
Anglo American prepares to bid for Macarthur. The Sunday Times reports that Anglo American (AAL.LN) is preparing to enter the £3B takeover battle for Macarthur (MCC.AU), putting Anglo American on a collision course with steel tycoon, Lakshmi Mittal. The article reports that, according to sources close to the situation, Anglo could launch a joint bid with Citic, the investment arm of the Chinese state and Macarthur’s biggest shareholder with a 22% stake. The Sunday Times notes that Arcelor Mittal (MT.NA), Macarthur’s second
largest investor with 16%, wants to buy the Macarthur to secure its supply of coking coal, a key ingredient in the steel-making process.
-  Foster's group Limited considers giving cash to shareholders to ward off SAB Miller. The Sunday Times reports that Foster’s is considering a handing cash to shareholders in an effort to fend off a £6B hostile bid from SAB Miller (SAB.LN). The article notes that Foster will launch its fightback against SAB Miller with its annual results on Tuesday. According to The Sunday Times, some analysts expect dull figures but John Pollaers, Foster’s CEO, will try to show that his plan to revive the company is on track with the company's annual results.
- Transocean puts oil exploration arm up for sale. The Sunday Times reports that Transocean has put its oil exploration arm up for sale. The article notes that the company has hired Bank of America Merrill Lynch to sell Challenger Minerals. According to The Sunday Times, Transocean hopes to get £60M for the division, which owns fields in the North Sea, Gulf of Mexico andGhana. The article notes that BP said Transocean was partly responsible for the oil spill but Transocean denies this.

The Telegraph
Real Estate Opportunities looks to sell 50% stake in Battersea Power Station. According to The Telegraph, Real Estate Opportunities (REO.LN) is looking to sell a 50% stake in  Battersea Power Station in order to fund a £5.5B regeneration project. The article notes that progress has been delayed and faces August 31 maturities on more than £400M of debt. The Telegraph reports that Lloyds Banking Group is understood to have appointed Ernst & Young to review the sales process and to provide insolvency advice. The article notes that Lloyds Banking Group, with Ireland's National Asset Management Agency, has a £260M facility secured against the scheme due to expire on August 31. According to sources close to REO, banks were "supportive" of the sale process and Ernst &Young has been brought in to analyze offers. The Telegraph notes that it is understood that Sovereign wealth funds
have expressed an interest in acquiring a 50% stake in Battersea Power Station. The article reports that REO is now also considering the sale of the entire site, valued at £500M, and maintaining interest through a profit-share agreement.
Royal Dutch Shell closes leaking oil valve after 12 days. The WSJ reports that divers have switched off a valve which leaked around 1,600Barrels into the ocean over the course of the spill. The article notes that this is just the beginning for Shell as it will have to remove oil trapped in the pipeline between the sealed off well and the platform. The Telegraph notes that the Marine Coastguard’s most recent estimate is that the sheen currently covers an area of 6.7 square kms and 26Barrels by volume.

Vancouver Sun
- Catalyst Paper looks for company to buy it friendly. In an interview, president Kevin Clarke says the sector needs to consolidate, and his company doesn't have the capital to be a buyer. The article notes that AbitibiBowater (ABH.CN) is frequently rumored to be a possible buyer.

Wall Street Journal
Latin American countries except El Salvador expecting larger harvests. Citing a survey of national coffee organizations, the WSJ reports that the countries' combined output will rise at least 2% for the season beginning 1-Oct, which could result in lower prices.
Patent-infringement suits all the rage in cell phone sector. The article is a summary, breaking no news, but raising eyebrows with the long lists of suits that have been filed. To name a few: Acacia Research (ACTG) has filed patent-infringement charges against many smart phone companies, some of which have settled. Acacia may complicate Hewlett-Packard's (HPQ) selling its webOS patents, if it chooses to do so. Google (GOOG) says that Microsoft (MSFT), Apple (AAPL), and Oracle (ORCL) are using "bogus" patents to interfere with Android.
US newspaper companies reducing projections for ad revenues. The article breaks no news, simply summarizing H1 results and comments made in conference calls.
Competition for Hulu heats up. The article largely summarizes the situation without breaking much new news. One person familiar with the matter tells the WSJ that some of the initial bidders will probably give a range of $500M-2.0B for Hulu; the range is wide because the final price will depend on exactly what shows Hulu will license the buyer for how long. Different sources give different opinions, saying: A sale is anywhere from 50% likely to "very likely." The sellers expect to take in a few billion dollars, which the article notes is less than the bid ranges that sources are giving.
Google (GOOG), Yahoo (YHOO), Amazon (AMZN), and DirecTV (DTV) are expected to put in first-round bids by the 24-Aug deadline.
Global foreclosure settlement being held up by disagreements on legal immunity. Citing sources from both sides, the WSJ adds some detail to what the NY Post reported 18-Aug: Federal and state officials still want to impose $20-25B penalties The banks want a deal and are willing to pay the money, but only if they can get a "wide-ranging legal release" from state AGs. The officials have no interest in granting broad immunity, but narrower immunity agreements are possible. The banks are considering accepting a settlement that 80% of states would agree to.
Verizon employees' returning to work seen as retreat. The article does not add any news to the 20-Aug announcement that people would be going back to work even though no new agreements have been struck.
Competition for Hulu heats up. The article largely summarizes the situation without breaking much new news. One person familiar with the matter tells the WSJ that some of the initial bidders will probably give a range of $500M-2.0B for Hulu; the range is wide because the final price will depend on exactly what shows Hulu will license the buyer for how long. Different sources give different opinions, saying:
A sale is anywhere from 50% likely to "very likely." The sellers expect to take in a few billion dollars, which the article notes is less than the bid ranges that sources are giving. Google (GOOG), Yahoo (YHOO), Amazon (AMZN), and DirecTV (DTV) are expected to put in first-round bids by the 24-Aug deadline.
Investor groups oppose proposed SEC rule to shorten 13D filing time frame. According to the WSJ, an assorted group of investors including BlackRock (BLK), TlAA-CREF and T. Rowe Price (TROW), among others, are lobbying against a proposed change in a federal rule that would speed up the time frame for alerting the public to the accrual of shares in a company. The WSJ notes that the proposed change was submitted to the SEC in March by corporate law firm Wachtell, Lipton, Rosen & Katz. The article point out that Wachtell's proposal would significantly shrink the time frame for an investor who crosses 5% ownership of stock in a public company to file a report revealing the size of the stake to one day from 10 days. The article points out that those opposing the change say it could limit activism that has benefited shareholders largely and note that investors who sell in the days just before a 13(D) filing do so willingly at a price they deem appropriate to sell. Tom Quaadman, an official at The U.S. Chamber of Commerce, notes that the Chamber is studying the proposed change and generally supports "increased disclosure" and recognizes that a 10 day period may be too long but also notes that one day may be too short. The newspaper reports that Meredith Cross, director of the SEC's division of corporation finance, said that the SEC has planned a broad review of Regulation 13D beneficial ownership reporting rules for next year and plans to discuss whether the 10-day period should be shortened.
- Sina (SINA) obtains 4% stake of Tudou Holdings for $40M. Sina's CEO says that besides the direct stakeholding, Sina may also form a strategic alliance with Tudou in website video. The companies will take advantage of each other’s advertisement resources, packaging up the ads and trying to catch up with Youku (YOKU). Analysts say that Sina may have chosen Tudou because its market value is only a quarter of Youku's. Before the investment, Baidu (BIDU) was another potential buyer of Tudou.
Oil prices mixed as Gaddafi teeters on the brink. Brent crude oil prices fell after Libyan rebels swept into the heart of Tripoli, although Muammar Gaddafi's forces have begun a counter attack reportedly led by Gaddafi's son Khamis, and they controlled about 15%-20% of the city as of earlier in the day. Brent crude was -1.8% at $106.71 midday in Europe, but Nymex recovered from earlier losses and was +1.3% at $83.36 due to a weaker dollar. Brent is more exposed to supply and demand fluctuations in the international oil market than Nymex. Analysts reckon that while it may take years for Libya's oil production to fully recover if and when Gaddafi falls, output of up to 1M bpd could be feasible within months.ConvaTec enters bidding for Kinetic. ConvaTec has reportedly made an offer for rival Kinetic Concepts (KCI) that tops the wound-care company's $6.3B agreement with a consortium comprising Apax Partners and two Canadian pension funds. The Apax group is looking to borrow $5B of the deal amount, which would make it the largest leveraged buyout since the financial crisis.
Verizon workers to return to work. Verizon (VZ) looks set to avoid losses from a prolonged walkout, with 45,000 workers due to start returning to work this evening after a 15-day strike. However, the stoppage will end without unions obtaining a deal over the telecom carrier's demands for concessions on pensions, health care and job security. Negotiations over a new contract will continue, but it looks like the company's decision to suspend health benefits at the end of the month may have helped persuade workers to end the strike for now.
Fed lending hit $1.2T during crisis. As the Fed fought to save the global financial system in 2008, lending to banks under seven programs tallied by Bloomberg reached a peak of $1.2T early in the December, almost three times the U.S. budget deficit that year. The largest borrower was Morgan Stanley (MS) with up to $107.3B in loans, while Citigroup (C) took $99.5B and BofA (BAC) $91.4B. "You're talking about the aristocracy of American finance going down the tubes without the federal money," said a former DOJ official. In addition, almost half of the Fed's top 30 borrowers, as measured by peak balances, were European firms.
Dollar Thrifty requests final takeover bids. Looking to end a long-running bidding war and uncertainty over its future, Dollar Thrifty (DTG) has told Hertz (HTZ) and Avis (CAR) to make "best and final" acquisition offers by early October. However, the suitors are unlikely to submit such proposals until they know they can get antitrust clearance, sources say. Based on Friday's closing prices, Hertz's offer is valued at $1.91B and Avis’ at $1.55B.
Lowe's to buy back $5B in shares. Lowe's (LOW) has authorized a $5B share buyback and said it expects to complete the program over the next two-to-three years. The U.S. home improvement chain also declared a regular quarterly dividend of $0.14 a share.
CCB unaware of prospective BofA stake sales. Bank of America (BAC) has not told China Construction Bank (CICHF.PK) that it plans to sell any of its $17B holding in the Asian company, CCB Chairman Guo Shuqing said today. His comments follow reports BofA has held initial talks to sell some of its stake to the principal investment funds of Kuwait and Qatar. CCB also said it has extended its co-operation agreement with BofA until the end of next year and is in negotiations to lengthen it for another five years.
Merkel again rejects eurobonds. Angela Merkel yesterday reiterated her opposition to eurobonds despite increasing pressure within the EU and among investors, saying they are "not the answer" to solve the eurozone's debt crisis. "Politicians can't and won't simply run after the markets," Merkel said. The finance ministry believes eurobonds would cost the country €2.5B ($3.6B) in extra interest in the first year and twice that in the second; by the tenth year the expense would soar to €20-25B.
Germany sees slowdown continuing through year-end. Germany's finance ministry said the country's "unexpected, obvious slowdown" may continue through to the end of 2011, with the main causes of the softening including the stuttering U.S. economy and market volatility. Another factor, private consumption, could keep faltering after falling in Q2 because of the uncertainties caused by the eurozone debt crisis. Germany should end 2011 with a GDP deficit of 1.5%, less than previously forecast.
White House pressures NY AG over foreclosure deal. The Obama administration has put increasing pressure on New York Attorney General Eric Schneiderman to drop his opposition to a settlement with major banks over inappropriate foreclosure practices, sources say. Schneiderman and his counterparts in some other states object to the deal because it would restrict their ability to prosecute wrongdoing in a variety of areas, including the securitization of mortgages.
Samsung C&T mulls bid for Parallel Petroleum. South Korean trading firm Samsung C&T said it is considering buying Parallel Petroleum from Apollo Global Management (APO), with a media report saying a deal for the U.S. oil firm might be worth almost $1B.
South Korea indicts Deutsche Bank staff. South Korean prosecutors have charged four Deutsche Bank (DB) employees and the bank's brokerage in the country for manipulating stock prices and making "unfair" profits during a one-day stock rout in November that wiped $27B in value from South Korean shares. Deutsche Bank has denied any wrongdoing.
Three banks shut. Regulators closed three banks on Friday, bringing the total failures so far this year to 68. The banks were in Florida, Georgia and Illinois, with the cost to the FDIC's insurance fund expected to be a combined $363.8M. 


Auriga: upgraded HPQ, SPWRA
Bank of America Merrill Lynch: upgraded EJ; downgraded AGU, IPI
CapStone: upgraded UA
Citi: upgraded PEG, ECL, NEM,
Credit Suisse: upgraded SLM
Davenport: upgraded AA
Goldman Sachs: upgraded HTHT

HSBC: upgraded YGE; downgraded YZC
Needham: upgraded HIBB
Piper Jaffray: upgraded ACAT, PII
Scotia Capital: upgraded POT
Stifel Nicolaus: upgraded CHCO, FCBC, UBSI, WSBC, AF, DCOM, FCF, FULT, HVB, ISBC, PBCT, {FS, TRST, WBS, SUSQ; downgraded FXCB, STL
William Blair: downgraded SSNC


Notable option market trades from Friday’s session:

Macro / Thematic

IWM - 19,000 of the September 75 calls were bought for $0.25.

SPY – 100,000 of the September 98 / 108 put spread was bought for $1.72. The put spread was bought to open.

TLT - 20,000 of the October 101 / 90 1x2 put spread was bought versus a sale of 20,000 of the October 128 calls for a $0.22 net debit. The legged trade was against 420,000 shares for $110.50.

UUP - 11,000 of the August / December 21 call spread was bought for $0.54. The December 21 calls were bought to open.

XLF - 40,000 of the October 10 puts were bought for $0.45. 50,000 of the September 11 puts were bought for $0.39. Both were bought to open.


BBY – 15,000 of the September 20 puts were bought for $0.35. The put were bought to open.

LEN - 13,000 of the September 13 / 16 put spread was bought for $2.20. It appears to be a roll down in strikes.

MGM – 22,500 of the January’13 7.5 puts were sold at $1.80. It is possibly a closing trade.

NWSA – 50,000 of the January’13 20 / 25 call spread was bought for $0.90. It looks opening and was tied to stock at $15.85 on an 18 delta.

SNE - 8500 of the October 23 calls were bought for ~$0.60. The calls were bought to open.


COP - 2000 of the January 70 straddle appeared to be sold at $12.40.

RRC - 2000 of the December 75 calls were sold at $1.77. The calls were sold to open.

Industrials / Materials

GG - 10,000 of the August 49 / September 52.5 call spread was bought for $0.504. The trade was tied to stock on a 50 delta.

HRBN - 4000 of the August / September 20 put spread was bought for $1.95. The trade was a roll from August 20s to the September 20s.

NEM - 2725 of the December 60 / January 67.5 call spread was bought for $2.50.

TIN - 10,000 of the August 26 / 30 risk reversal was sold to close to buy the September 22 / 25 bearish risk reversal to open. The investor collected $1.60 on the four legged trade.

UTX - 2200 of the January 80 calls were sold at $1.54.


CTL - 3780 of the October 35 calls were sold at $0.85. The calls were sold to open.

QCOM - 10,000 of the January 55 calls were sold against 10,000 of the January 47.5 synthetic long. The trade is effectively a buy write.


MCO - 7000 of the August / November 35 put spread appeared to be sold at $0.65. The trade appears to be a roll of a short put position from August to November


PFE - 8800 of the October 19 puts were bought for $0.44 tied to 281,600 shares of stock at $17.84 on a 32 delta. 

 *Special thanks to Option Radar, BMO Capital, MEB Options, Bloomberg, Reuters, Optionistics, LiveVolPro, CBOE, AMEX, Option Monster, T.O.P. group, and all of the options desks and traders we work with to provide the option flow! 

 No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.


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