Market Outlook for 15th Sep 2009

INTRADAY calls for 15th Sep 2009
+ve sector , scripts : Hydrabadind, Repro
BUY TATASTEEL-478 for 499-507+ with sl 470
BUY Prakash-153 for 160-167+ with sl 150

BUY Aartidrugs-82 for 88+ with sl 80
BUY Subex-79 for 88+ with sl76
BUY Eastsilk-16 for 20+ with sl 14.50

 

NIFTY FUTURE LEVELS
RESISTANCE
4836
4844
4862
4880
4898
SUPPORT
4812
4808
4804
4790
4772
4754
Buy DHUNSERI TEA & INDS;PNBGILTS

 

Strong & Weak  futures  

This is list of 10 strong futures:

Bhushan steel, Orient Bank, Jindal Saw, Chennai Petro, IOB, Allahabad Bank, Tata Motors, Patel Engineering, Hindalco & Aban Off shore.

And this is list of 10 Weak futures:

McDowell, TV-18, IDEA, Dish TV, ACC, FinanTech, India Cements, Tata Comm, TTML & Container Co.

Nifty is in Up trend

 

NIFTY FUTURES (F & O):
Above 4836 level, expect short covering up to 4842-4844 zone and thereafter expect a jump up to 4860-4862 zone by non-stop.

Multiple Support at 4808-4810 zone & at 4812 level. Below these levels, selling may continue up to 4804 level and thereafter slide may continue up to 4790-4792 zone by non-stop.

Below 4772-4774 zone, expect panic up to 4754-4756 zone by non-stop.

On Positive Side, cross above 4878-4880 zone can take it up to 4896-4898 zone by non-stop. Supply expected at around this zone and have caution.
 
Short-Term Investors:
Bullish Trend. 3 closes above 4780.25 level, it can zoom up to 4999.55 level by non-stop. 

 

BSE SENSEX:
Higher opening expected. Profit Booking should happen. 

Short-Term Investors:
Short-Term trend is Bullish and target at around 16824.77 level on upper side.
Maintain a Stop Loss at 16044.77 level for your long positions too.

 

POSITIONAL BUY:
Buy DHUNSERI TEA & INDS (NSE Cash) 
Uptrend may continue.

Support at 164 level and correction up to this level is possible. Traders can expect uptrend up to 167 level. If crosses 169 level then it will zoom.

Keep a Stop Loss at 162 level for your long positions.
 
Buy PNB GILTS (NSE Cash) 
Uptrend may continue.

Support at 29 level and correction up to this level is possible. Traders can expect uptrend up to 32 level. If crosses 33 level then it will zoom.

Keep a Stop Loss at 28 level for your long positions.

Global Cues & Rupee
The Dow Jones Industrial Average closed at 9,626.80. Up by 21.39 points.
The Broader S&P 500 closed at 1,049.34. Up by 6.61 points.

The Nasdaq Composite Index closed at 2,091.78. Up by 10.88 points.

The partially convertible rupee INR=IN closed at 48.74/75 per dollar on yesterday, weaker than Friday's close of 48.48/49.
 

FII DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	14-Sep-2009	1621.53	1665.93	-44.4

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	14-Sep-2009	1168.69	1174.8	-6.11

 

 Interesting findings on web:
The Dow rose 21.39, or 0.2 percent, to 9,626.80. The broader Standard & Poor's 500 index rose 6.61, or 0.6 percent, to 1,049.34, an 11-month high. The Nasdaq composite index rose 10.88, or 0.5 percent, to 2,091.78.

The Russell 2000 index of smaller companies rose 6.44, or 1.1 percent, to 600.03.

Major market indexes ended at their highest levels in nearly a year.

For the year:

The Dow is up 850.41, or 9.7 percent.

The S&P is up 146.09, or 16.2 percent.

The Nasdaq is up 514.75, or 32.6 percent.

U.S. stocks ended higher on Monday after gains in utilities and industrial shares offset concerns about the potential trade war between U.S and China.

Stocks retreated in early trading after China, the world's fastest growing major economy, said it's probing U.S. sales of chicken and auto products for "unfair trade practices," after the U.S. imposed tariffs on Chinese tires last Friday. Traders worried about the growing tension coming ahead of the G-20 summit later this month in Pittsburgh.

Stocks had started the day lower as a trade dispute between the US and China rattled the market. The rift started on Friday, when President Obama announced tariffs against tires from China, which followed up Monday by asking the World Trade Organization to intervene. The tariffs came on the heels of a union complaint that a surge of imports of the Chinese tires were taking away American jobs.

"You don't want to be messing with your biggest trading partner who holds most of your debt," Joe Saluzzi, co-manager of trading at Themis Trading, told Reuters. The economy "is still teetering on all sorts of edges here. Something like this could be the spark that sends us lower."

Shares of AES [AES  14.79    0.64  (+4.52%)   ] shot up 4.5 percent, while the S&P utilities index gained 1.4 percent after the Wall Street Journal reported that China and AES were in talks. AES owns 14 utilities, has 11 million customers and $16 billion in annual revenue.

This was just the latest buzz about M&A activity.

Stocks have clawed back from early losses to post moderate gains as traders push into utilities and industrial companies.

The day's early losses are tied to fears that a trade war could erupt between the U.S. and China. The U.S. has imposed trade penalties on tires coming from that country.

Utilities have pulled the market higher following a report of a takeover in the industry.

Investors funneled money into utilities and industrial stocks, helping the market carve out modest gains after early losses.

Stocks rose after zigzagging in a tight range for much of trading Monday. Stocks recovered from steep losses at the open that came on worries about a trade dispute between the U.S. and China.

The Dow Jones industrial average, which had been down more than 100 points in the early going, rose slightly in the final hour of trading. Other major indexes also rose.

The U.S. government late Friday imposed trade penalties on tires coming from China. The Chinese government filed a complaint with the World Trade Organization. Investors had worried it would erupt into a tariff war that could damage an economic recovery.

Traders reacted coolly to a speech from President Barack Obama, who warned the financial industry against the type of recklessness that led to the collapse of the brokerage Lehman Brothers Holdings Inc. one year ago. That event sent the Dow down 500 points in one day and led to a freeze in the credit markets that power the world's economies. The Dow is still down 12 percent from that time.

In sharp contrast to the tumult of a year ago, traders made only modest moves on Monday. Traders withdrew money from tech stocks, which have posted sharp gains this year, and moved it into areas that have lagged, like industrial stocks.

Richard Ross, global technical strategist at Auerbach Grayson in New York, said the economy still faces obstacles but that the market could extend its recovery because investors are more optimistic than when major stock indicators plunged to 12-year lows in early March.

"Questions remain but a lot of the uncertainty has largely been removed. That sort of doomsday scenario has been taken off the table," he said. "We're striking a much healthier balance between greed and fear."

Randy Cass, founder of financial services research group First Coverage in Boston, said stocks could push higher as year-end approaches because many investors are looking past weak economic numbers toward an eventual recovery.

"They have made their bets and the chips have been on the table since the first part of March," he said, referring to the start of the rally.

Student lender Sallie Mae weighed on financial stocks after Fitch Ratings downgraded the corporate ratings of SLM Corp., the company's formal name, and said the outlook is negative.

Analysts drew encouragement by the market's ability to hold the strong gains of last week and a six-month run in stocks that has left the Standard & Poor's 500 index up more than 50 percent.

Adam Gould, senior portfolio manager at Direxion Funds in New York, is encouraged to see investors step in to buy when the market dips.

"We open lower and buyers seem to chip away, and we climb higher," he said. "It's somewhat healthy that we're rallying this way — slowly."

Investors have little economic news to provide insight into whether they have been right to bet on an economic recovery since stocks tumbled to 12-year lows in March. Reports on retail sales, inflation, industrial production and housing are due later in the week.

Improvements in consumer spending and the housing market are considered crucial to allowing the economy to mount a strong rebound.

Gould would like to see the market make steady gains and not rocket higher the way it did in March, at the start of the six-month rally.

"If we're up one to two percent every week — that's pretty good as opposed to being up four percent and down six percent," he said.

In downturns in the past 60 years, the S&P 500 index has hit bottom an average of four months before a recession ended and about nine months before unemployment reached its peak.

Shares of Sprint Nextel [S  4.15    0.38  (+10.08%)   ] jumped 10 percent following a report in Britain's Sunday Telegraph newspaper that Deutsche Telekom was considering making a bid for the phone carrier. Sources told CNBC that Sprint is not aware of any Deutsche Telekom bid.

Fallout also continued from Kraft's [KFT  26.11    0.01  (+0.04%)   ] failed bid for Cadbury. The British chocolatier released a letter saying the offer failed to reflect the company's true value, and also said Kraft's low-growth conglomerate business model didn't fit in with Cadbury's strategy.

And Johnson & Johnson [JNJ  60.34    -0.08  (-0.13%)   ] is in talks to cut the price of its $1.5 billion merger with Irish drugmaker Elan for an 18.4-percent stake in the company and its drug pipeline.

General Electric [GE  15.35    0.68  (+4.64%)   ] was the biggest gainer on the Dow, followed by JPMorgan [JPM  43.75    1.25  (+2.94%)   ] and DuPont [DD  32.28    0.47  (+1.48%)   ].

GE shot up more than 4 percent, topping $15 for the first time since January. After breaking through that level, the pace of buying accelerated further.

Banks, including JPMorgan, advanced as they are typically among the biggest beneficiaries of M&A deals.

But Bank of America's [BAC  16.99    0.02  (+0.12%)   ] gain was modest following news that a judge hasrejected its $33 million settlement with the SEC over Merrill Lynch bonuses and several BofA executives face charges over their handling of the deal.

Drug stocks were higher from the getgo as investors took some defensive positions.

Eli Lilly [LLY  33.13    0.31  (+0.94%)   ] rose 1 percent after the drug maker announced plans to cut $1 billion in costs and 5,500 jobs over the next two years. Lilly also backed its full-year non-GAAP forecast of $4.20 to $4.30 a share.

Shares of Salix Pharmaceuticals [SLXP  20.2201    6.8401  (+51.12%)   ] surged more than 50 percent after the drug maker said its Rifaximin irritable bowl syndrome had met the main goals of late-stage studies.

And Dendreon [DNDN  27.46    3.62  (+15.18%)   ] shares soared 15 percent amid speculation that the company, which is working on a prostate cancer vaccine, is a takeover target.

As the market started to turn around, techs, banks and retail also gained.

Volatility began to subside in the market: The CBOE volatility index settled below 24.

President Obama's speech on financial reform had little impact on the market.

The president said there is still a need for government help to stabilize the financial system but the need is waning. He also said that taxpayers have earned a 17-percent return on the taxpayer-funded bailout measures.

Volume was below average, with 1.21 billion shares changing hands on the New York Stock Exchange. Advancers outpaced decliners, roughly 2 to 1.

Oil,Gold & Currencies:

Oil prices fell as the dollar, which has hit a succession of 12-month lows in recent days, firmed a bit. US light, sweet crude [US@CL.1  68.83    -0.03  (-0.04%)   ] dropped below $69 a barrel.

Gold prices fell.

The dollar traded mixed against other major currencies.

The dollar traded near the weakest level this year against the euro as record-low borrowing costs encouraged investors to sell the greenback and buy higher- yielding assets outside the world's largest economy.

The euro was near a nine-month high against the dollar before a German report economists said will show investor confidence rose to the highest in more than three years. The dollar slid to the lowest in more than a year against the Swiss franc after Federal Reserve Bank of San Francisco President Janet Yellen said policy makers must guard against inflation becoming too low rather than too high.

"The bulk of the liquidity created in the dollar is now shifting into non-U.S. assets amid signs of an easing of the recession," said Akira Takeuchi, a Tokyo-based currency dealer at Chuo Mitsui Trust & Banking Co., a unit of Japan's seventh- largest banking group. "Without some signal that the U.S. is ready to pull back on monetary easing, the dollar will continue to weaken."

The dollar traded at $1.4607 per euro as of 10:42 a.m. in Tokyo from $1.4618 yesterday in New York when it fell to $1.4653, the weakest level since Dec. 18. The yen was at 91.01 per dollar from 90.94 yesterday when it rose to 90.21, the strongest level since Feb. 12. The yen bought 133.30 per euro from 132.94.

The U.S. currency was at 1.0352 francs from 1.0345 francs yesterday after declining to 1.0323, the lowest since July 2008.

Record Low

The cost of three-month loans in dollars between banks dropped yesterday to a record low of 0.295 percent, according to the British Bankers' Association. The London interbank offered rate, or Libor, slid below that of the Swiss franc on Sept. 8 for the first time since November.

The Dollar Index traded near the lowest level in almost a year after Yellen said there's a "fear," which is "real, growing and disruptive," that the Fed will be unable to withdraw its $1 trillion expansion of credit.

"We face an economy with substantial slack, prospects for only moderate growth, and low and declining inflation," Yellen said yesterday in a speech in San Francisco. Until the time comes to raise interest rates, "we need to defend our price stability goal on the low side and promote full employment," she said.

Dollar Index

The Dollar Index, which ICE uses to track the U.S. currency against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, fell to 76.626 from 76.653. It dropped to 76.457 on Sept. 11, the lowest since Sept. 25, 2008.

The U.S. target lending rate of zero to 0.25 percent compares with 8.75 percent in Brazil and 1.25 percent in Norway.

The euro may strengthen before the ZEW Center for European Economic Research releases its index of investor and analyst expectations today. The index increased to 60 in September from 56.1 in August, according to a Bloomberg News survey of economists.

A reading of 60 would be the highest since April 2006. Europe's economy probably returned to growth in the current quarter after governments spent billions of euros to pull the region out of recession, the European Union said yesterday.

"The outlook for the euro-zone economy is improving," said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd. "A good ZEW report would likely send the euro to a new high."

The European Central Bank on Sept. 3 kept its key rate at 1 percent to boost spending. The Frankfurt-based central bank is providing lenders with unlimited cash for 12 months and is buying covered bonds to counter the slump.

Adding to signs the global recession is easing, U.S. retail sales likely advanced 1.9 percent in August, after declining 0.1 percent in the previous month, according to a separate Bloomberg survey of economists.

U.K. Housing Market

The pound gained for the first time in three days against the yen after a U.K. report today showed more surveyors reported a gain in British home values than a drop for the first time in two years.

The number of U.K. respondents saying prices rose in August exceeded those reporting declines by 11 percentage points, the first positive reading since July 2007, the London-based Royal Institution of Chartered Surveyors said.

"The RICS data indicates the U.K. housing market may have stabilized, suggesting the economy is on the mend," said Takashi Kudo, director of foreign-exchange sales at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. in Tokyo. "This is likely to be positive for risk appetite, thereby leading to selling of the yen and buying of the pound."

The Bank of England last week said it won't expand its 175 billion pound ($291 billion) asset-purchase program and kept its benchmark interest rate at 0.5 percent.

The pound rose to 151.17 yen from 150.81 yen, and the U.K. currency climbed to $1.6607 from $1.6583 in New York yesterday.

Bonds:

Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.43 percent from 3.35 percent late Friday.

What to expect:

TUESDAY: PPI; retail sales; Empire State survey; business inventories; earnings from Best Buy, Adobe

WEDNESDAY: Weekly mortgage applications; CPI; current account; industrial production; weekly crude inventories; earnings from Oracle

THURSDAY: Housing starts; weekly jobless claims; Philly Fed; Earnings from FedEx

FRIDAY: Quadruple witching

Asia:

Stocks in Asia fluctuated as phone and finance companies dropped, while mining shares advanced, leaving the MSCI Asia Pacific Index little changed a year after the collapse of Lehman Brothers Holdings Inc.

Telstra Corp., Australia's largest phone operator, sank 4.6 percent after the government said the company should split its retail and wholesale businesses. Consumer lender Aiful Corp. slumped 7.9 percent in Tokyo, falling for a second day after Standard & Poor's said it may cut its credit rating. Rio Tinto Group, the world's No. 3 mining company, rose 1.1 percent after agreeing to sell a stake in a cable division.

The MSCI Asia Pacific Index was little changed at 115.82 as of 11:12 a.m. in Tokyo. The gauge has recovered all its losses in the past year as the panic caused by the collapse of Lehman and American International Group Inc. abated.

"The worst is behind us, but we aren't sure how well or badly the economy will fare next year," said Hiroshi Morikawa, a strategist at MU Investments Co., which manages the equivalent of $14 billion in Tokyo. "What's changed after Lehman was that financial companies have reduced leverage using debts, but there are still lots of things off their books, which keeps investors nervous." 

Nikkei 225 10,213.70     +11.64 ( +0.11%). (08.29 AM IST)

Japan's Nikkei stock average eked out gains of 0.1 percent on Tuesday, buoyed by Toyota Motor Corp (7203.T) and other exporters as the yen fell against the dollar, but worries that it may only be a brief respite limited gains.

Hong Kong typhoon cancels morning trading

Morning trading in Hong Kong financial markets was cancelled Tuesday as Typhoon Koppu brought heavy rains and wind to the city, reportedly causing minor injuries to at least 28 people. At 8 a.m. local time (8 p.m. U.S. Eastern time), the typhoon was centered around 220 kilometers (137.5 miles) west of Hong Kong and forecast to move west-northwest at about 20 kilometers per hour, according to the Hong Kong Observatory. The HKO hoisted the No. 8 storm signal, the level which prompts market and government office closures, but said it may be lowered to a No. 3 storm signal around 10 a.m. local time. Stock markets will open for afternoon trading if the signal is lifted before noon. The Hang Seng Index ended down 1.1% at 20,932.20 Monday.

SSE Composite  3009.94   -0.55.(08.33 AM IST)

China's key stock index opened up 0.08 percent on Tuesday, as China's top tourist agency prepares to launch a Shanghai IPO while most tyremakers were mixed after saying the impact of the U.S. decision to impose special duties on Chinese tyre exports would be limited.

The Shanghai Composite Index .SSEC opened at 3,029.097 points after crossing key resistance at 3,000 points the previous day, and rising 1.24 percent to a one-month closing high.

China International Travel Service Corp (CITS) said on Tuesday it would launch an IPO this week that is worth about 1.7 billion yuan ($249 million) to fund expansion, including setting up new tourist agencies.

But analysts said the size of the IPO was not large and would not have greatly affect sentiment. ($1 = 6.83 yuan) 

Acer PC shipment soars in Q2.

Sanlian Group eyes 100 more outlets.

Guangzhou Hengyun to invest RMB 1.18 bln in 2 power plants.

Volkswagen to invest EUR 4 bln in China by 2011.

Shenzhen OCT, China Merchants Property buy land in Shenzhen.

Konka to sell 3 mln flat panel TVs in H2.

Brilliance Auto may sign with Daimler, Toyota.

China's iron ore imports down 14.5% in Aug.

China's fiscal revenue up 36.1% in Aug.

Hubei Yihua Chemical to invest RMB 1.4 bln in PVC project.

Kunshan TFT-LCD production line project starts construction.

Sun Hung Kai sells property to Yeland for RMB 882 mln.

Yanlord Riverside City dominates sales in China in H1.

Steel market poised for losses as China output hits record

Coming off this year's highs, steel-maker shares in Asia are unlikely to revisit their peak levels from 2007 anytime soon, with steel output in China at a record pace and prices for the metal on the decline, analysts said.

China's monthly steel production hit a fresh high in August at 51.65 million tons, up 21% year on year to represent a record daily production of 1.67 million tons, according to a Morgan Stanley research note Monday.

China's "steel inventories are now over 11 million tons, similar to the last peak in March 2009 -- which suggests industry over-production," the analysts said.

Earlier this year, steel prices were "depressed" but "we were at the onset of the Chinese buying spree," said Marcus Hudson, president of Hudson & Associates, a commodity-hedging advisory firm.

The moves in steel prices have reflected onto steel producer shares across Asia, many of which reached their lowest levels of the year around March but went on to tap year-to-date highs in August.

"In short, the steel sector -- globally and in most regions -- had a decent summer, but now things look iffy again," said Joseph Innace, managing editor, Platts Steel Markets Daily.

By the close of morning trading Tuesday in Tokyo, Nippon Steel Corp. /quotes/comstock/11i!nisty (NIST.Y 37.80, -0.95, -2.45%) /quotes/comstock/!5401 (JP:5401 339.00, -9.00, -2.59%) and Kobe Steel Ltd. /quotes/comstock/11i!kbsty (KBST.Y 9.44, +0.24, +2.61%) /quotes/comstock/!5406 (JP:5406 165.00, -3.00, -1.79%) had each lost 1.8%, while JFE Holdings Inc. /quotes/comstock/!5411 (JP:5411 3,220, -10.00, -0.31%) fell 0.6%. On the other hand, South Korea's largest steel maker Posco /quotes/comstock/13*!pkx/quotes/nls/pkx (PKX 99.44, +0.53, +0.54%) tacked on 2.5% and Angang Steel Co. was up 0.8% in Shenzhen trading.

Overall, stock trading in Japan was mixed, with the Nikkei 225 Average up 0.1% and the broader Topix 1000 down 0.2%. South Korea's Kospi fell 0.6%. Trading in Hong Kong was closed for morning trading due to a typhoon.

"Ongoing weakness in Asian steel prices is likely to weigh against sentiment towards steel stocks in the near term," analysts at Goldman Sachs JBWere wrote in a recent note to clients.

On the other hand, "this may provide a good opportunity for longer-term investors to increase their exposure to the sector," they said.

Price cut

Steel company stocks were particularly weak in Japan Tuesday after the Nikkei reported Tuesday that steel makers agreed to cut prices for plates used to build ships by about 30% for this fiscal year. The move was due to lower costs for steel-making materials and weaker demand for the material in Asia, and in South Korea particularly.

In mid-May, the export price of Chinese hot-rolled coil, also known as HRC -- a bellwether product often shipped to key Southeast Asian markets -- was at $495 per metric ton (on an free-on-board Shanghai basis). But by early June, HRC was down to $465 per metric ton, according to Innace.

Prices then surged 29% to peak at $600 per metric ton on Aug. 6, only to drop again, this time by about 14%, to its recent price at $515, said Innace.

The initial steel-price recovery in May was "largely due to country economic stimulus program[s]" in China, Japan and elsewhere, Innace said. But "such programs allowed economies, especially Japan's, to help liquidate steel inventories and generate some restocking."

"End-user 'real' demand for steel has been elusive in Japan, the U.S. and Europe," he said.

Over in China, the buying spree seen earlier in the year "seemed to be more stockpiling and less demand-driven," said Hudson.

And taking a look at what China is producing versus actual demand, "it is apparent that they won't be supporting the global steel markets anytime soon," he said.

"Couple that with slow demand recovery in the U.S., and you get an outlook that is not too bright for steel," Hudson said.

Even so, analysts at Morgan Stanley said that after a slowing of production growth in China near the end of August and the concurrent drop in steel prices, the metal should begin to stabilize soon, with "improving news flow to support regional steel shares." 

Warren Buffett 'Suits Up' .. and a Chinese Stock Soars

Warren Buffett's enthusiastic praise of his Chinese business suits and the company that made them may have given the mensware manufacturer's stock a big boost.

In Shanghai trading, shares of Dalian Dayang Trands are up almost 19 percent over a few days to a high for the year, after China Daily highlighted Buffett's endorsement.

The state-run English-language newspaper says it has an average daily circulation of over 300,000 around the world.

The effusive September 10 article includes a photo of Buffett hugging Dayang Trands chairwoman Li Guilian, who was invited by Buffett to this year's Berkshire Hathaway shareholders meeting in Omaha .. where he wore only tailor-made suits from her company.

It describes a video tape made by Buffett to mark Dayang Trand's 30th anniversary, in which the billionaire says he has nine suits made in China that "fit perfectly" and has thrown everything else away.  Buffett adds that his friend, Microsoft Chairman Bill Gates, is also wearing Trands suits, at Buffett's recommendation.

In the tape, Buffett describes his visit to Dayang Trands as a "highlight" of his stop in Dalian, part of a 2007 tour of China and South Korea.

While he doesn't say anything about buying a stake in the company, Buffett does joke in the tape that he and Gates might start a clothing store to sell Trands suits.  "We will be great salesmen, because we love them so much."

Buffett's Berkshire has taken a 10 percent stake in BYD, a Chinese company producing an all-electric-car.

No word from Buffett on how he feels about Chinese-made tires.

Current Berkshire stock prices:

Class A: [BRK.A  98750.00  ---  UNCH  (0)   ]

Class B: [BRK.B  3257.00    -7.00  (-0.21%)   ]

Obama to Wall Street: More Oversight Coming

Oversight of the financial system is going to be much more rigorous and will include steps such as higher capital requirements for large institutions, which are so deeply interconnected that the failure of one could bring about a failure of the entire financial system, President Barack Obama told CNBC Monday.

"We want to create some circuit breakers here," Obama said. "What we want to do is position our rules in such a way that you don't end up in a situation where your only choice is either financial meltdown on the one hand, or taxpayers having to engage in these huge bailouts."

Obama stressed that oversight is important to the financial system, despite the returned sense of normalcy that has surfaced lately. He worries, he said, that this normalcy could turn into complacency.

"If Washington does not provide the kind of regulatory oversight that's needed to make sure that we've got transparency, accountablity, clear rules of the road, then ironically what you may end up with is the government being even more meddlesome in the markets than it otherwise would have been."

In addition to speaking on the financial markets, Obama touched on a series of other topics:

Health Care: The president said that two-thirds of the price tag associated with health care reform will be accounted for by cutting waste out of the system.

No More Stimulus Funds: The stimulus program was designed to span two years, and he has a "strong inclination" not to create a second plan.

China Trade Dispute: Obama stressed the importance of countries abiding by trade agreements and said he's confident the China dispute won't lead to a trade war.

Afghanistan is Not Vietnam: The war against Al-Qaeda and other terrorist groups remains a top priority, but he will monitor the dangers of overreach.

Earlier Monday — the one year anniversary of the Lehman Brothers failure — Obama addressed Wall Street on his plans for financial reform, and how big banks will no longer participate in "reckless behavior." He once again stressed his belief in the free market, saying he has "absolutely no interest in having the government maintaining the levels of intervention that we have right now in the financial markets."

On the issue of health care, Obama said that with expanded coverage, hospitals will be able to lower bills, as they'll no longer have to inflate costs to cover uninsured patients, he said.

Obama added that nothing else adds to the deficit as much as the rising cost of health care, and reforming the sector could have an immediate impact on lowering the country's debt.

The president said he will do everything in his power to avoid a second stimulus. He added that his administration developed the first plan to span two years because it knew the consumer would continue to be pinched, and he pointed to the positive signs that a recovery is close.

"Most folks believe that we've now turned the corner where we might actually start seeing some economic growth," he said. "We are focused on [the question of] how do we create jobs in this environment without adding to the deficit."

On the recent trade dispute with China, Obama said he still believes in trade agrements, but he also believes in enforcing the rules in these agreements.

While Obama said he wasn't surprised that China was upset, he said the two countries continue to have a strong relationship, and that he's confident that this misstep won't lead to a trade war.

As for the war in Afghanistan, Obama said it's still one of his primary goals to dismantle Al-Qaeda and other terrorist groups that pose a threat to the US. Despite the war's unpopularity with many Americans, he said it's not fair to compare the situation to Vietnam.

"You have to learn lessons from history. On the other hand, each historical moment is different," he said. "The dangers of overreach and not having clear goals and not having strong support from the American people — those are all issues that I think about all the time."

Bank reforms going down wrong road: Fed's Lacker

A proposal designed to prevent another failure like that of Lehman Brothers could just make matters worse, Jeffrey Lacker, the president of the Richmond Federal Reserve Bank, said Monday.

If not carefully crafted, establishing a procedure for the government to take over and wind down a failed, big financial firm without forcing it into bankruptcy could create new moral hazards that could weaken market discipline and could lead to more, not less, volatility, he said.

Without mentioning President Barack Obama by name, Lacker's speech pushed back at a central idea in Obama's proposal to revamp regulation for the financial system. The president gave a speech in New York earlier Monday urging Congress to move forward on his ideas, including creating a government resolution authority to deal with firms that are considered "too big to fail." See full story.

After investment-banking giant Lehman filed for bankruptcy a year ago, the repercussions rippled around the globe. Financial markets panicked, credit dried up and the global economy went into a tailspin from which it is just now recovering.

U.S. regulators have said they had no authority at the time to bail out Lehman, as they did earlier with Bear Stearns and later with American International Group Inc.

Treasury Secretary Timothy Geithner has proposed that the government be given the power to "resolve" financial firms that are failing by seizing them, restructuring them and selling off what's left.

The new resolution authority -- which would be similar to the authority the Federal Deposit Insurance Corp. now has over depository banks -- "would have the discretion to use public funds to shield creditors from losses, a feature that I believe will severely limit the benefit from reforming the resolution process," Lacker said.

"The leading proposals before Congress concentrate almost exclusively on expanding government protection and regulation, but I believe we would be better off placing greater reliance on market-based incentives for prudent risk management.

"A widespread belief that public funds will soften the blow to private creditors would weaken market discipline and further complicate the task of regulators," he added.

Lacker also said research at the Richmond Fed has concluded that 45% of financial-sector liabilities in 1999 had some type of implicit or explicit government backing. It seems only logical that this safety net has risen over the past decade, he commented.

"I have a hard time believing that we really need a publicly funded financial-institution support system covering nearly half of the liabilities in our credit markets."

Lacker said he realized the transition to a "narrower" safety net would be quite difficult politically. Because actions speak louder than words, Washington will have to demonstrate its tough commitment by imposing sharp losses on creditors.

That may be why the resolution-authority proposal is so popular, according to the Richmond Fed president. But this could only cast the safety net wider, encouraging more risky behavior and more financial market turbulence.

S.F. Fed's Yellen says recovery still at risk of shocks

She's worried more about threat of falling prices than inflation

San Francisco Federal Reserve Bank President Janet Yellen said Monday she expects the economic recovery in the U.S. to be "tepid" and slow, suggesting that a debilitating and sustained drop in prices poses a greater threat than runaway inflation.

In a speech to a group of financial analysts here, Yellen said that this summer probably marked the end of the U.S. recession, and that the economy is on track to expand in the second half of this year.

But the expansion that's already started to gather steam "will remain vulnerable to shocks," and the unemployment rate will remain "elevated for a few more years," she said in a speech, delivered 10 minutes before the close of stock-market trading.

Yellen said she is forecasting a recovery that is far less robust than those following past recessions, and expects it to look more like the letter U than a V.

Even a growth rate of 3% to 4% in the gross domestic product would be considered "tepid," she told reporters after the speech.

An expansion at those levels "will leave us with an unemployment rate that's way too high for far too long," she said.

Economists surveyed by the Blue Chip forecasting survey in late August found most economists expected U.S. real GDP to increase at an annual rate of 2.3% in both third and fourth quarters of this year.

Yellen, a voting member of the Fed's Federal Open Market Committee this year, has emerged as one of the more vocal advocates of the Fed's continuing its ultraloose monetary policy even as the economy starts to claw its way out of the worst recession in generations. She has said she fears the Fed could act too fast in taking away its monetary stimulus if it responds to market and political pressures, and that a too-hasty exit could usher in another credit crunch and recession.

Barclays economist Michelle Meyer termed her the most "dovish" member of the FOMC in a report Friday. Meyer noted officials recently have "shown a divergence in views about the strength of the nascent recovery."

The so-called hawks, notably Richmond Fed President Jeffrey Lacker, have voiced more concern about the threat of inflation. Read more about the Fed and its 'exit strategy' dilemma.

Inflation hawks are worried that the Fed's near-zero interest rates and the trillions in U.S. dollars dumped into the economy via unusual stimulus programs, plus burgeoning federal deficits, will lead to dangerous inflation in coming years.

On the other side of the spectrum, some policy makers and economists fret that economic slack and pressure on wages raise the specter of deflation, or a sustained drop in prices.

Yellen commented on the bifurcation of views about inflation that has emerged lately, saying that "in my career, I have never witnessed a situation like the one that exists now, when views about inflation risks have coalesced into two diametrically opposed camps."

She placed herself in the camp that worries more about falling, rather than accelerating, prices. "My personal belief is that the more significant threat to price stability over the next several years stems from the disinflationary forces unleashed by the enormous slack in the economy," she said.

The current high level of unemployment, combined with relatively idle factories, "threatens to push inflation lower," Yellen said.

Core PCE price inflation, a popular metric for inflation at the Fed, has averaged just under 1.5% over the past 12 months. That's already below the level that most members of the Federal Reserve's interest-rate-setting panel think best promotes price stability, which is about 2%, she said.

But she acknowledged that some of the concerns over inflation stem from a doubt that the Fed will be able to reduce its special lending and securities-buying programs when it wants to, because of political pressures.

"This fear is real, it's growing and I believe it's disruptive," she said.

"That's why it's so important for me to say the following loud and clear: We at the Fed are ready, willing, and able to tighten policy when it's necessary to maintain price stability, " she said.

Exit strategies

When the Fed decides to increase its target rates, now near zero percent, one possible route will be to raise rates on reserves that banks hold at the Fed, she said.

Encouraging banks to keep more of their deposits at the Fed, rather then lending them out, would tighten monetary policy even before the Fed's balance sheet shrinks.

The central bank is likely to start tightening monetary policy well before employment and inflation reach healthy levels.

"We don't want to wait until we're at 5% unemployment and 2% inflation because if we wait that long, given the lags in monetary policy, we'd clearly overshoot," she told reporters.

But with unemployment at 9.7% and consumer prices, depending on the measure, either falling year-over-year or increasing at very low levels, both indicators are far from those levels.

On Wednesday, economists anticipate the Labor Department will show consumer prices dropped again last month from August a year-ago.

"We have our foot on the accelerator, I think we need to leave it there," she said. "It will go when it's the right time for it to go."

Citi seeks to lower government's stake: WSJ

Executives at Citigroup Inc. /quotes/comstock/13*!c/quotes/nls/c (C 4.40, -0.12, -2.66%) have been working on a plan to cut the U.S. government's 34% stake in the firm through a multibillion-dollar stock offering, The Wall Street Journal reported Tuesday, citing people familiar with the matter. Under the plan, Citigroup would issue new shares to the public and the Treasury Department would sell at least a portion of its Citigroup holdings, the report said. 

U.S. Said to Explore Selling Off Its Citigroup Stock

The U.S. Treasury Department and Citigroup Inc. have begun discussing how to sell the 34 percent stake that the government acquired in the rescue of the bank, people familiar with the matter said.

The Treasury, which owns about 7.69 billion common shares after a recent stock conversion designed to shore up the bank's capital, may start unloading the stake as soon as October, said one of the people. It aims to sell the holdings over the next six to eight months, the person said.

While the Treasury hasn't developed a formal plan for the sale, it is considering options, the people said. Under one scenario, the shares would be sold to public investors in blocks over six to eight months. Or the government may sell a small amount of stock daily or weekly, said the people, who declined to be identified because the talks are private. Under a third option, the shares would be sold at once in a managed offering.

The Obama administration has begun efforts to wind down the government's $700 billion financial rescue program. The Treasury purchased the stock at $3.25 a share, giving U.S. taxpayers a paper profit of about $9.77 billion based on today's closing stock price of $4.52.

Citigroup's bailout last year was valued at $52 billion. Even after a share sale, the government would retain a $27 billion investment. That stake is denominated in trust-preferred shares -- a class of securities that ranks senior to common stock and junior to most debt.

Treasury spokesman Andrew Williams and Susan Thomson, a spokeswoman for New York-based Citigroup, declined to comment. 

Obama Sees Job Losses Ending, Vows to Push on Wall Street Rules

President Barack Obama said job losses are "bottoming out" and the U.S. economy looks to be growing again even as he warned against cutting off government aid "so soon that the recovery doesn't take flight."

Obama, speaking to Bloomberg News one year after the bankruptcy of Lehman Brothers Holdings Inc. crippled the economy, voiced confidence that his plan to overhaul regulation to forestall another crisis would pass Congress this year.

He vowed "to do everything I can" to fight banking industry efforts to kill his proposal for a financial products safety agency and stuck by his call to make the Federal Reserve responsible for ensuring the stability of the overall system.

"I'm very optimistic about us getting a set of rules in place that prevent the kind of crisis that we're seeing from happening again," Obama said in a White House interview yesterday.

He opposed setting limits on pay to financial industry executives, even in the face of public outrage over some of the multimillion-dollar bonuses and salaries Wall Street companies are still handing out.

"Why is it that we're going to cap executive compensation for Wall Street bankers but not Silicon Valley entrepreneurs or NFL football players?" he said.

On trade, Obama brushed aside concerns that his Sept. 11 imposition of 35 percent tariffs on $1.8 billion in imported tires from China would trigger a cycle of retaliation.

"We're not going to see a trade war," he said. "There are some tensions around this, no doubt about it. But my message is very simple: We have rules on the books."

Growth in Exports

The president ticked off a number of signs the economy is on the mend, including stronger exports and a pickup in manufacturing. Payroll cuts have also tapered off, he said, adding that "we could start seeing some positive job growth."

Since the recession began in December 2007, the U.S. has lost 6.9 million jobs. Payroll cuts peaked at 741,000 in January and have since subsided, with 216,000 job losses in August, according to the Labor Department.

The 48-year-old president said the economy was still fragile and cautioned against prematurely removing government programs aimed at supporting financial markets and boosting demand.

"I don't think we're out of the woods yet," he said. "What we have to be careful about is taking the crutches away from the patient too early." He said that was the mistake the U.S. made during the Great Depression.

No Second Stimulus

Still, Obama told CNBC television in a separate interview that he had a "strong inclination" against a second stimulus package on top of the $787 billion program passed by Congress in February.

The world's largest economy contracted 1 percent from April through June, according to the Commerce Department. The drop was the fourth in a row, making it the longest contraction since quarterly records began in 1947.

On health care, Obama was less forthcoming, especially about how to pay for his initiatives. Although he reiterated that two-thirds of the estimated $900 billion cost would come from eliminating waste, fraud and abuse within the system, he wouldn't commit to sending Congress a bill laying out how to achieve this. He said he would let the Senate Finance Committee "work its way through" the cost-savings process.

He also declined to specify what additional revenue measures might be needed other than his earlier endorsement of a fee on insurers for the most-expensive policies. He did pledge "to use my office and my own time and energy anywhere that's appropriate" to enact the legislation.

'Common-Sense Rules'

The president's comments followed an earlier speech in New York where he pushed for a new regime of "common-sense" regulations to avoid another market meltdown. Speaking at Federal Hall on Wall Street, Obama chastised the industry for still engaging in "reckless behavior," "quick kills," and "bloated bonuses."

He declined during the interview to identify any of the abusers, saying the tendency to "take exorbitant risks that were unsustainable for the system" was widespread.

"And that's the culture I think that we've got to reverse, not to squelch innovation or creativity, but to make sure that we don't get into what's called a moral hazard problem, where people assume that government's there as a backstop," Obama said.

Wall Street Compensation

Obama said what's needed is a change in Wall Street compensation so long-term performance rather than short-term profit is rewarded.

"Those principles are ones that I want enshrined in Wall Street's practices," he said. "But this has been a country where, as a general proposition, we don't go around saying, 'You can't pay people whatever the market will bear in the private sector.'"

Obama's plan for a consumer financial protection agency has run into opposition from the banking industry and Republicans, who say such a body would limit consumer choice and access to credit.

While not promising to veto a bill that lacked such an agency, Obama pledged that he would work to stop opponents from defeating it.

"I don't think they're going to succeed in killing it, and I'm going to do everything I can to stop them from killing it," he said. "We need a consumer financial protection agency that consolidates the tasks of all these different agencies right now."

Rewarding Good Practices

"That will help the American consumer and ultimately will allow, you know, good, solid business practices to be rewarded in ways that right now they're not always rewarded," Obama said.

Obama defended his proposal to make the Fed the regulator of systemic risks -- a plan that has drawn skepticism from Democrats including House Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd, who are reluctant to expand the central bank's power. They back Federal Deposit Insurance Corp. chief Sheila Bair's preference for a regulatory council to monitor firms for risk.

"What you ultimately have to have is one person or one institution or entity that is making clear decisions at the end of the day, that the buck has to stop with somebody," Obama said. "And I think that the Fed is best equipped to do this."

'Best Representative'

Obama also said he won't be going to Denmark next month to make a final pitch for Chicago's bid for the 2016 Summer Olympic Games because of the demands of the health-care and financial-regulation deliberations.

He said that while he's "deeply invested" in winning the Olympics for his hometown, "I'm in the middle of some very important decisions."

The administration announced last week that first lady Michelle Obama will travel to Copenhagen for the Oct. 2 meeting of the International Olympic Committee where the host city will be chosen. Chicago is competing against Madrid, Rio de Janeiro and Tokyo.

"Michelle's our best representative," Obama said.
 

INVESTMENT VIEW
Abbott Labs-Emerging As A Major Player In Cardiac Care

Drug and medical device maker Abbott Laboratories will buy heart device maker Evalve Inc. in a deal worth as much as $410 million.
 

Abbott said it will pay $320 million upfront for the Menlo Park, Calif., heart device maker, and another $90 million based on approvals for potential products. Evalve makes devices that are used to repair the mitral valve of the heart, which controls blood flow from the left atrium, or upper chamber, to the left ventricle.

 

Evalve said its MitraClip system can treat mitral regurgitation - a condition in which the mitral valve does not close completely - without open heart surgery. The device is approved for sale in Europe and is being tested in the U.S.

 

Abbott, of North Chicago, said it expects the deal to close in the fourth quarter and said it will not change the company's annual guidance.

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)
 
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Arvind Parekh

+ 91 98432 32381