• CIT snags $4.5B lifeline. A group of hedge funds including many of its bondholders offered to lend CIT Group (CIT) $4.5B to build creditor support for a controversial debt exchange, pitting them against activist investor Carl Icahn, who wants the swap voted down. The lifeline comes as CIT's lenders must decide by midnight tonight whether to support its proposed debt exchange, a pre-packaged bankruptcy plan, or neither. Sources say the funds bought up CIT debt last summer on a bet the government would bail out the troubled lender, and stand to lose from a freefall bankruptcy, which Icahn is pushing for.
• Mutual funds use Fed bucks to buy bonds. Mutual funds - including those run by T. Rowe Price (TROW) and BlackRock (BLK) - are using Fed financing to reap 15%-plus returns with limited risk. The Fed's TALF (Term Asset-Backed Securities Loan Facility) offers low-cost financing to buy AAA-rated bonds backed by consumer and business loans, as well as commercial mortgages. Investors can borrow up to 95% of the bonds' value by pledging the securities and some additional collateral, and have no obligation to repay the loan beyond the collateral - in essence shifting most of the potential losses to the government. In the words of one fund manager: "This is one of those opportunities that, as an investor, we have to take advantage of."
• IMF boosts Asia growth outlook. The IMF raised its 2009-2010 growth forecast for Asia's economy, but warned that a fragile recovery in advanced economies and lingering problems in the global financial system still pose risks. IMF now sees Asia growth of 2.8% and 5.8% this year and next, up from previous estimates of 1.2% and 4.3% - far higher than the 1.25% growth expected from G-7 economies, but well short of the region's 6.66% average. The report says the region is outpacing other parts of the world, with 'green shoots' of recovery appearing earlier and taking firmer root than elsewhere. (IMF Asia Outlook)
• U.S.-China trade talks open on sour note. China/U.S. trade talks opened on a discordant note Thursday as fresh frictions surfaced after China announced plans to investigate dumping allegations against Detroit's Big Three automakers. Punitive measures are unlikely to cause much harm since most of the vehicles they sell are made in China, but another row - on top of disputes over steel pipes, chicken, movies and music - could further stress their tenuous relationship ahead of Obama's Nov. 15 visit.
• Economists shave GDP estimates after weak orders. Durable goods orders rose 1% in September, short of the 1.5% gain economists expected, but a reverse of August's 2.4% drop. Following the weaker-than-expected gain, Goldman Sachs economist Ed McKelvey dropped his Q3 GDP growth estimate - due out this morning - to 2.7% from a previous 3%. "The headline gain in orders was in line with expectations but not as firm as we had thought," he said. Later, Morgan Stanley and Merrill Lynch followed suit, with Morgan shaving its outlook to 3.8% from 3.9%, and Merrill to 2.3% from 2.5%.
• AIG recoups CDS losses. AIG (AIG) is seeing billions of dollars in inflows from recovering credit-default swaps - the very securities that helped level the insurer. Q2 inflows may have topped $3B, including at least $1B from Goldman Sachs (GS). Credit-default swaps - a type of insurance policy on securities backed by assets such as mortgages - required AIG to put up huge amounts of collateral when the investments they backed fell in value. Many of the sour trades were closed out last year by the government, a move that saved AIG, but may have deprived it of billions of dollars.
• Homebuyer credit extension nears approval. Key senators voiced support for extending and expanding the soon-to-expire homebuyer tax credit, and a vote on the measure could come next week. The current plan would see the $8,000 first-time homebuyer tax credit, set to expire at the end of November, extended through April 2010, and would allow for people who have been in their home for at least five years to receive a $6,500 tax credit if they purchase a new primary residence. The income limit on the credit would also rise to $125,000 from $75,000.
• House panel approves credit rating rules. The House Financial Services Committee signed off (49-14) on legislation aimed at ratings agencies, including barring them from consulting for companies they're also rating, and requiring raters to have outsiders on their boards. The bill also enables investors to sue firms for failing to carry out their duties.
• Fed: To grow or to shrink? A draft bill of new financial-regulation legislation moving through Congress would give the Fed substantial new powers, including the authority to force large firms to shrink if their size threatens the broader economy. The view is likely to conflict with the Senate's, where financial regulation is moving at a much slower pace, and members of both parties remain wary of offering the Fed - seen by many as partially responsible for the collapse - any new authority.
• New home sales flatline. New home sales fell 3.6% in September to an annual rate of 402K, well short of economist consensus of 440K and last month's downward-revised 417K. Months' supply rose to 7.5 from 7.3 in August. Sales were down 7.8% year-over year, and, from the peak of the residential construction boom back in mid-2005, sales are down 71.1%. After adjusting for population growth since the pre-2009 all-time low in 1981, sales are now 15% below previous records. (Census Bureau's New Home Sales (.pdf))
• Norway tightens rates. Norway became the first European country to hike interest rates post-crisis, lifting its key rate by 25 bps to 1.5%. Governor Svein Gjedrem noted inflation is higher than expected, while unemployment was "considerably lower than previously projected," and indicated rates would rise gradually. On Oct. 6, Australia became the first G-20 nation to tighten. (Norges Bank statement)

Earnings: Thur. Before Open

• ABB Ltd. (ABB): Net income of $1.03B (+12%). Sales $7.9B (-10%). Orders $7.06B (-21%). "It remains unclear when and how quickly capital investments by customers will recover from the downturn. In addition, the volatility of raw material prices and the limited availability of project funding continue to influence the timing of many power and industrial investment decision." ABB preannounced on Oct. 19. Shares -2.1% premarket. (PR)
• Aetna (AET): Q3 EPS of $0.69 beats by $0.03. Revenue of $8.72B (+14.4%) in-line. Sees full-year EPS of $2.75 vs. $2.86 consensus. (PR)
• Allegheny Energy (AYE): Q3 EPS of $0.59 beats by $0.06. Revenue of $794M (-6.6%) vs. $952M. (PR)
• Allergan (AGN): Q3 EPS of $0.70 in-line. Revenue of $1.13B (+4.2%) vs. $1.08B. Shares +0.8% premarket. (PR)
• American Electric Power Company (AEP): Q3 EPS of $0.93 beats by $0.08. Revenue of $3.5B (-16.7%) vs. $3.97B. (PR)
• AstraZeneca (AZN): Q3 EPS of $1.46 beats by $0.06. Revenue of $8.2B (+5.5%) vs. $7.9B. Sees full-year core EPS of $6.20-6.40 vs. consensus of $5.99. Shares +0.7% premarket. (PR)
• AutoNation (AN): Q3 EPS of $0.36 beats by $0.01. Revenue of $2.92B (-13.2%) vs. $3.13B. "Cash for Clunkers was a highly effective stimulus program that provided a much needed lift in auto sales and has set the stage going forward for a gradual recovery of new vehicle sales." Says CARS boosted Q3 EPS by $0.07. Approves $250M buyback. (PR)
• Avon (AVP): Q3 EPS of $0.42 beats by $0.02. Revenue of $2.55B (-3.5%) in-line. (PR)
• Barrick Gold (ABX): Q3 EPS of $0.54 beats by $0.07. Revenue of $2.1B (+11.6%) in-line. Significantly reduced gold hedges, and will eliminate within 12 months. (PR)
• BioCryst Pharmaceuticals (BCRX): Q3 EPS of -$0.28 misses by $0.06. Revenue of $10.5M (+18%) vs. $4.6M. BioCryst recently received FDA approval to use its flu I.V. drug peramivir as an emergency treatment against H1N1. (PR)
• Brookfield Properties (BPO): Q3 FFO of $0.34 in-line. Revenue of $657M (-7.1%) vs. $580M. (PR)
• Burger King (BKC): FQ1 EPS of $0.34 misses by $0.03. Revenue of $637M (-5.4%) vs. $653M. Expects the unpredictable consumer environment will persist in fiscal 2010. (PR)
• Brunswick (BC): Q3 EPS of -$1.53 misses by $0.19. Revenue of $666M (-35.9%) vs. $701M. Shares -5.1% premarket. (PR)
• CME Group (CME): Q3 EPS of $3.35 beats by $0.06. Revenue of $650M (-17.4%) in-line. "As the economy continues to stabilize, there is room for further organic growth in our core business. At the same time, we are actively working to ensure that the benefits our business model brings to the financial system are communicated to the legislators and regulators who are charged with regulatory reform." (PR)
• CNOOC (CEO): Q3 revenue of 23.8B yuan ($3.47B, -23.1%) vs. estimate of 21.6B. Avg. selling price -36.6% to $67.83/barrel. Net daily production +18.4% to 647K. Capital expenditure +10.3% to 11.24B yuan. Shares -0.9% premarket. (Bloomberg, PR)
• Colgate-Palmolive (CL): Q3 EPS of $1.12 beats by $0.01. Revenue of $4B (+0.3%) in-line. (PR)
• Corinthian Colleges (COCO): FQ1 EPS of $0.37 beats by $0.09. Revenue of $388M (+34.2%) vs. $378M. Total student population +25% to 93.5K. Sees full-year EPS of $1.55-1.60 vs. $1.35. Shares +5% premarket. (PR)
• Cott (COT): Q3 EPS of $0.18 beats by $0.02. Revenue of $405M (-3.7%) in-line. To sell $200M in senior notes due in 2017, and use proceeds to fund a previously announced tender offer for notes due in 2011. (PR)
• Deutsche Bank (DB): Q3 net profit €1.4B from €414M a year ago. Pre-tax profit of €1.3B from €93M. Net writedowns of €300M. Risk provision of €544M, up from €236M a year ago, but down from €1B in Q2. Return on equity 15% vs. 1% last year. Says it reduced levels of trading risk, "even at the expense of short-term revenue gains." DB released preliminary results last week. Shares -2.6% premarket. (PR)
• Digital Realty Trust (DLR): Q3 FFO of $0.74 beats by $0.02. Revenue of $163M (+14.9%) in-line. Shares (PR)
• Eastman Kodak (EK): Q3 EPS of -$0.23 misses by $0.04. Revenue of $1.78B (-25.9%) vs. $1.89B. Sees revenue decline at high-end of previous 12-18% range. (PR)
• Expedia (EXPE): Q3 EPS of $0.48 beats by $0.05. Revenue of $852M (+2.3%) vs. $829M. "Travelers are clearly responding to our improving value proposition, as we broaden our fee cuts and increase the depth and breadth of our global supply." Shares +6.8% premarket. (PR)
• ExxonMobil (XOM): Q3 EPS of $0.98 misses by $0.05. Revenue of $82.3B (-40.3) vs. $85.2B. Shares -1.5% premarket. (PR)
• France Telecom (FTE): Q3 Ebitda of €4.56B (-8%), in line with consensus. Revenue of €12.69B (-6.4%) vs. €12.85B. Expects Q4 to be similar to Q3, and will thus continue to implement cost savings plans to prevent its Ebitda margin from declining further. Shares -0.5% in Paris. (PR, WSJ)
• GrafTech International (GTI): Q3 EPS of $0.15 beats by $0.09. Revenue of $165M (-47.8%) vs. $162M. (PR)
• Kellogg Company (K): Q3 EPS of $0.94 beats by $0.10. Revenue of $3.28B (-0.3%) in-line. "The current economic environment has placed significant pressure on our consumers." (PR)
• KBR Inc. (KBR): Q3 EPS of $0.45 beats by $0.04. Revenue of $2.84B (-5.9%) in-line. (PR)
• Mack-Cali Realty (CLI): Q3 FFO of $0.81 beats by $0.05. Revenue of $194M (-5.3%) vs. $175M. (PR)
• Monster Worldwide (MWW): Q3 EPS of $0.01 beats by $0.01. Revenue of $215M (-35.2%) vs. $223M. (PR)
• Moody's (MCO): Q3 EPS of $0.43 beats by $0.05. Revenue of $452M (+4.2%) vs. $417M. Declares quarterly dividend of $0.10. (PR I, II)
• Motorola (MOT): Q3 EPS of $0.01 beats by $0.01. Revenue of $5.45B vs. $5.54B. Appoints Edward Fitzpatrick as CFO. Sees Q4 continuing operations EPS of $0.07-0.09 vs. $0.06. Shares +4.3% premarket. (PR)
• MPS Group (MPS): Q3 EPS of $0.06 beats by $0.04. Revenue of $408B (-29.4%) vs. $403B. MPS is being acquired by Adecco. (PR)
• Mylan Laboratories (MYL): Q3 EPS of $0.32 beats by $0.05. Revenue of $1.26B (-23.7%) in-line. Sees 2010 EPS of $1.24-1.28 vs. $1.17. (PR)
• Newmont Mining (NEM): Q3 EPS of $0.79 beats by $0.24. Revenue of $2.05B (+49.5%) vs. $1.72B. (PR)
• Nintendo (NTDOY.PK): H1 net profit of ¥69.5B ($768M, -52%). Sales of ¥548B (-34.5%). Cuts H1 dividend by 37% to ¥270. Sold 5.75M Wii consoles (-43%) and 11.7M DS hand-held player sales (vs. 13.7M last year). Sees full-year net income of ¥230B vs. ¥270B consensus, full operating profit of ¥370B (-33%), sales of ¥1.5T (-18%), and Wii sales of 20M (vs. previous 26M). (PR I, II, III, Bloomberg)
• Noble Energy (NBL): Q3 EPS of $1.10 beats by $0.28. Revenue of $621M (-43.4%) vs. $657M. (PR)
• NRG Energy (NRG): Q3 EPS of $1.02 misses by $0.12. Revenue of $2.92B vs. $2.18B. (PR)
• Office Depot (ODP): Q3 EPS of -$0.08 beats by $0.02. Revenue of $3.03B (-17.2%) in-line. (PR)
• OfficeMax (OMX): Q3 EPS of $0.08 misses by $0.06. Revenue of $1.83B (-12.6%) in-line. Same-store sales -11.5%. Continues to anticipate macro employment trends will not turn positive until well into 2010. (PR)
• Patterson-UTI Energy (PTEN): Q3 EPS of -$0.12 beats by $0.04. Revenue of $176M (-71%) vs. $163M. (PR)
• PG&E (PCG): Q3 EPS of $0.93 beats by $0.02. Revenue of $3.23B (+12.3%) vs. $3.48B. (PR)
• PPL Corp. (PPL): Q3 EPS of $0.52 beats by $0.07. Revenue of $1.8B vs. $3B. (PR)
• Procter & Gamble (PG): FQ1 EPS of $1.06 beats by $0.07. Revenue of $19.8B (-6%) in-line. (PR)
• Shell (RDS.A): Adjusted net income of $2.62B vs. consensus of $2.5B. Revenue of $75B, down from $131.6B a year ago. "Q3 results were affected by the weak global economy. Upstream and downstream profitability has been sharply reduced compared to year-ago levels. We see some indications that energy demand and pricing are improving, but the outlook remains very uncertain, and we are not expecting a quick recovery." Shares -3.5% in London. (PR)
• Smith International (SII): Q3 EPS of $0.07 misses by $0.08. Revenue of $1.88B (-34.1%) in-line. (PR)
• Sprint Nextel (S): Q3 EPS of -$0.17 misses by $0.02. Revenue of $8.04B (-8.8%) in-line. Net subscribers -135K. Post-paid churn 2.17% vs. 2.05% in Q2, due to seasonality and heightened competition. Pre-paid churn 6.65% vs. 6.38% in Q2. (PR)
• Taiwan Semi (TSM): Q3 EPS of $0.18 in-line. Revenue of $2.74B (-8.1%) in-line. Gross margin +1.5 points from Q2 to 47.7%. Sees Q4 revenue of NT$90-92B vs. consensus of NT$85.8B. (PR)
• Ventas (VTR): Q3 EPS of $0.66 beats by $0.03. Revenue of $236M (+0.3%) vs. $230M. (PR)
• Virgin Media (VMED): Q3 operating cash flow of £348M (+7%) vs. consensus of £337M. Ebitda of £348M. Revenue of £953M (+1.3%) vs. £942M. Net additions of 8,100 vs. 8,000. (PR)
• Williams Companies (WMB): Q3 EPS of $0.24 beats by $0.05. Shares +2.2% premarket. (PR)
• Xcel Energy (XEL): Q3 EPS of $0.48 misses by $0.02. Revenue of $2.31B (-18.8%) vs. $3.01B. (PR)

Earnings: Wed. After Close

• AFLAC (AFL): Q3 EPS of $1.25 beats by $0.05. Revenue of $4.5B (+23%) vs. $4.7B. Shares -0.2% AH. (PR)
• Agnico-Eagle Mines (AEM): Q3 EPS of -$0.11 vs. estimate of $0.20; results include foreign exchange loss and other items accounting for cost of $0.14/share. Revenue of $159M (+91%) vs. $183M. Shares -8.3% AH. (PR)
• Akamai Technologies (AKAM): Q3 EPS of $0.38 beats by $0.03. Revenue of $207M (+5%) vs. $199M. Shares +9.6% AH. (PR)
• Annaly Mortgage Management (NLY): Q3 EPS of $0.75 beats by $0.03. Net interest income of $436M (+24%). Shares +2.3% AH. (PR)
• AvalonBay Communities (AVB): Q3 FFO of $1.09 beats by $0.01. Revenue of $224M (+0.3%). Sees Q4 FFO of $0.61-0.64 vs. $0.97 and full-year FFO of $3.86-3.90 vs. $4.19. (PR)
• Brandywine Realty Trust (BDN): Q3 FFO of $0.44 beats by $0.08. Revenue of $147M (+2%) vs. $141M. Raises full-year FFO guidance to $1.82-1.85 from $1.75-1.80, vs. $1.78. Sees fiscal 2010 FFO of $1.23-1.34 vs. $1.38. Shares -1.9% AH. (PR)
• Cadence (CDNS): Q3 EPS of $0.03 beats by $0.04. Revenue of $216M (-7%) vs. $215M. Sees Q4 EPS of $0.02-0.04 vs. $0.01, and full-year EPS of -$0.08 to -$0.10 vs. -$0.14. (PR)
• Cerner (CERN): Q3 EPS of $0.61 in-line. Revenue of $409M (-3%) vs. $421M. Sees Q4 EPS of $0.68-0.74 vs. $0.74. Shares -1.9% AH. (PR)
• CB Richard Ellis Group (CBG): Q3 EPS of $0.08 misses by $0.02. Revenue of $1B (-23%) in-line. Shares -4% AH. (PR)
• Duke Realty (DRE): Q3 FFO of $0.32 beats by $0.01. Revenue of $224M (+4.1%) vs. $219M. (PR)
• Equity Residential (EQR): Q3 FFO of $0.53 beats by $0.01. Revenue of $493M (-4%) vs. $487M. Sees Q4 FFO of $0.49-0.53 vs. $0.49. (PR)
• Express Scripts (ESRX): Q3 EPS ex-items of $0.99 beats by $0.19. Revenue of $5.6B (+3%) vs. $5.5B. Sees full-year EPS of $3.76-3.82 vs. $3.49. Shares +0.8% AH. (PR)
• First Solar (FSLR): Q3 EPS of $1.79 beats by $0.05. Revenue of $481M (+38%) vs. $529M. Shares -15.9% AH. (PR)
• Genco Shipping & Trading (GNK): Q3 EPS of $1.09 beats by $0.08. Revenue of $93M (-14%) vs. $91M. Shares -2.9% AH. (PR)
• Helix Energy Solutions Group (HLX): Q3 EPS of $0.04 misses by $0.01. Revenue of $216M (-65%) vs. $249M. Shares -0.3% AH. (PR)
• LSI Logic (LSI): Q3 EPS of $0.18 beats by $0.14. Revenue of $578M (-19%) vs. $556M. Sees Q4 EPS of $0.07-0.13 vs. $0.06 and Q4 revenue of $605M-645M vs. $587M. Shares +7% AH. (PR)
• Lincoln National (LNC): Q3 EPS of $0.84 beats by $0.08. Revenue of $2.1B (-8%) vs. $2.4B. Shares +9.2% AH. (PR)
• O'Reilly Automotive (ORLY): Q3 EPS of $0.63 beats by $0.07. Revenue of $1.26B (+13%) vs. $1.23B. Comparable store sales up 5.3%; "Continued improvement in our gross margin results fueled by improved acquisition costs as the result of our increased purchasing power." Shares -0.2% AH. (PR)
• Owens-Illinois (OI): Q3 EPS of $0.74 misses by $0.19. Revenue of $1.9B (-7%) in-line. Shares -6% AH. (PR)
• Questar (STR): Q3 EPS of $0.60 beats by $0.09. Revenue of $600M (-21%) vs. $542M. Raises full-year EPS guidance to $2.45-2.55 from $2.35-2.45, vs. $2.57. (PR)
• Realty Income (O): Q3 FFO of $0.47 beats by $0.01. Revenue of $82M (flat) in-line. Sees full-year FFO of $1.86-1.92 vs. $1.83. Shares +2.3% AH. (PR)
• Ryland Group (RYL): Q3 EPS of -$1.20 misses by $0.31. Revenue of $328M (-40%) vs. $352M. Shares -0.5% AH. (PR)
• Symantec (SYMC): FQ2 EPS of $0.36 beats by $0.03. Revenue of $1.48B (-3%) vs. $1.43B. Shares +6.1% AH. (PR)
• Teck Resources (TCK): Q3 EPS of $0.59 beats by $0.09. Revenue of $2.1B in-line. Sees 2009 coal sales of 19.5-20.5M tons, slightly higher than previous guidance. Shares +4.1% AH. (PR)
• Teradyne (TER): Q3 EPS of $0.14 beats by $0.03. Revenue of $262M (-12%) vs. $256M. Sees Q4 EPS of $0.12-0.17 vs. $0.12 on Q4 revenue of $255M-270M vs. $252M. Shares +2.2% AH. (PR)
• Trinity Industries (TRN): Q3 EPS of $0.29 beats by $0.04. Revenue of $557M (-52%) vs. $564M. Sees Q4 EPS of $0.08-0.13 vs. $0.06. Shares -1.3% AH. (PR)
• XL Capital (XL): Q3 EPS of $0.89 beats by $0.26. Revenue of $1.5B (-15%) vs. $1.7B. Shares +5.2% AH. (PR)

Today's Markets

Asia markets moved sharply lower Thursday, but losses in Europe were mild and U.S. futures have moved higher overnight following Wednesday's losses.

Stock markets worldwide have rallied strongly since the lows reached in March of this year. In the U.S. the S&P 500 is up about 22% year-to-date. Despite many not trusting this rally, the market continues to defy gravity. As the market continues to go up or hold ground at current levels, some are convinced that the equity market is a leading indicator.

Retail investors who disappeared from the markets from the brutal market crash of the credit crisis are slowly trickling back in. Investors are putting money back to work via 401K retirement plans, their individual investment accounts, etc. As a result, asset management firms are seeing a rise in the flow of assets under management.

Q3 2009 Earnings Call Transcript

October 20, 2009 9:00 am ET

• Apple: What recession? Apple (AAPL) customers continued to buy up iPhones and Mac computers, seemingly ignoring the recession and helping the company's Q4 results shine. "We are thrilled to have sold more Macs and iPhones than in any previous quarter," Steve Jobs said. Apple easily exceeded analysts' Q4 earnings expectations as back-to-school promotions drove sales: revenue grew 25% to $9.87B versus last year's quarter, while net income surged 47% to $1.67B (see more numbers below). Apple shares rose 7.2% to $203.43 in after-hours trading; the stock has more than doubled this year. Read Apple's earnings call.
• Lehman's Europe unit readies $90B claim. Lehman's European arm, now managed by PricewaterhouseCoopers, is preparing a new $90B claim against the U.S. parent of the failed bank - bringing the unit's total claims against various Lehman entities globally to $208B. PwC fees for managing the wind-down so far: €168M ($253M).
• Icahn targets CIT. Corporate raider Carl Icahn turned up the heat on CIT Group (CIT) Monday, slamming the company for unfairly favoring large bondholders with its revised debt exchange offer and saying he was prepared to offer a better deal by lending the company $6B and saving it $150M in fees. In a letter to CIT's board, Icahn said the proposed alternative $6B loan package is "the latest example of incompetent and unconscionable behavior" from CIT's board. Prospective lenders, he says, would get well in excess of what the current syndicated loan market should dictate, in exchange for voting their debt in favor of the company's reorganization plan.
• Morgan confirms Van Kampen sale to Invesco. Morgan Stanley (MS) confirmed Monday that it's selling its retail asset-management business, including the Van Kampen fund unit, to Invesco (IVZ), for $1.5B in stock and cash, including a 9.4% stake in Invesco. "By taking a minority interest in Invesco, Morgan Stanley will be able to realize significant value in partnership with a world-class player," co-president James Gorman said. The deal, rumored for months and expected to close in mid-2010, will remove some sales limits that Van Kampen managers faced since Morgan's JV with Smith Barney closed.
• Bernanke warns U.S., Asia to mind the gap. Fed chairman Ben Bernanke called on U.S. and Asian leaders to "avoid ever-increasing and unsustainable imbalances in trade and capital flows," saying the U.S. financial system is currently "overwhelmed" by an inflow of capital. Speaking Monday at a San Fran. Fed conference on Asia, Bernanke warned that while the U.S. trade deficits with developing countries are not as onerous as they were two years ago, they are still a threat to the global economy. World leaders believe global economic growth must begin to depend less on the U.S. consumer.
• Fed tests exit tool... As global central banks begin to weigh inflation risks, the Fed confirmed Monday it has begun experimenting with "triparty" reverse repo agreements, but says their actual use is not imminent. In a reverse repo, the Fed pledges mortgage-backed securities and Treasurys it bought as collateral for short-term loans, thereby draining cash from the financial system. Reverse repos are normally the domain of the 18 primary dealers; the experiment involves extending that to deals with the $2.5T money-market mutual fund business.
• ... while Australia says inflation risk looms. The Reserve Bank of Australia believes that the risk to global economic growth is passing, and that the bigger threat is now inflation. "Keeping interest rates at very low levels for an extended period could therefore threaten the achievement of the inflation target over the medium term," according to minutes from its Oct. 6 meeting, released Tuesday. At the meeting, the RBA unexpectedly raised its policy rate by 0.25% to 3.25% - its first such hike since March 2008, and the first in a major developed economy since the start of the financial crisis last year.
• Galleon faces massive withdrawals. Clients of hedge-fund giant Galleon jumped ship Monday after Friday's arrest of co-founder Raj Rajaratnam, forcing Galleon to unload some of its holdings, including tech stocks. So far, investors have requested $1.3B of the total $3.7B Galleon manages, and two of its brokerage firms - Bank of America (BAC) and Barclays (BCS) - have cut off relations with the firm. In a letter to investors and employees Monday evening, Rajaratnam said the charges "are, without exception, entirely baseless," and vowed to defend the firm.
• Financial sector fraud on the rise. Fraud is increasing twice as fast in the financial sector as in other sectors, according to Kroll's annual Global Fraud Report, released Monday. In a survey, senior executives said North America had been particularly hit hard by the financial crisis: the average financial services company lost over $15M to fraud over the past three years. The report comes as sources say investigators plan to charge 10 more securities dealers with insider trading, some linked to Galleon Group, which is at the center of one of the biggest-ever undercover operations into illegal trading (see above).
• Bair speaks up for small banks. FDIC head Sheila Bair warned Monday small community banks are struggling to compete against their too-big-to-fail rivals. "Too big to fail has become worse," she said, "it's become explicit when it was implicit before." Bair contends government guarantees create competitive disparities between large and small banks, because "everybody knows small institutions can fail," making it more expensive for them to raise capital and secure funding.
• China fires new salvo in trade tussle. In the latest in a series of China-U.S. trade disputes, China's Ministry of Commerce took preliminary measures Monday to impose tariffs of as much as 36% on certain nylon imports from the U.S., saying the imports have damaged the domestic industry. The ruling affects imports of Nylon 6, used to manufacture a variety of products, including toothpaste and chiffon. Affected U.S. firms include BASF's (BASFY.PK) U.S. arm and Honeywell (HON).
• Group support for Microsoft/Yahoo tie-up. In an open letter, advertising industry heavyweights urged the Department of Justice to fast-track approval of a Microsoft (MSFT) / Yahoo (YHOO) tie-up, saying the potential benefits for advertisers, marketing services agencies, Web site publishers and consumers are "too important to wait for." Google (GOOG) remained more circumspect, perhaps because it doesn’t want to alienate customers.

Earnings: Before Open

• Autoliv (ALV): Q3 EPS of $0.36 beats by $0.08. Revenue of $1.33B (-14.2%) vs. $1.28B. Shares -0.4% premarket. (PR)
• Bank of New York Mellon (BK): Q3 EPS of $0.54 beats by $0.06. Revenue of $3.33B (+3.7%) vs. $3.18B. Provision for credit losses goes to $147M from $61M last quarter. (PR)
• Biogen Idec (BIIB): Q3 EPS of $1.12 beats by $0.08. Revenue of $1.12B (+2.8%) in-line. Shares -1.9% premarket. (PR)
• BlackRock (BLK): Q3 EPS of $2.10 beats by $0.17. Revenue of $1.14B (-13.2%) in-line. "Improving investor sentiment was the most important factor in third quarter results. Clients are putting money back to work in the markets, driving inflows in equities and bonds, and outflows in money market funds industry-wide." Shares +0.9% premarket. (PR)
• Brinker International (EAT): FQ1 EPS of $0.17 beats by $0.02. Revenue of $778M (-20.9%) vs. $766M. Cost of sales fell to 28.2% from 28.4% last quarter. (PR)
• Caterpillar (CAT): Q3 EPS of $0.64 beats by $0.58. Revenue of $7.29B vs. $7.49B. "We believe the third quarter marked the low point for Caterpillar sales and revenues in what has been the toughest recession since the 1930s. We are seeing encouraging signs that indicate a recovery may be underway." Shares +4.4% premarket. (PR)
• China Mobile (CHL): Q3 net profit of 28.6B yuan ($4.2B), up 2.6% from 27.9B last year, short of consensus of 29.2B. Sales rose 9% to 114.1B yuan. Ebitda rose 5% to 57.8B yuan, short of 58.1B consensus. (Bloomberg)
• China Telecom (CHA): Q3 profit of 2.39B yuan ($350M), down from 4.6B last year, and well short of consensus of 3.68B. Ebitda profit margin slipped to 41.1% from 42.3%. (Reuters)
• Coach (COH): FQ1 EPS of $0.44 beats by $0.05. Revenue of $761M (+1.1%) vs. $754M. (PR)
• Coca-Cola (KO): Q3 EPS of $0.82 in-line. Revenue of $8.04B (-4.2%) vs. $8.11B. "We expect the consumer to continue facing economic uncertainties into 2010 and for consumer sentiment to recover slowly.: Shares -1.2% premarket. (PR)
• Comerica (CMA): Q3 EPS of -$0.10 beats by $0.43. $311M provision for loan losses, unchanged from Q2. (PR)
• Diamondrock Hospitality (DRH): Q3 FFO of $0.19 beats by $0.02. Revenue of $138M (-14.6%) vs. $134M. (PR)
• DuPont (DD): Q3 EPS of $0.45 beats by $0.12. Revenue of $5.96B (-18.3%) vs. $6.14B. Sees full-year EPS of $1.95-2.05 vs. $1.83. "We see overall sequential improvement in our industrial businesses as market conditions begin to firm." (PR)
• Forest Laboratories (FRX): FQ2 EPS of $0.85 misses by $0.01. Revenue of $963M (+4%) vs. $1B. (PR)
• Great Atlantic & Pacific Tea Company (GAP): FQ2 EPS of -$1.18 misses by $0.47. Revenue of $2.06B (-5.4%) vs. $2.13B. "The current challenging economy continues to impact our business. The macro headwinds including rising unemployment, intensifying price competition and now also deflation are creating an even more difficult short-term economic environment." Shares -9.7% premarket. (PR)
• Illinois Tool Works (ITW): Q3 EPS of $0.60 beats by $0.07. Revenue of $3.58B (-19.8%) in-line. Operating margin 13.5% up from 9.9% last quarter. (PR)
• Invesco (IVZ): Q3 EPS of $0.24 in-line. Revenue of $706M vs. $687M. Shares +3.6% premarket. IVZ announced yesterday it would acquire Morgan Stanley's (MS) retail asset management business, including Van Kampen Investments." (PR)
• Jefferies Group (JEF): Q3 EPS of $0.42 beats by $0.14. Revenue of $M (+154.5%) in-line. Shares +6.1% premarket. (PR)
• Journal Communications (JRN): Q3 EPS of $0.02 misses by $0.06. Revenue of $105M (-22.9%) vs. $108M. (PR)
• LaBranche (LAB): Q3 EPS of -$0.22 misses by $0.27. Revenue of $M in-line. Shares -4.9% premarket. (PR)
• Lockheed Martin (LMT): Q3 EPS of $2.07 vs. consensus of $1.83. Revenue of $11.06B (+4.5%) vs. $11.4B. (PR)
• Lexmark (LXK): Q3 EPS of $0.65 beats by $0.20. Revenue of $958M (+6%) vs. $901M. Gross margin 32.7% vs. 32.5%. Sees Q4 EPS of $0.50-0.60 vs. $0.47, revenue "up slightly." Stronger than expected customer demand drove better than expected growth. (PR)
• Marshall & Ilsley (MI): Q3 EPS of -$0.68 in-line. Average loans and leases fell 6% to $47.1B. "There are some encouraging early signs that credit quality is improving, but we realize it will take a few more quarters to fully address our problem loans." Announces $775M common stock offering. Shares -10.2% premarket. (PR)
• Parker-Hannifin (PH): FQ1 EPS of $0.45 beats by $0.28. Revenue of $2.24B (-27%) vs. $2.17B. Shares +4.9% premarket. (PR)
• Peabody (BTU): Q3 EPS of $0.49 beats by $0.26. Revenue of $1.67B (+24.6%) vs. $1.42B. Shares +4.2% premarket. (PR)
• Pfizer (PFE): Q3 EPS of $0.51 beats by $0.03. Revenue of $11.62B (-2.9%) vs. $11.41B. Sees full-year EPS of $2.00-2.05 vs. $1.98. (PR)
• Precision Castparts (PCP): FQ2 EPS of $1.54 misses by $0.09. Revenue of $1.3B (-27.6%) vs. $1.4B. "From a top-line perspective, overall sales declines seem to be bottoming out in the second quarter." Shares -3.1% premarket. (PR)
• Regions Financial (RF): Q3 EPS of -$0.37 misses by $0.12. Revenue of $1.62B (-20.3%) vs. $1.58B. Allowance for credit losses +2.9% to $1.025B. Shares +0.35% premarket. (PR)
• Sherwin Williams (SHW): Q3 EPS of $1.51 beats by $0.16. Revenue of $2B (-12%) in-line. Sees Q4 EPS of $0.35-0.55 vs. $0.61, and revenue down 8-12% Y/Y. (PR)
• State Street (STT): Q3 EPS of $1.05 beats by $0.01. Revenue of $2.24B (-19.3%) in-line. Shares -0.75% premarket. (PR)
• UAL (UAUA): Q3 EPS of -$0.43 beats by $0.51. Revenue of $4.43B (-20.3%) in-line. Shares +8.1% premarket. (PR)
• UnitedHealth (UNH): Q3 EPS of $0.89 beats by $0.12. Revenue of $21.7B (+7.6%) vs. $21.56B. (PR)
• United Technologies (UTX): Q3 EPS of $1.14 beats by $0.02. Revenue of $13.38B (-11.3%) in-line. "Order rates for most of our businesses have largely stabilized, although the shape of recovery is still uncertain." (PR)
• Western Union (WU): Q3 EPS of $0.33 beats by $0.01. Revenue of $1.31B (-4.6%) in-line. Says recent stabilization trends are encouraging. (PR)

Earnings: Mon. After Close

• Apple (AAPL): FQ4 EPS of $1.82 beats by $0.40. Sales of $9.87B vs. $9.2B. Sees FQ1 EPS of $1.70-1.87 vs. consensus of $1.91 on sales of $11.3-11.6B, in line. Sold 3.05M Macs, 10.2M iPods, and 7.4M iPhones during quarter. Gross margin 36.6%. Shares +5.9% AH. (PR)
• Atheros Communications (ATHR): Q3 EPS of $0.46 beats by $0.08. Revenue of $157M (+13%) vs. $147M. Shares +2.1% AH. (PR)
• Boston Scientific (BSX): Q3 EPS of $0.19 beats by $0.05. Revenue of $2.03B (+3%) vs. $2.04B. Sees Q4 EPS of $0.17-0.21 vs. $0.17. Expects full-year adjusted EPS of $0.75-0.79 vs. $0.56. Shares -7% AH. (PR)
• JDA Software Group (JDAS): Q3 EPS of $0.40 beats by $0.04. Revenue of $96M (-3%) vs. $92M. Shares -2.8% AH. (PR)
• Lincare (LNCR): Q3 EPS of $0.53 beats by $0.01. Revenue of $393M (-3%) vs. $391M. Shares -0.8% AH. (PR)
• Packaging Corp. of America (PKG): Q3 EPS of $0.25 in-line. Revenue of $554M (-11%) vs. $549M. Sees Q4 EPS of $0.13 vs. $0.17. Shares -7.4% AH. (PR)
• Steel Dynamics (STLD): Q3 EPS of $0.30 beats by $0.07. Revenue of $1.2B (-54%) vs. $1.1B. Shares +2.6% AH. (PR)
• Texas Instruments (TXN): Q3 EPS of $0.42 beats by $0.03. Revenue of $2.9B (-15%) vs. $2.8B. Sees Q4 EPS of $0.42-0.50 vs. $0.40. "Our balance sheet is strong and has allowed us to opportunistically make investments in Analog and Embedded Processing throughout this downturn that should provide returns for years to come." Shares +2% AH. (PR)
• UDR Inc. (UDR): Q3 FFO of $0.31 beats by $0.01. Rental income of $150M (+2%) vs. $149M. Lowers full-year FFO guidance to $1.14-1.20 from $1.23-1.35, vs. consensus of $1.27. Shares -0.5% AH. (PR)
• Volterra Semiconductor (VLTR): Q3 EPS of $0.19 misses by $0.01. Revenue of $29.7M (-3%) in-line. Shares -10.3% AH. (PR)
• Werner (WERN): Q3 EPS of $0.26 beats by $0.06. Revenue of $429M (-27%) vs. $428M. Shares +3.3% AH. (PR)
• Zions Bancorp (ZION): Q3 EPS of -$1.41 misses by $0.17. Revenue of $753M (+29%) vs. $633M. Shares -1.1% AH. (PR)

Today's Markets

Asian markets were mostly higher Tuesday, while Europe stocks were mostly lower. Nasdaq futures are well higher on the strength of Apple's (AAPL) blowout Q4; other indexes are flat.

Do you feel that you've missed out on a stock that has moved up greatly in this market? With earnings season upon us once again, it makes for a great time to be selling put options due to high implied volatility. In this article, I will outline an option strategy that I use particularly during earnings season. This will put money in my pocket up front, give me a chance to purchase the stock for less than it's trading for now, and also give me gains if the stock moves even higher. I must note that this strategy could lose money if the stock moves much lower after results and you get the stock PUT to you at expiration (or in the rare case of an early exercise). This post requires the knowledge of stock options. To learn more about the option strategies outlined in this post, risks, pricing, calculations, other strategies, and options in general, click here.

The table below shows some of the stocks I'm willing to go long (for reasons not discussed in this post), which will be reporting earnings this week. To understand the table below read the example used with Apple (AAPL) below.

From the WSJ:

The Dow Jones had its best close for over a year last Friday on the 2nd anniversary of its record close. The markets certainly seem to be expecting good things from the forthcoming US earnings season judging by the recent price action.

Note US market activity will be lighter than normal today as the Columbus Day holiday closes the US bond market, banks, government offices and many businesses, though the stock market will be open for a normal day of trading.

• Paulson fibbed to clinch TARP. Then-Treasury Secretary Henry Paulson misled the public about the health of U.S. banks in order to seal the $700B TARP rescue package, according to TARP Inspector General Neil Barofsky. On Oct. 14, Paulson said TARP recipient banks were healthy, and that they took the money for "the good of the U.S. economy," in order to boost lending. In truth, regulators were already concerned that some banks were teetering. Barofsky's report, to be released today, also implies Bank of America (BAC) should have qualified for more aid earlier, but funds were withheld pending its merger with Merrill. In response to the report, TARP director Herb Allison said any review of the government's actions "must be considered in light of the unprecedented circumstances in which they were made."
• PPIP to swell to $12.27B. The Treasury will announce today that AllianceBernstein (AB), BlackRock (BLK) and Wellington Management have raised a combined $1.94B to participate in government's scheme to soak up toxic assets from banks, known as PPIP. For their efforts, the Treasury will match the $1.94B dollar for dollar, and provide debt financing to double that, bringing their total purchasing power to $7.74B. Last week Invesco (IVZ) and TCW became the first two PPIP investors with a combined $1.13B.
• CIT failure would benefit Goldman, hurt taxpayers. Sources say Goldman Sachs (GS) stands to earn a $1B 'make-whole payment' from CIT Group (CIT) if it files for Chapter 11 or otherwise terminates a $3B financing facility extended by Goldman last June. On the other hand, U.S. taxpayers stand to lose the $2.3B the Treasury paid to purchase preferred shares in CIT. In a statement this morning, Goldman Sachs insisted the $1B was not a 'windfall payment' but rather represents "the present value of the spread to be earned over the life of the facility."
• IMF's new role as G-20 admin. The cloudy relationship between the IMF and its shareholders took shape over the weekend. While managing director Dominique Strauss-Kahn would have liked the IMF to emerge as a global central bank, G-7 leaders in Istanbul - with broad support from other world leaders - moved to convert the IMF into the administrative arm of the G-20, which is emerging as the board of directors of the global economy. On Sunday, G-7 leaders instructed the IMF to prepare the framework for an "orderly and cooperative exit" from global fiscal and monetary stimulus.
• Brocade puts itself on the block. Brocade Communications (BRCD), which makes equipment that links computer networks to data-storage centers, has quietly put itself up for sale. H-P (HPQ), whose mounting rivalry with Cisco Systems (CSCO) has it scrambling to source parts for its ProCurve networking division, is a lead candidate to acquire Brocade. Other tire-kickers include Oracle (ORCL). Brocade's market cap as of Friday was $3.2B.
• BofA readies for sudden departure. Sources say Bank of America's (BAC) board will settle this week on an emergency CEO in case legal turmoil forces Ken Lewis to step down before year-end. The TARP IG report due out today (see above) will also say that while government officials didn't pressure BofA to hide Merrill's losses from shareholders, it was under pressure to finish the deal, and that its lawyers decided the bank did not need to disclose losses mid-stream.
• Euro-zone service sector moves back to growth. The euro-zone services sector returned to growth for the first time in 16 months, with Markit's PMI index climbing to a surprisingly strong 50.9 (consensus: 50.6) from 49.9 in August. France's growth was most pronounced, climbing to 52.2 from 49.3. Business sentiment regarding activity in one year's time hit a 44-month high. "Although the rise was only very modest," Markit chief economist Chris Williamson said, "signs that the recovery has spread from manufacturing to services add to hopes that the upturn can become self-sustaining." Meanwhile, euro area retail sales (.pdf) dropped 0.2% in August from July, the 15th straight month of decline, and 2.6% weaker than a year ago.
• Finra concedes partial blame for Ponzi schemes. Finra, the U.S. brokerage industry’s main regulator, is inadequately trained to investigate fraud allegations, according to an internal probe (.pdf) of the Madoff and Stanford scandals. Finra's report concedes regulatory lapses that allowed the giant Ponzi schemes to proliferate undetected weren't confined to the SEC (which earlier issued its own damning findings (.pdf)), noting it received credible tips from at least five sources, including the SEC. Somewhat troubling is the notion that current SEC chief Mary Schapiro was head honcho at Finra during the period in question.
• HSBC chief fires warning shot. HSBC (HBC) CEO Michael Geoghegan is convinced we're headed for a W-shaped recovery and a second downturn, and says he's in no rush to expand. "I'm not as convinced we're through the worst as others are," he told the FT in an interview. Meanwhile, HSBC's head of global private banking said this morning the bank has mulled ING's (ING) private banking assets for sale in Asia and Switzerland, noting such businesses almost never come up for sale. On Sunday, HSBC sold its NYC headquarters for $330M in cash to Israeli businessman Nochi Dankner.
• U.S. group enters race for Volvo. A U.S.-led consortium is pitting itself against China's Geely Automotive to buy Ford's (F) Swedish car maker, Volvo (VOLVY.PK). The group is led by former Ford director and turnaround specialist Michael Dingman and former Ford and Chrysler executive Shamel Rushwin, who have lined up financing. While the U.S. consortium is reportedly offering much less than Geely, both involve similar plans to invest more than $3B in Volvo.
• Greenspan sees more job losses. Calling Friday's September job report "pretty awful," former Fed chairman Alan Greenspan warned that the U.S. unemployment rate could "penetrate the 10% barrier and stay there for a while before we start down." Greenspan said he was especially worried that Friday's report, which put unemployment at 9.8%, showed an increasing number of Americans unemployed for more than six months – up by 450,000 at 5.4M.

Today's Markets

Asia markets were mixed Monday, Europe is marginally higher, and futures are up about half a point from Friday's close.

• Escalating trade tensions. On Friday, the U.S. announced a tariff on Chinese tires in a move some say may actually be a precursor to a campaign to reduce trade barriers. Each of the four presidents that served before Obama moved to protect domestic industries early in their term before making a push for freer trade. Whatever the end goal may be, China 'strongly opposes' the tariffs and said it may turn to the WTO to intervene, and yesterday announced it's initiating antidumping procedures against imported U.S. chicken and auto products.
• Obama renews push for financial reforms. Just ahead of the one year anniversary of Lehman Brothers' collapse, Obama is heading to Wall Street to explain how the government plans to unwind its involvement in the financial sector and to renew his push for regulatory reform. Obama is expected to ask for the support of the financial community in implementing new market regulations and will call for greater global coordination on financial oversight. In conjunction with Obama's remarks, the Treasury will release a document called "The Next Phase" (.pdf), outlining ways in which emergency measures are being reduced.
• Deutsche Telekom sprints for next deal. Just days after announcing plans to merge U.K. operations with France Telecom (FTE), Deutsche Telekom (DT) is reportedly considering a bid for Sprint Nextel (S). Deutsche Telekom, a distant fourth in the U.S. market behind Sprint, Verizon Wireless (VZ) and AT&T (T), has apparently been researching a possible Sprint tie-up for over a year, but began serious due diligence three months ago. A potentially costly offer could be submitted in the next few weeks. DT -1.4%, S +10.1% premarket (7:00 ET).
• J&J renegotiates Elan deal. Johnson & Johnson (JNJ) is reportedly in talks to cut the price of its $1.5B deal with Elan (ELN), following a court order that the J&J tie-up violates a partnership between Elan and Biogen Idec (BIIB). J&J wants to reduce the deal's price tag by at least $100M, and new terms could be announced in the coming days.
• Plenty of suitors for JAL. American Airlines (AMR) and Delta Air Lines (DAL) are both said to be considering rival investments in Japan Airlines, with Delta prepared to inject up to ¥50B in a tie-up that would include code sharing on international flights. American Airlines is looking to buy equity in JAL in part to prevent it from switching over to a rival airline network, though both American and Delta also see this as a way to grow revenue from Asia. JAL is Asia's largest airline by revenue but lost $1B last quarter and is under pressure to cut costs and raise money.
• BIS: Higher taxes for larger banks. The Bank for International Settlements [BIS] published its Quarterly Review (.pdf) yesterday, expressing 'cautious optimism' on the state of the global economy but noting that interbank lending fell $812B during the previous quarter. The BIS recommended that big banks pay higher taxes to offset the disproportionately large systemic risks they pose.
• BlackRock plans internal trading platform. BlackRock (BLK) is set to create its own global trading platform, allowing BlackRock clients to conduct deals with one another through internal trades that completely bypass Wall Street. BlackRock says it's not trying to marginalize Wall Street, though the move is certainly a sign of increased resistance to paying fees for securities trades that have small margins and rely on large volumes to achieve profitability. The plan is still in early stages, and will probably be introduced for stocks first, followed by fixed income.
• Gas firms give go-ahead on Gorgon. Chevron (CVX), Exxon Mobil (XOM) and Royal Dutch Shell (RDS.A) approved development of the Gorgon liquefied natural gas project in Australia, paving the way for a venture that could earn A$300B ($258B) in gas sales to China, India and Japan in its first twenty years. The project's first phase will cost A$43B with the first LNG exports expected in 2014.
• China in power-plant talks with AES. Sovereign wealth fund China Investment Corp. is said to be in talks to take a significant minority stake in power-plant developer AES Corp. (AES). Sources said the two sides are also discussing a possible joint venture in which China Investment Corp. would contribute capital to fund AES' plans to develop power plants around the globe.
• Friday failures. Three more bank failures on Friday, bringing this year's total to 92 and costing the FDIC's insurance fund around $2B. Most of those losses come from the seizure of Corus Bank, whose 11 branches and $7B in deposits will be assumed by MB Financial (MBFI). (Read the FDIC's press releases: I, II, III)

Today's Markets

Asia closed mostly down. European markets and U.S. futures start the week in the red.

This is the second quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out our series preface on hedge fund 13F filings.

Next up is John Griffin's hedge fund Blue Ridge Capital. Griffin is very similar to Stephen Mandel (whom we also just covered) in that they were both some of Julian Robertson's top men at legendary hedge fund Tiger Management. They both went on to form their own funds and as such are labeled 'Tiger Cubs.'

Shawn Tully at Fortune has a fun article recounting the rapid rise of Blackrock, which will soon be the largest asset manager in the world.

He contrasts the firm’s fixed-income investment strategy with other firms (e.g., Pimco) as follows:

Citigroup reports that in July the world outside the US was where to invest, as we tend to argue. The non-US DR index in dollars rose 10.10% that month vs a 7.41% rise in the S&P500, and in the year to date, the non-US index is up 22.52% vs a mere 9.33% for the S&P.

Best performers were Latin America and CEEMA (Central Europe and Middle East), both up over 50% YTD. Asia Pacific ex-Japan and Asia Pacific Emerging markets are up over 33%.

As ETFs have grown in popularity over the last several years, iShares has firmly established itself as the market leader, its name becoming practically synonymous with that of the products it offers. With more than 180 funds, many of which are among the largest on the market, iShares ETF platform offers exposure to multiple asset classes covering nearly every corner of the investable market. The recent acquisition of the fund family by BlackRock (BLK) has given the firm even more marketing firepower, and we’ve seen a number of new fund launches since the deal was announced. But iShares might not want to rest on its laurels for too long reports the Wall Street Journal’s Shefali Anand.

Anand notes that iShares has historically been able to charge much higher fees than its competitors because its products typically feature very narrow bid-ask spreads. iShares MSCI Emerging Markets ETF (EEM), for example, charges expenses of 0.72%, 45 basis points more than Vanguard’s Emerging Markets ETF (VWO). While this isn’t a huge deal to long-term investors, it matters to high-frequency traders who make their living off of a few basis points here and there.

By Murray Coleman

Is Fidelity finally ready to jump into ETFs in a big way? My sources say maybe … but there could be one troubling hitch.

Conclusion: While the “toxic asset” investment story may hold significant investment appeal for retail investors, it is a well documented fact that a closed end fund’s (CEF) share price will typically trade to a post-IPO discount to its net asset value (NAV) over a 12 month period. (Closed-end Fund IPOs, Edward S. O’Neal, PhD)

Recommendation: Retail investors may be better off buying shares of Blackrock’s proposed Toxic Asset CEF in the post-IPO after-market at what is likely be a discount to its NAV. (It’s akin to driving a brand new car off the showroom lot; you’ve immediately experienced a reduction in value. Buy it used.)

The Federal Reserve is feeling somewhat vulnerable lately, and has taken some unprecedented steps to convince the public and foreign investors that the central bank is not on the path of desecrating the US dollar. Treasury Secretary and former New York Fed president Timothy Geithner, has been traveling the world trying to salvage confidence in the dollar amongst increasing fears of runaway inflation.

Matters have become so serious the Fed felt they need additional firepower. The Fed is independent, but it still reports to Congress. American International Group (AIG), Fannie Mae (FNM) and Freddie Mac (FRE) are forbidden from lobbying the government, but the Fed is not. Yesterday Linda Robertson, who headed Enron’s lobbying office from 2000 until the energy company’s collapse from an accounting scandal in 2002, began her job as the Fed’s first lobbyist.

• CIT confirms rescue details. CIT Group (CIT) confirmed its $3B rescue by bondholders, of which $2B is available immediately and the rest is expected to be available within ten days. The loan has a 2.5-year maturity. CIT also announced a tender for debt due August 17 where it would pay creditors $0.825 on the dollar as part of a "comprehensive restructuring of its liabilities," and canceled its Thursday earnings release. The real question now is whether the loan is anything more than a stop-gap measure and if CIT can survive without a complete overhaul.
• California closes budget gap. California lawmakers reached an agreement over how to close a $26B budget deficit, pulling the state back from the brink of bankruptcy. The deal, which needs to be approved by the state's full Senate and Assembly, will cut spending for schools, public works, welfare programs and municipalities, will force companies and individuals to pay income taxes sooner and will make it more difficult to receive state aid. In the time it took lawmakers to close the budget gap, California issued 153,711 IOUs worth $682M.
• TARP update. A leaked report from TARP Special Inspector General Neil Barofsky shows the country's bailouts and backstop plans total $23.7T. Of the $700B slated for TARP, $441B has been distributed. Barofsky will present a quarterly report on TARP to a congressional panel at 10:00 ET, and will criticize the Treasury for not being transparent enough about how it's spending taxpayer money. (Read Barofsky's report (.doc))
• Deutsche's spying probe. Insiders say Deutsche Bank (DB) has fired two top executives following an internal investigation into whether the company spied on a board member and others. Meanwhile, German prosecutors have opened a preliminary probe into whether Deutsche Bank and its senior officials broke civil and criminal laws protecting individual privacy.
• Yahoo's new homepage. Yahoo is launching a new homepage months earlier than planned, rolling out a test version in some markets today. The first homepage re-design since 2006, Yahoo is hoping to attract more users and advertisers by making its site the "center of their lives online," and will make it easier for users to access content from across the web, including from social networking sites.
• Ameritrade reaches ARS settlement. TD Ameritrade (AMTD) reached a settlement with New York Attorney General Andrew Cuomo and will buy back $456M of auction-rate securities from around 4,000 clients. Clients with accounts under $250,000 should get their money back within 75 days, while the company aims to return the rest of the funds by March 2010.
• Swiss banks retreat from U.S. clients. As the Justice Department's case against UBS (UBS) drags on, Swiss banks are reevaluating their U.S. business connections. Some Swiss banks are cutting off business with American clients for fear of U.S. authorities, while others are no longer accepting deposits from U.S.-based customers or allowing them to open accounts.
• Final Opel bids. General Motors confirmed it received three binding takeover offers for its Opel unit and will consider the deals in conjunction with the European countries that will be affected. The consortium of Magna International (MGA) and Russia's Sberbank made an unexpected last-minute change to their bid to appease critics, agreeing to evenly split a 55% majority stake in Opel instead of giving 80% of the stake to Sberbank. The other two bidders are RHJ International and Beijing Automotive.
• Wyeth okays Pfizer deal. As expected, Wyeth (WYE) shareholders approved a takeover by Pfizer (PFE), with 98% of votes cast in favor of the deal. The transaction still needs to be cleared by U.S. antitrust regulators.
• Barnes & Noble's e-book strategy. Barnes & Noble (BKS) announced plans to launch an electronic bookstore and will debut a physical e-book reader early next year, a direct attack on Amazon (AMZN) and its Kindle. Titles bought through the eBookstore can also be read over devices like the iPhone (AAPL) and BlackBerry (RIMM) and on computers.
• Leading indicators improve. Conference Board's Leading Indicators index rose +0.7% in June, vs. +0.5% consensus, the third increase in as many months with most components contributing positively. The index is up 2% in H1 2009 vs. -3.1% in H2 2008.

Earnings: Tuesday Before Open

• Ameritrade (AMTD): FQ3 EPS of $0.33 beats by $0.04. Revenue of $614M (-1.6%) vs. $580.5M. (PR)
• Autoliv (ALV): Q2 EPS of -$0.24 beats by $0.18. Revenue of $1.19B (-37%) vs. $1.15B. (PR)
• BJ Services (BJS): FQ3 EPS of -$0.11 misses by $0.11. Revenue of $787M (-40.8%) vs. $868M. (PR)
• BlackRock (BLK): Q2 EPS of $1.75 beats by $0.17. Revenue of $1.03B in-line. Assets under management $1.373T. Shares +1.6% premarket (8:20 ET). (PR)
• Caterpillar (CAT): Q2 EPS of $0.72 beats by $0.50. Revenue of $8.0B (-41.5%) vs. $8.9B. Shares +9.3% premarket (7:50 ET). (PR)
• Coca-Cola (KO): Q2 EPS of $0.92 beats by $0.03. Revenue of $8.3B (-8.6%) vs. $8.7B. Shares -1% premarket (7:50 ET). (PR)
• Comerica (CMA): Q2 EPS of -$0.10 beats by $0.35. Tier 1 capital ratio of 11.57%. Net credit-related charge-offs of $248M, or 2.08% of average total loans. (PR)
• Continental Airlines (CAL): Q2 EPS of -$1.36 misses by $0.01. Revenue of $3.1B (-22.7%) in-line. (PR)
• EI DuPont de Nemours (DD): Q2 EPS of $0.61 beats by $0.08. Revenue of $6.9B (-22.4%) vs. $7.15B. Shares +1% premarket (6:40 ET). (PR)
• Elan (ELN): Q2 EPS of -$0.14 beats by $0.01. Revenue of $281M (+14.4%) vs. $262M. (PR)
• Forest Laboratories (FRX): FQ1 EPS of $0.87 beats by $0.05. Revenue of $1B (+4.3%) in-line. (PR)
• Freeport-McMoRan Copper & Gold (FCX): Q2 EPS of $1.38 beats by $0.69. Revenue of $3.7B (-32.3%) vs. $3.4B. Shares +3.1% premarket (8:10 ET). (PR)
• Hudson City Bancorp (HCBK): Q2 EPS of $0.26 beats by $0.01. Loan loss provisions of $32.5M in Q2 vs. $3M in Q2 2008. Net charge-offs of $9.6M. (PR)
• Jefferies Group (JEF): Q2 EPS of $0.30 beats by $0.04. Revenue of $590M (+50.5%) vs. $510M. Shares +5.1% premarket. (PR)
• Lexmark International (LXK): Q2 EPS of $0.55 misses by $0.05. Revenue of $905M (-20.6%) vs. $916M. (PR)
• Lockheed Martin (LMT): Q2 EPS of $1.88 beats by $0.07. Revenue of $11.24B (+1.8%) in-line. Reaffirms full-year guidance. Shares -0.4% premarket. (PR)
• Merck & (MRK): Q2 EPS of $0.83 beats by $0.06. Revenue of $5.9B (-2.5%) vs. $5.8B. (PR)
• Peabody Energy (BTU): Q2 EPS of $0.49 in-line. Revenue of $1.3B (-12.2%) vs. $1.4B. Shares -2.4% premarket (8:10 ET). (PR)
• Precision Castparts (PCP): FQ1 EPS of $1.70 misses by $0.05. Revenue of $1.4B (-23.8%) vs. $1.6B. (PR)
• Quest Diagnostics (DGX): Q2 EPS of $1.00 beats by $0.05. Revenue of $1.9B (+3.5%) in-line. (PR)
• Regions Financial (RF): Q2 EPS of -$0.28 misses by $0.06. Loan origination volume of $3.1B vs. $2.8B in Q1. Net loan charge-offs increased to $491M, or an annualized 2.06% of average loans. (PR)
• Schering-Plough (SGP): Q2 EPS of $0.46 beats by $0.01. Revenue of $4.6B (-5.6%) in-line. (PR)
• Southwest Airlines (LUV): Q2 EPS of $0.08 beats by $0.01. Revenue of $2.6B (-8.8%) in-line. Shares +0.7% premarket (7:50 ET). (PR)
• State Street (STT): Q2 EPS of $1.04 beats by $0.07. Revenue of $2.15B (-20.3%) vs. $2.16B. Shares -1.6% premarket (8:00 ET). (PR)
• United Technologies (UTX): Q2 EPS of $1.21 beats by $0.17. Revenue of $13.2B (-17.2%) vs. $13.9B. (PR)
• Unitedhealth Group (UNH): Q2 EPS of $0.73 beats by $0.03. Revenue of $22B (+6.8%) in-line. (PR)
• Western Union (WU): Q2 EPS of $0.32 beats by $0.02. Revenue of $1.25B (-6.9%) in-line. (PR)

Earnings: Monday After Close

• Allscripts-Misys Healthcare Solutions (MDRX): Q4 EPS of $0.16 beats by $0.01. Revenue of $166M (+71%) vs. $160M. (PR)

The second of the 3 big weeks for S&P 500 type companies arrives; last week was an unqualified success of setting expectations low, cutting expenses aggressively and beating very slow-to-adjust analysts expectations. Now with the bar raised higher as expectations ramped up, I expect the sledding to be a bit tougher.

Here are names of interest in the early part of the week, with names the market will be watching and some additional ones that I like to look at. Tuesday will be the more interesting day. I forgot about earnings knee jerk reaction time, when I shorted American Express (AXP) and Capital One (COF) late Friday; both report Thursday so despite extreme overvaluations and gaps in each chart, I'll be heading to the sidelines before then on the 2 positions.

Stocks were down again on Friday (making it two down weeks in a row) as a fall in crude prices (they had their worst week since January) and a drop in consumer sentiment proved a drag. Chevron (CVX) joined in the chorus of doom on Friday by warning that Q4 earnings would be “significantly lower” than the preceding quarter, hightening earnings worries. Against such a background, the ordinary punter finds it hard to comprehend that yet again failure is being rewarded; AIG in talks with U.S. over another $250 million in bonuses.

The Dow has now fallen back 7.4% since that June 12 finish. The S&P 500 and Nasdaq have fallen back by similar amounts. The Dow finished the week down 1.6%. The S&P 500 dropped 1.9%, with a 2.6% decline for the Nasdaq. Investors fretted about the potential for a string of tepid earnings reports this week and worried about the pace of the alleged recovery. Among the big companies reporting next week are railroad CSX, Goldman Sachs (GS), Intel (INTC), IBM, JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C) and General Electric (GE). Personally I think that the earnings of the financials will be almost impossible to decipher but watch for increased provisioning against non-performing loans.