Morning Note...

Futures are -55bps this morning as global financial concerns have been tempered by a mega-deal from Warren Buffett’s Berkshire Hathaway.  Early this morning, futures were down over 1% as the UBS earnings miss across the pond, coupled with a second announced bailout of $51B for UK banking giants RBS and LYG, weighed on global financials.  Additionally, the tech sector, particularly the semiconductors, is weaker as MSCO lowers its stance to “cautious.”  However, BRK/A’s proposed $100 takeout of Burlington Northern (BNI; closed $76 yesterday) is a massive $40B deal (potentially Buffett’s largest) that represents a very bullish outlook for the United States and its infrastructure.  The entire transport sector is bid up in sympathy this morning.  It’s interesting to note that the two sectors that represent the internal “engine” of our economy (Semis and Transports) – which have been recently cited by market technicians as “broken” in terms of trading action – are in the news today.  Obviously transports are recovering on the M&A news, and semis (INTC, KLAC, NVDA, NVLS, ONNN, XLNX, MU) are weaker on the Morgan Stanley call.  In other M&A news, SWK and BDK announced a merger yesterday after the close.  PEET to buy Diedrich Coffee for $26/share.  In earnings news, CHK beats by 5c, ADM beats by 20c, and MA beat expectations.  RCL is down 4% on earnings after saying most bookings are coming from Florida and that the economy is not improving.  JNJ announced a major restructuring, including 7k job cuts (7% of global workforce).    

Overseas, Australia’s Central Bank raises rates for a second time to 3.5% and the EU raises it’s 2010 growth forecast to 0.7%.  In a move that is bullish for gold and perhaps bearish for the USD, India swaps out of $6.7B and into gold, according to the FT: see quote section below.  In political news, the Virginia and NJ elections are being closely watched today for potential Republican victories, which might give some insight into coming midterm congressional elections, where Republican wins will be seen as bullish for the economy…

In terms of sentiment, “Uncle Warren” seems to have literally saved the day today considering the early morning rout that was gathering momentum.  Without this announced deal, equity markets would have been in for a true “gut check” test.  The question is, does this M&A simply forestall that downward test (which might again gather momentum off the back of cautious Fed comments tomorrow, anemic auto sales later today, poor retail sales Thursday, or weak jobs data Friday) or does this deal mark an important inflection point that absolutely reverses the downward trend that was developing?  As always, stay tuned…

ORLY initiated Neutral at UBSS.  WSJ bullish on dividend plays like T, MO, BMY.  F discloses $2B convertible notes offering.  HEP to offer 2M shares through GSCO.  RL earnings beat.  WAG October comps +4.9%.  UBSS ups HD with Buy.  MSCO cuts ALTR, ARMH.  PIPR ups ANDS.  ATSI higher on earnings.  CNI, CP, CSX, KSU, UNP higher on BNI news.  TEVA beats by 1c.  TNS beats by 6c.  WST misses by 8c.  BofA/MLCO ups AVB, DCI.  CITI ups VCLK.  FBRC ups OSG.  JEFF ups TS.  BARD ups AIMC.  WELA ups OFIX.  GSCO cuts AMG. 

Asia mixed overnight.  Europe down nearly 2% across the board.  USD +65bps.  Oil -150bps.  Gold +30bps.  Bonds ticking higher, thus yields are lower.

Brightpoint News: 

Brightpoint PreMarket (yest close/premkt/% change/volume):

S&P 500 PreMarket (last/% change prior close/volume): 

BURLINGTON NORTH      98.15    +29.03%           1534382

BLACK & DECKER            58.59    +23.76%           468711

NORFOLK SOUTHERN      49.85    +6.91%             169935

CSX CORP                     45.75    +6.79%             425914

UNION PAC CORP           58.65    +6.52%             761230

VIACOM INC-B               29.60    +5.53%             1100

STANLEY WORKS           47.55    +5.32%             549860

COGNIZANT TECH-A       40.82    +5.21%             109391

FOREST LABS INC          28.90    +5.17%             3100

WYNDHAM WORLDWID   16.07    -4.97%              49100

AMERISOURCEBERGE      23.50    +4.4 %              1000

FORD MOTOR CO           7.29      -3.83%              7707582

SANDISK CORP              20.10    -3.64%              15125

XILINX INC                     20.98    -3.54%              100

MICRON TECH                6.35      -3.5 %              23250

KEYCORP                       5.36      -3.42%              2172

ZIONS BANCORP            13.58    -3.35%              525

NVIDIA CORP                 11.69    -3.15%              24020

WHOLE FOODS MKT       33.26    +3.04%             999

TENET HEALTHCARE       5.14      -3.02%              41430

Today’s Trivia:  Seven of the ten largest hotels (by number of rooms) are in Las Vegas.  Where are the other three?  (ps: they are not all in one place)

Yesterday's Answer:  The hypothalamus is the part of the brain responsible for body temperature, sleep, hunger, and thirst.   

Best Quotes: “India buys gold from the IMF

Published: November 3 2009 09:18 | Last updated: November 3 2009 12:37

Most investors make a virtue of diversification. But when the asset holder is a central bank, and the assets in question are US Treasuries, few like to shout about it. Tuesday’s curt announcement from India’s Reserve Bank that it was swapping $6.7bn of dollars for 200 tonnes of gold from the IMF’s vaults did not mention the D-word. The exercise was described simply as “reserves management.” Move along, nothing to see.

True, this is modest, in the context of a $286bn foreign exchange pool, Asia’s fourth-largest. It raises the share of gold from 3.6 per cent of reserves to just over 6 per cent. And it is opportunistic, as much as strategic. After years of net selling, other central banks have started to sit on their bullion. GMFS, a precious metals consultancy, forecasts net sales of just 16 tonnes this year – the lowest total since 1998. The IMF, which announced plans to offload 403 tonnes in September, is the only big seller around.

But the exchange is telling nonetheless. Since a balance of payments shock in the early 90s, the RBI had been steadily offloading its gold. The reversal of that trend burnishes the yellow metal’s credentials as the ultimate reserve currency. The decline in the dollar, down 15 per cent since March against six major currencies, is neatly mirrored by a 15 per cent rise in gold. RBI governor Duvvuri Subbarao may have asked himself a simple question: will the supply of gold rise as fast as the supply of dollar assets? Answer: almost certainly not.

The unmasking of a new, deep-pocketed buyer took the gold market by surprise, pushing spot prices to within a whisker of the record nominal high of last month. But for the RBI, the push from the dollar was probably stronger than the pull from gold

BACKGROUND NEWS

The International Monetary Fund has sold 200 metric tonnes of gold to India’s central bank, making $6.7bn which it will use to shore up its long-term finances and subsidise loans to poor countries.

India’s central bank is the first to buy from the IMF since the Fund put 403.3 tonnes of its stockpile up for sale in September.

The IMF made more money than it initially expected, selling the metal to the Reserve Bank of India gradually over the past two weeks at an average market price of around $1,045 an ounce.”

--Financial Times