9/228:59 News & Notes

A great link:http://www.nytimes.com/2008/09/20/business/20nocera.html?pagewanted=2&_r=3&ref=business

Short-sale ban spreads around globe - WSJ
WSJ reports the effort to quash short selling gained momentum around the globe Sunday as Australia, Taiwan and the Netherlands announced restrictions to prevent investors from betting that stocks will decline. Sunday, Australia banned placing short sales on any stock, taking it further than its decision Friday to tighten such rules. Taiwan will ban short selling of 150 of the market's heavyweights when they trade below the previous session's closing levels for the two weeks starting Monday, the Financial Supervisory Commission said. Dutch regulator Autoriteit Financi?le Markten, or AFM, banned so-called naked short selling of financial institutions for three months.

CNBC reports there have been additional stocks added to the SEC's list of stocks protected against short-selling; additions include GE, BMO, LM, GM, COF, MCO

Central banks may expand range of collateral, Nikkei says - Reuters.com
Reuters.com reports central banks in the United States, Europe and Japan will consider taking foreign-denominated assets as collateral in an effort to provide liquidity for battered financial markets, the Nikkei newspaper said on Sunday. Currently most central banks only accept assets denominated in their home currency as collateral, the paper said. If central banks were to accept assets denominated in other currencies, cash-strapped firms would be able to get funds easier, it said. Six central banks, including the U.S. Federal Reserve, the Bank of Japan, the European Central Bank, and the Bank of England are discussing a potential rule change, the Nikkei said.

RIG Transocean: Free cash flow options could create significant shareholder value - FBR (114.79 )
Friedman Billings notes that RIG should generate 22% of its market cap in free cash flow before the end of 2010, according to firm's ests. Firm's special dividend and share repurchase models outline the significant potential upside from these two scenarios. The co's growing backlog and debt reduction should allow the co to begin using FCF to create shareholder value starting in 2009. Firm believes either a commitment to a consistent special dividend over the next several years or an aggressive share repurchase program would both be very beneficial for shareholders. Firm encourages mgmt to more vocally lay out to investors what its plans are for Transocean's cash flows over the next several years, which they believe should be massive
RCM Comment: Following our theme of a resurgent commodity market, drilling stocks lead the pack. Added to this theme is a positive political environment for increased drilling.

Dollar may get 'crushed' as traders weigh up bailout - Bloomberg.com
Bloomberg.com reports Treasury Secretary Henry Paulson's plan to end the rout in U.S. financial markets may derail the dollar's three-month rally as investors weigh the costs of the rescue. The combination of spending $700 bln on soured mortgage-related assets and providing $400 billion to guarantee money-market mutual funds will boost U.S. borrowing as much as $1 trillion, according to Barclays Capital interest-rate strategist Michael Pond in New York. While the rescue may restore investor confidence to battered financial markets, traders will again focus on the twin budget and current-account deficits and negative real U.S. interest rates. "As we get to the other side of this, the dollar will get crushed,'' said John Taylor, chairman of New York-based International Foreign Exchange Concepts, the world's biggest currency hedge-fund firm, which manages about $15 bln.
RCM Comment: INFLATION!!!!!!!!!!!!!

U.S. widens scope of bad-debt plan beyond home loans - Bloomberg.com
Bloomberg.com reports the Bush administration widened the scope of its $700 bln plan to avert a financial meltdown by including assets other than mortgage-related securities. The U.S. Treasury submitted revised guidance to Congress on its plan late yesterday as lawmakers and lobbyists push their own agendas. The department also adjusted its plan to insure money-market funds to limit protection to balances as of Sept. 19, after complaints from bank lobbyists. Officials made the changes two days after unveiling plans for an unprecedented intervention in financial markets. The change to potentially allow purchases of instruments such as car loans, credit-card debt and other devalued assets may force an increase in the size of the package as the legislation proceeds through Congress. Treasury officials now propose buying what they term troubled assets, without specifying the type, according to a document obtained by Bloomberg News and confirmed by a congressional aide. Separately, the Treasury said in a statement late yesterday it would limit its $50 bln plan for insuring money-market funds to those held by investors as of Sept. 19, excluding any subsequent contributions.
RCM Comment: This story only begins to uncover the truly grotesque nature of this bailout. The bailout is obviously becoming a massive land grab by special interests. Anyone who believes that the number of $700 billion is the cap on the plan is dreaming. This activity is creating the best entry point for investing in commodities (especially precious metals) that we have seen in a long time.

Foreign banks hope bailout will be global - NY Times
NY Times reports foreign banks, which were initially excluded from the bailout, lobbied successfully over the weekend to be able to sell the toxic American mortgage debt owned by their American units to the Treasury, getting the same treatment as U.S. banks. On Sunday, the Treasury secretary, Henry M. Paulson Jr., indicated in a series of appearances on morning talk shows that an original proposal introduced on Saturday had been widened. "It's a distinction without a difference whether it's a foreign or a U.S. one," he said in an interview with Fox News. The prospect of being locked out of the bailout set off alarm bells among chief executives of overseas banks whose American affiliates also hold distressed mortgage-related assets, like Barclays (BCS) and UBS (UBS). The original text provided access to the $700 bln bailout for any financial institution based in the United States. As the day wore on, some raised their concerns with the Treasury Department, arguing that foreign institutions were both big employers and major players in the American capital markets. By Saturday evening, the language had been changed to allow any financial institution "having significant operations" in the United States. While Mr. Paulson has agreed with that argument, the Bush administration is also leaning on foreign governments to pitch in with bailout programs of their own as needed. "We have a global financial system and we are talking very aggressively with other countries around the world, and encouraging them to do similar things, and I believe a number of them will," Mr. Paulson said on Sunday.
RCM Comment: The bailout gets bigger and bigger.


Goldman, Morgan scrap Wall Street model, become banks in bid to ride out crisis - WSJ
The Wall Street Journal reports the Federal Reserve, in an attempt to prevent the crisis on Wall Street from infecting its two premier institutions, took the extraordinary measure on Sunday night of agreeing to convert investment banks Morgan Stanley (MS) and Goldman Sachs (GS) into traditional bank holding companies. With the move, Wall Street as it has long been known will cease to exist. Morgan and Goldman will come under the close supervision of national bank regulators, subjecting them to new capital requirements, additional oversight, and far less profitability than they have historically enjoyed. This fundamentally alters the landscape," a Goldman Sachs spokesman said Sunday night. "By becoming a bank holding company and being regulated by the Federal Reserve, we have directly addressed issues that have become of mounting concern to market participants in recent weeks." Morgan Stanley officials have been talking about this option internally for several months, and Fed officials have been stationed at the bank since the crisis intensified earlier this year. After last week's market crisis, Morgan Stanley officials asked the Fed to speed up its review and grant the bank designation sooner. "It became clear that the world had changed," said Morgan Stanley spokeswoman Jeanmarie McFadden. She said that the firm would reduce its leverage ratios over the next few years from current levels to something more in line with that at commercial banks.