Morning Market Comments

1. According to Bloomberg, Australia, the world's sixth largest wheat exporter, may harvest less of the grain than previously forecast because of dry weather in some states.  Production may be 22.7 million metric tons, down from an August estimate of 24.5 million tons.  That compares to last year's drought-reduced crop of about 13 million tons.  Australian farmers need rain ahead of the harvest starting in about November to meet yield potential.

2. There is speculation in Australian newspapers that Incitec Pivot Ltd, Australia's largest fertilizer maker, may be a takeover target for Potash Corp of Saskatchewan (POT).  As Potash is debt free, the paper speculates that Potash could buy Incitec without issuing shares.  Then again the paper also speculates that other acquirers  could include Yara International, Agrium (AGU) and Mosaic….so I don't know how much faith you put in a story that basically says that every major fertilizer producer is a possible acquirer.

3. Agrium (AGU) Chief Executive Officer Mike Wilson says an increase in global demand for grains and agriculture products will continue, and he's increasing his stake in the company by 13% to take advantage of it.  Wilson said yesterday that Agrium's share price decline is unwarranted and he bought 20,000 shares this week to raise his personal holding to 175,000 shares. "Even if there is a slowdown in the U.S. or other parts of the world, we believe year over year grain demand will increase and that grain prices and grain fundamentals will stay strong…we do not see, globally, grain demand falling off".

4. Research in Motion (RIM) introduced a version of its Blackberry Pearl with a flip cover yesterday.  The phone will be available later this year and the specific release date and price haven't been disclosed.  RIM is trying to extend its success beyond business users with its first flip model.  Consumers accounted for about 60% of new subscribers in the first quarter and now make up more than 40% of customers. About 75% of mobile phones old in the U.S. are the flip kind according to Jim Balsillie.  "The most common preference is the flip and yet it's the most unaddressed because it requires some special innovation" Balsillie said.  The company created a special hinge for the Pearl that gives more room for the keyboard and trackball.  The phone has a 2-megapixel camera with a flash, and it connects to Wi-Fi networks.

5. The move to place both Fannie Mae (FNM) and Freddie Mac (FRE) into a conservatorship has triggered Credit Default Swaps (CDS) that could result in losses to financials institutions of up to U$25 billion, according to the Financial Times. Another unwelcomed surprise in this ongoing financial crisis.

6. Yesterday, ImClone (IMCL) formally rejected Bristol Myers' (BMY) U$60 per share offer to purchase the 83% of the company it does not already own. ImClone also said it received a U$70 per share offer from an yet unnamed suitor.

7. Credit Suisse lowered their earnings estimates, target and rating on Becton Dickinson (BDX) due to headwinds created by a strengthening U.S. dollar. The shares are now rated Neutral and the target price is U$89 from U$96. The Portfolio Advisory Group believes the investment thesis remains intact and will continue to hold the stock in its U.S. Core Portfolio. This does raise the question about earnings prospects for other multinationals. We continue to argue that earnings estimates for U.S. companies are too high.

Big banks are tripping over themselves to lower their ratings and targets on other financial institutions. This morning, Credit Suisse lowered their earnings estimates and target price on Lehman Brothers (LEH). Their new target is U$10, it was $35 per share. Their new target could prove to be a stretch. The market continues to punish the shares of Lehman Brothers. After falling into yesterday's close, the shares are down a further U$3.25 or 45% in pre-market trading. The company must find a buyer for its asset management business sooner rather than later. The sale would help shore up the balance sheet and give the company time to spin-off its commercial real estate assets. If they can sell Neuberger and spin off its unwanted real estate assets, shareholders are left with a quality fixed income trading operation, back to where it began. The company's apparent reluctance to sell the entire asset management operation could prove to be a stumbling block to culminating a transaction. Lehman is in no position to negotiate and it appears time is of the essence.

Shares of Washington Mutual (WM) plunged 30% yesterday on the back of a 20% decline on Tuesday. The stock is off another 25% in the pre-market this morning. Short sellers have piled on the stock and now represent 26% of shares outstanding according to Data Explorers. The company received a memorandum of understanding from regulators this week asking for a detailed financial plan in the face of mounting losses. News that potential suitors have backed away because of new accounting rules coming this December has also added fuel to the fire.