Today's Headlines

Bloomberg:

• Banks Face Two-Front War on Bad Mortgages, Foreclosures. Shoddy mortgage lending has led bankers into a two-front war, pitting them against U.S. homeowners challenging the right to foreclose and mortgage-bond investors demanding refunds that could approach $200 billion. While federal regulators and state attorneys general have focused on flawed foreclosures, a bigger threat may be the cost to buy back faulty loans that banks bundled into securities. JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. have set aside just $10 billion in reserves to cover future buybacks. Bank of America alone said this week that pending claims jumped 71 percent from a year ago to $12.9 billion of loans.
  
• Philadelphia-Area Manufacturing Expanded in October. Manufacturing in the Philadelphia region expanded less than forecast in October as a measure of orders contracted for a fourth month. The Federal Reserve Bank of Philadelphia’s general economic index rose to 1 from minus 0.7 a month earlier. Less inventory rebuilding and consumers constrained by joblessness near 10 percent may restrain factories. The Philadelphia Fed bank’s shipments gauge rose to 1.4 from minus 7.1 in September. The employment index increased to 2.4 from 1.8 a month earlier. The new orders measure increased to minus 5 from minus 8.1, today’s report showed. The Philadelphia Fed’s index of prices paid jumped to 31.5, the highest level since May, from 9.8. The gauge of prices received increased to minus 9 from minus 13.9.
• Clarida Questions Effectiveness of Quantitative Easing: Video.
• Oil Declines as Chinese Refinery Demand Growth Slows to Least in 18 Months. Crude declined as China’s oil processing grew the least in 18 months after government measures to cool the economy reduced fuel consumption. Oil slipped as much 2.1 percent following data from China Mainland Marketing Research Co. that showed refineries in the world’s biggest energy-consuming country processed about 8.5 million barrels a day in September. That’s a 6.6 percent gain from a year earlier and the smallest increase since March 2009. “The Chinese numbers didn’t knock the socks off of oil traders,” said Phil Flynn, vice president of research at PFGBest in Chicago. “You’ve got a China demand premium built into the oil price. The disappointing numbers overnight, together with slower GDP growth, higher inflation and higher interest rates, are putting a damper on bullish sentiment.” “We’re starting to see a bit more of a focus on the fundamentals of the market,” said Michael Fitzpatrick, a broker with MF Global in New York. “We’ve traded with the stock market and the dollar lately, but those correlations are staring to break down.” “If it weren’t for the Dow and dollar, oil would be getting hammered real hard because of the Chinese news,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Prices have been quite robust lately, and a large part of that was due to expectations of ever-faster Chinese growth.”
• European Services, Manufacturing Growth Weakens. Europe’s services and manufacturing industries expanded at the weakest pace in a year in October, suggesting a global slowdown and the rising euro are starting to undermine the region’s recovery. A composite index based on a survey of euro-area purchasing managers in both industries fell to 53.4 from 54.1 in September, London-based Markit Economics said today. Economists forecast a drop to 53.7, the median of 12 estimates in a Bloomberg survey shows.
• Sarkozy Moves to Speed Senate Vote on Raising Retirement Age Amid Strikes.
  

Wall Street Journal:

• Goldman(GS) Eyes Its Buffett Tab. Goldman Sachs Group Inc. is considering paying back a $5 billion investment from Warren Buffett's Berkshire Hathaway Inc. that bolstered the securities firm during the worst of the financial crisis, according to people familiar with the situation.
• Financial Regulation Overhaul Draws Weak Public Support. Many Democrats hoped this summer’s financial regulation overhaul would help them in elections this fall. A survey by economists at the University of Chicago and Northwestern University indicates they’re not getting much traction from it. Just 12% of respondents in the survey said they were satisfied with the Dodd-Frank law to revamp financial oversight, while 54% were dissatisfied. Two out of three people said they believe the measure is insufficient to protect against future bailouts. Even among only Democrats, the law has little support. Just 35% of Democrats said they were “satisfied” or “very satisfied” with the measure. The vast majority of Republicans, 80%, said they were dissatisfied, along with 54% of independents.
• Goldman(GS) Hiring More in Move into Asset Management.
• G-20 Seeks to Forge Elusive Consensus on Currencies. Finance ministers from the Group of 20 nations are under pressure to reach a truce in what's being called a global "currency war," but they will struggle to produce anything substantive this week. G-20 finance ministers and central bankers are seeking consensus at meetings Friday and Saturday on steps that could calm foreign-exchange markets, but they will likely leave any concrete measures to the leaders of the big industrial and developing countries, who meet in Seoul next month.

CNBC:

• Americans Growing More Pessimistic About Economy: CNBC Survey. The American dream appears increasingly elusive to the average citizen, with the CNBC All-America Economic Survey finding continued high levels of pessimism in the nation’s outlook for incomes, home values and the future of the economy. After trillions of dollars were put to work for monetary and fiscal stimulus, just 8 percent of the nation views the economy as excellent or good and 92 percent see it as fair or poor, little changed from a year ago. But just 37 percent of the public believes the economy will improve in the next year, down five points from a year ago. Taken together, the combined percentage of Americans who are pessimistic about the economy now and for the next year is at the second highest for the three-year life of the CNBC survey.

Zero Hedge:

• The Obama Recovery Has Finally Succeeded... If You Are a High Frequency Trader. A headhunter firm is either helping GETCO build the 21st century equivalent to the atom bomb, clustering every single HFT trader under one roof for the most destructive group of momo lemmings ever assembled, or the Obama recovery is truly working... for those who know nothing but how to frontrun what remaining traders are left. From a job search posting on LinkedIn:
• France Grinds to Literal Halt as Authorities Impose Fuel Consumption Restrictions.
  

LA Times:

• Bell's Rizzo Used Low-Income Housing Funds to Boost His Pay, Audit Says. Controller's report on redevelopment agency finds $520,000 in dubious spending and $500,000 in inappropriate payments to three top administrators as the City Council provided no 'meaningful oversight.'

Market Folly:

• Latest Hedge Fund Exposure Levels to Various Asset Classes. Societe Generale is out with their latest hedge fund watch and we see that overall, hedgies are very long the Swiss franc and have increased long positions in oil. Let's take a look at SocGen's round-up of hedge fund exposure to the various asset classes. With regard to equities, Societe Generale finds that hedge funds as a whole are astonishingly 'neutral' on the markets. While a few funds have net shorts on the S&P, the main area hedgies are maintaining short positions are in small caps with the Russell 2000 (which investors typically play via the IWM exchange traded fund). In our particular coverage, we've seen many hedge funds favor high quality stocks essentially as placeholders in a portfolio given the somewhat tepid economic environment. In bonds, they note that many funds had net short positions but they've been forced to square those positions as double-dip fears returned. SocGen notes that hedgies are somewhat long 10 year treasuries though as the second round of quantitative easing looms large. Possibly the most notably change in terms of asset class exposure would be the uptick in commodity positions. As the dollar has weakened, many hedge funds believe commodities will benefit from quantitative easing round two. Specifically, these funds prefer positions in oil with a large net long position.

Politico:

• Right Declares War on NPR. NPR’s decision to fire Juan Williams over comments he made about Muslims on Fox News has prompted calls on the right for Congress to remove its funding, and concern on the left that NPR may have just handed its critics a powerful weapon for painting the broadcaster as liberal. The biggest names in conservative politics – including Mike Huckabee and Sarah Palin, both paid Fox News contributors like Williams — rushed to his defense after he said he gets “nervous” when he sees people in Muslim dress boarding an airplane.

Dow Jones:

• Honda Motor Co.'s domestic sales are down 35% so far this month from the previous year, more than an expected 28% decline, citing a company executive.

Reuters:

• FACTBOX: U.S. European Bank Writedowns, Credit Losses. Top U.S. and European banks have lost more than $1.2 trillion on toxic assets and bad loans since the start of 2007.
  

Expansion:

• Spain's government is considering a new social tax on banks, energy companies and telecommunications firms to help plug the budget deficit.

Der Spiegel:

• How Speculators Are Crippling the Copper Industry. Hedge funds and other major investors are always looking for new places to park their cash. Now copper is attracting the hot money, causing the price of the metal to fluctuate wildly. Key industries are warning of the consequences.

DigiTimes:

• DRAM Prices Still Have Room to Fall, Says Nanya. After having slid lately, contract prices of DRAM chips are likely to be further dragged down by another 10-20% in the fourth quarter of 2010, according to Pei Lin Pai, VP and spokesperson for Nanya Technology. The decline will be moderate later in 2010, when PC replacement demand from the enterprise sector emerges, said Pai.

Caijing:

• China property price growth is expected to slow from the fourth quarter through the first half of next year, citing a report from the Chinese Academy of Social Sciences.