North American Investment Grade CDS Index 98.90 bps +.91%
European Financial Sector CDS Index 150.08 bps +7.60%
Western Europe Sovereign Debt CDS Index 195.17 bps +2.36%
Emerging Market CDS Index 246.23 bps +5.16%
2-Year Swap Spread 29.0 +3 bps
TED Spread 15.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 235.0 +2 bps
China Import Iron Ore Spot $167.80/Metric Tonne +.66%
Citi US Economic Surprise Index +22.40 +3.0 points
10-Year TIPS Spread 2.09% -4 basis points
Overseas Futures:
Nikkei Futures: Indicating +27 open in Japan
DAX Futures: Indicating +34 open in Germany
Portfolio:
Slightly Lower: On losses in my Biotech and Technology long positions
Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short
Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 trades slightly lower, despite rising eurozone sovereign debt angst and China inflation fears. On the positive side, Food, Homebuilding, Restaurant, Retail, Wireless, Telecom, Gold, Oil Service and Energy shares are especially strong, rising more than .5%. (XLF) has held up well throughout the day despite euro bank weakness and worries over WikiLeaks. The 10-year yield is falling -2 bps to 2.80%. The euro currency continues to trade very poorly. Copper is rising +1.29% despite euro weakness. Weekly retail sales rose +3.2% this week versus a +2.6% gain the prior week. This is the best showing since the first week of June. On the negative side, Education, Alt Energy and Internet shares are under meaningful pressure, falling more than 2.0%. Tech sector stocks are relatively weak today. The Spain sovereign cds is climbing +4.19% to 365.04 bps, the Japan sovereign cds is rising +9.6% to 70.76 bps, the Belgium sovereign cds is gaining +10.8% to 202.61 bps and the Italy sovereign cds is rising +8.61% to 268.21 bps. Moreover, the US Municipal CDS Index is surging +4.92% to 200.0 bps and other key cds indices continue their recent sharp moves higher. While the euro financial sector cds index has soared of late, it is still below levels seen during May/June. Given the ongoing jump in eurozone debt angst, recent equity gains, China inflation fears, insider trading scandals, rising Korean peninsula tensions and financial sector Basel III concerns, the broad market continues to remain resilient, which is a big positive. However, the situation in Europe is getting very close to the point that any further deterioration will have a significantly negative impact on global indices. I expect US stocks to trade mixed-to-lower into the close from current levels on rising euro sovereign debt angst, US municipal debt worries and China inflation fears.
EU Faces More Bailouts as Euro Contagion Spreads to Portugal: Euro Credit. The failure of the Irish rescue to stem a selloff across euro-region bond markets may spell more bailouts to come, starting with Portugal. The costs to insure Portuguese debt against default rose to a record today and Spanish bonds extended declines today after sliding the most since the euro’s debut yesterday, highlighting investor concerns that officials lack the tools to contain a debt crisis threatening the currency’s survival. The extra yield that investors demand to hold Italian debt over German 10-year bonds rose to the highest in more than 13 years. “We are barely halfway through the current crisis in the euro zone,” Paul Donovan, deputy head of global economics at UBS AG in London, said in an interview with Ken Prewitt and Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance” program. “Unless we can see a further significant decline in bond yields in Portugal, the market is going to expect another bailout. And then market attention will turn to Spain.”
Obama Appoints Geithner, Lew to Negotiate on Tax Cuts. President Barack Obama said he asked Treasury Secretary Timothy Geithner and budget office director Jack Lew to lead negotiations with congressional Republicans on extending Bush-era tax cuts. Obama said after meeting with Republican and Democratic congressional leaders at the White House that both sides agree action is needed to extend tax cuts to middle-income families before the end of the year even as they remain divided on tax rates for the wealthiest Americans.
Consumer Confidence Rose in November to a Five-Month High. Confidence among U.S. consumers rose in November to the highest level in five months and a gauge of business activity unexpectedly climbed, signaling the recovery is taking hold heading into 2011. The Conference Board’s sentiment index increased to 54.1, exceeding the median forecast in a Bloomberg News survey, figures from the New York-based research group showed today. Another report today showed housing remained the American economy’s weak link. The S&P/Case-Shiller index of home values in 20 cities climbed 0.6 percent in September from the same month in 2009, the smallest gain since January, the last time prices declined year over year. The gauge fell 0.8 percent from the prior month after adjusting for seasonal variations, the biggest drop since April 2009. Factories, which helped lead the economy out of the recession, are still bolstering the expansion. The Chicago ISM’s business barometer rose to 62.5 in November, exceeding even the highest estimate of economists surveyed by Bloomberg.
Italy-Germany 10-Year Yield Spread Reaches 200 Points, Widest Since 1997. Italian and Spanish government bonds fell, driving the extra yield investors demand to hold the securities instead of German bunds to euro-era records, as Europe’s debt crisis intensified. The drop pushed the yield spread between 10-year Italian securities and similar-maturity German debt to more than 2 percentage points for the first time since 1997. The Belgian yield premium over bunds reached a record after its borrowing costs rose at a sale of 2.8 billion euros ($3.7 billion) of treasury bills. The cost of insuring debt for Italy, Spain, Portugal and Ireland surged to records, stocks and the euro slid and U.S. Treasuries advanced. “Contagion risk is still high on the agenda,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “Nobody wants to expose themselves to any peripheral risks.” The Italian 10-year bond yield rose a sixth day, gaining three basis points to 4.68 percent at 4:34 p.m. in London, after reaching 4.88 percent earlier today. The 3.75 percent security due in March 2021 fell 0.26, or 2.60 euros per 1,000-euro face amount, to 92.89. The spread with 10-year German bonds increased to as much as 212 basis points, a euro-era record.
U.S. Retail Sales Rise 3.5% as Shoppers Snap Up Deals. Weekly retail sales rose in the week ended Nov. 27 as shoppers flocked to the Black Friday sales with renewed confidence following the economic downturn. Sales climbed 0.5 percent from the preceding week, the International Council of Shopping Centers and Goldman Sachs Group Inc. said today in a statement. Sales at stores open at least a year rose 3.5 percent from a year earlier. The results don’t include online sales.
'Real Bad' Cash Jam May Force Michigan Towns to Borrow or Default by March. Cities and towns across Michigan have had property-tax collections plunge as much as 20 percent in the past year, the steepest drop since a 1994 state tax rewrite, forcing scores of communities to choose by March whether to borrow to pay bills or risk default on bonds. The municipalities rely on property taxes for as much as 60 percent of their revenue, according to the Michigan Municipal League. State support that typically makes up an additional 20 percent to 35 percent of city budgets has been slashed by almost a third in the past year, during the longest recession since the 1930s.
Gold Advances as Concern European Debt Crisis May Worsen Increases Demand. Gold in New York rose the most in a week as Europe’s escalating debt woes boosted demand for the precious metal as a haven asset. The dollar climbed today to a 10-week high against the euro. Investor concern has shifted to burgeoning debt in Spain and Portugal after European governments bailed out Ireland and Greece. Gold has risen 26 percent this year, touching a record $1,424.30 an ounce on Nov. 9. “Gold is moving higher predominantly on the continued fear of debt contagion in Europe,” said Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago. Gold futures for February delivery rose $18.10, or 1.3 percent, to $1,385.60 an ounce at 11:29 a.m. on the Comex in New York. The price is up 2.1 percent in November, heading for the fourth straight monthly gain.
States Weigh Cap-and-Trade Market Spanning North America. California, New Mexico and 10 U.S. Northeastern states may try to create a North American carbon market on their own now that President Barack Obama has given up on cap-and-trade legislation that stalled in Congress. The emissions-trading system would be based on a planned carbon market in California, the most populous state, and an existing regional cap-and-trade program for power plants in the Northeast, according to state environmental officials. Three Canadian provinces have also shown interest in a cross-border carbon-trading system, the officials said.
ECB Tried to Force Ireland Into Bailout, Minister Says. European Central Bank officials tried to force Ireland to seek a bailout earlier this month and European officials are now trying to do the same to Portugal, Irish Justice Minister Dermot Ahern said. “Clearly there were people from outside this country who were trying to bounce us in as a sovereign state, into making an application, throwing in the towel before we had even considered it as a government,” he told Irish state broadcaster RTE in an interview today. “And if you notice, they are doing the same with Portugal now.” Asked about who was pressuring Ireland, he said “quite obviously people from within the ECB.”
Spain Banks Face Funding Hurdle Amid Bailout Threat. Spain’s banks may struggle to refinance about 85 billion euros ($111 billion) in debt next year as costs surge on concern continental Europe’s fourth- biggest economy may need an Irish-style bailout. “There’s a universal dumping of Spain going on,” said Andrea Williams, who helps manage about 623 million pounds ($968 million), including shares in Banco Santander SA, at Royal London Asset Management. “The fear is that Portugal, Spain and Italy are now in line after what happened in Ireland.”
Senate Backs Biggest Food-Safety Overhaul in 70 Years. The U.S. Food and Drug Administration would gain more power to police food companies under the bill that passed today in a 73-25 vote. The measure, backed by the food industry, public- health groups and consumer advocates, adds inspections and lets the FDA force recalls, rather than relying on companies to voluntarily remove contaminated foods from store shelves.
JPMorgan(JPM) Gives Bankers iPads, Signaling Danger to RIM(RIMM). JPMorgan Chase & Co. will give its investment bankers iPads to provide an additional mobile tool as Apple Inc. expands its domain to Wall Street, threatening Research in Motion Ltd. in a market it traditionally dominated. “We believe there are real benefits in our working environment that can be realized using this device - as well as the personal productivity and enjoyment that come as part of the package,” two managing directors at New York-based JPMorgan said in an e-mail obtained by Bloomberg News. Apple is building on its momentum in the tablet space, leveraging its 95 percent market share to expand from its traditional consumer base into the corporate market as RIM readies a rival device, the BlackBerry PlayBook.
Wall Street Journal:
Did New Rules Worsen Pay Situation? A study prepared for an influential shareholder group says rule changes meant to revamp Wall Street's pay culture have been negative, concluding that pay practices at six U.S. banks and securities firms have "worsened" since the financial crisis. The report, set to be released Tuesday and commissioned by the Council of Institutional Investors, which represents about 130 pension funds, contends that financial firms still tie too much of their compensation to short-term results and have increased salaries to offset the impact of recent regulatory curbs on pay.
Miners Dig In For a Fight. The phosphate mined for more than a century here in central Florida to make fertilizer has yielded thousands of jobs and countless harvests around the world. But environmental groups are arguing in federal court that the cornucopia extracts too high a price.
iGate(IGTE) Seeks Up to $700 Million Via Debt to Fund Patni Bid. Software services company iGate Corp. (IGTE) is looking to raise up to $700 million to help fund its joint bid with Apax Partners LLP to take control of rival Patni Computer Systems Ltd. (532517.BY), two people familiar with the matter said Tuesday.
Lukoil Eyes 150,000 B/D From Iraq W Qurna-2 In 2013. OAO Lukoil Holdings (LKOH.RS), Russia's largest non-state oil producer, aims to produce 150,000 barrels a day at Iraq's supergiant West Qurna Phase 2 in January 2013, a person familiar with the project said Tuesday.
Portugal's Banks Pile Up Sovereign Debt. Portuguese banks are buying their government's debt at a fast pace, a move that could pose a risk to institutions that so far have weathered the financial crisis better than many. According to the Portuguese Central Bank, the country's financial institutions, including banks, have together invested €17.91 billion ($23.5 billion) in the country's public debt as of September, up 87% from €9.58 billion a year ago. Since the beginning of the year, the exposure has risen 77%.
The Small Error That Could Ruin Dem's Health Care Efforts. Conservative foes of the Affordable Care Act want the federal courts to smother the new health care law in its crib. They've argued that Democrats failed to erect the proper safeguards to protect the legislation from being stricken down entirely by the courts. And when a Virginia district court judge rules in the coming days on the Constitutionality of the law's insurance mandate, he'll also have to decide whether none, some, or all of the law must go with it. The obscure term of art here is "severability."
Google(GOOG) is Said to be Poised to Buy Groupon. Google is near a deal to acquire Groupon, the pioneering online discounter, for as much as $6 billion, people with direct knowledge of the matter told DealBook on Monday.
Wiretaps Said to Widen Insider Treading Inquiry. Secret, court-approved wiretaps put in place more than two years ago are now being used by prosecutors in a widening inquiry of securities fraud and insider trading involving hedge funds and consultants that provide industry research, according to court documents and interviews with people close to the investigations.
Why Hasn't WikiLeaks Been Put Out of Business?So now we know what it takes to get everyone to realize how damaging WikiLeaks is to U.S. foreign policy. When WikiLeaks released nearly half a million documents undermining U.S. war efforts in Iraq and Afghanistan earlier this year, it was met with a collective yawn. And it was hard to find more than a just few top officials in the United States or abroad who complained when the site released raw footage of a shooting video taken from a U.S. helicopter in Iraq. What's the big deal? After all, those were unpopular wars. But now that the site has started releasing what it promises to be 250,000 diplomatic cables, suddenly, the entire world is up in arms. Examples:
Politico:
EPA: More Renewable Fuels Required. The Obama administration Monday increased the amounts of ethanol and other renewable fuels it wants to see as part of the nation’s gasoline supply, but a senior official took aim at the practice. Responding to a congressional mandate, the Environmental Protection Agency will require that 13.95 billion gallons of transportation fuel comes from renewable sources in 2011, or about 8 percent of domestic gasoline and diesel supplies.
Strong Showing in Anti-Earmark Vote. Thirty-nine senators voted Tuesday in support of a three-year moratorium on appropriations earmarks, the strongest showing ever by opponents of the current process and a potential game changer in the year-end budget debate. Seven Democrats backed the proposal, and the party leadership will have to decide now whether to strip out or weaken draft language in an omnibus spending bill that currently sets aside billions for home-state projects.
Reuters:
CFTC to Unveil Position Limit Plan Dec. 16: Source. The U.S. futures regulator intends to unveil on December 16 its long-awaited revised plan to limit speculative positions held by commodity traders, a source with direct knowledge of the matter said on Monday.
Baltic Index Falls, China PMI Survey Awaited. The Baltic Exchange's main sea freight index .BADI, which tracks rates to ship dry commodities, fell for a fourth session on Tuesday as slower cargo business kept pressure on the larger capesize market. The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, fell 2.14 percent, or 46 points, to 2,099 points. "The capes can find a support only if the Chinese start restocking again, which I don't see happening in the immediate future," said Georgi Slavov, head of dry research and structured products at ICAP Shipping.
AP:
AP-CNBC Poll: Cut Services to Balance the Budget. To ease surging budget deficits, Americans prefer cutting federal services to raising taxes by nearly 2-1 in a new poll. An Associated Press-CNBC Poll showed widespread anxiety about budget shortfalls exceeding $1 trillion a year. Eighty-five percent worry that growing red ink will harm future generations — the strongest expression of concern since AP polls began asking the question in 2008. Fifty-six percent think the shortfalls will spark a major economic crisis in the coming decade.
Les Echos:
The French government is preparing a plan to cut subsidies for solar energy. French Prime Minister Francois Fillon will meet ministers in two days to discuss a possible lowering by about 10% in the price paid by Electricite de France SA for solar power and a cap on the annual volume of installations.
Irish Independent:
IMF Chief: Yes You Can Bounce Back. THE head of the IMF mission in Ireland last night insisted the country can bounce back from the economic crisis -- but outlined a swathe of painful measures that must be taken. And he warned that further losses at the Irish banks could be uncovered, possibly in the area of tracker mortgages and small business loans. In an exclusive interview with the Irish Independent, the IMF's Ajai Chopra also insisted Ireland would be able to afford to pay back the crippling multi-billion-euro loans it received in bailout funds.
Xinhua:
China's consumer price index probably increased 4.7% on year in November, accelerating from October's 4.4% gain, citing a Bank of Communications report.
Bond Sales Tumbling in Worst Month Since Lehman Aftermath: Credit Markets. Corporate bond sales worldwide are tumbling on concern Ireland’s debt crisis will spread across Europe as returns on the notes approach their worst month since credit markets froze two years ago. Issuance has slumped 31 percent since Nov. 15, compared with the same period a year earlier, after surging 34 percent in the first half of the month, according to data compiled by Bloomberg. Plunging returns on debt of borrowers from France’s Credit Agricole SA to Bentonville, Arkansas-based Wal-Mart Stores Inc. are dragging bonds to a 1.08 percent loss in November, Bank of America Merrill Lynch index data show.
Hedge Funds Raise Natural Gas Wagers to Four-month High: Energy Markets. Hedge funds increased bullish bets on natural gas to the highest level in four months on speculation that lower-than-normal temperatures will bolster heating demand and trigger withdrawals from record stockpiles. The funds and other large speculators increased so-called net-long positions, or wagers on rising prices, by 50 percent in the seven days ended Nov. 23, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report.
Forged Comment Letters Sent to Regulators Writing Swaps Rules. Forged comment letters purportedly from an H.J. Heinz Co. executive, a Burger King Co. franchise and at least five other Arkansas-based officials or businesses were sent to the Commodity Futures Trading Commission, which is considering rules for the $583 trillion swaps market. The letters, some of which contain identical passages, criticize banks for their “cartel-like control of the derivatives market.” They include signatures from a circuit court judge, a county sheriff, a lawyer and a mental health counselor. All were forgeries, according to interviews conducted by Bloomberg News.
U.S., EU Expect Limited Progress at Climate Talks, No Treaty. U.S. and European Union envoys said they expect progress on forming a $100 billion fund to fight global warming and on protecting forests at climate talks in Cancun, Mexico, though no treaty will be agreed.
Japan Unemployment Rises, Output Falls, Showing Risk Economy May Contract. Japan’s industrial production decreased and the unemployment rate unexpectedly climbed in October, providing early signs that the country’s economy will likely shrink this quarter. Factoryoutput declined 1.8 percent from September, the sharpest drop since February 2009, the Trade Ministry said in Tokyo today. The jobless rate increased to 5.1 percent from 5 percent and the economy lost 180,000 jobs, the most since May, according to the statistics bureau. Bond prices rose. The figures add to evidence that Japan’s economy may contract for the first time in five quarters, as the expiration of stimulus measures and weak exports prompt companies such as Toyota Motor Corp. to reduce production. Japan’s central bank may face pressure to ease policy further as sluggish demand fuels deflation, according to economist Yuichi Kodama.
WikiLeaks Using Amazon(AMZN) Servers After Attack. WikiLeaks, the website that published a quarter-million sensitive diplomatic cables on Sunday, is using Amazon.com Inc. servers in the U.S. to help deliver its information. It sounds like an odd choice, but it could make sense. The site cablegate.wikileaks.org, which WikiLeaks is using for the diplomatic documents, is linked to servers run by Amazon Web Services in Seattle, as well as to French company Octopuce. Wikileaks.org, the site’s front page, links back to Amazon servers in the U.S. and in Ireland. Several Internet watchers, including technologist Alex Norcliffe, reported earlier on WikiLeaks’ use of Amazon services.
Russian Missiles Fuel U.S. Worries. The U.S. believes Russia has moved short-range tactical nuclear warheads to facilities near North Atlantic Treaty Organization allies as recently as this spring, U.S. officials say, adding to questions in Congress about Russian compliance with long-standing pledges ahead of a possible vote on a new arms-control treaty. U.S. officials say the movement of warheads to facilities bordering NATO allies appeared to run counter to pledges made by Moscow starting in 1991 to pull tactical nuclear weapons back from frontier posts and to reduce their numbers. The U.S. has long voiced concerns about Russia's lack of transparency when it comes to its arsenal of tactical nuclear weapons, believed to be many times the number possessed by the U.S.
'Cyber Monday' Sales Show Strength. Even Following a Weekend With Solid Online Shopping, Heavy Promotions Help Produce Double-Digit Gains for the Day. Early estimates indicated overall sales gains of about 20% from a year earlier for "Cyber Monday," the nickname for the Monday after Thanksgiving. That comes on top of strong online sales growth on Thanksgiving Day and Black Friday. For those two days combined, comScore Inc. reported that online shoppers spent about $1.1 billion, up more than 15% from $913 million a year earlier.
Attack by WikiLeaks. For all of his self-justification as an agent of "pure" transparency, Mr. Assange is not serving the interest of free societies. His mass, indiscriminate exposure of anything labeled secret that he can lay his hands on is a hostile act against a democracy that is fighting a war against forces bent on killing innocents. Surely, the U.S. government can do more to stop him than send a stiff letter.
ABB to Acquire Baldor(BEZ) for $3 Billion. Switzerland conglomerate ABB Group plans to announce Tuesday that it is acquiring electric motor manufacturer Baldor Electric Co. for about $3 billion, the companies said. ABB planned to pay about $63.50 per share in cash for Fort Smith, Ark.-based Baldor. The deal would mark ABB's first major acquisition in the U.S. and retain Baldor's headquarters in Arkansas and the brand name. The Baldor sale would give ABB a foundation to establish a presence in the U.S. while the deal would also allow Baldor to take advantage of ABB's global distribution. Shares of Baldor closed at $45.11 on Monday on the New York Stock Exchange, giving the company a market capitalization of $2.12 billion.
CNBC:
North Korea Says It Has 'Thousands of Centrifuges'. Secretive North Korea detailed for the first time its expanded nuclear program on Tuesday, saying it had thousands of centrifuges as pressure built on China to rein in its ally amid heightened tensions on the peninsula.
Seagate(STX) Halts Talks With Private Equity Firms. A potential takeover of Seagate Technology, which could have been worth about $9 billion, fell apart on Monday and the hard drive disk maker will instead pursue a share buyback plan.
Splits in Euro Zone Emerge Amid Debt Crisis. Even as Europe struggles to contain its latest debt crisis, fresh fissures are emerging that show the euro zone diverging into two — or even three — different economic parts that threaten to compound the problems even further.
IBD:
Drugmaker Diversifies Its Product Lineup Through Acquisitions. To diversify its asset portfolio, Endo Pharmaceuticals (ENDP) went shopping this year. In cutting three deals, Endo convinced many investors and analysts that it could survive the slowing growth and generic competition that inevitably threaten all branded drugs.
US Senate Fails to Repeal Unpopular Tax Provision. Efforts to repeal what is widely seen as a burdensome tax provision in the new federal healthcare law failed in the U.S. Senate on Monday despite broad support to drop it.
Barclays(BCS) Attracts Unusual Flurry of Put Trading. Unusual put activity on the U.S.-listed shares of British bank Barclays Plc on Monday grabbed a lot of attention among traders due to the massive amount of trading and the unusual order size. In all, about 161,000 puts changed hands in Barclays, well above their average daily volume of 1,167 contracts versus only 3,050 calls, according to option analytics firm Trade Alert.
Telegraph:
Hedge Fund Manager Mark Hart Bets on China as the Next 'Enormous Credit Bubble' to Burst. Mark Hart, an American hedge fund manager who has made millions predicting the crises in US sub-prime market and European debt, has launched a fund to bet on the imminent implosion of China. Mr Hart, who runs Corriente Advisors from Fort Worth Texas, has told potential investors in a presentation that China is in the "late stages of an enormous credit bubble". When this bursts, the financier said he expects an "economic fall-out" that will be as "extraordinary as China's economic out-performance over the last decade".
The Australian:
Hillary Clinton Condemns WikiLeaks Cable Release as 'Attack'. THE WikiLeaks release of diplomatic memos was an "attack on the international community", US Secretary of State Hillary Clinton said today. Ms Clinton vowed to prevent future leaks, as other Obama administration officials warned of a criminal investigation against website founder Julian Assange. "This disclosure is not just an attack on America's foreign policy interests. It is an attack on the international community," Ms Clinton said after meeting Turkish Foreign Minister Ahmet Davutoglu. "I want you to know that we are taking aggressive steps to hold responsible those who stole this information.
Financial News:
China's central bank should clearly state that it is shifting to a "prudent" monetary policy and allow further yuan appreciation to combat rising inflation, Sheng Songcheng wrote. Sheng is head of the central bank's Shenyang branch. China may see inflation quicken this month from October's price rises driven by food costs, making it "almost certain" that inflation will top 3% for the full year, Sheng wrote. There is still room for further increases in reserve requirement ratios for banks, Sheng said. The People's Bank of China should also relax a ceiling on the benchmark deposit rate and allow rates to float higher to help narrow the current negative real rate, Sheng said.
China Daily:
China needs to raise interest rates by another 200 basis points to curb inflation given existing excess liquidity, Zhong Jiyin, an economist with the Chinese Academy of Social Sciences, wrote.
China's Guangdong province may raise the minimum wage early next year to help ease the region's labor shortage, citing Ge Guoxing, deputy director-general of the province's labor department.
Evening Recommendations
None of note
Night Trading
Asian equity indices are -1.75% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 118.0 +7.5 basis points.
Asia Pacific Sovereign CDS Index 113.50 +1.75 basis points.
S&P/CS 20 City House Price Index MoM% SA for September is estimated to fall -.4% versus a -.28% decline in August.
9:45 am EST
Chicago Purchasing Manager for November is estimated to fall to 59.9 versus a reading of 60.6 in October.
10:00 am EST
Consumer Confidence for November is estimated to rise to 53.0 versus a reading of 50.2 in October.
Upcoming Splits
None of note
Other Potential Market Movers
The Fed's Kocherlakota speaking, NAPM-Wilwaukee Index, Bloomberg FCI Monthly, weekly retail sales reports, weekly ABC consumer confidence reading, (LOW) analyst meeting, (BIIB) analyst meeting, Barclays Lodging Conference, Citi Basic Materials Conference, Piper Jaffray Healthcare Conference and the Canaccrod Genuity Energy Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and real estate shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 98.01 bps +2.49%
European Financial Sector CDS Index 146.09 bps +8.56%
Western Europe Sovereign Debt CDS Index 190.66 bps +5.73%
Emerging Market CDS Index 234.99 bps +4.24%
2-Year Swap Spread 26.0 unch.
TED Spread 14.0 unch.
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 233.0 -3 bps
China Import Iron Ore Spot $166.70/Metric Tonne +.12%
Citi US Economic Surprise Index +19.40 -4.7 points
10-Year TIPS Spread 2.13% -1 basis point
Overseas Futures:
Nikkei Futures: Indicating -46 open in Japan
DAX Futures: Indicating +53 open in Germany
Portfolio:
Slightly Higher: On gains in my Medical, Biotech and Technology long positions
Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short
Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades at session highs, reversing meaningful morning losses, despite rising Korean Peninsula tensions and increasing euro sovereign debt angst. On the positive side, Coal, Energy, Oil Service, Bank, Hospital, HMO, Construction, Education and Road & Rail shares are especially strong, rising more than .5%. Small-cap and cyclical shares are outperforming. (XLF) has traded very well throughout the day. The 10-year yield is falling -4 bps to 2.83%. The euro currency continues to trade very poorly. Copper is rising +.3% and the S&P GSCI Ag Spot Index is rising +.46% despite euro weakness. On the negative side, Airline, Wireless, Ag, Networking, Telecom and Drug shares are under pressure, falling more than 1.0%. The Russia sovereign cds is rising +5.76% to 172.11 bps, the Hungary sovereign cds is gaining +5.03% to 362.87 bps, the Portugal sovereign cds is surging +6.54% to 538.77 bps, the Spain sovereign cds is climbing +8.27% to 350.46 bps and the UK sovereign cds is rising +11.31% to 78.32 bps. Moreover, the Emerging Markets Sovereign CDS Index is surging +8.75% to 216.22 bps and other key cds indices continue their recent sharp moves higher. While the euro financial sector cds index has soared of late, it is still below levels seen during May/June. The Citi Asia Economic Surprise Index continues to weaken, falling -1 point to -7.9 today, which is the lowest reading globally and the lowest since May 2009. Given the ongoing jump in eurozone debt angst, recent equity gains, China inflation fears, insider trading scandals, rising Korean peninsula tensions and financial sector Basel III concerns, the broad market continues to remain resilient, which is a big positive. Market leaders remain relatively firm. Spain's debt auction on Thursday May be the market's next big test. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, diminishing economic fear, seasonal strength, less financial sector pessimism and short-covering.
EU's Irish Rescue Fails to Stem Contagion; Spain Bonds Drop. European governments’ 85 billion- euro ($113 billion) bailout package for Ireland failed to quell the market turmoil menacing the euro as stocks, bonds and the currency declined. Irish 10-year bonds slid after an early advance, Spanish bonds slid by the most since the euro’s launch and European shares sank 1.4 percent. The euro slid against 15 of its 16 major counterparts and the cost of insuring the debt of Spain and Portugal against default soared to records. “The notion that a rescue package for Ireland would create a firewall and stop the fear of contagion is clearly discredited,” said Preston Keat, director of research at Eurasia Group, a political consultancy, in London. “Portugal and Spain are already facing pressures in the markets.” Six months after the Greek rescue exposed flaws in the euro’s makeup and fueled doubts whether 16 countries belong in the same currency union, policy makers again found themselves meeting on Sunday in Brussels racing to calm markets.
Portugal, Spain Debt Risk Soars to Records on Bailout Concern. The cost of insuring against default on Portuguese and Spanish government debt soared to record-high levels as an aid package for Ireland failed to reassure investors the region’s debt crisis will be contained. Credit-default swaps on Portugal jumped 37 basis points to 539, and contracts on Spain climbed 28.75 to 351.5, according to CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments increased 9 basis points to 197, a record based on closing prices. “The market seems to think it’s inevitable Portugal requests assistance next -- perhaps in January? -- and then after that Spain will be scrutinized with a fine tooth comb over the coming months,” said Jim Reid, head of fundamental strategy at Deutsche Bank AG in London. Swaps on Italy rose 28 basis points to 244, the highest level in almost six months, as the nation’s borrowing costs increased at a sale of 6.8 billion euros of bonds. The cost of insuring the subordinated bonds of European banks also rose as investors bet Ireland’s precedent for making junior bondholders share the cost of a rescue will be followed. Finance Minister Brian Lenihan told state broadcaster RTE the government needs to impose “big haircuts” on junior bondholders after the bailout. The Markit iTraxx Financial Index of swaps on the junior debt of 25 European banks and insurers soared 16.5 basis points to 294.5, after earlier rising to the highest level since April 2009, according to JPMorgan Chase & Co. The senior index was up 1 at 165, after earlier falling as much as 9 basis points. Swaps on Ireland increased 5.5 basis points to 604 and Greece, which was bailed out earlier this year, dropped 10 basis points to 962, CMA prices show.
Euro Falls to Two-Month Low Versus Dollar, Yen on Concern Crisis to Spread. The euro fell to the lowest levels in more than two months against the dollar and yen as an 85 billion-euro ($112 billion) aid package for Ireland failed to stem concern that Europe’s sovereign-debt crisis will broaden. “The euro is unable to sustain even modest upticks, and its weakness is dragging down other major currencies,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. “The European debt situation is getting more serious. It’s not just about Ireland and Portugal anymore; Spain and Italy are being hit even harder.”
Hungary Stocks Enter Bear Market, Bonds Sink on Concern Crisis Will Expand. Hungary’s benchmark equity index dropped more than 20 percent from its 2010 peak and government bonds sank as a surprise interest-rate increase compounded concern that Europe’s debt crisis is spreading east. The BUX Index fell 2.6 percent to 20,221.37 at the close in Budapest, the world’s second-biggest drop today after Turkey’s ISE National 100 Index.
Baltic Index Drops a Third Session as Fleet Growth Lowers Rates. The Baltic Dry Index, a measure of commodity-shipping costs, fell for a third consecutive session as fleet expansion pulled down rates to hire bigger iron-ore carriers, even as steel prices rise. The gauge declined 25 points, or 1.2 percent, to 2,145 points, according to the London-based Baltic Exchange. That was the lowest level since Aug. 9. Rents to hire iron ore-hauling capesize ships retreated 4.6 percent to $29,333 a day, for a 16 percent slide in the vessels’ four-day run of losses. “Despite an improved steel-price backdrop, the dry-bulk market has been unable to participate on the back of increased vessel deliveries,” Omar M. Nokta, head of research at Dahlman Rose & Co. in New York, wrote in a note e-mailed today.
EU Says Euro-Area Growth to Weaken in 2011 as Crisis Still 'Casts Shadow'. Europe’s economy may weaken next year as budget cuts to stem a mounting debt crisis hurt consumer demand and faltering global expansion curbs exports, the European Commission said. Gross-domestic-product growth in the 16-nation euro region may weaken to 1.5 percent in 2011 from 1.7 percent this year, the Brussels-based commission said in a report published today. While Germany may expand 3.7 percent this year, the economies of Ireland, Greece and Spain will continue to shrink.
Wall Street Journal:
Kucinich Cancels Fed Hearing. Rep. Dennis Kucinich postponed a hearing to scrutinize the Federal Reserve’s latest round of debt buying — the day after his office announced it. Aides to the Ohio Democrat, who frequently questions the Fed, alerted other committee Democrats last Wednesday that the Oversight and Government Reform subcommittee he chairs will indefinitely delay a hearing, originally scheduled for Tuesday, “in order to work with the Federal Reserve to allow them to testify,” according to an email.
Japan Rejects China's Proposed Six-Party Talks. Japanese Foreign Minister Seiji Maehara rejected China's new proposal to hold emergency talks between North Korea and related nations, saying Pyongyang must first display sincere effort to ease its confrontational posture.
CNBC:
Deficits Posing Threat to More Stock Market Gains: Pros. Deficits from governments large and small pose the biggest challenge ahead to a stock market poised to go higher, a panel of experts told CNBC. While the economic climate is favorable and valuations attractive, the market and economy remain susceptible to shocks, said Goldman Sachs analyst Abby Joseph Cohen. "On the intermediate- to long-term side, we must do something to address not only the federal deficit but also the deficit at the state and local level," said Cohen, head of Goldman's Global Markets Institute. "Keep in mind much of this is related to long-term liabilities."
Dennis Gartman: 'Eventually, the Euro Breaks Apart'. Faced with "almost terminal problems," Dennis Gartman on Monday said the euro could soon unravel. "Eventually, the euro breaks apart into a northern euro and a southern euro," said Gartman, explaining that the Continent's many languages, religions and cultures are too diverse for the singular currency to work.
Obama to Freeze Government Salaries at All Time High. Of course, government workers thank him, as this means federal salaries which have exploded in the past 5 years will be stuck at all time highs for at least two years, even as nominal salaries for everyone else (except FIRE workers of course) continue to decline. (graph)
Tax Battle in DC Promises a 'Lame' Result. The first showdown of the lame duck Congress is expected to take place over extending the Bush tax cuts -- and it will do nothing but highlight the gulf between the Republican and Democratic camps, The Post has learned. Chances of a compromise are growing, though far from certain, as both sides come to grips with the realities of inaction, the source said. "The markets have priced in a two-year extension and I don't think they understand how tenuous that is," the source said, adding that Senate leaders have yet to start working on a compromise plan.
New York Times:
For PayPal, the Future is Mobile. By adding legions of new users and online retailers, PayPal is threatening to overtake eBay’s(EBAY) struggling marketplace as the biggest breadwinner within a few years.
After Del Monte(DLM), Who's Next on the Shopping List. The buyout of Del Monte Foods is the latest in a series of multibillion-dollar deals in the food industry this year, including the $19.5 billion takeover of Cadbury by Kraft Foods, and Coca-Cola’s $13.6 billion purchase of Coca-Cola Enterprises’ North American operations.
cnet:
Report: 3D TV Sales to More Than Double in 2011. The adoption of 3DTVs is expected to spike next year. Futuresource Consulting predicts that 4 million 3DTVs to be sold worldwide by the end of this year. The figure could at least double next year to 5 million 3DTVs in the U.S. and 3 million in Western Europe, the market researcher said today. Futuresource added that so far, "year-one adoption of 3DTV is running at a far quicker rate in most territories than it did for high-definition."
Congressman Wants WikiLeaks Listed as Terrorist Group. The incoming chairman of the House Homeland Security Committee says WikiLeaks should be officially designated as a terrorist organization. Rep. Peter King (R-N.Y.), the panel's presumptive next head, asked the Obama administration today to "determine whether WikiLeaks could be designated a foreign terrorist organization."
Politico:
WikiLeaks Target: American Power. The first victims of the leaked cables released Sunday are anyone who shared secrets with American diplomats, especially Arab leaders who saw their private security deals — and their insistence that those deals be kept from their people — published online with undiplomatic bluntness. But the main effect of the many details of American diplomacy revealed in the thousands of documents obtained and released by WikiLeaks was to deepen the damage to their intended targets: U.S. foreign policy, prestige and power.
Reuters:
Fed's Bullard - Funding of Consumer Bureau a Worry. St. Louis Federal Reserve President James Bullard said on Monday funding for a consumer protection office established under regulatory reform laws is not based on a clear sense of how much the bureau needs and is a source of concern. "The amount of money allocated in the law is not based on a careful assessment of what the needs of the bureau will be as it attempts to fulfill the mandate of the Congress," he said in remarks prepared for delivery to a conference at the St. Louis Fed.
Gartner Cuts PC Shipment Forecasts. Research firm Gartner cut its forecasts for global personal computer sales in 2010 and 2011, citing weaker demand in the face of an uncertain economy and as some customers choose tablet computers over PCs.
US Commercial Real Estate Vacancies Peaking - Realtors. U.S. commercial real estate vacancy rates have already peaked or will soon top out, though rents are likely to continue to fall, a realtors group said on Monday.
Financial Times Deutschland:
German CDU Wants Curbs on Solar Capacity Growth. Members of Chancellor Angela Merkel's Christian Democratic Union want to limit the growth in solar-panel installations in Germany because the rising costs to consumers may undermine the acceptance of alternative energy. CDU lawmaker and energy-policy expert Thomas Bareiss said in a letter to Environment Minister Norbert Roettgen that the government should cut the guaranteed gratuity per kilowatt hour for newly installed solar panels by an extra amount on Jan. 1, the newspaper said. Depending on installed solar-panel growth in the first months of 2011, additional special gratuity cuts for new installations should be introduced in the middle of the year, the newspaper cited Bareiss as saying. The annual amount to be paid by consumers to subsidize environmentally friendly energy production will increase to 13 billion euros ($17.3 billion) on Jan. 1 from 8 billion euros, the newspaper said.
Late November DRAM Contract Prices Down 12-13%. DRAM contract prices are dropping amid global oversupply caused by increased supply from Samsung Electronics, Inotera Memories and Nanya Technology, the sources said. As spot market prices for 2GB DDR3 modules have slipped to below US$20, contract prices may also drop to below US$20 by the end of 2010, the sources indicated.
Ireland Wins $113 Billion Aid; Germany Drops Threat on Bonds. European governments sought to quell the market turmoil menacing the euro, handing debt-strapped Ireland an 85 billion-euro ($113 billion) aid package and diluting proposals to force bondholders to cover a share of future bailouts. European finance chiefs ended crisis talks in Brussels yesterday by endorsing a Franco-German compromise on post-2013 rescues that means investors won’t automatically take losses to share the cost with taxpayers as German Chancellor Angela Merkel initially proposed to the consternation of bond traders. The first test of the twin decisions come today with markets resuming trading after speculation intensified last week that Portugal and perhaps even Spain will require external support. In a third move, Greece was told it could have an extra four-and-a-half years to repay emergency loans totaling 110 billion euros to match the seven-year term under Ireland’s deal. “People are now going to focus on Portugal and it’s probably also going to need some help,” said Axel Merk, president and chief investment officer of Merk Investments LLC in Palo Alto, California. “We’ll maybe see some relief in markets, but governments need to show they’re getting their economies in shape.”
Dollar Advances Versus Euro as Noyer Says Low Rates May Cause Imbalances. The dollar rose to a two-month high against the euro after European Central Bank council member Christian Noyer said monetary easing creates the potential for global imbalances, boosting demand for safer assets. The euro weakened against 15 of its 16 major counterparts on lingering concern that Portugal and Spain will ask for aid after Ireland received a bailout. “Noyer’s remarks on low rates and worldwide imbalances seem to be causing some selling of the euro and buying of the dollar,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “Worries over contagion in Europe from Ireland’s woes also remain.”
Thanksgiving Weekend Sales Rise as Shoppers Scoop Up Deals. The average shopper spent 6.4 percent more than last year over the holiday weekend, the National Retail Federation said today. U.S. retail sales during Thanksgiving weekend totaled $45 billion as more shoppers picked up jewelry and toys, the Washington-based NRF said in a statement, citing a survey conducted by BIGresearch. More people are scouring for deals earlier, with the number of customers shopping on Thanksgiving Day more than doubling over the past five years.
Black Friday Sales Rise .3% as Shoppers Wait for Retailers to Cut Prices. Even as stores across the U.S. reported increased traffic on Black Friday, the busiest shopping day of the year, sales rose just 0.3 percent to $10.7 billion, ShopperTrak, the Chicago-based consulting firm, said yesterday. Still, there were signs of consumer strength. Shoppers took advantage of earlier-than-usual promotions in the first two weeks of November, pushing up sales 6.1 percent and 6.2 percent respectively, according to ShopperTrak. That helps explain why Black Friday sales weren’t more robust, the firm said.
Shadow Chancellor Johnson Says 'Concerned About Contagion' in the Eurozone. Alan Johnson, Treasury spokesman for the U.K. opposition Labour Party, supports the coalition government’s decision to lend money to Ireland and said he was worried about the future of the eurozone. “I am concerned about contagion, about what’s happening in Spain and Portugal,” Johnson told the BBC’s “Andrew Marr Show.” “We should be worried about the eurozone. This is happening at the same time we’re still feeling the effects of the global economic crisis.”
Lee Vows to Make North Korea Pay for Attack as China Urges Talks. South Korean President Lee Myung Bak vowed to make Kim Jong Il’s regime pay for military attacks as China sought talks to defuse tension on the Korean peninsula. "It’s become clear that more patience and tolerance only leads to bigger provocations," Lee said today in a national address from Seoul. "North Korea will be made to pay for any further provocation no matter what."
Dublin Protesters Decry Ireland's Budget Cuts as Bailout Agreement Looms. About 50,000 people marched in Dublin to protest the Irish government’s 15 billion-euro ($20 billion) austerity measures aimed at cutting the budget deficit. Today’s march was organized by the Irish Congress of Trade Unions, an umbrella organization for labor groups. The ICTU general secretary, David Begg, said the crowd exceeded 100,000 people, compared with 50,000 estimated by police.
Bond Buyers Demand Less Collateral as Yield Spreads Widen: Credit Markets. Unsecured bonds are grabbing a bigger slice of global debt sales as central banks’ efforts to boost growth spur investors to take on more risk and demand less collateral, leaving them with less protection in a default. Companies around the world have sold $246.9 billion of unsecured high-yield debt this year, making up 72.6 percent of all speculative-grade issuance, according to data compiled by Bloomberg. That compares with $112.1 billion during the same period in 2009, or 61.5 percent of junk bond offerings. The diminished security comes amid concern Europe’s debt crisis may spread, slowing the global economy as nations enact austerity programs. “There’s so much cash chasing investment opportunities out there that buyers are willing to sacrifice covenants and security,” said Guy LeBas, chief fixed-income strategist and economist at Janney Montgomery Scott LLC in Philadelphia. “We’re trying to dodge these covenant-light and low-security deals right now, even though they’re popular.”
Arab Leaders Urged U.S. to Stop Iran, WikiLeaks Shows. Saudi Arabia and other Arab governments sided with Israel in urging the U.S. to stop Iran from developing a nuclear bomb, according to a New York Times account of 250,000 classified U.S. embassy cables released by WikiLeaks, the non-profit website.
Talk of $100 Oil Returns as Options Jump Most in 3 Months: Energy Markets. Oil’s return to $100 has become the biggest bet in the crude options market. The price of options to buy December 2011 futures at $100 a barrel jumped 14 percent on Nov. 24, the largest one-day gain in three months, according to data compiled by Bloomberg. So-called open interest for the contract has risen 51 percent this year to 45,424 lots, the highest for any crude option on the New York Mercantile Exchange. The increase in trading of $100 options shows some investors anticipate oil will rise at least 19 percent to levels last reached in 2008.
Iran's Atomic Chief Says First Nuclear Plant to Come on Stream by January. Iran finished loading fuel into the country’s first nuclear power reactor and aims to start up the plant in the southern city of Bushehr by late January, the head of Iran’s Atomic Energy Organization said. The water inside the reactor’s core needs to warm gradually, and a series of tests has to be carried out, Ali Akbar Salehi said yesterday, according to state-run news channel Press TV. “We hope the Bushehr power plant will hook up with the national grid in one or two months,” Salehi said in a report published on Press TV’s website.
FBI Charges Man in Alleged Plot to Bomb Tree-Lighting in Portland, Oregon. A Somali-born teenager was arrested in an undercover operation on charges that he tried to detonate a van that he thought was filled with explosives at a Portland, Oregon, Christmas tree-lighting ceremony. Mohamed Osman Mohamud, 19, obtained what he believed to be the bomb from undercover FBI employees, according to court papers filed with his arrest yesterday. The public was never in danger, a Justice Department statement said. “I want whoever is attending that event to leave, to leave either dead or injured,” Mohamud allegedly told undercover FBI agents, according to an affidavit filed in support of the arrest. At another point, he allegedly said, “It’s gonna be a fireworks show” and “a spectacular show.”
McCain Says China Not Behaving Responsibly on Restraining Ally North Korea. U.S. Senator John McCain said China’s response to North Korea’s deadly shelling last week shows that the Beijing government isn’t taking on the responsibilities of a world power. China is not doing enough to restrain its ally North Korea following the Nov. 23 artillery attack on the island of Yeonpyeong that killed four South Koreans, McCain, a member of the Senate Armed Services Committee, said today on CNN’s State of the Union. China is North Korea’s biggest trading partner. “We have to understand that China is not behaving in a responsible fashion as a world power,” McCain said. “We have to make adjustments to our policies regarding China.”
Wall Street Shrinks From Default Swaps as Dodd-Frank Rules Hit Speculators. Trading in credit-default swaps, Wall Street’s fastest-growing business before the credit crisis, has tumbled 40 to 60 percent from three years ago as banks prepare for new regulation of derivatives. The declines estimated by executives at four of the biggest dealers of swaps means lower profits at firms that used to get as much as two-thirds of credit-market trading revenue from the derivatives. Moody’s Investors Service says pending rules may translate into job cuts of as much as 50 percent in groups that trade the contracts.
Irish Bank Dumps New York Assets. Anglo Irish Bank Corp., the troubled bank at the heart of Ireland's controversial bailout, is raising cash by dumping New York real estate assets. Its latest move: putting up for sale a $147 million construction loan that financed the Setai Wall Street condominium and spa in the financial district.
For Cyber Shoppers, Gadgets Look Hot. The holiday shopping season, which starts online Cyber Monday, promises to be very good for Apple Inc(AAPL). The Cupertino, Calif.-based consumer electronics giant will likely take advantage of the gift-giving season to flex its muscles, grabbing market share for its popular iPod, iPhone and iPad products.
Investing in Fear is Big Business. Call it a bull market in fear. The popularity of the VIX index, which has become a widely watched barometer of investor fear since the financial crisis, is generating a host of spinoffs, copycats and derivatives. It is adding up to big business for VIX's owner, the Chicago Board Options Exchange, as well as partners and competitors that have developed products pegged to, or inspired by, the VIX.
Emerging Wild Card: Inflation. Price pressures in emerging markets could force central banks to tighten aggressively, roiling assets and currencies.
Democrats Gird for Tax-Relief Battle. Congressional Democrats, under pressure from their liberal wing, are preparing to put up a fight over tax relief for wealthier Americans before they agree to any compromise with Republicans that could extend the Bush-era breaks.
CNBC:
Next Debt Crisis May Start in Washington: Bair. The US needs to take urgent action to cut its debt in order to prevent the next financial crisis, which may start in Washington, Sheila Bair, chair of the Federal Deposits Insurance Corp. (FDIC) wrote in an editorial in the Washington Post. The federal debt has doubled over the past seven years, to almost $14 trillion, and the growth is a result of both the financial crisis and the government's "unwillingness over many years to make the hard choices necessary to rein in our long-term structural deficit," Bair wrote. Retiring baby boomers will impact government spending heavily and this year, combined spending on Social Security, Medicare and Medicaid are expected to make up 45 percent of primary federal spending, compared with 27 percent in 1975, she explained."Defense spending is similarly unsustainable, and our tax code is riddled with special-interest provisions that have little to do with our broader economic prosperity," Bair wrote.
Portugal, Spain in Crosshairs as Ireland Bailed Out. The European Union's bailout of Irelandis unlikely to halt expectations that the euro zone debt crisis will spread to Portugal, or provide reassurance that a firewall can be built around Spain.
War Machines: Recruiting Robots for Combat. While smart machines are already very much a part of modern warfare, the Army and its contractors are eager to add more. New robots — none of them particularly human-looking — are being designed to handle a broader range of tasks, from picking off snipers to serving as indefatigable night sentries.
Is US Foreign Policy Crippled Following Latest Wikileaks Dump? Never before in history has a superpower lost control of such vast amounts of such sensitive information -- data that can help paint a picture of the foundation upon which US foreign policy is built. Never before has the trust America's partners have in the country been as badly shaken. Now, their own personal views and policy recommendations have been made public -- as have America's true views of them. Very soon the once-legendary US foreign service department will be butt of all jokes. Perhaps it is time for someone within the administration to finally take some blame for this fiasco, although we most certainly are not holding our breath for a Hillary Clinton resignation.
Comverse Technology Inc.(CMVT) is in advanced talks to be acquired by Oracle Corp.(ORCL) and Platinum Equity at between $9.50 to $10 a share.
Politico:
United Nations Climate Talks in Limbo. Cap-and-trade legislation Obama promised two years ago on the campaign trail is dead and buried, and his administration is attempting to regulate carbon dioxide emissions and cover billions of dollars in pledges without majority support in Congress. Internationally, heading into the United Nations-led climate talks in Cancun, Mexico, next week, prospects for a multitrillion-dollar transoceanic carbon market are in tatters and a new binding treaty to succeed the Kyoto Protocol remains years away. Obama won't be going to Mexico for the conference that starts Nov. 29, and neither will Secretary of State Hillary Clinton, House Speaker Nancy Pelosi or many of the other members of Congress who went to ice-cold Copenhagen for last year's U.N. climate negotiations.
Presidential Historian Curses, Calls Americans 'Lazy and Obese'. Presidential biographer Edmund Morris delivered one of the more, well, colorful lines on this week's Sunday morning shows. On CBS's "Face the Nation," host Bob Schieffer, anchoring an authors roundtable discussion with the likes of Bob Woodward and Arianna Huffington, kept engaging the panelists in discussion about how America’s Founding Fathers would have felt about today’s political climate. Morris went on to criticize the American people, who he said “are insensitive to foreign sensibilities, who are lazy, obese, complacent and increasingly perplexed as to why we are losing our place in the world to people who are more dynamic than us and more disciplined.”
George Osborne, the U.K.'s Chancellor of the Exchequer, will today call for changes to make the country "the most competitive corporate tax system in the G20," citing Treasury officials.
Telegraph:
Jim O'Neill Says the Euro Faces 'Black Swan' Moment. Jim O'Neill, one of Goldman Sachs' most senior partners, has said that the eurozone must embark on a significant round of fiscal and political harmonisation if the euro is to survive. In an interview with The Sunday Telegraph, Mr O'Neill also revealed that the euro should carry a "risk premium" and that it was over-valued by at least 10pc. He said that the only reason it was not weaker was because many of the eurozone's problems were being masked by events in America and worries about weaknesses in the US economy.
'Investors Drawn to China Like Moths to a Flame'. NeilWoodford, Invesco Perpetual's star fund manager, has voiced concern that China's growth story is heading for a crossroads. Woodford said world markets seemed to be drawn like moths to a flame by China's GDP growth numbers. "I do not deny that in the long term an economy like China will grow much more rapidly than the West. But I think one has to be very careful about correlating growth necessarily with economic opportunity, and opportunity to make money," said Mr Woodford. "China has got some massive challenges. Ultimately, the main one will be this 180 degree shift from export-led growth to domestic consumption-led growth. Mr Woodford's concerns coincide with figures showing that food prices in China were 10.1pc higher in October than in the same month last year – a level of inflation not seen since mid-2007. This is deepening concern that China's economy is now starting to overheat.
Sunday Independent:
A majority of Irish people favor defaulting on debts to bondholders at the country's "stricken" banks, citing a poll commissioned by the newspaper. The poll found 57% of respondents favor a default on bank debt, against 43% who oppose such a move. About two-thirds of respondents also opposed austerity measures in the government's four-year budget plan released on Nov. 24, the poll showed.
Adenauer and Friends Seek to Block Ireland's 85 Billion Euro Bailout. Lawyer and playwright among those against bailout as fears grow that Spain could be next to fall. A German coalition comprising a controversial playwright, the grandson of the first Chancellor of the post-war federal republic and a campaigning constitutional lawyer will challenge Ireland's 85bn Euro bailout this week.
TSF Radio:
The European Union is not working on any aid package for Portugal, citing Portuguese Defense Minister Augusto Santos Silva.
NRC Handelsblad:
H&M's CEO Karl-Johan Persson expects higher cotton prices to depress profit margins, he said in an interview. An increase in cotton rates will be "tough" for the fashion industry and may force some companies to raise prices, citing Persson.
Der Spiegel:
Marco Buti, the European Commission's head of economics, is calling for a doubling of the European bailout fund.
Nikkei English News:
A Japanese government panel is considering a cut in the corporate tax rate for next fiscal year, to make domestic companies more competitive in global markets.
Zjol.com:
China will continue a "relatively proactive" fiscal policy in the next few years, citing central bank adviser Li Daokui. The country will shift from the "extremely loose" monetary policy from the past two years, Li said.
Weekend Recommendations Barron's:
Made positive comments on (AMP) and (SHOO).
Made negative comments on (CMG).
Night Trading
Asian indices are -.75% to +.75% on average.
Asia Ex-Japan Investment Grade CDS Index 110.50 +3.5 basis points.
Asia Pacific Sovereign CDS Index 111.75 +5.75 basis points.
The Fed's Bernanke speaking, Fed's Bullard speaking, Dallas Fed Manufacturing Activity for Nov. and the (ZIOP) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.
