Friday Watch

Evening Headlines
Bloomberg:

• European Ministers Hold Ireland Debt Crisis Talks at G-20. Finance ministers from Germany, France and the U.K. met in Seoul to discuss Ireland’s debt crisis after bond yields soared on concern the European Union will need to step in with a bailout. Ministers are monitoring developments and will probably issue a joint statement later today, said Steffen Seibert, a spokesman for German Chancellor Angela Merkel.
• Bernanke's Stimulus Plan Pummels Northrop(NOC), Wal-Mart(WMT) Bonds: Credit Markets. Federal Reserve Chairman Ben S. Bernanke’s latest plan to stimulate the U.S. economy is pummeling investors owning the longest-maturity corporate bonds. The price of 30-year debt from Northrop Grumman Corp., the largest U.S. Navy shipbuilder, has dropped 5.2 percent since Nov. 2, the day before the Fed’s announcement. Wal-Mart Stores Inc. bonds due in 2040 have slipped 3.8 percent in the period to about the lowest level since the Bentonville, Arkansas-based retailer sold the securities last month. U.S. corporate bonds due in 15 years or more have lost 2.5 percent since the Fed committed to buying $600 billion of Treasuries, compared with a decline of 0.4 percent for the investment-grade market overall, according to Bank of America Merrill Lynch index data. That signals investors believe the Fed will succeed in bolstering growth and avoiding deflation, leading to higher interest rates.
• Spanish Bond Yields at Risk as Debt Contagion Gathers Force: Euro Credit. Spain’s efforts to cut the euro region’s third-biggest deficit may not avert record borrowing costs, as investors speculating on a bailout for Ireland or Portugal trash the bonds of Europe’s peripheral countries. The extra yield investors demand to hold Spanish 10-year bonds over German bunds jumped 25 basis points this week to 220, nearing June’s euro-era record of 232 basis points. The risk premiums for Ireland and Portugal soared to record highs of 647 and 460 basis points, respectively. Collapsing bond values make it harder for Ireland and Portugal to sell new debt, and leave Spain vulnerable to similar attacks, according to analysts including Phyllis Reed, head of bond research at Kleinwort Benson Private Bank in London. Shoring up the finances of an economy that is 12 percent of the euro region and more than three times Portugal and Ireland combined would strain the 750 billion-euro ($1 trillion) lifeline set up to stop contagion from Greece’s near default in May. “There’s a perception that once you start down the path with one country, the others have to follow, at least the market will interpret it that way,” said Reed. Investors “won’t be able to help themselves, whether it’s right or not,” she said.
• ECB's Trichet is Bond Buyer of Only Resort as Euro's Debt Crisis Worsens. European Central Bank President Jean-Claude Trichet is the buyer of only resort as the euro area’s bond market melts down. Just six months after he threw out his rule book to prevent Greece’s debt crisis from splintering the euro area, the 67-year old Frenchman may again be the only policy maker able to prevent the collapse in Irish and Portuguese bonds from spreading. That may require him to ignore opposition from Bundesbank President Axel Weber to the ECB’s bond-buying program and expand purchases of sovereign assets, according to Citigroup Inc. and Royal Bank of Scotland Group Plc. The pressure on the Frankfurt-based ECB reflects its status as the only institution in the 27-nation European Union able to act fast enough to placate bondholders.
• Cisco(CSCO) Options Trading Jumps to a Record on Bets the Shares Will Rebound. Cisco Systems Inc. option trading jumped to a record and was 19 times the four-week average on wagers that the world’s largest computer networking-equipment maker will rebound after the biggest drop since July 1994. Volume exceeded 1.58 million contracts as almost 1 million calls changed hands compared with 586,000 puts as of 4 p.m. in New York. The most-active contracts were November $21 calls, April $24 calls and April $18 puts.
• Bank of America(BAC) Said to Sell BlackRock(BLK) Stake to Mizuho. Mizuho Financial Group Inc., Japan’s third-biggest bank, agreed to buy a 2 percent stake in BlackRock Inc. for $500 million, including shares sold by Bank of America Corp., according to two people briefed on the transaction.
• China Commodity Futures Tumble on Tightening Concern as Inflation Jumps. China’s commodities futures tumbled today with cotton, sugar and rubber falling by the daily limits after gains to records were seen as excessive and on concern China may take additional measures to curb inflation, possibly reducing demand. Copper, zinc, soybeans and palm oil also slid. “The government already sold stockpiles of cotton, sugar, aluminum and zinc, and there’s speculation that it may do more to suppress prices and contain inflation,” Tian Feng, analyst at BOC International (China) Ltd., said by phone from Shanghai.
• China Real-Estate Bubble Concern Fails to Deter Investors. Most global investors think China is experiencing a real estate bubble, even as they say the world’s fastest-growing major economy offers the best opportunity for making money over the next year. Two-thirds of the people surveyed in the latest Bloomberg Global Poll say a bubble is inflating property values in China, where the economy grew at a 9.6 percent annual rate in the third quarter. Still, when asked to identify one or two markets offering the best opportunities in the next year, 33 percent of investors cite China, more than any other country. Brazil ranks second at 31 percent, followed by India with 29 percent and the U.S. at 23 percent.

Wall Street Journal:

• Watchdog Planned for Online Privacy. The Obama Administration is preparing a stepped-up approach to policing Internet privacy that calls for new laws and the creation of a new position to oversee the effort, according to people familiar with the situation. The strategy is expected to be unveiled in a report being issued by the U.S. Commerce Department in coming weeks, these people said. The report isn't yet final and could change, these people said.
• 'Mortality Swaps' Coming Alive. Fitch Issues Rating on Insurer's Death-Risk Transaction. Fitch Ratings issued the first public rating on a mortality swap transaction, potentially opening the floodgates for what is a relatively new area of the capital markets and one that isn't tied to conventional assets like stocks and bonds. The transaction in question helped an unidentified U.S. life insurer transfer the risk that several policyholders might die sooner than expected to institutional investors.
• A Growth Agenda for the New Congress by Arthur Laffer. For now: Extend the Bush tax cuts, repeal ObamaCare, support free trade. After 2012: Enact a flat tax, stabilize prices, balance the budget, give politicians incentive pay.

CNBC:

• Regional Bank Profits to Get Hit by New Regulations: Whitney. Regional banks are going to become less profitable because of tighter financial regulations and are likely to close thousands of bank branches to cut costs, analyst Meredith Whitney told CNBC.

Business Insider:

• We May Be Able to Work With Russia, China, And Pakistan on Trade, But They Aren't Our Friends.
• Here's Why QE2 Could Threaten the Dollar's Status as the Global Reserve Currency.

Zero Hedge:

• Move Over Vampire Squid, Enter Rocket Docket - Matt Taibbi Take Fraudclosure Mainstream. The man who made Goldman Sachs a household name (using some very helpful and lurid imagery), has found a new target: Bank of America(BAC), JP Morgan(JPM), Wells Fargo(WFC) and Citi(C).... And the "Rocket Docket."

NY Times:

• Obama's Trade Strategy Runs into Stiff Resistance. President Obama’s hopes of emerging from his Asia trip with the twin victories of a free trade agreement with South Korea and a unified approach to spurring economic growth around the world ran into resistance on all fronts on Thursday, putting Mr. Obama at odds with his key allies and largest trading partners.
• Quants and Morgan Stanley(MS) to Part. For nearly two decades, the mathematical whiz Peter Muller and his secretive band of traders have helped power Morgan Stanley to bigger profits. But now Morgan Stanley and Mr. Muller are in advanced talks about splitting up.

LA Times:

• Audits of City Finances Ofter Cover Up Serious Problems. Accountants gave Bell clean reports, ignoring red flags that pointed to excessive salaries, illegal taxes and failure to follow reporting requirements. A Times review finds Bell is far from being alone.

Cattle Network:

• Think $5 Corn is Expensive? Some Are Betting on $10 Next Year. The corn market’s rally above $5 a bushel this fall has stirred growing consternation among livestock producers and others dependent on the largest U.S. crop. As the global grain supply outlook tightens, some traders in Chicago are placing bets that prices may double next year. Over the past week, trading firms including JPMorgan Chase & Co. and MF Global Holdings Ltd. bought call option contracts that would pay off if corn rose above $10 or $11 a bushel next spring. “There’s real risk out there” for higher prices, Van said. He’s been trading in the corn options pit since the contract was launched in 1985 and said he’d never seen an $11 call traded until the past week. “Price rationing could take it up further. I would certainly think we’re headed higher.” Concern over tight supplies also spilled into the soybean market, where $20 call options traded over the past week, a premium of more than 50 percent over current futures prices. Consumers, who are already paying record supermarket prices for bacon, would face even higher meat costs as animal inventories decline, he said. “It’s kind of a chilling thought,” Meyer said today, referring to $10 corn. “You’re talking devastating kinds of costs” for livestock producers, he said. “You’d see liquidation on a massive scale in the pork industry, and in chicken, turkey and beef as well. It would decimate all of us.” As of the close of trading yesterday, there were 850 open contracts in March 2011 $10 corn call options and 1,286 positions in May 2011 $11 calls, according to CME reports. In soybean options, there were 1,686 positions open in March 2011 $20 calls.
  

NASDAQ:

• California Teachers Pension Fund to Invest $150 Million in Commodities. The California State Teachers' Retirement System, one of the largest U.S. pension funds, said Wednesday it will likely invest up to $150 million in commodities as part of a new investment strategy. In September, staff at the fund, known as CalSTRS, proposed that the fund invest $2.5 billion in commodities to provide a hedge against inflation. At a meeting on Nov. 4, CalSTRS's investment committee agreed that the fund should make a foray into commodities, but dialed back the amount to $150 million. The committee concluded that the lower amount was more appropriate for what the committee considered to be innovative investments that potentially carry more risk than the funds' current investments, said Ricardo Duran, a CalSTRS spokesman.

Politico:

• Democrats Angry Over Obama Tax Deal Talk. For almost a decade in Democratic politics, there was little disagreement: If you were running for office, you wanted do away with the Bush tax cuts for high-end earners. Now, in the eyes of liberal and moderate Democrats alike, President Barack Obama has blinked — even before the new House Republican majority takes office.

Reuters:

• Nvidia(NVDA) Eyes Higher Sales, Talks Up Tegra. Graphics chipmaker Nvidia forecast higher sales for the current quarter and said its mobile business would take off next year when tablets and smartphones will use its Tegra chips. Nvidia's shares rose in after-hours trade after the company said its revenue in the fourth quarter would rise between 3 percent and 5 percent sequentially. Analyst on average had expected 2.6 percent growth, according to Thomson Reuters I/B/E/S.
• Finisar(FNSR) Raises Q2 Revenue Outlook, Shares Up. n">Finisar Corp raised its second-quarter revenue outlook on higher demand for its network and telecom products, sending shares of the fiber optic components maker up about 14 percent after the bell.

Financial Times:

• Harbinger Reassures Investors Over Fund.

Financial Times Deutschland:

• Germany will present its proposal for a European crisis mechanism next week rather than next month to allay investor concerns that have driven up bond yields, citing the Finance Ministry. The plan, which will spell out to what extent bondholders would have to contribute to a sovereign bailout, could be presented at a meeting of European Union finance ministers next week rather than the EU summit in December.
  

RTHK:

• Hong Kong Chief Executive Donald Tsang said the city's government will take measures to curb any risks of a property bubble developing as high capital inflows and low interest rates increase the likelihood of a bubble forming.

China Daily:

• The U.S. decision to undertake a second round of so-called quantitative easing is "dangerous" and is a "beggar-my-neighbor" policy, Bank of China Ltd. Chairman Xiao Gang wrote. The result of quantitative easing in the U.S. is that the dollar has tumbled, inflation expectations have increased and asset and commodities prices have surged, Xiao wrote. The weakening of the dollar has hurt other economies, Xiao wrote.

Evening Recommendations

• None of note
  

Night Trading

• Asian equity indices are -1.50% to -.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 105.0 +4.0 basis points.
  
• Asia Pacific Sovereign CDS Index 98.0 +1.0 basis point.
  
• S&P 500 futures -.64%
  
• NASDAQ 100 futures -.60%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DDS)/.05
• (JCP)/.17
• (DHI)/-.02
• (WEN)/.04
• (A)/.60

Economic Releases
9:55 am EST

• Preliminary Univ. of Mich. Consumer Confidence for November is estimated to rise to 69.0 versus a reading of 67.7 in October.

Upcoming Splits

• (HCSG) 3-for-2
• (WCN) 3-for-2
• (RAI) 2-for-1
• (AOS) 3-for-2
  

Other Potential Market Movers

• The Fed's Tarulio speaking, Fed's Raskin speaking, CSFB Healthcare Conference and the BofA Merrill Energy Conference could also impact trading today.
  

BOTTOM LINE: Asian indices are lower, weighed down by financial and commodity 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.