Evening Headlines
Bloomberg:
- Euro Dominos Will Fall Until Currency is Split: Matthew Lynn. Who’s next? First Greece went bust. Now Ireland is on the brink of a bailout from the European Union and the International Monetary Fund. When it happens, we’ll hear plenty of soothing words about how contagion has been stopped, the euro area has been put on a firmer footing, and the single currency saved. There will be a lot of grand rhetoric about the importance of the European project. Stern condemnations of the speculators will ring out across the continent. Don’t listen to a word of it. The euro has turned into a bankruptcy machine. Once the markets have finished with Ireland, they will simply move on to Portugal and Spain, and after that to Italy and France. There is a domino effect at work, and, with each rescue, the fault lines within the euro grow wider and wider. This process isn’t going to stop until the euro is taken apart.
- Gap(GPS), Wal-Mart(WMT) Clothing Costs Rise on 'Terrifying' Cotton Prices. Gap Inc., J.C. Penney Co. and other U.S. retailers may have to pay Chinese suppliers as much as 30 percent more for clothes as surging cotton prices boost costs. “It’s a little terrifying to deal with cotton suppliers now,” said Vicky Wu, a sales manager at Suzhou Unitedtex Enterprise Ltd., a closely held, Jiangsu province-based clothes maker that counts Gap and J.C. Penney among its clients.
- Sarkozy Under Pressure as French Debt Market Feels Irish Heat: Euro Credit. French President Nicolas Sarkozy, fresh from skirmishes over plans to raise the retirement age, is now under pressure to reduce the government deficit as investors punish nations such as Ireland for having too much debt. The extra yield investors demand to hold 10-year French government bonds instead of German securities of similar maturity reached 50 basis points last week, the most since June. France’s debt costs more to insure against default than in Chile and Malaysia, both of which have lower credit ratings. Its debt will equal about 84 percent of gross domestic product by the end of the year, more than the Netherlands and Germany, according to estimates from the European Commission. “I’ve never liked the liability profile of France because of its over-reliance on shorter maturities,” said Louis Gargour, chief investment officer at LNG Capital LLP, a London- based hedge fund he co-founded in 2006. “If deficits rise or borrowing costs increase, that debt becomes more difficult to refinance.”
- Hedge Funds Increase Natural Gas Bets Before Price Decline: Energy Markets. Hedge funds raised bullish bets on natural gas futures to a six-week high the day before prices plunged on record inventories and warmer-than-expected weather. The funds and other large speculators increased wagers that prices will rise by 24 percent in the seven days ended Nov. 9, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report, which was released yesterday. On Nov. 10, the Energy Department reported that stockpiles rose to 3.84 trillion cubic feet, surpassing last November’s total.
- Eton Park, Paulson Sell Stakes in Goldman Goldman Sachs(GS). Eric Mindich’s Eton Park Capital Management LP and John Paulson’s hedge fund sold their stakes in Goldman Sachs Group Inc. during the third quarter. Eton Park previously held 2 million shares of New York- based Goldman Sachs, according to a filing today with the U.S. Securities and Exchange Commission. Paulson & Co. sold 1.1 million shares of the bank, a separate filing shows. Mindich, 43, is a former Goldman Sachs partner who began New York-based Eton Park in 2004 with $3.5 billion, one of the biggest startups in the hedge-fund industry.
- Copper Resumes Decline on Concern China Demand May Slow, Dollar's Advance. Copper in London resumed a decline as the dollar’s rebound hurt demand for commodities priced in the U.S. currency amid the potential for slowing demand in China, the world’s largest user. The metal pared early gains in Shanghai. Copper for three-month delivery on the London Metal Exchange fell as much as 0.9 percent to $8,570 a metric ton, and traded at $8,595 a ton by 9:05 a.m. Singapore time.
- 'Sarah Palin's Alaska' Is Most-Watched Premiere on Discovery's(DISCA) TLC Network. "Sarah Palin’s Alaska," the reality- TV show on Discovery Communications Inc.’s TLC network, drew 4.96 million viewers for its premiere episode last night. The documentary-style series, in which former Alaska Governor Palin explores the state’s wilderness and lifestyle, was the most-watched premiere ever on TLC.
- McConnell to Back Ban on 'Earmarks' for Pet Projects. Senate Minority Leader Mitch McConnell, faced with greater influence of lawmakers elected with Tea Party support, dropped his opposition to a plan by House Republican leaders to ban budget “earmarks” for lawmakers’ pet projects.
- Pence to Introduce Bill Ending Fed Dual Mandate. U.S. Representative Mike Pence, chairman of the House Republican Conference, said he plans to introduce a bill tomorrow that would end the Federal Reserve’s dual mandate, forcing the central bank to focus on inflation. “The Fed’s dual mandate has failed,” Pence, of Indiana, said in a statement.
- Solar panel makers from Arizona to Shanghai face a price crunch in 2011 because they're adding manufacturing capacity just as global demand is poised to fall, Axiom Capital Management Inc. said. The supply of photovoltaic panels may climb to almost triple the level of demand next year, flooding the market and potentially crashing the price, said Gordon Johnson, Axiom's NY-based solar power analyst. "It could be Armageddon," he said in an interview. "Demand is about to fall at a time when you're going to have a significant increase in supply. In a commoditized industry, that is a formula for disaster." Manufacturers have sold a record number of panels this year as developers rushed to connect them to the grid and lock in subsidized power prices before the rates are cut by governments in Germany, Italy and the Czech Republic. In Germany's case, the world's largest panel market, demand will fall in 2011 after the state cuts rates producers earn by 13%, Johnson said. That will glut the market next year for photovoltaic panels, which turn sunlight into electricity, and drive the price manufacturers can charge down to as low as $1.10 per watt from about $1.80 this year, Johnson said.
- Municipal Funds Fall Most in Two Years as Bonds Drop, Borrowing Costs Rise. Funds that invest in debt securities issued by state and local governments fell the most in two years today as losses in the municipal bond market were exacerbated by a rise in their cost of borrowing.
- China's 'State Capitalism' Sparks a Global Backlash. Since the end of the Cold War, the world's powers have generally agreed on the wisdom of letting market competition—more than government planning—shape economic outcomes. China's national economic strategy is disrupting that consensus, and a look at the ascent of solar-energy magnate Zhu Gongshan explains why.
- Apple(AAPL) iTunes, at Long Last, Gets Rights to Beatles.
- BHP(BHP) to Scale Back its Acquisitions Strategy. After failing three times to execute huge deals, BHP Billiton Chief Executive Marius Kloppers is expected to reveal a change in his acquisitions strategy in favor of buying smaller, more manageable resource companies and focusing less on blockbuster mergers. The Anglo-Australian miner also is likely to increase the size of its $4.2 billion share-buyback program.
- U.S. Pursues Wider Role in Yemen. Americans Move to Bring In Equipment and Operatives and Propose New Bases for Fight Against al Qaeda Affiliate.
- Illegal Immigrants Win Ruling on College Fees. Illegal immigrants in California may continue to pay the lower in-state fees at public colleges and universities, the state's top court ruled Monday, a decision that saves them as much as $23,000 a year.
- California's Destructive Green Jobs Lobby by George Gilder. Silicon Valley, once synonymous with productivity-enhancing innovation, is now looking to make money on feel-good government handouts. California officials acknowledged last Thursday that the state faces $20 billion deficits every year from now to 2016. At the same time, California's state Treasurer entered bond markets to sell some $14 billion in "revenue anticipation notes" over the next two weeks. Worst of all, economic sanity lost out in what may have been the most important election on Nov. 2—and, no, I'm not talking about the gubernatorial or senate races. This was the California referendum to repeal Assembly Bill 32, the so-called Global Warming Solutions Act, which ratchets the state's economy back to 1990 levels of greenhouse gases by 2020. That's a 30% drop followed by a mandated 80% overall drop by 2050. Together with a $500 billion public-pension overhang, the new energy cap dooms the state to bankruptcy.
Marketwatch.com:
Business Insider:
- Why Bernanke's "Quantitative Easing" Isn't Fooling Anyone.
- Gary Shilling: Of Course the Fed's Plan Won't Work - We're Deleveraging!
- Ireland Given 24 Hour Ultimatum to Take Bailout or Be Responsible for Pan-European Contagion.
- Further Observations on the Parabolic Blow Off in Federal Compensation. (graph)
- Ports of L.A. and Long Beach Post 18% Growth in Container Traffic. The combined cargo total for October compared with a year earlier offers a better-than-expected sign of recovery.
- Google(GOOG) CEO: Android Update "could replace credit cards". The next generation of Android is coming in a few weeks, and that update to the mobile operating system "could replace credit cards," according to Google chief executive Eric Schmidt.
- Big Pharma's Comeback? Get ready for plenty of direct-to-consumer advertisements, celebrity awareness campaigns, and big-selling drugs, because Big Pharma appears to have found not just a single hit, but a whole bunch of them.
- David Einhorn Buys Apple(AAPL), Sells EMC(EMC). Hedge fund titan David Einhorn bought more Appleand increased positions in tech stocks during the third quarter, according to the latest regulatory filing with Securities and Exchange Commission.
- Nancy Pelosi Scrambles to Thwart Rebellion. Nancy Pelosi is getting the first test of her might under the new Democratic reality as she scrambles to extinguish a rebellion against her power to appoint lieutenants to top party posts. Realizing they don’t have the votes to knock the defeated speaker from the top perch in party leadership, moderate Blue Dog Democrats have set their sights a little lower, targeting liberal Pelosi enforcers George Miller (D-Calif.), Rosa DeLauro (D-Conn.) and Louise Slaughter (D-N.Y.), all of whom hold influential jobs because Pelosi has installed them.
Reuters:
- Venezuela to Open "Socialist" Securities Exchange. In what President Hugo Chavez described as a blow for "vampire" capitalism, Venezuela will next month open a state-run stock and bond exchange aimed at financing public companies and wooing middle class voters. In recent weeks, Chavez has accelerated his drive to increase the hand of the state in all sectors of the economy including finance, housing and food production. Oil and heavy industry is already largely government run. "The public securities exchange system has been born," Chavez said on his weekly TV show on Sunday in a speech peppered with references to capitalist "vampires" and "vultures." He said it will open in December. "This is not the capitalist exchange, Dracula, this is the socialist exchange. The state and the republic guarantee your money and it will have a good yield."
- US Offshore Oil Leasing Could Be Delayed - API. Next year may be the first time in over four decades that the United States does not lease areas in the Gulf of Mexico for oil or gas drilling, because of additional environmental reviews planned by the Obama administration, a major oil lobbying group said on Monday.
- Contagion Hits Portugal as Ireland Dithers on Rescue. The EU authorities have begun to vent their fury against Ireland over its refusal to accept a financial rescue, fearing that the crisis will engulf Portugal and Spain unless confidence is restored immediately to eurozone bond markets.
- Muslims Told to Reject West: Report. A newly released intelligence report says hard-line Islamist groups want to build a "parallel society" in Canada, which could undermine the country's social cohesion and foster violence. The de-classified Intelligence Assessment obtained by the National Post says extremists have been encouraging Muslims in the West to reject Western society and to live in "self-imposed isolation." The report focuses on groups such as the Muslim Brotherhood and Hizb-ut-Tahrir, which do not advocate terrorist violence but promote an ideology at odds with core Western values. "Even if the use of violence is not outwardly expressed, the creation of isolated communities can spawn groups that are exclusivist and potentially open to messages in which violence is advocated," it says. "At a minimum, the existence of such mini-societies undermines resilience and the fostering of a cohesive Canadian nation."
- China will introduce measures to control rising food prices, including limits on how much products may be sold for and subsidies. The government will also increase punishment for speculators in cotton and corn.
- China may adjust its economic policies for 2011 on increasing inflation pressure, citing an adviser for the central government's economic work meeting which will be held in December. It is likely that the country will shift to a combination of prudent monetary policy and proactive fiscal policy, citing Yang Tao, a researcher with the Chinese Academy of Social Sciences. There's still space for increasing interest rates and reserve ratios.
- Chinese regulators want to remove most risks from loans taken by local government's financing vehicles by the end of 2012. Regulators want to reduce risks by securing repayments and writeoffs. The China Banking Regulatory Commission is asking its local branches to report the result of field checks on financing vehicle loans before Dec. 15.
Citigroup:
- Reiterated Buy on (EPB), raised target to $38.50.
- Reiterated Buy on (ITW), target $58.
- Reiterated Buy on (RAI), target $79.
- Asian equity indices are -.75% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 109.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 102.0 -.5 basis point.
- S&P 500 futures -.14%
- NASDAQ 100 futures -.31%.
Earnings of Note
Company/Estimate
- (DKS)/.17
- (JEC)/.61
- (WMT)/.90
- (SKS)/.02
- (HD)/.48
- (ANF)/.50
- (TJX)/.91
- (BOBE)/.40
8:30 am EST
- The Producer Price Index for October is estimated to rise +.8% versus a +.4% gain in September.
- The PPI Ex Food & Energy for October is estimated to rise +.1% versus a +.1% gain in September.
- Net Long-Term TIC Flows for September are estimated to fall to $62.5 Billion versus a $128.7 Billion in August.
- Industrial Production for October is estimated to rise +.3% versus a -.2% decline in September.
- Capacity Utilization for October is estimated to rise to 74.9% versus 74.7% in September.
- The NAHB Housing Market Index for November is estimated to rise to 17.0 versus 16.0 in October.
- (RAI) 2-for-1
- (AOS) 3-for-2
- The Fed's Lockhart speaking, weekly retail sales reports, weekly ABC Consumer Confidence reading, Morgan Stanley Consumer/Retail Conference and the (FFIV) investor meeting could also impact trading today.
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