Monday, February 13, 2012

Monday Watch

Weekend Headlines

  • Greek Parliament Backs Austerity as Riots Continue. Greek Prime Minister Lucas Papademos won parliamentary approval for austerity measures to secure an international bailout after rioters protesting the measures battled police and set fire to buildings in downtown Athens. A total of 199 lawmakers voted in favor and 74 against, Parliament Speaker Filippos Petsalnikos said in remarks carried live on state-run Vouli TV. When, on Nov. 16, Papademos won a mandate from the Parliament to implement budget measures and secure the bailout of 130 billion euros ($172 billion) he received the support of 255 lawmakers in the 300-strong chamber. “It is up to us, our vote, whether the country will remain in the euro or be led to a disorderly default,” Papademos told parliament. “Voting for the economic program and opening the road for a loan accord sets the basis for the modernization and recovery of the economy.” Passage of the austerity bill puts the spotlight on a meeting of euro-region finance ministers on Feb. 15 that must decide whether to approve the second aid package. Resolution of the negotiations, which started in July, would help contain the threat that speculators will target debt-saddled nations, including Italy and Portugal.
  • Roesler Tells ARD Greece Must Deliver or Germany Won't Pay. German Economy Minister Philipp Roesler said the lower house of parliament in Berlin can call off a special meeting on Feb. 27 to approve more aid for Greece if the Greek government and opposition parties fail to live up to their commitments today. The meeting that’s scheduled to approve Germany’s contribution to the second aid package for Greece “only makes sense if Greece has shown before, through legal measures and deeds, that it’s worth it,” Roesler said in an interview on ARD public television. “If that doesn’t happen, there won’t need to be a session.” Asked whether today’s parliamentary meeting in Athens is decisive for future German aid, Roesler said Chancellor Angela Merkel’s government wants to see full support by all Greek parties for the economic adjustment program the government has agreed to.
  • Europe Job Losses Accelerating With AstraZeneca-to-PepsiCo Cuts. Global companies from NEC Corp. (6701) to PepsiCo Inc. (PEP) and AstraZeneca Plc (AZN) are chopping jobs more than three times faster than in 2011 as they brace for recession in Europe and a slowdown in China. Announced workforce reductions surged to 94,369 through Feb. 10 from 26,561 a year earlier, according to data compiled by Bloomberg. Employers based in Western Europe accounted for the biggest group of job-cut disclosures, threatening to add to unemployment in the euro area already running at a 13-year high. Such firings are now running at the quickest pace to start a year since a 2009 peak, when the European and U.S. economies shrank amid the deepest slump since World War II. Now, Europe’s debt crises may help spur a 0.5 percent contraction in the euro- area economy in 2012, based on economists’ estimates.
  • Soros: Greek Bailout Won't Rid Europe of Danger. Billionaire investor George Soros predicted weak growth and lingering political tension that could shatter Europe’s economic union even if Greece agrees to austerity measures. “Right now the European Union and particularly the heavily indebted countries face a lost decade,” Soros said. “It might actually be longer than a decade because Japan that had a similar situation with the real estate boom and the banking crisis has had now 25 years of no growth,” Soros said. “That will create tensions within the European Union, which could destroy the European Union,” he said. “And that’s a real danger.” A package of budget, wage and pension cuts that Greece’s parliment could adopt as soon as tomorrow is “not necessarily going to work in the long run,” Soros said. “Greece is a sick situation” that has been “mishandled” by European authorities and “will continue to be an irritant and a problem for Europe,” Soros said. The European Union, once a desirable objective, has become “more of an imposition,” he said. In the U.S., the economy “shows some signs of revival,” thanks in part to the emergence of shale gas and oil and years of low-wage growth, which have lowered manufacturing costs, Soros said.
  • Norway Faces Severe Credit Shock as Household Debt Swells, FSA Chief Warns. Norway faces “severe” imbalances in its credit and property markets as households continue to amass debt at unsustainable levels, according to the head of the country’s financial regulator. “Growth rates on household debt and house prices are not following a sustainable path,” Morten Baltzersen, Director General of the Financial Supervisory Authority in Oslo, said in an interview. “The longer these developments go on, the greater the risk is of a severe imbalance evolving.”
  • China's Wuhu Halts Property Easing as Wen Pledges Curbs. China’s eastern city of Wuhu suspended a decision to ease property curbs three days after its announcement, in a move that underscores the nation’s determination to cool prices. The mid-sized city in Anhui province will temporarily suspend its home subsidy policy so it can study details on how to implement the rules, according to a statement on the local authority’s website yesterday. Wuhu will waive a deed tax and subsidize some home purchases, it said Feb. 9, becoming the first Chinese city this year to signal its intention to ease property curbs. China won’t waver on its real-estate controls, which aim to bring home prices down to a reasonable level, to ensure fairness and stability, Premier Wen Jiabao said during a meeting with business executives last week, Xinhua News Agency reported yesterday. Wuhu followed in the footsteps of the southern Chinese city of Foshan, which in October shelved plans to ease limits on home purchases one day after its announcement. “We at Credit Suisse recommend selling China property sector now,” Jinsong Du, the bank’s Hong Kong-based analyst, wrote in an e-mailed note. “The Wuhu reversal clearly shows that the stock market has severely underestimated the central government’s political will to cool the housing market significantly further.”
  • Japan Economy Shrinks on Export Slump. Japan’s economy shrank an annualized 2.3 percent in the fourth quarter, more than economists estimated, as slumping exports undermine a recovery from last year’s record earthquake. The contraction compared with the median forecast for a 1.3 percent decline in a Bloomberg News survey of 26 economists.
  • Hong Kong Economy May Contract on Exports. Hong Kong's economy may shrink this quarter if exports fail to improve amid faltering global growth, Financial Secretary John Tsang said. "I see a difficult year ahead for the global economy," Tsang said in a transcript of a radio broadcast, posted on a government website. "We may even see negative growth in the first quarter of this year if exports fail to pick up."
  • Lew Says Infrastructure Spending Still Needed to Aid Economy. White House Chief of Staff Jack Lew said hundreds of billions of dollars in spending for roads and bridges, education and manufacturing are necessary to keep the U.S. economy growing. Election-year sparring over the budget begins tomorrow as President Barack Obama submits the fourth spending blueprint of his presidency, a multitrillion-dollar package that calls for $350 billion in short-term spending to create jobs and a $476 billion, six-year highway bill, while saying it will cut $4 trillion from the deficit over a decade, partly by raising taxes on the wealthy. Tomorrow’s budget proposal is loaded with “massive taxes” on small business and families, requires “bureaucratic rationing” of Medicare and Medicaid, and “hollows out” spending for defense and national security, Republican Representative Paul Ryan, chairman of the House Budget Committee, said on ABC‘s “This Week.” Ryan said he is planning an alternative budget that would drive down deficits through an overhaul of Medicare without calling for any tax increases that may slow the economy.
  • GM(GM) Profits, But Taxpayers Are Still on Hook: Shikha Dalmia. Three years after being rescued by a taxpayer bailout, General Motors (GM) last week announced some rather ambitious profit targets for 2012. But even if it meets these targets -- a big if -- taxpayers should not wait on one foot to recover their remaining “investment” in the company.
  • Speculators Lift Wagers to Highest Since September: Commodities. Hedge funds increased bets on rising commodity prices to the highest since September on mounting confidence that growth in the U.S. will strengthen demand. Money managers boosted their combined net-long positions across 18 U.S. futures and options by 13 percent to 929,199 contracts in the week ended Feb. 7, Commodity Futures Trading Commission data show. That’s the highest since Sept. 20. Bullish wagers on copper rose to a six-month high, and soybean holdings jumped by the most this year.
  • Syrian Forces Press Assault as Violence Spills Into Lebanon. Syrian forces pressed their efforts to stamp out dissent against the rule of President Bashar al- Assad in the central city of Homs as violence spilled over into neighboring Lebanon. Syrian soldiers killed 10 people today in Homs, including five in the Baba Amr neighborhood, Al Arabiya television reported, citing the Syrian Revolution General Commission. In the Lebanese city of Tripoli, two people were killed yesterday in clashes between supporters of Assad and his opponents, it reported, without saying where it got the information. Nineteen people were injured, it said. Syrian forces have intensified efforts to crush the 11- month uprising against Assad since Russia and China vetoed a United Nations Security Council resolution on Feb. 4. The resolution had aimed to facilitate a political solution to a conflict that according to UN estimates has killed more than 5,400 people since starting in mid-March.

Wall Street Journal:
  • SEC Launches Inquiry Aimed at Private Equity. Federal regulators have launched a wide-ranging inquiry into the private-equity industry that examines how firms value their investments, among other matters. The Securities and Exchange Commission's enforcement division sent letters to private-equity firms of various sizes in early December as part of an "informal inquiry," according to the letter and people familiar with the matter. It is unclear which firms received a letter, which includes language saying it shouldn't be construed as an indication the agency suspects securities-law violations.
  • Volcker to Push Back on Banks' Trading. Paul Volcker is about to fire back at critics of the proposed rule that bears his name. The former Federal Reserve chairman is expected to file a comment letter on the Volcker rule before a Monday deadline, contending that the U.S. financial system will be safer and healthier with a ban on proprietary trading by banks, according to people familiar with the situation. Mr. Volcker also is likely to resist recent attacks on the Volcker rule from money managers, financial firms and foreign governments, including claims that banning banks from trading with their own money could reduce liquidity.
  • Catholic Bishops Oppose Compromise on Birth-Control Insurance. Catholic bishops said Friday night that they would not support the Obama administration's proposed compromise on a controversial rule that requires most employers to fully cover contraception in their workers' health plans. The U.S. Conference of Catholic Bishops, which had led opposition to the regulation, issued a statement saying that they didn't believe their concerns were addressed by a new policy offered by President Barack Obama on Friday morning to allow religious employers who object to the use of birth control to turn over responsibility for covering it to insurance companies.
  • China's Banks Face New Fee Regulations. China's banking regulator has drafted rules to stop banks from charging their customers excessive fees, which have become a focus of rising frustration in a country where customer service is seldom a priority. The new rules, issued Friday evening by the China Banking Regulatory Commission, said all fees must be set by banks' head offices and not local branches, that banks must be more transparent when setting prices, and that they must give three months' notice before raising fees.
  • Spanish Unions to Protest New Labor Decree. Spain's biggest unions called for mass protests across the country on Feb. 19 in response to labor-market changes the government announced this past Friday to lower the country's towering unemployment rate and spur economic growth. "We want to raise a clamor in the streets of Spain against the labor-market reforms," said Ignacio Fern├índez Toxo, the head of Spain's largest union, in a news conference Saturday, although he stopped short of calling for a general strike.
  • U.S. Is Asked to Review Bankruptcy Bonuses. The top Republican on the Senate Judiciary Committee asked Attorney General Eric Holder to examine the Justice Department's efforts to enforce a law limiting executive pay in certain bankruptcy cases. Sen. Charles Grassley, the Iowa Republican who introduced broad bankruptcy legislation that became law in 2005, expressed concern that companies might be skirting the law when issuing bonuses and other compensation to executives during Chapter 11 bankruptcy proceedings.
  • Private Equity Drills Into Oil Patch. Wall Street thinks it has tapped a new gusher. Searching for growth in a tepid economy, private-equity firms are zeroing in on the U.S. oil patch. Deal makers are excited because advances in drilling techniques such as horizontal drilling and hydraulic fracturing, or fracking, have made it easier to extract oil and natural gas from shale and other rock formations, creating an opening for private-equity firms to place big bets in a capital-hungry business. Some early investors already have extracted billions of dollars of profits.
  • Texans Are Baffled by the Keystone Decision. China will get the oil from Canada that could have come to the U.S.
  • China's Central Bank Wary Of Easing Policy: Report. The People's Bank of China may be more cautious to loosen its monetary policy amid complexity in China's economy in the start of the year, the state-run China Securities News said in a front-page editorial. The weaker-than-expected new yuan loans data for January highlighted the central bank's efforts to curb credit expansion, the newspaper said. Chinese financial institutions extended CNY738.1 billion of new yuan loans in January, below expectations for CNY1 trillion in a survey of 16 economists polled by Dow Jones Newswires. The central bank is likely to keep the country's interest rates on hold in the near term, the newspaper said, adding whether there is a cut in banks' reserve requirement ratio will be determined by February economic data.
Business Insider:
Zero Hedge:


  • U.S. Gasoline Price Rises to $351/gallon: survey.
  • Low-Interest Loans to European Banks Prompt Concern. Few would begrudge Mario Draghi his boast last week that he and the European Central Bank had prevented a disastrous credit crunch by showering banks with cheap loans in December. But beneath the gratitude toward Mr. Draghi, the president of the E.C.B., lurks a fear that the easy money could simply be creating the conditions for another banking crisis several years from now. Thanks to E.C.B. largess, some economists warn, sick banks now face less pressure to confront their problems — to clean out bad loans and other damaged assets, or even wind down operations if there is no hope of a turnaround. The E.C.B., they say, could inadvertently spawn a cohort of “zombie banks” like the ones that helped make the 1990s a lost decade for Japan. “It’s a huge bet,” said Charles Wyplosz, a professor of economics at the Graduate Institute in Geneva. “If the crisis ends up well, the E.C.B. will have pulled off a miracle. If things go wrong, then commercial banks will be in a much worse situation than they were before.”
  • Apple(AAPL) Launches New Legal Attack on Samsung Phones. Apple has asked a federal court in California to block Samsung Electronics from selling its new Galaxy Nexus smartphones, alleging patent violations.
  • Pop Queen Whitney Houston Dies on Eve of Grammys.

The Hill:

  • Obama's 2013 Budget: 10 Takeaways. President Obama’s 2013 budget will be released publicly on Monday at 11:15 a.m., but senior administration officials gave a preview of what the president will ask for. Here’s a guide to what the White House wants spending and taxes to look like in the next fiscal year. 2. What are the economic assumptions for this year and this decade? Steve Bell of the Bipartisan Policy Center points out that mid-decade figures will be key to scrutinize. In last year’s budget, the Obama administration forecast real gross domestic product to rise to 4.4 percent by 2013. CBO last month predicted 1.1 percent growth in 2013. Higher growth helps Obama’s budget meet its deficit reduction targets since growth raises revenue and lowers safety net spending.
USA Today:
  • New Rule Puts A Wrinkle In Figuring Taxes On Stock Sales. For the first time, the annual tax forms investors receive, called the 1099-B, from their brokers will contain dramatic changes. Beginning with the just-completed 2011 tax year, it's up to brokers to track how much investors paid for stocks that were sold and report that information directly to the IRS. This so-called cost basis is what determines how much tax investors pay.
  • Al Qaeda Leader Backs Syrian Revolt Against Assad. Al Qaeda leader Ayman al-Zawahri, in a video recording posted on the Internet on Sunday, urged Syrians not to rely on the West or Arab governments in their uprising to topple President Bashar al-Assad. In the eight-minute video, entitled "Onwards, Lions of Syria" and posted on an Islamist website, the Egyptian-born Zawahri also urged Muslims in Turkey, Iraq, Lebanon and Jordan to come to the aid of Syrian rebels confronting Assad's forces. "Wounded Syria still bleeds day after day, while the butcher, son of the butcher Bashar bin Hafiz (Hafez al-Assad), is not deterred to stop," Zawahri, wearing his white turban and seated against a green curtain, said. "But the resistance of our people in Syria despite all the pain, sacrifice and bloodshed escalates and grows," he added. Zawahri took command of al Qaeda after Osama bin Laden was killed by U.S. special forces in a raid in Pakistan last May. A Muslim should help "his brothers in Syria with all that he can, with his life, money, opinion, as well as information," Zawahri says.
  • China Tells Banks to Roll Over Local Government Loans: FT. China has instructed its banks to embark on a huge roll-over of loans to local governments, the Financial Times reported, aiming to give itself more time to deal with a debt hangover from the global financial crisis. China encouraged banks to lend to local governments for new projects during the financial crisis to buoy the economy, but its provinces and cities now face $1.7 trillion in debts. More than half those loans were scheduled to come due over the next three years, the newspaper said. Banks had started extending maturities for local governments to avoid a wave of defaults, the paper said, citing bankers and analysts familiar with the matter. One person briefed on the plan said in some cases the maturities would be extended by as much as four years, it said.
  • Greek Parties Expel Rebel Deputies After Austerity Vote. The two Greek parties supporting the government of technocrat Prime Minister Lucas Papademos expelled more than 40 deputies on Monday for failing to back an austerity bill needed to avoid the country's chaotic default. The conservative New Democracy party said it had expelled 21 out of its total 83 deputies. The Socialist PASOK party expelled about 20 of its 153 lawmakers.
Financial Times:
  • UK-based investment banks may lower bonuses next year by about 25% from the $6.6 billion expected to be paid in 2012, down by close to 40% from the previous year. The reasons bonus pots are shrinking are "job cuts and a worsening financial performance," rather than a change in bonus culture, citing the Center for Economics and Business Research economist Rob Harbron.
The Telegraph:
Bild am Sonntag:
  • Greece should exit the euro region voluntarily if its government fails to implement the policy changes it promised in return for financial aid, Alexander Dobrindt, general-secretary of Germany's Christian Social Union, said. Officials should try to convince the Greek government that an orderly exit from the euro is better than the threat of an "uncontrolled collapse," Dobrindt said.
La Libre Belgique:
  • European Central Bank Governing Council member Yves Mersch said the introduction of joint euro bonds would require a transfer of sovereign powers and legitimate democratic control of the common-currency region by the European Parliament, citing an interview. If jointly issued euro bonds would involve a transfer only from competitive nations with prudent budget policies to weaker countries, it could lead to a disastrous situation of moral hazard, Mersch said.

Kyodo News:

  • Temperatures in one of the damaged reactors at Tokyo Electric Power Co.'s Fukushima nuclear station are still rising, citing the company. The temperature at the bottom of the No. 2 reactor rose to 172.9 degrees Fahrenheit at 10 am, the highest level since a so-called cold shutdown of the unit was achieved in December. The unit hasn't gone critical yet, citing the company.
China Daily:
  • Advisers to the government of Hainan, China's southernmost province, propose imposing a tax on vacant homes to discourage property speculation.
Weekend Recommendations
  • Made positive comments on (DAN), (INT), (ORLY) and (HNT).
  • Made negative comments on (CZR).
Night Trading
  • Asian indices are -.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 165.0 +6.0 basis points.
  • Asia Pacific Sovereign CDS Index 138.50 +3.5 basis points.
  • FTSE-100 futures +.58%.
  • S&P 500 futures +.52%.
  • NASDAQ 100 futures +.52%.
Morning Preview Links

Earnings of Note
  • (DBD)/.84
  • (REGN)/-.60
  • (ALEX)/.22
  • (RAX)/.15
  • (HMA)/.21
  • (MAS)/-.01
Economic Releases
  • None of note

Upcoming Splits

  • (MNST) 2-for-1
Other Potential Market Movers
  • The Germany bond auction and the Sterne Agee Financial Institutions Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.

1 comment:

theyenguy said...

In the linked article, Volatility Rises And Stocks Slide On Fears Of Greek Default … The Great Deleveraging Will Be Accompanied By Wildcat Governance, I write:

Neoliberal finance, specifically the LTRO ponzi credit scheme has boosted emerging market currencies, CEW, and major world currencies, DBV, driving commodity prices higher as is seen in the ongoing Yahoo Finance chart of CEW, DBV, UGA, DBB, JJC, SLV. Bloomberg reports Speculators Lift Commodity Wagers to Highest Since September. I believe that competivive currency devaluation coming though fears of Greek Default will drive commodities lower, with possibly the exception of gasoline. I expect copper stocks, COPX, and silver stocks, SIL, to fall sharply.

Commodity trading and processing firms, such as Archer Daniel Midland will experience significant transformation as they become partners in regionalization. In as much as major world currencies, DBV, and emerging market currencies, CEW, traded lower in July, 2011, yet recovered with the ECB’s LTRO credit liquidity operation. Nevertheless inflationism has turned to destructionism and growth has turned to contraction. Reuters reports Volatile Commodity Market Hurts Profit At Archer Daniel Midland. ADM has experienced sharply lower quarterly earnings and cut its capital spending plans. Commodity trading firms like ADM are experiencing increased risks and costs. We are prioritizing capital projects, said CEO Patricia A Woertz. ADM said in January that it will cut about 1,000 workers. The chart of ADM shows a parabolic three white soldiers rise into a grand finale finish.

I add, stocks and commodities appear to be at a rally high given the emergence of a soon coming Greek default. One could go short at this time, yet wealth is best preserved by investing in and taking possession of gold bullion.