Friday, September 20, 2013

Friday Watch

Posted by Gary .....at 12:28 AM
Evening Headlines 
Bloomberg:
  • Asian Stocks Set for Biggest Three-Week Gain in Two Years. Asian stocks rose, with the regional benchmark index on course for its biggest three-week advance in two years, as a weaker yen boosted Japanese shares. Volumes were below average with markets in Hong Kong, China, South Korea and Taiwan closed for holidays. Nikon Corp. (7731), a camera maker that gets 85 percent of sales outside Japan, climbed 6.2 percent. Shiseido Co. surged 4.7 percent in Tokyo as Citigroup Inc. recommended buying shares of the comestics maker. Declines among raw-material shares limited gains on the regional benchmark gauge, which is on course for the biggest three-week advance since October 2011. The MSCI Asia Pacific Index rose 0.2 percent to 141.38 as of 11:03 a.m. in Tokyo, poised for a third straight week of gains and extending a four-month high.
  • Indonesia Has Bigger Problems Than Bikinis. This column isn’t a defense of beauty contests. My question is, why the misplaced anger? Where’s the outrage over obscene levels of graft, which eats up national wealth and forces 115 million Indonesians to live on less than $2 a day? Where are the placards condemning policies that have made the rupiah Asia’s most pathetic currency? Why don’t we hear chants demanding greater accountability from leaders? It’s great that Indonesians are worked up, but their ire would be more constructive if it were focused on the right target. Investors know the trouble. And that’s the biggest problem of all. 
  • Onion Shortage Seen Worsening in India as Rain Delays Crop. Onion prices in India may extend a record rally as heavy monsoon rains delay harvests and worsen a shortage, potentially accelerating food inflation in Asia’s third-largest economy. Retail prices of the vegetable used in everything from soups to curries soared to 70 rupees ($1.13) a kilogram (2.2 pounds) in New Delhi this week from 20 rupees three months earlier, according to the Consumer Affairs Ministry. Prices may increase further as farmers are unable to pick the crop due to monsoon rains, said C.B. Holkar, a director at the National Agricultural Cooperative Marketing Federation of India Ltd. 
  • Rubber Declines, Paring Weekly Rally, as Oil’s Drop Cuts Appeal. Rubber declined, paring a weekly advance, as a drop in oil reduced the appeal of the commodity as an alternative to synthetic products used in tires. The contract for February delivery on the Tokyo Commodity Exchange lost as much as 1.3 percent to 281.5 yen a kilogram ($2,829 a metric ton) and traded at 282.5 yen at 10:36 a.m. local time. The drop pared gains to 3.9 percent for the most-active contract this week.
  • Odds Grow Longer for Obama’s Nominee to U.S. Energy Panel. Opposition to President Barack Obama’s choice to head the U.S. Federal Energy Regulatory Commission grew as Republicans led by Senator Mitch McConnell said they’ll vote against Ron Binz’s confirmation. “His nomination is yet another threat to American energy and jobs and I will work to defeat it,” McConnell of Kentucky, the Senate minority leader, said in a statement today. Senators Rob Portman of Ohio and Lamar Alexander of Tennessee today joined fellow Republican senators Lisa Murkowski of Alaska, Dean Heller of Nevada and Democrat Joe Manchin of West Virginia in saying they won’t support Binz, a former chairman of the Colorado Public Utilities Commission. 
  • The Fed Wants More Protection Against Losses at Foreign Banks’ U.S. Units. The world’s biggest banks paint on a vast canvas. Many operate with a single, global balance sheet, raising money where it’s cheapest and investing it where it earns the highest return. So in certain countries, banks can have more liabilities than assets. Regulators allow them a free hand on the assumption that if one of their national operations runs into trouble, the home office will quickly route it all the funds it needs. Daniel Tarullo doesn’t think that’s such a good idea. And as the point person for regulation on the Federal Reserve’s Board of Governors, he has sway in saying no. Tarullo is part of a wave of national regulators who are “ring-fencing” national banking operations—insisting that they have a thick cushion of capital locally. The Fed doesn’t want to have to beg other central banks for help if a foreign bank in the U.S. suffers a funding crisis. Goodbye, globalization. Hello, Balkanization.
  • IBM(IBM) Needs to Reposition Itself for the Cloud Computing Era. How’s this for bleeding edge: The average member of IBM’s (IBM) senior executive leadership team started at the company in 1985, when the Internet was still a government project and Steve Jobs had just been fired from Apple (AAPL). Chief Executive Officer Ginni Rometty joined IBM in 1981, two years out of Northwestern University’s engineering school, and has been there ever since.
Wall Street Journal:
  • Despite Merkel's Popularity, Angst Creeps In. Chancellor's Re-Election Bid Comes Amid Calls for Economic Fixes; 'Mom Will Take Care of It.' Angela Merkel has become Europe's most popular leader by telling Germans they don't need to change, and by shielding them from much of Europe's debt-crisis pain at the same time. But as Ms. Merkel heads into a likely third term as Germany's chancellor, there are increasing calls from the business community, which she has counted among her most loyal supporters, and others for her to move more quickly to confront simmering domestic problems that they worry will eventually endanger German prosperity.
  • Fed's Guidance Questioned As Market Misreads Signals. Federal Reserve officials created new uncertainty about how much farther they will push their easy-money policies—and new questions about how effective they are at communicating their thinking—with the decision to stand pat on the pace of their bond purchases for now. The Fed on Wednesday went beyond merely deciding to keep buying the $85 billion a month of mortgage-backed securities and U.S. Treasurys that it had been telegraphing for months it might start winding down. In the news conference after a two-day policy meeting, Fed Chairman Ben Bernanke also seemed to walk away from some of the guidance he had given in June on how the bond-buying program would play out over the next year, making it even less clear when the program will end.
  • J.P. Morgan Faces a Hard-Line SEC. Despite Agreeing to 'London Whale' Fines, Agency Probes Bank Employees Over Possible Negligence. James Dimon is known for his hardball approach to business. Now, the Securities and Exchange Commission is playing hardball with J.P. Morgan Chase & Co. J.P. Morgan agreed to pay more than $920 million to settle with the SEC, the Office of the Comptroller of the Currency, the Federal Reserve and the U.K.'s Financial Conduct Authority over a trading blunder that cost the bank more than $6 billion.
  • China Intensifies Social-Media Crackdown. Campaign Takes Toll on Public Debate, Popular Platform. A forceful campaign of intimidation against China's most influential Internet users has cast a chill over public debate in the country and called into question the long-term viability of its most vibrant social-media platform.
  • Pricing Glitch Afflicts Rollout of Online Health Exchanges. Less than two weeks before the launch of insurance marketplaces created by the federal health overhaul, the government's software can't reliably determine how much people need to pay for coverage, according to insurance executives and people familiar with the program. Government officials and insurers were scrambling to iron out the pricing quirks quickly, according to the people, to avoid alienating the initial wave of consumers.
  • RSA: Don’t Use Encryption Influenced by NSA. RSA Security, a division of EMC, privately told customers Thursday to ditch an encryption algorithm that reportedly contains a flaw engineered by the National Security Agency. It marks one of the first instances of a security company acknowledging the U.S. government may have been involved in propping open a backdoor into a product.
Fox News:
  • Ohio clinic touted by Obama slashes budget due to ObamaCare. An Ohio clinic that was touted by Obama while he was speaking on health care reform is now blaming ObamaCare after it was forced to cut $330 million from its budget. Fox 8 reports the Cleveland Clinic, which is the largest employer in Northeast Ohio with about 39,000 workers in the region, announced the cuts to its 2014 budget at a meeting Wednesday. A spokeswoman for the clinic tells Fox News the clinic is being forced to cut back to prepare for increased costs and decreased revenue under the health care reform law. These changes will include offering early retirement to approximately 3,000 employees, reducing operational costs, and then layoffs as needed.
CNBC:
  • Icahn: Market is fully valued, but Apple is a buy. (video) Billionaire investor Carl Icahn said Thursday he thinks the stock market is fully valued but still sees Apple as a buying opportunity. "I think that right now, the market is giving you a false picture. The market tells you you're doing well, but I don't think a lot of companies are doing that well," Icahn told "Closing Bell," adding that while his firm is up 30 percent year to date, it still has a "huge hedge" on. Still, Icahn continues to view Apple as "very undervalued" because it has a low multiple and the underlying company has a tremendous amount of cash on hand and remains profitable. Icahn said he continues to buy shares of the tech company. Elsewhere in the market, Icahn said real estate is "ridiculously overvalued," especially in urban centers. "It's just absurdity, and I really can't understand it," Icahn said. "I think real estate again is coming to the top of a bubble."
  • Mortgage slowdown forces new layoffs at Wells Fargo. The ax is falling again at Wells Fargo's mortgage origination unit, as refinancing activity continues to slow. The bank on Wednesday sent 60-day notices of displacement to 1,800 employees across the country, citing a slowdown in activity throughout 2012 and early 2013.
Zero Hedge:
Business Insider:
LA Times:
  • The next financial crisis. Five years after the Lehman Bros. collapse, practically no structural changes have been made to the U.S. financial system.
NY Times:
  • As German Vote Nears, No Guarantees for Merkel’s Coalition. Germany’s race for Parliament tightened Thursday, three days before elections, with fresh polls underlining the difficulty that even the popular chancellor, Angela Merkel, faces in building a winning coalition. Ms. Merkel’s Social Democratic challenger, Peer Steinbrück, a classic center-leftist who has deep experience in Germany’s state and federal governments, urged his party to make the most of what it says is collapsing support for the chancellor and her Christian Democrats.
Reuters:
  • AK Steel (AKS) warns of wider-than-expected loss; shares fall. AK Steel Holding Corp estimated a wider-than-expected loss for the third quarter as production was hit by a mechanical failure at its Ohio facility, sending its shares down 7 percent in after-market trading. The steelmaker said it expects to incur a loss of 22 cents to 27 cents per share. Analysts were expecting a loss of 11 cents per share, according to Thomson Reuters I/B/E/S.
AP:
  • Obama Takes on Coal With First-Ever Carbon Limits. The Obama administration will press ahead Friday with tough requirements for new coal-fired power plants, moving to impose for the first time strict limits on the pollution blamed for global warming. The proposal would help reshape where Americans get electricity, away from a coal-dependent past into a future fired by cleaner sources of energy. It's also a key step in President Barack Obama's global warming plans, because it would help end what he called "the limitless dumping of carbon pollution" from power plants.
    The Obama administration will press ahead Friday with tough requirements for new coal-fired power plants, moving to impose for the first time strict limits on the pollution blamed for global warming. The proposal would help reshape where Americans get electricity, away from a coal-dependent past into a future fired by cleaner sources of energy. It's also a key step in President Barack Obama's global warming plans, because it would help end what he called "the limitless dumping of carbon pollution" from power plants.
    Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99
Financial Times:
  • Fed’s decision raises heat on Yellen. The Federal Reserve’s surprise move to hold back on trimming its bond buying has triggered a backlash among Republican lawmakers unhappy with the protracted easy-money policy, and raised pressure from the right on Janet Yellen, the frontrunner to take the helm of the central bank. “I hope the decision to continue purchasing assets at the same pace doesn’t mean the Fed has gotten itself into a trade it can’t get out of, which over time will create a whole new set of problems,” said Bob Corker, the Republican senator from Tennessee and a senior member of the Senate banking committee.
Telegraph:

Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 118.0 +3.5 basis points.
  • Asia Pacific Sovereign CDS Index 97.50 -5.0 basis points.
  • FTSE-100 futures -.14%.
  • S&P 500 futures -.13%.
  • NASDAQ 100 futures -.12%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (DRI)/.71
Economic Releases
  • None of note
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Kocherlakota speaking, Fed's Bullard speaking, Fed's Tarullo speaking, Fed's George speaking, BoJ's Kuroda speaking, Eurozone Consumer Confidence report, UBS Oil & Gas Conference, (SEE) analyst day and the (GT) investor meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and commodity shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

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