Monday, November 25, 2013

Monday Watch

Weekend Headlines 
Bloomberg: 
  • Obama Moves to Prevent Rift With Allies Over Iran Deal. Hours after announcing a nuclear deal with Iran, President Barack Obama moved to prevent the agreement from opening a rift with Israeli Prime Minister Benjamin Netanyahu and even with some Democrats in Congress. Obama called Netanyahu before departing on a trip to the U.S. West Coast. At an Israeli cabinet meeting today, the Israeli leader called the six-month accord with Iran “an historic mistake.” Some Democratic lawmakers with significant Jewish constituencies joined in the criticism, including Charles Schumer of New York, who said he was “disappointed” by a deal that “does not seem proportional.” Schumer, the Senate’s third-ranking Democrat, said that it’s now “more likely” that Democratic lawmakers will join Republicans in passing legislation to impose additional sanctions on Iran, a step that Obama warned in announcing the deal might either disrupt the agreement or distance the U.S. from allies needed to maintain remaining sanctions. 
  • Abe’s Stimulus Folly May Destroy Yen and JGBs, Doshisha’s Hama. Japanese Prime Minister Shinzo Abe’s reliance on fiscal and monetary easing to defeat deflation may precipitate a “plunge” in the yen and sovereign bonds, said Noriko Hama, an economics professor at Doshisha University’s Business School in Kyoto. “The Bank of Japan is no longer functioning as a proper central bank,” Hama said at a speech in Tokyo on Nov. 21, referring to the BOJ’s doubling of monthly bond purchases to more than 7 trillion yen ($68.8 billion) in April. “The scariest scenario, and the one we should be most wary of, is a bottomless crash in the yen,” as the global financial community loses faith in the currency, Hama said.
  • China Developers Owe 3.8 Trillion Yuan in Land Taxes, CCTV Says. Chinese property developers failed to pay at least 3.8 trillion yuan ($624 billion) in land taxes between 2005 and 2012, according to a China Central Television report. Agile Property Holdings Ltd. (3383), which owes the government 8.3 billion yuan in land appreciation taxes, and Soho China Ltd. (410), the biggest developer in Beijing’s central business district, owe the most among the 45 developers that failed to pay, CCTV reported yesterday, citing calculations by Li Jinsong, a Beijing-based lawyer. Other companies that owe the tax include China Vanke Co. (200002), the country’s biggest developer listed on mainland exchanges, the state television said. A gauge tracking property shares on the Shanghai Composite Index fell 0.8 percent as of 10:20 a.m., the biggest decline among the five industry groups on the benchmark, which dropped 0.3 percent.
  • China Trades Barbs With U.S. Over China Sea Defense Zone. China traded barbs with the U.S. and Japan over its newly announced air defense zone in the East China Sea, as tensions escalated between Asia’s largest economies and risked damaging a resurgence in trade. China’s Defense Ministry filed protests to both nations’ embassies, calling Japan’s remarks “unreasonable” and the U.S. comments “wrong,” according to a statement posted on the ministry’s website today. Japan lodged a complaint as the U.S. and South Korea expressed concern about China’s creation of the zone Nov. 23. 
  • Oil Sinks on Iran Deal as Stocks Advance; Yen Slides. Crude oil headed for the biggest drop in three weeks after Iran agreed to limit its nuclear program in exchange for relief from some sanctions. Asian stocks climbed, while the yen fell to its weakest since May. Brent crude sank 2.2 percent to $108.62 a barrel by 12:32 p.m. in Tokyo. Futures on the Standard & Poor’s 500 Index, which capped a seventh weekly gain Nov. 22, rose 0.3 percent. The MSCI Asia Pacific Index added 0.4 percent, while credit risk in the region fell. The yen dropped as much as 0.5 percent while Thailand’s currency and equities slid amid protests in Bangkok.
  • Rebar Advances as China’s Hebei Demolishes Old Steel Furnaces. Steel reinforcement-bar futures in Shanghai advanced as the government in Hebei province began demolishing old steel blast furnaces. Rebar for May delivery, the most-active contract by volume on the Shanghai Futures Exchange, rose as much as 0.8 percent to 3,642 yuan ($598) a metric ton and traded at 3,630 yuan at 10:49 a.m., local time.
  • Europe Twin Woes Fester in Draghi Job-to-Inflation Fight. Europe’s twin woes of too little inflation and too many unemployed will dominate data due this week just as officials prepare forecasts backing the rationale for Mario Draghi’s surprise interest-rate cut. Inflation stayed close to the lowest level in almost four years in November with a reading of 0.8 percent, according to the median prediction of 44 economists polled by Bloomberg News. Data published at the same time on Nov. 29 might also reveal the euro-area jobless rate remained at a record 12.2 percent.
  • Businesses Wary as Obama Picks Get Edge in Senate Rules. President Barack Obama will have more leverage to regulate the energy and financial-services industries under a Senate rule change that will let a simple majority confirm most presidential nominees. This week’s Senate vote means Obama won’t need Republican support to win approval of his nominees to run federal agencies and serve on U.S. trial and appeals courts. There are 231 Obama nominees pending in the Senate, including 53 judges, 81 candidates for cabinet-level agencies and 13 at independent regulatory agencies, according to the White House. Most important, in many ways, are Obama’s picks to serve on the U.S. Court of Appeals for the District of Columbia Circuit, which handles challenges to federal regulations and is called the second-highest court in the country. “Under any administration, federal agencies seek to implement the president’s policies by developing regulations,” said Jeff Holmstead, a Washington lawyer at Bracewell & Giuliani LLP who has represented coal-heavy utilities. “But in most cases, the judges on the D.C. Circuit are the people who decide whether those regulations comply with federal law.” 
  • Obama Hitting Seven Democratic Fundraisers on West Coast. President Barack Obama, with a full plate of domestic and foreign policy issues before him, is undertaking a three-day fundraising trip that includes stops at the Seattle home of former Microsoft executive Jon Shirley and Magic Johnson’s Los Angeles house. Obama left Washington today after the U.S. and other world powers announced an agreement to limit Iran’s nuclear program and as his administration seeks to recover from the troubled rollout of his health-care law. 
  • Obamacare Fiasco Erodes Government as Problem-Solver Idea. When Barack Obama was elected president in 2008, voters were not merely choosing a candidate they found more compelling. They also were endorsing a renewal of the notion that government could be a force for good. The flawed rollout of Obamacare, his signature legislative achievement, is testing that premise, giving Republicans a chance to re-litigate the role of government and Democrats pause that the damage could lead to congressional losses.
  • For-Profit Colleges Face Consumer Bureau Probe on Lending Roles. The U.S. Consumer Financial Protection Bureau is investigating at least two for-profit colleges over potentially abusive practices in marketing and originating student loans. The CFPB, which is studying and preparing to directly supervise the entire private student loan industry, is examining potential illegal practices by Corinthian Colleges Inc. (COCO) and ITT Educational Services Inc. (ESI), according a document posted on the agency’s website and securities filings.
Wall Street Journal: 
  • Iran Pact Faces Stiff Opposition. Israel and Some U.S. Lawmakers Blast Interim Deal to Curb Nuclear Program, Ease Sanctions. A groundbreaking deal to curb Iran's nuclear program faces towering obstacles at home and abroad to becoming a permanent agreement, starting with the U.S. Congress and two of America's closest allies. The leaders of both the Democratic and Republican parties are threatening to break with President Barack Obama's policy and enact new punitive sanctions on Iran, arguing that the interim deal reached in Geneva on Sunday yields too much to the Islamist regime while asking too little.
  • Capital Journal: Allies Fear a U.S. Pullback in Mideast. Some Say Negotiations with Iran Represent Latest Evidence War-Weary U.S. Seeks to Close Books on Region's Long-Term Problems. America's allies in Israel and Saudi Arabia view the new nuclear agreement with Iran with a mixture of unease and alarm. But for some in the skeptics' camp, the broader concern extends well beyond the preliminary nuclear deal. Their underlying worry is that the negotiations with Iran represent just the latest evidence that a war-weary U.S. is slowly seeking to close the books on a series of nettlesome long-term problems, allowing Washington to pull back from its longtime commitment to the Middle East.
  • Companies Prepare to Pass More Health Costs to Workers. Firms Brace for Influx of Participants in Insurance Plans Who Had Earlier Opted Out. Companies are bracing for an influx of participants in their insurance plans due to the health-care overhaul, adding to pressure to shift more of the cost of coverage to employees. Many employers are betting that the Affordable Care Act's requirement that all Americans have health insurance starting in 2014 will bring more people into their plans who have previously opted out. That, along with other rising expenses, is prompting companies to raise workers' premium contributions, steer them toward high-deductible plans and charge them more to cover family members.
  • Iran's Nuclear Triumph. Tehran can continue to enrich uranium at 10,000 working centrifuges. President Obama is hailing a weekend accord that he says has "halted the progress of the Iranian nuclear program," and we devoutly wish this were true. The reality is that the agreement in Geneva with five Western nations takes Iran a giant step closer to becoming a de facto nuclear power. Start with the fact that this "interim" accord fails to meet the terms of several United Nations resolutions, which specify no sanctions relief until Iran suspends all uranium enrichment. Under this deal Iran gets sanctions relief, but it does not have to give up its centrifuges that enrich uranium, does not have to stop enriching, does not have to transfer control of its enrichment stockpiles, and does not have to shut down its plutonium reactor at Arak.
Marketwatch.com: 
  • Holiday season ushers in retail stock jitters. Investors will be closely watching the holiday hysteria that’s soon to overtake the stores and shopping malls of America, especially as Wall Street fears the coming holiday season could be a dud for retailers. 
ValueWalk:
Business Insider:
New York Times:
LA Times:
  New York Post:
  • False Job Numbers: Did the White House Know? Let me be the first to ask: Did the White House know that employment reports were being falsified? Last week I reported exclusively that someone at the Census Bureau’s Philadelphia region had been screwing around with employment data. And that person, after he was caught in 2010, claimed he was told to do so by a supervisor two levels up the chain of command. On top of that, a reliable source whom I haven’t identified said the falsification of employment data by Census was widespread and ongoing, especially around the time of the 2012 election.
The Detroit News: 
  • Obamacare will kill middle class. Obamacare is the biggest assault ever on the middle class. If not radically altered or repealed, it will diminish lifestyles and increase the financial struggles of average individuals and families. Combined with other costly government meddling in the economy, it will destroy the concept of an American middle. Incomes that over the past decade have barely kept pace with inflation will not absorb the surging cost of health insurance that will come for many, if not most people, on Jan. 1. We’re painfully familiar with Obamacare’s impact on the individual insurance market. Those who buy their own insurance are seeing policies canceled and replaced with ones costing two to three times as much. President Barack Obama’s fake fix won’t provide much relief.
Telegraph: 
Night Trading
  • Asian indices are -.25% to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 129.0 -4.5 basis points.
  • Asia Pacific Sovereign CDS Index 101.75 -1.5 basis points.
  • FTSE-100 futures +.36%.
  • S&P 500 futures +.26%.
  • NASDAQ 100 futures +.29%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (HI)/.52
  • (NUAN)/.29
  • (DY)/.46
  • (PANW)/.07
  • (CPRT)/.34
Economic Releases
10:00 am EST
  • Pending Home Sales for October are estimated to rise +1.1% versus a -5.6% decline in September.
10:30 am EST
  • Dallas Fed Manufacturing Activity for November is estimated to rise to 5.0 versus 3.6 in October.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Taruillo speaking, 2Y T-Note auction, BoJ Minutes and the (SNE) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and industrial 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...

Thanks for the Tyler Durden, Zero post, Hedge Banks Warn Fed They May Have To Start Charging Depositors

An inquiring mind asks what constitutes safe money? Are money market funds, safe? Will they be able to maintain their constant $1.00 value, or will they “break the buck”? During QE business loan based short term bond funds, such as FLOT, were safe investments, in that they were ever increasing in value. But when the bond vigilantes called the Interest Rate on the US Ten Year Note, ^TNX, higher from 2.48%, on October 23, 2013, on the exhaustion of the world central banks authority, the “money good” attribute of the short term bond funds failed. An inquiring mind also asks will the 1-3 Year Treasury Bonds, SHY, be safe investments, that is will they retain their value or will they too fall lower, as the bond vigilantes steepen the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, seen in the STPP ETN, STPP, steepening, and call the Interest Rate on the US Ten Year Note, ^TNX, higher from 2.75%?