Style Outperformer:
- Large-Cap Value (+.09%)
- 1) Education +.97% 2) Hospitals +.93% 3) Utilities +.79%
- DRIV, SHFL, RIMM, CTAS, ATU, DFG, SHAW and CIE
- 1) JAG 2) ORCL 3) HGSI 4) CROX 5) ALXA
- 1) RIMM 2) KO 3) ACN 4) FWLT 5) JBL
Wednesday, December 21, 2011
Bull Radar
Style Outperformer:
Wednesday Watch
Evening Headlines
Bloomberg:
- Banks May Flock to 'Free Money' as ECB Awards Three-Year Loans. The European Central Bank is set to flood euro-area banks with cheap cash as they flock to its offer of three-year loans today. Banks will ask the ECB for 293 billion euros ($384 billion) of the 1,134-day funds, according to the median of 14 forecasts in a Bloomberg News survey of economists. Estimates range from 150 billion euros to as much as 600 billion euros. The money will be lent at the average of the ECB’s benchmark rate -- currently 1 percent -- over the period of the loan. Results are due at 11:15 a.m. in Frankfurt and the loans start tomorrow. “This is basically free money,” said Jens-Oliver Niklasch, a strategist at Landesbank Baden-Wuerttemberg in Stuttgart. “The conditions are unbeatable. Everybody who can will try to get a piece of this cake.” Europe’s debt crisis has increased the risk of government and bank defaults, making institutions wary of lending to each other and driving up the cost of credit. The ECB is trying to ensure that banks have access to cheap cash for the medium term so that they can keep lending to companies and households. In addition to the longer-term loans, the ECB has widened the pool of collateral banks can use to secure the funds. Italian and Spanish government bond yields have dropped since the ECB announced the loans on Dec. 8 as banks buy the securities to use them for collateral. French President Nicolas Sarkozy has suggested banks could use the loans to buy even more government debt.
- Moody's Says Britain Isn't Immune to Debt Turmoil in Euro Area. Moody’s Investors Service said the U.K.’s “strengths” aren’t enough to completely shield its top credit rating from the euro-area debit crisis and the government must stick to its deficit-reduction program. “The U.K. sovereign faces rising challenges, which means that there’s a reduced ability to absorb further macroeconomic or fiscal shocks,” Sarah Carlson, an analyst at Moody’s in London, said in an interview after the company published a report on the U.K. late yesterday. The outlook on the Aaa rating “is stable, but certainly the amount of headroom that existed before has reduced.” Britain’s Office for Budget Responsibility cut its growth forecasts last month, prompting Chancellor of the Exchequer George Osborne in his autumn fiscal update to extend spending cuts by two years to trim the budget deficit. The U.K. recovery has lost traction as officials in Europe, Britain’s biggest trading partner, struggle to contain the region’s debt crisis. “The Autumn statement gave a pretty good indication that the government remains committed to the fiscal consolidation program,” Carlson said. “This commitment is an important contributor to the Aaa rating and that certainly supports the stable outlook.” Carlson also said the outlook on the rating “is going to be sensitive to future developments in the euro area.” While the U.K. “isn’t a member of the monetary union, it is certainly not immune to this crisis,” she said.
- Hungary May Raise EU’s Highest Rate Again as IMF Pressure Mounts. Hungary may need to raise the European Union’s highest benchmark interest rate next year as talks over a bailout stalled and the government and the central bank spar over monetary-policy independence. The Magyar Nemzeti Bank increased the two-week deposit rate by a half-point for a second month to 7 percent yesterday and said it would raise borrowing costs further if country risk worsens. Policy makers also considered a quarter-point increase. The European Commission and the International Monetary Fund suspended talks on a financial aid package to Hungary last week, citing objections to a draft law on the central bank that they say may undermine policy autonomy. The forint is the worst- performing currency in the world since June 30, data compiled by Bloomberg show. “With the government at loggerheads with the central bank, talks with the IMF seemingly having broken down and fresh signs of strains in the bond market, we think it would be premature to rule out further, more aggressive, tightening over the coming months,” William Jackson, a London-based economist at Capital Economics Ltd., said yesterday in an e-mailed note.
- Mortgage Bonds Miss Rally as Europe Sales Loom: Credit Markets. U.S. mortgage bonds that lack government backing are trading at about the lowest prices in more than a year, even as riskier assets from high-yield company bonds to stocks rally, with investors bracing for sales of home-loan debt by European banks. A group of prime jumbo-mortgage securities tracked by JPMorgan(JPM) as a benchmark fell to 93.3 cents on the dollar this month, the lowest level since August 201o. A set of subprime bonds tumbled to a two-year low of 28.1 cents.
- Emerging Stocks to Drop on Commodities 'Downside' Risk: Technical Analysis. Emerging-market stocks, especially Brazil and India, are poised to “significantly underperform” next year as commodity prices fall further, according to Bank of America Corp. (BAC) The Continuous Commodity Futures Price Index (CCI)’s drop below key Fibonacci support “points to additional downside risk,” Mary Ann Bartels, New York-based head of U.S. technical and market analysis at Bank of America, wrote in a Dec. 19 note. Emerging markets may be “negatively impacted by the break in commodities,” she said. The commodities index of 17 raw materials rose 0.4 percent to 549.98 on Dec. 19, paring this year’s slump to 13 percent.
- BOJ Cuts Economic View for Second Month. Japan’s central bank lowered its assessment for the nation’s economy for a second straight month while refraining from boosting monetary stimulus, citing easy domestic financial conditions.
- Oracle(ORCL) Misses Estimates as Clients Cut Spending. Oracle Corp. (ORCL), the world’s second- largest software maker, reported quarterly sales and profit that missed analysts’ estimates as customers held off on buying databases, applications software and computer systems. Profit before some costs in the fiscal second quarter, which ended Nov. 30, was 54 cents a share on revenue, excluding certain items, of $8.81 billion, the company said in a statement today. On average, analysts had projected profit of 57 cents on sales of $9.23 billion, according to data compiled by Bloomberg. Oracle’s shares fell as much as 11 percent in late trading. Oracle and other business-software companies are taking longer to close deals as companies gird for slow economic growth in the U.S. and the possibility of a recession in Europe next year, said Rick Sherlund, an analyst at Nomura Holdings Inc. New software licenses, an indicator of future revenue, rose less than Sherlund projected, and sales of hardware acquired through the Sun Microsystems deal fell more than expected. “There’s nothing I can find in here that’s a silver lining,” said Brendan Barnicle, an analyst at Pacific Crest Securities in Portland, Oregon, who has an “outperform” rating on Oracle shares. “Every metric in here is below where consensus was. I don’t know how to sugar-coat it.” Although sales of higher-priced hardware are accelerating, Barnicle said margins in the quarter were still below his estimate.
- Nike(NKE) Profit Tops Analysts' Estimates on North American Sales. Nike Inc., the world’s largest sporting-goods company, reported second-quarter profit that topped analysts’ estimates as sales of footwear and apparel surged in North America. Net income in the quarter ended Nov. 30 rose 2.6 percent to $469 million, or $1 a share, from $457 million, or 94 cents, a year earlier, Beaverton, Oregon-based Nike said today in a statement. Analysts projected 97 cents a share, the average of 18 estimates compiled by Bloomberg. Nike’s profit has surpassed analysts’ projections in 21 of the past 22 quarters. Chief Executive Officer Mark Parker has been trying to maintain profit growth amid higher raw-material and labor costs by increasing sales and raising prices. Total revenue rose 18 percent to $5.73 billion in the quarter. Orders for December to April, excluding currency changes, advanced 13 percent, surpassing analysts’ average projection for a 12.7 percent gain.
- Wall Street Trading Revenue to Decline as 'Year to Forget' Ends. Some of Wall Street's biggest firms signaled optimism in October after posting their worst trading and investment-banking period since the financial crisis. Now, analysts say the fourth quarter may have been worse. Fixed-income trading revenue at U.S. banks may fall 12 percent from the third quarter, minus accounting adjustments, while equities drop 10 percent and investment-bank revenue will probably be unchanged, David Trone, an analyst at JMP Securities, wrote in a Dec. 16 report. Some analysts had expected a rebound after the third quarter was the worst for trading and investment banking since 2008, when the collapse of real estate markets contributed to a worldwide credit crunch. Now many are looking ahead to 2012 after investors stayed on the sidelines amid concern that the European debt crisis would lead to a global slowdown.
- Virgin America Attendants Vote Against Unionization. The National Mediation Board said Tuesday that a majority of the Virgin America flight attendants who cast ballots in an election over whether to be represented by the Transport Workers Union voted against unionization. Of the 547 attendants at the San Francisco-based airline who voted, 324, or 59%, rejected the TWU, compared with 223, or 41%, who cast ballots for the union.
- MF Global Transfer Draws Scrutiny. Securities Firm Shifted $200 Million to Company Account at J.P. Morgan(JPM); Questions From the Bank. Investigators on the hunt for missing customer money from MF Global Holdings Ltd. are scrutinizing about $200 million moved to a company account at J.P. Morgan Chase & Co. three days before the securities firm filed for bankruptcy protection, according to people familiar with the matter. The transfer has drawn interest from investigators partly because J.P. Morgan asked MF Global in a letter the following day to attest that the Oct. 28 shift of funds didn't violate regulations designed to protect customer money.
- North Korea Seals Chinese Border.
- California Suing Fannie and Freddie. California Attorney General Kamala D. Harris filed suit against Fannie Mae and Freddie Mac on Tuesday, seeking to force the firms to answer a detailed list of questions after the firms' federal regulator sought to block an open-ended inquiry by the state. The lawsuits, filed in San Francisco County Superior Court, are the latest salvo by Ms. Harris against the mortgage-finance giants and their regulator, the Federal Housing Finance Agency.
- China Hackers Hit U.S. Chamber. A group of hackers in China breached the computer defenses of America's top business-lobbying group and gained access to everything stored on its systems, including information about its three million members, according to several people familiar with the matter. The break-in at the U.S. Chamber of Commerce is one of the boldest known infiltrations in what has become a regular confrontation between U.S. companies and Chinese hackers. The complex operation, which involved at least 300 Internet addresses, was discovered and quietly shut down in May 2010.
- Standoff Sets In as House Rejects Tax Bill.
- EU Debt Crisis: Six Families Share Their Stories.
- Doubts Arise in Euro's Birthplace. Netherlands' Support Weakens Amid Concern Over Bailouts. For the 20th anniversary of the treaty that led to the euro, Dutch officials have quashed a proposal to invite the graying architects of the currency back for a commemoration. Until a local university suggested an academic conference this coming February, there was nothing at all planned here for the historic event. Contrast that with five years ago, when the city marked the anniversary with a yearlong series of events called "Maastricht celebrates Europe." This time, "we had our doubts whether a celebration would be justified," says Jean Bruijnzeels, a city accounts manager.
- Inside Capitol, Investor Access Yields Rich Tips. When Senate Democrats finally brokered a compromise over the proposed health-care law, a group of hedge funds were let in on the deal, learning details hours before a public announcement on Dec. 8, 2009. The news was potentially worth millions of dollars to the investors, though none would publicly divulge how they used the information. They belong to a select group who pay for early, firsthand reports on Capitol Hill.
Zero Hedge:
CNBC:
Forbes:
- The Ugly Realities Of Socialized Medicine Are Not Going Away. The worldwide recession has forced countries around the world to curb public spending — or risk defaulting on their debt. The United Kingdom is the latest to tighten its belt. The National Health Service (NHS) — the centralized public agency that runs Britain’s government healthcare system — is being forced to shave $31 billion from its budget by 2015. These cuts are leading to a precipitous drop in the quality of care patients receive. The NHS has been living well beyond its means for quite awhile. And now brutal government-enforced cost controls are exacting a heavy human toll. Thanks to Obamacare, America will soon face the same sort of reckoning.
- National Guard at Border Cut to Fewer Than 300. The Obama administration will keep a reduced contingent of National Guard troops working along the Mexican border for the next year, the Defense Department said Tuesday. Starting in January, the force of 1,200 National Guard troops at the border will be reduced to fewer than 300 at a cost of about $60 million, said Paul Stockton, assistant secretary of defense for homeland defense.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 21% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Thirty-nine percent (39%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -18 (see trends).
- Jabil(JBL) sees Q2 largely below estimates, shares fall. Contract manufacturer Jabil Circuit Inc posted quarterly revenue below analysts' estimates as its large customers battled inventory pile-ups, and sees lower revenue in the second quarter from its high-velocity segment which services digital products. Shares of the company were down 4 percent at $19.17 in extended trade on Tuesday.
- Japan: to take 30-40 yrs to decomission Fukushima atomic plant.
- US Regulator Considers Mortgage Debt Reduction for Bankrupt. The regulator for Fannie Mae and Freddie Mac is actively considering a proposal that would allow for a reduction in the outstanding mortgage debt of homeowners in Chapter 13 bankruptcy, Financial Times reported on Tuesday.
- Weaker Euro Will Help Solve Europe Deficit Woes by Martin Feldstein. The large current account deficits of Italy, Spain and France can be reduced without lowering their incomes or requiring Germany to accept inflationary increases in its domestic demand. The key is to expand the net exports of those trade deficit countries to the world outside the eurozone.
- Eurozone Crisis Hits US Mortgage Securities. Asset sales by banks under pressure in Europe have hit prices for securitised mortgages in the US, indicating that the effects of the eurozone crisis are widening. Rather than selling distressed assets in their home markets, there are increasing signs that European banks are selling assets outside the region, hitting prices for asset-backed paper.
- Former Italian Prime Minister Giuliano Amato told Sky News in an interview that expelling Greece from the euro area wouldn't be "a sound solution" to the bloc's crisis and would "give the markets the wrong signal." The euro area could consider instead "a sort of suspension" of member countries that fail to maintain the standards set by the Maastricht protocol after they join the bloc, Amato said to Sky. "Not necessarily the solution is throwing the country out forever but it might be a sort of temporary" condition, Amato said. The idea was proposed by Germany a year ago, and "deserves attention," he said. While the euro-area agreement last week "is not so useful" in stabilizing the markets because the signing and implementation isn't imminent, the European Central Bank's "promise" to pump liquidity into financial institutions is "keeping hopes high and alive," Amato said. Markets are expecting "huge transfers" of money to be passed "from the region's AAA countries to the weaker ones, north-south-bound," Amato said, adding he's "not so convinced this is needed for other countries beyond Greece."
- Factors that lead to inflation still exist at the moment, Chen Jiagui, a researcher from the Chinese Academy of Social Sciences, writes in a commentary. Some producers of goods and services may adjust prices higher next year after previous price increase plans were halted by the government, Chen said. Imported inflationary pressures remain large, he said.
- China should stop giving U.S. low-cost financing, Zhang Monan, a researcher with the State Information Center wrote in a front-page commentary. China should make a fundamental change to investment direction of its reserve assets, a large portion of which was invested in U.S. debts, he said.
- Shanghai and Qingdao will continue to limit home purchases in 2012, joining Guangzhou, Shenzhen and other Chinese cities in doing so to curb the property market, citing local authorities.
- None of note
- Asian equity indices are +.25% to +3.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 210.0 -4.5 basis points.
- Asia Pacific Sovereign CDS Index 158.0 unch.
- FTSE-100 futures +.49%.
- S&P 500 futures +.06%.
- NASDAQ 100 futures +.21%.
Earnings of Note
Company/Estimate
- (LNN)/.43
- (KMX)/.38
- (WAG)/.67
- (ATU)/.43
- (SHAW)/.44
- (KBH)/.03
- (BBBY)/.88
- (FINL)/.11
- (SCS)/.19
- (TIBX)/.35
- (MU)/-.08
10:00 am EST
- Existing Home Sales for November are estimated to rise to 5.05M versus 4.97M in October.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,125,000 barrels versus a -1,932,000 barrel decline the prior week. Distillate supplies are estimated to fall by -750,000 barrels versus a +480,000 barrel gain the prior week. Gasoline inventories are estimated to rise by +1,500,000 barrels versus a +3,824,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.38% versus a -2.6% decline the prior week.
Upcoming Splits
- None of note
- The first 36-month ECB tender, 7-Year Treasury Note Auction and the weekly MBA mortgage applications report could also impact trading today.
Tuesday, December 20, 2011
Stocks Surging into Final Hour on Euro Bounce, Short-Covering, Window-Dressing, Better US Economic Data
Broad Market Tone:
- Advance/Decline Line: Substantially Higher
- Sector Performance: Every Sector Rising
- Volume: Light
- Market Leading Stocks: Performing In Line
- VIX 23.01 -7.65%
- ISE Sentiment Index 106.0 +8.16%
- Total Put/Call .78 -9.30%
- NYSE Arms .19 -92.97%
- North American Investment Grade CDS Index 126.61 -3.34%
- European Financial Sector CDS Index 291.71 -1.03%
- Western Europe Sovereign Debt CDS Index 365.50 -3.45%
- Emerging Market CDS Index 313.07 -1.99%
- 2-Year Swap Spread 48.0 -2 bps
- TED Spread 56.0 -1 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -116.50 +1.25 bps
- 3-Month T-Bill Yield .00% unch.
- Yield Curve 167.0 +9 bps
- China Import Iron Ore Spot $132.0/Metric Tonne +.53%
- Citi US Economic Surprise Index 73.90 +.5 point
- 10-Year TIPS Spread 2.04 +11 bps
- Nikkei Futures: Indicating +139 open in Japan
- DAX Futures: Indicating +32 open in Germany
- Higher: On gains in my Tech, Medical, Biotech and Retail sector longs
- Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added some back
- Market Exposure: Moved to 75% Net Long
Today's Headlines
Bloomberg:
- Merkel Takes Vacation as Debt Crisis, Domestic Woes Fester. Chancellor Angela Merkel presided over her final Cabinet meeting of 2011 before she takes a winter break, leaving behind the simmering debt crisis and a political ally whose job as German president is on the line. Merkel discussed minimum wages, changes to a stocks law and a bill on energy-efficiency labeling with ministers in Berlin today, her last publicly scheduled meeting before she goes on vacation tomorrow. Her spokesman declined to say where she is going, saying only that her next official appearance is not until Jan. 5. As she takes time out, the German leader leaves the threat of a credit-rating downgrade hanging over Europe’s biggest economy and the wider euro area, as rating companies join investors in questioning the impact of Merkel’s Dec. 9 European summit push for closer fiscal ties to combat the crisis. The euro fell to an 11-month low against the dollar on Dec. 14. “They haven’t solved the crisis,” Christian Schulz, an economist at Joh. Berenberg Gossler & Co in London, said by phone. “If the whole thing blows up, it’s going to cost Merkel a lot. Her future rests on the future of the euro.”
- Spain, Italy Lead Drop in Government Default Swaps in Europe. Spain and Italy led a decline in the cost of insuring against default on government debt before the European Central Bank starts offering three-year loans tomorrow. Credit-default swaps on Spain dropped 21 basis points to 387 and Italy tumbled 31 to 504, according to CMA prices at 4 p.m. in London. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments declined 11 basis points to 359. The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings decreased 31.5 basis points to 772.5, according to JPMorgan Chase & Co. A decline signals improvement in perceptions of credit quality. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 7.5 basis points to 179.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers decreased 17 basis points to 298 and the subordinated index dropped 15 to 540.
- IMF Urges European Firewall Around Ireland as Prospects Fragile. Ireland's European benefactors should take steps to create a firewall around the nation, as its prospects remain “fragile” amid the escalating euro-region debt crisis, the International Monetary Fund said. The crisis may hamper Irish economic growth, increase the cost of re-entering bond markets and make it harder for the country's banks to sell off assets, the Washington-based fund said today in its fourth review of Ireland's bailout program.
- Europe Dragging Down U.S. in Record Correlation: Credit Markets. For all the evidence that the U.S. economy is expanding, the nation's credit markets are unable to decouple from Europe as everything from junk bonds to interest- rate swaps move increasingly in lockstep with the euro region. Correlation between the 17-nation currency and prices of a credit-default swaps index tied to U.S. junk bonds is at about the highest on record, Bloomberg and London-based Markit data show. Interest-rate swap spreads in the U.S., a gauge of fear in credit markets, are trading the most in tandem with European corporate credit since 2007. "You're living in fairyland if you think the U.S. won't be impacted by Europe," MacDonald, head of research at Aladdin, a Stamford, Connecticut-based investment firm, said yesterday in a telephone interview. Investors are speculating "Europe is going to get worse before it gets better," he said, and they "don't feel the U.S. can easily sidestep it." Correlation between the euro-dollar exchange rate and the price of the Markit CDX North America High Yield Index reached a record 0.76 on Dec. 2, when measured over 60-day periods, and held at 0.74 yesterday, data compiled by Bloomberg and London- based Markit show. The measure has climbed from 0.1 on April 7.
- U.S. Housing Starts Jump 9.3%, to Highest in Year. Builders broke ground in November on more houses than at any time in the past 19 months, led by a surge in multifamily units, signaling the market is stabilizing heading into 2012. Starts increased 9.3 percent to a 685,000 annual rate, exceeding the highest estimate of economists surveyed by Bloomberg News and the most since April 2010, Commerce Department figures showed today in Washington. Building permits, a proxy for future construction, also climbed to a more than one-year high. Work on multifamily units like apartments and townhouses is growing as the rental market improves. Applications for the construction of single- family homes climbed 1.6 percent, and those for multifamily units jumped 14 percent. New construction of single-family houses rose 2.3 percent from the prior month to a 447,000 annual rate, the most since June. The category is heading for a record low this year at around 423,000, about 10 percent less than in 2010, according to Bloomberg News calculations. Three of four regions had a November increase in starts, led by a 54 percent jump in the Northeast and a 23 percent gain in the West. Starts fell 18 percent in the Midwest.
- Canada Is 'Very Serious' About Selling Oil to Asian Markets, Harper Says. Canadian Prime Minister Stephen Harper said he is ‘very serious’ about the idea of selling the country’s oil to markets in Asia, and that Canada no longer wants to export its energy only to the United States. “I am very serious about selling our oil off this continent, selling our energy products off to Asia,” Harper said in an interview with CTV National News broadcast last night. He said that when “senior Americans” told him U.S. lawmakers would approve TransCanada Corp. (TRP)’s Keystone XL pipeline, allowing Canada to sell all its oil to the U.S., he replied, “We’d love to, but I think the problem is now that we’re on a different track.”
- Paulson-Backed Lender Grows by Buying Failed Banks. (video)
- Gold Climbs Most This Month as IMF Pledge Boosts Euro Against U.S. Dollar. Gold rose, heading for the biggest gain this month, as the weakening dollar boosted demand for the metal as an alternative asset. The euro rose against the U.S. currency after Europe pledged 150 billion euros ($196 billion) to the International Monetary Fund to help stem the region’s debt crisis, and as the European Central Bank widened its support for bond markets.
- US Demands Airlines CO2 Emissions Data As Spat With EU Drags On. The U.S. government has demanded aviation-emissions data from nine European airlines two weeks before the European Union's emissions trading system is set to include air-travel despite strong opposition from the U.S. and many other countries. The U.S. Department of Transportation on Friday told seven U.S. carriers and the EU airlines to provide data about how the EU plan affects them. The DoT letters, reviewed by The Wall Street Journal, said the department "will now seek certain information related to ETS."
- Egyptian Women March Against Abuse by Military. Thousands of Egyptian women have taken to the streets of Cairo in a mass demonstration against the military's brutality against women during a crackdown on protesters that shocked many in the largely conservative society. Ringed by a protective chain of male protesters, women from different social classes and religious background gathered in Tahrir Square Tuesday and marched through the streets of Cairo. Many carried signs with images of soldiers dragging protesters by the hair and kicking and stomping on them on the ground. One image was particularly shocking.
- Fitch Puts European Banks on Watch. Fitch Ratings placed banks in multiple European nations on watch for possible downgrade following the placement of the their home country's sovereign ratings under a similar review recently. The watch status applied to banking groups in France, Spain, Italy, Belgium, Ireland and Cyprus.
- Fitch Warns on Bailout Fund's Rating. The triple-A debt rating of Europe's temporary bailout fund largely depends on France and Germany retaining their triple-A status, ratings agency Fitch warned Tuesday, adding that the agency's revision last week of its outlook on France to negative implies that the fund is at a greater risk of a downgrade. "We affirmed France's triple-A status but warned that there is a slightly greater than 50% chance of a downgrade within the next year or two.
- Goldman(GS) Sees More Cuts in China Aluminum Output. The decline in aluminum prices has already led to production cutbacks in China and will likely lead to more, providing a mildly bullish boost to the metal, Goldman Sachs said. The bank on Tuesday lowered its 12-month aluminum price forecast by 9.4% to $2,400 a metric ton from $2,650/ton previously, and kept its three-month outlook unchanged at $2,300/ton. The price of aluminum, used in the automotive, aerospace and construction industries, has tumbled along with other commodity prices in recent weeks and is trading at 2011 lows.
- NJ Recycling Company Told to Pay $570,000 for Dumping Asbestos-Contaminated Debris. A New Jersey recycling company has been sentenced to pay a $500,000 criminal fine and more than $70,000 in restitution and cleanup costs for its role in dumping thousands of tons of asbestos-contaminated construction debris on farmland near the Mohawk River in central New York in 2006.
- Portrait of New North Korea Leader Takes Shape. U.S. Officials Describe Kim Jong Eun, Elusive Inheritor of the Kim Family's Dictatorship, as Sadistic and Unpredictable.
- Long-Short Equities Fund Managers Roiled By Market Volatility. Hedge funds that try to beat the market through buying and selling individual stocks have had such a rough go of things this year that a number of them are cutting back on their allocations. Long/short equity managers recorded the heaviest withdrawal among various hedge fund strategies so far this year, accounting for $5 billion of the $9.4 billion outflows through November, according to Eurekhedge. On a return basis, these funds lost 7.10% for the first 11 months of the year--a steeper decline than the 4.37% drop for the industry as a whole, or the flat S&P 500 index.
- Hopes For Crisis Relief Ride on ECB Loans to Banks. Demand for the European Central Bank's first ever offer of three-year loans to banks on Wednesday is likely to go a long way to determining whether countries embroiled in the debt crisis receive some relief or have to endure yet more pain. The ECB hopes the limit-free, ultra-cheap and ultra-long funding will have a range of beneficial effects, including bolstering trust in banks, easing the threat of a credit crunch and most of all, tempting banks to buy Italian and Spanish debt.
- Subprime Buyers Pushing Late Auto Sales. As auto sales have surged in recent months, I’m hearing from more and more dealers about the renewed strength of the subprime and deep subprime buyer. You know the folks I’m talking about. Those who have a checkered (avg. score 550-620) credit record. The same folks who were either shut out or chose not to buy a new or used car when the economy tanked three years ago. The return of the subprime auto buyer is confirmed with the latest data from CNW Research and Experian.
- Two Wall Street Execs and Family Killed in New Jersey Plane Crash.
- Check Out These Twisted North Korean Propaganda Posters.
- IBM Just Made 5 Wild Predictions About The Future.
- Investors Pulled Tons of Money Out of the BRICS This Year. (graph)
- EFSF at 5-Day Low Despite Sovereign Strength. (graph)
- Deus Ex LTRO. I think we have already seen the initial impact. Now we will wait to see rates do well, but will be disappointed. The big banks with risk management departments will decide to decline. The risk/reward just won’t be attractive to them. We will find out that places like DB don’t participate and that small weak banks do. That will actually start another spiral on those weak banks, as people will sell the shares and they won’t find lenders outside of the ECB as no one will trust their discipline. In the end, this won’t do much for the sovereign debt market, but will shine a spotlight on which banks should be shorted and will possibly expedite their default.
- Fed Issues Update On Dodd-Frank Framework, Director Responsibility and Annual Stress Tests.
TheStreet.com:
- Bank of America(BAC) Risks Capital Shortfall: Creditsights. Bank of America is "at risk" of failing to keep up with a Federal Reserve timetable for strengthening its balance sheet, according to research published Tuesday by Creditsights, a credit research firm.
- Alarm as Dutch Lab Creates Highly Contagious Killer Flu. The UK’s Independent reports that a deadly strain of bird flu with the potential to infect and kill millions of people has been created in a laboratory by European scientists – who now want to publish full details of how they did it. The discovery has prompted fears within the US Government that the knowledge will fall into the hands of terrorists wanting to use it as a bio-weapon of mass destruction.
- Hedge Fund Walks Out On Greek Debt Swap Talks -Sources. Vega Asset Management has resigned from a group of private creditors leading talks with Greece and its international lenders over a restructuring of its debt, two sources said, amid differences over how to proceed with the voluntary bond swap.
- US Oil Boom Town Prompts Fears Of Crude Glut. The boom in North American oil production has triggered a race to expand the US’s main oil storage centre, raising concerns among some industry executives of potential glut in capacity. By next year, the capacity of tanks around Cushing, an Oklahoma town that calls itself the pipeline crossroads of the world, will equal to nearly a day’s of global oil production as refineries, trading houses, Wall Street banks and pipeline companies build or lease hundreds of thousands of barrels of new tanks.
Telegraph:
- Don't Ask The ECB to Intervene. Is it possible that the European Central Bank (ECB) doesn't want to intervene to end the debt crisis is because, whisper it quietly - it can’t afford to?
- Britain, the IMF, and the World's Richest Beggar. Euro rage is reaching new heights over Britain's latest outrage. Our refusal to pony up a further €31bn we cannot afford, to prop up a monetary union that was created against our wishes and better judgment, and launched with the malevolent purpose of accelerating the great leap forward to a European state that is inherently undemocratic. It is being presented as treachery, Anglo-Saxon perfidy, and the naked pursuit of national self-interest. Let me just point out:
- Debt Crisis: Live. Moody's warns that UK could face a downgrade as "formidable and rising challenges" such as the deficit increase since 2008 have eroded ability to absorb further fiscal shocks.
Die Welt:
- Germany's Bundesbank doesn't think the conditions for providing aid to the IMF have been fulfilled until the Bundestag, Germany's lower house, explicitly backs the measure, citing people close to the central bank.
- Clariant AG sees demand weakening in various areas of the chemicals market, CEO Hariolf Kottmann said in an interview.
- Clashes in Oil Region Threaten Kazakhstan Leader. Riots by oil workers in western Kazakhstan suggest that pressure is mounting for President Nursultan Nazarbayev to relax the rigid authoritarian system he has built in a nation that is fast losing its veneer of stability. Officials say 14 people were killed in Friday’s clashes following the dismissal of oil workers in Zhanaozen in western Kazakhstan and another person was killed when violence spread to a nearby village on Saturday. It was a local crisis that had long been simmering and local authorities had failed to master. “People want to be heard, but there are no mechanisms that would allow people to be heard. … This results in such brutal methods,” Kazakh political analyst Aidos Sarym said. “Zhanaozen actually threatened the unity of our nation. “In general, there is a need to slacken the reins. Public mechanisms are needed. There are things that should be discussed in parliament,” he said. “There must be modernization of society, of the political system.”
- Merrill: 'Classic Bubble' Signs in Canadian Housing Market. Canada’s housing market shows the “classic signs of over valuation, speculation and over supply,” but Bank of America Merrill Lynch says that’s no reason to think that there will be an epic crash of American proportions. In a report issued Monday, the bank’s Canadian analysts said record Canadian household debt and increased joblessness are cause for concern over the next year. There will likely be fewer sales, and prices could slip as much as 5 per cent in the next year. “Canadian home prices set new highs in 2011 and are now showing many of the signs of a classic bubble,” they wrote. “We estimate the housing market nationwide is about 10 per cent over valued. Even so, the only way these valuations can be explained is by the record low mortgage rates. Under more normalized interest rates, home prices would actually look 25 per cent overvalued based on current prices.”
Financial Chronicle:
- India's Sensex, Nifty Plunge to 28-Month Low. FAST spreading negative sentiment on Indian equities pulled the benchmark indices Sensex and Nifty to a new 28-month low taking the market capitalisation of shares listed on the Bombay Stock Exchange to below the psychological $1 trillion mark. Most of Tuesday's 204-point fall in the Sensex to 15,175 came in the last hour of trading led by aggressive selling in the large cap stocks. Sensex closed just above the August 20, 2009 low of 15,035, making India the worst-performing stock market worldwide.
- Property Sales See Declines in East China. Commercial property sales in booming Zhejiang province has seen further declines as the property sector continues to cool off with no signs of immediate loosening of tightening measures. The total area sold slumped 22.9 percent year-on-year to 30.7 million square meters in the January-November period, the provincial statistics bureau said in a statement. The sales declined 20 percent in the first 10 months and 15.3 percent in the first nine months, according to the statement. Meanwhile, sales revenue hit 308.8 billion yuan, down 16.4 percent from the same period a year ago. The decline was 12.6 percent in the first 10 months. China will unswervingly maintain its regulation policies on the property market next year intended to return housing prices to a reasonable level, according decisions made at the country's central economic work conference this month. With gloomy prospects for the next year, many cash-strapped property developers rolled out big discounts to promote sales, as they struggle to pay back debts at the year-end, the bureau said. Earlier several local developers were reported to be in liquidity crisis or unable to pay back debts, and many real estate agencies have closed stores due to the declines in existing home sales.
- Shanghai Keeping Curbs on Property Market. SHANGHAI is to further strengthen efforts to rein in housing speculation next year and continue to enforce home-purchase restrictions, the local government said yesterday. It is the latest in a number of Chinese cities to vow to stick to property tightening measures and extend restrictions on buyers which are due to expire at the end of the year. During last week's annual Central Economic Work Conference, China's top leaders vowed to maintain tightening in the property sector, including home purchase restrictions, curbs on onshore and offshore fundraising options for developers and higher downpayments for multiple home buyers. China will stick to property tightening policies, push home prices back to a reasonable level, and speed up construction of ordinary houses to increase supply, the conference concluded as it laid out its 2012 blueprint for the country. "The central government has repeatedly made it very clear over the past weeks that rein-in measures to curb housing speculation should be continuously implemented so the latest announcement by the Shanghai government came as no surprise," said Sky Xue, an analyst with China Real Estate Information Corporation. "In the short term, home prices will for sure continue to go through a downward trend."
Bear Radar
Style Underperformer:
- Large-Cap Value (+2.46%)
- 1) Drugs +1.14% 2) Airlines +1.89% 3) Software +2.04%
- TEO, IPAR, ARGN, SAFM, RCL and RHT
- 1) WDC 2) LRCX 3) CBG 4) VZ 5) JEF
- 1) OC 2) SCHN 3) MA 4) GMCR 5) XOM
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