Tuesday, September 21, 2010

Tuesday Watch

Posted by Gary .....at 12:25 AM

Evening Headlines
Bloomberg:
  • Greek Sovereign Default Would Be a 'Tragedy,' Papandreou Says. Greece’s Prime Minister George Papandreou renewed the country’s pledge to return to international capital markets as soon as possible and ruled out any plans to restructure debt. “We are not going to default,” Papandreou said yesterday during an interview with Betty Liu at the New York Stock Exchange. “Default would be a tragedy.”
  • Recovery Deniers Just Got Mugged by Reality: Caroline Baum. This just in: The recession that started in December 2007 ended in June 2009, according to the official arbiter of the U.S. business cycle. That will come as a surprise to the 14.9 million unemployed, especially the 6.2 million who have been jobless for 27 weeks or more. It won’t offer encouragement to the 1.1 million discouraged workers who stopped looking for jobs because they don’t think there are any. Nor will it resonate with the 8.9 million who are working part-time for economic reasons -- the primary reason being, the economy stinks. For the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), designating the trough month for the recession means just one thing: “Any future downturn of the economy would be a new recession,” not a continuation of the old one, according to yesterday’s press release.
  • Fed Under Pressure to Avoid Creating Confusion Over Potential for Easing. Federal Reserve officials debating whether to boost stimulus are under pressure to avoid creating confusion among investors about any new effort to spur the U.S. recovery. The Federal Open Market Committee, which meets today, triggered a stock selloff with its last statement on Aug. 10 as investors took it as a signal the economy will falter. The Standard & Poor’s 500 Index tumbled 7.1 percent during the two weeks following the statement after reaching a three-month high on Aug. 9.
  • Most Hedge Funds Should Escape New Swaps Regulation in U.S., ISDA Says. Most hedge funds and money managers shouldn’t fall under new derivatives rules being written by U.S. regulators, according to the International Swaps and Derivatives Association, a trade and lobbying group. The Commodity Futures Trading Commission and the Securities and Exchange Commission are responsible for writing the new rules governing $615 trillion in over-the-counter derivatives. They should find hedge funds and money managers don’t meet the criteria of a firm that “maintains a substantial position in swaps,” using leverage that creates “substantial counterparty exposure,” ISDA said today. That’s how the new law defines the so-called major swap participant. “Very few, if any, investment funds should qualify,” ISDA said today in a letter to the CFTC and SEC.
  • TransCanada Oil-Sands Pipeline to Gulf May Add 12,000 Jobs, Chief Says. TransCanada Corp.’s 2,000-mile pipeline linking Alberta’s oil sands with Gulf Coast refiners may add at least 12,000 jobs and provide a stable fuel source for the U.S., Chief Executive Officer Russell Girling said. Efforts to stop the $7 billion Keystone XL project because lawmakers say developing tar sands may release more greenhouse gases than other types of oil production will result in the crude being redirected from the U.S., Girling said. “Permitting our pipeline will not impact the development of oil sands,” Girling said today in a telephone interview. “The oil sands will be developed in any event.” TransCanada’s proposal has been faulted by U.S. lawmakers such as Henry Waxman, chairman of the House Energy Committee, and questioned by the U.S. Environmental Protection Agency. Without Alberta’s oil, the U.S. will need more crude from countries less friendly to its interests than Canada, Girling said. Canada is now the biggest U.S. source of imported oil.
  • HP(HPQ) and Oracle(ORCL) Resolve Litigation on Hurd Employment. Hewlett-Packard Co. and Oracle Corp. said they resolved litigation over the appointment of Mark Hurd as a president of Oracle and reaffirmed the long-term partnership between the two companies.
  • Oil Supplies Hit Five-Week Low in Survey on Enbridge Halt: Energy Markets. U.S. crude-oil supplies probably fell to a five-week low after an Enbridge Energy Partners LP pipeline, the largest linking Canada and the U.S. Midwest, shut for eight days following a leak, a Bloomberg News survey showed. Inventories slipped 1.6 million barrels, or 0.4 percent, in the seven days ended Sept. 17 from 357.4 million a week earlier, according to the median of 14 analyst estimates before an Energy Department report tomorrow.
  • Goldman(GS) Shareholder a Loser to CD Rates When Blankfein Earned $125 Million. Goldman Sachs Group Inc.’s stock is one of the best-performing financial shares in the past decade and beat the S&P 500 Stock Index, helping to explain Lloyd C. Blankfein’s $125 million in cash bonuses during the period. Some investments did even better. One-year certificates of deposit earned an average rate of 3.17 percent in the last 10 years, beating the 2.78 percent annual total return on Goldman Sachs stock. Buying a 10-year Treasury note in mid-September 2000 would have yielded 5.8 percent annually.

Wall Street Journal:
  • Net Neutrality Activists Target Google(GOOG) as Talks Heat Up. Net neutrality activists and left-leaning interest groups are launching an online advertising campaign targeting Google co-founders Larry Page and Sergey Brin for the company’s recently announced agreement about web traffic delivery with Verizon Communications.
  • NYC Mayor to Impose Job Freeze. New York City Mayor Michael Bloomberg will impose a citywide hiring freeze as his administration begins to take more aggressive steps to deal with a multibillion budget deficit in the upcoming fiscal year, people familiar with the mayor's decision confirmed Monday night.
  • Turkey Questions Sanctions on Iran. Turkey's president questioned the effectiveness of sanctions as a tool to curb Tehran's nuclear ambitions and indicated his country's relations with Israel won't improve until the Jewish state apologizes for its deadly May raid on a flotilla trying to reach Gaza.
  • Obama Hints at High-Level Changes. President Barack Obama raised the prospect of changes to his economic team Monday, saying his over-worked staffers were "going to have a whole range of decisions about family that'll factor into" their career decisions.
  • A Tale of Two Recoveries. The state of the economy after a year of 'rebound.'
MarketWatch.com
Business Insider:
  • The PIIGS Are Being Crucified On A Eurotrash Gold Standard. (charts)
  • The "Deleveraging" Deception. There is wide agreement among economists and the financial media that our lackluster economic performance stems from continued "deleveraging" among consumers and businesses. Although it is certainly true that after decades of overly speculative borrowing, individuals and corporations are paying down debt, rebuilding their savings, and generally repairing their respective balance sheets. But these activities cannot be faulted for our economic malaise. In fact, as a country, we haven't deleveraged at ALL. All the moves made by the private sector have been vastly outpaced by the federal government's efforts to add leverage to the economy. The net result is that we are much more indebted now than we were before the recession began; as a result, we are digging ourselves even faster into debt.
Zero Hedge:
NY Times:
Rasmussen Reports:
Reuters:
  • Senators Warn Insurers On Premium Increases. Two Democratic senators are demanding more transparency about premium increases from health insurers and warning them against blaming higher rates on a newly passed reform law. Senate Finance Committee Chairman Max Baucus of Montana and Commerce Committee Chairman John Rockefeller of West Virginia said they sent a letter to the five largest health insurers by enrollment registering their concerns over increases for next year. The letters were sent to WellPoint Inc, UnitedHealth Group Inc, Aetna Inc, Health Care Services Corp and Cigna Corp.
  • China Guizhou Orders Aluminum Smelters to Cut Output. Power-hungry smelters in Guizhou, one of China's major primary aluminium producing provinces, have been ordered to cut production, in efforts to help meet Beijing's target to reduce energy intensity, smelter officials said on Monday. The move may temporarily shut 30 percent of around 850,000 tonnes of operating annual capacity in the southwestern province, cutting some 80,000 tonnes of metal production between September and December.
Financial Times:
  • Gulf States in $123 Billion US Arms Spree. The Arab states of the Gulf have embarked on one of the largest re-armament exercises in peacetime history, ordering US weapons worth some $123bn as they seek to counter Iran’s military power. A package of US arms worth more than $67bn for Saudi Arabia accounts for the largest single component of this military build-up, providing a huge boost to the American defence industry.
China Securities Journal:
  • China's real-estate developers should price homes "reasonably" or face tougher tightening measures, citing Zhu Zhongyi, vice chairman of the China Real Estate Association.
Shanghai Daily:
  • Shanghai is cracking down on real estate developers and property agents collaborating to manipulate home prices.
South China Morning Post:
  • China plans to increase its minimum wage by at least 20% annually in the next five years, more than doubling it by 2015, citing Huang Mengfu, a government adviser.
China Business News:
  • China may announce property tax measures before or after the National Day holidays in October which takes place from Oct. 1 to Oct. 7.
Evening Recommendations
RBC Capital:
  • Rated (OC) Outperfrom, target $31.
  • Rated (DNDN) Outperform, target $50.
Night Trading
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 121.0 -4.0 basis points.
  • Asia Pacific Sovereign CDS Index 112.50 +2.0 basis points.
  • S&P 500 futures -.18%.
  • NASDAQ 100 futures -.06%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (AZO)/5.45
  • (FDS)/.80
  • (CAG)/.39
  • (PRGS)/.18
  • (CTAS)/.37
  • (ADBE)/.49
  • (DRI)/.77
  • (CCL)/1.47
Economic Releases
8:30 am EST
  • Housing Starts for August are estimated to rise to 550K versus 546K in July.
  • Building Permits for August are estimated to fall to 560K versus 565K in July.
2:15 pm EST
  • The FOMC is expected to leave the benchmark fed funds rate at .25%.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The weekly retail sales report, ABC consumer confidence reading, UBS Life Sciences Conference, (SWKS) analyst meeting and the Goldman Sachs Communacopia Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology 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 100% net long heading into the day.
0 comments

Monday, September 20, 2010

Today's Headlines

Posted by Gary .....at 2:51 PM


Bloomberg:
  • Homebuilder Confidence Holds at Lowest Level in a Year as Tax Credit Ends. Confidence among U.S. homebuilders in September unexpectedly held at the lowest level in more than a year, showing the housing market remains depressed following the expiration of a government tax credit. The National Association of Home Builders/Wells Fargo confidence index was unchanged at 13, matching the August reading as the lowest since March 2009, data from the Washington-based group showed today. The gauge was projected to rise to 14, according to the median forecast of 50 economists surveyed by Bloomberg News. “It’s hard to see where the impetus for growth for housing is going to come from,” said David Semmens, an economist at Standard Chartered Bank in New York who forecast the index would be unchanged. “The employment situation keeps people very much on the back foot and remaining in their existing homes.”
  • Harvard's Feldstein Favors Extending All Bush-Era Tax Cuts for Two Years. Harvard University economics professor Martin Feldstein said raising taxes on the wealthiest Americans could push the nation back into a recession and urged that all Bush-era tax cuts be extended for two years. Feldstein, a member of the committee that dates the beginning and end of recessions, said President Barack Obama’s proposal to allow tax cuts for the wealthy to lapse “is going to slow the economy down and could push the economy into recession again next year.” “We should extend all of the Bush tax cuts for two years and we will have a clean slate and see where the economy is,” Feldstein said today in a radio interview on “Bloomberg Surveillance” with Tom Keene. “We should commit now to two years -- and nothing beyond the two years.”
  • Mr. President, Here's My Resume, Where's My Job?: Caroline Baum. Asked whether President Barack Obama has a clear plan for creating jobs, 53 percent of the respondents to a recent New York Times/CBS poll said no.
  • IBM's(IBM) $1.7 Billion Netezza(NZ) Deal May Spur Bids for Data-Warehousing Company. International Business Machines Corp.’s $27-a-share deal to acquire Netezza Corp. pushed the stock above that level, suggesting investors may expect a competing bid for the analytics-technology provider. IBM, the world’s largest computer-services provider, struck a cash deal worth about $1.7 billion, IBM said in a statement today. The per-share price is 9.8 percent more than Marlborough, Massachusetts-based Netezza’s Sept. 17 closing price.
  • Warren, Geithner Look Past Tensions to Shaping Consumer-Protection Agency. Elizabeth Warren, appointed last week to help set up a new U.S. consumer financial-protection agency, spent much of the past two years critiquing Treasury Secretary Timothy F. Geithner. Now, he will oversee her. The Consumer Financial Protection Bureau, a watchdog for products from credit cards to mortgages, may be shaped as much by Warren’s ability to work with Geithner as by the financial firms and industry critics trying to steer its agenda.
  • Obama Says China Hasn't Taken Steps It Agreed Upon to Let Yuan Strengthen. President Barack Obama said China hasn’t done “everything they said would be done” to allow its currency to rise in value. The yuan is “valued lower than market conditions say it should be” and that gives China “an advantage in trade,” the president said ahead of scheduled talks with Premier Wen Jiabao at this week’s United Nations General Assembly in New York.
  • Individual Investors May Be Returning to U.S. Stock Market, Bespoke Says. Individual investors may be moving back into stocks, as gains in the Standard & Poor’s 500 Index this month occur at the start of the trading day, the time when they enter most transactions, Bespoke Investment Group LLC said. The S&P 500’s average hourly change between the prior close and 10 a.m. is 0.45 percent, higher than the 0.18 percent that occurs in the next 60 minutes until 11 a.m., according to a Sept. 17 report sent to clients by Bespoke. The difference during the remaining one-hour segments of a session is less than 0.1 percent.
  • PBOC Researcher Says China Needs Higher Mortgage, Fixed-Term Deposit Rates. China should raise mortgage rates and allow fixed-term deposit rates to float higher to curb inflation expectations, said Ji Min, an official at the central bank’s research bureau. Mortgage rates are too low, fueling asset bubbles and increasing lending risks, Ji wrote in the latest edition of China Finance magazine in an article co-authored by Chang Li from Tsinghua University. Negative real interest rates prompted households to divert savings to wealth management products and other investments this year, leading to rapid price gains for property, gold and agricultural products, Ji and Chang said.

Wall Street Journal:
  • New Smog Proposals From EPA Draw Fire. A proposed crackdown on smog by the Environmental Protection Agency is fueling resistance from businesses groups concerned about costs, Republicans who say it'll be a drag on the economy—and some heartland Democrats engaged in tough election battles this fall. EPA Administrator Lisa Jackson has dramatically stepped up the pace and scope of regulatory activity since 2009. She has pushed sweeping rules to regulate greenhouse-gas emissions linked to climate change, challenged coal companies over their mining practices, and questioned the methods energy companies are using to drill for natural gas. Now Ms. Jackson is proposing to redefine what constitutes unsafe levels of ground-level ozone, a primary ingredient in smog.
  • China's SAIC Motor Considers Stake in GM. China's biggest auto maker is considering buying a stake in General Motors Co. when the U.S. company reverts to a publicly traded concern this fall, people familiar with the matter said.
  • Islam's Encounters With America. A survey by Elaph, the most respected electronic daily in the Arab world, saw 58% object to the building of the WTC mosque.
CNBC:
  • Poll: Extend Bush Tax Cuts, Say Americans Worried About Economy. Ninety percent of Americans are concerned about the economy, according to a new CNBC poll, and two-thirds of those surveryed think neither Democrats nor Republicans have a clear vision for improving it. The poll by Public Opinion Strategies/Hart Research was conducted between September 9 and 12. A majority of the respondents believe the Bush tax cuts should be extended, even for people making more than $250,000 a year. Fifty-five percent think increasing taxes on any Americans will slow the economy and kill jobs.
MarketWatch:
Business Insider:
Zero Hedge:
LA Times:
The Boston Globe:
  • Boston Area School Segregation Called Rife. Public schools in the Boston and Springfield metropolitan areas are among the most segregated in the country, often isolating black and Latino students in low-performing schools, according to a report released today by Northeastern University.
Engadget:
Gallup:
Rasmussen Reports:
Politico:
Reuters:
  • EU, IMF Assure Investors On Greek Aid: Source. Greece's international lenders assured investors this week that they would not abandon Athens at the end of a 3-year bailout plan if it fulfilled tough reforms but failed to regain market trust, a source told Reuters on Sunday.
  • U.S. Commercial Property Prices Down 3.1% - Index. U.S. commercial property prices fell 3.1 percent in July as a weak economy and fears of deflation drove the index measuring prices down to more than 43 percent below its peak, according to the Moody's/REAL All Property Type Aggregate Index released on Monday.
Telegraph:
  • Long-Term Increase in US Unemployment 'Possible', Warns OECD. Millions of Americans risk falling out of the job market forever, the Organisation for Economic Co-operation and Development (OECD) has warned, as it cautioned a full recovery from recession will take years. The recession has left the US with a long-term unemployment rate – a measure of those without work for more than six months – of 4.5pc, almost double that of the 1980s and 1990s downturns. "Previous US recessions have exhibited no long-term damage to the economy or long-term increase in unemployment, but it is possible this recession will trigger these effects," the OECD said in its first survey of the world's biggest economy since late 2008.
  • Austerity Plan Helps UK Retain Top AAA Rating. Moody's retained its top AAA rating on the Britain saying the country can withstand economic challenges, giving the Coalition's austerity plans a boost and lifting shares.
0 comments

Bear Radar

Posted by Gary .....at 2:10 PM

Style Underperformer:
  • Large-Cap Growth (+.91%)
Sector Underperformers:
  • 1) Papers -1.43% 2) Semis +.04% 3) Road & Rail +.33%
Stocks Falling on Unusual Volume:
  • COGT, IMO, IP, RKT, PKG, JOBS, LOGM, RIMM, ENOC, RINO, ENSG, BRCM, RBCN, CREE, PKG and TIN
Stocks With Unusual Put Option Activity:
  • 1) PWER 2) HOG 3) MRVL 4) IP 5) SUN
Stocks With Most Negative News Mentions:
  • 1) WYNN 2) LEN 3) AA 4) BX 5) WWE
0 comments

Bull Radar

Posted by Gary .....at 11:10 AM

Style Outperformer:
  • Small-Cap Growth (+1.98%)
Sector Outperformers:
  • 1) Homebuilders +2.59% 2) Education +2.46% 3) Hospitals +2.02%
Stocks Rising on Unusual Volume:
  • TZOO, PCLN, TXT, MBT, AIXG, TOT, MMR, ID, INET, NZ, VCLK, MMR and TDC
Stocks With Unusual Call Option Activity:
  • 1) TLAB 2) MJN 3) ID 4) CHTP 5) RAX
Stocks With Most Positive News Mentions:
  • 1) VZ 2) GOOG 3) AAPL 4) IBM 5) BA
0 comments

Sunday, September 19, 2010

Monday Watch

Posted by Gary .....at 11:46 PM

Weekend Headlines
Bloomberg:
  • Fed Will Retain Policy on Assets, Low-Rate Pledge, Survey Shows. The Federal Reserve next week is likely to affirm its pledge to keep interest rates low for an “extended period” and maintain the floor on its holdings of securities, say economists surveyed by Bloomberg News. The Fed’s Open Market Committee at its Sept. 21 meeting will hold off from expanding the balance sheet by purchasing securities, according to 60 of 64 analysts surveyed Sept. 16-17. Fifty-four of 63 economists said the Fed will leave unchanged a sentence saying high unemployment and low inflation warrant “exceptionally low” rates for an “extended period.” The survey indicates that even with the economy slowing for two quarters and unemployment persisting at 9.5 percent or higher for the past year, Fed Chairman Ben S. Bernanke may need more time to decide if additional stimulus is needed to support a rebound in growth. A few respondents said the Fed may say next week it’s prepared to take action as needed.
  • German Banks Need $60 Billion in Capital to Meet Basel Rules, Spiegel Says. Germany’s 10 biggest banks need about 50 billion euros ($60.3 billion) in additional capital to meet the Basel Committee’s stricter capital rules, Der Spiegel reported, citing a confidential Bundesbank study. Banks examined in the German central bank’s study include Deutsche Bank AG, Commerzbank AG and state banks such as WestLB AG, Landesbank Baden-Wuerttemberg and Bayerische Landesbank, the weekly magazine reported in an advance copy of an article for its Sept. 20 edition. The study concluded that, based on historical data, the banks could come up with “somewhat more than 40 billion euros” through 2019 by retaining profit and raising capital, Der Spiegel said. The gap would have to be financed from other sources, placing particular strain on the Landesbank state banks, the magazine said.
  • Oil Trades Near Lowest in Almost Three Weeks on Economic Recovery Concerns. Oil traded near its lowest in almost three weeks after falling amid speculation the U.S. economic recovery is slowing, reducing fuel use in the world’s biggest crude consumer. U.S. gasoline consumption in August averaged 9.23 million barrels a day, down from 9.3 million in August 2009, the American Petroleum Institute said. The October contract traded at $73.55 a barrel, down 11 cents, in electronic trading on the New York Mercantile Exchange at 9:53 a.m. Sydney time.
  • Gillard's Dollar Peaking as Tax Proves Aussie 27% Overvalued. Australia’s dollar, this quarter’s best performing major currency, is now the most overvalued. Purchasing power parity, a measure of the cost of goods relative to other countries, shows the so-called Aussie is 27 percent too expensive, according to data compiled by Bloomberg. The median estimate of strategists and economists is for it to weaken 6 percent by year-end, the fourth-worst performance of 31 currencies tracked by Bloomberg. While Australia’s dollar has soared 11.4 percent since June, benefitting from its ties to China’s economy, traders speculate new Prime Minister Julia Gillard’s planned tax on mining companies will damp demand for the nation’s assets at the same time global economic growth decelerates. “If I were to pick a currency to have my money in for the next month, it would be Australia’s, but after a month I’d pick something else, like the U.S.,” said John Taylor, who oversees about $9 billion as chairman of FX Concepts LLC in New York.
  • NYSE, Nasdaq Plan to End Market Maker Stub Quotes Blamed in May 6 Crash. NYSE Euronext, Nasdaq OMX Group Inc. and Bats Global Markets sought permission from regulators yesterday to eliminate stub quotes, or bids and offers as low as pennies or as high as thousands of dollars provided by market makers that were blamed for worsening the May 6 crash.
  • Escaping Double Dip to Growth Recession Means No Job Relief. Federal Reserve Chairman Ben S. Bernanke pulled out all the stops to avert a depression last year. Now he and his colleagues must decide how to respond to the risk of a growth recession in 2011. The possibility of a sub-par expansion poses a dilemma for the central bank’s policy-making Federal Open Market Committee when it meets tomorrow. While the economy isn’t so weak that it’s clearly in need of more monetary stimulus, it may not be strong enough to keep unemployment from increasing.
  • UBS's Asia Hedge Fund Clients Raise Short Bets 30% on Mixed Economic Signs. UBS AG’s hedge fund clients in Asia have increased short bets on stocks three times as fast as their long holdings this year amid conflicting views about the global economic recovery. Outstanding stock shorts of local and global hedge funds trading in Asia have grown by 30 percent in 2010 and their long holdings have expanded by about 10 percent, said Lynden Howie, the largest Swiss bank’s head of equity finance in the region.
Wall Street Journal:
  • GOP Aims to Erode White House Agenda. Preparing for a Potential Congressional Majority, Republican Leaders Say Repeal of Health-Care Law Tops Their Priorities. Eyeing a potential Congressional win in November, House Republicans are planning to chip away at the White House's legislative agenda—in particular the health-care law—by depriving the programs of cash. The emerging plan has been devised in part to highlight the policy differences between the two main parties, especially over legislative achievements of the Obama administration that have proven unpopular with voters.
  • New Fed Rules Are Being Questioned. J.P. Morgan Chase & Co.(JPM) Chief Executive James Dimon, already frustrated with some aspects in the Dodd-Frank law, is questioning whether the Federal Reserve Bank of New York's implementation of a provision will allow him to perform his duties on the Fed board. The issue came to a head Thursday, when Mr. Dimon raised the issue at a New York Fed board meeting, said people with knowledge of the meeting. Mr. Dimon and other bank representatives on the board could end up resigning, though the issue remains unresolved, these people said.
  • The Slow Death of Fund of Funds. The fund of hedge funds industry is facing a slow death as investors bypass their services in favour of investing directly in hedge funds. Investors have turned their backs on funds of funds and their extra layer of fees. John Casey, co-founder of management consultant Casey Quirk and an adviser to the asset management industry for more than four decades, said: "It is the end of an era for fund of funds managers." Funds of hedge funds' assets under management have fallen by almost a third since 2007, while direct investment in hedge funds has grown 1%.
  • Shaping Ads for Web-Connected TV. Technology companies racing to deliver video to the living room over the Web are exploring the idea of offering ads on their services, seeking to capture some of the billions of ad dollars that flow to television.
  • Bond Markets Get Riskier. Demand for High-Yield Junk Bonds Boosts Prices; Investor Protections Decline. Last week, prices on high-yield, or junk, bonds hit their highest level since 2007, nearly double their lows of the credit crisis. Nine months into the year, companies have sold $172 billion in junk bonds, already an annual record, according to data provider Dealogic. To some extent, the bull case for junk bonds is based on a declining rate of corporate defaults lately and a belief that, as long as the economy doesn't relapse into recession, default rates will continue to decline.
  • Republicans Gain Ground Among Independents by Douglas E. Schoen and Heather R. Higgins. A new comprehensive national survey shows that independent voters—who voted for Barack Obama by a 52%-to-44% margin in the 2008 presidential election—are now moving strongly in the direction of the Republican Party. The survey, conducted by Douglas E. Schoen LLC on behalf of Independent Women's Voice in late August, raises the possibility of a fundamental realignment of independent voters and the dominance of a more conservative electorate. Today, independents say they lean more toward the Republican Party than the Democratic Party, 50% to 25%, and that the Republican Party is closer to their views by 52% to 30%.
CNBC:
IBD:
NY Times:
CNNMoney:
Business Insider:
Zero Hedge:
EETimes:
  • Regulations Rise As Venture Capitalists Exit Health Care. Medical electronics companies face increasing hurdles getting funding and regulatory approval to bring new technologies to market, according to executives at a medical device event here. "We're in a bit of a perfect storm right now with some of the worst things I've seen in 30 years," said Eamonn Hobbs, chief executive of DelCath Systems and chairman of the Medical Device Manufacturers Association (MDMA), host of the event. As many as three-quarters of venture capitalists are exiting the health care field as the total pool of venture capital decreases and regulatory hurdles increase, said Kevin Wasserstein, managing director of Versant Ventures (Menlo Park, Calif.) which focuses on health care."Even entrepreneurs have started to retreat from pursing big ideas [in health care], and we risk as an industry evolving to incrementalism and safer projects," said Wasserstein.
PIMCO:
Washington Post:
  • As Midterms Approach, Democrats Are Reaching Out to Black Voters. One thing is for sure this election year for many Democrats: They are not making it about President Obama. The man who was so popular two years ago is not in their stump speeches and certainly not in their ads. If he shows up in town, they happen to have a prior commitment. Some even boast of opposing him. But there is one group for whom Democrats want to make it all about Obama: African Americans. In the past week, party leaders launched a drive to stoke enthusiasm among black voters, dusting off the president's 2008 campaign logo, lingo and grass-roots strategy to get them to the polls in November. The party has backed a $2 million ad buy targeted at urban newspapers and radio stations with a simple message: "Stand With President Obama. Vote November 2."
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 28% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-four percent (44%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -16 (see trends).
Politico:
  • Colin Powell Critical of President Obama. Former Secretary of State Colin Powell, who endorsed Democrat Barack Obama for president in 2008 despite serving three Republican presidents, said Sunday that Obama needs to change his approach in the White House because voters are feeling overwhelmed by sweeping new laws that expand the scope of government. “The president also has to ... shift the way in which he has been doing things,” Powell said on NBC’s “Meet the Press.” “The American people feel that too many programs have come down. There are so many rocks in our knapsack now that we’re having trouble carrying it.”
AP:
  • Twin Baghdad Car Bombs Kill 31, Wound Dozens. Two car bombs exploded in Baghdad Sunday morning, killing at least 31 people, breaking what has been a period of relative calm since the end of the Muslim holy month of Ramadan. The biggest blasts in the Iraqi capital in a month occurred as commuters were starting their work week, underlining the challenges facing Iraqi security officials in stabilizing Baghdad as the U.S. forces end combat operations and Iraq's police and military assume responsibility for protecting the capital.
Financial Times:
  • ECB Intervenes in Irish Bond Markets. The European Central Bank intervened to stabilise the Irish bond markets on Friday after a report by a leading UK bank triggered investor fears that the country might turn to the international community for a multibillion-euro bail-out. The renewed bout of jitters sparked a half a percentage point jump in two-year Irish bond yields and pushed 10-year yields and the cost of insuring the country’s debt against default to record highs. Although investors said Dublin would only need financial help in the event of more unexpected banking losses and a deterioration of its economy, the Irish sell-off highlighted the continued fragility of eurozone bond markets. Traders said the intervention by the ECB was small – in the tens of millions of euros but the report by Barclays Capital still prompted the International Monetary Fund to state it did not envision that Ireland would need financial assistance. The Irish government will test investor sentiment on Tuesday with an auction of four-year and eight-year bonds that bankers warn could see the country having to pay high yields to attract demand. Domenico Crapanzano, head of euro rates trading at Jefferies, said: “There are just no buyers out there for Ireland because of worries over its banks and economy. Ireland and also Portugal are very much the worry for investors.” Irish two-year bond yields rose half a percentage point to 3.54 per cent, while 10-year bond yields jumped to 6.17 per cent a record high since the launch of the eurozone in January 1999.
  • EU Hedge Fund Plans Under Fire. New proposals to regulate hedge funds and private equity funds in Europe could be a “catastrophe” for the venture capital sector, industry figures warn. The concerns stem from a move by Belgian diplomats to break the deadlock that has surrounded the proposals since summer. Belgium holds the rotating EU presidency and is spearheading compromise talks between member states and the European Parliament, both of which must approve the rules, which would regulate hedge funds and private equity funds on a pan-European basis for the first time. As part of this process, it is being suggested that managers of funds under €500m ($652m, £417m), which are not seen to pose a systemic threat to financial markets, should be exempted from the rules. But, paradoxically, the European Private Equity and Venture Capital Association is strongly opposed to an exemption based on size alone, saying it would cut across the sector’s ability to raise funds internationally. “Small funds invest in local innovative businesses but must raise money worldwide from institutional investors who will demand compliance with the EU directive,” says Uli Fricke, EVCA chair. She argues that, as a result, a blanket exemption would either force venture funds to voluntarily opt into the burden of full compliance with new directive or cut their scope for international capital raising.
  • Greek Bank Stress Tests Delayed. The international community has postponed bank stress tests for Greece to give the country breathing space as Athens prepares to test the success of its European roadshow last week by raising more money in the capital markets. The so-called “troika” – the International Monetary Fund, European Commission and European Central Bank – has agreed with Greece’s central bank to delay testing the solvency of the country’s struggling bank sector by one month to the end of October. The delay means that the banks’ nine-month results could be assessed, as well as the outcome of a €1.7bn capital raising by National Bank of Greece, the country’s largest lender, which is due to be completed next month. A short-term auction of three-month bills on Tuesday will test whether the Greeks and troika officials have made any headway in convincing overseas investors that they should buy the country’s debt. One investor said of the meeting in London on Wednesday last week: “The IMF official was particularly impressive and convincing, although there are still big question marks over whether Athens can avoid defaulting on their bonds.”
Telegraph:
  • New Fears Over UK Bank Break-Ups. The Government inquiry into UK banks is to go much further than the issue of splitting the banks apart and look at the lack of competition in the retail sector.
Expresso:
  • Portugal's government plans to provide an outline of the 2011 budget proposal earlier than normal to reassure investors of its commitment to meet deficit targets. The outline may be issued as early as this week. The government normally announces budget proposals in October.
Irish Times:
  • Irish Bank Bailout May Cost EU 40 Billion, Ex-NTMA Head Says. Michael Somers, former chief executive officer of Ireland's National Treasury Management Agency, said the cost of bailing out the country's banks could reach 40 billion euros ($52 billion). "We have an immediate problem that we have got to get out of," Somers is quoted as saying. The Irish government so far has injected almost 33 billion euros into banks and building societies, with two-thirds of that going to Anglo Irish Bank Corp.
Business Line:
The Standard:
  • China banks' capital-adequacy ratios may need to exceed requirements set by the Basel committee for them to control risks better, Guo Shuqing, chairman of the China Construction Bank Corp, said.
Weekend Recommendations
Barron's:
  • Made positive comments on (AMTD), (ITT) and (LOV).
  • Made negative comments on (OPEN) and (LOGM).
Night Trading
  • Asian indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 125.0 +2.0 basis points.
  • Asia Pacific Sovereign CDS Index 110.50 -2.75 basis points.
  • S&P 500 futures +.05%.
  • NASDAQ 100 futures +.05%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (DFS)/.38
Economic Releases
10:00 am EST
  • The NAHB Housing Market Index for September is estimated to rise to 14 versus a reading of 13 in August.
Upcoming Splits
  • (SXCI) 2-for-1
Other Potential Market Movers
  • The UBS Life Sciences Conference and (CBST) Investor Day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate 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 75% net long heading into the week.
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Weekly Outlook

Posted by Gary .....at 4:33 PM
U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on technical selling, profit-taking, rising sovereign debt angst, mounting US housing concerns and China bubble worries. My intermediate-term trading indicators are giving mixed signals and the Portfolio is 75% net long heading into the week.
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