Monday Watch

Weekend Headlines
Bloomberg:

• Fed Risks Its Credibility on a Bowlful of Mush: Caroline Baum. It’s all over but the voting. After all the speeches and the posturing, after the trial balloons and the press leaks, the Federal Reserve probably will announce another round of quantitative easing at the conclusion of its two-day meeting Wednesday. The Fed embarks on this program with the intention of lowering yields on long-term Treasuries, which in turn will bring down mortgage rates and corporate bond yields. Surely there must be two or three households holding back on a home purchase because the 30-year mortgage rate at 4.2 percent is too onerous.
• Food Inflation Rising as Cooking Oil Poised to Catch Gain Gains. Cooking oils, left behind in this year’s surge in agriculture prices, are poised to catch up with grains as record demand cuts stockpiles by the most in 17 years. Inventories of soybean oil and palm oil, used by Nestle SA and Unilever and in everything from Hellmann’s mayonnaise to Snickers candy bars, will drop 12 percent in the coming year as China and India increase consumption 11 percent, U.S. Department of Agriculture data show. Food prices climbed in September to the highest level since the crisis in 2008 that sparked riots from Haiti to Egypt, the United Nations says.
• Hedge Funds Increase Bullish Bets on Oil to Six-Month High. Hedge funds raised bullish bets on oil to the highest level in more than six months as supplies of gasoline fell, French refinery strikes ended and plants in the U.S. and Europe returned to service. The funds and other large speculators increased wagers on rising crude prices by 9.3 percent in the seven days ended Oct. 26, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. It was the highest level since April 16.
• U.S. Nuclear-Bomb Detector Ignored by Truckers Leaves Shipping Vulnerable. Two years after South Korea’s busiest port installed a $3.5 million scanner to check U.S.- bound shipping containers for nuclear weapons, the machine sits idle because truckers won’t drive through it due to fears of radiation exposure. That means about 1.9 million containers left Busan for American harbors last year without U.S.-mandated screening. Singapore and Hong Kong, the world’s busiest and third-busiest ports, also don’t participate. Nine years after the Sept. 11 attacks, less than 1 percent of the 14.5 million cargo boxes reaching U.S. shores are scanned abroad, the government said.
• Marijuana Legalization Proposal in California Opposed by 49%, Poll Finds. A California ballot measure to legalize marijuana for recreational use has lost popularity in the past month, according to the final statewide survey by the Field Poll before the Nov. 2 election. Support for Proposition 19 has fallen to 42 percent of likely voters, with 49 percent against, according to the results of a Field Poll released today. Last month, those in favor outnumbered opponents 49 percent to 42 percent, the poll said. The measure would allow people 21 years of age and older to grow and possess marijuana in small quantities for personal use, and would allow local governments to tax marijuana businesses.

Wall Street Journal:

• GOP Set for Big Gains as Voters Voice Anger. Republicans are positioned for large gains Tuesday, likely retaking the House and picking up seats in the Senate, amid strong voter frustration with President Barack Obama and the Democratic-run Congress, according to a new Wall Street Journal/NBC News poll. Republicans held a six-point edge, 49% to 43%, when likely voters were asked which party they hoped would be in charge. Nearly half of voters who favored GOP control of Congress said their feelings reflected a vote of protest against the Democrats—an unusually high proportion that pollsters said reflected deep frustration among many voters. Mr. Obama ended a pre-election campaign swing Sunday in Cleveland with a call for Democrats to vote Tuesday. But the poll results suggest he is turning off many swing voters—the same voters who are expected to decide close races. A majority of likely voters in the survey, 52%, disapproved of Mr. Obama's job performance, while one-third of independents approved.
• Packages May Have Been Sent by Militants Linked to Schools; Arrests Made. U.S. authorities believe two packages laden with explosives that were found in cargo shipments from Yemen may have been shipped by suspected militants linked to language schools there, officials say. Yemeni officials said late Saturday that security forces had arrested two people connected to a probe into who sent the two explosive-laden packages to the U.S. President Ali Abdullah Saleh said earlier during a news conference Saturday that security forces had surrounded the house of one suspect in the probe. It wasn't clear where security forces took the two suspects, a female university engineering student and her mother, according to the family's attorney. The student, Hanan Al-Samawi, was a fifth-year student at Sana'a University.
• Apple(AAPL) Sues Motorola Over Smartphone Patents. Apple Inc. sued Motorola Inc., alleging that the company's smartphone lineup and the operating software it uses infringe on the iPhone-maker's intellectual property.
• Who's Afraid of Marco Rubio? Democrats are scared enough of the charismatic Republican Senate hopeful that some were willing to sacrifice their own candidate to help a stronger challenger in the race. He appealed as a different sort of Republican. He kept his pitch upbeat, shunned personal attacks, worked hard to widen support without apologizing for his conservatism, and more noticeably than anyone in this race ran on an unabashed and constantly invoked faith in American exceptionalism. Bill Clinton sure noticed his success, and recently the former president threw a Hail Mary to stop him by nudging Kendrick Meek—the Democratic nominee who won a contested primary—to leave the race.

CNBC:

• Dispute Between China and Japan Overshadows Summit. Hillary Clinton’s meeting with 16 heads of state at the east Asia Summit in Vietnam on Saturday was supposed to be a powerful signal of the renewed engagement of the US with the region.
• China Orders Banks to Charge Higher Mortgage Interest. Beijing has taken a fresh step to discourage property buying by ordering banks to charge higher mortgage interest rates for first home buyers, local media reported over the weekend. Lenders were told by China's banking regulator that they can offer at most 15 percent, versus the previous 30 percent, discount to the benchmark interest rates to new mortgage loan applicants, the Beijing News reported.

NY Times:

• U.S. Hunts for More Suspicious Packages. Officials searched for suspicious packages in the United States and other countries after two shipments containing explosives, sent from Yemen and addressed to synagogues in Chicago, were intercepted in Britain and Dubai.
• U.S. Says Genes Should Not be Eligible for Patents. Reversing a longstanding policy, the federal government said on Friday that human and other genes should not be eligible for patents because they are part of nature. The new position could have a huge impact on medicine and on the biotechnology industry. Opponents say that genes are products of nature, not inventions, and should be the common heritage of mankind. They say that locking up basic genetic information in patents actually impedes medical progress. Proponents say genes isolated from the body are chemicals that are different from those found in the body and therefore are eligible for patents. The Patent and Trademark Office has sided with the proponents and has issued thousands of patents on genes of various organisms, including on an estimated 20 percent of human genes. But in its brief, the government said it now believed that the mere isolation of a gene, without further alteration or manipulation, does not change its nature.
• China's Fast Rise Leads Neighbors to Join Forces. China’s military expansion and assertive trade policies have set off jitters across Asia, prompting many of its neighbors to rekindle old alliances and cultivate new ones to better defend their interests against the rising superpower. A whirl of deal-making and diplomacy, from Tokyo to New Delhi, is giving the United States an opportunity to reassert itself in a region where its eclipse by China has been viewed as inevitable.

Business Insider:

• Why Stocks Can Continue To Rally Even If QE2 Is A Huge Letdown.
• The Shipping Glut is So Bad Globally That Ships Are Now Sailing Slower Than 19th Century Clippers Just to Keep Busy.
• M2 Velocity Suggests A Stronger Q4 GDP. (graph)
  

Zero Hedge:

• Is The Fed TRYING to Force a Surge in Commodity Prices and Input Costs? Diapason Explains Why Hyperinflation is Blackhawk Ben's End Goal.

Washington Post:

• White House Considering 'Decoupling' Top-Tier Tax Cut. With Republicans poised to gain ground in Tuesday's elections, the White House is losing hope that Congress will approve its plan to raise taxes on the nation's wealthiest families and is increasingly focusing on a new strategy that would preserve tax breaks for both the wealthy and the middle class. According to people familiar with talks at the White House and among senior Democrats on Capitol Hill, breaking apart the Bush administration tax cuts is now being discussed as a more realistic goal. That strategy calls for permanent extension of cuts that benefit families earning less than $250,000 a year, and temporary extension of cuts on income above that amount. The move would "decouple" the two sets of provisions, Democrats said, and focus the debate when tax cuts for the rich expired next year or the year after. Republicans would be forced to defend carve-outs for a tiny minority populated by millionaires, an unpopular position that would be difficult to advance without the cover of a broad-based tax cut for everyone, aides in both parties said.
• Investigators Link Package Explosives to Al-Qaeda Bomb-Maker in Yemen. Investigators examining explosives found in packages intercepted in Britain and Dubai suspect the material, preliminarily identified as PETN, points not only to the role of an al-Qaeda affiliate in Yemen but to a sophisticated bomb-maker who last year sent his brother to his death in an effort to kill a Saudi prince. Ibrahim Hassan al-Asiri, a 28-year-old Saudi national who is on that country's most-wanted list, secreted a PETN-based bomb in a body cavity of his younger brother, Abdullah, who pretended to be turning himself in. The bomb killed his brother and wounded Mohammed bin Nayef, a top counterterrorism official and Saudi royal. Asiri, who is based in Yemen, is also believed to have built the underwear bomb that a Nigerian man trained in Yemen attempted to detonate last Christmas Day on a commercial aircraft approaching Detroit.

LA Times:

• Gulf Seafood Safe to Eat, FDA Says.

iStockAnalyst:

• QE2 Sends Interest Rates Up. Yes, Up!

BigGovernment:

• Jerry Brown On His First Gubernatorial Campaign: "It's All a Lie...I Didn't Have a Plan for California' (video)

Real Clear Politics:

• Obama's Economists Missed What Voters Plainly Saw.

Reuters:

• Angola Wants Higher Output Quota From OPEC. Angola wants OPEC to raise the country's oil output quota as the southwest African country depends on its natural resources for "social economic recovery", Oil Minister Jose Botelho de Vasconcelos said on Sunday. Asked if the country was producing well above the OPEC quota, he said: "We are very close to it," adding his country was cutting its output to comply with its OPEC quota.
• Ahmadinejad Aide Says Iran Not Ready to Talk Nuclear. Iran will not discuss its nuclear programme at talks with global powers, an adviser to President Mahmoud Ahmadinejad said on Sunday, adding fresh doubt to the chances of a negotiated end to its stand-off with the West.

Financial Times:

• European Central Bank President Jean-Claude Trichet warned that a future rescue mechanism for indepted countries, designed to shift responsibility to investors from taxpayers, could inadvertently push up their borrowing costs, citing European Union officials.

Telegraph:

• Angela Merkel Consigned Ireland, Portugal and Spain to Their Fate. Germany has had enough. Any eurozone state that spends its way into a debt crisis or cannot adapt to a monetary union set for Northern rhythms will face “orderly” bankruptcy.

Sunday Times:

• BHP Billiton may increase its $39 billion bid for Potash Corp.(POT) by 10%. The revised offer won't be made until after a Nov. 8 court case about Potash Corp.'s use of a so-called poison-pill defense against the attempted takeover.

Sunday Business Post:

• The Irish government may cut 4 billion euros from next year's budget to reduce its deficit. The budget, set to be announced in December, will include more than 1 billion euros of tax increases.

China Business News:

• China faces "unprecedented" pressure on its currency and in trade, Zhang Yansheng, a researcher affiliated with the National Development and Reform Commission, wrote. The pressure on China comes as the external environment will worsen in 2011 because of weakening economies in developed nations and as trade disputes intensify.

Economic Information Daily:

• China may raise the resource tax paid by coal producers from 3% to 5% of sales, from 1% currently, citing a person familiar with the matter.

21st Century Business Herald:

• China may require banks to raise interest rates for second home loans to the maximum floating rate. The maximum floating rate is 1.7 times the benchmark rate.

Shanghai Securities News:

• Inflation in China may be as high as 4% in October, citing Liu Yuhui, a researcher at the Chinese Academy of Social Sciences. Inflation may quicken to between 4% and 5% during much of the first half of 2011 on "new price gain factors," Liu said.

Weekend Recommendations
Barron's:

• Made positive comments on (RSH), (QCOM), (FCX) and (WHR).
• Made negative comments on (CMG) and (SKX).

Citigroup:

• Removed .
• Reiterated Buy on (IM), boosted target to $25.
• Reiterated Buy on (CLF), target $87.
  

Night Trading

• Asian indices are unch. to +1.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 107.0 +3.0 basis points.
• Asia Pacific Sovereign CDS Index 100.25 +3.25 basis points.
• S&P 500 futures +.72%.
• NASDAQ 100 futures +.62%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SPG)/.90
• (GLW)/.53
• (CNA)/-.69
• (L)/-.01
• (ICE)/1.36
• (AGN)/.78
• (BHI)/.46
• (PTV)/.56
• (ACV)/.39
• (HUM)/1.67
• (FST)/.45
• (VMC)/.17
• (PPS)/.31
• (WMS)/.36
• (APC)/.31

Economic Releases
8:30 am EST

• Personal Income for September is estimated to rise +.2% versus a +.5% gain in August.
• Personal Spending for September is estimated to rise +.4% versus a +.4% gain in August.
• The PCE Core for September is estimated to rise +.1% versus a +.1% gain in August.
  

10:00 am EST

• ISM Manufacturing for October is estimated to fall to 54.0 versus a reading of 54.4 in September.
• The ISM Prices Paid for October is estimated to rise to 70.0 versus a reading of 70.5 in September.
• Construction Spending for September is estimated to fall -.5% versus a +.4% gain in August.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The (KCG) analyst/investor meeting could also impact trading today.
  

BOTTOM LINE: Asian indices are higher, boosted by technology and financial shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 100% net long heading into the week.

Weekly Outlook

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 mixed as investment manager performance angst, short-covering, less financial sector pessimism, mostly positive earnings reports, diminishing economic fear, seasonal strength and buyout speculation offsets a "sell the good news" reaction to the US election and the Fed's QE2 announcement. My intermediate-term trading indicators are giving mostly bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,183.26 +.01%*



The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,183.26 +.01%
  
• DJIA 11,118.49 -.13%
  
• NASDAQ 2,507.31 +1.13%
  
• Russell 2000 703.35 -.01%
  
• Wilshire 5000 12,263.83 +.13%
  
• Russell 1000 Growth 540.07 +.33%
  
• Russell 1000 Value 598.20 -.04%
  
• Morgan Stanley Consumer 723.15 -.46%
  
• Morgan Stanley Cyclical 927.42 -.44%
• Morgan Stanley Technology 627.61 +1.55%
  
• Transports 4,754.29 -.01%
  
• Utilities 404.86 -.48%
  
• MSCI Emerging Markets 46.01 +.04%
  
• Lyxor L/S Equity Long Bias Index 1,000.13 +.83%
  
• Lyxor L/S Equity Variable Bias Index 856.72 +.18%
  
• Lyxor L/S Equity Short Bias Index 781.45 -1.46%
  

Sentiment/Internals

• NYSE Cumulative A/D Line +104,681 +.04%
  
• Bloomberg New Highs-Lows Index +282 -147
  
• Bloomberg Crude Oil % Bulls 12.0 -29.41%
  
• CFTC Oil Net Speculative Position +125,271 +24.24%
  
• CFTC Oil Total Open Interest 1,394,673 -1.98%
  
• Total Put/Call .87 +1.16%
  
• OEX Put/Call .74 -31.48%
  
• ISE Sentiment 147.0 +12.21%
  
• NYSE Arms 1.19 +19.0%
  
• Volatility(VIX) 21.20 +12.88%
  
• G7 Currency Volatility (VXY) 12.89 +2.87%
  
• Smart Money Flow Index 9,446.0 -.31%
  
• Money Mkt Mutual Fund Assets $2.807 Trillion +.9%
  
• AAII % Bulls 51.23 +3.24%
  
• AAII % Bears 21.60 -14.25%
  

Futures Spot Prices

• CRB Index 300.67 +1.16%
  
• Crude Oil 81.41 -.64%
  
• Reformulated Gasoline 206.02 +.09%
  
• Natural Gas 4.07 +9.85%
  
• Heating Oil 223.88 -1.66%
  
• Gold 1,359.80 +2.29%
  
• Bloomberg Base Metals 233.32 -1.70%
  
• Copper 374.70 -1.89%
  
• US No. 1 Heavy Melt Scrap Steel 328.67 USD/Ton unch.
  
• China Hot Rolled Domestic Steel Sheet 4,264 Yuan/Ton -.58%
• S&P GSCI Agriculture 458.98 +4.17%
  

Economy

• ECRI Weekly Leading Economic Index 123.10 +.90%
  
• Citi US Economic Surprise Index +1.70 +6.4 points
  
• Fed Fund Futures imply 72.1% chance of no change, 27.9% chance of 25 basis point cut on 11/3
• US Dollar Index 77.03 -.43%
  
• Yield Curve 226.0 +5 basis points
  
• 10-Year US Treasury Yield 2.60% +4 basis points
  
• Federal Reserve's Balance Sheet $2.278 Trillion -.43%
  
• U.S. Sovereign Debt Credit Default Swap 40.45 -1.45%
• Illinois Municipal Credit Default Swap 271.0 -4.99%
  
• Western Europe Sovereign Debt Credit Default Swap Index 148.0 +6.54%
  
• 10-Year TIPS Spread 2.15% +3 basis points
  
• TED Spread 18.0 +1 basis point
  
• N. America Investment Grade Credit Default Swap Index 94.02 -2.83%
  
• Euro Financial Sector Credit Default Swap Index 93.80 -2.63%
  
• Emerging Markets Credit Default Swap Index 204.54 -2.33%
  
• CMBS Super Senior AAA 10-Year Treasury Spread 245.0 +7 basis points
  
• M1 Money Supply $1.764 Trillion -.50%
• Business Loans 601.0 +.02%
  
• 4-Week Moving Average of Jobless Claims 453,300 -1.2%
  
• Continuing Claims Unemployment Rate 3.5% unch.
  
• Average 30-Year Mortgage Rate 4.23% +2 basis points
  
• Weekly Mortgage Applications 828.90 +3.17%
  
• ABC Consumer Confidence -47 -1 point
  
• Weekly Retail Sales +2.70% +10 basis points
  
• Nationwide Gas $2.81/gallon -.02/gallon
  
• U.S. Cooling Demand Next 7 Days 9.0% below normal
• Baltic Dry Index 2,707 -.48%
  
• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 37.50 +25.0%
  
• Rail Freight Carloads 235,606 -.66%
  
• Iraqi 2028 Government Bonds 93.18 +2.27%
  

Best Performing Style

• Mid-Cap Growth +1.16%

Worst Performing Style

• Small-Cap Value -.45%

Leading Sectors

• Gaming +6.25%
• Semis +4.06%
• Gold +3.96%
• Airlines +3.78%
• Software +2.81%

Lagging Sectors

• Medical Equipment -1.14%
• REITs -1.79%
• Insurance -2.05%
  
• Computer Hardware -2.30%
• HMOs -2.86%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Higher into Final Hour on Tax Policy/Election Optimism, Earnings Strength, Short-Covering, Buyout Speculation

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Rising
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 21.12 +1.15%
  
• ISE Sentiment Index 157.0 +22.66%
  
• Total Put/Call .87 unch.
  
• NYSE Arms 1.30 +18.41%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 94.02 bps +.03%
  
• European Financial Sector CDS Index 93.66 bps +.64%
  
• Western Europe Sovereign Debt CDS Index 148.0 bps +1.95%
  
• Emerging Market CDS Index 204.02 bps +.76%
  
• 2-Year Swap Spread 16.0 +1 bp
  
• TED Spread 18.0 +2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .11% -1 bp
  
• Yield Curve 227.0 -2 bps
  
• China Import Iron Ore Spot $149.10/Metric Tonne -.33%
  
• Citi US Economic Surprise Index +1.70 +2.2 points
  
• 10-Year TIPS Spread 2.16% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating -27 open in Japan
• DAX Futures: Indicating +18 open in Germany

Portfolio:

• Higher: On gains in my Tech and Ag long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher, at session highs, despite recent equity gains, rising terrorism fears and eurozone sovereign debt worries. On the positive side, Road & Rail, Education, Gaming, Wireless, Computer Service, Disk Drives, Semi and Computer Hardware shares are especially strong, rising 1.0%+. Small-caps and cyclicals are outperforming. The Transportation Index continues to trade well and is poised to take out its 52-week high over the coming weeks. Lumber is rising +3.69%. The California Municipal CDS is falling -8.55% to 243 bps. On the negative side, Coal, Alternative Energy and Medical Equipment shares are under pressure, falling more than 1.0%. The Portugal sovereign cds is gaining +4.89% to 377.57 bps, the Greece sovereign cds is rising +7.34% to 817.10 bps, the China sovereign cds is gaining +7.18% to 63.47 bps and the US sovereign cds is gaining +5.82% to 40.34 bps. The broad market continues to consolidate recent gains on below average volume, which is healthy. Most negative news is still being ignored, while positives continue to be rewarded. So many investors are positioning for a "sell the news" reaction to next week's Fed meeting and US election that any expected weakness may be relatively mild and short-term in nature. I expect US stocks to trade modestly higher into the close from current levels on tax policy/election optimism, less economic fear, short-covering, buyout speculation, less financial sector pessimism and earnings optimism.

Today's Headlines

Bloomberg:

• U.S. Economy Grew 2% as Consumer Spending Rises. The U.S. economy expanded at a 2 percent annual rate in the third quarter and inflation cooled, underscoring the views of Federal Reserve policy makers who say more stimulus will be needed to spur growth. The increase in gross domestic product matched the median forecast of economists surveyed by Bloomberg News and followed a 1.7 percent second-quarter gain, Commerce Department figures showed today in Washington. Other reports showed business activity increased this month and consumer confidence weakened.
• Ireland, Greece Debt Woes Reverse Sovereign Default Swaps Rally. A bondholder showdown in Ireland, slumping Greek tax revenue and political gridlock in Portugal reversed Europe’s biggest sovereign debt rally in three months. The average price of credit-default swaps on Portugal, Italy, Ireland, Greece and Spain rose to 406.5 basis points from 363.5 last week, according to CMA. That’s the biggest weekly increase since Aug. 13. Governments of Europe’s so-called peripheral nations are struggling to lower their budget deficits even as they impose public spending cuts and increase taxes.
• Stocks May Jump 10% After Fed Quantitative Easing Announcement, Biggs Says. U.S. stocks may rise 10 percent should the Federal Reserve announce a program of asset purchases known as quantitative easing, and emerging-market shares will keep rising, according to hedge-fund manager Barton Biggs. “The conventional wisdom is the markets are going to probably sell off,” Biggs, managing partner of New York-based Traxis Partners LLC, said in an interview today with Betty Liu on Bloomberg Television’s “In the Loop.” “Investors may in fact get a “surprise” with “another 10 percent rally.” Biggs said the “most attractive plays” for investors are technology stocks and pharmaceuticals. He said oil-services companies have fallen too much.
• Whitman-Brown Governor's Race in California is Now a 'Toss-Up,' Poll Shows. The race for governor of California between Democrat Jerry Brown and Republican Meg Whitman is now rated a “toss-up” instead of “leans Democrat,” according to Rasmussen Reports.
• Brazil Says Offshore Oil Field May be Americas' Biggest Find in 34 Years. Brazil said the government’s Libra field may hold “gigantic” reserves of as much as 15 billion barrels, almost twice initial estimates, which would make it the biggest discovery in the Americas in more than three decades. Oil was found below a layer of salt at the first exploration well at the government’s field, according to an e-mail sent today by the national petroleum regulator, known as ANP. Brazil drilled to a depth of 5,410 meters (17,750 feet) at the well and may reach 6,500 meters by December, the ANP said. A deposit of 15 billion barrels would be almost twice the size of state-controlled Petroleo Brasileiro SA’s nearby Tupi field, would eclipse Brazil’s total current reserve base and also be the biggest find in the Americas since Mexico discovered Cantarell in 1976.

Wall Street Journal:

• Sinopec in Talks With BP(BP) to Develop Shale Gas in China. China Petroleum & Chemical Corp. (SNP), or Sinopec, said Friday the company is in talks with BP PLC (BP.LN) to explore and develop shale gas resource in China, adding that it plans to bid for six more shale gas blocks to step up its investment in cleaner-burning fuels in the country.
• Recovery in Building is Forecast for 2011. The nation's construction industry, virtually on life support during the economic downturn, will begin a slow recovery next year, according to a forecast set to be released Friday. Next year, the value of new projects that start construction is expected to climb to $445.5 billion, an 8% rise from this year when that figure hit a post-recession low, according to the closely watched McGraw-Hill Construction forecast.
• India's Major Crisis in Microlending. The microlending movement that was supposed to help lift millions of people in India out of poverty has in recent weeks fallen into chaos. Urged on by local government officials and politicians, thousands of borrowers have simply stopped paying lenders, even though they have the money. The government has begun ratcheting up restrictions, fearing that borrowers are being buried by usurious interest rates. In some cases, officials have even arrested lending agents for allegedly harassing borrowers.

Business Insider:

• Interview With Rep. Randy Neugebauer: The Fed Is In The Price-Control Business. Congressman Randy Neugebauer (Republican, Texas) has questioned the Fed's decision to target higher inflation and says there's no way we know it will work. "We've tried to spend and borrow our way into prosperity...now we're being told to print," he said. Neugebauer doesn't think Fed Chairman Ben Bernanke and the FOMC should be targeting higher prices for assets. "The Fed is almost in the price control business," he said, noting that's what he thought markets were supposed to do. The concern for Neugebauer is that inflation might hit commodity prices, and not wages, raising the cost things like food for consumers. He's also worried continued low interest rates are hitting seniors and pensioners who rely on the interest growth from their savings for spending. And all of this action from the Fed might have no positive impact at all, according to Neugebauer. He fears that businesses and individuals are too concerned about paying down debt and cutting costs to take on new loans and spend, no matter how cheap they are.

Zero Hedge:

• How GE(GE) Paid a total of $5 Billion in Domestic Taxes Between 2002 and 2009 on $639 Billion in Domestic Revenues.

MarketWatch.com:

• The 2010 Election: Ugly Economy, Angry Voters.

New York Post:

• Google(GOOG) Yearns to Make YouTube a TV Network. Google is pitching YouTube not only as a popular Web destination, but as a content channel to have a place in the living room alongside TV networks like ABC, CBS and NBC. As Google targets the TV set, it is also making a play for TV-sized ad buys rather than smaller online budgets.
  

New York Times:

• U.S. Solar-Power Projects Forecast to Taper Off. The boom in construction of solar-power plants in California and Arizona is unlikely to last because it depends on temporary U.S. government incentives, according to David Crane, NRG Energy's(NRG) CEO.
  

LA Times:

• Redbox Planning to Expand Onto the Web Next Year. As more consumers leave DVDs behind for digital downloads, the company that brought movie vending machines to grocery stores nationwide is following the audience. Redbox unveiled Thursday a new digital strategy that by next year will expand the number of movies offered to consumers directly in their homes -- a move the Illinois-based company hopes will set the stage for longer-term growth and soothe investors anxious about its prospects.

New York Daily News:

• Suspicious UPS Packages Across East Coast, Including One in Brooklyn, Under Investigation. Authorities are investigating a series of suspicious UPS packages across the East Coast - including a possible explosive inside a delivery truck in Brooklyn, law enforcement sources said. The discovery of an improvised device in a package in the United Kingdom triggered the massive response in the United States. Cargo planes were grounded at airports in Newark and Philadelphia and the NYPD bomb squad surrounded a UPS truck at MetroTech in downtown Brooklyn, officials said. "We're investigating what we believe is a possible explosive device on board that truck," said top NYPD spokesman Paul Browne. The Manhattan Bridge was closed and two buildings in the office complex were evacuated Friday morning.

ABC News:

• Democratic Closing Argument: Personal Attacks. Democrats Attack Over Personal Issues, Republicans Over Policy. It's not just the Aqua Buddha and David Vitter's prostitute, Democratic candidates across the country are closing out the campaign with personal attacks on Republican candidates, sometimes digging up decades-old legal problems.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 26% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-five percent (45%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -19 (see trends).

Reuters:

• Persistent Low Rates Not Helping Economy - Blackstone(BX) COO Says. A near-zero interest rate policy is not aiding a U.S. economic recovery, as it reduces income to retirees and offers little help to companies sitting on vast amounts of cash, the COO of private equity giant Blackstone Group said on Thursday. "I think that traditional economic theory which says that the lower the interest rate the more stimulation you get in the economy ... misses the point," said Tony James, chief operating officer of Blackstone, which has assets under management of over $100 billion. "When interest rates get too low for too long, you get a structural shift in the economy and lower rates can actually be counterproductive." James said low rates do not help U.S. companies sitting on record amounts of cash and that have no need to borrow money. Leveraged companies which have locked in rates are also not aided. "And I believe that American industry in general has plenty of capacity," he said. "So I don't see that lower rates are going to particularly encourage American industry to borrow and build." It also doesn't help people who depend on money market accounts and savings accounts to live on, he said, as it gives them less income to spend. "So it actually net-net doesn't have any stimulative effect, it has a counter-stimulative effect by reducing income," he said. James' views are shared in part by two top asset managers, Bill Gross, co-founder of Pacific Investment Management Co, and Jeremy Grantham, chief investment strategist at Grantham Mayo Van Otterloo & Co, who lambasted the Fed's loose monetary policy this week. The U.S. central bank's bond asset purchasing program "is in fact inflationary, and, if truth be told, somewhat of a Ponzi scheme," Gross wrote in his monthly investment outlook posted on Pimco's Website. Gross said the United States is in "'a liquidity trap,' where interest rates or trillions in asset purchases may not stimulate borrowing or lending because consumer demand is just not there." Grantham, who helps oversee over $100 billion at Grantham Mayo Van Otterloo & Co, said Fed policy has resulted in "extraordinary destructiveness" and "ruinous cost."
• US Senators Raise Concerns on Oil Sands Pipeline. Nearly a dozen U.S. Senators on Friday raised questions about the need for a proposed $7 billion pipeline that they said will bring "dirty oil" from Canadian oil sands to U.S. refineries and significantly increase the country's reliance on fossil fuels. The lawmakers, 10 Democrats and one independent, said the State Department needs to answer several key questions before deciding whether to approve TransCanada's application to build the 2,000-mile Keystone XL pipeline. Led by Democrats Patrick Leahy, of Vermont, and Jeff Merkley, of Oregon, the letter said the department should examine whether greater use of fuel-efficient technologies and advanced biofuels could offset the need for the pipeline. The department should also consider whether expanded use of oil sands crude will harm U.S. attempts to reduce oil consumption, the lawmakers said. This is the latest in a series of critiques that various lawmakers have lobbed at State as the department considers whether to greenlight the Keystone project, which is expected transport 510,000 barrels per day of crude from Alberta to the U.S. Gulf coast. Clinton angered some lawmakers and environmental groups this month when she said her department was "inclined" to approve the pipeline because of energy security issues. Supporters say the project will ensure a stable source of oil and lessen dependence on oil from the Middle East and Venezuela.
• U.S. Economic Growth Gauge Rises to 3-Week High: ECRI. A measure of future U.S. economic growth rose to a 3-week high in the latest week, while the index's annualized growth rate rose to a 19-week high, a research group said on Friday.

The Globe and Mail:

• Have Talked With 15 Bidders: Potash(POT). says it has been in discussions with 15 potential bidders for the company as it works to trump Potash Corp. of Saskatchewan Inc.BHP Billiton Ltd.’s $38.6-billion (U.S.) hostile bid, but needs more time for a possible counteroffer to come forward given the size, complexity and funding required to do the transaction, new regulatory documents filed Friday show. The “highly charged political environment” around approving such a bid is also a factor weighing on timing of talks, Potash Corp. says.