Obama Says He'll Negotiate With Republicans on Bush Tax Cuts. President Barack Obama said he is “absolutely” ready to negotiate this month with congressional Republicans, who have hardened their stance that soon-to-expire Bush-era tax cuts should be extended for high-income taxpayers. Obama, a Democrat, said today that he hopes to avoid “brinkmanship” in the lame-duck session of Congress when he confronts Republicans over how to prevent expiration of lower taxes on wages, investments and multimillion-dollar estates that were enacted in 2001 and 2003. Unless Congress acts, those tax policies expire Dec. 31.
Bernanke Breathes New Life Into Junk Bond Rally With QE2: Credit Markets. The Federal Reserve sent the cost of protecting high-yield, high-risk debt from default to the lowest in almost six months by bolstering demand for the investments with its program to buy $600 billion more of Treasuries. The benchmark credit-default swaps index for junk bonds that rises as investor confidence improves jumped to the highest since April 15, according to data provider CMA. The extra yield investors demand to own the bonds rather than Treasuries fell 2 basis points to 592 basis points, or 5.92 percentage points, Bank of America Merrill Lynch index data show. While longer-dated government bonds tumbled, the Fed’s move breathed new life into the five-month junk rally that stalled in the past two weeks.
Fed Stimulus Expansion Worsens Hong Kong 'Bubble' Risk, HKMA's Chan Says. The U.S. Federal Reserve’s expansion of stimulus will add to the risk of a housing bubble in Hong Kong and may force extra measures to cool prices, said Norman Chan, the head of the city’s central bank. The Hong Kong Monetary Authority will “take measures that are specific to the housing market if necessary,” Chan said at a press briefing in the city today. “The risk of an asset bubble in Hong Kong’s property market is rising.”
U.S. Carbon Contracts Fall as Obama Cools to Cap-And-Trade. Futures contracts in the U.S. Northeast’s carbon market fell to their lowest level in six weeks after President Barack Obama backed away from the national cap-and-trade program he once sought. “Cap-and-trade was just one way of skinning the cat,” Obama said at a White House news conference today, one day after the Democratic Party lost control of the House of Representatives to Republicans. The Democratic president said a cap-and-trade program, in which companies buy and sell carbon dioxide allowances, is “not the only way” to cut greenhouse gases. “I’m going to be looking for other means to address this problem,” Obama said.
Oil Rises a Fourth Day After Fed Move Weakens Dollar. Oil rose for a fourth day to more than $85 a barrel as the dollar traded near a nine-month low against the euro after the Federal Reserve’s move to buy an additional $600 billion of Treasuries to spur the economy. “The next barrier could come at $87, and if that is broken there is not much resistance beyond that,” Mike Sander, of Sander Capital Advisors in Seattle, said in an e-mailed note. “The Federal Reserve is basically devaluing the dollar even further, thus a rise in oil is not surprising.” Crude oil for December delivery gained as much as 43 cents, or 0.5 percent, to $85.12 a barrel on the New York Mercantile Exchange and was at $85.08 at 10:32 a.m. in Sydney. Crude may return to $100 a barrel next year for the first time since 2008 as central banks pump cash into their economies, JPMorgan Chase & Co. and Bank of America Merrill Lynch said. Distillate supplies, which include heating oil and diesel, fell 3.57 million barrels to 164.9 million. It was the biggest drop in distillate fuel supplies since the week ended Sept. 19, 2008. Inventories were 19 percent above the five-year average. Inventories of crude oil rose 1.95 million barrels to 368.2 million, the department said. Supplies were forecast to climb by 1.5 million barrels. They were 14 percent above the five-year average.
BHP(BHP) Shares Gain After Canada Blocks Potash Corp.(POT) Bid. BHP Billiton Ltd., the world’s largest mining company, rose to the highest in almost six months in Sydney trading after Canada blocked its $40 billion hostile takeover bid for Potash Corp. of Saskatchewan Inc. Shares in the Melbourne-based company rose 3.2 percent to A$43.98 at 10:25 a.m. local time on the Australian stock exchange. That’s the highest since April 14. Prime Minister Stephen Harper’s government said yesterday a sale of the world’s largest fertilizer company wouldn’t provide a “net benefit” to the nation. BHP is disappointed and will review its options, the company said in a statement. “BHP Billiton will continue to cooperate with the minister and the Investment Review Division of Industry Canada and will review its options,” the company said in the statement. The cost of protecting BHP’s bonds from default dropped the most in more than four months. Credit-default swaps on BHP fell 15 basis points to 82 basis points as of 9:05 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. prices.
Paraguay Titanium Find May Be World's Largest, Discoverer Says. The American explorer who discovered the world’s biggest copper deposit in Chile has staked a claim in Paraguay to what he says may be the largest titanium find. David Lowell, 82, the president of closely held CIC Resources Inc., controls mineral rights to at least 185,000 hectares (457,000 acres), according to Paraguay’s sub-ministry of mining and energy. That is an area the size of London. “Our deposit could control the world titanium market, a big enough piece of production that whoever operates it would dictate what the price is going to be,” Lowell said in an interview. “And the price, presumably, would be reduced by having higher-grade ore and large tonnage.”
Royce to Seek House Financial Services Chairmanship. House Republicans returning to power after an Election Day sweep in which they gained at least 60 seats will have to choose between two members of their own party as they select a leader for the panel that oversees Wall Street. U.S. Representative Ed Royce of California, elected to his 10th two-year term yesterday, said he will seek the chairmanship of the House Financial Services Committee, challenging Alabama Representative Spencer Bachus, the panel’s ranking Republican.
Executives Await Friendlier Climate. Business executives said Wednesday they are counting on the electoral shock delivered to Democrats Tuesday to bring a slowdown in federal regulation, tax cuts and a more business-friendly stance in Washington.
Qualcomm 4Q Profit Up 7.7% on Record Shipments. Qualcomm Inc. (QCOM) Wednesday reported better-than-expected fourth-quarter results and forward-looking guidance as the chip maker continues to benefit from soaring demand for mobile devices. In addition, Qualcomm said it will exit its struggling mobile video device business, called FLO TV, and will record some restructuring charges in fiscal 2011. While many semiconductor makers recently have warned of weakening consumer demand, Qualcomm and rival Broadcom Corp. (BRCM) have benefited from their high exposure to the sweet spot for consumers--smartphones and other mobile devices. Qualcomm helped popularize a technology used in many 3G cell phones, and it also is providing chips for the next-generation mobile broadband network known as Long-Term Evolution, or 4G. Chairman and Chief Executive Paul Jacobs said Wednesday that Qualcomm expects continued strong growth in shipments of code division multiple access-based devices, including smartphones and other data-centric devices, in the new year, "driven by the global adoption of 3G and accelerating consumer demand for wireless data." The strong demand led Qualcomm to forecast fiscal first-quarter adjusted earnings of 70 cents to 74 cents a share, above Wall Street expectations of 64 cents, and revenue of $3.05 billion to $3.35 billion. Analysts polled by Thomson Reuters projected revenue of $2.99 billion. And for the new year, it predicted per-share earnings of $2.63 to $2.77 on revenue of $12.4 billion to $13 billion, while analysts were looking for $2.59 a share and $12.1 billion, respectively. Qualcomm shares, down 1.2% this year, jumped 6.4% to $48.70 in after-hours trading Wednesday.
Morgan Stanley(MS) May Wait on Smith Barney. Morgan Stanley could use some wiggle room to help meet looming capital requirements. One option: delaying parts of the Morgan Stanley Smith Barney takeover from co-owner Citigroup Inc., which would leave billions of dollars in the securities firm's pocket.
Yemen Terror Response Shows Flaws. The unexploded device found on a plane in the U.K. on Friday has triggered criticism over the speed of Britain's response to the incident and a lack of communication between key allies. U.K. Prime Minister David Cameron was angered that it took almost 10 hours for him to be told about a potential terrorist bomb intercepted at Britain's East Midlands Airport early Friday, people familiar with the situation said. German investigators have said a British intelligence official failed to take timely action to prevent the air-freight shipment of the bomb. The criticisms come amid heightened concern in the U.K. over al Qaeda in the Arabian Peninsula, the Yemen-based group suspected of being behind last week's thwarted package bombing plot.
News Corp.'s(NWSA) 1Q Earnings Rise 36% on Ad Rebound. News Corp.'s (NWSA, NWS) earnings climbed 36% in its fiscal first quarter as a rebound in advertising markets powered its television networks and publishing segment, offsetting weakness at its film studio, satellite business and its digital media unit. For the quarter, News Corp. posted net income of $775 million, or 30 cents a share, up from year-ago results of $571 million, or 22 cents a share. Excluding a tax benefit of $90 million, the company earned 27 cents a share; the average analyst estimate on Thomson Reuters was 24 cents a share. Shares of News Corp.'s class A shares, up 8.4% this year, rose 38 cents, or 2.6%, to $15.22 in after-hours trading.
Voters Strongly Anticipate Health Care Repeal in the House. Voters overwhelmingly believe the new Republican-controlled House of Representatives is likely to vote to repeal the unpopular national health care law. A new Rasmussen Reports national telephone survey finds that 83% of Likely U.S. Voters think it is at least somewhat likely that Republicans will vote to repeal the health care measure passed by Democrats in March. That includes 52% who say a repeal vote is Very Likely.
Politico:
Democrats Find Common Ground: It's the White House's Fault. The bodies aren’t even cold yet in the House, but the Democratic Party has already opened up a bitter debate over who’s to blame. The party’s bloodied moderates Wednesday released two years of pent-up anger at a party leadership they viewed as blind to their needs and deaf to the messages of voters who never asked for President Barack Obama’s ambitious first-term agenda. Liberals pushed back hard: The problem, they say, was those undisciplined moderates, who won delays, unsightly compromises and a muddled message from a too-accommodating administration. Yet a third group of Democratic politicians and operatives blamed not policy but a failed sales job for the party’s woes. One thing all sides agree on: The White House blew it.
Dem Strategists: Move Toward Center. After bruising Democratic midterm losses, top Democratic strategists are urging President Barack Obama to shift toward the center ahead of 2012. Just as former President Bill Clinton did in 1995-96 after Republicans swept into congressional power, Obama should forgo a more liberal agenda in the latter half of his term, the strategists argued. If not, they warned, the country’s electoral map could be tinted red indefinitely.
Reuters:
Whole Foods'(WFMI) Sales Stay Strong, Shares Jump. Whole Foods Market Inc shares soared 8 percent after strong sales at established markets quelled concerns the momentum that has driven a 50 percent gain in its shares was slowing. The upscale grocer, which posted quarterly profit that topped Wall Street's view, also raised its earnings forecast for fiscal 2011.
Zumiez(ZUMZ) Tops Oct. Comp Sales View, Hot Topic(HOTT) Falls Short. Zumiez Inc's unique brands helped the teen apparel retailer's October same-store sales trounce market estimates, while Hot Topic Inc's comparable sales missed Wall Street's view as its merchandise failed to lure shoppers. Zumiez, which has been beating monthly same-store sales estimates since May, also raised its third-quarter profit view on strong sales and product margins, sending its shares up 10 percent to $27.78 in extended trade.
MasTec(MTZ) Q3 Results Beat, Raises FY View. MasTec Inc (MTZ.N) posted better-than-expected quarterly results, helped by an acquisition, and the utility contractor raised its full-year outlook, sending its shares up 9 percent in extended trade.
ValueClick(VCLK) Q3 Tops Street View; Sees Q4 Above Estimates. Online marketer ValueClick Inc posted a quarterly profit that topped market estimates convincingly on higher margins and tax benefit, and forecast fourth-quarter results above Wall Street view, sending its shares up 8 percent.
U.S. Dollar Printing is Huge Risk - China Central Bank Adviser. Unbridled printing of dollars is the biggest risk to the global economy, an adviser to the Chinese central bank said in comments published on Thursday, a day after the Federal Reserve unveiled a new round of monetary easing. China must set up a firewall via currency policy and capital controls to cushion itself from external shocks, Xia Bin said in a commentary piece in the Financial News, a Chinese-language newspaper managed by the central bank. "As long as the world exercises no restraint in issuing global currencies such as the dollar -- and this is not easy -- then the occurrence of another crisis is inevitable, as quite a few wise Westerners lament," he said.
Telegraph:
Ireland is Running Out of Time. Ireland has been desperately unlucky. The bond crisis is snowballing out of control before the country has had enough time to let its medical, pharma, IT, and financial services industries (don’t laugh, some of it is doing well) come to the rescue. Yields on 10-year Irish bonds surged this morning to a post-EMU high of 7.41pc.
Nikkei English News:
Elpida Memory Inc. plans to cut DRAM production for the first time in two years because of falling prices of memory chips. The Japanese chipmaker may also delay construction of a new facility in Taiwan.
China Information News:
China should act with other countries against excessive depreciation of the U.S. dollar after suffering currency losses, citing former statistics chief Li Deshui. Limiting depreciation will stabilize global economic growth, Li Deshui, who is also a vice director of the Chinese People's Political Consultative Conference's economic commission, said.
Preliminary 3Q Non-farm Productivity is estimated to rise +1.0% versus a -1.8% decline in 2Q.
Preliminary 3Q Unit Labor Costs are estimated to rise +.6% versus a +1.1% gain in 2Q.
Initial Jobless Claims for last week are estimated to rise to 442K versus 434K the prior week.
Continuing Claims are estimated to rise to 4378K versus 4356K prior.
Upcoming Splits
None of note
Other Potential Market Movers
The ICSC Chain Store Sales report for October, $10 Bln 10-year TIPS auction, weekly EIA natural gas inventory report, Goldman Sachs Industrials Conference, (UNP) analyst meeting and the (WAG) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 92.71 bps -.55%
European Financial Sector CDS Index 101.67 bps +6.17%
Western Europe Sovereign Debt CDS Index 159.67 bps +1.48%
Emerging Market CDS Index 197.07 bps -2.56%
2-Year Swap Spread 16.0 unch.
TED Spread 17.0 unch.
Economic Gauges:
3-Month T-Bill Yield .12% +1 bp
Yield Curve 228.0 +4 bps
China Import Iron Ore Spot $150.20/Metric Tonne unch.
Citi US Economic Surprise Index +12.70 +2.7 points
10-Year TIPS Spread 2.19% +2 bps
Overseas Futures:
Nikkei Futures: Indicating +130 open in Japan
DAX Futures: Indicating +32 open in Germany
Portfolio:
Higher: On gains in my Tech, Retail and Medical long positions
Disclosed Trades: Added to my (SXCI) long, took profits in another long
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs despite recent equity gains, fears over a possible "sell the news" reaction to the election/Fed announcement and euro sovereign debt concerns. On the positive side, Bank, Steel, Paper, Internet, Semi, Disk Drive, Networking, Gaming, Road & Rail and Airline shares are especially strong, rising 1.0%+. (XLF) has been relatively strong throughout the day. Cyclicals are outperforming. Lumber is rising +.6% and Gold is falling -1.15%. Oil Tanker rates are soaring another +18.75% and have risen +58.33% in 5 days. The Citi US Economic Surprise Index is now at the best level since early June. The 10-year yield is rising +3 basis points to 2.62% and the yield curve continues to steepen. On the negative side, Homebuilding, Education and Coal shares are under pressure, falling more than 1.0%. The Portugal sovereign cds is gaining +3.49% to 415.14 bps, the Ireland sovereign cds is gaining +6.24% to 545.72 bps and the Greece sovereign cds is gaining +2.4% to 870.75 bps. The bears inability to gain any traction on an expected "sell the news" reaction to today's developments is a bit surprising and shows the market's ongoing resilience. If an equity sell-off does not materialize very soon, I suspect that another push higher in the major averages will commence on short-covering as hedge funds remain poorly positioned for equity strength. I expect US stocks to trade mixed-to-higher into the close from current levels on tax policy/election optimism, less economic fear, buyout speculation, investment manager performance angst, diminishing financial sector pessimism, short-covering and earnings optimism.
Fed to Buy Extra $600 Billion of Treasuries to Boost Growth. The Federal Reserve will buy an additional $600 billion of Treasuries through June, expanding record stimulus and risking its credibility in a bid to reduce unemployment and avert deflation. Policy makers, who said new purchases will be about $75 billion a month, “will adjust the program as needed to best foster maximum employment and price stability,” the Fed’s Open Market Committee said in a statement in Washington. The central bank kept its pledge to keep interest rates low for an “extended period.” He’s risking a strategy that may either fail or fuel inflation and asset bubbles, said Scott Pardee, a former New York Fed official who now teaches at Middlebury College in Vermont. “Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the committee judges to be consistent, over the longer run, with its dual mandate,” the FOMC said. “Progress toward its objectives has been disappointingly slow.” The dollar weakened and stocks fluctuated in the minutes after the announcement. Treasury notes were lower. Including Treasury purchases from reinvesting proceeds of mortgage payments, the Fed will buy a total of $850 billion to $900 billion of securities through June, or about $110 billion per month, the New York Fed said in accompanying statement. The panel kept its benchmark interest rate at zero to 0.25 percent, where it has been since December 2008. The one of the five who has a vote this year, Kansas City Fed President Thomas Hoenig, today cast his seventh straight dissent, the most at consecutive regular policy sessions since 1955. “The risks of additional securities purchases outweighed the benefits,” and the “continued high level of monetary accommodation” may eventually “destabilize the economy,” the statement said of Hoenig’s opposition.
Washington State Rejects Income Tax on Wealthiest Residents. Washington state voters rejected a ballot measure to impose an income tax on the wealthiest residents that pitted Bill Gates Sr. against Microsoft Corp., the company co-founded by his son. The income-tax measure, Initiative 1098, failed 65 percent to 35 percent, with 59 percent of precincts counted, according to the Associated Press.
California Voters Reject Legalization of Marijuana for Recreational Use. California voters rejected a ballot measure that would have legalized marijuana for recreational use, blocking efforts to expand the industry beyond medical purposes in the most populous U.S. state. Proposition 19 was failing 54 percent to 46 percent, with 78 percent of precincts counted, according to the Associated Press. Supporters included billionaire investor George Soros, who contributed $1 million to support the effort.
Billionaire Ken Fisher Sees 16% S&P 500 Rally After Elections. The Standard & Poor’s 500 Index may rally as much as 16 percent in the next six months because yesterday’s election will stymie legislative initiatives in Congress, billionaire investor Kenneth Fisher said. Equities have surged since July as odds that Republicans would take control of the U.S. House of Representatives increased. Fisher’s optimism is based in part on history. Stocks average gains of 11 percent in the third year of U.S. presidencies and haven’t fallen since 1939 when the Dow Jones Industrial Average lost 2.9 percent, according to data since 1833 compiled by the Stock Trader’s Almanac. The fourth year, when elections are held in November, is second-best, with an average advance of 5.8 percent.
ADP Estimates U.S. Companies Added 43,000 Workers to Payrolls. Companies in the U.S. boosted payrolls by more than forecast in October, data from a private report showed today. Employment increased by 43,000 after a revised 2,000 drop in September, according to figures from ADP Employer Services. The median estimate of 38 economists surveyed by Bloomberg News called for a 20,000 gain. Forecasts ranged from a decline of 10,000 to a 50,000 increase.
U.S. Service Economy Expanded More Than Forecast in October. Services in the U.S. expanded in October at the fastest pace in three months, indicating the recovery is gaining strength even as central bankers are poised to loosen monetary policy. The Institute for Supply Management’s index of non- manufacturing businesses, which covers about 90 percent of the economy, rose to 54.3 from 53.2 in September. The Commerce Department said factory orders in September rose 2.1 percent. The figures also signaled spending on equipment and software, which helped the U.S. rebound from recession, may cool less than previously estimated. The ISM non-manufacturing employment gauge rose to 50.9 in October, matching the July level that was the highest since the recession started in December 2007. The measure of new orders increased to a three-month high.
Ireland Debt Swaps at Record High as Allied Signals 63% Chance of Default. The cost of insuring Irish sovereign debt surged to a record as credit-default swaps on Allied Irish Banks Plc subordinated debt signaled a 62 percent probability of default within five years. Contracts insuring 10 million euros ($14 million) of Allied Irish’s junior bonds cost about 3.25 million euros upfront and 500,000 euros annually, according to data provider CMA. That’s up from 400,000 euros a year in April. Swaps on the government’s debt jumped 27 basis points to 545. Swaps on Allied Irish’s senior debt increased 25.5 basis points to a record 706, CMA prices show. Ireland problems weighed on Europe’s indebted peripheral nations, with swaps on Portugal climbing 9.5 basis points to 418 and Spain up 3.5 at 228.5. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 3 to a five-week high of 161. The cost of insuring corporate bonds was little changed, with the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increasing 3 basis points to 451, according to JPMorgan Chase & Co. The Markit iTraxx Europe index of 125 investment-grade companies was unchanged at 96.75 and the Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers rose 3.5 to 128.5.
World Bank Says China Needs to Raise Rates Further. The World Bank said China should raise interest rates and allow a stronger yuan to damp inflation, along with guarding against a surfeit of capital inflows. “Further normalization of the macroeconomic stance is needed to guard against macro risks,” the World Bank said in a periodic report on the Chinese economy released today, citing asset-price gains, bad loans and “strained” local-government finances. “Interest rates will need to rise further.”
Fed Easing May Spur Deflation in Europe, Mundell Says. Federal Reserve debt purchases to stimulate the U.S. economy may send the euro rising against the dollar, sparking deflation in Europe, said Nobel Prize-winning economist Robert Mundell.
Wall Street Journal:
Doubts Cloud Gold's Bright Future.Demand Has Overwhelmed Fundamentals; Supplies Up, Jewelry Sales Down. The outlook for gold prices is tarnished by the erosion of several longstanding factors that have proven supportive for the yellow metal in the past.
Solar-Panel Maker to Close a Factory and Delay Expansion. Solyndra, a Silicon Valley solar-panel maker that won half a billion dollars in federal aid to build a state-of-the-art robotic factory, plans to announce on Wednesday that it will shut down an older plant and lay off workers. The cost-cutting move, which will reduce the company’s previously announced production capacity, is a sign of the notable shift in the prospects for cutting-edge American solar companies, which now face intense price competition from Chinese manufacturers that use more established photovoltaic technologies.
LA Times:
San Francisco Bans Happy Meals. The city's board of supervisors votes to forbid restaurants from giving away toys with meals that have high levels of calories, sugar and fat.
InvestorsOffshore:
Fund Managers Downbeat On US Equities. Hedge fund managers remain downbeat on US equities according to the TrimTabs/BarclayHedge Survey of Hedge Fund Managers for October. About 39% of the 102 hedge fund managers the firms surveyed in the past two weeks are bearish on the S&P 500, up from 37% in September. “The lean toward bearishness surprises us a bit because extreme caution in September produced substantial underperformance,” said Sol Waksman, CEO of BarclayHedge. “We suspect managers will invest much more aggressively in the current quarter. Stock prices keep grinding higher, and hedge funds hauled in USD18.8bn in the past three months. Managers have to put that fresh cash to work.” About 32% of managers cite currency wars as the biggest threat to global financial stability, and 36% feel world leaders should focus on the problem of too-big-to-fail institutions at the November 11-12 G-20 Summit in Seoul. About 28% of hedge fund managers are bearish on the 10-year US Treasury note, the largest share since the inception of the survey in May. In contrast, 32% of managers are bullish on the US dollar index, the largest share since June. Only 9% of managers aim to decrease leverage in the coming weeks, while 19% plan to increase it.
National Real Estate Investor:
Quantitative Easing: Are the Consequences Worth the Benefits? The next round in the Federal Reserve Bank’s risky plan to stimulate growth by suppressing long-term interest rates — Quantitative Easing 2 — will strengthen the bottom line for many commercial real estate investors, experts say. But inflationary side effects may do more harm than good to the U.S. economy, and the plan is unlikely to generate the job growth landlords need to drive absorption. “We’re trying to cure the problem with the hair of the dog that bit us,” observes Robert Bach, chief economist at real estate services provider Grubb & Ellis. In this case, the dog in question was excess money and credit, which fueled overspending by consumers and investors alike. As the Fed buys Treasury bonds with newly printed money in the coming months, it will add hundreds of billions in additional dollars to the monetary system. “The Fed is trying to flood the economy with even more liquidity,” says Bach. “The fear is that all of this money sloshing around the financial system has nowhere to go, no way to express itself, except in terms of higher inflation.”
Politico:
Oklahoma Bans Sharia Law. Oklahoma on Tuesday approved a ballot measure blocking judges from considering Islamic or international law when making a ruling. Nearly 70 percent of voters in the state cast ballots approving the measure.
White House Aide: President Obama Will Heed Election Message. A top aide to President Barack Obama said not to look for a change in his “fundamental principles, but certainly there were messages that have to be heeded, and we will.” “If you believe in democracy, we were swept in by a big wave, so you have to pay attention to these results and what people are saying,” the aide said. “They want us to work together, to focus on the economy – for jobs and growth — and we’re going to do that.” The tone was more humble than is customary for this White House, and the aide promised a period of introspection. The aide also mentioned deficits as an area that the parties can do a better job of working together. “There are lessons for us, and there are lessons for [Republicans], as well,” the aide said. “This wasn’t a vote for more partisanship, for more ideology. … This wasn't a vote to refight the old battles, or re-empower the special interests. This was a vote for cooperation and pragmatism.” “And [voters] want responsible, open, accountable government, including real steps to discipline the budget deficits,” the aide added. “We ran to bring that to Washington and they're telling us we have to do better."
Inside White House, Calls for Shake-Up. Some of the calls for a White House shake-up are now coming from inside the building. Frustrated current and former West Wing staffers, speaking on condition of anonymity, told POLITICO they hoped Tuesday night’s humbling losses would persuade President Barack Obama to pursue a much more sweeping fix than just the “natural” post-election churn of personnel his administration has insisted will take place.
Senator Reid Says Willing to "Tweak" Healthcare Law. Senate Majority Leader Harry Reid on Wednesday said he is willing to make changes to the landmark healthcare reform legislation passed earlier this year. "If there's some tweaking we need to do with the healthcare bill, I'm ready for some tweaking," Reid, a Democrat, said in an interview on CNN, after Republicans captured the U.S. House of Representatives in Tuesday's midterm elections.
Ford(F) Shares Hit One-Year High on Strong October Sales. Ford Motor Co (F.N) shares hit their highest level in nearly six years on Wednesday, after the company reported stronger-than-expected October sales and showed evidence that it is seizing market share. So far this year, Ford is No. 2 in the U.S. market, overtaking Toyota Motor Corp (7203.T) and following General Motors Co GM.UL. Shares of Ford rose as high as $14.84 Wednesday. The last time shares traded at that level was December 2004. So far this year, Ford shares are up about 47 percent, while the S&P 500 .SPX is up 6.7 percent.
U.S. Election Results Could Speed Foreclosure Deal. Half of the state attorneys general heading a nationwide probe into U.S. home foreclosures will not be in their jobs next year, a development lenders hope could help speed a resolution, industry lawyers said on Wednesday.
QE2 is Risky and Should be Limited by Martin Feldstein. The Federal Reserve’s proposed policy of quantitative easing is a dangerous gamble with only a small potential upside benefit and substantial risks of creating asset bubbles that could destabilise the global economy. Although the US economy is weak and the outlook uncertain, QE is not the right remedy. Under the label of QE, the Fed will buy long-term government bonds, perhaps one trillion dollars or more, adding an equal amount of cash to the economy and to banks’ excess reserves. Expectation of this has lowered long-term interest rates, depressed the dollar’s international value, bid up the price of commodities and farm land and raised share prices. Like all bubbles, these exaggerated increases can rapidly reverse when interest rates return to normal levels. The greatest danger will then be to leveraged investors, including individuals who bought these assets with borrowed money and banks that hold long-term securities. These risks should be clear after the recent crisis driven by the bursting of asset price bubbles. Although the specific asset prices that are now rising are different from last time, the possibility of damaging declines when bubbles burst is worryingly similar. The problem now extends to emerging markets, a group not directly affected in the last crisis. The lower US interest rates are causing a substantial capital flow to those economies, creating currency volatility. The economies hurt by the increasing value of their currencies are responding with measures to protect their exports and limit their imports, measures that could lead to trade conflict. Ahead, when the US economy does begin to grow, the increased cash on banks’ balance sheets will make the Fed’s exit strategy harder. It was previously “cautiously optimistic” it would be able to contain the inflationary pressures that could be unleashed by banks with a trillion dollars of excess reserves. This will be harder if the amount of excess reserves is doubled. This could lead to much higher interest rates to restrain demand or to an unwanted rise in inflation. Although its real focus is on reducing unemployment, much of the rhetoric of Ben Bernanke, the Fed chairman, is about preventing deflation because some members of the Fed’s open market committee think the Fed should focus exclusively on price stability. But there is no deflation. Core consumer prices are rising and inflation is expected to average 2 per cent over the next 10 years. The truth is there is little more that the Fed can do to raise economic activity. What is required is action by the president and Congress: to help homeowners with negative equity and businesses that cannot get credit, to remove the threat of higher tax rates, and reduce the out-year fiscal deficits. Any QE should be limited and temporary.
Vedomosti:
PhosAgro Considers Rival Bid for Potash Corp. OAO PhosAgro, Russia's largest maker of phosphate fertilizers, is considering a bid for Potash Corp.(POT), citing a company document. PhosAgro Chairman Vladimir Litvinenko wrote to Russian Prime Minister Vladimir Putin on Oct. 20 asking for state credits to make the acquisition, the Moscow-based daily said, citing the letter. Putin forwarded the request to Deputy Prime Minister Igor Sechin, who contacted relevant ministries and state banks, said Vedomosti, without citing anyone. One possibility is a merger of PhosAgro and Potash Corp., it cited a person close to PhosAgro as saying. Canadian Industry Minister Tony Clement plans to announce his decision on whether to approve BHP Billiton Ltd.’s $40 billion bid for Potash Corp. today after markets close in New York, said an official familiar with the announcement.
Irish Examiner:
Irish Finance Minister Brian Lenihan will disclose the scale of the government's 2011 budget deficit reduction plan tomorrow. The full budget will be unveiled on Dec. 7.
DigiTimes:
LED TV Panel Demand to Increase Significantly in January-February 2011, Says Lextar President. Demand for LED-backlit LCD TV panels will increase significantly in January-February 2011 as TV vendors are planning to launch new models in March, according to David Su, president of Taiwan-based LED epitaxial wafer and chipmaker Lextar Electronics, a subsidiary of AU Optronics (AUO).
Haaretz.com:
Outgoing Intel Chief: Iran Can Already Produce Nuclear Bomb. Iran is busy setting up two new nuclear installations, according to the head of Military Intelligence, Major General Amos Yadlin. Speaking before the Knesset Foreign Affairs and Defense Committee, Yadlin said that MI has indications that work has began on the installations, but did not comment on the sources. Yadlin also told the MKs that Iran has sufficient enriched uranium to manufacture a single nuclear device and may soon have enough for making another bomb.
