Tuesday Watch

Evening Headlines
Bloomberg:

• Euro Crisis Enters New Phase With Credit Squeeze: Daniel Gros. The life-support system for Greece, Ireland, Portugal and Spain is now under threat. The highly indebted nations of the euro area can’t survive the deficit crisis without access to central-bank credit. Last month’s Franco-German agreement at Deauville, France, and the statement of European leaders on Oct. 29 have changed the ground rules for euro-area debt. All 27 member states have now signed up to the need for a revision of the Lisbon Treaty in exchange for a permanent crisis-resolution mechanism. The key new element is that Europe’s leaders have specifically said that future rescues might involve private creditors. Nothing is known about the magnitude of their required contribution, but it’s now certain that they might be asked to participate. The agreement by European leaders is reinforced by two additional recent developments.
• Crude Oil Stockpiles Increase in Survey, Threatening Rally: Energy Markets. U.S. crude-oil inventories probably increased to the highest level in 18 months, threatening a rally in futures prices, as refineries idled units because of lower profit margins, a Bloomberg News survey showed. Supplies rose 1.75 million barrels, or 0.5 percent, in the seven days ended Nov. 5 from 368.2 million a week earlier, according to the median of 10 analyst estimates before an Energy Department report tomorrow. That would leave stockpiles at the most since May 8, 2009. Crude demand has slumped as refiners reduced operating rates to the lowest level in eight months, according to the Energy Department. The profit from making crude into fuel, or the crack spread, has decreased 44 percent in the past six months, according to data compiled by Bloomberg. “The lack of physical tightness is leaving the market vulnerable to another downdraft like we saw in May,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Prices climb, climb, climb and then ultimately find it impossible to stay there.”
• Netanyahu Says U.S. Must Show a Military Strike Against Iran is Possible. Israeli Prime Minister Benjamin Netanyahu said the U.S. and the international community need to convince Iran that a military strike is possible in order to prevent the Iranian government from developing nuclear weapons. “The simple paradox is this,” Netanyahu said in a speech yesterday to Jewish activists in New Orleans. “If the international community, led by the U.S., wants to stop Iran without resorting to military action, it will have to convince Iran that it is prepared to take such action.”
• ETFs Riskier to Markets Than High-Frequency Trading, Kauffman Study Says. Exchange-traded funds, not high- frequency trading, pose the greatest danger to stock-market stability and may trigger more disruptions like the May 6 selloff, according to the Kauffman Foundation in Kansas City. The proliferation of ETFs presents “unquantifiable but very real systemic risks of the kind manifested very briefly during the ‘flash crash’” earlier this year, Harold Bradley and Robert E. Litan said in a research report published today. Potentially worse declines are “a virtual certainty” without ETF reforms, Bradley and Litan said. The U.S. Securities and Exchange Commission blamed a mutual fund’s routine hedge against losses for starting a chain of events that turned an orderly decline into a crash that erased $862 billion in equity value in less than 20 minutes. Regulators also are investigating whether trading formulas, or algorithms, could “cascade,” triggering further action by computerized trading systems that would exacerbate market disruptions, Andrei Kirilenko, a senior economist at the Commodity Futures Trading Commission, said last week.
• World Bank Says Asia May Need Capital Controls to Curb Bubbles. Asian economies may need to turn to capital controls as quantitative easing by the U.S. threatens to spur asset bubbles in the region’s stock, currency and property markets, the World Bank said. Any curbs should be “targeted”, temporary and tailored to address specific problems, Sri Mulyani Indrawati, a World Bank managing director, said in an interview. This could include countries tying up funds for as long as a year to help limit hot-money, she said.
• Euro Falls to One-Week Low Versus Dollar on European Fund-Raising Concern. The euro declined to a one-week low against the dollar as speculation European nations will struggle to raise funds reduced demand for the region’s assets. The common currency weakened versus 14 of its 16 major counterparts as Portugal prepared to sell as much as 1.25 billion euros ($1.74 billion) of debt tomorrow as concerns about so-called periphery European nations caused their bonds to tumble. “You’ve got these rumblings over in Europe,” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. “It’s mainly Portugal, Ireland and Greece. There’s a downside risk for the euro.”
• U.S. Bond Rating Upgrades Trounce Europe by Record Amount: Credit Markets. U.S. credit quality is improving relative to Europe at the fastest pace ever, underscoring greater economic growth in America and downgrades of nations from Ireland to Greece. The ratio of upgrades to downgrades by Standard & Poor’s in the U.S. this year is 1.07, compared with 0.46 in Europe, the widest gap ever, according to data compiled by Bloomberg. S&P lifted the ratings of 455 U.S. issuers including Starwood Hotels & Resorts Worldwide Inc. and lowered 427. In Europe, there were 102 upgrades including France’s second-largest automaker Renault SA, versus 224 cuts.
• GE(GE) to Invest $2 Billion in China as Immelt Seeks Power, Rail Investments. General Electric Co. plans to invest $2 billion in China in technology and financial service ventures as well as research centers, adding 1,000 jobs in a country Chief Executive Officer Jeffrey Immelt is targeting for growth.

Wall Street Journal:

• Hedge Funds Slow to Change Marketers' Pay Structure - Survey. Hedge funds are revising their infrastructure, staffing and compensation policies to attract the so-called "sticky money" from pension funds, endowments and other institutional investors, but change to the pay structure of marketing executives at hedge funds has been slow, according to a recent survey. As a result, marketers may not be in sync with hedge funds' desire to market to such institutions, according to the study conducted by hedge fund executive placement agent Alpha Search Advisory Partners.
• New Push to Ban Earmarks in Senate. Lawmakers aligned with the tea party are moving quickly to show their strength by trying to ban budget earmarking in the Senate, where support is still strong for the practice critics deride as pork-barrel spending. South Carolina Sen. Jim DeMint on Monday was collecting signatures on a letter calling for a vote by his fellow Senate Republicans to ban earmarks, in which spending is channeled to projects favored by individual lawmakers, outside the competitive federal funding system.
• Fed Global Backlash Grows. China and Russia Join Germany in Scolding; Obama Defends Move as Pro-Growth. Global controversy mounted over the Federal Reserve's decision to pump billions of dollars into the U.S. economy, with President Barack Obama defending the move as China, Russia and the euro zone added to a chorus of criticism. Mr. Obama returned fire in the growing confrontation over trade and currencies Monday in a joint news conference with Indian Prime Minister Manmohan Singh, taking the unusual step of publicly backing the Fed's decision to buy $600 billion in U.S. Treasury bonds—a move that has come under withering international criticism for weakening the U.S. dollar.

Business Insider:

• Here Are The Ugly Details Behind The Irish Mortgage Crisis.

Zero Hedge:

• Dallas Fed Admits "For The Next Eight Months, The Nation's Central Bank Will Be Monetizing The Federal Debt", Opens Door to Bernanke Impeachment.
• Morgan Stanley On How Only A "Deux Ex Machina" Can Save The European Periphery, And Why The Fed May Have to do God's Work Out of the Machine.
  

Forbes:

• QE2 A Dangerous Endgame For Ordinary Wage Earning Americans.

CNN Money:

• 10 Signs the Consumer is Not Dead. Americans are certainly strapped, but there is very convincing evidence that consumers are rebounding faster than most economists give them credit for.

Institutional Investor:

• Large Hedge Funds Weave Through Volatility. Many of the largest, high-profile hedge funds lagged the broader market in October. Several of them are even behind for the year. And their investors think this is just fine. As most new money flowing into hedge funds these days has been headed for the largest funds — a trend we have chronicled in the past — those investors are seeking the comfort of relatively stable organizations that, for the most part, are not swinging for the fences.

Politico:

• Darrell Issa Plans Hundreds of Hearings. California Rep. Darrell Issa is already eyeing a massive expansion of oversight for next year, including hundreds of hearings; creating new subcommittees; and launching fresh investigations into the bank bailout, the stimulus and, potentially, health care reform.

Reuters:

• Raymond James(RJF) Eyes Expansion as Valuations Improve. Raymond James Financial is considering acquisitions as the investment banking firm industry's valuations are leveling off after the crisis, its chief operating officer told Reuters on Monday.

Chongqing Morning Post:

• China's Chongqing city is ready to introduce a property tax, citing the municipality's housing bureau. The local authority will temporarily intervene in home prices and increase supply of affordable housing.

China Securities Journal:

• Possible interest rate increases are the biggest risk for China's property loans, citing Chen Huai, a researcher at the housing ministry. About 70% to 80% of mortgage loans were lent in the last three years when interest rates were at the lowest in more than two decades, Chen said. Interest rate levels may at least double the current level in the next 5 to 10 years if the government continues efforts to keep inflation between 3% to 5% annually, Chen said.
  

Securities Times:

• Chinese government departments are drafting rules to allow authorities to intervene in home prices. Local governments may be given the power to limit selling prices of homes and profits developers take.

Beijing Times:

• China should return to a normal monetary policy regardless of the U.S.'s second round of quantitative easing, or QE2, Yi Xianrong, a researcher with the Chinese Academy of Social Sciences wrote. China should withdraw from the "abnormal" monetary policy which began from 2008, Yi wrote. The country's economy will face huge risks if it doesn't change the policy because of quantitative easing in the U.S., Yi wrote. China should prohibit hot money inflows into the domestic property market, Yi wrote.

Evening Recommendations
Citigroup:

• Reiterated Buy on (BZH), target $6.
• Reiterated Buy on (XL), target $25.
• Reiterated Buy on (PCLN), target $540.

Wells Fargo:

• Rated (TRN) Outperform.
• Rated (GBX) Outperform.
  

Night Trading

• Asian equity indices are -.75% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 102.0 +8.0 basis points.
  
• Asia Pacific Sovereign CDS Index 93.75 unch.
  
• S&P 500 futures -.30%
  
• NASDAQ 100 futures -.24%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FOSL)/.74
• (GBE)/-.23
• (MMC)/.28
• (ROK)/.91
• (APP)/.00
• (ASEI)/1.10
• (PEGA)/.26
• (EBIX)/.32
• (IGT)/.19
• (HGG)/.16

Economic Releases
7:30 am EST

• The NFIB Small Business Optimism Index for October is estimated to rise to 90.0 versus a reading of 89.0 in September.
  

10:00 am EST

• Wholesale Inventories for September is estimated to rise +.7% versus a +.8% gain in August.
  

Upcoming Splits

• (RVBD) 2-for-1
  

Other Potential Market Movers

• The $24 Billion 10-Year Treasury Bonds Auction, IBD/TIPP Economic Optimism Index for November, JOLTs Job Openings report for September, weekly retail sales reports, weekly ABC Consumer Confidence reading, (EGN) analyst meeting, (HAS) investor day, (NFG) financial analysts meeting, (TRMB) analyst day, (AMD) financial analyst day, Goldman Sachs Techtonics Conference, Wells Fargo Tech/Media/Telecom Conference, JPMorgan Ultimate Services Investor Conference and the Piper Jaffray Tech/Media/Telecom Conference 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 lower and to maintain losses into the afternoon. The Portfolio is 100% net long heading into the day.

Stocks Slightly Lower into Final Hour on Profit-Taking, Eurozone Sovereign Debt Angst, Rising QE2 Concerns

Broad Market Tone:

• Advance/Decline Line: Slightly Lower
  
• Sector Performance: Mixed
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 18.42 +.88%
  
• ISE Sentiment Index 166.0 +8.50%
  
• Total Put/Call .72 +5.88%
  
• NYSE Arms 1.0 +42.92%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 87.25 bps +2.32%
  
• European Financial Sector CDS Index 109.17 bps +7.34%
  
• Western Europe Sovereign Debt CDS Index 171.0 bps +3.22%
  
• Emerging Market CDS Index 194.05 bps +2.13%
  
• 2-Year Swap Spread 18.0 +3 bps
  
• TED Spread 18.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .11% -1 bp
  
• Yield Curve 215.0 -2 bps
  
• China Import Iron Ore Spot $157.20/Metric Tonne +2.61%
  
• Citi US Economic Surprise Index +32.60 +6.6 points
  
• 10-Year TIPS Spread 2.11% +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +17 open in Japan
• DAX Futures: Indicating +21 open in Germany

Portfolio:

• Slightly Lower: On losses in my Medical and Biotech 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 just slightly lower despite recent sharp equity gains, euro sovereign debt concerns and rising QE2 ramification worries. On the positive side, Coal, Oil Service, Gold, HMO, Construction and Education shares are especially strong, rising 1.0%+. Cyclicals and small-caps are outperforming again. The California Municipal CDS is falling -2.01% to 257.23 bps, which is a positive. The 10-year yield is rising +2 bps to 2.55%. The Citi US Economic Surprise Index is now at the best level since April 15th. On the negative side, Insurance, Airline and Utility shares are under pressure, falling more than 1.0%. (XLF)/(IYR) are trading a bit heavy today. The Citi Eurozone Economic Surprise Index is falling -11.3 points today to +26.30, which is its lowest levels since July 21st. The Spain sovereign cds is gaining +6.46% to 264.53 bps, the Portugal sovereign cds is rising +3.52% to 458.93 bps and the Ireland sovereign cds is rising +1.98% to 597.11 bps. The Western Europe Sovereign CDS Index is near its record high set May 7th at 174.12 bps, which is a large negative. Other key credit default swap indices are beginning to rise too much, as well. The divergence between the US/Eurozone Economic Surprise Indices, rising eurzone sovereign debt worries and overly bullish trader expectations regarding the euro currency could provide the catalysts for more euro weakness. The equity market continues to remain very resilient, despite potential headwinds, which remains a large positive. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic fear, buyout speculation, investment manager performance angst, short-covering and earnings optimism.

Today's Headlines

Bloomberg:

• Irish Credit-Default Swaps Surge to Record on Bank Bailout Cost Concerns. Credit-default swaps on Ireland and its banks surged to record high levels on concern the cost of bailing out the nation’s financial system is unsustainable. Contracts on Ireland soared 28 basis points from a record closing level to 606, according to data provider CMA. Swaps on the senior debt of Allied Irish Banks Plc climbed 43.5 basis points to 899.5 and Bank of Ireland Plc increased 37.5 to 724.5. “The uncertainty regarding sovereign debt and deficits in the European periphery will remain a strain for risky assets,” Tim Brunne, a Munich-based strategist at UniCredit SpA, wrote in a note to investors. The extra yield, or spread, investors demand to hold Irish 10-year bonds instead of similar-maturity benchmark German debt increased 10 basis points to 531 basis points, near the record 534 basis points reached at the end of last week. Swaps on Allied Irish subordinated debt jumped 8 percentage points to 54 percent upfront and five percent a year, meaning it costs 5.4 million euros in advance and 500,000 euros annually to insure 10 million euros of the bank’s debt for five years. Subordinated swaps on Bank of Ireland jumped 2 percentage points to 31 percent upfront and five percent a year. The Markit iTraxx SovX Western Europe Index of swaps on 15 nations rose 3.75 basis points from a record closing level to 174.75. Contracts on Portugal jumped 9 basis points to 454, Spain climbed 9.5 to 259.5 and Italy increased 4 to 195. Greece declined 3 basis points to 195. The cost of insuring corporate bonds also rose. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings climbed 7 basis points to 438, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings increased 2 basis points to 98.75, JPMorgan prices show. The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers was unchanged at 132.5.
• Google(GOOG), Dell(GELL) Likely to Keep Acquisition Spree Alive. and Google Inc.Dell Inc. plan to push ahead with more acquisitions, helping maintain a takeover spree that’s boosted the value of U.S. technology mergers to more than $60 billion this year. Google is likely to buy more companies about the size of YouTube and DoubleClick, its two largest deals, to help offer more online services, the company’s head of mergers and acquisitions said in an interview last week. Dell plans more takeovers in its drive to double the size of its data-center business to $30 billion in sales, a company executive said. Internet and computer companies are increasingly relying on acquisitions to gain new technology and customers.
• Euro Periphery-Nation Bond Yield Spreads Likely to Stabilize, Nomura Says. Bond yield premiums demanded by investors to hold Irish and Portuguese debt instead of benchmark bunds may stabilize, Nomura International Plc said. “This crisis, fueled by little true news, has entered a new phase and we expect some shorter-term stability,” a team of analysts led by Nick Firoozye in London wrote in a research report today. Portugal’s sale of bonds scheduled for Nov. 11 may go “smoothly” as a result, the analysts wrote. Greek Prime MinisterGeorge Papandreou’s move to rule out early elections may also “provide some comfort to spreads,” the analysts wrote in the note.
• CEOs Most Optimistic on U.S. Profits in Bull Signal for S&P 500. More U.S. executives than ever are increasing earnings forecasts compared with those lowering them. EBay Inc., United Parcel Service Inc. and 196 other companies raised profit estimates above analysts’ projections last month as 130 firms cut them, the biggest gap since Bloomberg began tracking the data in 1999. Shipping companies and computer makers boosted forecasts the most, pushing the Morgan Stanley Cyclical Index of businesses most tied to the economy up 27 percent from July 2 through Nov. 5.
• SEC Weighs Slowing Algorithms in Times of Market Volatility, Schapiro Says. U.S. Securities and Exchange Commission Chairman Mary Schapiro said her agency is examining whether computer algorithms used to trade thousands of shares in milliseconds should include risk controls that instruct them to slow down during periods of market volatility. The agency is considering what to do about algorithms that “go crazy,” Schapiro said today at a Securities Industry and Financial Markets Association conference in New York. “Should they be programmed with throttles to slow them down?”
• Gulf Oil-Spill Commission Finds No Evidence BP(BP) Put Saving Cash Over Safety. The U.S. panel investigating the BP Plc oil spill found no evidence decisions were made to put profit ahead of safety on the drilling rig, its co-chairman said.
• SEC Bans Market-Maker 'Stub' Quotes Blamed for Losses in May 6 Stock Crash. The U.S. Securities and Exchange Commission banned a market-maker pricing practice known as stub quotes, prohibiting a technique that caused shares to trade as low as 1 cent during the May 6 crash.
• Israel's Netanyahu Asks Biden to Pressure Iran Harder Over Nuclear Program. Israeli Prime Minister Benjamin Netanyahu told U.S. Vice President Joe Biden that Iran must face greater pressure to stop it from developing nuclear arms, his spokesman said. He also expressed hope that disputes that have stalled Middle East peace talks will be resolved.

Wall Street Journal:

• Regulators Watch Closely as Bonuses Soar. As brokerage firms' recruiting bonuses rise, so does regulators' concern that the incentives being attached to them could pose a threat to compliance with securities laws. The biggest brokerages are offering packages to their top-producing brokers that can exceed 300% of a year's production in fees and commissions, and much of that money is tied to their performance after they join the new company.
• Obama Jumps Into G-20 Surplus Spat. U.S. President Barack Obama, returning fire in a heated exchange with Germany, added his voice to U.S. efforts to reduce massive German and Chinese trade surpluses and increase pressure on China to let the value of its currency rise. And in a highly anticipated speech to the Indian Parliament, the U.S. president for the first time publicly backed India's inclusion as a permanent member in the United Nations Security Council, albeit after the security council undergoes a broad restructuring that could takes years, if it happens at all.

CNBC:

• Fed Policies, GOP Victory Put Markets in 'Sweet Spot': Pros. Federal Reserve pump-priming and likely policy changes coming to Washington have market pros scurrying into bullish positions for the days ahead.
• For the Geek: Hot Holiday Gadgets 2010.

Business Insider:

• Stanley Druckenmiller, Paul Tudo Jones, And Jim Pallotta Playing Fantasy Football Might Be In Rajaratnam Wiretaps.
• Dallas Fed Chief: The Fed Is Monetizing The Nation's Debt For The Next 8 Months. Ben Bernanke has been able to get quantitative easing pushed through with only minimal opposition, but starting early next year the Fed is about to get much more hawkish, as three members are about to get votes, and three doves will lose their votes.
• We Just Got The 14th Piece of Evidence That the Double Dip is Toast. Earlier we mentioned 13 signs that the double dip is toast. Among them: Strong ISM improvement, strong car sales, and the end of public sector job layoffs. The Fed just gave us a 14th sign: Loan lending standards continue to ease:

Zero Hedge:

• Ron Paul Comments on QE2, Says Fed Will Self Destruct, Shocked That Krugman Has "Any Credibility Whatsoever".

New York Times:

• Cost of Green Power Makes Projects Tougher Sell. Michael Polsky’s wind farm company was doing so well in 2008 that banks were happy to lend millions for his effort to light up America with clean electricity. But two years later, Mr. Polsky has a product he is hard-pressed to sell. His company, Invenergy, had a contract to sell power to a utility in Virginia, but state regulators rejected the deal, citing the recession and the lower prices of natural gas and other fossil fuels. “The ratepayers of Virginia must be protected from costs for renewable energy that are unreasonably high,” the regulators said. Wind power would have increased the monthly bill of a typical residential customer by 0.2 percent. Even as many politicians, environmentalists and consumers want renewable energy and reduced dependence on fossil fuels, a growing number of projects are being canceled or delayed because governments are unwilling to add even small amounts to consumers’ electricity bills.

Washington Post:

• Regulators Flawed in Foreclosure Oversight. As foreclosures began to mount across the country three years ago, a group of state bank regulators suspected that some borrowers might be losing their homes unnecessarily. So the state officials asked the biggest national banks for details about their foreclosure operations. When two banks - J.P. Morgan Chase and Wells Fargo - declined to cooperate, the state officials asked the banks' federal regulator for help, according to a letter they sent. But the Office of the Comptroller of the Currency, which oversees national banks, denied the states' request, saying the firms should answer only to inquiries from federal officials.

San Francisco Chronicle:

• California Borrows $40 Million a Day to Pay Unemployment. With one in every eight workers unemployed and empty state coffers, California is borrowing billions of dollars from the federal government to pay unemployment insurance. The Los Angeles Times reports that the state owes $8.6 billion already, and will have to come up with a $362-million payment to Washington by the end of next September. The continued borrowing means federal unemployment insurance taxes are going to increase, upping the annual payroll costs $21 a year per worker. California tops the list of 32 states that have borrowed a total of $41 billion to pay claims.

NASDAQ:

• Hedge Funds Post Inflow of $3.8 Billion in September. TrimTabs Investment Research and BarclayHedge reported that the hedge fund industry posted an inflow of $3.8 billion (0.2% of assets) in September 2010, the third straight inflow as well as the sixth in eight months. Assets surged 2.5% to $1.62 trillion, the highest level since April. "September was a good month for hedge fund managers," said Sol Waksman, founder and President of BarclayHedge. "Nine in 10 managers reported a profit for the month, and our Hedge Fund Index increased 3.5%. This is the largest gain since May 2009, and it lifted the index above the October 2007 high-water mark." Hedge fund investors were risk averse in September. Equity Long Only funds redeemed $829 million (1.2% of assets), the heaviest outflow of all fund strategies, while Emerging Markets funds redeemed $269 million (0.1% of assets), the third outflow in four months. Meanwhile, commodity trading advisors (CTAs) hauled in $5.8 billion, the sixth straight inflow as well as the fourteenth in 16 months. In contrast, Funds of Hedge Funds redeemed $635 million (0.1% of assets). "It won't surprise us to see hedge fund managers investing aggressively through year-end, which could keep a strong bid under stock prices," said Vincent Deluard, Executive Vice President at TrimTabs. "Investors have poured $ 16.1 billion into hedge funds in the past three months, and managers need to put that fresh cash to work. Also, more than half of managers have failed to poke through their previous high-water marks. In order for these folks to collect performance fees this year, they need to lever up and produce a blockbuster quarter."

Gartner:

• Gartner Says EMEA Enterprise IT Spending to Rebound in 2011 with 1.3% Growth After Two Consecutive Years of Decline.

Reuters:

• Irish Credit Unions May Need Major Restructuring. Ireland's credit union sector may need to be significantly restructured if arrears continue to rise and lending opportunities remain subdued, the official in charge of regulating the industry said on Monday. "Not all credit unions will make it through this difficult financial and economic environment in their current structure," James O'Brien, the registrar of credit unions, told the National Supervisors Forum.
• FrontPoint Health Funds See Big Redemptions. Investors have asked FrontPoint to return about half of its healthcare portfolios' assets, or about $750 million, after the fund and its top manager became embroiled in an insider trading case, a source familiar with the matter said on Monday. The Greenwich, Connecticut-based hedge fund firm has also extended the redemption deadline to December 1 from November 15 to receive money back on December 31, FrontPoint's two chief executive officers told their investors late last week.
• U.S. QE2 Decision Not a Good One -Eurogroup Head. Juncker Says Fed Decision is Fighting Debt with Debt. The chairman of euro zone finance ministers Jean-Claude Juncker criticised on Monday the U.S. Federal Reserve's bond purchase plans, noting they might not boost the U.S. economy but push capital into emerging economies. "I don't think it is a good decision," Juncker told a European Parliament hearing.

AP:

• Radical Yemeni Cleric Calls for Killing Americans. A U.S.-born Islamic cleric linked to attacks by al-Qaida in Yemen on U.S. targets called for Muslims around the world to kill Americans in a new video posted on extremist websites Monday. Anwar al-Awlaki, 39, is one of the most prominent English-language radical clerics and his sermons advocating jihad, or holy war, against the United States have influenced militants involved in several attacks or attempted attacks on U.S. soil. Yemeni officials say he may have blessed the recent mail bomb plot, though he may not have taken an active part in it. Al-Awlaki has in past messages encouraged Muslims to murder American soldiers and justified the killings of American civilians by accusing the United States of intentionally killing a million Muslim civilians in Iraq, Afghanistan and elsewhere. But this message appeared stronger, arguing that no justification was needed. In his 23-minute message delivered in Arabic, al-Awlaki said because all Americans are the enemy, clerics don't need to issue any special fatwas or religious rulings allowing them to be killed. "Don't consult with anybody in killing the Americans," he said. "Fighting the devil doesn't require consultation or prayers seeking divine guidance. They are the party of the devils," he added. It is "either us or them."

IrishTimes.com:

• German Finance Minister Upbeat About Ireland's Recovery Prospects. GERMAN FINANCE minister Wolfgang Schäuble has said that he is optimistic that Ireland will be able to pull out of its economic crisis. But he insisted that future EU bailouts would come with tough conditions, including a clause specifying the precise losses that bondholders would be expected to shoulder. “The EU was not founded to enrich financial investors,” he told this morning’s Der Spiegel magazine. Mr Schäuble rejected suggestions that Ireland’s difficulties were likely to unsettle the financial markets, saying investors would be far more worried if G20 nations failed to cut their deficits in half by 2013 as promised.
• If You Thought the Bank Bailout Was Bad, Wait Until the Mortgage Defaults Hit Home. Ireland is effectively insolvent – the next crisis will be mass home mortgage default, writes MORGAN KELLY.
  

Naftemporiki:

• Eurostat won't Revise its estimate of Greece's 2009 deficit to more than 15.5% of GDP, from 13.8%, citing people at the Finance Ministry.

Canada Free Press:

• Soros Bets on U.S. Financial Collapse. Another financial expert is expressing his deep disgust with the Federal Reserve’s decision to print more money and buy more U.S. debt, saying it is a sign that the U.S. capitalist system is moving closer to collapse. “This is the type of stuff we accused the communist and socialist governments of doing—interfering in free markets through currency manipulation,” declared Zubi Diamond, author of The Wizards of Wall Street. “What the Fed is doing is not good for free market capitalism and it is not good for America.” In an interview with Accuracy in Media, Diamond went on to say, “The Fed is following the economic models of Third World countries by printing more money and devaluing their currencies. If you keep doing what Third World economies do, eventually you will become a Third World economy.”

Bear Radar

Style Underperformer:

• Small-Cap Value (-.40%)

Sector Underperformers:

• 1) Airlines -1.28% 2) Insurance -1.03% 3) Utilities -.77%

Stocks Falling on Unusual Volume:

• APC, BFR, MICC, WCRX, SIGA and BEAV
  

Stocks With Unusual Put Option Activity:

• 1) EWW 2) ATVI 3) EGO 4) UNG 5) CTSH
  

Stocks With Most Negative News Mentions:

• 1) CALM 2) TASR 3) KG 4) ECHO 5) GMCR
  

Bull Radar

Style Outperformer:

• Mid-Cap Growth (-.09%)

Sector Outperformers:

• 1) Coal +2.76% 2) Education +1.24% 3) HMOs +.48%

Stocks Rising on Unusual Volume:

• CEVA, NG, SLW, VECO, MFC, HMC, TM, CCJ, TLK, BAC, CCME, ROSE, DDIC, STMP, JDSU, ATPG, SOHU, JAZZ, JOBS, MOTR, CROX, CYOU, EBIX, PETD, ONXX, IDCC, JRCC, FOSL, NTES, KUB, ASH, ANR and NDN
  

Stocks With Unusual Call Option Activity:

• 1) LTD 2) M 3) CCI 4) JDSU 5) NKE
  

Stocks With Most Positive News Mentions:

• 1) MCD 2) EFX 3) CMTL 4) HAIN 5) CVH

Monday Watch

Weekend Headlines
Bloomberg:

• Euro Falls as Concern Over Irish Bond Sales, Greece Damps Investor Demand. The euro fell for a second day against the dollar as concerns about Ireland’s capacity to gain support for its budget and political uncertainty in Greece reduced the appeal of the region’s assets. Europe’s currency weakened versus 11 of its 16 major counterparts before European Union Economic and Monetary Affairs Commissioner Olli Rehn arrives in Dublin today to look at Ireland’s budget plan. The euro also dropped as the extra yield that investors demand to hold Ireland’s debt rather than German bunds has more than doubled in the last three months. “The recent blow out in euro area peripheral country government bond spreads relative to bunds is starting to weigh on the euro,” said David Forrester, a currency economist at Barclays Capital in Singapore.
  
• Hedge Funds Raise Bullish Bets on Oil to Four-Year High: Energy Markets. Hedge funds ramped up bullish bets on oil to the highest level since at least June 2006 as the Federal Reserve enacted stimulus measures, helping spur crude to a two- year high and weakening the dollar. The funds and other large speculators increased wagers on rising crude prices by 8.6 percent in the seven days ended Nov. 2, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. So-called net-long positions climbed to a record for the CFTC data available. The Dollar Index, which tracks the U.S. currency against those of six major trading partners, slipped 0.9 percent last week and is down 13 percent since this year’s June 7 peak. “It’s all about the dollar being debased,” said Mike Armbruster, co-founder of Altavest Worldwide Trading in Mission Viejo, California. “You’re going to see managed money take its cue from the dollar. If the dollar continues to weaken, you’ll see them continue to go long oil.” Oil for December delivery rose $5.42 last week, or 6.7 percent, to settle at $86.85 a barrel on Nov. 5 on the New York Mercantile Exchange, the first five-day rally since April. JPMorgan Chase & Co. and Bank of America Merrill Lynch last week forecast that oil may return to $100 a barrel for the first time since the 2008 financial crisis. “Whatever QE2 will or won’t do in the economy, it will cause the price of raw materials to rise,” said Jennifer Fan, portfolio manager with Arrowhawk Commodity Strategies, a hedge fund in Darien, Connecticut.
• Obama Says Election May Spur 'Midcourse Corrections'. President Barack Obama said today that Democratic losses in last week’s congressional elections may require him to make some “midcourse corrections,” conceding the results were a “healthy” outcome of democracy. “One of the wonderful things about democracy is that when the people are not happy it’s their right, obligation and duty to express their unhappiness, much to the regret sometimes of incumbents,” Obama told Indian university students at St. Xavier’s College in Mumbai. “But that’s a good thing, that’s a healthy thing,” Obama said.
• October Payroll Increase Points to Acceleration in U.S. Consumer Spending. Employment in the U.S. rose in October for the first time in five months, a sign the world’s largest economy may strengthen in the final quarter of the year.
• Irish Fight to End Bond 'Buyers Strike' as EU Comes to Examine Budget Plan. Ireland will try to win support this week from the European Union to avoid a Greek-style bailout as investors balk at buying the country’s bonds. EU Economic and Monetary Affairs Commissioner Olli Rehn arrives in Dublin today for a two-day visit after the government laid out a plan last week to cut spending and raise taxes by as much as 6 billion euros ($8.4 billion) in 2011. While Ireland has the funds to avert the need for an immediate rescue, its cash may run out in the middle of next year unless it can raise money from the bond market in 2011. Ireland led a surge in the cost of insuring sovereign debt to a record on Nov. 5 as the government struggles to convince investors it won’t be the next Greece, whose economy was rescued by the EU and International Monetary Fund in May. “It’s close to a buyers strike at this point,” said Jens Peter Soerensen, chief analyst in Copenhagen at Danske Bank A/S, a primary dealer in Irish government bonds. “Something needs to happen in the next few weeks to change the dynamic.”
• BP(BP) to 'Reset' Dividend, Won't Sell Refineries, Times Reports. BP Plc, which in June canceled three quarterly dividend payments, is considering reducing the amount it pays out to shareholders, the Sunday Times reported, citing the energy company’s chief executive officer, Robert Dudley. “We have the opportunity to reset the dividend level and the mix of the kind of businesses we do,” Dudley said in an interview with the newspaper. “That is certainly part of our thinking going forward.” BP isn’t planning to sell refineries, according to Dudley. After selling 10 refineries in the past decade, BP now has plants that “give you value going forward,” the report cited him as saying.
• Duquesne Alumni Said to Start New Hedge Fund With $5 Billion. Stan Druckenmiller’s former colleagues at Duquesne Capital Management LLC are opening a new firm with $5 billion in assets, said four people briefed on the plans, the second-largest hedge-fund startup ever.
• Obama to Ease Export Restrictions for Indian Defense, Space Organizations. U.S. President Barack Obama will announce a relaxation in export controls for India today to reduce barriers to commerce and align the countries’ trade regimes to reflect their strategic alliance, an administration official said. As part of the agreement, the Obama administration will support India’s full membership in multilateral nuclear non- proliferation regimes and remove India’s defense and space organizations from the U.S. “entities list,” which restricts them from doing business with the U.S. “This really includes India as a major player in a non- proliferation world,” Michael Froman, Obama’s deputy national security adviser, said in Mumbai today. “Removing these entities from the list will allow for greater trade and cooperation in civilian space and defense and enable our governments to focus on other outstanding barriers.”
• Mexican Violence May Escalate After Accused Drug Leader Killed in Shootout. Mexican marines killed an alleged drug cartel leader known as “Tony the Storm,” a move that may cause violence to intensify in northeastern Mexico as drug gangs fight over shipping routes to the U.S.
• Dubai Third-Quarter House Prices Fall 6% on Reduced Lending, Colliers Says. Dubai home prices declined 6 percent in the third quarter while the United Arab Emirates’ biggest construction firm, Arabtec Holding PJSC, reported 96 percent drop in profit and Deyaar Development PJSC suffered a loss. The Dubai House Price Index dropped 6 percent in the third quarter compared with the previous one, reaching its lowest level since the second quarter of 2009 on a summer slowdown and as banks continued to restrict lending, Colliers International, a brokerage, property and asset management company said today.
• Groupon Said to Seek Venture Funding That May Value Company at $3 Billion. Groupon Inc., owner of a daily coupon website with 20 million subscribers, is seeking venture funding that may value the company at about $3 billion, according to three people familiar with the matter. The company aims to raise the funding to help it expand beyond the 230 markets where it now operates, said the people, who declined to be identified because the fundraising is private. The company had been discussing funding that would value it in the range of $2 billion to $3 billion, two of the people said.

Wall Street Journal:

• Citi Debt Funds Probed by SEC. A Securities and Exchange Commission investigation of soured Citigroup Inc. debt funds has subpoenaed former in-house brokers, some of whom contend the bank misled investors about how risky the funds were, according to people familiar with the matter.
• Investor Said to Press For Symantec(SYMC) Breakup. Activist investor Relational Investors LLC is building a stake in Symantec Corp. with plans to press for a breakup of the software company, a person familiar with the matter said. Such a breakup would involve splitting Symantec into two businesses--security and data storage, this person said.
• AOL(AOL) Hires Advisers, With Eye on Yahoo(YHOO). AOL Inc. has hired financial advisers to explore various strategic options for the company, one of which includes a possible tie-up with bigger rival Yahoo Inc., people familiar with the matter said.
  
• GOP to Use Debt Cap to Push Spending Cuts. Republicans are planning to demand major spending cuts next year before they would agree to raise the amount of federal debt that can be issued, setting up a clash between the Obama administration and a Congress stocked with lawmakers who campaigned as deficit hawks.
• Regulators, Banks Grapple With Volcker Rule's Reach. When J.P. Morgan Chase & Co. lawyers came to Washington in September to vent about prohibitions in the Volcker rule, they didn't bother stopping at the White House or Congress. The reason: The power to hammer out exact language in the rule aimed at preventing risky bets belongs to a small army of regulators, including some who were unknown on Wall Street before the financial-overhaul bill passed in July.
• Which Firms Need Tougher Oversight? Don't Look at Me. Companies across the financial-services industry are aggressively seeking to avoid being subjected to tougher regulation—and to make sure their competitors are. At issue is a new regulatory designation created by Congress's overhaul of finance rules earlier this year, in which firms classified as "systemically important" would have to comply with additional rules and submit to oversight from the Federal Reserve. Life insurers, hedge funds and asset managers are pelting regulators with arguments for being exempt.
• Ripple Effects Likely as Starbucks(SBUX), Kraft(KFT) Pzrt Ways. Starbucks Corp. wants to part ways with Kraft Foods Inc., a move that could shake up the single-cup coffee market in U.S. grocery stores. Late Thursday, Starbucks said it wants to unwind an agreement under which Kraft has distributed Starbucks bagged coffee as well as its Seattle's Best coffee brand in supermarkets and other food retailers since 1998. The business has grown to $500 million in annual sales from $50 million 12 years ago, according to Tim McLevish, Kraft's chief financial officer.
• Battle Looms Over Tax Breaks, Spending Cuts. Newly empowered Republicans pushed Sunday to extend Bush-era tax levels for as long as possible and pledged significant cuts in spending, as President Barack Obama sought to maintain his footing in an escalating budget battle. The fiscal fight over the coming weeks and months likely will be a crucial one for both sides, helping to set the policy and political tone for the next two years and beyond.
• As Global Economy Shifts, Companies Rethink, Retool. When leaders of the world's largest economies gather for a summit in Seoul this Thursday, their mantra will be "global rebalancing."
• California: The Lindsay Lohan of States. Sacramento is headed for trouble again, and it shouldn't expect a bailout.
• The New Malaise and How to End It by Keven M. Warsh. Given what ails the economy, additional monetary policy measures are poor substitutes for more powerful pro-growth policies.

Marketwatch.com:

• China's Property Market at Turning Point, Xie Says. China’s property market has reached a turning point and will begin a gradual decline for years, said financial analyst Andy Xie at the Caixin Summit in Beijing.

CNBC:

• G20 Finds Common Ground Opposing US. The Group of 20 is beginning to look more like the G19 plus 1 as emerging and rich countries alike accuse the United States of breaking a vow of unity. This week's G20 summit will require every bit of President Barack Obama's diplomacy skills after the Federal Reserve embarked on a new $600 billion bond-buying spree, sparking criticism from four continents that the U.S. central bank was ignoring the global repercussions.
• Stocks Return to April Highs While Pessimism Grows. If you're already confused about what drives the stock market, try mulling this one over: The major indexes have climbed back to their spring highs, while we've grown more pessimistic. Since April, when the Standard & Poor's 500 index last pierced 1,200, Wall Street prognosticators have cut estimates for economic growth and trimmed corporate earnings projections. The chatter is darker now, too. Gone is talk of a robust "V'' shaped recovery and of the Federal Reserve's exit strategy from policies designed to stimulate the economy. Now we worry whether a new dose of stimulus might not prove enough. Yet stocks have climbed anyway, with the S&P 500 up 10 percent this year. "Stocks are climbing a wall of worry," says James Paulsen, chief investment strategist at Wells Capital Management. Paulsen suggests all the worry is keeping many investors from jumping headlong into stocks. And that means if the recovery gathers steams, as he expects, these investors may start buying in earnest, propelling stocks higher. "There is still dry powder," he says.

IBD:

• Does Pickup in Rail Traffic Foretell Start of Economic Recovery?

NY Times:

• Saudis Warned U.S. of Attack Before Parcel Bomb Plot. Saudi intelligence officials warned the United States in early October that Al Qaeda’s affiliate in Yemen was planning a terrorist attack using one or more aircraft, three weeks before a plot to send parcel bombs on cargo planes was foiled at the last minute, American and European officials said Friday.
• He Saw Trouble Coming. Now He Sees It Going. ARE we finally coming out of the woods, economically speaking? Two data points from last week seemed to indicate an upswing ahead. October’s employment figures rose more than economists had expected, and the stock market clawed its way back to levels last reached just before the calamitous events of fall 2008. But positive indicators can and do disappoint, so I decided to consult an expert on these matters: Ian Shepherdson, chief United States economist at High Frequency Economics. As a reader of economic tea leaves over the last five turbulent years, Mr. Shepherdson has a darn good record. For instance, unlike the throng of economists who failed to see the housing crisis coming, Mr. Shepherdson warned his clients in fall 2005 that real estate would crash and a recession would ensue. He was early, of course, and now acknowledges that he was not nearly emphatic enough in his warnings. But he was fundamentally right back then and has been consistently on target since. So, I am happy to report that he sees the beginnings of a turn in the economy that could translate to a rise in gross domestic product growth and an improving employment picture in the second half of 2011.

CNNMoney:

• Amazon(AMZN) to Buy Diapers.com for $540 Million. "What Amazon fears most: Diapers" declared the cover of BusinessWeek earlier this fall. Now it's clear that Amazon didn't fear diapers, it just wanted them for itself.
• How Apple(AAPL) Gets to $500. If you're the kind of investor who likes to fiddle with Wall Street's assumptions, you'll get a kick of the report the folks at Trefis issued Friday.

Business Insider:

• Economist Intelligence Unit Says Ireland Is In Much Worse Shape Than It Thinks. Ireland is heading for default in June because the country will not be able to raise money on the public debt markets, according to the Economist Intelligence Unit's Megan Greene. Speaking to the Irish Independent, Greene said the country will have to tap the eurozone support system, the ESF, in June because they are in much worse shape than they realize.
• Hussman: Bernanke Has Engaged in FISCAL Policy, And is Unconstitutionally Usurping The Power of Congress. In his latest letter, John Hussman writes about -- what else -- his utter contempt for the Bernanke, quantitative easing, speculative bubble-making, and all the standard ills that people ascribe to the the Fed. An interesting point he makes is that Bernanke -- by having made purchases other than plain vanilla US Treasury debt during QEI -- essentially was practicing fiscal policy (rather than monetary policy) and was thus usurping powers specifically designated to Congress.
• World Bank Chief Calls For a New Global Gold Standard. On the even of the G20 Summit, World Bank Chief Robert Zoellick has what will be a much-talked-about op-ed in the FT regarding the topic du jour: the currency war. In it he lays out multiple ideas including a specific plan for yuan appreciation, an end to unilateral currency interventions, a focus on growth via "supply-side-bottlenecks (i.e. structural adjustment), and perhaps most surprisingly: gold.

Zero Hedge:

• Sean Corrigan Butchers the Chairman's Inversion of Cause and Effect, Discusses the Fed's Brand New "Unbridled Imperial Arrogance". Diapason's Sean Corrigan is out in full force for the second week in a row, this time looking at the consequences of a QE2, in which as he explains, the very premise of cause and effect has been inverted by the Federal Reserve, and which will result in even more dire consequences bequeathed by the launch of the HFRBS QE2. Yet in the last ditch effort to preserve a crumbling system, Bernanke is willing to sacrifice it all: the middle class, the dollar, and now logic. Here is how... and why.
• Betting on an Infinite Bernanke Put? Not So Fast, Says Fed Governor Kevin Warsh. If the recent weakness in the dollar, run-up in commodity prices, and other forward-looking indicators are sustained and passed along into final prices, the Fed's price stability objective might no longer be a compelling policy rationale. In such a case—even with the unemployment rate still high—we would have cause to consider the path of policy. This is truer still if inflation expectations increase materially.

LA Times:

• Marc Andreessen Expected to Unveil Social Web Browser RockMelt. The developer of Netscape is backing RockMelt, which incorporates popular social networking services such as Facebook and Twitter so users can take their friends with them as they wander the Internet.

Boston Herald.com:

• State Money Tied into Probe. SEC eyes hedge fund backed by Barney Frank pal. The state’s pension portfolio for thousands of public employees has a $700 million stake in a hedge fund investment firm that is under investigation by the Securities and Exchange Commission for allegations it misled investors by claiming to be a women-owned business. The firm, Pacific Alternative Asset Management Co. LLC, marketed itself as a firm run and owned by women in a male-dominated industry. Yet it was hedge fund mogul and Barney Frank pal S. Donald Sussman who in 2000 provided a $2 million loan to four entrepreneurs of the fledgling company, giving him a 40 percent stake in the investment manager’s parent company, Paamco Founding Partners Co. LLC.

OregonLive.com:

• Eastern Oregon Residents Near Wind Farms Express Health Concerns Over Noise, Lights, Stress. If there's anything that worries Linda Bond, it's the prospect of living in the shadow of hundreds of wind turbines with their noise and blinking lights. "I am really concerned about their proximity to the schools," said Bond, a 59-year-old retired Oregon City teacher who now lives in Union, where a huge wind-energy project is proposed.

NJ.com:

• Use of Less Invasive Robotic Surgery Grows Among N.J. Surgeons. The surgery is drastically less invasive, which results in much quicker recovery time for those in need of repair. The patient on the table in this case only had three tiny incisions through the ribs, versus the potential cutting of the breastbone. "The next day they are in their own room — and back to work in two and a half weeks," said Patel, who has performed 700 such bypasses from his robotic cockpit. Robotic surgery has been around for a decade, but has only recently begun to carve out this significant niche in medicine. A combination of better tools and — more importantly — surgical experience has resulted in a boom of robotic surgeries worldwide. In New Jersey, where the first all-robotic kidney transplant ever was performed at St. Barnabas Medical Center in 2008, surgeons report they rely on robots to assist them in as many as half their operations. The reasons are simple, doctors say. Robotic tools allow them to cut less, spill less blood, leave less scarring and pain and probe with greater precision than ever before. They say that while no machine can ever replace a surgeon’s instinct, no surgeon can replicate a robot’s steady hand. By far the most common robotic machine is the da Vinci Surgical System like the one in Saint Michael’s, made by the California-based Intuitive Surgical(ISRG). More than 1,600 da Vinci machines are operational in hospitals worldwide — 1,200 of which are in the U.S. and 36 in New Jersey. The latest model was released last year, which added high-definition 3-D imaging and an updated interface to the machine, and made it easier for surgeons to use. Surgeons have responded. In 2009, the da Vinci robot assisted about 90,000 prostate surgeries and 70,000 hysterectomies worldwide, according to Intuitive. The combined number is eight times greater than it was five years ago.

Politico:

• President Obama, on '60 Minutes,' Blames His Leadership. President Barack Obama acknowledged a series of errors since taking office, admitting that he misjudged the pace of the economic recovery, that he has sometimes strayed from his campaign promise to change the tone of debate in Washington, and that leadership “isn’t just legislation.” “We were so busy and so focused on getting a bunch of stuff done that we stopped paying attention to the fact that, yeah, leadership isn’t just legislation, that it’s a matter of persuading people and giving them confidence and bringing them together, and setting a tone,” Obama said in an interview conducted Thursday for airing Sunday on CBS’s “60 Minutes.” “We haven’t always been successful at that, and I take personal responsibility for that. And it’s something that I have to examine carefully as I go forward.”
• Seniors Fed Democrats in Midterms. In an election marked by dramatic defections from the Democratic Party, older voters swung hardest, seemingly threatened by President Barack Obama’s mantra of change. Voters over 65 favored Republicans last week by a 21-point margin after flirting with Democrats in the 2006 midterm elections and favoring John McCain by a relatively narrow 8-point margin in 2008. Concerned by changes to Medicare and compelled by a Republican Party that promised a return to America’s glory days, seniors played a crucial — and often understated — role in races across the country. They were unswayed by ubiquitous Democratic warnings about Republican changes to Social Security. And they put a series of campaigns out of reach for Democrats.
  

USA Today:

• Automakers Put Smartphones to Work in Your Car.
• Taxpayers' Bill on Freddie, Fannie Foreclosures: $2 Billion. Taxpayer-funded Fannie Mae and Freddie Mac have spent more than $2 billion this year on foreclosed property expenses after acquiring tens of thousands of homes through foreclosures. The mortgage giants owned more than 240,000 foreclosed homes on Sept. 30, they reported last week. That's about 25% of all lender-owned homes in the U.S., according to RealtyTrac.

AP:

• Microsoft(MSFT) CEO Sells $1.3 Billion of Shares. Microsoft Corp. CEO Steve Ballmer has sold about $1.3 billion worth of his company shares recently, the first time he's done so in seven years. Ballmer confirmed the stock sales Friday and said they were made to diversify his investments and aid his year-end tax planning. He said he plans to sell as many as 75 million shares by year's end. Securities and Exchange Commission filings by Ballmer this week show he sold about 50 million shares.Ballmer still holds about 350 million shares, worth some $9 billion at Microsoft's current price of around $26.

Reuters:

• Senior U.S. House Republican Opposes Fed Easing Plan. The Federal Reserve's plan to boost U.S. economic growth with $600 billion in bond purchases is a mistake that will trigger inflation, a leading Republican in the House of Representatives said on Sunday. Representative Paul Ryan, expected to become chairman of the House budget committee when Republicans take control of the chamber in January, told the "Fox News Sunday" program that the "upsides are very low" in the central bank's moves to inject more money into the U.S. economy. "I think its going to give us a big inflation problem down the road," Ryan said. Ryan said the Fed should stick to its main job of ensuring price stability, adding that the Fed's plan was "destabilizing" investment outlooks.

Sunday Tribune:

• The European Central Bank owns an estimated $25 billion worth of Irish government bonds. That would amount to a fifth of Ireland's national debt.
• Ireland's government backed away from a plan to cut the state pension because of opposition from lawmakers.
  

WirtschaftsWoche:

• The European Union will ease some climate regulations for automakers, citing an unpublished EU document. Automakers will be able to have fuel-saving technology approved by their member-state regulators instead of filing with the EU.

Financial Post:

• Potash Corp.(POT) Goes Back to Its Roots. Looking back on the historic events of the past week, Brad Wall says they represent a “new phase” for Canada, one in which we can say “No” to foreign investment on rare occasions, and still be a healthy free-trading country. That may be true. But one would have to assume executives at Potash Corp. of Saskatchewan Inc. took the Premier’s comments another way entirely. Especially those in Chicago who will need to either retire or tell their wives to start looking for Saskatoon real estate. To say Potash Corp. is set to go through a “new phase” would be an understatement. Assuming the dust clears and the takeover talk fades, the fertilizer giant is going to evolve into something completely new: a company retrenched in its home province that is immune to takeovers, and linked very closely to the provincial government that fought to protect it. In a sense, it is getting back to its Crown Corporation roots, minus the nationalization, and that rarely ends up being a good thing for investors.

Business Standard:

• The Export-Import Bank of the U.S. will set up a $5 billion facility for Indian infrastructure investment, citing U.S. and Indian government sources. An announcement on investments will probably come during President Barack Obama's India visit.

China Securities Journal:

• Inflation in China may exceed 3% this quarter driven by rising agricultural products prices, citing State Information Center Chief Economist Fan Jianping. Increasing global liquidity after policy easing in developed economies may push up commodity prices and excess funds in China may fuel speculation in agricultural products, Fan said.

China Securities News:

• China's export industry may be able to withstand a 5% to 6% appreciation in the yuan next year, citing Li Jian, a researcher at the Ministry of Commerce. The magnitude of the yuan's gains next year "will not be very much higher" than this year's and should be done in a "gradual" manner as a one-time revaluation will "greatly hurt" the nation's economy and exporters, Li said. China's export growth may slow to about 20% next year as global demand is not optimistic, he said.

Weekend Recommendations
Barron's:

• Made positive comments on (ANR), (JDSU), (GES) and (CCJ).

Citigroup:

• Reiterated Buy on (GR), raised target to $99.
• Reiterated Buy on (GLW), target $22.
  

Night Trading

• Asian indices are -.50% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 94.0 +1.0 basis point.
• Asia Pacific Sovereign CDS Index 89.50 -4.25 basis points.
• S&P 500 futures -.34%.
• NASDAQ 100 futures -.29%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SYY)/.51
• (DYN)/-.01
• (RAX)/.09
• (SLXP)/-.14
• (MDR)/.28
• (WRC)/.95
• (PCLN)/4.96
• (MDRX)/.17
• (GEOY)/.41

Economic Releases
8:30 am EST

• None of note
  

Upcoming Splits

• (RVBD) 2-for-1
  

Other Potential Market Movers

• The Fed's Bullard speaking, Fed's Warsh speaking, Fed's Fisher speaking, $32 Billion 3-Year Treasury Auction and the (MON) yield data review luncheon could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by real estate 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 week.