Irish Bailout May Unleash Market Vigilantes on Portugal: Credit Markets. A resolution of the Irish debt crisis may shift the burden of speculation to Portugal. While officials such as European Central Bank Vice President Vitor Constancio predict a bailout of Ireland will reduce financial pressures in the euro region, analysts from Citigroup Inc. and Nomura International Plc say any relief would be short-lived as investors turn their focus to the next-weakest peripheral nation. The markets indicate that country is Portugal with 10-year bond yields of 6.92 percent, compared with 8.31 percent in Ireland and 11.71 percent in Greece, which received rescue funds in May from the European Union and International Monetary Fund. Portuguese Finance Minister Fernando Teixeira dos Santos said Nov. 15 that while “there is a risk of contagion,” that doesn’t mean the country will seek financial aid. “Portugal isn’t in the situation that it is now because of Ireland,” said Steven Mansell, director of interest-rate strategy at Citigroup Global Markets Ltd. in London. “If Ireland reaches an agreement to tap the European Financial Stability Facility or some other mechanism to support its banking sector, I don’t think that will alleviate the pressure on Portugal.”
Cowen Scorned as Irish Mourn Loss of Sovereignty With Bailout. Irish rebels fought for independence during World War I, boasting they served “neither King nor Kaiser.” Ireland may now have to do exactly that to qualify for a bailout partly funded by both Britain and Germany. Prime Minister Brian Cowen is edging toward accepting a rescue package that may threaten the country’s low-tax policies and put voters on the hook to repay loans the central bank says may be worth “tens of billions” of euros. For critics of Cowen’s Fianna Fail party, which governed Ireland through its decade-long boom, national pride is at stake. Cowen has “squandered” independence for a “German bailout with a few shillings of sympathy from the British chancellor,” the Irish Times newspaper said yesterday. The government should be “ashamed that Fianna Fail should be the ones to surrender sovereignty,” said Michael Noonan, finance spokesman for Fine Gael, the largest opposition party.
General Motors(GM) Sells $500 Million Stake to China Partner SAIC. General Motors Co. sold a $500 million stake in its initial public offering to Chinese partner SAIC Motor Corp., cementing ties that have helped the American company boost sales in the world’s largest auto market. SAIC bought the 0.97 percent stake “on the basis of a good strategic partnership between the two” and its “confidence in GM’s development prospects,” the Shanghai-based carmaker said in an e-mailed statement yesterday.
Irish Grasp at EU, IMF Lifeline. Dublin Admits It Needs a Rescue; Moment of Truth for 16-Nation Euro Zone. The Irish government all but buckled to pressure to accept a historic international bailout Thursday, capitulating after a week of intense lobbying from officials across Europe and spurring questions about which other European economies will need a helping hand.
Few Businesses Sprout, With Even Fewer Jobs. Fewer new businesses are getting off the ground in the U.S., available data suggest, a development that could cloud the prospects for job growth and innovation. In the early months of the economic recovery, start-ups of job-creating companies have failed to keep pace with closings, and even those concerns that do get launched are hiring less than in the past. The number of companies with at least one employee fell by 100,000, or 2%, in the year that ended March 31, the Labor Department reported Thursday. That was the second worst performance in 18 years, the worst being the 3.4% drop in the previous year. Newly opened companies created a seasonally adjusted total of 2.6 million jobs in the three quarters ended in March, 15% less than in the first three quarters of the last recovery, when investors and entrepreneurs were still digging their way out of the Internet bust.
Private Medicare Plans Are Retrenching. Seniors enrolling in private Medicare policies starting this week are finding fewer options, as health insurers close down certain types of plans due to legislative changes and looming cuts to federal funding.
Foreclosure Talks Gain Steam. Talks between major lenders and state attorneys general about the nationwide investigation of foreclosure practices are accelerating, with state officials pushing for an overhaul of the loan-modification process that would be much broader than a crackdown on the use of "robo signers," people familiar with the situation said. Ally Financial Inc.'s GMAC Mortgage unit on Thursday held its first face-to-face meeting in Iowa with the multistate group involved in the investigation. Iowa Attorney General Tom Miller is spearheading the probe. Bank of America Corp., Citigroup Inc. and J.P. Morgan Chase & Co. have recently picked up the pace of their talks or are planning to meet soon with key officials in the probe.
Iran Rights Envoy Assails U.N. Censure. Official Defends Stoning, Arrests, as General Assembly Committee Condemns Crackdown by Tehran. Iran's top human-rights official gave a robust defense of his country's right to engage in the stoning of criminals and imprison lawyers viewed as threatening the stability of the Islamic Republic, as a United Nations committee censured Tehran for what it said was an accelerating crackdown on its opponents.
An Energy Drink for the GOP. The Republicans have yet to make the billions wasted on job-killing subsidies to green energy projects a top issue.
Hedge Funds Holding Ground Despite Redemption Rumors. Hedge funds are poised to close out a strongly profitable year, even though smaller firms are under pressure as investors still have the jitters over an unpredictable market. Industry veterans refuted rumors that have passed our way regarding a strong flow of redemptions as managers close out their books for 2010. In fact, the $2.34 trillion dollar hedge fund business saw $26.6 billion of inflows in the third quarter as part of a net increase of $120.9 billion, according to data from Bank of America Merrill Lynch. That equates to a 5.45 increase in total assets under management. Not bad numbers considering increasing whispers that investors are bailing on hedge funds.
Fed's Plosser: Zero Rates May Be Too Low. Philadelphia Federal Reserve Bank President Charles Plosser said on Thursday that it was "absolutely" possible that the U.S. central bank was making a policy mistake by keeping short-term rates pressed to zero. Plosser, who assumes a voting position on the Fed's policy-setting panel next year, also told a conference at the Cato Institute that it was not clear that "extra action" was a good thing. Plosser also said that he did not believe the Fed's further easing of monetary policy was warranted given current economic conditions. "For me, the benefits were not large enough to outweigh the costs," he told reporters after a conference at the Cato Institute.
Marketwatch.com:
Bernanke Turns Up Heat on China Currency Policy. Federal Reserve Chairman Ben Bernanke put aside traditional central bank niceties and launched a direct attack on the slow pace of China’s steps to strengthen its currency. In a speech prepared for a conference at the European Central Bank on Friday morning, Bernanke said that China’s decision to undervalue the yuan has essentially thrown a monkey wrench into the global economic recovery.
Pat-Downs at Airports Prompt Complaints. Some offer graphic accounts of genital contact, others tell of agents gawking or making inappropriate comments, and many express a general sense of powerlessness and humiliation. In general passengers are saying they are surprised by the intimacy of a physical search usually reserved for police encounters.
IBD:
Audio Technology Maker Seeks New Growth Markets. In a world that can't seem to get enough video, there's still plenty of money to be made in audio. Consider the case of San Francisco-based Dolby Laboratories (DLB).
CNN Money:
Wind Energy, Solar Power Face Cloudy Future. After years of rapid growth and darling status among many in Washington, the future of the American renewable energy industry is uncertain. That's because the government cash it has come to rely on may dry up on Dec. 31.
NASDAQ:
Hong Kong's government will release measures intended to cool the rising home market after the stock exchange closes today, Dow Jones Newswires reported.
Rasmussen Reports:
Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 25% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-two percent (42%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -17 (see trends).
Reuters:
Dell's(DELL) Margins Blow by Street, Shares Rise. Dell Inc raised its yearly income forecast after third-quarter margins and smashed expectations, helped by sliding costs of PC components and propelling its shares 4.8 percent higher.
Foot Locker(FL) Q3 Beats on Higher Margins, Shares Jump. n">Athletic footwear retailer Foot Locker Inc posted third-quarter results that raced past Wall Street expectations, as strong demand for running shoes spurred comparable-store sales and gross margin expansion, lifting its shares 10 percent in extended trade. Foot Locker, valued at about $2.61 billion, is now reaping the rewards of closing about 650 underperforming stores over the past 3 years to drive sales and margins.
n">Salesforce.com(CRM) Sees Sales Growth, Shares Rise. Salesforce.com Inc beat Wall Street profit estimates and forecast better-than-expected sales for the next fiscal year as more customers sign up for its "cloud computing" services, and its shares rose 7 percent.
European Central Bank Tightens Screw on Ireland, Portugal and Spain. The European Central Bank (ECB) has issued a clear warning that it will press ahead with plans to raise interest rates and withdraw lending support for banks despite the eurozone debt crisis, even if this risks pushing Ireland, Portugal and Spain into deeper trouble.
South China Morning Post:
Chinese local-government levels of debt have risen to unsustainably high levels, citing a report by a National Audit Office official. Debt of 18 provinces, 16 cities and 36 counties in China rose 59.4% last year to 2.79 trillion yuan, according to the report by Cai Gen, an audit office official based in Jiangsu province. The debt ratios indicate local authorities are under pressure to repay and may be a credit risk, the report said.
Financial News:
China's monetary authorities and financial regulators should improve the nation's mechanism for macroeconomic supervision, Wang Songqi, deputy director of financial research at the Chinese Academy of Social Sciences, wrote in a commentary. The biggest risks for China come from its own financial system, Wang said.
Evening Recommendations Citigroup:
Reiterated Buy on (FL), target $19.
Night Trading
Asian equity indices are -1.25% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 103.0 -4.5 basis points.
Asia Pacific Sovereign CDS Index 100.25 -3.5 basis points.
The Fed's Bernanke/ECB's Trichet/IMF's Managing Director/Bank of China Governor speaking at ECB Conference and the (BSX) Investor Day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate and commodity shares in the region. I expect US stocks to open modestly 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 90.18 bps -2.39%
European Financial Sector CDS Index 102.33 bps -.19%
Western Europe Sovereign Debt CDS Index 163.0 bps -.71%
Emerging Market CDS Index 218.48 bps -2.89%
2-Year Swap Spread 18.0 unch.
TED Spread 15.0 unch.
Economic Gauges:
3-Month T-Bill Yield .13% -1 bp
Yield Curve 240.0 +2 bps
China Import Iron Ore Spot $163.20/Metric Tonne unch.
Citi US Economic Surprise Index +29.90 +5.8 points
10-Year TIPS Spread 2.11% +3 bps
Overseas Futures:
Nikkei Futures: Indicating +122 open in Japan
DAX Futures: Indicating +4 open in Germany
Portfolio:
Higher: On gains in my Medical, Retail, Technology and Biotech long positions
Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges, covered some of my (EEM) short, added to my (GOOG) long
Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades meaningfully higher despite ongoing US municipal debt fears, China inflation concerns, tax policy uncertainty, US housing worries and euro sovereign debt angst. On the positive side, Airline, Gaming, Construction, Disk Drive, Computer, Internet, Oil Service, Energy and Coal shares are especially strong, rising more than 2.25%. Cyclical and small-cap shares are outperforming. Copper is jumping +2.8%. The Ireland sovereign cds is dropping -4.03% to 503.02 bps and the Hungary sovereign cds is falling -5.29% to 299.75 bps. Moreover, the California Municipal CDS is falling -2.79% to 287.93 bps and the Illinois Municipal CDS is falling -2.67% to 292.0 bps. The AAII % Bulls fell to 40.0 this week, while the % Bears jumped to 32.5, which is also a big positive. On the negative side, Education, HMO, Hospital and Utility shares are underperforming, rising less than .5%. (IYR) has also underperformed throughout the day. The Greece sovereign cds is jumping +3.78% to 992.90 bps. The UK, Portugal and Spain sovereign cds are flat after recent sharp gains, which is also a big negative. Given euro currency strength and global equity optimism today, I would have expected a much larger drop in sovereign cds. If the euro debt situation begins to temporarily calm again and these cds come in, stocks should test their 52-week highs. I expect US stocks to trade mixed-to-lower into the close from current levels on tax hike worries, more shorting, eurozone debt concerns, US housing worries and China inflation fears.
Ireland Turns to EU as Trichet Says ECB Aid Limited. Ireland said it may ask for an international bailout as European Central Bank President Jean- Claude Trichet signaled debt-laden nations can’t rely on him to keep their financial systems afloat forever. Finance Minister Brian Lenihan said in Dublin he would welcome the creation of “substantial contingency capital funding” for Irish banks, as they became “unmanageable for the state itself.” In Frankfurt, Trichet said in a speech that policies first used to fight the global credit crisis can’t “evolve into a dependency as conditions normalize.” The ECB is concerned that banks in Ireland and Greece are becoming too reliant on its unlimited money market operations and is pushing Ireland to accept a rescue funded by European Union governments and the International Monetary Fund.
Economic Data Show U.S. Recovery Accelerating. The index of U.S. leading indicators rose for a fourth consecutive month, manufacturing surged in the Philadelphia area and jobless claims climbed less than forecast, signaling the world’s largest economy is accelerating. “The soft patch is behind us,” said Jonathan Basile, an economist at Credit Suisse in New York. “We have a little more momentum. Employers are getting a bit more optimistic about the outlook and don’t need to cut costs like before.”
Credit Swaps Drop Amid U.S. Jobless Report, Ireland Debt Talks. The cost of protecting corporate bonds from default in the U.S. fell to the lowest level since Nov. 8 as a report showed fewer Americans than expected sought jobless benefits and European negotiators discussed a rescue plan for Ireland’s banks. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, decreased 2.8 basis points to a mid-price of 89.7 basis points as of 9:07 a.m. in New York, according to index administrator Markit Group Ltd.
GE Capital Survey Finds Recovery Optimism, Hiring Among Midsized Companies. GE Capital, one of the biggest lenders to small and midsize U.S. companies this year, said a survey showed most chief financial officers see improved capital access, low to moderate economic growth and “healthy” hiring. “None of the CFOs expect a double dip, and 84 percent see stable to improving” economic conditions, Dan Henson, who oversees GE Capital in the Americas, a unit of Fairfield, Connecticut-based General Electric Co., said in a telephone interview.
JPMorgan(JPM) Boosts CLO Sales Targets as Investors Seek Yield Pickup. JPMorgan Chase & Co. analysts are increasing their expectations for sales of collateralized loan obligations for the next two years as investors hunt for yield. The New York-based bank expects CLO sales will rise to $12.5 billion next year up from $10 billion initially forecasted, JPMorgan analysts Rishad Ahluwalia and Maggie Wang said in a note today. Sales of the debt in 2012 will climb to $25 billion from the initial estimate of $20 billion.
Deutsche Bank 'Most Exposed' to Derivatives, Mediobanca Says. Deutsche Bank AG, Germany’s largest bank, is the most exposed to derivatives contracts among top European lenders, according to a research report by Italian investment bank Mediobanca SpA. Deutsche Bank’s derivatives contracts are equivalent to 39 percent of the lender’s total assets at the end of June, analysts at Mediobanca wrote in the report published today. Mediobanca analyzed the 16 biggest European banks by assets and the two largest Italian lenders, UniCredit SpA and Intesa Sanpaolo SpA. As of June 30, “the less exposed banks’” to derivatives contracts were Lloyds Banking Group Plc, Credit Suisse Group AG and Banco Santander SA.
IMF Says Hong Kong's Asset Inflation May Spur Slump. The International Monetary Fund said Hong Kong’s accelerating asset inflation risks causing a bust that leads to deflation and an extended economic “downturn,” and urged further measures to rein in property prices. “Depending on the amplitude of the upswing, the resulting downturn could prove both protracted and painful,” the IMF said in a report today. The government should consider increasing stamp duties on housing and taxes on owners of higher-end properties if prices continue to rise, it said. Hong Kong home prices have climbed about 50 percent since the start of last year, surpassing a 1997 peak that was followed by a six-year deflationary slump.
Marriage Rate Falls to About 50% as People Say Institution is Obsolete. About half of all adults in the U.S. are married, down from 72 percent in 1960, while 4 in 10 people consider marriage obsolete and most say their definition of family has changed, according to a poll. In a telephone survey of 2,691 Americans by the Pew Research Center in Washington, 86 percent of respondents said a single parent and child constitute a family. Four out of 5 respondents said an unmarried man and woman with a child also were a family, and 63 percent said a gay or lesbian couple raising a youngster could be described the same way. The findings come with a “mix of unease and acceptance” as respondents were evenly split as to whether the new family units were good, bad or didn’t make a difference for society, the authors of the report said. Young adults, non-religious people, liberals and blacks, were more likely to be accepting of the new arrangements than their counterparts.
Prime U.S. Mortgage Foreclosures Rise to Record. Foreclosures on prime fixed-rate mortgages in the U.S. jumped to a record in the third quarter as unemployment strained household budgets of the most creditworthy borrowers. The inventory of homes in foreclosure financed by prime fixed-rate loans rose to 2.45 percent from 2.36 percent in the previous three months, the Mortgage Bankers Association said in a report today. New foreclosures rose to 0.93 percent from 0.71 percent. Both numbers were the highest in the 12 years since the Washington-based trade group started tracking the categories.
Wall Street Journal:
The Deficit Dilemma and Obama's Budget. Much of the projected doubling of the national debt between now and 2020 reflects the spending and tax proposals in the president's fiscal plan this year.
China Protests U.S. Green-Energy Probe. A Chinese trade organization Wednesday said a U.S. government investigation into subsidies China provides for its renewable energy companies was baseless and would hurt China-U.S. cooperation. The China Chamber of International Commerce, in a letter to U.S. Trade Representative Ron Kirk dated Nov. 12, said Washington shouldn't ignore the huge potential offered by new energy cooperation and should change its stance "before this issue further jeopardizes the U.S.-China trade relations."
Rangel Censure is Recommended. The House ethics committee was urged Thursday to give Rep. Charles Rangel the most severe punishment short of expulsion for 11 violations in a case that undercut Democrats' aim to run the cleanest Congress in history.
Joining the ObamaCare Suit. The historic state lawsuit against ObamaCare is moving through the federal courts, with 20 states so far on board the case led by Florida Attorney General Bill McCollum and sure to be continued by his successor, Pam Bondi. Newly elected Governors and AGs now have an opportunity to join this suit and underscore its importance to the future of liberty and our federal system of government.
Outraged Yet? What if Fed Buys Munis? California’s delay of a $10 billion municipal bond sale has only fueled existing chatter on trading floors that the Federal Reserve would take the extraordinary step of buying these securities just as it has with Treasuries. Chairman Ben Bernanke would pursue this unprecedented route, if he thought necessary, even after the vocal criticism he’s received for his second round of quantitative easing, they said. “Given the recent bond offering by California appears to have been given the cold shoulder by the public, might they turn to the Fed?” asks Art Cashin, director of NYSE floor operations at UBS Financial Services, in his widely-read morning note to clients.
The Best Indicator of Consumer Spending is TV News. A new paper from the Swiss Economic Institute found that TV sentiment predicts consumer spending patterns better than the UMich consumer sentiment index.
The Street.com:
GM IPO Bittersweet for "Car Czar" Rattner. General Motors(GM_) initial public offering on Thursday should be a triumphant moment for former "car czar" Steven Rattner, though he may be a bit distracted with other matters at the moment. Rattner, who left a job as a reporter for The New York Times(NYT_), to become a media industry dealmaker for Morgan Stanley(MS_) and Lazard(LAZ_) before starting a private equity firm called Quadrangle Group, was also hit with two lawsuits by New York State Attorney General and Governor-Elect Andrew Cuomo on Thursday. As if that weren't enough for one day, he has also settled a related case with the Securities and Exchange Commission, agreeing to pay $6.2 million and to agreeing to refrain from "associating with any investment adviser or broker-dealer for at least two years."
New York Times:
Beijing's Focus on Food Prices Ignores Broader Inflation Risk. China took steps Wednesday to control rising prices at the most basic consumer level. But Beijing faces a severe challenge in preventing higher global commodity prices from igniting broader inflation that could threaten China’s streak of powerful economic growth. In terms of economic diplomacy, the measures announced Wednesday were almost precisely the opposite of the steps the Obama administration and many Western economists have been urging Beijing to take. China’s broadly measured money supply has surged in the last two years, soaring 54 percent as its central bank has supported the export economy by intervening in currency markets to keep the renminbi artificially low. Chinese and Western economists worry that the Chinese price index may underestimate inflation separate from food and energy. The Chinese index has longstanding methodological problems — like measuring apartment rents but not the cost of buying and living in an apartment, which has soared in recent years.
This is big. This is FiOS + Google(GOOG) TV Ads. Today we've strengthened the reach of the Google TV Ads platform even further by signing a partnership with Verizon FiOS TV, one of the fastest growing television providers with the largest fiber-optic network in the US. By adding over 50 networks on Verizon FiOS TV across 3.3 million homes, we can offer you growing access to the audiences you want to reach on television. By early 2011, advertisers will be able to reach 35 million households, or almost one-third of all US cable and satellite homes through Google TV Ads. Combine this reach with our digital buying platform, and you have one powerful solution that can deliver results.
ProPublica:
SEC Investigating Citigroup(C) Mortgage Deal. The Securities and Exchange Commission is investigating Citigroup's role in a $1 billion deal that the bank created in the run-up to the financial crisis. The agency is looking at whether Citi improperly pushed an independent manager to put specific assets into the deal, according to people familiar with the probe.
Politico:
Soros: Obama Shouldn't Compromise. Meeting with major Democratic donors in Washington this week, George Soros urged them to pressure the Obama administration to focus on liberal policy priorities including climate change and immigration reform, which are considered non-starters with Republicans set to assume control of the House. During a private session Wednesday on the sidelines of a conference of major Democratic donors organized by the Democracy Alliance, Soros reiterated the position that wealthy liberals should focus their giving on groups that will push President Barack Obama and congressional Democrats on liberal legislative initiatives, rather than groups supporting individual candidates, according to a source in the meeting.
Malaysian Man Hacked into Fed Bank - US Prosecutor. A Malaysian man was charged with hacking into the computer network of the U.S. Federal Reserve Bank and possessing more than 400,000 stolen credit cards and debit cards, U.S. prosecutors said on Thursday.
British banks have £140 billion exposure to Ireland's economic crisis. George Osborne has pledged to help Ireland after new figures showed British banks have a £140 billion exposure to the beleaguered country. The new figures - from the Bank for International Settlements - disclose that Britain faces the biggest potential losses from a meltdown in the Irish economy. This country’s banks have lent more than those from any other country to the Irish government, consumers and businesses. RBS, the largely-nationalised bank, is thought to have the biggest exposure with more than £50 billion of outstanding loans. Amid the growing fears that an Irish collapse could have a serious knock-on effect in this country, Mr Osborne said that the Treasury was considering all options for financial aid.
Irish Independent:
Last-Ditch Bid to Fund Banks and Avoid Bailout. The Irish Government has drawn up a last-ditch plan to avoid being forced to accept a bank bailout. It wants to borrow money for the banks -- supported by a guarantee from the European Central Bank. That would mean technically avoiding a bailout and the politically damaging perception of a loss of sovereignty. However, it would also risk alienating EU leaders who are convinced that the Government should take the bailout and get on with restoring the public finances. And regardless of what sort of 'bailout' eventually emerges -- there will be strict budgetary conditions attached -- the Government will have to enforce a draconian Budget next month.
DigiTimes:
Tablets Will Be A 100 Million Unit Market By 2013 - Analyst Report. Although Apple's iPad is currently still not able to fully replace notebooks in the mobile industry, the product has already impacted netbook shipments seriously and may even achieve shipment volumes higher than those of netbooks in the fourth quarter of 2010, according to Digitimes Research senior analyst Joanne Chien. Smartphones, tablet PCs and notebooks will all become the mainstream terminal devices in the mobile Internet market in the future with smartphone shipments having a chance to reach 800 million units in 2013, up more than double from 2010, with tablet PCs at 100 million units and notebooks 300 million units. As smartphone shipments will reach 440 million units in 2011 and continue to see surging growth over the next few years, Chien believes tablet PCs will benefit from the opportunity as consumers will want to enhance their experience from smartphones and decide to choose a tablet PC.
