North American Investment Grade CDS Index 92.84 bps +.01%
European Financial Sector CDS Index 129.28 bps +5.17%
Western Europe Sovereign Debt CDS Index 177.50 bps -1.84%
Emerging Market CDS Index 210.70 bps -4.09%
2-Year Swap Spread 23.0 -2 bps
TED Spread 17.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .13% -2 bps
Yield Curve 253.0 +8 bp
China Import Iron Ore Spot $167.80/Metric Tonne unch.
Citi US Economic Surprise Index -9.60 -30.2 points
10-Year TIPS Spread 2.20% +1 bp
Overseas Futures:
Nikkei Futures: Indicating -8 open in Japan
DAX Futures: Indicating +12 open in Germany
Portfolio:
Higher: On gains in my Biotech, Medical, Ag and Technology 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 near session highs despite a disappointing jobs report and recent gains. On the positive side, Education, Road & Rail, Gaming, Semi, Software, Gold, Ag, Oil Service, Alt Energy and Coal shares are especially strong, rising more than 1.0%. Cyclical and Small-Cap shares are outperforming. (XLF), which opened on the weak side, is heading into positive territory now. The Transports continue to trade well. Copper is rising +.35% and the S&P GSCI Ag Spot Index is jumping +3.19%. The Italy sovereign cds is dropping -2.89% to 211.23 bps, the Portugal sovereign cds is falling -3.91% to 425.45 bps and the UK sovereign cds is falling -8.43% to 67.56 bps. Moreover, the US Muni CDS Index is dropping -3.4% to 182.57 bps. On the negative side, Retail shares are under mild pressure. Today's overall market action is more positive than the major averages would suggest as I continue to see a number of small/mid-cap stocks experiencing technical breakouts on decent volume. I expect US stocks to trade mixed-to-higher into the close from current levels on falling eurozone sovereign debt angst, seasonal strength, investment manager performance angst, short-covering, less financial sector pessimism and technical buying.
U.S. Payroll Gains Trail Forecasts; Unemployment Rate Rises. Employers added fewer jobs than forecast in November and the unemployment rate rose to 9.8 percent, pointing to economic weakness that’s likely to keep the Federal Reserve pumping money into the financial system. Payrolls increased 39,000, less than the most pessimistic projection of economists surveyed by Bloomberg News, after a revised 172,000 increase the prior month, Labor Department figures showed today in Washington. The jobless rate rose to a seven-month high, while hours worked and earnings stagnated. The number of unemployed Americans rose to 15.1 million last month, including a record 6.4 million women. Financial firms cut 9,000 jobs last month, the most in four months, today’s report showed. Construction companies subtracted 5,000 workers and payrolls at retailers fell 28,100. Private payrolls that exclude government agencies also gained less than forecast, rising by 50,000 in November. Economists projected a 160,000 gain, the survey showed. The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- held at 17 percent. “The labor market is capping off a very poor recovery this year,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “I don’t think we’ll slide back into job losses, but being stuck in neutral isn’t good. While consumer spending has normalized, employers are uncertain about demand going into 2011.” The report also showed the number of people unemployed for 27 weeks or more increased as a percentage of all jobless, to 41.9 percent, the highest since August.
ECB Bond Buying Triggers Biggest Drop in Corporate Debt Risk in Six Months. The cost of insuring against losses on European corporate bonds fell for a third day after the European Central Bank increased government bond purchases to stem “acute” tensions in financial markets. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings declined 9 basis points to 470, according to JPMorgan Chase & Co. prices at 2:30 p.m. in London. The gauge is down from 526 on Nov. 30, the biggest three-day decline since May 12. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments also fell for a third day, dropping to 174.5 basis points from a record high 200.75 on Nov. 30. Credit markets briefly pared the rally after the U.S. Labor Department said payrolls increased 39,000, less than the most pessimistic projection of economists surveyed by Bloomberg News, after a revised 172,000 increase the prior month. The jobless rate rose to 9.8 percent. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings decreased 1.25 basis points to 106.5, JPMorgan prices show. The cost of protecting bank bonds from default also fell, with the Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers down 8 at 142 and the subordinated index 12 lower at 272.
Service Industries in U.S. Expand at Faster Pace. Service industries expanded in November at the fastest pace in six months, showing the U.S. recovery is broadening out as the year comes to a close. The Institute for Supply Management’s non-manufacturing index, which covers about 90 percent of the economy, rose to 55 last month from 54.3 in October. The ISM non-manufacturing employment gauge rose to 52.7, the highest since October 2007, from 50.9 a month earlier. The measure of new orders increased to 57.7, the highest since April, from 56.7. Business activity eased to 57 from 58.4. The ISM’s index of prices paid fell to 63.2 from 68.3 a month earlier. Estimated sales for Thanksgiving and the three days after the U.S. holiday reached $45 billion, a 9.1 percent gain from a year ago, as the number of shoppers rose 8.7 percent to 212 million, according to the National Retail Federation.
Sovereign Defaults Would Force Bank Bailouts, Dimon Tells Sole. Defaults of European countries would also lead to bank bailouts, Jamie Dimon, chief executive officer of JPMorgan Chase & Co., told Il Sole 24 Ore in an interview. “Europe would have to rescue the banks” that hold state debt, Dimon told Sole. It would be better instead to “correct the Maastricht Treaty,” he said. European countries including Italy have exacerbated their economic problems by introducing taxes leading to capital flight or rules making the labor market excessively rigid, Dimon told the daily.
Cotton Surges to Biggest Weekly Gain in 39 Years on India Limits. Cotton futures surged, heading for the biggest weekly gain in 39 years, on mounting concern that supplies will be limited from India, the world’s largest exporter after the U.S. Cotton-yarn shipments will be capped at 720,000 metric tons in the year that started Oct. 1, the Indian government said Dec. 1 in a bid to stabilize domestic prices and boost supply. Futures traded in New York are up 75 percent this year and touched a record last month, partly on concern that India won’t ship enough of the fiber to meet growing global demand.
Crude Oil Futures Increase to 25-Month High in New York as Dollar Tumbles. Crude oil rose to a 25-month high as the dollar tumbled, increasing the appeal of commodities as an alternative investment. Crude jumped as much as 1.1 percent as the Dollar Index, which tracks the currency against six others, dropped to the lowest intraday level since Nov. 23 after U.S. employers added fewer jobs than forecast in November and the unemployment rate unexpectedly increased. Oil for January delivery rose 86 cents, or 1 percent, to $88.86 a barrel at 12:54 p.m. on the New York Mercantile Exchange. Prices touched $88.96 a barrel, the highest intraday level since Oct. 9, 2008. Futures have increased 6.1 percent this week and 12 percent this year.
Greenspan Says ECB Has 'Terrible Problem' on Deficits. Former Federal Reserve Chairman Alan Greenspan said the European Central Bank faces a “terrible problem” because its measures to combat the debt crisis make it easier for countries to defer cutting budget deficits. “I think they’ve got a terrible problem,” he said in an interview with CNBC in Washington today. “To the extent that they increase their purchases of bonds of the various different countries, they of necessity take the pressure off the political system within those countries to do what has to be done.”
Fed Purchases May Set Bad Precedent, Wrightson Economist Crandall Says. Federal Reserve asset purchases won’t do much to help the economy now and may set a bad precedent for later actions, Wrightson ICAP LLC chief economist Lou Crandall said today. “This is really a marginal effort in terms of its contribution right now,” Crandall said of the Fed’s strategy, in a radio interview on “Bloomberg Surveillance” with Tom Keene. “They’re embracing a principle that I think has the potential to be abused in the future.” Crandall is No. 1 among economic forecasters for the two- year period ended on Sept. 30, according to data compiled by Bloomberg.
Brazil Raises Reserve Requirements to Remove $36 Billion From Circulation. Brazilian banks fell in Sao Paulo trading after the central bank raised reserve and capital requirements to slow consumer lending growth that’s running at 20 percent annually and prevent a credit bubble.
South Korea, U.S. Reach Accord on Revising Free-Trade Pact Auto Provisions. The U.S. and South Korea reached agreement to change automobile provisions in a pending trade deal, clearing the way for legislatures in both nations to approve the delayed accord, said a person briefed on the talks. South Korea agreed to let the U.S. phase out its 2.5 percent tariff on automobiles over five years instead of as much as three years, a demand of Ford Motor Co., the person said, declining to be identified before an announcement.
Wall Street Journal:
France Moves to Ban Site Hosting WikiLeaks. WikiLeaks' battle to remain online encountered another obstacle Friday after France's Industry Minister Eric Besson said the government plans to ban WikiLeaks from a French server, saying the site was "criminal" and put innocent lives at risk.
Deficit Plan Fails to Win Panel Support. The president's U.S. deficit commission received the backing of a majority of its 18-strong panel, but fell short of the 14 votes needed to possibly trigger congressional votes on its recommendations.
CNBC:
Fed Just Creating Asset Bubbles, No Stimulus: Ross. Federal Reserve policies are creating an asset bubble that isn't helping create jobs or acting as a real stimulus to the economy, investor Wilbur Ross told CNBC.
A New Test Is Proposed in Licensing Radio and TV. Michael J. Copps, one of the five commissioners on the Federal Communications Commission, said Thursday that a “public value test” should replace the current licensing system for television and radio stations. The test, he said, “would get us back to the original licensing bargain between broadcasters and the people: in return for free use of airwaves that belong exclusively to the people, licensees agree to serve the public interest as good stewards of a precious national resource.” Mr. Copps, a Democratic commissioner who has long wanted to reform the license system, made the proposal in an address at the Columbia University Graduate School of Journalism on Thursday. It is his latest effort to draw attention to the public interest requirements of local stations at a time when he believes American journalism is in “grave peril.” In his prepared remarks, he criticized the casual nature of the current license renewals for stations and said his intent with the public value test was to foster “a renewed commitment to serious news and journalism.” If a station were to fail the public value test and did not improve a year later, he added, the agency should “give the license to someone who will use it to serve the public interest.”
Washington Post:
Reports Show Violations of Surveillance Limits in U.S. The federal government has repeatedly violated legal limits governing the surveillance of U.S. citizens, according to previously secret internal documents obtained through a court battle by the American Civil Liberties Union. In releasing 900 pages of documents, U.S. government agencies refused to say how many Americans' telephone, e-mail or other communications have been intercepted under the Foreign Intelligence Surveillance Act - or FISA - Amendments Act of 2008, or to discuss any specific abuses, the ACLU said. Most of the documents were heavily redacted. However, semiannual internal oversight reports by the offices of the attorney general and director of national intelligence identify ongoing breaches of legal requirements that limit when Americans are targeted and minimize the amount of data collected.
AppleInsider:
The iPad, a product that didn't even exist a year ago, is expected to cause nearly 50 percent of all growth for Apple in fiscal year 2011, according to one Wall Street analyst.Robert Cihra with Caris & Company issued a note to investors on Friday noting that Apple's growth is "stunning." He said the company has managed to effectively create its own growth through innovation, while its competitors are lost "in a sea of otherwise commoditized hardware." In the December quarter, Cihra expects Apple to sell 6.7 million iPads. He has also projected the sale of 32 million iPads in fiscal year 2011, accounting for more growth in Apple's bottom line than the iPhone. "A product that didn't even exist a year ago... now leads an entire charge to thin-client access/computing architecture," he wrote. He sees the iPad "igniting an explosion toward 'thin-client' access computing, with Apple's most extensible advantage its lightweight iOS software and apps ecosystem." Cihra sees the iPhone accounting for more than 40 percent of Apple's fiscal year 2011 growth, with 64 million units sold. He also sees another 5 percent expansion in the company's bottom line thanks to the Mac platform, where he sees sales increasing 19 percent year over year. Accordingly, Caris & Company has raised its price target for AAPL stock to $400, up from its previous projection of $375.
Politico:
Obama's Stimulus Pours Millions Into Faith-Based Groups. An analysis by POLITICO found that at least $140 million in stimulus money has gone to faith-based groups, the result of an unpublicized White House decision to spend government money, where legal, supporting religiously inspired nonprofit groups. And that decision was just the beginning.Rasmussen Reports:
Reuters:
US SEC to Unveil Swaps Dealers Proposals. U.S. regulators are expected to unveil proposals on Friday that will determine which firms will be forced to hold more cash to deal in the lucrative over-the-counter derivatives market. The proposals will define who will be subject to more scrutiny from the Securities and Exchange Commission, which has new-found power to police the estimated $600 trillion market. That means Wall Street firms that dominate the market will be subject to additional capital and margin requirements as swap dealers and major swaps participants.
Spain Speeds Reforms, Makes Cuts to Reassure Markets. Spain brought forward pension reforms, raised tobacco taxes and cut windpower subsidies on Friday as it fought to slash a high budget deficit and calm investor concerns it could need a financial bailout.
Ditlev Engel, the chief executive officer of Vestas Wind Systems A/S, said the European wind-energy business lacks momentum and the outlook isn't bright. That assessment by the head of the world's biggest wind-turbine maker will be a blow to governments such as Britain's, which hope to develop industries employing tens of thousands of people around renewable-energy technologies.
The Globe and Mail:
Fairfax's Prem Watsa Sees Commodity Bubble Brewing. Never mind the current hype over commodities: Prem Watsa and his team at Fairfax aren’t convinced that resources and agricultural goods will continue to skyrocket. “Anything that everybody thinks is going to happen worries us,” Mr. Watsa said in an interview. “The excesses get built up. Recessions take them out.” He is particularly troubled by the number of pension funds throwing cash at the commodities market. “You aggregate that, there’s a lot of money going into a small market,” he said. “Takes the price through the roof.” This isn’t the first time Mr. Watsa has contradicted conventional wisdom. He predicted a severe financial crisis long before even the Federal Reserve saw it coming, and made billions by hedging against it.
Le Temps:
Bank Sarasin & Cie AG will stop investing in U.S. equities, citing a letter sent by the company to clients. The bank also advised clients to do likewise, given the "concentration of regulations in the United States and the toughening of American tax legislation."
Junk Bond Market 'Back Open' as Sales Soar, Spreads Shrink: Credit Markets. The market for junk bonds is reviving, after at least seven companies pulled sales last week, signaling that investors are gaining confidence that Europe’s sovereign debt crisis won’t infect the global economy. International Lease Finance Corp. and Clearwire Corp. led speculative-grade companies set to sell $2.4 billion of debt today, the most in two weeks, according to data compiled by Bloomberg. Relative yields have narrowed 29 basis points since Nov. 30 to 593 basis points, or 5.93 percentage points. That’s the biggest two-day decline since May. Junk bond issuance, which declined in November following the busiest two-month period on record, is returning amid reports that retail sales rose the most since March and the increase in the number of Americans signing contracts to buy existing houses jumped by a record 10 percent in October. The European Central Bank extended an emergency loan program and President Jean-Claude Trichet pledged to fight “acute” financial market tensions.
Greece's Credit Rating May Be Cut by S&P on EU Rules. Greece was warned it could receive a lower credit rating from Standard & Poor’s as proposed European Union rules threaten to hurt bondholders. Greece’s ‘BB+’ long-term sovereign rating was placed on “CreditWatch” with negative implications, Standard & Poor’s Ratings Services said in a statement today from Madrid. S&P said it is assessing credit implications of the so-called European Stability Mechanism that may govern European Union sovereign bonds beginning in July 2013. “Assigning ‘preferred creditor’ status to future official lending via the ESM could be detrimental to the ability of non- official holders of sovereign debt to be repaid,” S&P said. The possible cut by S&P “is simply an indication of tightening liquidity conditions there and growing uncertainty about Greece and other front-line European countries’ ability to handle their debt loads,” said Gary Schlossberg, senior economist at Wells Capital Management Inc. in San Francisco. “It is also an indication of the questions that remain about how sufficient official rescue packages will be,” Schlossberg said. “There’s a real risk that Europe’s crisis will get a bit worse before it gets better.”
Germany rejected issuing joint Eurobonds or increasing the euro-area bailout fund as Deputy Finance Minister Joerg Asmussen dismissed calls for authorities to step up efforts to fight the resurgent debt crisis. "It's more disturbing to markets if you signal things which are not needed and which are not requested," Asmussen said. "So even if, what I don't see, even if more countries approach the assistance mechanism, there are sufficient funds to deal with this." "If you introduce just Eurobonds as a financial instrument but you don't adjust the whole fiscal framework of the monetary union, then you have just an instrument but it doesn't fit with the rest of the government structures," he said. "So there is a clear 'no' from Germany to this kind of Eurobonds."
North Korea Boosts Rockets, Tanks; May Target Seoul, Yonhap Says. North Korea has increased the number of multiple rocket launchers, bolstering its capability to attack South Korea’s capital, Yonhap News reported, citing a South Korean government official it didn’t identify. North Korea has more than 5,200 240-millimeter multiple rocket launchers, 100 more than previously estimated, Yonhap reported. North Korea has also increased the number of tanks by 200 and the country’s air force has bolstered its capability to intercept planes, Yonhap said.
Senate Leadership Accused of Secret Plan to Legalize U.S. Online Gambling. Three U.S. House Republicans are objecting to what they call a “secretive, closed-door, undemocratic” effort in the Senate to pass legislation that would legalize and tax some Internet gambling before Congress adjourns this year. “Creating a federal right to gamble that has never existed in our country’s history and imposing an unprecedented new tax regime on such activity require careful deliberation, not back- room deals,” the lawmakers said in a Dec. 1 letter to Senate Majority Leader Representatives Spencer Bachus, Dave Camp and Lamar Smith, all in line to be committee chairmen with oversight of online gambling when Republicans take control of the House in January, said they have learned that the Senate may attach a measure to “must-pass” legislation during the current lame-duck session.Harry Reid and his Republican counterpart, Mitch McConnell of Kentucky.
China is 'Scared' of U.S. Monetary Policy, Rogoff, Rickards Say. Policy makers in China, which holds $883.5 billion in U.S. Treasuries, are concerned the nation with the world’s biggest economy is debasing its currency, according to Kenneth S. Rogoff and James Rickards. The world is in the early stages of a currency war, said Rickards, chief financial and administrative officer of Oro Capital Advisors LLC. Rickards, Rogoff, a professor of economics and public policy at Harvard University, and Laurence H. Meyer, co-founder of Macroeconomic Advisers LLC, spoke today at the Bloomberg Hedge Funds 2010 conference in New York.
China's Services Industry Grows at Slower Pace as Inflation Erodes Margins. China’s non-manufacturing purchasing managers’ index fell to a nine-month low in November as accelerating inflation eroded service companies’ margins. The index dropped to 53.2 from 60.5 in October, according to a statement today by the Beijing-based National Bureau of Statistics and the Federation of Logistics and Purchasing. A separate service PMI released by HSBC Holdings Plc fell to 53.1, a near two-year low. The non-manufacturing new-order index fell to 50.1 last month from 56.3 in October, and new orders in consumer service industries indicated a contraction, with a reading of 47, today’s data show. Consumer prices gained 4.4 percent in October from a year earlier as food prices jumped 10 percent, according to statistics bureau data.
China Needs to Raise Deposit Rates to 12-Year High on Inflation, Xie Says. China has to raise deposit rates by “at least” 3 percentage points in the next 12 months to protect investors faced with a negative return on their savings as inflation accelerates, independent economist Andy Xie said. A 300 basis point increase would raise the benchmark deposit rate from 2.5 percent to 5.5 percent, the highest since March 1998. Consumer prices will quicken to 6.2 percent by mid- 2011 after climbing 4.4 percent in October, according to Credit Suisse Group AG.
Wall Street Journal:
Tax-Cut Vote Shows Democratic Divide. House Passes Extension Excluding Higher Incomes, a Largely Symbolic Effort Reflecting Unhappiness With White House. The bill passed 234-188, but 20 Democrats opposed it— mostly lawmakers who lost on Election Day and who agree with Republicans that it is bad policy to let any tax rates rise amid a fragile economy. Three Republicans voted for the bill.
Shopper Splurge Buoys Hopes. Retailers' reports of robust November sales offered more evidence that the lackluster U.S. economy may finally be gaining momentum, despite stubbornly high unemployment. According to 27 retailers tracked by Thomson Reuters, sales at stores open a year or more rose 6% last month, sharply exceeding a year-earlier rise of just 0.5%. Online retailing also showed sizable gains. "It's a cheerful holiday start—for most," said Alison Kenny Paul, vice chairman and leader of the U.S. retail team at Deloitte Consulting LLP. "People are back in spirit, shaking off the recession and spending on themselves, as well as for gifts."
Government by Executive Order. A new Labor Department plan shows the president still has wide power to implement an anti-business agenda. Because President Obama will now have a tough time getting his liberal agenda through a more Republican Congress, many Democrats are urging him to ram it through using the executive branch's unilateral power. John Podesta, head of the Center for American Progress, even issued a list of executive orders and rule-makings last month that Mr. Obama can use to "push the country to a better place." If the Department of Labor is representative, his advice is in sync with moves already under way.
Tax Breaks for Bailout Recipients Stir Up Debate. A series of tax relief measures is saving companies bailed out by the government billions of dollars at a time when concern over tax revenues has risen.
Ellison Says Oracle(ORCL) Will 'Go After' H-P(HPQ). Oracle Corp. will use new hardware to attack onetime partner Hewlett-Packard Co. in the market for server systems, said Oracle Chief Executive Larry Ellison. The jibe Thursday came as Oracle announced new computers based on the Sparc chip technology developed by Sun Microsystems—which Oracle acquired in January for $7.4 billion—as well as updates to other products.
Amazon(AMZN) Says WikiLeaks Violated Terms of Service. It was "inaccurate" to claim that pressure from the U.S. government or large-scale attacks by hackers caused the company to discontinue its service of WikiLeaks, said Amazon spokesman Drew Herdener in a statement. Amazon, which rents Web infrastructure on a self-service basis, "does not pre-screen its customers" but does reserve the right to discontinue service if its terms aren't followed, said Mr. Herdener. WikiLeaks "doesn't own or otherwise control all the rights to this classified content," one of the stipulations of Amazon's contractual terms, he said. Mr. Herdener said that Amazon's terms of service also require that content "will not cause injury to any person or entity." Yet he said "it is not credible that the extraordinary volume of 250,000 classified documents that WikiLeaks is publishing could have been carefully redacted in such a way as to ensure that they weren't putting innocent people in jeopardy." Mr. Herdener said Amazon did face "large-scale" attacks on its servers after it began hosting WikiLeaks content recently, but that they were "successfully defended against."
Twitter Grows Up In Valuation, Board Count. Twitter Inc. is considering raising capital at a valuation of more than $3 billion, said a person familiar with the matter, as it becomes the latest Web start-up to attract multibillion-dollar valuations. Possible investors in the four-year-old microblogging service include the Russian Internet investment firm Digital Sky Technologies and Silicon Valley venture-capital firm Kleiner Perkins Caufield & Byers, said the person familiar with the matter.
French Officials Warn Against Bank-Run Proposal. Bankers and politicians warned against a plan inspired by French former football star Eric Cantona to spark a bank run next week, saying that such a move would be counterproductive. The plan—which calls on depositors to remove their money from banks on Tuesday—has attracted increasing attention in recent days, drawing comments from French financial leaders.
U.S.-Korea Pact Hinges on Autos. U.S. and South Korean negotiators meeting to revive a stalled trade pact are down to one main sticking point, say people familiar with this week's negotiations—leaving the biggest U.S. free-trade deal in nearly two decades hinging on an economically negligible but politically potent issue. The deal now comes down to whether South Korea will agree to give the U.S. four or five years to phase out the 2.5% tariff it levies on Korean-built cars, these people say, rather than cutting the tariff immediately, as Seoul has sought.
Holdings Spiked Near Deal Time. Several hedge funds under scrutiny in an insider-trading investigation made big bets on health-care stocks also being examined in the probe, according to a Wall Street Journal analysis. Hedge funds SAC Capital Advisors LP, Diamondback Capital Management LP, Jana Partners LLC and Balyasny Asset Management LP all increased their holdings in one or more of three health-care stocks during the quarters in which the companies announced mergers and the stock shot up in price, according to public filings. It wasn't clear from the filings whether the purchases took place before or after the deals were unveiled.
Bloomberg Businessweek:
Europe Tops Hedge Funds' Worries as Portugal at Risk. David Gerstenhaber, founder of $1.6 billion hedge fund Argonaut Capital Management, said Portugal may be the next casualty of Europe’s debt crisis. “Portugal is structurally weak,” he said in a telephone interview from New York. “There’s a 90 percent chance that they will get some form of help” to keep concern over the country’s creditworthiness from spreading to Spain and Italy, he said. Gerstenhaber, 50, is among hedge-fund managers who say Europe’s debt woes pose one of the biggest risks to a global economic outlook that has only gradually improved this year.
Julian Assange Arrest By British Police Delayed By Technicality. The noose around Wikileaks' Julian Assange is tightening. It appears that not only does British police know where he is, but that he himself is currently residing in South-east England, awaiting his own arrest.
Democrat Webb Unhappy With Ban on Offshore Drilling. North Carolina's neighbor to the north, U.S. Sen. Jim Webb of Virginia, isn't happy about cutting off the Atlantic Ocean to offshore drilling for oil and natural gas. Webb, a Democrat, said in a statement today that the Obama administration has "over-reacted" to the BP oil spill. "A much more sensible response could have been found in making sure that industry employ the best technology and proper safeguards, and that government take more seriously its oversight role in order to make this happen," Webb said. "Enhancing our nation's energy independence and answering our emerging energy needs demand that we keep all options on the table, including conservation, renewable energy and energy efficiency, domestic offshore oil and gas development, clean coal, and nuclear power," he said. The Obama administration announced Wednesday that it was taking the Atlantic Ocean off the table for offshore drilling until at least 2017.
Rasmussen Reports:
Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 22% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Thirty-nine percent (39%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -17 (see trends).
Politico:
House Censures Charles Rangel by Overwhelming Vote. The House voted overwhelmingly on Thursday to censure Rep. Charlie Rangel (D-N.Y.), who pleaded for leniency but now finds his 40-year career tarnished after his colleagues rebuked him using a rare form of public punishment for ethics violations. The vote was 333-79, with 77 Democrats and two Republicans voting against censure, the harshest form of punishment short of expulsion from Congress. Immediately following the vote, Speaker Nancy Pelosi (D-Calif.) formally called on the 80-year-old Rangel to stand in the well of the House to be informed that he had indeed been censured by his colleagues for series of 11 ethics violations.
Joe Barton: I'll Work to Repeal Obamacare. Rep. Joe Barton wants House Republicans to work overtime — including weekends — next year to roll back the Obama administration’s health care and environmental policies.
Reuters:
Viacom(VIA/B) CEO Sees Ad Market Improving. Viacom Chief Executive Philippe Dauman is bullish on advertising revenue growth for this quarter and next year as high ratings from shows like "Jersey Shore" help bring in new advertisers.
EXCLUSIVE - Email of Analyst Visited by FBI Went to Big Players. Money manager Ameriprise Financial would seem to have little in common with closely held investment advisory firms like Friess Associates and Sonar Capital Management or a giant hedge fund like Citadel Group. Yet a Portland, Oregon-based technology analyst under scrutiny in a U.S. insider trading probe included employees of all three firms in an unusual email he sent in late October, according to information reviewed by Reuters. The research analyst, John Kinnucan, told an eclectic list of industry contacts that two agents with the Federal Bureau of Investigation had recently visited him in connection with the investigation. In the email, sent to more than 50 people associated with some 20 hedge funds and mutual funds, Kinnucan said he had rebuffed a demand by the FBI that he cooperate with the inquiry and secretly record conversations with a client, said people familiar with the situation. Kinnucan's email, which included the names of industry contacts and their company email addresses, has unnerved many on Wall Street. There is a fear that by simply being a recipient on the email, federal authorities may take notice and come visit these contacts too. Employees of Ameriprise, Delaware-based Friess Associates and Boston-based Sonar Capital and MFS Investment Management, were some of the recipients of the Kinnucan email. Some of the better-known hedge funds -- Coatue Management, Citadel, SAC Capital Advisors and Maverick Capital -- also employ analysts and traders who received the email.
U.S. Commercial Property Values Up 2% in November. U.S. commercial real estate prices rose 2 percent in November and are up 32 percent from their recent lows as investors flock to higher-yield investments, according to independent research firm Green Street Advisors. That means about half the value that was wiped out from 2007 to 2009 has been restored, leaving prices 19 percent shy of their peak, according to The Green Street Advisors Commercial Property Price Index.
Financial Times:
Spain's banking restructuring fund plans to raise 2 billion euros by issuing bonds in the next few months, citing bankers in Madrid. The Fund for Orderly Bank Restructuring has already raised 3 billion euros in bonds and seeks further funds as it makes loans to the country's savings banks.
Petr Aven, a founding owner of Alfa Bank, said the investment climate in Russia is deteriorating, citing an interview with Aven. "Economically, we are returning to Soviet times again," Aven said.
Telegraph:
UK Banks Borrowed More Than £640bn from US Federal Reserve. British banks borrowed more than $1 trillion (£640bn) from the Federal Reserve during the financial crisis, led by Barclays following its swoop on the US business of Lehman Brothers.
Australian Review:
The Reserve Bank of Australia borrowed $53 billion from the Federal Reserve in 10 transactions during the financial crisis, citing the U.S. central bank. The RBA drew on a currency-swap facility to assist its domestic banks.
South China Morning Post:
Steep Drop in Property Sales Seen Next Year. Property sales in Hong Kong will drop sharply next year as the government's measures against speculation start to bite, a leading property agency says.
Evening Recommendations Citigroup:
Reiterated Buy on (PVH), target $76.
Night Trading
Asian equity indices are unch. to +.50% on average.
Asia Ex-Japan Investment Grade CDS Index 109.0 -1.0 basis point.
Asia Pacific Sovereign CDS Index 109.25 -.75 basis point.
The Change in Non-Farm Payrolls for November is estimated at 150K versus 151K in October.
The Change in Private Payrolls for November is estimated at 158K versus 159K in October.
The Unemployment Rate for November is estimated at 9.6% versus 9.6% in October.
Average Hourly Earnings for November are estimated to rise .2% versus a .2% gain in October.
10:00 am EST
ISM Non-Manufacturing for November is estimated to rise to 54.8 versus 54.3 in October.
Factory Orders for October are estimated to fall -1.2% versus a +2.1% gain in September.
Upcoming Splits
None of note
Other Potential Market Movers
The (SON) analyst meeting and (ITW) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly 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 92.83 bps -3.55%
European Financial Sector CDS Index 122.06 bps -12.08%
Western Europe Sovereign Debt CDS Index 180.83 bps -6.55%
Emerging Market CDS Index 221.81 bps -3.43%
2-Year Swap Spread 25.0 -2 bps
TED Spread 16.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 245.0 +1 bp
China Import Iron Ore Spot $167.80/Metric Tonne unch.
Citi US Economic Surprise Index +20.60 -1.1 points
10-Year TIPS Spread 2.19% +3 basis points
Overseas Futures:
Nikkei Futures: Indicating +137 open in Japan
DAX Futures: Indicating +3 open in Germany
Portfolio:
Higher: On gains in my Biotech, Medical, Retail, Ag and Technology long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades substantially higher despite some disappointment over the ECB's announced actions to stem their debt contagion. On the positive side, Coal, Disk Drive, Bank, I-Banking, Construction, Homebuilding, Road & Rail, Semi, Computer Hardware, Software and Paper shares are especially strong, rising more than 2.0%. Cyclical shares are outperforming again. (XLF) has strongly outperformed throughout the day. The Transports are clearly breaking out again. Copper is rising +.67% and lumber is gaining another +.40%. The Spain sovereign cds is plunging another -6.24% to 296.84 bps, the Italy sovereign cds is dropping -4.87% to 217.26 bps, the Portugal sovereign cds is falling -5.67% to 448.30 bps and the Ireland sovereign cds is falling -3.64% to 542.50 bps. The large declines in the euro financial sector cds and western europe sovereign cds indices are also major positives. On the negative side, Gaming, Airline, Food and Tobacco shares are mildly lower. One of my longs, (AAPL), is slowly grinding back near its all-time high of $321.30. I expect it to convincingly break above this level in the short-term and still move much higher over the intermediate/long-term on p/e multiple expansion, new products and forward estimate increases. Another one of my longs, (SXCI), is jumping +12.0% to an all-time high on volume with the announcement of an accretive acquisition. I also still see substantial upside in this stock over the intermediate/long-term. I am seeing a number of small/mid-cap stocks experiencing technical breakouts on decent volume which bodes well for further upside in the major averages after a brief pause. I expect US stocks to trade mixed-to-higher into the close from current levels on falling eurozone sovereign debt angst, declining economic fear, seasonal strength, investment manager performance angst, short-covering, less financial sector pessimism and technical buying.
