Today's Headlines

Bloomberg:

• Germany Snubs Peas to Boost Aid, Sell Joint Bonds. Germany rejected calls to increase the European Union’s 750 billion-euro ($1 trillion) aid fund or introduce joint bond sales, signaling its refusal to bear extra costs to stamp out the debt crisis. With European finance ministers gathered in Brussels today for their monthly meeting, German Chancellor Angela Merkel rebuffed pleas from Belgium and central bankers to boost the emergency fund to save countries such as Portugal and Spain from falling prey to speculation. “Right now I see no need to expand the fund,” Merkel told reporters in Berlin. She said EU treaties bar joint bond sales, which might force up Germany’s borrowing costs, the lowest in the euro area.
  
• Biggs Says Technology at Start of Bullish Cycle on Asian Demand: Tom Keene. Demand from Asia is spurring a bull market for computer and software makers, according to Barton Biggs, manager of the Traxis Partners LLC hedge fund. “The big capital spending cycle, the last one, was from 1995 to 2000, and it was a transforming cycle,” Biggs, the managing partner of New York-based Traxis and former chairman of Morgan Stanley Asset Management, said in an interview today on “Bloomberg Surveillance” with Tom Keene. “The developments in terms of the cloud, storage and a whole series of new devices is the beginning of a new technology cycle.” While the peak season for spending by technology companies was once Christmas, the cycle for semiconductor makers and companies such as Apple Inc. has changed to revolve more around the Chinese New Year in January or February, Biggs said. “I feel really good about the markets here,” Biggs said. “Everything’s not perfect. The Case-Shiller, in terms of U.S. housing, and the European problems haven’t been solved. But nevertheless, it’s pretty clear the world is emerging from the soft spot it was in and we’re getting poised for pretty decent growth.”
• Russia Poised to Control 50% of U.S. Uranium Output. ARMZ, the uranium-mining unit of Rosatom Corp., Russia's state-owned nuclear-energy company, may soon control as much as half of U.S. uranium production, after U.S. authorities approved its purchase of 51% of Canada's Uranium One Inc.. The purchase of the stake in Uranium One, which owns mines in Wyoming, was approved in Octobe4r by the Committee on Foreign Investments in the U.S. and last month by the U.S. Nuclear Regulatory Commission.
• Radware(RDWR) Jumps 20% After Calcalist Reports Riverbed(RVBD) May Seek to Acquire It. Radware Ltd., the maker of technology that helps Internet networks run more efficiently, jumped as much as 20 percent after Israeli newspaper Calcalist reported Riverbed Technology Inc. may seek to acquire it. Radware, based in Tel Aviv, gained $6.22, or 19 percent, to $38.98 at 9:59 a.m. New York time in Nasdaq Stock Market trading, after earlier rising to as high as $39.45. The shares had more than doubled this year before today.
• Peter Thiel's Clarium Hedge Fund Falls 23% This Year. Clarium LP, the hedge fund run by PayPal co-founder Peter Thiel, lost 23 percent this year, according to a note sent to clients. The $321 million fund declined 7.8 percent last month, according to the Dec. 3 note. Armel Leslie, a spokesman for Thiel’s San Francisco-based Clarium Capital Management LLC, declined to comment.
• Carlyle to Buy Majority Stake in Credit Hedge Fund Claren Road. Carlyle Group, the world’s second- largest private-equity firm, agreed to buy a 55 percent stake in Claren Road Asset Management, a $4.5 billion long-short hedge fund focused on liquid credit assets. Citigroup Inc., which invested in Claren Road in 2006, and Goldman Sachs Group Inc.’s Petershill Fund, which bought a minority stake in 2008, will sell their holdings, according to an e-mailed statement by Washington-based Carlyle. Claren Road founders Brian Riano, John Eckerson, Sean Fahey and Albert Marino will continue to manage the day-to-day operations and make all investment decisions.
• Italy, Spain Lead Increase in European Sovereign Credit Risk. Italy and Spain led an increase in the cost of insuring bonds sold by Europe’s peripheral nations, according to CMA prices for credit-default swaps. Swaps on Italy rose 8 basis points to 217 while Spain increased 9 basis points to 306. Contracts on Ireland were 11.5 baais points higher at 553 and Portugal was up 6 to 434. The Markit iTraxx SovX Western Europe Index of swaps linked to 15 governments rose 3 basis points to 179.5.
• UN Climate Negotiators Considering Two-Year Deadline for New Emission Cuts. Diplomats at United Nations climate talks this week will consider a two-year deadline for industrial nations to sign up for further cuts in greenhouse-gas emissions after Kyoto Protocol limits expire in December 2012.
• Moody's Cuts Hungary Credit Rating Two Steps on 'Temporary' Deficit Cuts. Hungary’s sovereign credit rating was cut two levels by Moody’s Investors Service on concern that the government’s policy of plugging budget holes with “temporary measures” won’t be sustainable.
• Rogoff Says Europe's 'Denial' Won't Avert Greek, Irish Bond Restructuring. Europe’s debt crisis will probably result in bond restructurings in Greece, Ireland and Portugal even as policy makers say they have the weapons to avert default, Harvard University Professor Kenneth Rogoff said. “They can’t just be in a state of denial,” Rogoff said in a Bloomberg Television interview today. “They’ve tried to guarantee everything, to say, ‘Well, Germany is behind it and the IMF is behind it, it’s inconceivable for a euro-zone country to restructure.’” “We’ll be very lucky to avoid restructuring” in countries such as Greece, Ireland and Portugal, he said.
• Fed's $600 Billion Credit Easing May Complicate Stimulus Exit, Lacker Says. Federal Reserve Bank of Richmond President Jeffrey Lacker said the purchases of $600 billion in U.S. Treasuries risk spurring inflation in a few years and may make it harder for the Fed to eventually withdraw the stimulus. “Further balance sheet expansion now could require more rapid balance sheet reduction later on, complicating the withdrawal of monetary stimulus when it becomes necessary to maintain price stability,” Lacker said today in a speech in Charlotte, North Carolina. “It is appropriate” to regularly review the purchases, he said.

Wall Street Journal:

• Recruiters Expect Pickup In Hiring of Top Managers. Recruiters expect companies' executive-hiring plans to brighten, with business-development and sales executives most in demand, according to a November survey by Norwalk, Conn.-based ExecuNet Inc., an online networking site and job board. About 26% of search firms expected their clients to add executive jobs over the next six months, compared with about 5% that expected their clients to cut or not fill open positions. ExecuNet subtracts the second number from the first to calculate a hiring-index score. The 21-percentage-point difference between optimistic and pessimistic search firms in November was nearly 12 points greater than it was in October.
• US Housing Market to Rebound in 2011 - Freddie Mac Economist. Macroeconomic factors suggest the U.S. housing market will improve in 2011, Freddie Mac's chief economist said in a note Monday. Accelerating economic recovery, low mortgage rates, a bottoming of home prices and increased affordability of homes at current low prices will be behind the improvement, said Frank Nothaft, the chief economist at the mortgage finance company.

Barron's:

• Apple(AAPL), Sprint(S): Einhorn's Favorite Picks(After Gold). “I still like Apple. Apple is a very interesting company. You buy one Apple device, you want to buy more Apple devices. Your kids buy Apple devices, you buy them, now all of a sudden you have to get your employer to support it. Before you know it, they’re using iPhones and iPads and all kinds of things. This is not the early stage, ’cause gosh knows, the stock has done great for a long time. But, net out the cash, it’s a market multiple, which is extraordinary for a company doing as well as this.”

CNBC:

• Goldman Sachs(GS) 2011 Forecast: Stocks, Gold, Oil Higher. Goldman Sachs is bullish on the U.S. economy for 2011, and forecasts U.S. stocks will see their third straight year of gains. The investment banking powerhouse sees the S&P 500 gaining nearly 25 percent to a level of 1450 in the next 12 months, fueled by strong corporate profits, easy monetary policies and an improving U.S. economy. Goldman sees stocks gaining as the U.S. economic growth accelerating from 2.5 to 4 percent by the end of 2012, but says investors will continue to have doubt.
• Google(GOOG) Unveils Web Bookstore in Challenge to Amazon(AMZN).
  

Business Insider:

• Here It Is: The Justice Dept. Announces The Details of Wall Street Crackdown. The big announcement we've all been waiting for is a bit of a letdown because its almost all ponzi schemes and the biggest we've read about is a $880 million scheme - nothing compared to the billions Madoff scammed from investors.
• Harry Reid Is Pushing Bill To Legalize Online Poker.
• Arnold Schwarzenenegger Is Going to Announce a Fiscal State of Emergency in California Today.
• Check Out Bill Ackman's Awesome Presentation On Why The Time Is Now To Invest In Housing.
  

New York Times:

• GE(GE) and JPMorgan(JPM) Got Lots of Fed Help in '08. Newly disclosed records show that during the 2008 financial crisis, the Federal Reserve essentially lent $16.1 billion to General Electric by buying short-term corporate i.o.u.’s from the company at a time when the public market for such debt had nearly frozen. And on Sept. 15, 2008, the day Lehman Brothers filed for bankruptcy protection, JPMorgan Chase received a $3 billion loan from the Fed. The loan was extended under one of several Fed programs tapped by the Wall Street bank, one of the more robust financial institutions to weather the crisis. The two companies received help even as their chief executives, Jeffrey R. Immelt of G.E. and Jamie Dimon of JPMorgan, sat on the nine-member board of the Federal Reserve Bank of New York. “In my view, it is an obvious conflict of interest for C.E.O.’s of banks and large corporations who serve on the Fed’s board of directors to have received cheap loans from the Fed,” Senator Bernard Sanders, a Vermont independent who wrote the legal provision requiring the Fed to make the disclosures, said in a statement on Sunday. “While they got a huge amount of government support, small businesses are going bankrupt because they can’t receive affordable credit, workers are losing their homes to foreclosure, and consumers are being charged 25 percent to 30 percent interest rates on their credit cards by the very same banks that were bailed out,” he added. G.E. was one of the largest beneficiaries of the Fed program to buy commercial paper, or short-term i.o.u.’s. A few institutions — among them Bank of America, UBS, Barclays and Citigroup — sold even more to the Fed. In contrast, JPMorgan got far less help under the program for investment banks than some of its Wall Street rivals, like Citigroup, Merrill Lynch and Morgan Stanley, which each tapped the program on more than 100 occasions. Goldman(GS), previously an investment bank, became a Fed-regulated bank holding company during the crisis. It tapped the Fed program to help investment banks 52 times, owing $18 billion to the Fed at one point — receiving far greater support than JPMorgan. The chairman of the New York Fed at the time, Stephen Friedman, was a Goldman director and former chairman of Goldman. The Fed granted Mr. Friedman a waiver so he could continue serving as chairman of the New York Fed. While awaiting the waiver, Mr. Friedman bought shares of Goldman around the time the bank received Fed support.

TechCrunch:

• U.S. Online Advertising Expected to Grow 14% in 2010. Online ad spending is expected to grow nearly 14 percent this year in the U.S. to $25.8 billion, according to a revised forecast by eMarketer. Its last forecast in May projected about 11 percent growth to $25.1 billion. The market research firm also expects U.S. online advertising to keep growing at double-digit rates through 2014, when it estimates the total will reach $40.5 billion.

MSNBC:

• WikiLeaks Publishes List of Worldwide Infrastructure 'Critical' to Security of U.S. A list drawn up by U.S. officials of companies and installations around the world regarded as "critical" to the security of the United States has been published online by controversial website WikiLeaks. The list includes factories, ports, fuel companies, drug manufacturers, undersea cables, pipelines, communication hubs and a host of other "key resources." Its publication was denounced as "irresponsible" by U.S. Assistant Secretary of State Philip Crowley, amid fears it could be used as a list of targets by terrorists, Britain's Times newspaper reported. "This is the kind of information terrorists are interested in knowing," added Rifkind, who now serves as chairman of the British parliament's Intelligence and Security Committee.

Rasmussen Reports:

• Most Say Continuing Offshore Drilling Ban Will Hurt Economy. The Obama administration announced last week that it is continuing the ban on offshore oil and gas drilling along the Eastern seaboard and in the eastern portion of the Gulf of Mexico. Most voters expect that decision to drive up gas prices and hurt the economy. A new Rasmussen Reports national telephone survey finds that 54% of Likely U.S. Voters believe the new seven-year ban will increase gas prices, while just 11% think it will make gas prices go down. Twenty-five percent (25%) expect the ban to have no impact on prices at the pump. Similarly, only 15% of voters feel the ban is good for the economy. Fifty-four percent (54%) predict that it will be bad for the economy, but 20% say it will have no impact.

The Daily Beast:

• Bernanke's Arrogance Problem by Zachary Karabell. Last night, the Fed chief trumpeted tax code changes and brushed off critics with his department’s typical over-confidence. Zachary Karabell on Bernanke’s desperate attempts at spin.

Politico:

• Obama Signals Yield on Tax Cuts. President Barack Obama conceded Monday that he’ll probably have to let the Bush tax cuts for the rich be extended as part of a deal with Republicans, arguing that such an agreement was necessary to ensure that taxes for the middle class don’t increase on Jan. 1.

Reuters:

• Spain May Extend State of Emergency After Strike. Spain will extend a state of emergency if needed to prevent further travel disruption, its prime minister said on Monday, after a wildcat strike by air traffic controllers grounded flights last week. Controllers only returned to work after the Socialist government sent in the army to take over control towers and threatened controllers with jail.

Telegraph:

• WikiLeaks: Top Chinese Official Doesn't Believe GDP Figures. China's economic figures are unreliable and not to be trusted, according to Li Keqiang, one of the country's most senior officials. The 55-year-old is widely tipped to become China's next prime minister and is currently the country's executive vice premier, with responsibility for macro-economic management. However, in private talks with the US ambassador in 2007, when he was still just the head of the Chinese province of Liaoning, Mr Li cast doubt on China's much-vaunted economic statistics. A diplomatic cable leaked by Wikileaks, the whistle-blowing website, reveals that Mr Li described China's gross domestic product figure as "man-made" and "therefore unreliable". Chinese officials have repeatedly been found to have artificially inflated their local GDP figures in order to win face and hit their targets. Mr Li said he used three ways of evaluating Liaoning's economic activity, focusing on electricity consumption, the volume of rail cargo and the amount of bank loans disbursed. "By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth," the cable said. "All other figures, especially GDP statistics, are 'for reference only,' he said smiling," it added.

El Confidencial:

• Spain's financial system needs more capital, according to Jose Maria Azner, the former Spanish prime minister. "The system needs more capital and without it, it won't be able to emerge from the brutal crisis it finds itself in," citing Aznar.

DigiTimes:

• NAND Flash Prices Continue to Rally Amid Korea Tensions, Says inSpectrum.

Bear Radar

Style Underperformer:

• Large-Cap Growth (-.09%)

Sector Underperformers:

• 1) Hospitals -.81% 2) Biotech -.71% 3) Paper -.53%

Stocks Falling on Unusual Volume:

• CELG, ULTA, SGEN and WNS
  

Stocks With Unusual Put Option Activity:

• 1) CLWR 2) SPWRB 3) LFC 4) YUM 5) WFR
  

Stocks With Most Negative News Mentions:

• 1) DFS 2) OII 3) GTIV 4) ARO 5) DMND
  

Bull Radar

Style Outperformer:

• Small-Cap Growth (+.05%)

Sector Outperformers:

• 1) Coal +1.03% 2) Steel +.97% 3) Internet +.64%

Stocks Rising on Unusual Volume:

• NG, SSRI, WTI, TGA, RVBD, SWC, FCX, AAPL, TEO, WPI, JCOM, PRX, MET, VRGY, RDWR, RMBS, ARII, OXPS, SCOK, DDIC, LLEN, GNTX, CBPO, ASMI, ASYS, TSTC, EZCH, KELYA, TLVT, ASEI, DORM, NFLX, BKS, GAS, PVD and RLI
  

Stocks With Unusual Call Option Activity:

• 1) RDWR 2) NAV 3) KBH 4) WMB 5) AAP
  

Stocks With Most Positive News Mentions:

• 1) RAI 2) ZUMZ 3) AMT 4) NOC 5) ARII
  

Monday Watch

Weekend Headlines
Bloomberg:

• Bernanke Says Fed May Take More Action to Curb Joblessness. Federal Reserve Chairman Ben S. Bernanke said U.S. unemployment may take five years to fall to a normal level and that Fed purchases of Treasury securities beyond the $600 billion announced last month are possible. “At the rate we’re going, it could be four, five years before we are back to a more normal unemployment rate” of about 5 percent to 6 percent, Bernanke said. The purchase of more bonds than planned is “certainly possible,” said Bernanke, 56. “It depends on the efficacy of the program” and the outlook for inflation and the economy. The economy, which grew 2.5 percent in the third quarter, is so weak that Bernanke said growth could fizzle out without support. “It’s very close to the border,” he said. “It takes about 2.5 percent growth just to keep unemployment stable and that’s about what we’re getting. We’re not very far from the level where the economy is not self-sustaining.” Bernanke said a return to a recession “doesn’t seem likely” because sectors of the economy such as housing can’t become much more depressed. Still, a long period of high unemployment could damage confidence and is “the primary source of risk that we might have another slowdown in the economy.” Bernanke said he is “100 percent” confident that, when necessary, the central bank can control inflation and reverse its accommodative monetary policy. “We’ve been very, very clear that we will not allow inflation to rise above 2 percent,” he said. “We could raise interest rates in 15 minutes if we have to,” he said. “So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time.” The yield on the 10-year Treasury note increased 44 basis points to 3.01 percent on Dec. 3 from a month before, while the 30-year Treasury yield climbed 27 basis points to 4.31 percent.
• Parnassus Beats 85% of Peers as Top Funds Stay Bullish for 2011. For Jerome Dodson at Parnassus Investments, growing public pessimism about the economy in 2010 convinced him to purchase stocks. Allianz RCM Technology Fund’s Walter Price ruled out a recession after executives told him business was improving. At Columbia Management Investment Advisers LLC, Tom Galvin said record cash made equities impossible to pass up. Unemployment close to 10 percent and falling home sales failed to deter the best-performing U.S. fund managers this year, handing them average gains of 28 percent, data compiled by Bloomberg show. They’re bullish on 2011, boosting stakes in oil producers, temporary-help providers and Internet companies. “When everybody’s depressed is absolutely the best time to buy stock,” said Dodson, who oversees $4.5 billion as president of Parnassus in San Francisco.
• Bond Yields at 4% Draw Janney, Northern Trust as Sales Hop: Credit Markets. Investment-grade U.S. corporate bonds are attracting investors betting a struggling labor market will help contain inflation after yields rose above 4 percent for the first time since early August. The extra yield investors demand to own investment-grade corporate bonds rather than Treasuries shrank to 179 basis points, or 1.79 percentage points, as of Dec. 3 from 182 at the end of November as the U.S. reported that the unemployment rate jumped to 9.8 percent, Bank of America Merrill Lynch index data show.
• Euro's Worst to Come as Best Forecasters See Crisis Spreading. The most accurate foreign-exchange strategists say the euro’s worst annual performance since 2005 will extend into next year as the region’s sovereign-debt crisis saps economic growth. Standard Chartered Plc, the top overall forecaster in the six quarters ended Sept. 30 based on data compiled by Bloomberg predicted the euro may weaken to less than $1.20 by mid-2011 from $1.3414 last week. Westpac Banking Corp., the second most accurate, is “bearish in the short term,” and No. 3 Wells Fargo & Co. cut its outlook at the end of last week.
• Euro Finance Chiefs Meet as Belgium Seeks Bigger Crisis Fund. European finance ministers travel to Brussels today as Belgium argues that the region’s 750 billion- euro ($1 trillion) bailout fund could be increased to fight contagion from the sovereign crisis.
• Hedge Funds Decline in November Amid Europe Debt Crisis, Stock Market Drop. Hedge funds declined the most in six months in November as the European debt crisis pushed stock markets lower across the globe. The Bloomberg aggregate hedge fund index fell 1.5 percent, the most since May, when a sudden selloff in stocks known as the “flash crash” prompted investors to cut risk. Long-short equity funds, whose managers can bet on rising and falling stocks, dropped 1.6 percent last month and gained 6.1 percent since the start of the year.
• Hedge Funds Increase Bullish Oil Bets Most in Eight Weeks: Energy Markets. Hedge funds increased bullish bets on oil by the most in eight weeks as signs that the global economic recovery is gaining pace stoked speculation demand for crude will rise. The funds and other large investors boosted so-called net- long positions, or wagers that oil prices will climb, by 18 percent in the seven days ended Nov. 30, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. It was the largest increase since the week ended Oct. 5.
• Copper Stockpiles Slumping Makes Metal a Favorite for Goldman(GS). The biggest slump in copper inventories in six years is compounding shortages as prices head toward record highs, making the metal a top pick for Goldman Sachs Group Inc. and Morgan Stanley. Demand will outpace supply by 367,500 metric tons next year, enough for wires, pipes and appliances in about 1.8 million U.S. homes, according to the median forecast of 12 analysts surveyed by Bloomberg. Stockpiles may drop to an all-time low of less than one week’s usage, said Michael Widmer, a London-based metals analyst at Bank of America Merrill Lynch. Global exchange inventories have dropped 22 percent this year, heading for the largest slide since 2004, data compiled by Bloomberg show.
• Wal-Mart(WMT), Carrefour Face Temporary Price Controls in Southwest China City. The southwestern Chinese city of Kunming, where Wal-Mart Stores Inc. and Carrefour SA have operations, has imposed temporary price ceilings on daily necessities to counter inflation. Kunming’s government asked five retailers -- three non- Chinese, one Chinese and one based in Hong Kong -- to report any price adjustments and give reasons for the changes two days in advance of making any alterations, the National Development and Reform Commission’s local branch said on its website yesterday. Besides the five companies, other food, cooking-oil and beverage producers are requested to apply for government approval 10 working days before making price changes, the statement said. The city government also imposed temporary price ceilings on daily necessities in major parts of the city starting from yesterday to the end of February, according to the statement. Prices of grain, cooking oil, meat, eggs, milk and noodles are to be kept at levels before Nov. 17, the statement said. The city limited retail prices of vegetables, depending on type, to 40 percent to 100 percent higher than wholesale prices, the statement said.
• North Korea Says Tensions 'Extreme' as South Korea Plans Drills. North Korea said South Korea is raising tension on the Korean peninsula to an “uncontrollable extreme phase” by holding military exercises with the U.S. and live-firing drills close to disputed waters. The South Korean government “is so hell-bent on the moves to escalate the confrontation and start a war that it is recklessly behaving bereft of reason,” the state-run Korean Central News Agency said in a commentary yesterday. North Korea is “now maintaining a maximum self-possession and self- control,” it said.
• BofA(BAC) Tells Fed It Fulfilled Final TARP Exit Condition, FT Says. Bank of America Corp. told U.S. regulators that it has sold enough assets this year to meet the final condition set as part of its repayment of a $45 billion government bailout, the Financial Times reported. The bank told the Federal Reserve the sale of BlackRock Inc. shares and the sale of the right to buy China Construction Bank Corp. stock would bring it near the $3 billion requirement, the newspaper said. The balance will come from a tax gain from holding a smaller stake in BlackRock, according to the report.

Wall Street Journal:

• New Debt Ceiling Part of Tax Talks. An increase to the federal government's borrowing limit is being considered in talks on extending the Bush-era tax cuts, people familiar with the situation said Friday. They warned, however, that the issue could be too politically toxic to be part of a final deal.
• Ex-USTR Not So Diplomatic About China. Now that Susan Schwab, who was U.S. Trade Representative under President George W. Bush, has left public life, she’s free to say what she really thinks about the state of trade relations with China. “Foreign firms are in fact discriminated against in this market,” Ambassador Schwab, now a professor at the University of Maryland’s School of Public Policy, declared at a panel discussion Saturday hosted by the Italian Embassy in Beijing. Schwab referred to her own experience negotiating deals in China for Motorola in the early 1990s. At the time, “the message we got from the government was that there was technology transfer for market share,” she said. Based on those signals, Motorola and other companies decided to invest for the long term in China, expecting treatment to improve over time. “The outcome for major multinationals that took this approach has been very mixed,” Ms. Schwab said.
• China Clones, Sells Russian Fighter Jets. A year after the collapse of the Soviet Union, a cash-strapped Kremlin began selling China a chunk of its vast military arsenal, including the pride of the Russian air force, the Sukhoi-27 fighter jet. For the next 15 years, Russia was China's biggest arms supplier, providing $20 billion to $30 billion of fighters, destroyers, submarines, tanks and missiles. It even sold Beijing a license to make the Su-27 fighter jet—with imported Russian parts. Today, Russia's military bonanza is over, and China's is just beginning. After decades of importing and reverse-engineering Russian arms, China has reached a tipping point: It now can produce many of its own advanced weapons—including high-tech fighter jets like the Su-27—and is on the verge of building an aircraft carrier. Not only have Chinese engineers cloned the prized Su-27's avionics and radar but they are fitting it with the last piece in the technological puzzle, a Chinese jet engine. In the past two years, Beijing hasn't placed a major order from Moscow. Now, China is starting to export much of this weaponry, undercutting Russia in the developing world, and potentially altering the military balance in several of the world's flash points.
• Iran Touts Nuclear Advance Ahead of U.S. Talks. As the U.S. and Iran prepare for Monday's first diplomatic meeting between the two sides in more than a year, Tehran announced delivery of its first shipment of homemade "yellowcake" uranium—a troubling sign for Western governments seeking to contain the nation's nuclear ambitions. At the same time, significant differences have emerged over such basics as the terms and substance of the discussions on Tehran's nuclear program set for Monday and Tuesday in Geneva.
• As Bonds Flag, Stocks Beckon. After a stellar two-year run, the bond market is stumbling and a number of investors are betting that stocks will post better returns in the coming months. Among the signs being held up as evidence: Investors in the past two weeks pulled money from bond funds for the first time in almost two years, and there are indications of a growing move toward stocks.
• No Longer Tiny, Netflix(NFLX) Gets Respect - and Creates Fear. After years as a bit player in entertainment, Netflix Inc. is being eyed for a new role by Hollywood: industry hulk.
• Julian Assange, Information Anarchist. WikiLeaks founder Julian Assange hopes to hobble the U.S. government. Whatever else WikiLeaks founder Julian Assange has accomplished, he's ended the era of innocent optimism about the Web. As wiki innovator Larry Sanger put it in a message to WikiLeaks, "Speaking as Wikipedia's co-founder, I consider you enemies of the U.S.—not just the government, but the people." The irony is that WikiLeaks' use of technology to post confidential U.S. government documents will certainly result in a less free flow of information. The outrage is that this is Mr. Assange's express intention.

CNBC:

• Pfizer(PFE) Kindler Retires, Replaced by Read.
• Six Banks Got Over 98% of the Fed's PDFC Money. Institutions that ultimately went on to become just six banks—Bank of America, Citigroup, Morgan Stanley, Barclays, Goldman Sachs, and JPMorgan—received at total of about $8.78 trillion through the PDFC program.

IBD:

• Apparel Makers Hope to Weave Growth Into Holiday Season Sales.

NY Times:

• Jamie Dimon: America's Least-Hated Banker.
• Mounting State Debts Stock Fears of a Looming Crisis. The State of Illinois is still paying off billions in bills that it got from schools and social service providers last year. Arizona recently stopped paying for certain organ transplants for people in its Medicaid program. States are releasing prisoners early, more to cut expenses than to reward good behavior. And in Newark, the city laid off 13 percent of its police officers last week. While next year could be even worse, there are bigger, longer-term risks, financial analysts say. Their fear is that even when the economy recovers, the shortfalls will not disappear, because many state and local governments have so much debt — several trillion dollars’ worth, with much of it off the books and largely hidden from view — that it could overwhelm them in the next few years. “It seems to me that crying wolf is probably a good thing to do at this point,” said Felix Rohatyn, the financier who helped save New York City from bankruptcy in the 1970s. Some of the same people who warned of the looming subprime crisis two years ago are ringing alarm bells again. Their message: Not just small towns or dying Rust Belt cities, but also large states like Illinois and California are increasingly at risk.

Business Insider:

• It Sounds Like South Korea Is Really Preparing For The Imminent Collapse Of The North.
• Big Banks Are Stifling Economic Growth And Taxing Consumers. Have you noticed the price of oil lately? It’s $90 a barrel in a dismal economy with unemployment hovering around 10%. The problem with Fed chairman Bernanke`s latest QE 2 initiative is that he has just given more access of cheap money to the big banks.
• New York Times Mocks State Dept. Over Handling of WikiLeaks Cables.
  

Zero Hedge:

• A Look at the Upcoming Week's European Events.

Washington Post:

• A Fateful Step for a Banking Giant. When Bank of America agreed to buy Countrywide Financial for $4 billion in January 2008, the bank's chief executive, Kenneth D. Lewis, called it a "one-time opportunity." When this opportunity knocked, however, it blew the door down. More than two years after the acquisition, Bank of America has taken write-offs of $5.5 billion because of troubles at Countrywide. And the losses are still mounting. Now, instead of celebrating its improved profits and stronger capital base, the bank is trapped in a "Groundhog Day"-style routine of fending off crisis.

Chicago Tribune:

• Groupon Rejects Google's(GOOG) Offer; Will Stay Independent. The two companies had been engaged in talks, with speculation about the marriage reaching a fever pitch over the last week. Mountain View, Calif.-based Google reportedly had offered between $5 billion and $6 billion for the daily deal start-up. Groupon still may choose to pursue an initial public offering but will not make a decision about going public until 2011, a source said.

Politico:

• GOP: Doc Fix Can Break Health Reform. The idea of tying the doc fix to a partial health reform repeal has legs because it comes with a clear rhetorical message: Congress should not start creating new entitlements without the necessary funding to uphold existing ones.
  
• Dems Dreading Pending Tax Deal. The deal that Democrats, Republicans and the White House appear to be stepping gingerly but inexorably toward to wrap up the lame-duck congressional session is generating some grumbling from Democrats that they won't be particularly pleased with the likely outcome. "We're only moving there against my judgment and my own particular view of things,” Senate Majority Whip Dick Durbin (D-Ill.) said Sunday on CBS's "Face the Nation."
• Kyl Blasts Administration for Foot-Dragging on WikiLeaks. Sen. Jon Kyl (R-Ariz.) is accusing the Obama administration of being too slow to respond to the security threat posed by the troves of classified information published by the online information hub WikiLeaks. "What troubles me is this is the third dump and the administration didn’t seem too concerned about the first two dumps," Kyl said Sunday on CBS's "Face the Nation," referring to the recent release of a collection of diplomatic cables and earlier releases of hundreds of thousands of classified U.S. military reports from Iraq and Afghanistan. "It’s only when it starts to embarrass the State Department because they have cables that are very ..revealing about what some of our diplomats have said about other world leaders that we appear to be all that exercised about it," Kyl said.

USA Today:

• Jobless Rate Up Among Those With at Least Bachelor's Degree. Last month's increase in unemployment was especially discouraging for the well-educated. The jobless rate for Americans with at least a bachelor's degree rose to 5.1%, the highest since 1970 when records were first kept, reports the Bureau of Labor Statistics. October's 4.7% rate was up from 4.4% in September. Meanwhile, the national unemployment rate last month rose to 9.8% from 9.6%. Joblessness among those with advanced educations probably drove the overall rate higher, as that group makes up 30% of the labor force, the single biggest sector, says Mark Zandi, chief economist of Moody's Analytics. The government's figures show there were 2.4 million unemployed people last month with bachelor's degrees and higher.

Financial Times:

• Europe's Leaders at Odds Over Bond Plan. Germany’s Wolfgang Schäuble – on Monday named as the FT’s European finance minister of the year – said in a video interview that jointly guaranteed bonds would require “fundamental changes” in European treaties. He added that it was also key that governments had incentives to maintain discipline over finances – and faced sanctions when they did not. “Otherwise the euro would fail,” he warned. Germany also fears the issuance of joint bonds would raise its borrowing costs.

Telegraph:

• China's Credit Bubble on Borrowed Time as Inflation Bites. The Royal Bank of Scotland has advised clients to take out protection against the risk of a sovereign default by China as one of its top trade trades for 2011. This is a new twist. "Many see China’s monetary tightening as a pre-emptive tap on the brakes, a warning shot across the proverbial economic bows. We see it as a potentially more malevolent reactive day of reckoning," said Tim Ash, the bank’s emerging markets chief. Officially, inflation was 4.4pc in October, and may reach 5pc in November, but it is to hard find anybody in China who believes it is that low. Vegetables have risen 20pc in a month.
• Bernanke's QE3 Faces Stiff Resistance. Ben Bernanke, chairman of the Federal Reserve, was expected to open the way for a third blast of bond purchases in a 60 Minutes interview, but any such move is likely to face resistance from Fed hawks and mounting criticism in Congress. Mr Bernanke faces a shift in the balance of power as hard-liners join the Fed’s voting body this year. Jeffrey Lacker from the Richmond Fed said he was “not well-disposed” to bond purchases, suspecting that the “risks exceeed the benefits.” Kevin Warsh from the Fed board has raised doubts, as have the Fed chiefs from Dallas, Philadephia, Minneapolis, and Kansas. Mr Bernanke’s stated purpose is to force down borrowing costs, yet inflation fears have instead pushed up yields on 10-year Treasuries by 60 basis points to 3pc since early October. Long rates are used to price mortgages and company debt. Oil has shot up to $90 a barrel. This acts as a tax on US consumers.
• JPMorgan(JPM) Revealed as Mystery Trader That Bought £1bn-worth of copper on LME. The American investment bank JP Morgan is the mystery trader that grabbed more than half the copper on the London Metal Exchange, The Daily Telegraph has learned.

The Guardian:

• WikiLeaks Cables Blame Chinese Government for Google(GOOG) Hacking. Leading politician ordered attacks after Googling his own name and finding critical articles, US dispatches say.

Efe:

• China and Venezuela signed a memorandum of understanding to place a further $6 billion in a joint development fund, citing members of a delegation accompanying Finance Minister Jorge Giordani on a visit to the Asia country. China will contribute $4 billion and Venezuela $2 billion into the fund that will be used to finance development projects in bother countries.
  

China Securities Journal:

• China must curb "excessive" trading and speculation in its futures markets to curb risks and rein in inflation expectations, citing Jiang Yang, an assistant to chairman of the China Securities Regulatory Commission.
• China will end a preferential purchase tax for vehicles with engines no larger than 1.6 liters next year, citing a person at the National Development and Reform Commission.
  

Weekend Recommendations
Barron's:

• Made positive comments on (WHR) and (SJM).

Citigroup:

• Reiterated Buy on (GLW), target $22.
• Reiterated Buy on (ITW), boosted estimates, raised target to $60.
  

Night Trading

• Asian indices are unch. to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 106.50 -2.5 basis points.
• Asia Pacific Sovereign CDS Index 107.50 -1.75 basis points.
• S&P 500 futures -.15%.
• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DG)/.35
• (SPB)/.33

Economic Releases

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Lacker speaking, UBS Media/Communications Conference and the (FIS) investor day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology 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.

Weekly Outlook

U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as diminishing economic fear, seasonal strength, buyout speculation, less financial sector pessimism, diminishing sovereign debt angst, investment manager performance anxiety and short-covering offsets profit-taking, technical selling and China inflation concerns. My intermediate-term trading indicators are giving mostly bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,224.71 +2.97%*



The Weekly Wrap by Briefing.com.

*5-Day Change