Style Underperformer:
- Large-Cap Growth (+2.57%)
- 1) Retail +.64% 2) Airlines +.65% 3) Utilities +1.02%
- IOC, WAG, NEOG, DMND, JVA, NFLX, AMZN, FGP, NDN, AM and GDOT
- 1) EWT 2) IOC 3) LCC 4) CIGX 5) MELA
- 1) WMS 2) ABT 3) ZMH 4) INTC 5) AMAT
Tuesday, September 27, 2011
Bear Radar
Style Underperformer:
Bull Radar
Style Outperformer:
- Small-Cap Growth (+3.38%)
- 1) Coal +4.89% 2) Oil Tankers +4.78% 3) Steel +4.75%
- IVN, DB, SU, TDS, THO, SAPE, RIMM, CAVM, NUAN, IMGN, JOYG, SGA, TY, MIC and ATI
- 1) IVN 2) WAG 3) AMX 4) CI 5) SGMO
- 1) KIM 2) SAM 3) BSX 4) LMT 5) BAX
Tuesday Watch
Evening Headlines
Bloomberg:
- Geithner to Europe: 'Get on With' Crisis Response. U.S. Treasury Secretary Timothy F. Geithner predicted that European governments will step up their response to their region’s debt crisis after a chiding from counterparts around the world. “They heard from everybody around the world” in Washington meetings last week, Geithner said on ABC’s “World News With Diane Sawyer” program. Europe’s crisis is “starting to hurt growth everywhere, in countries as far away as China, Brazil and India, Korea.
- China Banks Shunned by Investors Eying 2003 Low in Credit Bust. The cheapest Chinese bank stocks since 2004 may drop further as the three-year credit boom that created the world’s most profitable lenders shows signs of turning into a bust. The MSCI China Financials Index sank 24 percent this month, falling more than benchmark bank gauges for Europe, the U.S., Japan and emerging markets. Valuations in China dropped below levels reached during the global financial crisis for the first time last week, even after Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. said first-half profits hit a record and analysts raised forecasts for next year. While banks in the MSCI index reported $104 billion of earnings in the past 12 months, bad loans to local governments, a fading real estate boom and slower economic growth are making some of the most successful investors bearish. Jim Chanos, the short seller who predicted Enron Corp.’s collapse, says Chinese banks will fall below the value of their net assets for the first time since December 2003, from an average premium of about 20 percent. Fund managers at Vontobel Asset Management Inc. and International Value Advisers LLC who beat 99 percent of peers this year are avoiding the stocks. “China’s economy is very distorted, and the banks, as ever, are at the epicenter of the distortions,” Edward Chancellor, who helps oversee about $106 billion as a strategist at Grantham Mayo Van Otterloo & Co. in Boston and warned of a “sucker’s rally” in Chinese stocks three days before the benchmark index peaked in August 2009, said in an interview. “If China runs into problems with the banking system, which I think it will, I cannot see a situation in which foreign investors are the main priority of Beijing.” Bad debts may cut China’s growth rate to near zero from 9.5 percent, hurting a global economy that’s already weighed down by Europe’s sovereign debt crisis and a stagnant U.S. job market, according to Chanos, founder of New York-based hedge fund Kynikos Associates LP. “The main concern we have, and the reason we’re not touching the banks, is we’re not sure that the Chinese economy is sustainable as it is,” said Charles de Lardemelle, whose $2.3 billion IVA International Fund slipped 5 percent this year through Sept. 23, compared with an 18 percent average drop for peers, according to data compiled by Bloomberg. Similar surges in credit and investment in Japan, Thailand and South Korea all ended with a collapse in economic growth, he said in a phone interview from New York. Evidence is building that Chinese property developers and local government financing vehicles, used to get around laws prohibiting direct borrowing, are struggling to repay their obligations as the economy slows. About 85 percent of the government financing vehicles in China’s Liaoning province, on the border with North Korea, had insufficient income last year to cover debt-servicing payments, according to a July speech by the provincial auditor.
- China's Developers Facing 'Increasingly Severe' Credit Outlook, S&P Says. Chinese developers face an “increasingly severe” credit outlook, which may force them to cut prices and turn to costlier funding sources as sales weaken, Standard & Poor’s said. A 30 percent decline in sales may leave many developers facing a liquidity squeeze, S&P said after conducting stress tests of the nation’s real estate companies. Most developers would be able to “absorb” a 10 percent sales drop next year, the credit rating company said. “The worst isn’t over for China’s real estate developers,” S&P analysts led by Frank Lu wrote in a report today. “Developers are bracing themselves for slower sales and lower property prices ahead.”
- Freddie Mac Mishandled Loan Reviews, May Have Spared Banks, Watchdog Says. Freddie Mac is reviewing its procedures for examining mortgages after auditors faulted its handling of lapsed loans issued before the 2008 credit crisis, a government watchdog said in a report on the finance firm. The mortgage-finance firm, which is operating under U.S. conservatorship, didn’t do enough to find flaws that could’ve increased recovery of money from banks that sold defective loans, the Federal Housing Finance Agency’s inspector general said in the report released today. FHFA, the regulator that oversees Freddie Mac and larger rival Fannie Mae, suspended loan-repurchase agreements while the agency and the McLean, Virginia-based company explore ways to uncover more defective loans, according to the report. “It is critical that this issue be resolved, as it involves potentially considerable recoveries for Freddie Mac and ultimately taxpayers,” the inspector general’s office said in the report.
- Gold Rebounds From Slump on Speculation Greece Is Set to Default on Debt. Gold rallied as the biggest three- day drop since the failure of Lehman Brothers Holdings Inc. in 2008 encouraged purchases by investors seeking a store of value amid market turmoil. Silver also advanced. Immediate-delivery gold gained for the first day in five, climbing as much as 0.9 percent to $1,641.40 an ounce and trading at $1,640.75 at 10:41 a.m. in Singapore. The price had lost 8.8 percent in the previous three days as some investors sold the metal to cover losses in other markets, which plunged on concern that the global economy may lapse into recession. The European Central Bank is likely to debate next week restarting covered-bond purchases and may discuss interest-rate cuts to ease funding strains, a euro-region central bank official said. Policy makers are under pressure to halt the European debt crisis that has Greece on the brink of default. “The facts haven’t changed,” said Gijsbert Groenewegen, a partner at Silver Arrow Capital Management. “They’re just postponing what will happen in three months or six months or whatever, but we will get default.”
- JPMorgan(JPM) Differs With JPMorgan(JPM) on Apple(AAPL) iPad. JPMorgan Chase & Co. (JPM) analyst Mark Moskowitz said research from his colleagues in Asia about a cut in Apple Inc. (AAPL) iPad orders doesn’t represent the views of the securities firm’s U.S. team. “Apple is fine,” Moskowitz wrote.
- Stopgap Fix Ends Budget Impasse. A budget deadlock that had raised the risk of a federal government shutdown was broken Monday, as the Senate approved a short-term funding measure and the House appeared likely to follow suit. The Senate, on a 79-12 vote, approved a bill late Monday to fund the government through Nov. 18. The vote came after the main sticking point in negotiations between the two parties was resolved.
- New Capital Rules Likely for Banks. International regulators are set to rebuff heavy lobbying by banks and stick with a plan to require some of the world's largest financial institutions to hold extra capital, according to people familiar with the matter. The watchdogs that make up the Basel Committee on Banking Supervision are gathering Tuesday in the Swiss city to consider comments on a planned rule requiring big banks to maintain thicker capital cushions than other institutions.
- Welcome to the Boardroom: Chelsea Clinton Joins Diller. She's 31. She's still a graduate student. And she's held many different jobs in different industries over the last five years. But those factors didn't prevent Chelsea Clinton from landing a plum assignment: joining the board of Barry Diller's Internet media holding company. In her new role, the daughter of former President Bill Clinton and U.S. Secretary of State Hillary Clinton will be the youngest member of IAC's board by seven years.
- Mr. Buffett's Tax Secrets. The least he can do is show Americans why he pays so little.
- Greece Set to Approve Tax; Unions Prepare to Strike. Lawmakers are expected to approve an unpopular property tax on Tuesday to open the way for the return of inspectors from Greece's bailout lenders and the release of vital aid, despite growing anger among austerity-hit Greeks.
- "Anonymous" Enters Securities Analysis: Alleges Hong Kong's HK$ 8.5 Billion Chaoda Is Next Sino Forest.
- UBS' Euro Doom and Gloom Team Releases Sequel: "The Eurozone Sovereign Crisis Has Entered A More Dangerous Phase".
NY Times:
- Two Tibetan Monks Set Themselves on Fire in Protest. Two young Tibetan monks set themselves on fire on Monday at an embattled monastery in western to protest Chinese policies in the area, according to a advocacy group. The monks were apparently taken to a hospital, and it was unclear what condition they were in on Monday night.
- Goldman Sachs(GS) Draws Up Deeper Job Cuts. Goldman Sachs, bracing for what could be one of its worst quarters since it went public 12 years ago, is preparing to expand its cost-cutting initiative by hundreds of millions of dollars, a move that could lead to additional job losses at the Wall Street bank.
- Buckeye Oil Billions Will Unleash an Ohio Manufacturing Tech Boom. A prediction. The Ohio Valley is on track to become a hotbed of innovation. And one which will almost certainly focus on 21st century manufacturing. The catalyst for this seemingly counter-intuitive claim? Money. Black gold. Ohio is about to be awash in both.
- 10 Highest-Paid Bank CEOs. J.P. Morgan Chase's Jamie Dimon made $20.8M in 2010, a hefty 1,541% increase from the dark paydays of 2009. See which other bank executives raked in big bucks last year.
- New Facebook Information Sharing Features Cause Privacy Concerns. Privacy watchdogs are urging the Federal Trade Commission to look into the social networking service's new features that they say push Facebook users to share more than they may feel comfortable sharing.
- Obama Advisors Raises Warning Flags Before Solyndra Bankruptcy. Treasury chief Timothy F. Geithner and others were worried that the selection process for federal loan guarantees fell short and raised the risk that funds could be going to the wrong firms.
- ECB's Liikanen - Risks to Growth "Substantially" to Downside. European Central Bank Governing Council member Erkki Liikanen said on Monday he thought risks to euro zone growth were now "substantially" to the downside, when asked whether the ECB should cut interest rates next month. Asked if the ECB could reverse this year's rate hikes at its October 6 meeting --a move markets currently expect-- Liikanen stressed that the economic situation had continued to deteriorate since the ECB last met earlier this month. "We said (at last meeting) risks to inflation are balanced and risks to growth are balanced. And my personal opinion is that the growth is substantially to the downside."
- Hedge Funds: Concern Over ETFs' Shorting Role. Which came first, a hedge fund wanting to profit from the fall of an index inexpensively or the security that allowed it do so? As exchange traded funds race to provide easy access to ever more exotic indices, sectors, geographies and asset classes, this is a question that is increasingly on the minds of long-oriented asset managers and retail investors. They are concerned that by buying ETFs they may inadvertently be facilitating, or in some cases funding, the short positions of hedge funds. This is especially the case when ETFs are structured synthetically utilising swaps. “Both parties use these long and short, though hedge funds do use them more on the short side, while retail investors will do it the other way,” says Ken Heinz, president of Hedge Fund Research of hedge fund monitoring agency HFR.
- Germany at War Over Eurozone Bail-Out. European officials have confirmed that discussions are afoot to boost the eurozone bail-out fund's firepower as part of a grand plan to contain the region's sovereign debt crisis in Greece. Confirmation of the talks, however, sparked outrage in Germany, where opposition politicians threatened to derail the plans by voting against a key amendment to the bail-out fund this Thursday. The head of Germany's constitutional court also piled on the pressure by warning the government not to circumvent the law "by the back door".
- German Turmoil Over EU Bail-Outs as Top Judge Calls for Referendum. Germany's top judge has issued a blunt warning that no further fiscal powers may be surrendered to Europe without a new constitution and a popular referendum, vastly complicating plans to boost the EU's rescue machinery to €2 trillion (£1.7 trillion).
Securities Times:
- China's conditions aren't ready for the government to cancel limits on home purchases, introduced a year ago, citing Wang Juelin, a researcher at the Ministry of Housing and Urban-Rural Development.
- China should maintain a proactive fiscal policy along with prudent monetary policy because it helps curb inflation and prevent "over adjustment" of polices, Jia Kang, head of Chinese Ministry of Finance's research institute for fiscal science, writes in a commentary.
- Chinese regulators plan to conduct spot checks on some banks next month to ensure borrowers use their money for their stated purposes, citing a person familiar with the situation. Regulators will check banks whose borrowers may use their lending for high-yielding loans to a third party.
- The possibility of a global double-dip recession is rising because of a slowdown in the world's economic growth, citing Ba Shusong, a researcher at the State Council's Development Research Center.
- None of note
- Asian equity indices are +1.0% to +3.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 216.0 -7.0 basis points.
- Asia Pacific Sovereign CDS Index 174.25 +9.75 basis points.
- FTSE-100 futures +1.9%.
- S&P 500 futures +.13%.
- NASDAQ 100 futures +.19%.
Earnings of Note
Company/Estimate
- (AM)/.25
- (WAG)/.55
- (JBL)/.56
- (PAYX)/.38
- (PRGS)/.28
9:00 am EST
- S&P/CS 20 City MoM% SA for July is estimated to rise +.1% versus a -.06% decline in June.
- Consumer Confidence for September is estimated to rise to 46.0 versus a reading of 44.5 in August.
- The Richmond Fed Manufacturing Index for September is estimated to fall to -11 versus -10 in August.
- None of note
- The Fed's Fisher speaking, Fed's Lockhart speaking, 2-Year Treasury Note Auction, weekly retail sales reports, CSFB Small/Mid-Cap Conference, Jefferies Healthcare Conference, (CY) analyst event, (PRGO) analyst day and the (OKE) investor conference could also impact trading today.
Monday, September 26, 2011
Stocks Rising into Final Hour on Eurozone Debt Crisis Rumors, Quarter-End Short-Covering/Window-Dressing, Less Financial Sector Pessimism
Broad Market Tone:
- Advance/Decline Line: Slightly Lower
- Sector Performance: Most Sectors Rising
- Volume: Slightly Below Average
- Market Leading Stocks: Underperforming
- VIX 41.28 +.02%
- ISE Sentiment Index 111.0 -24.49%
- Total Put/Call 1.02 -11.30%
- NYSE Arms .49 -42.82%
- North American Investment Grade CDS Index 138.79 -1.45%
- European Financial Sector CDS Index 256.33 -.70%
- Western Europe Sovereign Debt CDS Index 353.83 -.46%
- Emerging Market CDS Index 365.35 -.63%
- 2-Year Swap Spread 29.0 -1 bp
- TED Spread 36.0 -1 bp
- 3-Month T-Bill Yield .00% unch.
- Yield Curve 167.0 +8 bps
- China Import Iron Ore Spot $172.90/Metric Tonne -.69%
- Citi US Economic Surprise Index -40.40 +.4 point
- 10-Year TIPS Spread 1.80 +5 basis points
- Nikkei Futures: Indicating +85 open in Japan
- DAX Futures: Indicating +29 open in Germany
- Slightly Higher: On gains in my Medical and Retail sector longs
- Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added some back
- Market Exposure: Moved to 75% Net Long
Today's Headlines
Bloomberg:
- ECB to Consider New Crisis Tactics. European Central Bank policy makers are likely to next week debate restarting their covered-bond purchases along with further measures to ease monetary conditions, a euro-region central bank official said. The reintroduction of 12-month loans to banks will also be discussed at the ECB’s Oct. 6 policy meeting, said the person, who spoke on condition of anonymity because the information is confidential. Interest-rate cuts are likely to be discussed, though they are not on the current agenda, the official said. The euro rose half a cent against the dollar to as high as $1.3543. Yield spreads between covered bonds and interest-rate swaps tightened.
- European Central Bank Governing Council member Ewald Nowotny said it's "dangerous" if Germany feels ignored because it's outvoted in the ECB, and those feelings need to be respected. "It's very dangerous if in Germany the feeling emerges that the country is passed over," Nowotny said. "To be precise, that such an important country is being outvoted at the ECB," he said. There is now a "protectionist tendency" in the euro area's biggest economy, and its sensitivities need to be considered, he added.
- Rehn Says European Banks Should Be Recapitalized, Welt Reports. A recapitalization of European banks should be part of the region’s effort to contain the sovereign-debt crisis, European Union Monetary Affairs Commissioner Olli Rehn told Germany’s Welt newspaper. “We have to supplement the repair work in the financial sector with a stronger recapitalization of banks to reduce the risk of a credit squeeze and prevent a further slowdown of economic growth, which is now materializing in Europe and the U.S.,” Rehn was quoted as saying. “The current crisis is a serious combination of a sovereign-debt crisis and weakness in the banking sector. We can’t solve one without the other.”
- Dimon Attacks Bank of Canada Chief Over Basel Rules. (video) Jamie Dimon, chairman and chief executive officer of JPMorgan Chase & Co., criticized Bank of Canada Governor Mark Carney on the subject of the new Basel III capital rules, saying many of them discriminated against U.S. banks and he would continue to describe them as "anti-American," the Financial Times reported. Dimon's attack on Carney, who is an advocate of the rules, was delivered in a closed-door meeting last week in the presence of more than two dozen bankers and finance officials, the newspaper said.
- Gold Plummets More Than $100, Silver Slumps on Euro Debt Crisis. Gold tumbled more than $100 and was set for its worst two-day slump since 1983 as equities and other commodities fell on speculation European governments will struggle to contain the region's debt crisis, threatening global growth. Silver headed for its worst two-day drop in 31 years. Cash gold fell as much as $124.08, or 7.5 percent, to $1,532.72 an ounce, the lowest price since July 8. The metal traded at $1,558.55 at 3:12 p.m. in Singapore, down 13.3 percent since Sept. 20. Spot silver lost as much as 16.3 percent to $26.07 an ounce, the lowest since November, and traded at $28.30. "It all depends on the stability of the financial situation in Europe and how that gets managed, but it's difficult times at the moment for gold," Alexandra Knight, an economist at National Australia Bank, said by phone from Melbourne. "It's possible people are selling gold to cover losses in other markets. We could see it come back as it's still a favored asset."
- New Home Sales Fall to Six Month Low. Purchases of new houses in the U.S. declined in August to a six-month low as the biggest drop in prices in two years failed to lure buyers away from even less expensive distressed properties. Sales, tabulated when contracts are signed, dropped 2.3 percent to a 295,000 annual pace, figures from the Commerce Department showed today in Washington. The median estimate of 73 economists in a Bloomberg News survey called for a decline to 293,000. The median price slumped 7.7 percent from August 2010, the steepest 12-month drop since July 2009.
- CICC's Hong Recommends Selling China Stocks on Any Rebound. Investors should sell Chinese stocks on rebounds because valuations are not “compelling” in terms of book value, China International Capital Corp. said. Price-to-book ratios are still about 35 percent higher than the lows reached during the 2008 global financial crisis, Hao Hong, a global equity strategist at CICC, wrote in a report today. The report was referring to the MSCI China Index, Hong said by phone. Investors should wait until economic fundamentals start to improve, the report said. “Consensus believes that Chinese markets now offer compelling valuations after the recent plunge,” Hong wrote. “We beg to differ.”
- Thai Stocks Drop Most in Almost Three Years on Economic Concern. Thailand's benchmark stock index slumped the most in almost three years after the central bank said it may trim its economic growth projections as the global recovery falters. The SET Index fell the most among Asian benchmark gauges today, declining 6 percent to 900.75 as of 3:30 p.m. local time, poised for the biggest drop since Oct. 27, 2008. PTT Pcl, whose shares account for 10 percent of the index, slumped as much as 12 percent as crude fell for a fourth day. Global investors have cut holdings in Thailand's equities and currency this month on expectation exports, which account for about 60 percent of the economy, will slow amid the European debt crisis and weakening U.S. recovery. The Bank of Thailand expects "some possibility for downward adjustments" in the growth forecast, Governor Prasarn Trairatvorakul said in an interview in Washington on Sept. 24.
- Brazil Economists See 2011 Inflation Topping Target Range. Brazil’s central bank will miss its inflation target this year for the first time since 2003, a central bank survey of economists shows. Consumer prices will rise 6.52 percent this year, according to the median forecast in a Sept. 23 central bank survey of about 100 analysts published today, as record low unemployment and a weaker currency fuel consumer price increases. The forecast was up from 6.46 percent the previous week. The central bank targets inflation of 4.5 percent, plus or minus two percentage points, and year-end inflation has remained within the target range for the past seven years.
- Trader Pay Would Face Restrictions Under Draft Volcker Rule. U.S. banks would have to change the way they compensate traders involved in market-making activities under one of the proposed restrictions of the so-called Volcker rule, according to a draft circulating among regulators.
- Europe's Banks Face New Funding Squeeze. An extraordinary dry spell in the market for long-term European bank funding is amplifying pressure on policy makers to devise a solution to the continent's banking crisis. For the past three months, European banks have been largely unable to sell debt at affordable prices to investors, who are wary of the banks' vulnerability to risky euro-zone government bonds and other loans. At $34 billion, the amount of senior unsecured debt issued by the continent's financial institutions this quarter is on track to be the smallest of any quarter in more than a decade, according to data provider Dealogic.
- Technicals Suggest Stocks Oversold.
- Eurozone SPV: What Could Possibly Go Wrong? Here Are a Few Possibilities.
Barron's:
The Memphis Daily News:
Reuters:
Diario Economico:
- Bad Week? Not Here. Despite central banks' best efforts, foreign-exchange specialist John Taylor of FX Concepts thinks the euro is headed sharply lower and the dollar will gain.
- Apple(AAPL) Shares Stung by Reported iPad Cuts. But analysts say demand for popular tablet remains strong.
- Euro Area Facing 'Outright Recession': Economist. The euro zone will be in a recession before the end of the year, an economist from the Royal Bank of Scotland (RBS) told CNBC Monday. "The euro zone will enter a recession by the fourth quarter of this year with contractions in growth for this quarter and the first quarter of next year, which in the current environment could be very damaging," said Silvio Peruzzo, European economist at RBS. Peruzzo said with a sizeable contraction in the industrial sector, and chances of a disorderly Greek default remaining elevated, a recovery when it comes will be extremely modest.
- Senate to Vote on Bill to Avert Government Shutdown.
- Top Republican Strategist Rejects Calls for More US Funding for Eurozone Bank Bailouts, Lagarde Wants $4 Trillion EFSF.
- Buffett's Berkshire(BRK/A) Buyback Helps Shareholders Dodge Taxes.
- A Look Inside the New Boeing(BA) 787 Dreamliner.
- Soros: Failing to Resolve the Euro Debt Crisis Will Trigger a Breakdown of the Global Financial System.
The Memphis Daily News:
Reuters:
- ETF Industry Braces Itself for Transparency Push.
- German FinMin Stresses No Aim to Top-Up EFSF Funding. Finance Minister Wolfgang Schaeuble on Monday moved to dispel doubts in Germany's parliament that the euro zone's current bailout mechanism could be boosted with substantial funding. The Free Democrats, (FDP) junior coalition partners in the government, had earlier said they were concerned over rumors the European Financial Stability Facility (EFSF) could be topped up just before parliament is expected to it new powers in a vote on Thursday. "No, that is clear... We do not intend to increase it," Schaeuble told broadcaster N-TV when asked if the government planned on boosting the size of the 440 billion-euro EFSF.
Diario Economico:
- The Portuguese government will cut its forecast for GDP in 2012. The government is working with a forecast that indicates a contraction of more than 2% and as much as about 2.5%. The government on Aug. 31 had announced a forecast for GDP to shrink 1.8% in 2012.
Bear Radar
Style Underperformer:
- Small-Cap Growth (-.71%)
- 1) Alt Energy -2.31% 2) Semis -1.44% 3) Oil Tankers -1.41%
- IVN, SINA, PSMT, ACTG, PEGA, MXWL, AAPL, FCFS, MELI, UTHR, DMND, STMP, RGLD, OPTR, WYNN, ZAGG, ROSE, TPCG, NIHD, BIDU, LULU, CTRP, CH, SLV, CLX, XSD, REN and MCP
- 1) ZSL 2) EP 3) SWC 4) JNK 5) TIF
- 1) CSCO 2) FSL 3) VNO 4) AA 5) AOL
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