BETWEEN THE HEDGES

Thursday, July 05, 2012

Thursday Watch

Posted by Gary .....at 12:03 AM

Night Trading

Asian equity indices are -.75% to -.25% on average.
Asia Ex-Japan Investment Grade CDS Index 164.50 +2.0 basis points.
Asia Pacific Sovereign CDS Index 134.75 -5.0 basis pionts.
FTSE-100 futures +.02%.
S&P 500 futures -.42%.
NASDAQ 100 futures -.30%.

Morning Preview Links

Earnings of Note
Company/Estimate

(ISCA)/.40
(JDAS)/.57
(CIM)/.11

Economic Releases
8:15 am EST

The ADP Employment Change for June is estimated to fall to 100K versus 133K in May.

8:30 am EST

Initial Jobless Claims are estimated to fall to 385K versus 386K the prior week.
Continuing Claims are estimated to rise to 3300K versus 3296K prior.

10:00 am EST

ISM Non-Manufacturing for June is estimated to fall to 53.0 versus 53.7 in May.

11:00 am EST

Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,300,000 barrels versus a -133,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,000,000 barrels versus a -2,279,000 barrel decline the prior week. Gasoline supplies are expected to rise by +1,000,000 barrels versus a +2,078,000 barrel gain the prior week. Finally, Refinery Utilization is expected to rise by +.25% versus a +.7% gain the prior week.

Upcoming Splits

None of note

Other Potential Market Movers

The Spanish/French 10Y Bond Auction, BoE rate decision, ECB rate decision, ECB's Draghi speaking, Challenger Job Cuts for June, ICSC Chain Store Sales report for June, RBC Consumer Outlook Index for July, weekly MBA mortgage applications report and the weekly Bloomberg Consumer Comfort Index could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Tuesday, July 03, 2012

Stocks Rising into Final Hour on Global Central Bank Stimulus Hopes, Less Eurozone Debt Angst, Short-Covering, Technical Buying

Posted by Gary .....at 1:01 PM

Broad Market Tone:

Advance/Decline Line: Higher
Sector Performance: Most Sectors Rising
Volume: Light
Market Leading Stocks: Performing In Line

Equity Investor Angst:

VIX 16.77 -.18%
ISE Sentiment Index 126.0 unch.
Total Put/Call .88 -15.38%
NYSE Arms 1.15 -11.43%

Credit Investor Angst:

North American Investment Grade CDS Index 106.46 -2.51%
European Financial Sector CDS Index 245.50 -3.22%
Western Europe Sovereign Debt CDS Index 267.17 -2.75%
Emerging Market CDS Index 276.46 +2.15%
2-Year Swap Spread 23.75 -1.25 basis points
TED Spread 38.0 -1.0 basis point
3-Month EUR/USD Cross-Currency Basis Swap -61.75 -5.0 basis points

Economic Gauges:

3-Month T-Bill Yield .08% +1 basis point
Yield Curve 132.0 +4 basis points
China Import Iron Ore Spot $135.40/Metric Tonne +1.42%
Citi US Economic Surprise Index -63.20 +.7 point
10-Year TIPS Spread 2.10 +2 basis points

Overseas Futures:

Nikkei Futures: Indicating +64 open in Japan
DAX Futures: Indicating -6 open in Germany

Portfolio:

Higher: On gains in my tech and biotech sector longs
Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added them back
Market Exposure: 50% Net Long

Today's Headlines

Posted by Gary .....at 12:47 PM

Bloomberg:

Euro Area Bought Some Time in Staving Off Breakup, Rogoff Says. European leaders probably bought “a little bit of time” in staving off a euro-area breakup after last week’s summit even as the region remains a long way from stabilization, Harvard University Professor Kenneth Rogoff said. Greek Prime Minister Antonis Samaras asked European leaders last week to loosen austerity measures tied to 240 billion euros ($303 billion) in financial aid from international donors for his country. Greece will struggle to meet its targets and still probably default, Rogoff said in an interview with Bloomberg Television today. “They are going to continue to do more and more radical measures to stand still,” Rogoff said. “We’re very, very far from a long-term vision. It’s a long difficult path, still. We’re a long ways from stabilization.”China is going through a “delicate political transition” that makes it harder to deal with its economic problems, he said. “I still expect sometime over the next few years to see a significant slowdown in China’s rate of growth that may prove very difficult to handle, especially for a world that’s just not expecting it,” he said.
UK Mortgage Lending Declines, Construction Shrinks: Economy. U.K. mortgage approvals fell in May and construction shrank at the fastest rate in 2 1/2 years in June, adding to signs the housing market is slowing amid growing concern over the economic outlook. Lenders granted 51,098 loans to buy homes, compared with 51,627 the previous month, the Bank of England said today in London. A gauge of building output based on a survey fell to 48.2 from 54.4 in May, a separate report by Markit and the Chartered Institute of Purchasing and Supply showed.
Barclay's(BCS) Three Top Managers Quit Amid Bank of England Dispute. Robert Diamond stepped down today as chief executive officer and Jerry Del Missier quit as chief operating officer, the London-based lender said in a statement. Chairman Marcus Agius will also leave once he has found a replacement for Diamond, who has worked at the bank for the past 16 years.
Sarkozy Home and Offices Searched By Police, France Inter Says. Former French President Nicolas Sarkozy’s home and his Paris offices were searched today by police, France Inter said, without citing a source for the information. Police went to the home he shares with wife Carla Bruni as well as his law office and another bureau he keeps at the request of judges in Bordeaux looking into allegations of campaign finance violations, the radio station reported on its website.
China Slowdown Cuts Luxury Spending, Hong Kong Retailing. China’s slowdown dragged Hong Kong’s retail-sales growth to the weakest pace since 2009 as shoppers visiting from the mainland cut back on purchases of luxury goods such as jewelry and watches.
Brazil Rate-Futures Yields Fall to Record on Shrinking Industry. Yields on Brazilian interest-rate futures contracts dropped to a record low on speculation the central bank will deepen cuts in borrowing costs after a report showed industrial production fell more than economists forecast. Output declined 0.9 percent in May from a month earlier, the national statistics agency said today in Rio de Janeiro. Economists had expected a decline of 0.6 percent, according to the median forecast in a Bloomberg survey of 40 analysts. “The industrial sector is what suffers most from the global deceleration, which the market should be interpreting as a possibility for more stimulus,” Flavio Serrano, senior economist at Banco Espirito Santo de Investimento, said in a phone interview from Sao Paulo.
Bank Bond Risk Nearing 3-Year High on Bad Loans: India Credit. Credit risk for India’s financial institutions is climbing toward a three-year high after the central bank warned that cash shortages and rising bad loans threaten lenders in Asia’s third-largest economy. The cost of insuring the debt of State Bank of India, the nation’s largest, against non-payment for five years has jumped 84 basis points from a four-month low of 280 reached in February, according to data provider CMA. Credit-default swaps on ICICI Bank Ltd. climbed 71 basis points to 425 in the period, while those on Bank of China Ltd. decreased three basis points to 207. The average cost of such contracts for 172 global banks rose 16 basis points to 354, data compiled by Bloomberg show. Indian banks’ soured loans may jump to 4.6 percent of total advances in the year through March 2013 from 2.9 percent in the prior period in a “severe-risk scenario,” as the economy expands at the slowest pace in nine years, the Reserve Bank of India said in a report on June 28.
Recent U.S. Home Price Gains 'at Risk' From Foreclosures: Trulia. Foreclosure backlog pressure means "recent" price "leaps" in areas including Phoenix, Fla. metros "at risk" of shrinking or reversing, Trulia says in June price, rent monitors report. Areas with highest prices increases all "at-risk," with high shr still in foreclosure.
Oil Rises on Stimulus Speculation, Iranian Supply. Oil surged on speculation that central banks from Europe to China will ease monetary policy to spur growth while sanctions against Iran curb supply. Prices gained as much as 5.1 percent as the European Central Bank is forecast to cut interest rates this week. A state-owned newspaper in China said the time is right to increase liquidity in the banking sector. Iran fired several missiles during a three-day military exercise as the country threatened to block tanker traffic in the Strait of Hormuz. Oil for August delivery climbed $3.61, or 4.3 percent, to $87.36 a barrel at 11:31 a.m. on the New York Mercantile Exchange. Prices are 12 percent lower this year. Brent for August settlement traded above $100 a barrel for the first time since June 11. The futures gained $3.32, or 3.4 percent, to $100.66 on the London-based ICE Futures Europe exchange.
IMF Lowers U.S. Growth Projections to 2%. The U.S. economy will grow by 2 percent this year and about 2.25 percent in 2013 amid a “tepid” recovery and the European debt crisis, the International Monetary Fund said, lowering its previous projections. The U.S. economy remains “subject to elevated downside risks, in light of financial strains in the euro area and uncertainty over domestic fiscal plans,” the IMF said in a statement today. In an April report, the IMF forecast U.S. growth of 2.1 percent this year and 2.4 percent in 2013.
GM(GM), Chrysler Sees June U.S. Auto Sales Beating Estimates. General Motors Co. (GM), Ford Motor Co. and Chrysler Group LLC said U.S. auto sales exceeded estimates in June as gains for the three carmakers and Nissan Motor Co. (7201) surprised analysts by surpassing projections.
Orders to U.S. Factories Rise for First Time in Three Months. Orders placed with U.S. factories rose in May for the first time in three months, easing concern that manufacturing is faltering. The 0.7 percent increase in bookings followed a revised 0.7 percent drop in the prior month, the Commerce Department said today in Washington. The median forecast of economists in a Bloomberg News survey called for a rise to 0.1 percent.
JPMorgan(JPM) Probed Over Potential Power-Market Manipulation. JPMorgan Chase & Co. (JPM) is being investigated by the Federal Energy Regulatory Commission over potential power-market manipulation, according to documents provided by the Washington-based agency. JPMorgan has allegedly withheld e-mails that FERC had sought in the investigation, prompting the agency to ask the U.S. District Court for the District of Columbia to order the bank to submit them or provide a reason for withholding, according to filings from FERC.
Fink Says U.S. Leaders ‘Snoring Away’ Amid Europe Wake-Up. BlackRock Inc. (BLK)’s Laurence D. Fink, who heads the world’s largest asset manager, said U.S. lawmakers need to provide more certainty about spending and tax policy as European leaders grapple with deficits. “Our politicians are guardians too, and they’re not acting in ways that guardians should,” Fink said today in an interview on Bloomberg Television’s “Market Makers” with Erik Schatzker and Trish Regan. “Europe is a great wake-up call and they’re still snoring away.” The U.S. is facing a so-called fiscal cliff at the end of the year when automatic spending cuts would begin and tax cuts will expire without action by a U.S. Congress that has been mired in political disputes. Fink said employers including defense contractors will be discouraged from investing in their operations until lawmakers signal how they’ll proceed. “We need more clarity, and that is my message to every politician I see,” said Fink. “It’s all about confidence. No one is investing for tomorrow.”

Wall Street Journal:

Athens Seeks Improved Bailout Deal. Greece will push for a better bailout agreement when it resumes long-stalled talks with international lenders this week, despite warnings from a European central banker Monday that the country must press ahead with its reform program and not dally further in meeting its commitments. The heads of a delegation of officials from the European Commission, International Monetary Fund and European Central Bank—known as the troika—will begin a three-day visit to Athens on Thursday to assess Greece's progress in implementing its latest €173 billion ($219 billion) bailout program.

CNBC.com:

Spain May Need More Aid Despite EU Summit Steps. Spanish Prime Minister Mariano Rajoy will find it tough to avoid asking for a full-scale sovereign bailout despite steps taken at an EU summit to help the country's indebted banks and pressured borrowing costs.
France Faces Major Test as It Enters 'Danger Zone'. Having been in power for less than two months Francois Hollande is facing the first major test of his pro-growth election (related: 10 Game-Changing Elections) commitments after a warning from the national audit office that France’s economy is in the “danger zone” and risks falling into a “debt spiral.”

Business Insider:

Zero Hedge:

Chicago Tribune:

Iran says test-fires missiles over threats of attack. Iran said on Tuesday it had successfully tested medium-range missiles capable of hitting Israel in response to threats of military action against the country, Iranian media reported, the latest move in a war of nerves with the West.

Seeking Alpha:

Hedge Against Inevitable Euro Meltdown: 'The Least Bad Option'.

Reuters:

Einhorn's Greenlight Capital up 3.7 pct in H1-source.

Telegraph:

Debt crisis: live. France slashed its growth forecasts as the country's new socialist government outlined plans for the next five years, while Spain said it would take additional steps to cut its deficit target and aid teams started trawling through Cyprus' finances.
Barclays scandal: Bob Diamond resigns - live. Barclays publishes "smoking gun" email that reveals conversation between the Deputy Governor of the Bank of England Paul Tucker and Bob Diamond over key bank lending rate.

Stern:

Horst Seehofer, head of the Christian Social Union, the Bavarian sister party of Chancellor Angela Merkel's Christian Democratic Union, said his party can't back limitless German commitments to help solve the euro region's sovereign debt crisis. Merkel's coalition doesn't have a majority in parliament without the votes of CSU lawmakers, Seehofer said. The CSU chief is threatening to leave the coalition if Merkel accepts billions of euros more in risks from attempts to save the euro, he said. His budget concern is that financial markets start questioning Germany's ability to shoulder rescue costs.

Augsburger Allgemeine Zeitung:

Bavarian Finance Minister Markus Soeder said preparations should be made for a Greek exit from the euro region, citing an interview. Greece "can't and doesn't want to" make efforts to stabilize its finances, Soeder said. Soeder is a member of the Christian Social Union, the Bavarian sister party of Chancellor Angela Merkel's Christian Democratic Union.

Bear Radar

Posted by Gary .....at 11:51 AM

Style Underperformer:

Large-Cap Value +.56%

Sector Underperformers:

1) Airlines -.59% 2) Utilities -.39% 3) Restaurants -.03%

Stocks Falling on Unusual Volume:

FOSL, BMY, HD, UNH, WLP, CPL, EEP, EEQ, ECHO, FIRE, PCYC, INWK and TCAP

Stocks With Unusual Put Option Activity:

1) XRX 2) SIRI 3) CTSH 4) GM 5) IYT

Stocks With Most Negative News Mentions:

1) BMY 2) OLN 3) D 4) T 5) EXP

Charts:

Bull Radar

Posted by Gary .....at 10:44 AM

Style Outperformer:

Small-Cap Value +.91%

Sector Outperformers:

1) Coal +3.86% 2) Gold & Silver +3.15% 3) Oil Service +2.22%

Stocks Rising on Unusual Volume:

ROSE, SU, MCP, MODL, LQDT, NTGR, ALEX, EXBD, UCO, NSM, HP, USO, PTEN, SMBL, GM, CNSL and WLL

Stocks With Unusual Call Option Activity:

1) AGO 2) AGU 3) UCO 4) CIT 5) PZG

Stocks With Most Positive News Mentions:

1) F 2) BA 3) INTU 4) ACHC 5) GS

Charts:

Monday, July 02, 2012

Tuesday Watch

Posted by Gary .....at 11:46 PM

Evening Headlines
Bloomberg:

Slovenia Heads for Sixth Euro-Area Bailout Request to Aid Banks. Slovenia is headed toward becoming the sixth euro-area nation to seek a bailout as faltering banks strain the finances of the first post-communist nation to adopt the common currency, said economists from London to Warsaw. The nation, which adopted the euro in 2007, is assessing the fiscal burden of covering the liabilities of its financial industry after Nova Ljubljanska Banka d.d., the largest bank, got a capital boost. Premier Janez Jansa, who said on June 27 that Slovenia risks a “Greek scenario,” told reporters two days later in Brussels the government is “doing everything to find a solution” and avoid the need for assistance. “It’s increasingly likely that Slovenia will be the next small economy asking for a European Union bailout, which would be focused on the banking sector,” Michal Dybula, an economist at BNP Paribas SA (BNP) in Warsaw, said by phone.
Denmark Says EU-Wide Regulator Hampers Bubble Fighting. Denmark is unwilling to sign up to a European banking authority and warns such a model could rob national regulators of the tools they need to prevent asset bubbles from forming in local markets. “It is very important that there are macro-prudential tools for each member state in order to make sure that you do not build up housing bubbles and other things,” Danish Economy Minister Margrethe Vestager said in an interview in Oslo yesterday. “Tools so that you can calibrate the risk weights in your banking system.” Denmark’s lenders have yet to emerge from a regional banking crisis triggered by a burst housing bubble more than four years ago. The country’s financial regulator has told banks to comply with stricter writedown standards after finding a number of lenders understated their impairment risk. Thanks to “first-hand experience, I have some reluctance in having a really thorough European authority, if that would mean that you would dismantle all national tools or national authorities in that respect,” Vestager said.
Spain's Waning Reserve Fund Risks Undermining Bonds: Euro Credit. Spain's social security system risks falling deeper into deficit this year, eroding the ability of its 67 billion-euro pension-reserve fund to prop up the Spanish bond market. The reserve account has almost doubled its holding of Spanish debt since 2008 as declining demand for the country's bonds led the fund to start replacing German, French and Dutch securities with national debt. As the welfare system posts a loss, the fund's ability to soak up new issues will diminish, adding to pressure on 10-year Spanish bonds, which yielded 486 basis points more than German Bunds yesterday. The reserve fund's assets, built up since 2000, is equivalent to about 11% of the central government's estimated outstanding debt for this year, and more than 75% of the planned bond issuance for 2012. Its waning firepower comes as foreign investors shun Spanish bonds and as domestic banks, which had been picking up the slack, begin to reduce their holdings.
Regulators Grappling With Libor Probe Said to Seek More Time. Barclays Plc (BARC)’s settlement of about $451 million with U.S. and U.K. regulators last week offered the first glimpse of what banks may have to pay to resolve a global probe of interest-rate manipulation. The question now is who’s next. The two-year investigation, which involves regulators on three continents, has touched as many as 18 financial institutions that help set London and Tokyo interbank offered rates for dollars, euros and yen. That number includes as many as 12 firms that have fired or suspended traders in connection with related internal probes of whether their employees tried to manipulate the rates known as Libor and Tibor.
BRICs Biggest Currency Depreciation Since 1998 to Worsen. The largest emerging markets, whose economies grew more than four-fold in the past decade, are making losers out of everyone from central bankers to Procter & Gamble Co. (PG) as their currencies post the biggest declines since at least 1998. For the first time in 13 years, the real, ruble and rupee are weakening the most among developing-nation currencies, while the yuan has depreciated more than in any other period since its 1994 devaluation. P&G, the world’s largest consumer-goods maker, cut its profit forecast for the second time in two months last week in part because of currency losses. Brazil’s Fibria Celulose SA (FIBR3), the biggest pulp producer, asked banks to loosen restrictions on dollar loans as the real hit a three-year low. Investors are fleeing the four biggest emerging markets, known as the BRICs, after Brazil’s consumer default rate rose to the highest level since 2009, prices for Russian oil exports fell to an 18-month low, India’s budget deficit widened and Chinese home prices slumped. Investors are bracing for more losses as economic growth slows. “I am quite bearish,” Stephen Jen, a managing partner at hedge fund SLJ Macro Partners LLP and a former economist at the International Monetary Fund, said in a phone interview from London. “When the global economy and capital flow slow down, it’s going to expose a lot of problems in these countries and make people stop and ask questions. A run on the currency could be particularly ugly.”
Microsoft(MSFT) Writing Down $6.2 Billion After AQuantive Sputters. Microsoft Corp. is taking a $6.2 billion writedown for almost the entire amount it paid for Internet-advertising company AQuantive Inc., signaling that its online division will perform worse than the company projected. The non-cash charge means the company will probably post a loss for the quarter, which ended in June. Before the statement, analysts had predicted that Microsoft would report profit of $5.3 billion in the period, data compiled by Bloomberg show.

Wall Street Journal:

Bond Rift Divides Merkel Coalition. The increasingly radical measures needed to tame the euro-zone debt crisis are leading to a growing rift within German Chancellor Angela Merkel's governing coalition. Ms. Merkel's junior partner, the pro-business Free Democratic Party, is angry about the mounting hints in Berlin that Germany might ultimately agree to collective debt issuance by euro-zone governments, known as euro bonds. In recent days, FDP leaders have criticized Finance Minister Wolfgang Schäuble for suggesting repeatedly that Germany might be open to euro bonds once it has won other European countries' binding agreement to centralized controls over taxation and spending.
Wall Street Is Still Giving to President. President Barack Obama called Wall Street executives "fat cats,'' criticized their bonuses and tried to raise their taxes. The financial-services industry, in turn, has directed a stream of complaints toward the administration, fueling perceptions of a rift between the president and a key 2008 donor group. But, defying expectations, the securities and investment industry has remained an important part of the Obama fundraising effort. Mr. Obama and the Democratic National Committee raised more than $14 million from the securities and investment industry through the end of April, according to the nonpartisan Center for Responsive Politics.
Gadhafi-Era Spy Tactics Quietly Restarted in Libya. Libya's caretaker government has quietly reactivated some of the interception equipment that fallen dictator Moammar Gadhafi once used to spy on his opponents. The surveillance equipment has been used in recent months to track the phone calls and online communications of Gadhafi loyalists, according to two government officials and a security official. Two officials say they have seen dozens of phone or Internet-chat transcripts detailing conversations between Gadhafi supporters. One person said he reviewed the transcript of at least one phone call between Saadi Gadhafi, the exiled son of the former dictator, and one of his followers inside Libya.
In India, Subsidies Upend Car Sales. Auto Makers Scramble to Revamp Production Plans as Rising Gasoline Prices Shift Buyer Preferences. India's auto industry was one of the high-profile success stories of the country's recent boom years, attracting auto makers from around the world eager to supply a fast-growing middle class.
McGurn: Chief Justice Roberts Taxes Credibility. Did the umpire change his call because of the crowd?
Obama's Iran Loopholes. All 20 of Iran's major trading partners have sanction exemptions.
Keith Hennessey: A Strategy to Undo ObamaCare. To push through key parts of the Affordable Care Act, Democrats used the 'reconciliation' process. A Republican president, House and Senate can use reconciliation to repeal them.

MarketWatch:

Dealing with a double whammy in China. Commentary: Serious systemic flaws are now being laid bare. By most measures China’s economy has slowed quickly since the last quarter of 2011. Electricity production, the National Bureau of Statistics reports, grew 1.7% in April and May from last year. Over the past decade the annual growth rate was 12%. Also in April and May, the railroad ton-kilometer figure grew by 1.3% compared to the same months last year, down from the 6% growth seen from 2005 to 2011.

Business Insider:

Zero Hedge:

CNBC:

China June official services PMI rises to three-month high.

NY Times:

Ex-Brokers Say JPMorgan Favored Selling Bank’s Own Funds Over Others. Facing a slump after the financial crisis, JPMorgan Chase turned to ordinary investors to make up for the lost profit. But as the bank became one of the nation’s largest mutual fund managers, some current and former brokers say it emphasized its sales over clients’ needs.

CNN:

Online poker CEO arrested for $430 million Ponzi scheme. Federal law enforcement officials arrested Raymond Bitar, chief executive officer of online poker site Full Tilt Poker, on Monday in connection with a $430 million Ponzi scheme his site was accused of running last year.

Rasmussen Reports:

Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows Mitt Romney attracting 46% of the vote, while President Obama earns 44%. Four percent (4%) prefer some other candidate, and five percent (5%) are undecided.