Broad Market Tone:
- Advance/Decline Line: About Even
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- ISE Sentiment Index 105.0 +3.96%
- Total Put/Call .77 -13.48%
Credit Investor Angst:
- North American Investment Grade CDS Index 90.56 -.57%
- European Financial Sector CDS Index 189.98 +.59%
- Western Europe Sovereign Debt CDS Index 100.50 -.17%
- Emerging Market CDS Index 258.78 +1.04%
- 2-Year Swap Spread 18.25 +.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -20.0 +.75 bp
Economic Gauges:
- 3-Month T-Bill Yield .07% +1 bp
- China Import Iron Ore Spot $137.10/Metric Tonne +.81%
- Citi US Economic Surprise Index 25.10 -5.1 points
- 10-Year TIPS Spread 2.54 unch.
Overseas Futures:
- Nikkei Futures: Indicating +39 open in Japan
- DAX Futures: Indicating +14 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech, biotech and medical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Slovenia’s New Cabinet Under Pressure to Avoid Cyprus Fate. Slovenia’s six-day-old government is being urged to prevent the nation becoming the euro region’s
next bailout battleground. Prime Minister Alenka Bratusek’s Cabinet must quickly carry
out a plan to revamp the country’s ailing lenders, the central
bank said yesterday. The former Yugoslav nation needs about 3
billion euros ($3.9 billion) of funding this year, while banks
need 1 billion euros of fresh capital, the International
Monetary Fund said last week. Slovenian banks such as Nova
Ljubljanska Banka d.d. are struggling with surging bad loans
that equal a fifth of economic output, fueling investor concern
that it may be next to seek aid.
- French Consumer Sentiment Drops on Stalled Economy, Unemployment. French consumer confidence dropped in March as a stalled economy and rising unemployment discouraged spending. A household sentiment index dropped to 84 this month from
86 in February, national statistics office Insee said today in
an e-mailed statement. Economists expected a reading of 86,
according to the median of 16 forecasts gathered by Bloomberg.
- Sarris Muffles Calls for Cyprus’s Exit From Euro Area. Finance Minister Michael Sarris sought to muffle calls for Cyprus to
weigh a precedent-setting exit from the euro to ease the economic pain
inflicted by the country’s 10 billion-euro ($13 billion) bailout. The option of eventually pulling out of the currency was floated yesterday by a Nobel prize winner now advising the government, Christopher Pissarides, and Nicholas Papadopoulos, head of the parliament’s finance committee.
- Dallas Fed Favoring Reduced Asset Purchases on U.S. Recovery. Dallas Fed President Richard Fisher
said he’d like the U.S. to reduce its mortgage-backed security
purchases program amid signs that the economy will probably grow
at about 3 percent by the end of the year.
“I’m personally in favor of tapering back our mortgage-
backed security purchases,” Fisher told reporters today at a
conference in Abu Dhabi.
- Home Prices in 20 U.S. Cities Climb by Most Since June 2006. The
S&P/Case-Shiller index of property values in 20 cities climbed 8.1
percent in January from the same month in 2012 after rising 6.8 percent
in the year ended in December, the group said today in New York. The increase exceeded the 7.9 percent median forecast by economists in a Bloomberg survey.
- Grain-Shipping Rates End Longest Rally Since ’03 as Demand Slows. Rates for Panamax ships carrying
grains ended their longest rally in a decade amid speculation
demand temporarily declined before holidays starting at the end
of this week. Earnings for the vessels, which also carry coal, slid 0.5
percent to $9,632 a day, according to the Baltic Exchange in London today. Rates rallied every day from Feb. 6 to yesterday,
the longest advance since 2003. The Baltic Dry Index, a wider
measure of commodity-shipping prices, also fell, as did three of
the four vessel types in the gauge.
- WTI Crude Advances to Five-Week High.
WTI for May delivery climbed $1.08, or 1.1 percent, to $95.89 a barrel
at 2:02 p.m. on the New York Mercantile Exchange after rising to $96.08,
the highest intraday level since Feb. 20. Prices are up 4.4 percent in
2013. The volume of all futures
traded was 7.4 percent above the 100-day average for the time of
day.
- Facebook’s(FB) Zuckerberg Said to Explore Forming Political Group.
Facebook Inc. Chief Executive Officer Mark Zuckerberg is exploring the
formation of a political advocacy group that would focus on topics such
as immigration, the economy, education and
scientific research funding, according to a person familiar with
the matter. Zuckerberg is considering establishing
the group with others in the technology community, according to the
person, who asked not to be identified because the plans haven’t been
made public.
- Audit Faults Stimulus-Backed $1.5 Billion U.S. Clean-Coal Effort. Poor management has hampered a U.S. program to develop technology to
capture carbon-dioxide emissions, the Energy Department inspector
general said in a report that raises new questions about a clean-energy
initiative backed by the 2009 economic stimulus. In total, the Energy Department received $1.5 billion in the American
Recovery and Reinvestment Act to invest in technology that responds to
climate-change risks.
Wall Street Journal:
- North Korea Is Running Out of Threats. When North Korea tosses out another threat of violence against one of
its neighbors or the U.S., it’s become routine to describe it as an
escalation of Pyongyang’s rhetoric. That description captures the fact that North Korea makes a lot of
threats without following through. But is there a point where it’s not
even appropriate to call new threats an escalation?
MarketWatch:
- EU to extend CDS probe to ISDA trade group. The European Union Tuesday widened the scope of its
ongoing probe into credit default swaps, or CDS, to include the
International Swaps and Derivatives Association (ISDA), an organization
of financial institutions that deals in over-the-counter trading of
derivatives. The European Commission said it had found "preliminary indications" that
ISDA may have been part of a coordinated effort of investment banks to
delay or prevent exchanges from entering the credit derivatives
business.
"Such behavior, if established, would stifle competition in the internal
market in breach of EU antitrust rules," the Commission said in a
statement.
Fox News:
- N. Korea puts artillery forces at top combat posture in latest threat on S. Korea, US. North Korea's military warned Tuesday that its artillery and rocket
forces are at their highest-level combat posture in the latest in a
string of bellicose threats aimed at South Korea and the United States.
Seoul's Defense Ministry said it hasn't seen any suspicious North
Korean military activity and that officials were analyzing the North's
warning. Analysts say a direct North Korean attack is extremely
unlikely, especially during joint U.S.-South Korean military drills that
end April 30, though there's some worry about a provocation after the
training wraps up. North Korea's field artillery forces — including
strategic rocket and
long-range artillery units that are "assigned to strike bases of the
U.S. imperialist aggressor troops in the U.S. mainland and on Hawaii and
Guam and other operational zones in the Pacific as well as all the
enemy targets in South Korea and its vicinity" — will be placed on "the
highest alert from this moment," the statement said. Kim will eventually
be compelled to do "something provocative to prove the threats weren't
empty," Lee said.
- California county administrator to get $423,644 a year -- after retirement. When local California official Susan Muranishi retires from her job
in a couple of years, she’s going to be walking away with a fat paycheck
-- $423,664 a year – for the rest of her life. Muranishi, an Alameda County administrator, makes $301,000 in annual
base pay. But in addition to that, the San Francisco Chronicle reports
she'll also receive:
CNBC:
- Has Wealth Inequality in US Sparked Fed's Interest? Recently, the Federal Reserve has also taken a greater interest in the topic. And some analysts are
asking whether financial inequality in the U.S. might soon become part
of the Fed's decision-making process.
- Cyprus Jitters: How It Could Still Go Wrong. "France is teetering between a core and a troubled peripheral
country; if it slips into the latter category, then the troubled euro
zone countries will outweigh the core and the euro will be doomed," he
said. Bill Blain, senior fixed income broker at Mint Partners,
feared the current state of Europe's banks after recent revelations
saying that Monday's comments from Dijsselbloem probably creates the
worst capital funding environment since 2008. "Let's just assume Europe's banks go back to square one," he said in a research note.
Zero Hedge:
Business Insider:
HedgeCo.Net:
- Study: The Impact Of The Obamacare Tax On Hedge Funds. The NII tax clearly is imposed on the carried
interest (i.e.incentive allocation) of a hedge fund manager. The Obamacare
legislation had hedge fund managers specifically in mind when it included income
from “trading in financial instruments” in the types of income expressly subject
to the NII tax. There do not appear to be significant planning opportunities for
hedge fund managers to avoid the NII tax on their incentive allocations, except
to the extent they have side pockets containing real estate or private equity
assets of the types noted below.
Reuters:
- Berlusconi ally says parties still far apart after Italy vote.
A senior official
in Silvio Berlusconi's centre-right party said on Tuesday there were
still wide differences with the centre-left which must be overcome this
week or Italy will have to go back to the polls after last month's
deadlocked election. "What I can tell you is that our positions are still very
distant from each other, and if they remain distant in the next
48 hours we will affirm that the only way is to go back to
vote," People of Freedom (PDL) party secretary Angelino Alfano
told reporters after talks with centre-left leader Pier Luigi
Bersani.
- Chill in car sales spreads to northern Europe. Snow is piled high on
the cars in a deserted dealership in Berlin, and it is not just
the stubborn wintry weather that is gnawing at salesman Mustafa
Kosak, shivering at his desk in a portable office. "Sales
were drastically down in January, February; sometimes
we are happy just to cover our overheads," said Kosak, 38, wrapped up in
a big overcoat. The chill in cars sales has spread from southern
Europe, where the worst of the euro zone debt crisis is crippling
economies, to the north, including the region's biggest car market,
Germany. New car sales have dropped 10 percent in 2013 so far this year
in Germany, nearly 30 percent in the Netherlands and 14.8
percent in Sweden.
- FOREX-Euro flat but vulnerable as Cyprus concerns continue. The euro
steadied versus the dollar on Tuesday, holding above a four-month low
hit the previous day, but remaining vulnerable to fears Cyprus's banking
problems may make investors shun euro zone assets or withdraw money
from banks in countries like Spain and Italy.
Telegraph:
- Mr Yen cautions on Japan's 'unsafe' debt trajectory. Japan's public debt has reached worrying levels and could lead to a bond
buyers' strike unless the government brings the budget deficit under
control, the country's top currency official has warned. "A debt ratio of 245pc of GDP is not really safe, and it is not happening
because we are investing," said Takehiko Nakao, Japan's 'Mr Yen' or
vice finance minister in charge of the exchange rate. Mr Nakao said the scope for further fiscal stimulus is running out and the
country must restore public finances to a sustainable path by the middle of
the decade. "We can't continue to expect people to lend money to us,"
he told The Daily Telegraph.
The West Australian:
- Bank of Spain sees economy shrinking further this year. Spain's economy will sink deeper into recession this year, the Bank
of Spain said on Tuesday, sending a stark message to the government as
it prepares to revise its own growth forecast. In its annual
update of economic forecasts, the central bank said it saw Spain's
economy shrinking by 1.5 percent in 2013 following a 1.4 percent
contraction last year as austerity continues to exacerbate the effects
of a burst property bubble. The central bank's new estimate is
well below the official forecast for a 0.5 percent contraction in GDP,
although the government is widely expected to revise the 2013 figure
downwards in April.
Style Underperformer:
Sector Underperformers:
- 1) Education -2.14% 2) Gold & Silver -1.31% 3) Retail -.81%
Stocks Falling on Unusual Volume:
- HA, BBVA, IRE, M, BAC, TI, CLMT, WIN, PWE, GMAN, PLCE, HCS, AMTG, AI, IEP, SPLK, TRLA, MFRM, ASH, CNW, AGU, TSRO, APOL, SLCA, AEO, BFAM, SFLY, CMCO, EVR, TECH, PNR, CRI, ROK and BPI
Stocks With Unusual Put Option Activity:
- 1) TWC 2) SVU 3) BIIB 4) JNK 5) GT
Stocks With Most Negative News Mentions:
- 1) SWN 2) COG 3) MDT 4) DELL 5) RCL
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +1.14% 2) Computer Hardware +1.11% 3) Disk Drives +.91%
Stocks Rising on Unusual Volume:
- HK, SONC, BSFT, STX, AMBA and WDC
Stocks With Unusual Call Option Activity:
- 1) HK 2) MDCO 3) LGF 4) CHS 5) HUN
Stocks With Most Positive News Mentions:
- 1) GILD 2) T 3) BSFT 4) EMR 5) BTU
Charts:
Evening Headlines
Bloomberg:
- Dijsselbloem Says Euro Troubled Lenders Must Fend for Themselves. Dutch
Finance Minister Jeroen Dijsselbloem, who committed taxpayer funds to
take over SNS Reaal NV (SR) last month, said troubled lenders in the
euro area must now fend for themselves as part of future regional
rescues. Dijsselbloem, who leads the group of 17 euro finance ministers,
said imposing losses on depositors and bondholders
can be part of the bailout toolkit after such measures were
taken to avoid default in Cyprus. “We are looking for a way to place risks where they are
taken,” Dijsselbloem said on Dutch television program “Pauw &
Witteman” late yesterday. “Banks should strengthen their
balances -- they have to ensure they can be unwound when they
get in trouble. Next, it should be possible to make shareholders
and bond holders contribute to a rescue. That’s how we move
along. And then eventually you may get to a government
contribution. That order was reversed in the last years.” Dijsselbloem said earlier yesterday that if ailing banks
can’t raise funds, “then we’ll talk to the shareholders and the
bondholders, we’ll ask them to contribute in recapitalizing the
bank, and if necessary the uninsured deposit holders.” Those
comments, to Reuters and the Financial Times, were confirmed
yesterday by Dijsselbloem’s spokeswoman, Simone Boitelle.
- Bersani Meets Berlusconi Deputy to Staunch Years of Conflict. Pier Luigi Bersani will meet Silvio Berlusconi’s deputies today, seeking to ease years of conflict
in his bid to assume the Italian premiership. Bersani, 61, has two days to overcome a shortfall of
support in parliament and may need help from Berlusconi, a
billionaire and three-time prime minister, to get there. The
appointment, set for 4:15 p.m. in Rome, is between Bersani and a
delegation led by Angelino Alfano, head of Berlusconi’s People of
Liberty party. Bersani and Berlusconi have room for common ground since
both want to maintain influence after losing voters to the
upstart Five Star Movement of ex-comic Beppe Grillo. Still,
years of bad blood make a partnership hard to come by.
Berlusconi relishes mocking Bersani for his previous adherence
to communism, while the ex-premier has been criticized for his
criminal trials. “Even if it starts, it will not last long,” Nicola
Marinelli, who oversees $180 million at Glendevon King Asset Management
in London, said of the chances for an alliance. “They’ve been fighting
for so long and the people behind them
really hate each other.”
- Monte Paschi Bailout Won’t Spur Recovery as Loan Losses Surge. Banca
Monte dei Paschi di Siena’s 4.07 billion-euro ($5.2 billion) state
rescue won’t resolve the troubles of Italy’s third-largest bank, which
is poised to report a second straight loss on soaring bad-loan
provisions. The world’s oldest bank may post a 2012 net loss of 2.33
billion euros ($3.03 billion) when it publishes results on Thursday,
based on the mean estimate of 10 analysts surveyed by Bloomberg. The
Siena-based lender had a 4.69 billion-euro loss in 2011, and will
probably be unprofitable in 2013 as well, analysts’ estimates show. Italy’s
economy remains mired in its longest recession in two decades and a
month-old political impasse threatens to increase sovereign-debt yields
and bank funding costs. The bank’s outlook is further complicated by
probes into the actions of former managers after derivatives were used
to hide losses. While the bailout will replenish capital, “concerns on low profitability, poor credit quality and high exposure to the
country’s sovereign debt remain,” said Wolfram Mrowetz, the
chairman of Alisei Sim, a Milan-based brokerage. “There are too
many structural issues still to address.”
- Kuroda Wants to Achieve BOJ’s 2% Price Target in Two Years. Haruhiko
Kuroda said he wants 2 percent inflation in two years and pledged to
buy more government bonds, underscoring the new Bank of Japan (8301)
chief’s efforts to accelerate an end to falling prices. “Achieving the 2 percent inflation target in two years is something that I have in my mind,” Kuroda said today in Parliament. He said the BOJ may scrap a rule limiting the scale of asset buying and consider purchasing more bonds with longer
maturities.
- Ford(F) CEO Mulally Says He’s Concerned About Japanese Yen. Ford
Motor Co. (F) Chief Executive Officer Alan Mulally said he’s concerned
about the depreciation of the yen that’s bolstering the competitiveness
of Japanese carmakers. “The most important thing that most countries
around the world believe in is letting the markets determine the
currency,” Mulally said today from Bangkok in reference to the
Japanese currency, during an interview on Bloomberg TV’s First Up with
Susan Li. “That’s just so important to all of us in the
international trading system.”
- China’s Stocks Fall Most in a Week as Brokerages, Miners Drop.
Chinese stocks fell for a second day, as declines by brokerages and
material producers dragged the Shanghai Composite Index (SHCOMP) down
the most in a week. Haitong Securities Co. sank 3.8 percent, the
second-biggest decline in the CSI 300 Index. (SHSZ300) Jiangxi Copper
Co. (600362) dropped 1.8 percent before reporting profit. Dongfeng
Automobile Co. and Cosco Shipping Co. fell at least 0.7 percent after
2012 net income fell from a year earlier. The Shanghai Composite Index lost 1.6 percent to 2,288.49 as of 10:19 a.m. local time. The CSI 300 Index retreated 1.9 percent to 2,563.73.
- China Money Rate Snaps 3-Day Drop on Possible Property Measures. China’s money-market rate rose,
snapping a three-day decline, on speculation the central bank
will take measures to rein in home-price increases. Many lenders
have started to control the scale of loans for
real estate development, the China Securities Journal reported
today, without saying where it got the information. The China
Banking Regulatory Commission is drafting guidelines on property
lending including mortgages, the newspaper cited an unidentified
person close to the regulator. “In China, a media report on banks
preparing to tighten mortgage-lending practices are likely to weigh on
sentiment,” Dariusz Kowalczyk, a strategist at Credit Agricole CIB in
Hong Kong, wrote in a research report today. “We expect the People’s
Bank of China to drain liquidity.” The seven-day repurchase rate,
which measures funding availability in the interbank market, climbed
eight basis points to 3 percent at 9:18 a.m. in Shanghai, according to a weighted
average compiled by the National Interbank Funding Center.
- BRICS Nations Plan New Bank to Bypass World Bank, IMF. The biggest emerging markets are uniting to tackle
under-development and currency volatility with plans to set up
institutions that encroach on the roles of the World Bank and
International Monetary Fund. The leaders of the so-called BRICS
nations -- Brazil, Russia, India, China and South Africa -- are set to
approve the establishment of a new development bank during an annual
summit that starts today in the eastern South African city of Durban,
officials from all five nations say. They will also discuss pooling
foreign-currency reserves to ward off balance of payments or currency
crises.
- RBNZ Wants Banks to Hold More Capital Against Risky Home Loans. New Zealand’s central bank plans to
require banks to hold more capital to strengthen their balance
sheets against the risk from high loan-to-value ratio lending. “The aim of the current review is to ensure that banks’
baseline capital requirements for housing loans properly reflect
risk in the housing sector,” Deputy Governor Grant Spencer said
in an e-mailed statement. “The bank is proposing higher capital
requirements for high LVR loans.” Raising the capital adequacy requirements could prompt
banks to seek more capital, which may push up interest rates and
slow New Zealand’s housing market, in which prices last month
rose at the fastest pace since early 2008.
- Rebar Falls in Shanghai as Chinese Banks Begin Property Curbs.
Steel reinforcement-bar futures
fell for the second time in three days in China as banks began
implementing measures to prevent a housing bubble, which may cut demand
for the material used in construction. The contract for October delivery fell as much as 1.1 percent to 3,868 yuan ($623) a metric ton on the Shanghai
Futures Exchange and was at 3,879 yuan at 10:07 a.m. local time.
- Rubber Declines as Yen’s Rebound Cuts Appeal Amid Cyprus Concern.
Rubber fell as Japan’s currency gained, cutting the appeal of
yen-denominated contracts, amid concern Cyprus’s bank-restructuring plan
will be a template for other European nations, imperiling bondholders
and depositors. The contract for delivery in August lost as much as 1.4
percent to 275.6 yen a kilogram ($2,920 a metric ton) and was at 277.7
yen on the Tokyo Commodity Exchange at 10:17 a.m. Futures extended this year’s retreat to 8.3 percent. “The market retreated as concerns grew that the Cyprus
bailout agreement would impact on other European nations,”
Hideshi Matsunaga, an analyst at broker ACE Koeki Co. in Tokyo,
said today by phone.
- Copper Futures Fall in New York as China Adds to Growth Concerns. Copper fell the most in four
sessions in New York, on speculation that metals demand will
slow as China’s government will take steps to tame inflation and
global growth weakens. China’s swap market is signaling interest-rate increases
for the first time since 2011, after inflation accelerated to a
10-month high and the government measures failed to slow the
rise in housing prices. “China’s growth story remains intact, but there are
serious concerns about the short-term outlook given the property
bubble and the ratcheting up of the government response,”
Edward Meir, an analyst at INTL FCStone in New York, said in a
report. “The global outlook remains patchy at best.” Supplies that are outstripping demand are also weighing on
prices, Meir said. Stockpiles of copper in warehouses monitored by the London
Metal Exchange expanded 0.5 percent to 565,350 metric tons, the
highest since October 2003, LME data today showed. Inventories
have jumped 77 percent this year.
- Oil Supplies Jump to
Nine-Month High in Survey: Energy Markets. U.S. oil inventories probably
rose to a nine-month high last week as domestic production stayed near
the most in 21 years and imports rebounded, a Bloomberg survey showed.
Stockpiles grew by 1.4 million barrels, or .4%, to 384.1 million in the
seven days ended March 22, the highest level since June 22, according to
the median of seven analyst estimates before an EIA report tomorrow.
- Intel(INTC) Said to Make Progress in Talks With Networks for TV Rights. Intel Corp. is making progress
in talks with Time Warner Inc., NBC Universal and Viacom Inc. to obtain
TV show and films for a first-of-its kind online multichannel pay-TV
service, according to people with knowledge of the situation. Intel, the world’s largest chipmaker, is negotiating financial
terms with the companies, according to the people, who sought anonymity
because the talks are private. The media companies have signed off on
the broad outlines of the proposed service, said the people, with some
aspects still to be settled. Other network owners aren’t as far along,
they said.
Wall Street Journal:
- Bailout Strains European Ties. Cyprus Deal Preserves Euro but Sows Mistrust Between Continent's Haves, Have-Nots. A deal reached Monday in Brussels may have saved Cyprus from becoming
the first country to crash out of the euro, but it came at the cost of
widening the political mistrust between the strong economies of Europe's
north and the weaklings of the south. Several officials familiar with talks in Nicosia and Brussels over
the €10 billion ($13 billion) rescue for the island described more than a
week of chaotic negotiations. European officials cited Cypriot
foot-dragging, reversals and dropped communications, a situation one
European Union official called "terrifying." Cypriot officials described
their European opposites as demanding and inflexible. The fresh bitterness over the Cyprus mess—which appears deeper than at
similar points during Greece's extended financial turmoil—could hamper
future attempts to fix the bloc's flaws. Germany, the euro zone's
biggest economy, prevailed as it typically has in the negotiations, but
at the price of growing resentment over what some Europeans saw as its
bullying of a tiny nation.
- U.S. Cracks Down on 'Forced' Insurance. A U.S. housing regulator is cracking down on a little-known practice
that has hit millions of struggling borrowers with high-price
homeowners' insurance policies arranged by banks that benefit from the
costly coverage. The Federal Housing Finance Agency, which regulates
mortgage giants Fannie Mae and Freddie Mac, plans to file a notice
Tuesday to ban lucrative fees and commissions paid by insurers to banks
on so-called force-placed insurance. Such "forced" policies are imposed
on homeowners whose standard property
coverage lapses, typically because the borrower stops making payments.
Critics say the fee system has given banks a financial incentive to
arrange more expensive homeowners' policies than necessary.
- Chinese College Graduates Play It Safe and Lose Out. Although Mr. Xie's parents are entrepreneurs who have built companies
that make glasses, shoes and now water pumps, he has no interest in
working at a private startup. Chinese students "have been told since we
were children to focus on stability instead of risk," the 24-year-old
engineering student says.
- Mortimer Zuckerman: The Great Recession Has Been Followed by the Grand Illusion. Don't be fooled by the latest jobs numbers. The unemployment situation in the U.S. is still dire. The Great Recession is an apt name for America's current stagnation,
but the present phase might also be called the Grand Illusion—because
the happy talk and statistics that go with it, especially regarding
jobs, give a rosier picture than the facts justify. The country isn't really advancing. By comparison with earlier
recessions, it is going backward. Despite the most stimulative fiscal
policy in American history and a trillion-dollar expansion to the money
supply, the economy over the last three years has been declining. After
2.4% annual growth rates in gross domestic product in 2010 and 2011, the
economy slowed to 1.5% growth in 2012. Cumulative growth for the past
12 quarters was just 6.3%, the slowest of all 11 recessions since World
War II.
And last year's anemic growth looks likely to continue.
Fox News:
- What to Cut: As Congress treats crises with new programs, government grows. "The government is far larger than it ever has been. The debt is
growing at record rates," Thomas Schatz, president of Citizens Against
Government Waste, said. Adjusted for inflation, federal spending has gone up from an average
of $882 billion every year in the 1980s to $1.48 trillion a year in the
'90s to $2.44 trillion a year in the first decade of the 21st century.
It's estimated that the government will have spent as much in the first
four years of the new decade as it did in all of the 1990s.
CNBC:
- Farmland Prices: Is the Bubble About to Burst? Record-high prices for corn, soybeans, wheat and other commodities
have left growers flush with cash to purchase more land. And what the
farmers don't pay for out of their own pockets, historically low
interest rates provide them with easy and cheap access to money to close
the deal. The favorable mix of both cash and credit has provided
fuel to drive up land values across the Midwest, stoking fears of a
bubble ready to burst.
- Cyprus Orders All Banks to Remain Closed Until Thursday. Cyprus has extended the closure of its banks for two more days — until
Thursday — a sudden postponement that comes after the country's leaders
spent days struggling to come up with a plan to raise the money needed
to secure an international bailout.
Zero Hedge:
Business Insider:
eFinancialCareers:
- Healthy Executive Pay Made Citi(C) Profitable, Say Citi Executives. With a shareholder vote on 2012 executive pay for Citigroup’s top brass
approaching, the bank is putting on the forward press, rationalizing the
gaudy pay packages that investors have condemned over the last few
years. The plan, which began paying out this year, will disperse nearly $580
million to top execs like Corbat. The money goes on top of previously
announced annual salaries and bonuses, and is designed to retain “key”
employees.
Reuters:
- CBS(CBS) apologizes to U.S. veterans for 'Amazing Race' episode. U.S. TV network CBS has
apologized after its Emmy-winning reality series "The Amazing
Race" angered veterans with an episode featuring Vietnamese
communist propaganda. The show's host, Phil Keoghan, apologized before the start
of Sunday's show for the March 17 episode in which participants
in Hanoi were required to memorize a pro-communist song and use
a downed U.S. B-52 bomber aircraft in the city as a prop.
Financial Times:
- Darling fears subprime ‘housing bubble’. Alistair
Darling, former Labour chancellor, has warned that the package of
mortgage guarantees announced last week could create “a housing bubble”
and risked repeating mistakes of the US subprime crisis. Speaking in
a Commons debate on the Budget, Mr Darling claimed that George Osborne
had largely “given up on doing anything” and that his housing package
could – if anything – create more
problems. He claimed a chronic housing shortage meant that extra state
support for mortgages could pump up prices.
- Cyprus bailout leaves investors queasy. Fears
that the Cyprus rescue, which includes a “haircut” for large
depositors, would set a precedent for similar action in other troubled
eurozone countries had been one of investors’ main concerns. Little
wonder, then, that markets retreated when Jeroen Dijsselbloem, head of
the eurogroup of finance ministers, said the Cypriot rescue marked a
watershed in how the region deals with failing banks. Investors are
worried, too, that capital controls in Cyprus will taint the banking
system in other struggling eurozone countries. “Capital controls are a
major step backwards for Europe,” says Andrew Milligan, head of global
strategy at Standard Life Investments. “It is
very difficult for markets to understand the processes and procedures
when a country needs assistance, which adds to the level of uncertainty
and risk – even if it is manageable for now.” Bob Savage at currency
hedge fund FX Concepts says: “If deposits over
€100,000 are not guaranteed in any eurozone nation, and if you’re in
Spain or Italy, this is not a great outcome.”
- Role of Cyprus in a German Europe.
The eurozone crisis is far from being over and it is not clear what new
EU structures will emerge at the end of it – or whether they would
dilute or strengthen German power. That leaves Germany holding the ring: writing the cheques, enforcing
the rules and increasingly making them up, as well. That is a dangerous
situation for Europe – and ultimately for Germany itself.
Telegraph:
- Eurozone’s bully boys will come to regret penalising tiny Cyprus. Europe’s monetary union was meant to be about solidarity among the many and
prosperity for all. It was not excessive Russian deposits which finished off the
Cypriot banking system but last year’s eurozone-imposed haircut of Greek
sovereign debt. As big holders of Greek bonds, Cypriot banks have suffered
losses approaching €5bn. Thus does each successive botched crisis lead
directly to the next one. Narrow political self-interest has been put above
that of the common good. No monetary union can expect long to survive this sort of self-inflicted
political battering. If Europe can make such a horlicks out of tiny Cyprus,
just think what might happen when the crisis once again laps at the doors of
larger economies such as Italy, Spain and Portugal.
ZDF:
- Schaeuble Says 'Germans Are Not the Bad Guys'. The German government's policies are "sensible and responsible", Finance Minister Wolfgang Schaeuble said in an interview. Cyprus is in a difficult situation from which there is no easy way out. People in Cyprus will have a hard time ahead.
Yonhap News Agency:
- U.S. seeks more missile defense drills with S. Korea, Japan. The United States is pushing to hold trilateral missile defense exercises with
South Korea and Japan on a regular basis, an informed source said
Monday. The move is part of the Pentagon's efforts to hone regional
capabilities to counter North Korea's evolving missile threats. "The
U.S. considers boosting trilateral cooperation with the regional allies as an
option," the source said, requesting anonymity.
Xinhua:
- China found more than 1,000 dead ducks in the Nanhe River in the southern province of Sichuan, citing Liang Weidong, a local government publicity office official.
China Securities Journal:
- May
banks in China have started to control the scale of loans for real
estate development to coordinate with new property curbs. China Banking
Regulatory Commission is drafting guidelines on property loans including
development loans and mortgages, citing a person close to the
regulator. The regulator also asked rural financial institutions to
lower the proportion of property development loans from the previous
year.
Evening Recommendations
Night Trading
- Asian equity indices are -1.0% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 120.0 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 91.25 -1.25 basis points.
- NASDAQ 100 futures +.15%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Durables Goods Orders for February are estimated to rise +3.9% versus a -5.2% decline in January.
- Durables Ex Transports for February are estimated to rise +.6% versus a +1.9 gain in January.
- Cap Goods Orders Non-defense Ex Air for February are estimated to fall -1.1% versus a +6.3% gain in January.
9:00 am EST
- The S&P/Case Shiller 20 City Home Price Index MoM% SA for January is estimated to rise +.8% versus a +.88% gain in December.
10:00 am EST
- The Richmond Fed Manufacturing Index for March is estimated at 6.0 versus 6.0 in February.
- Consumer Confidence for March is estimated to fall to 67.5 versus 69.6 in February.
- New Home Sales for February are estimated to fall to 420K versus 437K in January.
Upcoming Splits
Other Potential Market Movers
- The 2Y T-Note auction, weekly retail sales reports and the (BGC) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Almost Every Sector Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- ISE Sentiment Index 99.0 +5.32%
- Total Put/Call .89 -4.38%
Credit Investor Angst:
- North American Investment Grade CDS Index 91.11 +.80%
- European Financial Sector CDS Index 189.24 +7.3%
- Western Europe Sovereign Debt CDS Index 100.67 -.27%
- Emerging Market CDS Index 256.12 +.09%
- 2-Year Swap Spread 17.75 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -20.75 -.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .06% -1 bp
- China Import Iron Ore Spot $136.0/Metric Tonne +.52%
- Citi US Economic Surprise Index 30.20 +1.1 points
- 10-Year TIPS Spread 2.54 unch.
Overseas Futures:
- Nikkei Futures: Indicating -120 open in Japan
- DAX Futures: Indicating +7 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech, biotech sector longs and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
