Bloomberg:
- Shiller’s Bubble Warning Dismissed in Loan Surge: Brazil Credit. Brazil’s President Dilma Rousseff is
disregarding warnings about a housing bubble and is stoking
demand instead by helping people buy more homes as prices surge. The government increased the price limit of houses people
can buy using the unemployment insurance fund on Sept. 30 after
public lending for homes increased more than four times as much
as private banks in the two years through June, to 202 billion
reais ($90 billion), according to central bank data. Rousseff’s homebuilding program has propelled demand as she
seeks to stimulate the economy before next year’s presidential
election. Robert Shiller, six weeks before winning the Nobel
Prize for economics, cautioned that such demand may be fueling a
bubble as home prices grow twice as fast as rent. Mortgage debt
as a percentage of disposable household income has climbed to a
record 15 percent, almost double the level at the start of
Rousseff’s term.
- Former Chinese Commander Warns of War If Japan Shoots Down Drone.
A retired Chinese military commander
warned Japan that attacking China’s drones would represent the “first
shot” of a war, adding to tensions over islands claimed by both sides in
the East China Sea. China should attack Japanese planes over the
islands as a “minimum response,” Wang Hongguang, former deputy commander
of the Nanjing military region, wrote in the Global Times today. Japan
Prime Minister Shinzo Abe should be “mentally prepared,” Wang wrote.
“China has many kinds of
countermeasures from low intensity to high intensity.” The
Global Times said in July that Wang had retired recently.
- Swiss Banks May Shrink on Higher Leverage, JPMorgan Says. UBS
AG (UBSN) and Credit Suisse Group AG (CSGN), Switzerland’s biggest
banks, may have to shrink their fixed-income, currencies and commodities
activities if the nation’s regulator imposes higher leverage ratios
than currently planned, according to JPMorgan Chase & Co. (JPM) analysts.
- European Stocks Climb to Five-Year High as HSBC Rallies.
European stocks rose to a five-year high as HSBC Holdings Plc reported
increased profit and investors awaited this week’s interest-rate
decision from the European Central Bank. HSBC climbed the most in two
months as Europe’s biggest bank said pretax profit gained 30 percent.
PostNL NV rallied 7.8 percent after the Dutch postal operator raised its
income guidance. Ryanair Holdings Plc (RYA) tumbled the most in five
years
after cutting its earnings forecast amid higher competition and
a weaker economy. UBS AG and Credit Suisse Group AG fell.
The Stoxx Europe 600 Index gained 0.3 percent to 322.5 at
the close of trading, the highest since May 2008.
- Commodity Index Drops as Dollar Slips, Treasuries Advance. Industrial metals led a gauge of
commodities to a four-month low, while the dollar fell and
Treasuries rose, as investors assessed economic data for clues
to the next policy moves from central banks. U.S. shares
fluctuated while European stocks closed at a five-year high. The S&P GSCI Index of 24 commodities lost 0.2 percent to
611.07 at 12:57 p.m. in New York as copper slid 1.3 percent and natural gas sank 2.3 percent. The Bloomberg U.S. Dollar Index, a
gauge of the currency against 10 major peers, fell 0.2 percent
after climbing for six straight days in its longest rally since
May. Ten-year Treasury yields decreased three basis points to
2.60 percent.
- Seattle May Be First Big City Where Burger Flippers Get $31,200. In Seattle, supporting a $15-an-hour
minimum wage could be suicide for politicians. It’s too low. Ed Murray, who’s running for mayor, vows to phase in that
minimum for many jobs if he’s elected tomorrow. Incumbent Mike McGinn has declared he may not necessarily stop at $15. Much of the U.S. would scoff at mandating a full-time pay
equivalent of $31,200 a year, but in the biggest metropolitan
area in the Pacific Northwest it’s an idea taken very seriously.
- SAC Agrees to Plead Guilty to End Insider-Trading Case.
Billionaire Steven A. Cohen's SAC Capital Advisors LP, the hedge fund
accused of fostering a culture of rampant insider trading, has agreed to
plead guilty to securities fraud and wire fraud, pay a record $1.8
billion
and shutter its investment advisory business.
Wall Street Journal:
- Google’s(GOOG) Schmidt on NSA, China, North Korea. Google Inc. Executive
Chairman Eric Schmidt bristled at reports that the U.S. government
allegedly spied on the company’s data centers, saying such an act is
“outrageous” and could be a breach of the law if proven true. “It’s
really outrageous that the national security agency was looking between
the Google data centers if that’s true. The steps that the organization
was willing to do without good judgment to pursue its mission and
potentially violate people’s privacy, it’s not okay,” Mr. Schmidt told
The Wall Street Journal in an interview in Hong Kong. “The Snowden’s
revelations have assisted us in understanding that it’s perfectly
possible that there are more revelations to come.”
Fox News:
- Top hospitals opt out of ObamaCare. The Obama administration has been claiming that insurance companies will
be competing for your dollars under the Affordable Care Act, but
apparently they haven’t surveyed the nation’s top hospitals.
CNBC:
Zero Hedge:
Business Insider:
Washington Post:
- For consumers whose health premiums will go up under new law, sticker shock leads to anger. Americans who face higher insurance costs under President Obama’s
health-care law are angrily complaining about “sticker shock,”
threatening to become a new political force opposing the law even as the
White House struggles to convince other consumers that they will
benefit from it. The growing backlash involves people whose plans are being discontinued
because the policies don’t meet the law’s more-stringent standards.
They’re finding that many alternative policies come with higher premiums
and deductibles.
USA Today:
Reuters:
- Italy eyes 'Google(GOOG) Tax' to help fix public finances. Italy's largest
ruling party has proposed legislation to raise government revenues by
making it more expensive for multinational online companies like Google, Amazon and Yahoo to do business there.
A bill tabled by the center-left Democratic Party (PD) aims to raise at
least 1 billion euros through a law, dubbed the "Google Tax", obliging
companies that advertise and sell online in Italy to do so only through
agencies with a tax presence in the country.
- METALS-Copper falls on uncertain demand outlook for China. Copper fell for a third consecutive
session on Monday due to a drop in the euro, but remained firmly within a
range that has persisted for months on uncertainty about the outlook
for demand from top consumer China. Benchmark copper on the London Metal Exchange closed at $7,149 a tonne, down from a last bid of $7,240 on Friday.
- Saudi minister demands Iran leave Syria. Saudi Foreign Minister Prince Saud al-Faisal on Monday demanded that Iran leave Syria, saying Tehran was helping President Bashar al-Assad strike his own people.
Financial Times:
- Strong euro poses risk to recovery, Fabrizio Saccomanni warns. Italy’s
finance minister has warned of the risks of a strengthening euro to
Europe’s fragile recovery, urging the European Central Bank to ease
monetary policy to help the continent’s small and medium enterprises. The comments by Fabrizio Saccomanni come less than two weeks
after the euro hit a two-year high against the dollar. The single
currency has pared back some of its gains, but remains more than 2 per
cent higher than at the beginning of the year.
Telegraph:
ARD:
- ECB's Asmussen Says Interest Rates are Too Low in Germany.
Germany is being "seen as a safe haven, capital is flowing into
Germany," European Central Bank Executive Board member Joerg Asmussen
says in an interview.
Xinhua:
- Party Urges China to Curb Extravagant Official Spending. Chinese
Communist Party recently issued a notic on curbing problems related with
"formalism, bureaucracy, laxity and extravagance." The notice bans
using public funds to hold extravagant banquets. The notice calls for
curbs on excessive construction of government buildings. the notice
calls for strict controls on spending on government cars.
Style Underperformer:
Sector Underperformers:
- 1) Disk Drives -2.23% 2) Semis -.37% 3) Biotech -.23%
Stocks Falling on Unusual Volume:
- WRLD, RYAAY, BPI, UBS, RNF, CS, GVA, NQ, FBRC, IDCC, EDMC, ELLI, FLDM, GTLS, EPAY, ICGE, DD, CVRR, MW, BSFT, NPO, VSI, KORS, CLMT, MSG and PENN
Stocks With Unusual Put Option Activity:
- 1) CVC 2) AOL 3) XME 4) FDX 5) NVDA
Stocks With Most Negative News Mentions:
- 1) AVP 2) AMZN 3) ICE 4) NTAP 5) AFL
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Coal +2.41% 2) Steel +1.98% 3) Homebuilders +1.89%
Stocks Rising on Unusual Volume:
- TPH, BRY, VECO, CVA, SFY, GTI, LINE, VMC, RLGY, ZLTQ, CSIQ, SYY, SCTY, X, FSLR, NUAN, QLIK, SPWR, HWAY, WLT, AOL, GRPN and VOLC
Stocks With Unusual Call Option Activity:
- 1) DNR 2) AKS 3) STZ 4) TPX 5) MAT
Stocks With Most Positive News Mentions:
- 1) K 2) AAPL 3) LMT 4) T 5) MON
Charts:
Weekend Headlines
Bloomberg:
- Xi Borrows From Mao Playbook in Power Play Ahead of Plenum. The
mission for the near-dozen Communists sitting round a table at a
Beijing ministry was explicit: criticize their boss, who was present.
Party cadres carefully recorded their comments as they spoke, in an echo
of sessions held decades ago under Chairman Mao Zedong’s direction.
- Park Calls for Ending ’Vicious Cycle’ of Appeasing North Korea. South Korean President Park Geun Hye
called for ending the “vicious cycle” of rewarding North
Korean provocations, saying it complicates negotiations and
emboldens the Kim Jong Un regime to advance its nuclear program. “We
cannot repeat the vicious cycle of the past where
North Korea’s nuke threats and provocations were met with rewards and
coddling,” she told BBC World News in an interview that aired today.
“Otherwise, North Korea will continue to further advance its nuclear
capability.”
- Asian Stocks Fall After Fisher Speech on Fed Policy. Asian
stocks fell after Federal Reserve Bank of Dallas President Richard
Fisher said the U.S. central bank should end its record stimulus as soon
as possible. South Korean financial companies including Woori Finance
Holdings Co., Shinhan Financial Group Co., Mirae Asset Securities Co.
and Hana Financial Group Inc. dropped more than 1.6 percent. Coca-Cola
Amatil Ltd. (CCL), Australia’s largest listed drinks company, slumped
4.9 percent after forecasting 2013 earnings will decline. China
Resources Enterprise Ltd., a brewer and retailer with businesses in Hong
Kong and mainland China, gained 1.5 percent. The MSCI Asia Pacific excluding Japan Index fell 0.2
percent to 478.49 as of 11:47 a.m. in Hong Kong, after rising as
much as 0.2 percent.
- Euro at Six-Week Low on ECB; Aussie Climbs as Spending Surges. The euro fell to its lowest level in
more than six weeks before European Central Bank Executive Board
member Joerg Asmussen speaks in the run-up to a policy meeting
amid signs further stimulus may be needed in the region. The euro
fell 0.1 percent to $1.3480 as of 12:43 p.m. in Singapore, and last week
dropped 2.3 percent, the largest decrease since the five days ended
July 6, 2012. It fell as low
as $1.3442 today, the least since Sept. 18.
- Rebar Fluctuates as Investors Await China Party Plenum Meeting.
Steel reinforcement-bar futures swung
between gains and losses before a meeting of China’s top Communist Party
officials in Beijing which will map out a blueprint for economic
reform. Rebar for May delivery, the most-active contract by volume on
the Shanghai Futures Exchange, rose as much as 0.4 percent to 3,685
yuan ($603) a ton and fell as low as 3,666 yuan before
trading at 3,670 yuan by 10:41 a.m. local time. The contract
lost 1.5 percent last month.
- Junk Loans Approach $1
Trillion as Standards Dip: Credit Markets. Loans to junk related
companies in the U.S. are on pace to exceed $1 trillion this year, a
level not seen before the financial crisis, as concern rises that
lenders are lowering their standards. The almost $873 billion of
leveraged loans made in 2013 to borrowers ranging from hotel chain
Hilton Worldwide Holdings Inc. to coal producer Peabody Energy Corp. is
more than the $642.3 billion obtained in all of last year and up from
the post-crisis low of $161.5 billion in 2009, according to Bloomberg.
At the current rate, the record of $899.1 billion in 2007 may be
eclipsed as soon as this week.
- Fed Gives Banks New Dire Scenarios for 2014 Stress Tests. Lenders
including JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C)
will have to show they can survive the demise of a trading partner or a
plunge in value of high-risk business loans in the 2014 version of U.S.
stress tests. The scenarios for the annual tests, outlined by the
Federal
Reserve in a statement yesterday, reflect some of the most
pressing threats seen by regulators as they gauge the ability of
the U.S. financial system to withstand economic shocks. Bankers
will have to show what would happen to the value of leveraged
loans they hold, the impact of another housing bust and how
they’d fare if a firm that owes them substantial sums collapses.
- Health Site Flaws Test Democrats’ Unity as Attacks Rise.
Democratic Senator Joe Manchin of West Virginia announced he is
drafting legislation with Republican Senator Johnny Isakson of Georgia
to postpone the law’s penalty for failing to obtain health insurance, a
core provision that the White House has insisted on maintaining without
delay. Senator Mary Landrieu of Louisiana, a Democrat facing re-election
in a state that backed Obama’s Republican opponents in 2008 and 2012,
said in an interview this week that Obama should
fire some staff members to hold them accountable for the
website’s problems. She stopped short of joining demands from
Republicans for Sebelius’s resignation. Health and Human Services officials who testified this week
before House committees will appear next week in front of two
Senate panels whose Republican members have been outspoken in
criticizing them.
- Obama’s ‘Dishonesty’ Could Slow Second Term.
President Barack Obama continued to take political heat for the
troubled debut of his signature health plan while his advisers
downplayed the significance of the program’s low enrollment rate. Mitt
Romney, the Republican candidate who lost the 2012 presidential race to
Democrat Obama, accused the president of lying. “He wasn’t telling the
truth,” Romney said today on NBC’s
“Meet the Press.” “That fundamental dishonesty has really -- has really put
in peril the whole foundation of his second term,” Romney said.
“I think it is rotting it away.” During the presidential campaign and later, as Congress
debated the Affordable Health Care Act, Obama repeatedly said
that no one would be forced to give up their existing health
coverage under the law. The statement “undermined the president’s credibility,”
Romney said.
- Obamacare Birth Control Rule Assailed by Court as Split Widens. A requirement of President Barack Obama’s health-care law that group insurance plans cover
contraceptives may violate religious freedom, a U.S. appeals
court said, widening a split among the circuits and making it
more probable the U.S. Supreme Court will take up the issue. A three-judge panel in Washington said a lower court was
wrong to deny an injunction sought in a lawsuit by two brothers
who are Catholic. The men sued on religious grounds, seeking to
exclude contraceptive coverage from health plans provided by
their produce-distribution companies. While the panel didn’t
rule on the actual challenge, they disagreed with the trial
judge’s determination that the suit was unlikely to succeed.
Wall Street Journal:
- Investors Return to IPOs in Force. Investors
are stampeding into initial public offerings at the fastest clip since
the financial crisis, fueling a frenzy in the shares of newly listed
companies that echoes the technology-stock craze of the late 1990s.
- You Also Can't Keep Your Doctor. I had great cancer doctors and health insurance. My plan was cancelled. Now I worry how long I'll live.
Everyone now is clamoring about Affordable Care Act winners and losers.
I am one of the losers. My grievance is not political; all my energies
are directed to enjoying
life and staying alive, and I have no time for politics. For almost
seven years I have fought and survived stage-4 gallbladder cancer, with a
five-year survival rate of less than 2% after diagnosis. I am a
determined fighter and extremely lucky. But this luck may have just run
out: My affordable, lifesaving medical insurance policy has been
canceled effective Dec. 31.
Fox News:
CNBC:
- For signs of bubble, look no further than LBOs.
Market watchers who have been out hunting for bubbles may want to look
at debt rather than equity. A number of measures that focus on leverage,
particularly in the area of corporate takeovers, show that kind of
risk-taking back at levels just before the financial system imploded and
sent the economy into its worst slump since the Great Depression. Leveraged
buyouts—LBOs—for both big and midsize companies are approaching debt
levels last experienced in 2007, according to the latest figures from
Thomson Reuters.
Business Insider:
New York Times:
- After Delay, Lenders Set To Visit Greece for Audit.
Inspectors from Greece’s international lenders have put a postponed
visit to the country back on the agenda and will return early this week
after Athens made a new proposal on filling a gap of 2 billion euros in
the 2014 budget, the European Commission has said.
New York Post:
Real Clear Politics:
- Obamacare's Widening Disconnect.
Our relationship with government is in shambles, our feeling of
disconnect with Washington at an historic level. Yet the real problem is
not a health-care website that doesn’t work.
The real problem is a president and a Washington culture which both
believe it is okay to lie to get a bill passed. There is no connection
between such behavior and the values of most
Americans beyond Washington, for whom getting what you want usually
results from hard work, honest bargaining and a little compromise.
Reuters:
- Egypt to look beyond U.S. for arms: foreign minister.
Egypt's Foreign Minister Nabil Fahmy said on Saturday that Egypt would
look beyond the United States to meet its security needs and warned
Washington that it could no longer ignore popular demands in a changed
Arab world. Speaking ahead of a visit by U.S. Secretary of State John
Kerry, Fahmy said the United States must take a long-term view of its
relations with Egypt and understand that in the wake of the Arab Spring,
"it would have to deal now with the Arab peoples, not only with Arab
governments".
- Italian banks' cut plans too modest despite strike call. With Italy mired in its longest recession since the Second World War, the country's hard-pressed banks are cutting jobs, closing branches and infuriating unions, but the cuts
are far too modest to achieve the profitability gains they need.
Financial Times:
- Europe's Big Banks Cut Corporate Lending, Boost Sovereign Debt.
Region's 16 largest banks lowered risk exposure to corporate credit by
9%, while raising risk exposure to sovereign debt by 26% in 2011, 2012,
citing Fitch Ratings. Fitch cites approaching Basel III capital rules as
being partly to blame for decline in corporate credit lending.
Telegraph:
Tagesspiegel:
- Schaeuble
Says No ESM Money for Ailing Banks. German Finance Minister Wolfgang
Schaeuble says his party agreed with potential coalition partner SPD not
to consent to spending tax money to save banks in Europe, particularly
not from the ESM.
China Securities Journal:
- China's Property Bubble Is "Danger" to Economy. China's real
estate bubble poses "danger" to economy and the government should
combine property controls with economic reform of land and tax policies,
according to a front-page editorial. It is urgent to reduce bubble
caused by speculation and reduce potential financial and economic risks.
Weekend Recommendations
Barron's:
- Bullish commentary on (CVA) and (DFS).
Night Trading
- Asian indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 134.0 +4.0 basis points.
- Asia Pacific Sovereign CDS Index 103.50 +4.0 basis points.
- NASDAQ 100 futures +.25%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- Factory Orders for September are estimated to rise +1.8%.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Powell speaking, Fed's Rosengren speaking, Eurozone PMI, RBA rate
decision, ISM New York for October and the Robert W. Baird Industrial
Conference could also impact trading today.
BOTTOM LINE: Asian indices are modestly lower, weighed down by technology and commodity
shares in the region. I expect US stocks to open modestly higher and
to weaken into the afternoon, finishing mixed. The Portfolio is 50%
net long heading into the week.
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 modestly lower on rising global
growth fears, profit-taking, technical selling, rising
eurozone/emerging markets debt angst, more shorting and earnings
concerns. My intermediate-term trading indicators are giving neutral
signals and the Portfolio is 50% net long heading into the week.
