Today's Headlines

Bloomberg:

• High-Yield Borrowing Costs Decline to Record Low of 5% in Europe. Borrowing costs for junk-rated companies fell to a record in Europe as investors seek riskier debt amid confidence central banks will keep benchmark rates at all-time lows. The average yield on speculative-grade corporate bonds in euros dropped three basis points this week to 5 percent, Bank of America Merrill Lynch index data show. The cost of insuring the securities against losses fell to the lowest in six years, with the Markit iTraxx Crossover index dropping as much as 5.4 basis points to 332 basis points. The gauge was at 334 basis points at 1:53 p.m. in London. “There’s tremendous demand for higher yielding product,” said Suki Mann, a strategist at Societe Generale SA in London. “With the ECB and Fed in dovish mood, it’s more of the same in the medium term.” Non-financial companies raised a record 65 billion euros ($88 billion) from junk bond sales in Europe this year, up from 31 billion euros over the same period in 2012, according to data compiled by Bloomberg.

• Chinese Hackers Seen Exploiting Cloud to Spy on U.S. China-based hackers may target Internet-based e-mail, data storage and other services provided overseas by such companies as Microsoft Corp. (MSFT) to spy on the U.S., a congressional commission found. 

• Europe Stocks Little Changed as Investors Weigh U.S. Data. European stocks were little changed as investors weighed U.S. retail and home-sales (ETSLTOTL) data, as well as comments from people familiar with the debate saying the European Central Bank is considering a smaller-than-normal cut in the deposit rate if officials decide to take it negative. Metro AG climbed 2.4 percent after Barclays Plc upgraded its recommendation on the retailer. Diageo Plc dropped 1.2 percent after Chief Executive Officer Ivan Menezes said uncertainties in the global economy will drag on sales. Alcatel-Lucent slid 3.5 percent after announcing a capital increase. The Stoxx Europe 600 Index climbed 0.1 percent to 322.91 at the close of trading.

• U.S. 10-Year Yields at Almost 2-Month High on Fed Taper Outlook. Treasury 10-year yields rose to almost the highest level in two months as Federal Reserve officials said they might reduce their $85 billion in monthly bond purchases “in coming months” as the economy improves, minutes of their last meeting show. Benchmark yields rose for a second day as Fed Bank of St. Louis President James Bullard said a cutback in the central bank’s purchase program is “on the table” for the December meeting. Fed Chairman Ben S. Bernanke said yesterday interest rates will probably stay low until long after policy makers end debt purchases. Five percent of investors surveyed are looking next month for a Fed decision to taper, according to the latest Bloomberg Global Poll.

• Bullard Says Tapering Bond Buying Is ‘On the Table’ Next Month. Federal Reserve Bank of St. Louis President James Bullard, a voter on policy this year who has backed record stimulus, said that a strong jobs report could increase the chance of a reduction in bond purchases next month. “It’s definitely on the table, but it’s going to depend on the data,” Bullard said in a Bloomberg Television interview with Erik Schatzker. “A strong jobs report, I think, would increase the probability some for a December taper.”

• Taxpayer-Funded Technology Flops Plague U.S. Government. Almost a decade before the Obamacare website’s failed debut, the Air Force began work on a project to replace 240 outdated networks with a single logistics system. After spending about $1 billion, the program led by Computer Sciences Corp. collapsed last year. Senators Carl Levin and John McCain described it as “one of the most egregious examples of mismanagement in recent memory.” The list of federal information-technology lapses and flops includes systems to modernize air-traffic control and to secure the nation’s border, and now even President Barack Obama is wondering why the government can’t get it right. 

• Wall Street Keeps Swagger in CMBS as Sales Surge: Credit Markets. With almost six weeks to go in 2013, sales of commercial-mortgage bonds are already surpassing Wall Street’s forecasts for the year, defying concern that rising interest rates would stymie new deals. Issuance of the securities is poised to exceed $80 billion, eclipsing the $60 billion that Barclays Plc predicted in January, according to analysts at the bank. Lenders have arranged $65.5 billion of offerings this year and another $14.5 billion is in the works, including a $3.5 billion deal tied to Hilton Worldwide Inc. that will be the largest such offering since before the credit crisis, Bank of America Corp. data show. The average cost to borrow in the CMBS market climbed to as high as 5.38 percent in deals sold earlier this month after dipping to as low as 3.9 percent in June, Bank of America data show. The increase hasn’t discouraged landlords from seeking new loans as had been anticipated, according to Alan Todd, a commercial-mortgage debt analyst at Bank of America in New York. “A lot of borrowers are getting off the sidelines before rates go up again,” he said.

Wall Street Journal:

• Fed Grappled With Policy Message. Bond Buying Likely to Be Pared 'in Coming Months,' but Low Rates Prove Vexing. Federal Reserve officials still expect to start pulling back on the central bank's $85 billion-a-month bond-buying program "in coming months," but they engaged in a wide-ranging conversation at their October meeting about ways to reinforce their plans to keep short-term interest rates low for a long time after the program ends. Officials "generally expected that the data would prove consistent with the [Fed's] outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months," minutes from the Fed's Oct. 29-30 meeting said. The minutes were released Wednesday after the customary three-week lag. Officials also looked at different scenarios that could differ from their expectations for how the economy or the bond-buying program would evolve. One scenario they considered was if officials decided they needed to roll back the program before it had fully achieved its goals because they perceived its costs had started to outweigh the benefits. Two considerations came up under such a view, according to the minutes. First, the Fed would need to clearly communicate to the public the reasons it was making the decision to pull back, some officials said. Secondly, the Fed may want to find a different way to stimulate the economy. "It might well be appropriate to offset the effects of reduced purchases by undertaking alternative actions to provide accommodation at the same time," the minutes said.

MarketWatch: 

• Gold futures mark lowest close since mid-July. Prices fall further in electronic trade after the release of Fed meeting minutes. In electronic trading not long after the release of the minutes, prices traded even lower at $1,251.70 an ounce.

CNBC: 

• Fed minutes: Committee expected data would justify taper in coming months. Federal Reserve officials moved no closer to unwinding their monthly asset purchasing program at the October meeting, pointing instead to "coming months" when a tapering could occur. 

• Obamacare site tip of the iceberg: Ex-Medtronic CEO. (video)

Zero Hedge: 

• The "Obamacare Shock" - One California Employer's Terrifying True Story. 

• An ECB Negative Deposit Rate? Don't Hold Your Breath, Says Citi(C).

• "It's Going To End Ugly Unless The PBoC Changes Its Attitude To Liquidity".

• OECD Warns UK Faces Housing Bubble.

• Home Sales Plunge At Fastest Rate In 16 Months. (graph)

• Core Retail Sales Just Beat Expectations While Annual Inflation Drops To Lowest Since 2009. (graph)

• For The First Time In Four Years Caterpillar Posts Negative Retail Sales Across The Board. (graph)

• "Whatever It Takes": European Corporate Results Crater Thanks To Strong Euro.

ValueWalk:

• Citron ON Voxeljet AG(VJET): How Is This Company Even Public?

Business Insider: 

• Wall Street's Short Sellers Are Salivating Waiting For This Bubble To Pop.

New York Times:

• Dozens Killed in Wave of Attacks in Baghdad. A wave of apparently coordinated bombings hit bakeries and public markets in Baghdad on Wednesday, killing at least 37 people and wounding more than 80, many of them as they rushed to shop during a break in heavy rainstorms, according to the police, residents and medical officials.

Time:

• ‘You Can Keep Your Doctor’: Obamacare’s Next Broken Promise? Barack Obama’s broken promise that all Americans would be able to keep their health care plans after the implementation of the Affordable Care Act has infuriated people who took the President at his word and rattled even his staunchest supporters. But for the President, the real political pain may only be starting. Come 2014, the rest of the country may learn that another high-profile pledge was untrue. “No matter how we reform health care,” Obama said in 2009, “we will keep this promise: if you like your doctor, you will be able to keep your doctor. Period.” It’s not that simple. In order to participate in health-insurance exchanges, insurers needed to find a way to tamp down the high costs of premiums. As a result, many will narrow their networks, shrinking the range of doctors that are available to patients under their plan, experts say.

Washington Times:

• Obama’s 37% approval rating approaches Nixon’s second-term average. A new CBS poll puts the President’s sinking approval rating at an abysmal 37%. Only 57% approve of President Obama’s job performance due, in large part, to the bungling of the Affordable Care Act roll out.  For the President, it is a stunning nine-point drop in a one month period.

ABC News:

• Exclusive: US May Have Let 'Dozens' of Terrorists Into Country As Refugees. (video) Several dozen suspected terrorist bombmakers, including some believed to have targeted American troops, may have mistakenly been allowed to move to the United States as war refugees, according to FBI agents investigating the remnants of roadside bombs recovered from Iraq and Afghanistan.

Euromoney:

• Eurozone Banks' NPL Crisis Threatens to Derail Recovery. The IMF warns that corporate loan losses for banks in Spain, Italy and Portugal could hit 282 billion euros over the next two years, highlighting the scale of the challenge for the ECB's asset-quality review amid continued financial fragmentation.
  
  The IMF warns that corporate loan losses for banks in Spain, Italy and Portugal could hit €282 billion over next two years, highlighting the scale of the challenge for the ECB’s asset-quality review amid continued financial fragmentation.
  
  Full article: http://www.euromoney.com/Article/3280527/Eurozone-banks-NPL-crisis-threatens-to-derail-recovery.html?copyrightInfo=true
  Visit http://www.euromoney.com/reprints for additional distribution rights. For more articles like this, follow us @euromoney on Twitter.
  Eurozone banks’ NPL crisis threatens to derail recovery
  
  Full article: http://www.euromoney.com/Article/3280527/Eurozone-banks-NPL-crisis-threatens-to-derail-recovery.html?copyrightInfo=true
  Visit http://www.euromoney.com/reprints for additional distribution rights. For more articles like this, follow us @euromoney on Twitter.

Bear Radar

Style Underperformer:

• Large-Cap Value -.02%

Sector Underperformers:

• 1) Gold & Silver -1.06% 2) Utilities -.82% 3) Agriculture -.64%

Stocks Falling on Unusual Volume:

• SSW, DWRE, ICLD, SJM, SPSC, SGMS, CHKR, CPB, DDD, LOW, HOLI, NHI, EBAY, PRLB, SFM, CHRW, BA, GTLS, SSYS, FF, FGP, HIBB, HPY, CHUY, SQM and AMRI

Stocks With Unusual Put Option Activity:

• 1) ADT 2) DE 3) ADSK 4) MNST 5) DKS
  

Stocks With Most Negative News Mentions:

• 1) CSCO 2) TSLA 3) SJM 4) LOW 5) CHRW
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +.43%

Sector Outperformers:

• 1) HMOs +1.62% 2) Biotech +1.58% 3) Hospitals +1.12%
  

Stocks Rising on Unusual Volume:

• LZB, ETE, BMRN, GTN, YPF, PVA, TSL and NQ

Stocks With Unusual Call Option Activity:

• 1) STSI 2) NFX 3) DE 4) OLN 5) ABC

Stocks With Most Positive News Mentions:

• 1) JCP 2) DVN 3) HD 4) QCOM 5) DDD
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg:

• China Has ‘High’ Chance of Small Bank Failure, Official Says. One or two small Chinese banks may fail next year as they face pressure from their reliance on short-term borrowing, a Communist Party economic official said. Small banks get about 80 percent of their funding from interbank markets and deposits in savings vehicles known as wealth management products, Fang Xinghai, a bureau director at the Central Leading Group for Financial and Economic Affairs, said at a conference in Beijing today. They face risks from the mismatch with their long-term loans to borrowers such as local-government financing vehicles, he said. “Sometime next year, there may be one or two small lenders reporting a bank run or bankruptcies,” said Fang, a former head of Shanghai’s municipal Financial Services Office, whose current organization reports to the Central Committee of China’s ruling party. “That possibility is very high.”

• Chinese Skeptics Deepening Biggest A-Share Discount in 3 Years. China’s largest package of economic reforms since the 1990s is getting a bigger vote of confidence from foreign investors than from the nation’s own citizens. The benchmark index for Chinese stocks traded in Hong Kong has jumped 6.2 percent, more than twice the Shanghai gauge, since policy makers led by President Xi Jinping pledged to ease China’s one-child policy and liberalize interest rates on Nov. 15. That left mainland shares valued at a 5.8 percent discount, the most in three years, according to the Hang Seng China AH Premium Index. In a year when Asian equities are up 10 percent and American stocks are rising the most in a decade, China’s market is getting little respect, even from its own citizens. The Shanghai Composite index is down 3.4 percent, trailing its Hong Kong counterpart by the most since 2010. 

• Emerging-Market Hedging Costs at Five-Year High to U.S.: Options. The cost of options protecting against swings in emerging-market stocks has climbed to an almost five-year high versus U.S. contracts as economic growth slows from India to Brazil and foreign investors sell. Implied volatility on the iShares MSCI Emerging Markets exchange-traded fund was 56% higher than on an ETF tracking the Standard & Poor's 500 Index, according to data compiled by Bloomberg on six-month contracts with an exercise price near the shares. The measures of options prices for the emerging-markets fund was 61% higher on Nov. 8, the most since January 2009, and up from a low of 18% in March.

• Singapore Property Boom Fuels Malaysia Spillover Bubble. Chris Metcalf commutes for 45 minutes to Singapore each day from Iskandar, a region just over the border in Malaysia, to work as a lawyer at Clyde & Co LLP. “It’s too expensive to live in Singapore,” said Metcalf, who moved across the Johor Strait in June after finding he could no longer afford the island-state on a local salary and with four children. “We’re selling a house in the U.K. and when we do we’ll consider buying in Malaysia because it’s definitely better value.” 

• Asian Stocks Fall, Led by Australian Banks, WorleyParson. Asian stocks fell for a second day after valuations on the regional benchmark index reached the highest level since May and as Australian banks declined and WorleyParsons Ltd. (WOR) cut its profit forecast. Australia & New Zealand Banking Group Ltd. (ANZ) and Commonwealth Bank of Australia dropped more than 0.6 percent. WorleyParsons slumped a record 25 percent as Australia’s largest oil and gas engineering company cut its profit estimate. Micronics Japan Co. surged 21 percent in Tokyo after the electronics-component maker raised its full-year earnings forecast. The MSCI Asia Pacific Index fell 0.2 percent to 142.49 as of 12:44 p.m. in Hong Kong, with five stocks declining for every four that rose.

• Rebar Gains as Inventory in China Drops to Lowest Since 2011. Steel reinforcement-bar futures in Shanghai climbed as inventory in China fell to the lowest level in more than two years. Rebar for May delivery, the most-active contract on the Shanghai Futures Exchange, rose as much as 0.8 percent to 3,651 yuan ($599) and traded at 3,646 yuan at 10:50 a.m. local time.

• Hollande’s Tax Rebels Underscore Mounting Opposition. Another week, another round of protests in France against President Francois Hollande’s tax increases. Farmers have threatened to block roads into Paris tomorrow, saying they’re “fed up.” Horse-riding centers are set to protest this weekend against a higher sales tax, an issue ambulance drivers demonstrated against earlier this week.

• Climate Rift Widens as Poor Nations Seek Clarity on Aid Pledges. A debate over climate aid is widening the rift between richer and poorer nations at United Nations climate talks in Warsaw, creating another obstacle in the fight against global warming. Industrial nations have pledged to boost aid to $100 billion a year by 2020 for developing countries seeking to reduce their own pollution and cope with more intense storms and higher sea levels that come with higher temperatures. Poorer countries are seeking a predictable funding schedule to help them plan, and the richer states aren’t providing that.

• Coal Seen as New Tobacco Sparking Investor Backlash: Commodities. About $8 trillion of known coal reserves lie beneath the earth’s surface. The companies planning to mine and burn them are being targeted by a growing group of investors concerned with the greenhouse gases that will be made.

Wall Street Journal:

• Meet the Syrian Rebel Commander Assad, Russia and the U.S. All Fear. Tarkhan Batirashvili, Ethnic Chechen, Leads Group Deeply at Odds with Western-Backed Rebels in Syria. 

• 'Volcker Rule' Faces New Hurdles. Objections From SEC, CFTC Officials That Measure Is Too Soft on Banks May Delay Startup.

• Price War Looms for Electronics. Wal-Mart and Best Buy, Girding for Holidays, Poised to Fight for Market Share.

Fox News:

• Solar firm linked to Obama donors could be 'next Solyndra,' top GOP Sen. warn. A California-based solar company backed by several Obama supporters has been receiving millions in federal tax credits while losing $322 million since 2008, raising concerns about the company “becoming the next Solyndra.” Among SolarCity Corp.’s(SCTY) biggest investors is Elon Musk -- the high-profile donor and fundraiser who co-founded PayPal and whose companies SpaceX and electric-car company Tesla Motors have received at least $846 million in loans and startup money from the Obama administration. Alabama Sen. Jeff Sessions, the top Republican on the Senate Budget Committee, warned about SolarCity’s financial standing in a letter Monday to the Treasury Department. “There is concern that SolarCity might become the next Solyndra -- a company propped on the back of the taxpayers,” Sessions wrote. 

MarketWatch.com:

• China hard landing is likely: Andy Xie. Commentary: Real reform may not come fast enough for bubble economy. China’s asset bubble increasingly depends on financing from the shadow banking system. The carry trade — borrowing dollar loans at low interest rates offshore and converting the loans into yuan, either disguised as foreign direct investment or export revenue, for lending at a high interest rate — has become a significant source of funding in the shadow banking system. The recent surge of land prices in big cities may be due to it. The rising share of unstable financing for the country’s asset bubble threatens a chaotic ending. If the bubble suffers a confidence crash or a receding tide of liquidity, the unwinding of speculative holdings would be chaos, causing a hard landing. The carry trade drove the property bubble in Southeast Asia before 1997. The rising U.S. interest rate triggered its collapse. China is under the influence of the same force but on a much larger scale. The Fed’s massive quantitative easing has driven up China’s money supply, partly through the carry trade. If the Fed unwinds the QE, China’s bubble will burst.

• Bitcoin drops from $900 to $502 as swings widen.

CNBC:

• Obamacare bombshell: IT official says HealthCare.gov needs payment feature. (video) Another day, another big, bad black eye for HealthCare.gov. A crucial system for making payments to insurers from people who enroll in that federal Obamacare marketplace has yet to be built, a senior government IT official admitted Tuesday. The official, Henry Chao, visibly stunned Rep. Cory Gardner (R-Colo.) when he said under questioning before a House subcommittee that a significant fraction of HealthCare.gov—30 to 40 percent of it—has yet to be constructed. 

• Bernanke backs Yellen: Taper depends on economy. (video) Federal Reserve Chairman Ben Bernanke said on Tuesday the Fed would maintain its ultra-easy U.S. monetary policy for as long as needed and only begin to taper bond buying once it is assured that improvements in the labor market would continue.

Zero Hedge:

• Shopping With Bernanke: Where QE Cash Ends Up Tells Us Who Benefited. (graph)

• Berserk HFT Algo Du Jour. (graph)

• Look Away. (graph)

• Fuel Imports Send Japan's Deficit Careening To 3rd Worst On Record. (graph)

• How Washington D.C. Is Sucking The Life Out Of America.

• The American Model Of "Growth": Overbuilding And Poaching.

• Jim Rogers: "Own Gold" Because "One Day, Markets Will Stop Playing This Game".

Business Insider:

• CHANOS: Big Oil Companies Are The Next Value Trap.

• Washington's Top Watchdog Is Getting Involved In The Jobs Report-Rigging Story.

• The Situation For Journalists In China Is Becoming Untenable.

Washington Post:  

• The Insiders: Obamacare shifts voters’ thinking. A Gallup poll released yesterday says 56 percent of Americans do not believe it is Washington’s responsibility to “make sure all Americans have healthcare coverage,” while 42 percent believe the federal government is responsible.  Two years ago, it was a different story.  The same poll conducted by Gallup in 2011 showed that 46 percent of Americans believed the federal government was not responsible for making sure all Americans have healthcare coverage, and 50 percent said the federal government was responsible.

Reuters:

• Yahoo(YHOO) increases share buyback authorization by $5 billion.

Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99

Financial Times:

• U.S. Funds' Holding in Big Eurozone Banks Up 40% Since June. Share value in 10 largest listed banks totals $33b, as number of shares held rose by 10% over the same period, citing its own calculations. Big investments made by groups including T Row Price, BlackRock, Waddell & Reed. U.S. money market funds have also returned to the region, with lending to eurozone banks up 89% over the past year, citing rating co. Fitch.

Yonhap News:

• South Korea Concerned About Won's One-Sided Moves. South Korean authorities are concerned the volatility in the currency has been drastic and that the moves have been one-sided, citing a Bank of Korea official. Biggest concern is there's only dollar sales and no purchases in the market.

• S. Korea steps up defense on northwestern islands. South Korea has beefed up its forces on a group of northwestern islands along the tensely guarded maritime border with North Korea to counter provocations from its archrival, military officials said Wednesday.

Evening Recommendations

• None of note
  

Night Trading

• Asian equity indices are -1.0% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 132.0 +2.0 basis points.

• Asia Pacific Sovereign CDS Index 103.75 +2.0 basis points. 

• FTSE-100 futures -.34%.

• S&P 500 futures -.02%.

• NASDAQ 100 futures +.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DE)/1.90

• (ADT)/.46

• (SJM)/1.59

• (SPLS)/.42

• (LOW)/.47

• (JCP)/-1.74

• (GMCR)/.75

• (JACK)/.39

• (LTD)/.28

• (WSM)/.54

Economic Releases
8:30 am EST

• Retail Sales Advance MoM for October are estimated to rise +.1% versus a -.1% decline in September.

• Retail Sales Ex Auto MoM for October are estimated to rise +.1% versus a +.4% gain in September.

• Retail Sales Ex Auto and Gas for October are estimated to rise +.3% versus a +.4% gain in September.

• The CPI MoM fore October is estimated unch. versus a +.2% gain in September.

• The CPI Ex Food and Energy MoM for October is estimated to rise +.1% versus a +.1% gain in September.

10:00 am EST

• Existing Home Sales for October are estimated to fall to 5.14M versus 5.29M in September.

• Business Inventories for September are estimated to rise +.3% versus a +.3% gain in August.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +412,000 barrels versus a +2,640,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +50,000 barrels versus a -838,000 barrel decline the prior week. Distillate inventories are estimated to fall by -489,000 barrels versus a -481,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise +.64% versus a +1.9% gain the prior week.

2:00 pm EST

• FOMC minutes from Oct 29-30 meeting.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Bullard speaking, Fed's Dudley speaking, BoE minutes, weekly MBA mortgage applications report, BofA Energy Conference, Morgan Stanley Tech/Media/Telecom Conference, Goldman Megtals/Mining/Steel Conference, Jefferies Healthcare Conference, (RRGB) investor day and the (QCOM) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are 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 modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Lower into Final Hour on Rising Emerging Markets Debt Angst, Higher Long-Term Rates, Technical Selling, Transport/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 13.36 +1.98%

• Euro/Yen Carry Return Index 141.38 +.39%

• Emerging Markets Currency Volatility(VXY) 8.48 +1.44%

• S&P 500 Implied Correlation 33.41 unch.

• ISE Sentiment Index 154.0 +60.42%

• Total Put/Call .82 +5.13%

• NYSE Arms .91 -26.21% 

Credit Investor Angst:

• North American Investment Grade CDS Index 72.26 +1.20%

• European Financial Sector CDS Index 109.19 +3.21%

• Western Europe Sovereign Debt CDS Index 62.50 -2.34%

• Emerging Market CDS Index 291.62 +3.11%

• 2-Year Swap Spread 11.25 +.75 basis point

• TED Spread 16.75 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -2.25 +.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .07% unch.

• Yield Curve 242.0 +3 basis points

• China Import Iron Ore Spot $136.30/Metric Tonne -.51%

• Citi US Economic Surprise Index 5.20 +.2 point

• Citi Emerging Markets Economic Surprise Index -13.90 -1.8 points

• 10-Year TIPS Spread 2.19 -1 basis point

Overseas Futures:

• Nikkei Futures: Indicating +109 open in Japan

• DAX Futures: Indicating -1 open in Germany

Portfolio: 

• Higher: On gains in my biotech/medical sector longs, emerging markets shorts and index hedges

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg: 

• OECD Cuts Global Growth Outlook on Emerging-Market Slowdown. The Organization for Economic Cooperation and Development cut its global growth forecasts for this year and next as emerging-market economies including India and Brazil cool. The world economy will probably expand 2.7 percent this year and 3.6 percent next year, instead of the 3.1 percent and and 4 percent predicted in May, the Paris-based OECD said in a semi-annual report today. “Most of the emerging economies have underlying fragilities that mean they cannot continue growing as they used to,” OECD Chief Economist Pier Carlo Padoan said in an interview. “They used to be an important support engine for global growth in bad times. Now the reverse is true and advanced economies can’t be said to be in very good times again.”   
• Italy Banks’ Bad-Loan Ratio Rises to Highest Since 1999. Bad loans at Italian banks climbed to the highest in almost 14 years as the nation’s economy endured its longest recession since World War II and sovereign-debt risks drove up funding costs for companies. Non-performing loans at face value as a proportion of lending increased to 7.5 percent in September from 5.9 percent a year earlier, according to data published by the Italian Banking Association today. That’s the highest since November 1999 and up from 3 percent in June 2008, prior to the financial crisis, said the Rome-based association, known as ABI. 
• Ibovespa Falls Most in Seven Weeks on Economy; Petrobras Drops. The Ibovespa (IBOV) declined the most in seven weeks on speculation Latin America’s largest economy will remain stalled, making stock rallies hard to sustain. Oil producer Petroleo Brasileiro SA (PETR3) contributed the most to the Brazilian equity gauge’s drop, following crude lower. Former billionaire Eike Batista’s LLX Logistica SA fell the most on the index after its biggest two-day gain since September. The Ibovespa slid 2.4 percent to 53,027.25 at 3:28 p.m. in Sao Paulo, the biggest decline since Sep. 30 on a closing basis and the worst performance among major global benchmarks after Argentina’s Merval.
• Europe Stocks Slip From Five-Year High; Paddy Power Drops. European stocks dropped from a five-year high as investors weighed equity valuations that are at the highest since 2009. Paddy Power Plc slumped the most in five years after Ireland’s biggest bookmaker cut its forecast for 2013 profit growth. KBC Groep NV (KBC) fell 2.7 percent as two shareholders sold a combined 18.8 million shares in the Belgian bank. EasyJet Plc (EZJ) rallied 7.1 percent after announcing a special dividend. The Stoxx Europe 600 Index declined 0.7 percent to 322.56 at the close of trading in London.
• Junk Glistens Under ‘Bernankecare’ as Worst Stocks Win. Carl Giannone says he’s given up hunting for quality stocks. Now he’s simply riding the wave of upward momentum in the U.S. market. “It’s a game of musical chairs,” said Giannone, who manages a team of stock pickers at T3 Trading Group LLC in New York. “You just want to make sure you can sit down.” The Federal Reserve’s near-zero interest rate turns five years old next month, the longest period without an increase in history. Coupled with more than $3 trillion of asset purchases, it adds up to “Bernankecare,” said Joshua Brown, chief executive officer of Ritholtz Wealth Management in New York. And it’s causing parts of the market to behave strangely. Stocks of companies with weak balance sheets are rising twice as fast as stronger ones; junk borrowers get rates lower than their investment-grade counterparts did before the credit crisis; and initial public offerings are doubling on their first day of trading. While in the minority, some investors say prices have climbed so high it’s possible to look ahead and see an ugly end. Laurence Fink, chief executive officer of BlackRock Inc., the biggest U.S. money manager, said in an interview with Bloomberg Television on Nov. 12 that he feared a bubble and the Fed ought to quit buying so many securities.
• Treasury 10-Year Yield Rises From 1-Week Low on Fed Speculation. U.S. 10-year yields rose four basis points, or 0.04 percentage point, to 2.71 percent as of 2:30 p.m. New York time, according to Bloomberg Bond Trader prices. Yields fell earlier to 2.66 percent, the least since Nov. 8.
• Wal-Mart(WMT) Touts $98 TV in Weakest Holiday Season Since ’09. U.S. retailers are discounting earlier than ever as they brace for the weakest holiday shopping season since 2009. Wal-Mart Stores Inc. (WMT) is dangling a 32-inch flat-screen TV for $98, down from $148 last year. Sears Holdings Corp. has waived layaway fees and its Kmart chain is introducing a rent-to-own program. More than a dozen retailers are opening earlier, or for the first time, on Thanksgiving Day. Among the attention-grabbing stunts: a $1 million jackpot for one of the first shoppers to visit Gap Inc. (GPS)’s Old Navy chain on Black Friday. Faced with wary shoppers and a shorter holiday season, retailers are piling on deals as they jockey for marketshare during the most important sales period of the year. For the fourth year in a row, disposable incomes in 2013 have only inched up.
• Best Buy(BBY) Falls After Saying Holiday Price War to Hurt Profit. Best Buy Co., the world’s largest consumer-electronics retailer, fell the most in nine months after saying it will keep pace with competitors’ discounts in the holiday season, hurting fourth-quarter profitability. The shares dropped 6.3 percent to $40.83 at 9:35 a.m. in New York and earlier slid as much as 6.7 percent for the biggest intraday decline since Feb. 13.
• UN Chief Scolds Rich Countries for Backtracking on Climate. United Nations Secretary-General Ban Ki-Moon lashed out at rich nations that are watering down commitments to fight global warming, citing the typhoon that devastated the Philippines.
• VIX Trader Bets $13 Million on 88% Jump in Fear Gauge. An investor bought $13 million in call options on the Chicago Board Options Exchange Volatility Index, betting the gauge will rally at least 88 percent in the next four months. About 100,000 VIX March calls were purchased with a strike price of 23 for about $1.30 each, making the contract the most traded on U.S. options exchanges, according to data compiled by Bloomberg and Trade Alert LLC.

Wall Street Journal: 

• J.P. Morgan(JPM), U.S. Settle for $13 Billion. Deal Ends a Number of Legal Headaches for Largest U.S. Bank.

CNBC:

• Was Jack Welch right? Jobs numbers under fire. (video) Jack Welch may not have been so off the mark after all. The former General Electric CEO was pilloried back in October 2012 when he suggested that the previous month's unemployment report smelled fishy and perhaps had been manipulated. 
• Obamacare may need a taxpayer bailout: Ex-HHS head. (video)

Zero Hedge: 

• Santelli Slams The Jobs Manipulation Scandal: "American Media, You Can Do Better". (video)
• Gold Manipulation Probed By U.K. Regulator.
• Increased Minimum Wage, Decreased Economic Prosperity. (graph)
• Big Trouble In Massive China: "The Nation Might Face Credit Losses Of As Much As $3 Trillion". (graph)
• Step Aside Carl Icahn, It's Time For Larry Fink's Dose Of Cold Water.
• The Structural Decline Of US GDP In 4 Charts.
• Boehner:"Obamacare Needs To Be Scrapped Now" - Live Webcast. (video)

ValueWalk:

• EPS Downgrades For 81 Straight Weeks, Matching Longest Drop Since 2000. EPS downgrades as measured by Citi’s Earnings Revision Index (ERI) have fallen for 81 straight weeks, matching the 2008-2009 drop in the wake of the financial crisis and beating every other negative streak since 2000. But Equities are up 25% since the current streak of downgrades began in May 2012, with much of the price growth happening this year, and investors are still mostly bullish.

Business Insider: 

• Government Rebukes Tesla(TSLA) For Saying It Requested The Model S Fire Investigation. 
• Why The Stock Market Has Become Increasingly Like Dog Racing.
• Here Are The 50 Stocks That Big Hedge Funds Love Most.
• An Unusual Development In The Volatility Markets Is Flashing A Stock Market Warning Sign.
• Obama's Poll Numbers Continue To Crash.

Washington Examiner:

• More Obamacare promises are going up in smoke. The keep-your-coverage promise was just part of the Obamacare sales job. Obama, then-House Speaker Nancy Pelosi, Senate Majority Leader Harry Reid and top Democrats made all sorts of claims in their effort to convince a skeptical public to accept a complicated, far-reaching national health care scheme. Here are three promises that might cause serious trouble in the days to come:

Reuters:

• Investec sees euro crisis flare-up risk; short French bonds vs Bunds. Stagnant growth and possible deflation could trigger fresh upheaval in Europe next year, says Investec, which has short positions on peripheral bonds and expects European stocks to lag other developed equities in 2014. Philip Saunders, Investec's head of multi-asset investment business, told the Reuters Global Investment Outlook Summit on Tuesday that European equities would probably deliver positive returns next year but inflows of cash rotating from emerging and U.S. markets could soon dry up.
• Mexican stocks fall sharply after trading halt. Mexican stocks fell sharply on Tuesday after trading resumed following a halt due to technical difficulties. The IPC stock index shed 1.12 percent to 40,572 points.

Telegraph:

• OECD calls Europe's crisis policy unworkable, fears 'virulent episodes' in emerging markets. OECD's chief economist says current European policies are pushing a string of countries into deflation and onto a much lower growth path.