BETWEEN THE HEDGES

Friday, May 22, 2015

Friday Watch

Posted by Gary .....at 12:52 AM

Evening Headlines
Bloomberg:

Greek Talks Break Up in Riga as Earlier Optimism Evaporates. Late-night negotiations between the Greek, French and German government leaders ended without any sign of a breakthrough that will unlock bailout funds and ensure Greece’s future in the euro region. With time running out for a deal to free up the remaining 7.2 billion-euro ($8 billion) tranche of aid, talks between Prime Minister Alexis Tsipras, President Francois Hollande and Chancellor Angela Merkel broke up shortly before 1 a.m. on Friday in the Latvian capital Riga with the three agreeing only to stay in close contact.

The Only Three People Worth Listening to on Greece. The trick, say economists from ING Diba in Frankfurt to Berenberg Bank in London, is to focus on the people who exercise true power over the euro region’s bond and currency markets right now: Greek Prime Minister Alexis Tsipras, German Chancellor Angela Merkel and European Central Bank President Mario Draghi.

Bonds Head for Fifth Weekly Loss in Longest Decline Since 2013. Bonds around the world headed for a fifth weekly decline, the longest run of losses in almost two years, as investors stuck to bets for the Federal Reserve to increase interest rates and as oil prices advanced. The debt-market retreat that started in Europe in April extended into May on concern rising crude costs will lead to faster inflation. While U.S. economic data have been mixed, the Fed will still raise borrowing costs this year or early in 2016, a Morgan Stanley index shows. Europe and Japan are both showing signs of growth.

Yet Another Ghost Town in China Shows Extent of Regional Debt Crisis. China’s Ordos city, where towers that sprang from Inner Mongolian farmland now sit empty, is showing the hangover has just begun from a decade-long building boom. Ordos City Huayan Investment Group Co., a developer whose chairman headed a group of livestock researchers, is at high risk of defaulting on 1.2 billion yuan ($194 million) of bonds if investors exercise an option to offload them in December, said Haitong Securities Co. and China Investment Securities Co. Also in the city, Inner Mongolia Hengda Highway Development Co. asked noteholders to defer rights to sell back private securities in April due to cash shortages, according to China International Capital Corp.

China’s Sea Aggression to Bring Vietnam, U.S. Closer, Says Osius. China’s territorial maneuvers in the contested South China Sea are bringing its Communist neighbor Vietnam and the U.S. closer together, according to the new ambassador to Vietnam, Ted Osius. In his first interview with a Western news organization since arriving in December, Osius said human rights concerns remain an obstacle to even deeper ties that may lead to the lifting of a ban on the sale of lethal weapons to Vietnam. Even so, the former war foes are holding more high-level talks, particularly over how to manage tensions with China, he said in an interview on Thursday in Hanoi.

China Beverage Bottle Maker Sees Big Uncertainty Repaying Bond. A beverage bottle maker in China has said there’s big uncertainty about whether it can pay a bond maturing next week as a slowdown in the world’s second-biggest economy persists. Zhuhai Zhongfu Enterprise Co. said the company’s special account for debt payments has 174.152 million yuan ($28.1 million) and needs 447 million yuan to make the full repayment, according to a May 21 exchange statement. Its three-year 590 million yuan of 5.28 percent bonds come due May 28.

Hong Kong Investors Want More Oversight After $35 Billion Wipeout. After $35 billion in market value was erased from three Hong Kong-listed companies over two days, investors are asking if the city’s regulator should have done more to prevent the sudden selloff. Goldin Financial Holdings Ltd. and Goldin Properties Holdings Ltd., controlled by billionaire Pan Sutong, plunged more than 40 percent Thursday. A day earlier, Hanergy Thin Film Power Group Ltd. tumbled 47 percent in 24 minutes before trading in the Chinese solar company’s shares was suspended. The stocks, which had surged at least 500 percent in the 12 months before the rout, can also be bought and sold by mainland investors through an exchange link.

Asian Stocks Track U.S. Gain as Mixed Data Spur Fed Rate Bets. Asian stocks rose, with the regional benchmark index paring its weekly drop, after U.S. shares rose to records as mixed economic data fueled bets the Federal Reserve won’t rush to raise interest rates. The MSCI Asia Pacific Index added 0.2 percent to 153.09 as of 9:01 a.m. in Tokyo, on course for a 0.1 percent retreat this week.

OPEC Seen Unyielding in Battle With Shale for Oil-Market Share. OPEC will stick with the strategy of favoring market share over prices when it meets next month because rival producers are already starting to buckle. All but one of the 34 analysts and traders surveyed by Bloomberg said the Organization of Petroleum Exporting Countries will maintain its daily production target of 30 million barrels when it meets in Vienna on June 5.

Wall Street Journal:

Health Insurers Seek Hefty Rate Boosts. Proposals set the stage for debate over federal health law’s impact. Major insurers in some states are proposing hefty rate boosts for plans sold under the federal health law, setting the stage for an intense debate this summer over the law’s impact. In New Mexico, market leader Health Care Service Corp. is asking for an average jump of 51.6% in premiums for 2016. The biggest insurer in Tennessee, BlueCross BlueShield of Tennessee, has requested an average 36.3% increase. In Maryland, market leader CareFirst BlueCross BlueShield wants to raise rates 30.4% across its products. Moda Health,..

Brazil’s Economic Downturn, Corruption Scandals Shake Leader. Dilma Rousseff, Brazil’s first female president, is working to save her presidency and stanch the deterioration of Latin America’s biggest economy.

Fox News:

All for nothing? US vets who fought for Ramadi angry over fall to ISIS. (video) Iraqi War veteran Sgt. Ben Rangel remembers fighting to secure the city of Ramadi when he first arrived in Iraq for a tour of duty in 2004. He also recalls the bloodshed.

States move to pre-approve groceries that can be bought with food stamps. (video)

CNBC:

Our $58 trillion love affair with debt, in one crazy chart. (graph)

Zero Hedge:

US Retaliates At China Escalation, Warns Sea "Sandcastles" May "Lead To Conflict".

How The Media Deceive The Public About "Fast Track" And The "Trade Bills".

The Government's Message For Heavily Indebted Students: Don't Pay Us Back.

The Fallacy Of Unequivocal Faith In The Fed's Babbling Bubble-Blowers. (graph)

3 Things: If You Don't Like It Change It. (graph)

Hewlett Packard(HPQ) Just Reported Its Worst Revenue Since 2007: This Is How It "Beat". (graph)

"Above The Law" Fed Subpoena'd By Hensarling Over 2012 Leak "To The Priveleged Few".

Former Fed Governor Says Fed Lost Credibility To "Stay On Top Of Ticking Monetary Bomb".

When The Current Housing Bubble Finally Bursts. (graph)

572 Reasons Why The Fed Is Terrified To Hike: "One Rate Cut Every Three Trading Days".

2015's Lowest Volume, VIX Crush, & Data Dump Send Stocks To Record Highs. (graph)

Business Insider:

Charter(CHTR) is in talks with TWC(TWC) over a bid likely well above $170 per share.

Look no further than Japan and Germany for an answer on how low rates can go.

Evening Recommendations
Piper Jaffray:

Rated (HRB) Overweight, target $38.

Night Trading

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

Asia Ex-Japan Investment Grade CDS Index 104.25 -1.75 basis points.

Asia Pacific Sovereign CDS Index 58.25 -1.25 basis points.

S&P 500 futures +.07%.

NASDAQ 100 futures +.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

(ANN)/.32

(CPB)/.52

(DE)/1.56

(FL)/1.23

(HIBB)/1.13

Economic Releases
8:30 am EST

The CPI for April is estimated to rise +.1% versus a +.2% gain in March.

The CPI Ex Food and Energy for April is estimated to rise +.2% versus a +.2% gain in March.

Real Avg. Weekly Earnings YoY.

Upcoming Splits

None of note

Other Potential Market Movers

The BoJ rate decision, Germany IFO report, (CHK) annual meeting and the (PLCE) annual meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and real estate 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 day.

Thursday, May 21, 2015

Stocks Reversing Slightly Higher into Final Hour on Lower Long-Term Rates, Less European/Emerging Markets/US High-Yield Debt Angst, Oil Bounce, Energy/Transport Sector Strength

Posted by Gary .....at 3:18 PM

Broad Equity Market Tone:

Advance/Decline Line: About Even

Sector Performance: Mixed

Volume: Below Average

Market Leading Stocks: Performing In Line

Equity Investor Angst:

Volatility(VIX) 12.25 -4.89%

Euro/Yen Carry Return Index 140.66 +.03%

Emerging Markets Currency Volatility(VXY) 9.29 -.54%

S&P 500 Implied Correlation 60.81 -1.44%

ISE Sentiment Index 100.0 -25.93%

Total Put/Call .93 +12.05%

NYSE Arms .83 -22.41%

Credit Investor Angst:

North American Investment Grade CDS Index 63.45 -1.31%

America Energy Sector High-Yield CDS Index 1,106.0 +1.378%

European Financial Sector CDS Index 71.69 -2.17%

Western Europe Sovereign Debt CDS Index 21.68 -.89%

Asia Pacific Sovereign Debt CDS Index 58.71 -1.19%

Emerging Market CDS Index 282.32 -2.15%

iBoxx Offshore RMB China Corporates High Yield Index 119.57 +.09%

2-Year Swap Spread 26.50 +.5 basis point

TED Spread 27.0 +.5 basis point

3-Month EUR/USD Cross-Currency Basis Swap -19.25 -.25 basis point

Economic Gauges:

3-Month T-Bill Yield .01% -1.0 basis point

Yield Curve 161.0 -6.0 basis points

China Import Iron Ore Spot $57.91/Metric Tonne +1.38%

Citi US Economic Surprise Index -65.3 -1.0 point

Citi Eurozone Economic Surprise Index -11.70 -5.5 points

Citi Emerging Markets Economic Surprise Index -13.6 -.3 point

10-Year TIPS Spread 1.87 -3.0 basis points

Overseas Futures:

Nikkei 225 Futures: Indicating +53 open in Japan
China A50 Futures: Indicating +51 open in China

DAX Futures: Indicating +12 open in Germany

Portfolio:

Higher: On gains in my tech/retail sector longs and emerging markets shorts

Disclosed Trades: None

Market Exposure: 50% Net Long

Today's Headlines

Posted by Gary .....at 2:53 PM

Bloomberg:

Euro-Area Recovery Stutters as China’s Factory Weakness Persists. The euro area’s economic recovery stuttered in May as Germany lost momentum, while weakness in China’s manufacturing industry persisted. Markit Economics said its composite index of services and manufacturing in the euro zone slipped to 53.4 from 53.9 in April. While that’s above the 50 mark that divides expansion from contraction, it’s less than the 53.9 forecast by economists in a Bloomberg survey. A Chinese factory gauge came in at 49.1, missing the median estimate of 49.3.

Merkel Says Russia Can’t Return to G-7 as Ukraine Festers. German Chancellor Angela Merkel said Russia can’t rejoin Group of Seven meetings unless it respects international law, underscoring President Vladimir Putin’s exclusion from the G-7 summit she’s hosting next month. Addressing Germany’s lower house of parliament in Berlin on her summit agenda, Merkel said Putin’s encroachment on Ukraine signals that Russia isn’t part of the group of advanced economies’ “community of values.” Resolving the Ukraine conflict will require “patience and staying power,” she said.

Germany Loses Further Momentum as Manufacturing, Services Weaken. Germany’s economy stuttered again this month, with a gauge of output falling more than economists forecast to the lowest this year. Markit Economics said its composite index of services and manufacturing dropped to 52.8 from 54.1 in April. While that’s above the 50 mark that divides expansion from contraction, it’s the second straight decline and was less than the reading of 53.8 forecast by economists in a Bloomberg survey.

Lenovo Posts Slower Profit Growth as PC, Smartphone Market Slump. Lenovo Group Ltd. posted its slowest full-year profit growth in five years amid weak demand for PCs and slowing growth in smartphone shipments. Net income for the the year ended March 31, was $829 million compared with the $830.2 million average of 26 analyst estimates compiled by Bloomberg. Sales climbed to $46.3 billion, with analysts expecting $46.9 billion.

Six Reasons You Should Be Paying More Attention to Canada. Ignore it at your peril.

Obama Dismisses Fall of Ramadi in Iraq as ‘Tactical Setback’. The fall of the Iraqi city of Ramadi to Islamic State was only a “tactical setback” and not a sign the U.S. and its allies are failing in the fight against extremists, President Barack Obama said in an interview published Thursday in the Atlantic magazine. “I don’t think we’re losing,” Obama said in the interview conducted by Jeffrey Goldberg Tuesday at the White House. “There’s no doubt there was a tactical setback, although Ramadi had been vulnerable for a very long time, primarily because these are not Iraqi security forces that we have trained or reinforced.” Obama also defended his pursuit of a nuclear deal with Iran, saying he has a personal stake in resolving a conflict with “profound national security” implications. “Twenty years from now, I’m still going to be around, God willing,” he said. “If Iran has a nuclear weapon, it’s my name on this.”

Emerging Stocks Slide as Eastern Europe Declines Outweigh China. Emerging-market stocks fell for a fourth day as markets from Turkey to the Czech Republic slumped after data showed growth in manufacturing and services in the euro zone expanded less than forecast, outweighing gains in China. Brazilian stocks slid as unemployment rose more than forecast and a gauge of gross domestic product contracted more than estimated. Equities in Istanbul sank the most this month. Taiwan Semiconductor Manufacturing Co. led declines in the Taiex index. A measure of developing-nation technology companies slid the most among 10 industry groups. Chinese shares jumped 1.9 percent on bets sluggish manufacturing will spur more stimulus. The MSCI Emerging Markets Index slid 0.4 percent to 1,032.31 at 10:51 a.m. in New York, pushing the decline this week to 1.1 percent.

European Stocks Extend Three-Week High as Energy Producers Climb. European stocks rose for a fourth day, led by energy companies, as weaker-than-forecast U.S. data fueled speculation the Federal Reserve won’t rush to raise rates. The Stoxx Europe 600 Index added 0.4 percent to 407.87 at the close of trading, reversing an earlier drop of 0.4 percent.

Consumers’ Expectations for U.S. Economy Drop Most Since 2013. Americans’ expectations for the economy slumped in May by the most since October 2013, casting doubt on consumers’ ability to revive growth. A measure tracking the economic outlook fell by 6 points to 44 this month, data from the Bloomberg Consumer Comfort Index showed Thursday. Thirty-nine percent said the U.S. economy is getting worse, the largest share since the federal government shutdown 19 months ago.

Fox News:

Emails reportedly show confidant told Clinton Benghazi attack planned by fighters tied to Al Qaeda. (video) A longtime Clinton confidant reportedly advised then-Secretary of State Hillary Clinton two days after the 2012 Benghazi terror attack that an Al Qaeda-tied group had planned the deadly assault and used a protest as cover -- but despite this warning, Clinton's U.N. ambassador went on to publicly claim the attack was "spontaneous."

ZeroHedge:

Chinese 'Virus' Spreads To Germany: Meet The Company That Went From Record High To Zero In 1 Week.

Housing Recovery - Real Or Memorex. (graph)

Shake Shock(SHAK): Spot The Fast Food Outlier. (graph)

"We Reached The Tipping Point": Income Inequality Is Highest Since Records Began. (graph)

Kansas City Fed In Recession Territory After Respondent "Laid Off 8% Of Workforce In 2 Months". (graph)

Crash Contagion: Second Chinese Billionaire Wiped Out In Seconds After Stock Instacrash. (graph)

Stocks Recover Post-FOMC Losses After 4-For-4 Economic Data Misses. (graph)

Public Confused Why World's Biggest Banks Admitting Criminal Fraud, Leads To Public Yawns.

40% Of Existing Home Sales At Or Above Asking Price, Highest On NAR Record. (graph)

Philly Fed Hovers Near 15-Month Lows, Prices Paid Collapse Most Since Lehman. (graph)

US Manufacturing PMI Tumbles To Lowest In 16 Months As New Orders Tumbled. (graph)

Lumber Liquidators Loses Leader - Surprise CEO Resignation Extends Loss To 75% In 3 Months. (graph)

Chicago Fed Contracts For 4th Month In A Row As Initial Jobless Claims Hover Near 40 Year Lows. (graph)

Business Insider:

Tesla's(TSLA) home battery doesn't make economic sense for homeowners.

Boy Scouts' leader says ban on gay adults is not sustainable.

Crude oil is surging. (graph)

Everything we know so far about the sudden implosion of the world's biggest solar stock.

BUSTED: Paul Krugman removed 20 years of data from a chart to show a correlation that wasn't really there.

China and the US just had a confrontation over the South China Sea.

Reuters:

CME(CME) developing European gold futures contract.

Les Echos:

Germany's Schaeuble Doesn't Rule Out Greek Bankruptcy. "I would consider for a long time before repeating that Greece won't go bankrupt," German finance minister Wolfgang Schaeuble said in an interview. Schaeuble said in October 2012 that there would be no Greek bankruptcy; the situation today is very different, he said. Far too little progress has been made in talks with Greece, Schaeuble said.

Economic Times:

Tata Steel Falls as Q4 Results Disappoint. Shares of Tata Steel plunged as much as 5.56 per cent in early trade as the company disappointed on bottomline and topline figures in Q4FY15 due to weakening commodity prices and low volumes.

ISIS has built near-impregnable base and mass appeal: New book - See more at: http://www.straitstimes.com/news/world/europe/story/isis-has-built-near-impregnable-base-and-mass-appeal-new-book-20150205#sthash.TSyXsl7s.dpuf