American Market Preferred in Global Poll on New Confidence. Global investors are taking more risks with their money and targeting the U.S. as one of the best places to put their funds as they grow increasingly confident in the economic outlook. More than two of five of those surveyed say they are seeing more opportunities to make money, according to a quarterly Bloomberg Global Poll of 1,000 investors, analysts and traders who are Bloomberg subscribers. That’s the highest level since the poll began in July 2009 and compares with less than one in three who are still hunkering down. The rest of investors in the poll conducted Jan. 20-24 describe the economic environment as getting back to normal. “The recovery is materializing and global profit margins for 2011 probably are set to reach a new record,” says Angelo Meda, a participant in the poll and a portfolio manager for Banknord in Milan, which oversees more than $1 billion.
Rescue Fund Borrows as Merkel Blocks Common Debt: Euro Credit. The European Financial Stability Facility holds its debut bond sale today as policy makers trumpet reduced debt-market tensions as a reason to abandon talk of a common borrowing program in the euro area. The Luxembourg-based EFSF is selling as much as 5 billion euros ($6.8 billion) of five-year notes backed by guarantees from euro members, funds that will help pay for Ireland’s bailout. While Greek Prime Minister George Papandreou said on Jan. 21 there is a “wider consensus for euro bonds,” Germany, the region’s biggest economy, opposes the idea. Luxembourg Prime Minister Jean-Claude Juncker and Italian Finance Minister Giulio Tremonti proposed joint sales in a Dec. 6 Financial Times article as a potential solution to soaring interest rates for the common currency’s most indebted users. With France and Austria reinforcing Germany’s opposition to the concept, officials have proposed alternatives, including boosting the size of the bailout package and using EFSF funding to buy government debt or to recapitalize banks in the region. “We still have some smaller countries pushing for the idea of euro-zone bonds,” said Steve Barrow, head of research for Group of 10 currencies at Standard Bank Plc in London. “It’s not something I could envisage many policy makers going into willingly. It’s more likely to be a desperation measure.”
Cocoa Tests 1979 Peak as Ivory Coast Political Unrest Spurs Supply Risks. Cocoa may climb to the highest price since the late 1970s as political unrest disrupts supplies from Ivory Coast, the world’s biggest producer. Hedge funds have more than quadrupled bets on a cocoa rally since early December after a disputed election left Ivory Coast with two rival presidents. Alassane Ouattara, recognized internationally as the winner, yesterday ordered shipments halted to cut off funds to incumbent Laurent Gbagbo. The ban may send prices to as high as $3,720 a metric ton, a Bloomberg survey of six analysts showed. That would be the highest since January 1979. Cocoa has jumped 9.1 percent this month, the biggest gain after cotton among the 19 commodities tracked by the Thomson/Reuters Jefferies CRB Index. Cargill Inc., the largest closely held U.S. company, said yesterday it temporarily suspended bean purchases in Ivory Coast. Climbing prices may mean higher costs for Hershey Co., Mars Inc., Barry Callebaut AG, the world’s biggest maker of bulk chocolate.
BofA(BAC) Putbacks May Cost $8.5 Billion as Lawyers "Smell Blood'. Bank of America Corp., the biggest U.S. lender, may book an $8.5 billion charge on costs to resolve disputes over faulty mortgages, a figure at the upper end of the range the company gave last week, according to Oppenheimer & Co.
China Mutual Funds Boost Stock Holdings Near to Record Even as Shares Drop. China’s mutual funds boosted their stock holdings to a near-record high, a signal to fund trackers that investors are overly optimistic and equities may decline further. The nation’s 325 mutual funds invested 83.2 percent of their assets in equities during the fourth quarter, near a record of 83.8 percent in the last three months of 2009, Yan Gaojian, an analyst at Citic Securities Co., wrote in a report. The Shanghai Composite has lost 15 percent since a Nov. 8 high after the central bank raised the reserve requirement ratio for banks and interest rates to counter inflation. Consumer prices rose to a 28-month high of 5.1 percent in November before slowing to 4.6 percent last month.
AIG's(AIG) Benmosche Expects to Remain CEO Until 2012. Robert Benmosche, the American International Group Inc. chief executive officer battling cancer, expects to remain on the job until next year after consulting with doctors.
Countrywide Sued Over Mortgage-Backed Securities. Bank of America Inc.’s Countrywide Financial unit was sued by investors in mortgage-backed securities who alleged a “massive fraud” in a complaint filed today in New York state court. TIAA-CREF Life Insurance Co., New York Life Insurance Co., and Dexia Holdings Inc. are among about a dozen plaintiff institutional investors in mortgage-backed securities issued by Countrywide’s subsidiaries, according to the complaint.
Crude Oil Inventories Climb in Survey as Imports Increase: Energy Markets. U.S. crude supplies probably rose a second week as imports increased and refineries operated at the lowest rate since November, a Bloomberg News survey showed. Inventories climbed 1.25 million barrels, or 0.4 percent, in the seven days ended Jan. 21 from 335.7 million a week earlier, according to the median of 12 analyst estimates before an Energy Department report tomorrow.
Government Subsidy Cuts Raise Risk of Riots, UN's Sheeran Says. Risks of global instability are rising as governments cut subsidies that help the poor cope with surging food and fuel costs to ease budget crunches, the head of the United Nations’ World Food Program said. “We’re in an era where the world and nations ignore the food issue at their peril,” Josette Sheeran said in an interview yesterday at the agency’s Rome headquarters. The global recession has eroded government aid that helped people in poorer countries afford bread, cooking oils and other staples.
China's Banks Pay Record Deposit Rate for Government Cash; SHIBOR Climbs. China’s commercial banks, facing a cash shortage before the Chinese New Year holiday, offered record-high deposit rates to secure 30 billion yuan ($4.6 billion) of government money at an auction today. The benchmark money-market rate jumped the most in three years. The finance ministry obtained a six-month deposit rate of 5.9 percent, up from 5.4 percent at a similar-sized auction last month, according to statements on the website of the People’s Bank of China. That’s the highest rate paid in data going back to December 2006. The central bank’s benchmark six-month lending rate is 5.35 percent. The seven-day repurchase rate, which measures money availability between banks, jumped 2.85 percentage points, to a three-year high of 7.65 percent, according to a daily fixing by the National Interbank Funding Center in Shanghai. The increase was the biggest since January 2008. The three-month Shanghai Interbank Offered Rate, also a gauge of liquidity in the financial system, was fixed 20 basis points higher at a record 5.25 percent.
Fed Likely to Press On With Asset Purchases Even as Business Lending Rises. The Federal Reserve will probably push forward with $600 billion in securities purchases even as the biggest jump in business loans in more than two years adds to signs the U.S. economy is gaining strength. Commercial and industrial loans increased at an annual rate of 7.6 percent last month, the largest gain since October 2008, according to Fed data. Total bank credit has risen in three of the past six months as business loans cushioned against declines in real estate and consumer credit. Bernanke and his fellow policy makers will probably note improvements in the economy such as higher consumer spending in a statement to be released tomorrow, former Fed governor Lyle Gramley said. Encouraging signs like firmer bank credit are unlikely to prompt a reduction in stimulus so long as growth remains weak and unemployment persists near 10 percent, he said. “The Fed is not ready to let up on its accelerator,” said Gramley, senior economic adviser for Potomac Research Group in Washington. “They are going to be impressed with the fact the economy has gained some momentum, but there are still strong headwinds to growth, and bank lending is quite modest.”
Wall Street Journal:
Amazon(AMZN) May Expand Free Home Delivery. Amazon.com Inc. may be planning to expand a free home-delivery program, a move that analysts say could encourage consumers to do more of their shopping for groceries and other goods with the online retailer rather than local stores. The service, AmazonTote, is currently available only around Seattle, where the company is based. The program offers customers a free weekly delivery on a specified day and doesn't require a minimum-order size.
North Face Deal Signals Rise of Freeskiing. The United States Ski and Snowboard Association plans to sign a lucrative deal with outfitter The North Face that is expected to be announced Tuesday. The deal signals the continuing rise of freeskiing.
MTV's 'Skins' Loses More Advertisers. MTV's rocky road with its racy new television series, "Skins," continues. L'Oréal SA and sandwich-chain Subway on Monday brought to seven the number of marketers publicly pulling their advertisements from the program, which has prompted a barrage of criticism because of its depictions of minors engaging in sexual activity as well as drug and alcohol abuse. Several other high-profile companies—from Taco Bell to General Motors Co.—have distanced themselves from the series on the Viacom Inc.-owned network, which the Parents Television Council dubbed "the most dangerous television show for children that we have ever seen."
White House Energy 'Czar' to Exit in Staff Shake-Up. Carol Browner is leaving her position as White House "energy czar," and a staff shake-up is likely to eliminate her post altogether, according to Democrats familiar with events. The "czar" position, and Ms. Browner herself, have been lightning rods for critics of the president's environmental-policy agenda and a reassurance to its supporters, who liked having a top official in the White House devoted to their priorities. Ms. Browner led the administration's effort to gather votes in Congress for legislation to limit emissions of greenhouse gases. The effort unraveled in the Senate last year, amid opposition from Republicans and some Democrats fearful of its impact on energy prices and jobs. Ms. Browner was also a heroine to many environmentalists who cheered her decisions when she led the EPA in the 1990s and viewed her as an ally in internal administration debates over environmental regulation. Her influence within the administration has long been a source of concern to Republicans critical of her record in the Clinton administration. Fred Upton, the new chairman of the House Energy and Commerce (R., Mich.), had suggested in recent weeks that he intended to investigate Ms. Browner's authority.
Private Equity Makes Return to IPO Game. What private-equity honchos once received from initial public offerings: instant cash, heady gains and quick exits from their investments. What they likely will get from a coming surge of IPOs: muted initial gains, help reducing staggering debt loads and hope of finally handing some cash back to investors.
A 'Short' Plays Washington. When the U.S. Education Department set out to craft rules that would affect for-profit education companies, it drew input from a wide range of people, from executives in the business to consultants and education activists. It also heard from a group less commonly involved in Washington lobbying, hedge funds. "Hello, my name is Steven Eisman," began an email to an Education Department official in May. "I wanted to bring to your attention many of the unsaid or unknown aspects of this industry." Mr. Eisman runs a hedge fund called FrontPoint Financial Services, whose hugely profitable 2007 bet that housing would collapse was chronicled in the book "The Big Short." In the past year, Mr. Eisman has sold short the stocks of for-profit education companies. He and some other investors betting on these stocks to fall have sought meetings with Education Department officials, and in some cases gotten a hearing. In emails and presentations, the investors have painted the for-profit industry in a highly critical light. The process of writing laws and regulations has long attracted intense lobbying from companies whose prospects are at stake. Much less common is for investors such as hedge funds to do so. But some have moved to beef up their presence in Washington, especially since the financial crisis led the government more deeply into the private sector. A group called Citizens for Responsibility and Ethics in Washington, or CREW, wrote to Education Secretary Arne Duncan last week that "certain hedge fund managers had direct and sustained input into the regulatory process." In what the group called "more troubling," it said Education Department officials sought and received investors' input despite knowing their financial motives, and asked for an investigation. Two Republican senators, Tom Coburn of Oklahoma and Richard Burr of North Carolina, earlier asked the Education Department's inspector general to look into the propriety of the contacts with investors. "It is important to ensure that the integrity of the rule-making process has not been compromised," said a spokesman for Sen. Coburn. The IG's office is looking into the issue.
Emerging Nations Tackle Foods Costs. Fast-growing emerging nations are taking increasingly aggressive actions to beat back rising food prices as they grow more worried of threats to stability if prices don't start to retreat. Developing-market governments have unveiled a laundry list of measures—including price caps, export bans and rules to counter commodity speculation—to keep food costs from disrupting their economies as price spikes that some had hoped were temporary have stretched into the new year. Some economists worry that any further supply shocks could push prices even higher, triggering a food-price crisis like the one the world witnessed in 2008, when higher food costs led to violent unrest across the developing world.
Execution Drug Halt Raises Ire of Doctors. Doctors and pharmacists are criticizing a U.S. drug company's decision to permanently halt production of an anesthetic used in carrying out the death penalty, saying the drug was still needed for some surgical procedures. Hospira Inc., the sole U.S. maker of the anesthetic thiopental sodium, decided Friday not to resume producing the drug after months of opposition by activists and others over its use in lethal injections, the only or primary execution method in the 35 states that carry out the death penalty.
How Public Unions Took Taxpayers Hostage. The first to seize on the political potential of government workers was New York's Mayor Robert F. Wagner. The Kennedy White House took notice of his success.
CNBC:
Why Rising Food Prices Could Hurt Stocks. Rising food prices are probably a threat to your portfolio. Because they mean slower world growth at a time when the recovery is still patchy.
NY Post:
'Capitalist' Contradictions by Charles Gasparino. GE(GE) Hire No Course-Change for Obama. Sure, Immelt brings a lot of business experience to the post -- he's spent many years in the trenches of one of the world's biggest companies, and his last 10 as its CEO. Problem is, this isn't necessarily the kind of experience needed to deal with "jobs and competitiveness." Rather, Immelt's selection underscores the inherent flaw in Obamanomics: It favors the crony capitalists at the banks and large corporations that feed off government bailouts and contracts at the expense of entrepreneurs and small businesses, who in the past have pulled the nation's economy out of recession and created jobs. GE has seen some of its darkest days under Immelt. Since he replaced the iconic Jack Welch as head of the manufacturing/financial services conglomerate, the stock has fallen significantly. In the '08-'09 financial crisis, Immelt's GE was nearly decimated as its financial-services unit threatened to bring down the company. The once-mighty firm had to fall in line with the rest of the financial industry and accept a federal bailout. When Obama took over, with his lofty "social justice" and environmentalist goals, a beaten and bruised GE became one its best corporate partners -- advocating policies that would make the US economy more like Europe's and supporting the talk of "green jobs" miracles and the wisdom of taxing energy use. It paid off for GE, in the form of huge government contracts and other subsidies -- which, coupled with the bailout guarantees, helped the company survive and then thrive. Back when GE was majority owner of CNBC (and I worked for the network), Immelt showed his allegiance by calling a meeting of top network talent to discuss whether coverage of the administration's left-leaning economic policies was too negative. People who were present told me that Immelt didn't wind up overtly pressing for any change in coverage; he didn't have to, because his message was clear. The president's message is clear, too. Crony capitalists like Immelt -- or William Daley, the new White House chief-of-staff and a former top executive at JP Morgan (another bailout winner) -- will be calling the shots. The White House won't say what rules it has to prevent Immelt from using his appointment to get even more business for GE, but Immelt's spokesman says unabashedly that the CEO has no plans to back away from GE's government-serving business model and will continue to lobby the administration he's now a part of for business -- "as long as he's transparent," adding that he "doesn't intend" to use his role on the council for business purposes. All of which might be good for Immelt's GE -- but it's hardly the cure for the joblessness and other economic problems facing the country.
Business Insider:
California Entrepreneur Is Developing Marijuana Soda. Clay Butler is developing a line of "soda pot" called Canna Cola, a medical marijuana soft drink. In addition to that flavor, the California-based commercial artist plans on releasing others, including "Dr. Pepper-like Doc Weed, lemon-lime Sour Diesel, grape-flavored Grape Ape and orange-flavored Orange Kush," according to the Santa Cruz Sentinel.
Uncertainty Over Economy Clouds Obama Speech. A year ago, the economy looked as if it were speeding down the runway, only to stall out in the spring. Now tentative signs of a pickup are emerging across the country again. Factory production, retail sales and existing-home sales are rising, while unemployment claims are trending down. Companies like General Motors and Macy’s have recently announced hiring plans, and bank lending to businesses is starting to expand. Investor sentiment is strengthening, as major stock market indexes climb to their highest levels since mid-2008. This time, though, economists and business leaders are more measured in their optimism about the recovery. Growth is real, they say, though they remain unconvinced it will accelerate all that much.
Forbes:
In 2011 All Eyes Are On The Tablet. Apple's(AAPL) bust-out sales quarter for tablets and smartphones sheds light on consumers' demand for these products, suggesting some parts of the tech sector will have a good year.
China's End-of-Cycle Lending Binge. Today, Premier Wen cannot even control the state’s own banks. And, as a result of this and other factors, the economy is zooming along, fueled by cheap money from these financial institutions. At the moment, fixed investment, almost all of it funded by banks, is about 70% of GDP. No country has a higher rate. And growth is coming at a steep price, as more and more money produces less and less output, a trend evident in recent years. Nonetheless, state banks are continuing to pour money into increasingly dodgy projects. That means they are accumulating questionable loans — the real nonperforming loan ratio is undoubtedly many multiples of the official 1.14%. And all that has to happen for the economy to stumble is for the Chinese people to lose confidence in the sustainability of growth. That will happen when they start noticing the end-of-economic-cycle maneuvers the banks are now employing—and when they realize that Premier Wen will not or cannot stop the gusher of cash from state financial institutions.
Wired:
Was China's Stealth Tech Made in America? On March 27, 1999, during the height of NATO’s air war on Serbia, a very smart and very lucky Serbian air-defense commander achieved the seemingly impossible. Firing three 1960s-vintage SA-3 missiles, Col. Zoltan Dani managed to shoot down an attacking U.S. Air Force F-117 stealth fighter-bomber piloted by Lt. Col. Dale Zelko. NATO commanders had been sending the alliance’s planes, including the stealth attackers, into Serbia along predictable routes, allowing Dani to carefully plan his missile ambush. A fast-acting team of Air Force A-10 attack planes and helicopters retrieved Zelko intact, but not so the wreckage of the colonel’s top-secret jet, one of the technological stars of the 1991 Gulf War. The destroyed F-117’s left wing, canopy and ejection seat — plus Zelko’s helmet — wound up in a Belgrade aviation museum, but most of the rest of the 15-ton jet was gathered up by farmers living around the crash site. Twelve years later, some of those components may have finally surfaced — in the design of China’s new J-20 stealth fighter.
Politico:
GOP Dumps Pelosi's Composting Program. Republicans have begun cutting Democrat Nancy Pelosi’s "Green the Capitol" program and they’re starting with the garbage. House Administration Chairman Dan Lungren (R-Calif.) is moving to suspend the House composting program after a review showed the program was actually increasing the House’s overall energy consumption, the House Administration Committee announced Monday.
Tim Pawlenty: More Spending 'Atrocious'. Former Minnesota Gov. Tim Pawlenty says President Barack Obama’s expected push for new government spending is an “atrocious idea.” “The last thing he should be calling for is more government spending at a time where the Obama administration is driving the country toward the cliff of insolvency,” Pawlenty, who’s eyeing a White House bid to unseat Obama, told reporters after a book signing here. “It’s reckless. It’s irresponsible. It hasn’t worked. It’s not going to work. And he needs to be stopped in some regard.” In his second State of the Union address on Tuesday, Obama is expected to argue for more spending on infrastructure, research and education. Meanwhile, a showdown over increased federal expenditures could come as soon as March, when Congress will have to increase the national debt limit or risk a government shutdown. Since leaving office earlier this month, Pawlenty has repeatedly urged Republicans to refuse any increase in the debt ceiling. “The president is falsely trying to set up this choice between default and raising the debt ceiling,” Pawlenty said. “By prioritizing the paying of bills within the existing cash flow, you remove the question of default and have the debate be on discretionary spending and reform that needs to take place. “It’s inevitable,” he added. “It’s going to happen anyhow. I’m saying fast forward it to right now.”
Paul Ryan Will Call for End to 'Spending Binge'. Budget Committee Chairman Paul Ryan, in his State of the Union rebuttal Tuesday night, will call for an end to “Washington’s spending binge” that Republicans contend has hampered job creation and piled debt on future generations. In rejecting Obama’s planned call for “targeted investments”—which Republicans contend is a metaphor for more stimulus spending—Ryan reportedly will respond that the “spending binge” of the past two years failed to stem historic unemployment and the nation’s largest deficits. Instead, he will emphasize the need to cut federal spending in order to boost job creation.
Reuters:
TI's(TXN) Margins Disappoint, Envisions Spending Hike. Texas Instruments Inc disappointed Wall Street on margins and said it will sharply increase 2011 spending despite an expected decline in revenue this quarter, sending its shares down 3 percent. While TI said it is optimistic about growth prospects, analysts questioned whether its 2011 revenue growth would match an 8 percent increase in its research and development spending budget compared with 2010.
VMware(VMW) Warns Margins Static for 2011. VMware Inc. warned operating margins were not expected to increase this year as it spends money on new hires and attacking international markets, even though it forecast higher-than-expected sales of its virtualization software. Shares of the company, which vies with Microsoft Corp and Oracle Corp in the fast-growing field of computer virtualization, fell 4.4 percent after-hours.
AmEx(AXP) Revenue Rises, But Regulatory Issues Linger. American Express Co said fourth-quarter revenue grew 13 percent from a year earlier, as consumer spending increased. But an uncertain regulatory outlook threatened to overshadow the company's ambitions for future growth. Shares fell about 1.4 percent in after-hours trading on Monday, after the credit card lender and payment network reported its full fourth-quarter results.
Security Apps Boost Apple(AAPL) as BlackBerry Alternative. A slew of small security software developers are helping Apple's iPhone gain a foothold within corporations that were once the exclusive domain of Research In Motion's(RIMM) BlackBerry. The shift reflects efforts by some companies to accommodate the preference of many employees for Apple's iconic smartphone, a trend that has led software makers to develop programs to deliver secure email and other data over the iPhone.
Bond Insurers Face New Potential Downgrade Threat. Standard & Poor's could downgrade bond insurers by a full category or more if new ratings standards for the sector are implemented and the companies do not raise more capital, the agency said on Monday. Bond insurers' shares fell sharply, as the prospect of further deep downgrades weighed on an industry already facing challenges writing new business.
Obama Pressed to Seek Votes on Bush-Era Trade Deals. President Barack Obama faced bipartisan pressure on Monday to send Congress long-delayed trade deals with South Korea, Colombia and Panama and rally support for them. "We need to get back on track by opening markets to U.S. products," Senator Rob Portman told Reuters ahead of Obama's annual State of the Union speech to Congress on Tuesday. "I think it's a critical part of the overall package to deal with this stubbornly high unemployment."
Financial Times:
Moscow Braces for Fresh Terror Campaign. Moscow is bracing itself for a renewed terror campaign by Islamist militants after an explosion ripped through the international arrivals hall of the city’s Domodedovo airport, killing 35 people and injuring up to 170. Police put the city’s transport hubs on high alert after the second major terrorist attack to strike the capital in a year. There were no immediate claims of responsibility on Monday. But prosecutors said they were investigating a terrorist attack “most likely” carried out by a suicide bomber, while analysts said the attack bore the hallmarks of a campaign by militants battling to create an Islamist state in the Russia’s volatile North Caucasus.
SEC's $500M Office Expansion Plan Probed. The US Securities and Exchange Commission’s inspector general has launched an investigation into the agency’s estimated $500m in new office leases in Washington to determine if the expenses are justified, a person familiar with the matter says.
Telegraph:
Spain Tempts Fate With Minimalist Bank Rescue. Spain has set in motion a partial nationalisation of its crippled savings banks, or cajas, but stopped short of the giant rescue deemed necessary by some experts to contain the country’s festering crisis. Finance minister Elena Salgado said capital injections into the cajas would “in no way exceed €20bn [£17bn]”, with a large part coming from the private sector. Spanish banks will have to boost their core Tier 1 capital ratio to 8pc, even stricter than the Basel III rules. “This is unlikely to be a game-changer, and could potentially unwind the relief rally we have seen in the markets,” said Silvio Peruzzo, RBS’s Europe economist. “We view €50bn as the minimum recapitalisation for the Spanish banking system that would restore investors’ confidence,” said the bank. RBS said Spain remains caught in a vice of tightening fiscal policy and a deepening property slump that may culminate in a 40pc fall in house prices, eroding the solvency of the cajas. The Madrid consultants RR de Acuna estimate the overhang of unsold homes at 1.2m. Mr Peruzzo called on EU leaders to take much bolder action to overcome the crisis, demonstrating that they really mean to “save Spain” by beefing up the rescue machinery. EU ministers played for time at a key meeting last week, giving an impression of complacency.
The China Banking Regulatory Commission is about to start "window guidance" on banks, requiring them to file daily reports of credit issuance, citing two agency officials. China will raise the minimum reserve requirement ratio for banks whose lending grows more quickly than the regulator had expected, and may order banks to temporarily halt new-loan approvals.
China Business News:
Shanghai has sent a plan for a property tax in the city to China's Ministry of Finance for approval that would implement a 4% levy on the value of homes. The city will impose the tax on newly purchased homes of more than 60 square meters per person.
Most Chinese banks reduced the amount they plan to lend in January by at least 10% for their branches compared with a year ago, citing bank officials.
Financial News:
China needs two to three years to fix its property market, citing central bank adviser Xia Bin.
Evening Recommendations
None of note
Night Trading
Asian equity indices are -.50% to +1.25% on average.
Asia Ex-Japan Investment Grade CDS Index 106.0 -.5 basis point.
Asia Pacific Sovereign CDS Index 118.50 -1.0 basis point.
S&P/CS 20 City MoM% SA for November is estimated to fall -.8% versus a -.99% decline in October.
10:00 am EST
Consumer Confidence for January is estimated to rise to 54.0 versus a reading of 52.5 in December.
The House Price Index for November is estimated unch. versus a +.7% gain in October.
Upcoming Splits
None of note
Other Potential Market Movers
The $35 Billion 2-Year Treasury Notes Auction, weekly retail sales reports, Richmond Fed Index, weekly ABC consumer confidence reading and the (JNJ) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 81.80 -1.39%
European Financial Sector CDS Index 126.50 bps -12.76%
Western Europe Sovereign Debt CDS Index 175.17 bps -2.05%
Emerging Market CDS Index 198.45 -1.53%
2-Year Swap Spread 22.0 -1 bp
TED Spread 15.0 unch.
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 281.0 -1 bp
China Import Iron Ore Spot $185.0/Metric Tonne -.38%
Citi US Economic Surprise Index +35.70 -2.9 points
10-Year TIPS Spread 2.18% unch.
Overseas Futures:
Nikkei Futures: Indicating +55 open in Japan
DAX Futures: Indicating +14 open in Germany
Portfolio:
Higher: On gains in my Ag, Tech, Biotech and Medical long positions
Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short
Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades higher, despite recent equity gains, terrorism fears, worries over emerging markets inflation and financial sector weakness. On the positive side, Airline, Homebuilding, Construction, Biotech, Computer Services, Disk Drive, Semi, Computer, Alt Energy and Coal shares are especially strong, rising more than 1.0% today. Small-Cap and Cyclical shares are outperforming. Tech stocks are trading much better today. Copper is rising +.51%, Lumber is jumping another +2.74% and the 10-year yield is stable at 3.4%. The Spain sovereign cds is declining -3.76% to 255.62 bps, the Belgium cds is falling -5.64% to 170.12 and the Italy sovereign cds is falling -3.30% to 180.0 bps. The Western Europe Sovereign CDS Index is now -43 bps off its record high set on January 11. Moreover, the European Investment Grade CDS Index is dropping -4.54% to 77.92 bps, which is also a large positive. On the negative side, HMO, Medical Equipment, Bank, Oil Tanker and Defense shares are down on the day. (XLF) has underperformed substantially throughout the day. Ireland's sovereign cds is gaining +2.31% to 609.15 bps. Rough Rice futures are up another +1.9%. Thailand's benchmark equity index fell -4.3% overnight on rising inflation fears and is breaking down technically. Southeast Asian equities, in general, trade very poorly. The DJIA continues to hold up very well and is making another new multi-year high today. It is noteworthy that the (XLI) is seeing 792% above normal put volume today. After Friday's technical breakdown, the 10-Year TIPS spread is unch. today despite the global stock rally, a rise in the euro, surging food prices and rising economic optimism. As well, gold continues to trade poorly. I continue to believe that investors are becoming increasingly concerned by the possibility of economic hard landings in some key emerging markets. I expect US stocks to trade mixed-to-lower into the close from current levels on emerging market inflation fears, profit taking, financial sector pessimism and more shorting.
U.S. Credit Swaps Fall to Lowest in a Year on Corporate Earnings, Recovery. The cost of protecting U.S. corporate bonds from default fell to the lowest in more than a year as company earnings exceeded forecasts, adding to evidence the economic recovery is gaining pace. “There’s still no fundamental risk,” said Stephen Antczak, head of U.S. credit strategy at Societe Generale SA in New York. “Profits are OK, there are no defaults. People just aren’t fearful of negative fundamentals.” The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, decreased 0.9 basis point to a mid-price of 82 basis points as of 10:51 a.m. in New York, according to Markit Group Ltd. The index is falling as headline risk from the sovereign debt crisis in Europe declines, according to Antczak.
Intel(INTC) Will Add $10 Billion to Its Stock-Repurchase Program; Shares Advance. Intel Corp., the world’s largest chipmaker, added $10 billion to its stock-buyback plan to return money to shareholders as corporations’ spending on technology boosts its earnings. The increase brings the total authorized for buybacks to $14.2 billion, Santa Clara, California-based Intel said on its website today.
Carrying capacity for ships hauling commodities such as coal, iron ore and grains will expand at more than twice the rate of demand this year, according to forecasts from Clarkson Plc, the world's largest shipbroker. The fleet will grow 13% in 2011, led by a 17% expansion for capesize vessels that primarily carry iron ore. Demand will grow 6%, Clarkson said. Capacity rose 17% last year and demand 11%, it said.
Obama Keeps Corps of Corporate Friends Close Amid Criticism From Business. Even though his relationship with U.S. business has been strained at times, President Barack Obama has kept a coterie of business leaders, such as Robert Wolf, chairman of UBS AG’s Americas unit, and Honeywell International Inc. chairman David Cote, in his orbit. Obama raised more than $40 million for his presidential campaign from business groups and financial firms in the 2008 presidential campaign, more than double what his Republican opponent John McCain got. Many of those supporters have stayed with Obama during the first two years of his term even as the administration drew criticism over government regulation, the overhaul of health-care laws and rules for financial institutions. Obama, 49, counted corporate executives among his advisors and top fundraisers in his run for the presidency in 2008. Wolf, for example, helped raise $500,000 for Obama’s campaign and has stayed close to the president. He served on the original advisory panel and was part of an exclusive group who played golf with Obama while the first family was on vacation at Martha’s Vineyard in August. Wolf also was among the executives invited to a series of meals in Washington as Obama reached out to win support from businesses. He was joined on the invitation list by Intel Corp.’s Paul Otellini and Andrew Liveris of Dow Chemical Co., who were back at the White House on Jan. 18 for the state dinner honoring Chinese President Hu Jintao. Immelt, Boeing Co.’s James McNerney and Coca-Cola Co.’s Muhtar Kent, who serve on Obama advisory boards, attend regular meetings at the White House and get seats at state dinners as well, as do JPMorgan Chase & Co. CEO Jamie Dimon, Microsoft Corp. CEO Steve Ballmer and Lloyd Blankfein, chairman and CEO of Goldman Sachs Group Inc. At the White House, Obama and his aides regularly welcome corporate executives to private meetings. Immelt, Ballmer and Cote have each been to the White House more than a half-dozen times, according to Secret Service visitor logs. Billionaire investor Warren Buffett has been hosted by the president at least twice. The chairman of Berkshire Hathaway Inc. was also an informal advisor to Obama’s presidential campaign.
France's Sarkozy Urges Group of 20 to Regulate Commodities, Price Swings. French President Nicolas Sarkozy said regulation of commodity markets will be a priority as he leads the Group of 20 nations this year, and inaction may cause food rioting in the world’s poorest countries. Some commodity markets lack safeguards to limit price spikes and “price manipulation,” Sarkozy said at a press briefing in Paris today. "If we do nothing, we risk having food riots in the poorest countries and also an unfavorable impact on global growth,” Sarkozy said. “We want regulation of the financial markets for commodities.” Commodity-producing countries must be made to understand “that they themselves have the largest interest in an orderly movement,” Sarkozy said. “A frenetic upward jump is followed by a frenetic movement downward.” One of the rules France proposes is for commodity investors to set aside a deposit equal to part of the value of the raw material being traded, according to the president. “Does it make sense that you can buy considerable stocks of commodities without running any risk, without blocking any sum, without committing to any cargo delivery?” Sarkozy said.
Wheat Extends Advance to Five-Month High as La Nina Threatens Global Crops. Wheat rose to a five-month high in Chicago on signs of stronger demand and on speculation adverse weather that has hurt production in Australia, the U.S. and South America will persist. U.S. sales to overseas buyers surged to 1.054 million metric tons in the week ended Jan. 13, seven times more than a week earlier and the most since August, the Department of Agriculture said last week. Cold weather in the U.S. and a drought in China curbed crop prospects as rain in Australia floods fields and drought in South American hurts plants. “The price of wheat has gained in the last few days from surprisingly positive U.S. export data and the extreme cold in major U.S. growing areas,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report today. “The market still has to digest the loss of high-quality wheat from Australia due to the flood catastrophe.” Wheat for March delivery climbed 10.75 cents, or 1.3 percent, to $8.3525 a bushel at 1:14 p.m. London time on the Chicago Board of Trade. The grain reached $8.395, the highest price for a most-active contract since Aug. 6. Prices have gained for five days and are up 5.2 percent this month. Milling wheat for March delivery added 3.75 euros, or 1.4 percent, to 263.25 euros ($357.31) a ton on NYSE Liffe in Paris. The price has more than doubled in the past year.
Oil Drops in New York After Saudi Arabia's Al-Naimi Signals More Supplies. Crude for delivery in March dropped for a fifth day after Saudi Arabian Oil Minister Ali al-Naimi signaled OPEC may increase supply to meet growing demand in China and India. Saudi Arabia won’t let prices rise too quickly, in order not to distort demand,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. Al-Naimi reiterated that the Organization of Petroleum Exporting Countries’ policy is to meet any additional requirement for crude. Hedge-fund managers and other large speculators increased their net-long position 0.4 percent in crude contracts in the week ended Jan. 18, according to Commodity Futures Trading Commission data. Bets that prices will rise held by the managed money category of investors, in futures and options, outnumbered short positions by 210,564 contracts, the Washington-based regulator said Jan. 21 in its weekly Commitments of Traders report.
Brazil's Amazon May Hold 'Super Giant' Oil Fields, HRT Says; Shares Climb. Brazil’s Amazon may hold “super giant” fields of light oil in an area the country is starting to explore, HRT Participacoes em Petroleo SA Chief Executive Officer Marcio Mello said. The shares gained. The Rio de Janeiro-based oil-exploration company will start producing from its wells in the Amazon’s Solimoes river basin as early as June, Mello said today in a Bloomberg Television interview in New York. HRT will begin drilling in February and expects to reach an oil reservoir in May, he said. HRT will drill 12 wells at the Amazon this year. “The oil at Solimoes is the best in the whole of South America,” Mello said. “The Amazon is a completely unexplored frontier.” Brazilian oil deposits below a layer of salt in the Atlantic Ocean hold at least 123 billion barrels of reserves, more than double government estimates, according to a university study by a former Petroleo Brasileiro SA geologist. The research, which set out to show government figures were too optimistic, found they underestimated the area’s potential, said Hernani Chaves, a professor at the Rio de Janeiro State University who worked at Petrobras for 35 years. The forecast, which the study puts at a 90 percent probability, compares with the Brazilian oil regulator’s 50 billion-barrel estimate.
Spain Banks Capital Need Won't Exceed $27 Billion, Finance Minister Says. Spanish Finance Minister Elena Salgado said the amount needed to recapitalize the country’s banking system won’t exceed 20 billion euros ($27 billion) and “all or part” of that sum will come from financial markets. Spain will also make lenders adopt a core capital ratio of at least 8 percent, Salgado said in a news conference in Madrid today. Lenders will have until the fall to raise enough capital to meet that requirement, and those that can’t do so will be able to tap the state’s bank-rescue fund known as FROB, which will take ordinary shares with voting rights in exchange. The figure is lower than estimates from analysts including those at Moody’s Investors Service, which said today that lenders may need at least 17 billion euros, rising to 89 billion euros in a stressed case. Savings banks, or cajas, have been locked out of wholesale debt markets amid investor concern about 181 billion euros of what the Bank of Spain terms “potentially troubled exposure” to construction and real estate.
Wall Street Journal:
Suicide Attack Rocks Moscow Airport. A suicide attacker detonated a bomb at Russia's busiest airport Monday, killing at least 31 people and wounding more than 100 others, authorities said. The 4:32 p.m. blast near the international arrivals area of Moscow's Domodedovo Airport was the country's worst terrorist attack since twin bombings left 40 dead in the Moscow subway last March.
Energy Power Shifts From the West. The center of the global energy industry is shifting away from the West as publicly traded companies in Russia, China and Brazil take more top spots in an influential global ranking of the world's energy giants.
Spain Can Still Avoid Financial Doom. And so we wait. We wait for the spate of new data on the health of the euroland economies, we wait for the policymakers to come up with some device that satisfies the markets that the eurocracy has come up with a structure that controls national budgets to the satisfaction of German Chancellor Angela Merkel, euroland's paymaster-in-chief. The waiting for data will end this week, at least for a while; the waiting for a policy decision might not arrive before Godot. Meanwhile, it is all about Spain, Europe's fifth largest economy. Greece is gone, Ireland is gone and Portugal is going—all will have to restructure one way or another. If Spain, larger than all three combined, can survive the tender attentions of the bond market, policymakers will have time for their usual leisurely decision-making pace.
India Government Bonds Fall Ahead of RBI Rate Meet; Rupee Down. Indian government bonds ended lower on Monday as traders avoided new positions a day ahead of the Reserve Bank of India's rate-setting meeting, where the central bank is widely expected to increase its policy rates to rein in growing inflation expectations. Post market hours, a Reserve Bank report said its main policy objective in the near term will be to control inflation, a statement which may pressure bonds in early session Tuesday. "Since a lower inflation regime is essential for sustainable high growth, containing inflation becomes the dominant policy objective in the current environment," it said in its third-quarter review of macro-economic and monetary developments, which provides cues going into the policy meeting. The market though ended lower, recovered from the day's lows when some traders bought bonds as yields rose following a government official's comments on inflation. "Our advisers on the economy tell me we are going to end the [fiscal] year with 9.0% inflation," Revenue Secretary Sunil Mitra told reporters at a conference. The RBI expects inflation at 5.5% at the end of March.
"On The Ground" First Person Report on Chinese Inflation. A Zero Hedge reader writes from the ground in China, and shares his first person perspective on just how real inflation has become in the world's most populous and thus most price margin sensitive, country. Inflation is HUGE. In every way and is so noticeable in daily life that we talk about it, well, everyday as everything we buy is rapidly increasing in price. The thing is, is that it doesn't affect my life that badly, except for my rent that increased 10% (which was low, compared to the city-wide 20% increase in 2010), because I'm in a high income level, for local Chinese standards. For example, a bowl of dumplings I typically get for lunch has gone from 3rmb ($0.44) to 4rmb ($0.59). That's a 25% increase and happened in one day. Again, clearly in USD terms you can see that doesn't bother me, but for the average Chinese, it kills them. Veggies have gone up 60% in some cases.
Cuomo's Budget Ax to Cut $1 Billion From NYC. Look out, Mike! Here comes Gov. Cuomo -- and he's wielding a brutal bud get ax. Mayor Bloomberg, who last week warned of multibillion-dollar city deficits over the next several years, will get more bad news next week when Cuomo presents a cut-to-the-bone budget that "slashes" state aid to New York City by $1 billion or more, sources said yesterday.
Eisman Hit by Losses Amid Departure Talk. After a high-profile bet against subprime mortgages brought him huge profits, star money manager Steve Eisman is having a tough time extending his winning streak. Eisman, a prominent hedge fund manager at FrontPoint Partners, has seen his assets under management fall along with fund performance in the past year. Eisman's FrontPoint Financial Services, which launched in 2004, was down 8.3 percent through Dec. 31, and FrontPoint Financial Horizons Fund slipped 7.7 percent. In 2010, the two funds were the firm's worst performers, according to reports sent to clients.
New York Times:
Increasingly Confident Fed Is Set for First Meeting of 2011. The Federal Reserve will use its first policy meeting of 2011 this week to revisit its economic projections amid a climate of modest but increasing confidence about the recovery. The statement it will issue on Wednesday, according to people familiar with the private deliberations of Fed officials, is likely to reflect a guarded optimism about the economy, while also maintaining the Fed strategy announced last November to accelerate the recovery by pumping $600 billion into the banking system.
Adobe(ADBE) Survey Finds Readers 'Engaged' With Ads on Apple's(AAPL) iPad. Adobe on Monday released the results of a new survey which found that advertisements in digital magazines on devices like the iPad can "more effectively engage readers and create stronger purchase intention" than in print.
Rahm Emanuel Booted Off Chicago Mayoral Ballot. A panel of appellate judges ruled 2-1 that Emanuel - well ahead in the polls and fundraising - did not meet the one-year residency requirement to be on the ballot for the Feb. 22 election.
Reuters:
Thailand Down 4% on Region Inflation Worries. Thailand's stock market fell 4.3 percent on Monday, leading most other Southeast Asian bourses down as foreign investors continued to bale out of markets they believe are vulnerable to growing inflationary pressures. Thailand .SETI posted its biggest loss since Oct 15, 2009, led by energy and banking shares. Indonesia .JKSE, the region's worst-performing bourse this year, lost 1 percent and the Philippines .PSI fell 1.2 percent to a 4-½ month low. On Monday, Indonesia and the Philippines saw net foreign outflows of $27.5 million and $14.7 million respectively. On Friday Thailand saw an outflow of $251 million. In baht terms, according to stock exchange data, it was the highest figure since May 24 last year when Bangkok was still picking itself up after bloody political protests. On Monday, the exchange recorded foreign selling of 4.05 billion baht ($132 million), according to exchange data. In the four weeks to Jan. 21, Thailand suffered outflows of $465 million, while Indonesia and the Philippines saw selling worth $280 million and $52 million respectively, according to Nomura Research.
Small Firms Not Spared in US SEC Say-On-Pay Rule. Small businesses and newly listed public companies will not be exempt from a new rule U.S. securities regulators are poised to adopt on Tuesday giving shareholders an advisory say-on-pay vote, according to a person familiar with the rule. The rule is expected to stir concerns among the Republican commissioners at the Securities and Exchange Commission, as well as some small businesses who have urged the SEC in their comment letters not to burden smaller companies with additional say-on-pay requirements.
No Bailouts for States - US House Leader Cantor. U.S. House of Representatives Majority Leader Eric Cantor said on Monday that he does not support any federal bailouts for states or allowing them to declare bankruptcy.
International Business Times:
JC Penney(JCP) Adds Investors Ackman, Roth to Board. Ackman, the chief executive officer of hedge fund firm, Pershing Square Capital Management, has a 16.5 percent stake in Penney. Steven Roth, chairman of Vornado Realty Trust (NYSE: VNO), will also join the board. Vornado owns about 9.9 percent of Penney.
McDonalds(MCD) Sees Food Costs Rising as Sales Slow.McDonald’s, the world’s biggest burger chain, said its food costs will rise this year, leading analysts to forecast the company will put up prices, as it reported weaker-than-expected December sales.
DigiTimes:
HP(HPQ) Cuts January Notebook Shipment Goal On Component Shortage, Say Sources. Hewlett-Packard (HP) has been forced to revise downward its notebook shipment goal for January due to a delay in shipments of some key parts and components from upstream suppliers, including CMOS sensors and CPUs, according to sources from notebook component suppliers.
