North American Investment Grade CDS Index 83.01 -.40%
European Financial Sector CDS Index 130.67 bps -4.81%
Western Europe Sovereign Debt CDS Index 160.83 bps -.10%
Emerging Market CDS Index 212.03 +.39%
2-Year Swap Spread 21.0 -1 bp
TED Spread 17.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .14% -1 bp
Yield Curve 284.0 +1 bp
China Import Iron Ore Spot $185.60/Metric Tonne unch.
Citi US Economic Surprise Index +46.80 +4.8 points
10-Year TIPS Spread 2.33% -1 bp
Overseas Futures:
Nikkei Futures: Indicating +84 open in Japan
DAX Futures: Indicating +16 open in Germany
Portfolio:
Higher: On gains in my Medical, Retail and Tech long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher, despite recent equity gains, rising Mideast tensions, emerging markets inflation worries and rising long-term rates. On the positive side, Food, Restaurant, Retail, HMO, Wireless, Telecom, Steel and Oil Tankers shares are especially strong, rising more than 1.0%. Cyclicals are outperforming. Copper is rising +.25%, oil is stable and the UBS-Bloomberg Ag Spot Index is falling -2.53%. The European Financial Sector CDS Index continues to trend lower, which is a major positive. The Citi US Economic Surprise Index is hitting the highest level since Feb. 9th, 2010. On the negative side, Homebuilding, I-Banking and Paper shares are under pressure, falling more than 1.0%. (XLF) is underperforming. Lumber is falling -1.11%. Gold is beginning to gain traction again, despite today's euro weakness. Moreover, Rice is breaking out technically despite overall weakness in ag commodities. The 10-Year yield is rising +7 bps to 3.54%. The Saudi sovereign cds is gaining +1.94% to 121.11 bps, the Belgium sovereign cds is rising +4.36% to 155.81 bps and the Italy sovereign cds is climbing +6.06% to 167.13 bps. The major averages continue to trade very well as they slowly build on their recent technical breakouts. Any subsiding in Mideast tensions would likely lead to another meaningful push higher in US stocks. I expect US stocks to trade modestly higher into the close from current levels on earnings optimism, technical buying, short-covering, stable energy prices and rising economic optimism.
Trichet Says Prices Warrant 'Very Close Monitoring'. European Central Bank President Jean- Claude Trichet signaled no immediate plans to raise interest rates even though the bank expects inflation to stay above its 2 percent limit for longer than it predicted just three weeks ago. Trichet said the ECB’s benchmark rate, which it left at a record low of 1 percent today, remains “appropriate” and despite “short-term upward pressure,” inflation risks are balanced. The euro fell more than a cent against the dollar as investors pared expectations for an increase in borrowing costs. “For now they are prepared to look through the inflation hump,” said Julian Callow, chief European economist at Barclays Capital in London. “Unless inflation expectations move up abruptly, the ECB will probably maintain its accommodative stance to help Europe to patch itself together again.” With Europe still struggling to contain its sovereign debt crisis, Trichet may be trying to temper investor expectations for higher ECB rates after his change in tone on inflation last month caused a five-cent surge in the euro.
U.S. Economy: Service Industries Expand by Most Since 2005. in the U.S. expanded in January at the fastest pace since August 2005, indicating the economic recovery is broadening.Service industries The Institute for Supply Management’s index of non- manufacturing businesses rose to 59.4, exceeding the median forecast in a Bloomberg News survey, after December’s 57.1. Orders were the highest in seven years, while companies showed more confidence to hire. Faster growth in household spending and the economy may generate bigger employment gains needed to bring down the jobless rate. Sales climbed 4.4 percent in January, exceeding forecasts, as retailers such as Limited Brands Inc. used promotions to lure shoppers before snowstorms gripped the nation, Retail Metrics Inc. data showed today. “The consumer will be a source of strength through this year,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “Everything points to more hiring as the expansion goes on.”
World Food Prices Rose to Record in January as Commodities Gained, UN Says. World food prices rose to a record in January on higher dairy, sugar and cereal costs and probably will remain elevated, the United Nations said. An index of 55 food commodities climbed 3.4 percent from December to 231 points, the seventh straight increase, the UN’s Food and Agriculture Organization said in a report today. Dairy prices led advances among five food categories, rising 6.2 percent, the Rome-based agency said. Elevated food prices contributed to protests in Tunisia that ousted President Zine El Abidine Ben Ali last month and demonstrations in Egypt that prompted Hosni Mubarak to say this week he won’t seek re-election as president. “The new figures clearly show that the upward pressure on world food prices is not abating,” Abdolreza Abbassian, senior economist at the FAO, said in a statement. “These high prices are likely to persist in the months to come.” Milk futures traded in Chicago jumped 26 percent last month and corn increased 4.8 percent. Wheat added 6.5 percent in Paris trading and raw sugar gained 5.8 percent in New York. The dairy index climbed to 221 points last month, and a gauge of oils and fats gained 5.6 percent to 278 points, the FAO said. The sugar-price index advanced 5.4 percent to 420 points, a measure of cereal prices increased 3 percent to 245 points, and a gauge of meat prices remained at 166 points, the report showed. Countries probably spent at least $1 trillion on food imports in 2010, with the poorest paying as much as 20 percent more than in 2009, the UN has said. Surging food and energy costs are stoking emerging-market inflation and have the power to topple governments, Nouriel Roubini, the New York University economist who predicted the financial crisis, said on Jan. 26. “High food prices are of major concern, especially for low-income food-deficit countries that may face problems in financing food imports and for poor households, which spend a large share of their income on food,” Abbassian said.
Bernanke Says Faster Job Gains Needed to Assure Recovery. Federal Reserve Chairman Ben S. Bernanke said the U.S. needs to see faster job growth for a sufficient time before policy makers can be assured the economic recovery has taken hold. “With output growth likely to be moderate for awhile and with employers reportedly still reluctant to add to their payrolls, it will be several years before the unemployment rate has returned to a more normal level,” Bernanke said today in a speech at the National Press Club in Washington. “Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.” While Bernanke said economic growth will pick up this year and the Fed’s purchases of $600 billion in Treasuries are “providing significant support to job creation and the economy,” he gave no indication whether he’ll maintain or adjust monetary stimulus after the Fed finishes the asset buying in June. Bernanke has held the main interest rate near zero since December 2008. Fed policy makers are showing little alarm over the rise in food and energy prices. The central bank’s Jan. 26 statement acknowledged rising commodity prices while saying that longer- term inflation expectations were stable and “underlying inflation” was still on the decline. While prices of some “highly visible” items such as gasoline have “significantly” increased recently, “overall inflation remains quite low” and wage growth has slowed, Bernanke said. Bernanke omitted any mention of political turmoil in Egypt. Today’s appearance extends Bernanke’s public defense of the asset purchases dubbed QE2 for the second round of quantitative easing. The plan sparked a backlash from Republican leaders in Congress who said it may weaken the dollar.
Gold Jumps to Two-Week High as Egypt Tensions Spur Haven Demand. Gold futures jumped to a two-week high as the mounting conflict in Egypt boosted demand for the metal as a haven. Gold futures for April delivery rose $20.40, or 1.5 percent, to $1,352.50 an ounce at 12:14 p.m. on the Comex in New York.
Justice Sotomayor Becomes a Forceful Voice as Obama Top Court Appointee. On a U.S. Supreme Court full of justices with a lot to say, Sonia Sotomayor is beginning to find her voice. In her second term since President Barack Obama appointed her in 2009, Sotomayor is speaking out from the bench for the rights of prison inmates, banding with her fellow Democratic appointees on ideologically divisive issues and boring into the details of federal securities-fraud laws. And increasingly Sotomayor, 56, is making herself a public figure.
MasterCard(MA) Profit Jumps 41%, Exceeding Estimates as Card Spending Climbed. MasterCard Inc., the world’s second- biggest bank-card network, said fourth-quarter profit jumped 41 percent on a surge in U.S. consumer spending and the global migration to electronic payments. Net income climbed to $415 million, or $3.16 a share, from $294 million, or $2.24, in the same period a year earlier, the Purchase, New York-based company said today in a statement. The average estimate of 30 analysts surveyed by Bloomberg was $3.05. “Based on the spending trends we’ve seen and the improving consumer confidence, I’m cautiously optimistic that we’ll see continued improvements in 2011,” Chief Executive Officer Ajay Banga said in a conference call with analysts.
No Armageddon Ahead for Financial Stocks, Options Traders Say. Options to protect U.S. banks and brokers are the cheapest since the crisis began in 2007, indicating that investors are betting financial companies will continue leading the stock-market recovery. Implied volatility, the key gauge of option prices, for at- the-money options expiring in three months on the Financial Select Sector SPDR Fund has tumbled to 19.96 this week. That’s the lowest since July 2007 relative to equivalent options on the SPDR S&P 500 ETF Trust, which tracks the Standard & Poor’s 500 Index, showing that investors are less uncertain about financial companies relative to other stocks than at any time since the worst economic downturn since the Great Depression.
Dallas Fed's Fisher Says He Won't Support Further Asset Buying After June. Richard W. Fisher, president of the Federal Reserve Bank of Dallas, said he isn’t inclined to support further quantitative easing after the central bank completes its purchase of $600 billion in Treasuries in June. “You can never say never, but I cannot imagine a convincing argument for further quantitative easing after this round, given what is developing now in the economy,” the 61- year-old regional bank chief said today on Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays. Fisher said he regards the Fed’s asset-purchase plan as a “fait accompli” and that he wouldn’t have supported it if he had a vote last year. “I do not foresee America reneging on its obligations to its investors and its securities,” yet the U.S. risks losing its AAA debt rating “if we don’t get our act together,” he said. There has been a “flight to quality” to the U.S. and a “rush back to the dollar,” yet “if we do not correct our situation, we will go the path of what happens to old horses in the glue factory.”
UPS(UPS) May Increase Dividend on Strengthening Global Economy. United Parcel Service Inc. may increase its dividend today, signaling confidence at the world’s largest package-delivery company that the global economic recovery is gaining momentum, analysts said. UPS may raise the dividend to 52 cents from 47 cents, or 11 percent, according to a Bloomberg projection.
Wall Street Journal:
Regime Seeks to Appease After Days of Violence. Egyptian government officials took a number of steps aimed at addressing grievances long held by the regime's opponents, as protesters solidified their position in central Cairo's Tahrir Square. Egyptian Health Minister Ahmed Samih Farid said on state television that eight people had died and nearly 900 had been injured in the fighting that began Wednesday.
Army Sets Sights on New Rifle. For the first time in almost 50 years, the U.S. Army wants to replace the standard rifle shouldered by hundreds of thousands of frontline troops around the world. The service this week advertised its interest in a new weapon that would incorporate futuristic sights and other advances in rifle design and be able to handle improved ammunition.
Madoff Trustee's Suit Says J.P.Morgan(JPM) at 'Very Center' of Fraud. J.P. Morgan Chase & Co. stood "at the very center" of Bernard Madoff's fraud, according to a lawsuit unsealed Thursday that reveals for the first time how bank employees' concerns allegedly went unheeded and irregularities in his accounts were overlooked. The $6.4 billion lawsuit, filed in December and unsealed in federal bankruptcy court Thursday, says J.P. Morgan reported its long-held suspicions of Mr. Madoff to British authorities in late October 2008, less than two months before he surrendered and the fraud was exposed.
Niels Jensen Asks If Plunging Chinese Power Output is Indicative of a "Dramatic Economic Slowdown". The latest letter by Absolute Return Partners' Niels Jensen is a must read for anyone still on the fence about the Chinese "thesis." With many prominent pundits pitching either side of the China bull/bear case, often times covering up weaknesses in their arguments with extended and superfluous rhetoric, sometimes it gets easy to get lost in the noise: here is where Jensen's ability to create signal shines through. Jensen starts off with the official revelation that Chinese GDP is a made up number, discussed previously on Zero Hedge. "In a leaked 2007 cable Li Keqiang, who is the favourite to become the next premier, confided that official Chinese GDP figures are “man made” and “for reference only” (surprise, surprise), and that one should rather look at alternative measures such as electricity consumption, rail freight volumes and bank lending, if one wants a true picture of economic growth in China." It is all downhill from there. First, looking at trends in Chinese power output, indicates that the Chinese economy very likely fell off a cliff in 2010 despite what the fabricated GDP number was indicating:
Nielsen: Apple(AAPL) iAds More Effective Than TV Ads. According to the soup company Campbell’s, Apple iAds are twice as memorable as TV ads to the general public. The iAd probably cost Campbell’s about $1 million whereas a similar TV campaign could cost a bit more than $25 million.
Politico:
Hosni Mubarak Splits Israel from Neocon Supporters. As Israeli leaders worriedly eye the protests and street battles in neighboring Egypt, they’ve been dismayed to find that the neoconservatives and hawkish Democrats who are usually their most reliable American advocates are cheering for Egyptian President Hosni Mubarak’s fall. The Egyptian autocrat has kept his side of a chilly peace agreement with Israel for thirty years, permitting an era of relative stability in the Jewish state. And as Prime Minister Benjamin Netanyahu made clear in a cautious speech to the Knesset Wednesday, Israel is deeply worried what will happen to that relationship when Mubarak departs.
Fort Hood Inquiry Faults FBI, Army. A congressional investigation of the causes and response to the Fort Hood shootings faults the FBI and the Army for not doing enough to prevent the November 2009 massacre that left 13 people dead. In a report released Thursday by the Senate Homeland Security and Governmental Affairs Committee, the FBI is criticized for failing to notify the Army about alleged gunman Maj. Nidal Malik Hasan’s extremist views, while the Army lapsed in identifying and responding to his changing beliefs. “Our report’s painful conclusion is that that the Ft. Hood massacre could have and should have been prevented,” said Sen. Joe Lieberman, the committee’s chairman, said to reporters. “We have reached that conclusion because our investigation has found that employees of the Department of Defense and the FBI had compelling evidence of Nidal Hasan’s growing embrace of violent Islamist extremism in the years before the attack that should have caused them to discharge him from the U.S. Military and make him subject of an aggressive counter-terrorism investigation.”
Wolfgang Wiegard, a member of German Chancellor Angela Merkel's council of economic advisers, said there's reason for "justified doubt" that Greece will be able to avoid a restructuring of its debt. Greece will continue to require European support when its aid package expires, Wiegard said. While Spain is no "candidate" for the region's rescue fund "at the moment," the sovereign debt crisis isn't over, he said.
Folha de S.Paulo:
Brazilian Finance Minister Guido Mantega will ask support from his counterpart, U.S. Treasury Secretary Tim Geithner, to resist a proposal to regulate commodity prices. Mantega will raise the issue next week when Geithner will be in Brazil. Brazil opposes a French proposition made to the Group of 20 nations to regulate commodities markets.
Gunfire Erupts in Cairo as Mubarak Allies Battle Protesters. Gunfire erupted in Cairo’s Tahrir Square early this morning after clashes between supporters of Egyptian President Hosni Mubarak and demonstrators demanding an immediate end to his autocratic 30-year reign. Four people were killed this morning, Al Arabiya television reported. The Al Jazeera network showed footage of bodies being pulled on the street. Mubarak loyalists rode horses and camels yesterday into Tahrir Square, the epicenter of anti-government protests since Jan. 25, swinging whips and clubs. The two sides hurled rocks, bottles and concrete chunks, sometimes from rooftops, and some pro-government marchers carried machetes. Egyptian soldiers didn’t intervene, except to use water cannon to extinguish fires, and there were no uniformed police present. More than 600 people were injured and at least three killed in the clashes, according to state television, as the battle lines shifted with government supporters challenging the demonstrators who reject Mubarak’s plan to remain in power until September elections.
Portugal Crumbles as Century-Old Rent Controls Choke Investment. Century-old controls on rents and evictions are stifling investment in Portuguese real estate and leaving the country with crumbling city centers as rental income fails to keep pace with maintenance costs, according to landlords and property industry groups. The government has pledged to introduce measures in March to streamline rules on rental properties as it seeks to jumpstart an economy that’s had one of Europe’s weakest growth rates over the last decade.
BP(BP) Mediator Feinberg Can't Call Himself Independent, Judge Says. A federal judge said Kenneth Feinberg, the lawyer paying victims of BP Plc’s Gulf of Mexico oil spill, can’t identify himself as an independent administrator of a $20 billion settlement fund. U.S. District Judge Carl Barbier in New Orleans concluded yesterday that Feinberg must fully disclose his ties to BP when communicating with potential claimants. Lawyers for oil-spill victims had questioned Feinberg’s handling of the $20 billion trust fund, known as the Gulf Coast Claims Facility, or GCCF.
ICE(ICE) May Alter Rules to Curb Cotton Speculation, FT Reports. ICE Futures U.S. may change a rule that will help curb speculation in cotton-futures trading, the Financial Times said. Traders seeking to maintain positions to sell or take physical delivery in excess of the spot-month position limit of 30,000 bales would have to show it was “economically appropriate,” ICE said yesterday in a statement. The number of open contracts for March delivery was about 8.6 million bales with fewer than 200,000 bales certified for delivery, the newspaper said, citing Jordan Lea, the head of Eastern Trading, a cotton merchant, and the president of the American Cotton Shippers Association. Speculators may squeeze merchants, spurring a “massive spike where the market breaks down, where you’re literally unable to liquidate your position,” Lea was cited as saying. Cotton prices have more than doubled in the past year.
Copper Gains to Record, Heading for $10,000 on Demand Recovery. Copper advanced to records in London and New York as manufacturing improved from China to the U.S., boosting the demand outlook for the metal used in construction and electrical applications. Three-month delivery copper added as much as 0.5 percent to $9,993 a metric ton on the London Metal Exchange and traded at $9,970.75 by 11:19 a.m. Tokyo time. Copper for March delivery rose as much as 0.8 percent to $4.58 a pound on the Comex in New York before trading at $4.5535.
Cyclone Yasi Hits Australian Sugar Crops, Price Advances to 30-Year High. Sugar cane plantations in Australia, the world’s third-largest exporter, likely suffered significant damage from Tropical Cyclone Yasi, helping send futures prices to the highest in 30 years. “It has actually gone right through the center of key cane-growing areas,” Steve Greenwood, chief executive officer of Brisbane-based producers group Canegrowers said by phone today. “It’s going to be as bad as we thought, unfortunately.” Yasi, packing winds stronger than those from Hurricane Katrina, crossed overnight into the north Queensland region, which accounts for about a third of Australia’s sugarcane and 85 percent of the nation’s banana output. Canegrowers yesterday estimated losses including damage to crops and farms of at least A$500 million ($505 million). “The region is an important sugar cane producing region and we suspect significant cane damage has occurred,” Luke Mathews, commodity strategist at Commonwealth Bank of Australia, said in a note today.
Republican Governors Seize Court Ruling to Undo Health Law. Republican governors from Florida to Arizona say a recent court decision is grounds to stop implementing President Barack Obama’s health-care law. Florida Governor Rick Scott, a former hospital industry executive, said he’ll wait for further rulings before preparing to carry out the law aimed at creating near-universal health care. The state won’t accept a $1 million grant intended to help it get ready, Florida Insurance Commissioner Kevin McCarty said in a letter to federal officials yesterday. “We are not going to spend a lot of time and money with regard to trying to get ready to implement that until we know exactly what is going to happen,” Scott told reporters after a cabinet meeting in Tallahassee yesterday.
Investors Flee U.S. Municipal-Bond Mutual Funds for 12th Consecutive Week. Investors pulled money from U.S. municipal-bond mutual funds for the 12th consecutive week and added cash to domestic stock funds for the third straight time, the longest streak of deposits since April. Muni-bond funds had net redemptions of $2.7 billion in the week ended Jan. 26, the Investment Company Institute said today in an e-mailed statement from Washington. The withdrawals, triggered by concern that financially strapped cities and states may default, total $33.5 billion over the 12-week stretch. U.S. municipal bonds lost 5.3 percent in the three months ended Jan. 31, according to the Bank of America Merrill Lynch Municipal Master Index.
Wall Street Journal:
Mubarak's Supporters Strike Back. U.S. Pushes for Speedier Regime Change as Rival Camps Clash in Egypt's Streets. Violence erupted in Egypt's capital when supporters of President Hosni Mubarak clashed for the first time with protesters, as the regime dug in against demands, from within the country and from Washington, that a transfer of power begin immediately. The clashes began hours after Mr. Mubarak announced in a speech late Tuesday that he wouldn't run in elections slated for later this year. They gained intensity during the day in central Cairo's Tahrir Square, with the two sides rushing at each other, wielding clubs and throwing Molotov cocktails. Some Mubarak supporters charged protesters on horseback and camelback, a tactic the regime has employed against past demonstrations. Clutches of soldiers looked on, doing little to intervene.
White House Charts a New Plan. Reacting to Violence in Cairo, U.S. Makes First Calls for a Speedily Formed Transitional Government Without Mubarak. The Obama administration, stung by an outbreak of violence in Cairo Wednesday, is now pushing for a speedy transfer of power to a transitional government that would sideline Egyptian President Hosni Mubarak or remove him from power, people familiar with the matter say. An interim government, made up of opposition parties and parts of the current regime, could buy time to rewrite the Egyptian constitution, let opposition parties organize and prepare for elections this year, the people, who are close to the White House, said. Such a move will put Washington on a collision course with Mr. Mubarak, who appears intent on overseeing any transition, and those in the Egyptian opposition who are pushing for much speedier elections.
ElBaradei's Role Cast in Doubt. In the weeks leading up to the extraordinary uprising, a spectrum of opposition figures banded together to plan an alternative vision to the regime of President Hosni Mubarak. Even before last month's popular ouster of Tunisia's president electrified protesters in Egypt and across the Middle East, these people held dozens of meetings lasting more than 100 hours. They created a 100-member "shadow legislature" of union leaders, judges and representatives from youth parties and the country's banned but influential Muslim Brotherhood, say people in attendance. While the speed and scope of the past week's protests in Egypt largely took them by surprise, the opposition figures quickly assembled a game plan.
Hedge Funds Gird to Fight Proposals On Disclosure. Hedge funds are gearing up to take on proposed rules that would force them to turn over more data about their trading positions to the U.S. government. Regulators will be required to keep the information they gather confidential, but some hedge funds are invoking a WikiLeaks scenario, saying they are concerned that too many hands will be on their proprietary data and the government won't be able to protect it.
States Widen Currency-Trade Probes. State prosecutors are getting help from an organized group of whistle-blowers in a widening investigation into whether banks overcharged public pension funds by tens of millions of dollars for foreign-exchange transactions. The whistle-blowers, who are using Delaware shell companies to remain anonymous, are helping with investigations into the issue by attorneys general in California and Virginia, according to court documents and people familiar with the matter.
Key Moment Looms for Euro. As European Leaders Prepare to Release Details of New Strategy, Much Rides on Credibility of Plan. European leaders in Brussels on Friday are expected to confirm the broad outline of a strategy for solving the debt crisis, in a move that is seen as a decisive moment for the euro zone.
CNBC:
TARP Makes Future Bailouts More Likely: Top Official. The financial rescue fund known as TARP has actually increased the likelihood of more bank bailouts in the future, Neil Barofsky, the program’s special inspector general, told CNBC Wednesday. "As long as the market perceives that the government is going to be a backstop...(it will) encourage more and more risk-taking and put us right back where we were in late 2008," said Barofsky.
Did SEC Staffer Surf Porn While Investors Got Burned?A former regional supervisor at the Securities and Exchange Commission missed an alleged $550 million Ponzi scheme that was unfolding at the same time he was caught accessing pornography on his office computer, according to a report obtained by CNBC.
MarketWatch:
China Property Bubble to Pop This Year, Says Analyst. The end may be neigh for China’s inflated property market, according to one analyst who says the nation’s banking system is unlikely to pump out enough credit this year to sustain further gains in real-estate prices. “We think that the bubble will likely burst some time in the next year,” says Forensic Asia Ltd.’s managing director Gillem Tulloch, in Hong Kong. One reason, he says, is China’s state-directed banks will be under pressure to reel back lending in a meaningful way, leaving the economy short of the more than 11 trillion yuan ($1.7 trillion) in credit he says is needed to keep prices rising at rates that make owning more attractive than renting.
Yasi Damage Seen Less Than Feared. Cyclone Yasi slammed into Australia’s North Queensland coast in the dark hours of Thursday morning, battering the state’s coastal communities and its vast agricultural and mining interests, but there were no reports of fatalities or serious injuries, and the region appeared to escape maximum damage.
NY Post:
Health Law Starts to Tumble Down. If the administration and the Senate Democrats had any sense, they'd take Judge Vinson's ruling as a gift, not a setback. Because, whether they know it or not, the judge just handed them an opportunity to get health care right.
How The Crisis in North Africa Could Make the Global Food Situation Even Worse. Surging wheat prices are certainly one (though not the only) cause of rioting upheaval in Tunisia, Egypt, and elsewhere. And guess what. If things get worse, that could feed back into the food problem. That's because this region is a major source of diammonium phosphate, which is a major ingredient for growing... wheat.
What Egyptians Want: Not Western-Style Democracy. Precious few have bothered to ask exactly what it is that ordinary Egyptians are after. They should, because—beyond the general dissatisfaction with the Mubarak regime now visible on the Egyptian “street”—the values and beliefs of the protestors are likely to have a profound influence on the nature of the political order that will eventually emerge there. On that score, it turns out, there’s ample reason for pessimism. As Caroline Glick, one of Israel’s most astute observers of regional affairs, pointed out this week in the Jerusalem Post: “According to a Pew opinion survey of Egyptians from June 2010, 59 percent said they back Islamists. Only 27% said they back modernizers. Half of Egyptians support Hamas. Thirty percent support Hezbollah and 20% support al Qaida. Moreover, 95% of them would welcome Islamic influence over their politics…Eighty two percent of Egyptians support executing adulterers by stoning, 77% support whipping and cutting the hands off thieves. 84% support executing any Muslim who changes his religion.” Egyptian values, in other words, are far from liberal—even if some of the protesters currently out in the streets might be. This, of course, runs counter to the idea that has taken hold in many quarters: that the end of the Mubarak era will inexorably lead to democracy in the heart of the Arab world. But numbers don’t lie; Egyptian society as a whole is both religious and deeply conservative.
marketfolly:
Whitney Tilson Reduces Short Exposure, Refocuses on Buying Cheap Stocks. Whitney Tilson and Glenn Tongue's hedge fund T2 Partners have had some rough sledding the past few months, mainly due to their large short exposure. Over the last five months, they are down 4.3% net while the S&P 500 has rallied 23.5%. As such, they've re-examined their portfolio construction and have concluded to reduce short exposure and get back to basics: buying cheap stocks.
LA Times:
CKE Restaurants is Exploring a Move to Texas from California. The parent of the Carl's Jr. and Hardee's fast-foot chains is in 'very early' talks about moving its headquarters from Carpinteria in Santa Barbara County to the Lone Star State, a company spokeswoman says.
Middle East Situation 'Fragile' - World Bank Chief. The situation in the Middle East is "fragile" with countries like Egypt and Tunisia caught in a dilemma of "partial modernization" in which the political system does not allow the masses to benefit from economic advances, the head of the World Bank said on Wednesday. Interviewed by phone from Berlin as riots raged across Egypt, World Bank President Robert Zoellick said the lender was ready to move quickly to support nations in the region as they press forward with economic and political reforms. "We are in a very fragile situation, not only for Egypt but for a number of countries across the Middle East," he told Reuters.
Visa(V) Profit Rises as it Preps for New Environment. Visa Inc's quarterly profit rose 16 percent, slightly beating expectations, as consumer spending ramped up and the company processed more transactions abroad. But the days of outsize returns on low expenses appear to be ending for Visa, the world's largest credit and debit card processing network. It failed to beat expectations by as much as investors have come to expect, and it has yet to fully assuage investor concerns about how it will cope with new U.S. regulations that may reduce future revenue.Shares fell about 1 percent in after-hours trading, after closing 2 percent higher at $72.09.
Fed's Duke Says Expects Moderate Growth. A top Federal Reserve official suggested on Wednesday she does not think the U.S. central bank will have to extend its $600 billion bond-buying program beyond mid-year, but economic weakness could force the Fed's hand. "If the economy does, as I expect it to, and continues to grow at a moderate pace, then I think things will begin to come together," Fed Governor Elizabeth Duke said in response to a question about extending the bond-buying program after a speech at the University of North Carolina's Kenan-Flagler business school. "If we see further weakness in the economy, then we'll have to decide what seems to be the appropriate action to take at that time," Duke said.
Green Mountain(GMCR) Q1 Beats Street, Sees Strong Q2 Profit. Green Mountain Coffee Roasters Inc posted a better-than-expected quarterly profit, helped by strong holiday sales of its higher-margin coffee refills, and forecast a second-quarter profit above market estimates, sending its shares up 13 percent.
PIMCO's Gross Blasts U.S. Culture of Money and Greed. Billionaire bond maven Bill Gross in a February report says America needs new priorities and blasts a culture that worships money and greed. Gross, in remarks called "Devil's Bargain", blames money managers for failing to allocate capital wisely. He criticizes a culture that lives off ill-advised financial innovation such as securitization. In the comments on the website of Pacific Investment Management Co. Gross even points a finger at himself and says he is a member of this rogue's gallery."I know one thing for sure. This is not God's work -- it has the unmistakable odor of Mammon," says Gross, a founder and co-chief investment officer at PIMCO in Newport Beach, California, where he helps oversee about $1.1 trillion in assets.
SEC at Odds with CFTC on Swap Trade Rules. The Securities and Exchange Commission on Wednesday proposed rules for trading swaps that differ from those being considered by its fellow US market regulator, the Commodity Futures Trading Commission. The rules for “swap execution facilities”, or SEFs, are hugely important in determining the way derivatives markets function in the future and whether entities – such as Wall Street derivatives dealers – capture trading activity.
Evening Recommendations ThinkEquity:
Rated (FCS) Buy, target $21.
Rated (CEVA) Buy, target $30.
Rated (ONNN) Buy, target $13.
Rated (ALTR) Buy, target $45.
Night Trading
Asian equity indices are -.25% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 108.50 +1.5 basis points.
Asia Pacific Sovereign CDS Index 119.25 +.25 basis point.
Preliminary 4Q Non-farm Productivity is estimated to rise +2.0% versus a +2.3% gain in 3Q.
Preliminary 4Q Unit Labor Costs are estimated to rise +.2% versus a -.1% decline in 3Q.
Initial Jobless Claims for last week are estimated to fall to 420K versus 454K the prior week.
Continuing Claims are estimated to fall to 3950K versus 3991K prior.
10:00 am EST
The ISM Non-Manufacturing Composite for January is estimated at 57.1 versus a reading of 57.1 in December.
Factory Orders for December are estimated to fall -.5% versus a +.7% gain in November.
Upcoming Splits
None of note
Other Potential Market Movers
The Fed's Bernanke speaking, Fed's Kocherlakota speaking, ICSC January Chain Store Sales, Raymond James Global Airline Conference, (EK) investor meeting and the (EMR) investor conference could also impact trading today.
BOTTOM LINE: Asian indices are slightly higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
