Friday, October 28, 2011

Friday Watch

Evening Headlines

  • Sarkozy Sees More Budget Cuts to Save France's AAA Rating as Growth Slows. President Nicolas Sarkozy plans up to 8 billion euros ($11 billion) in additional budget cuts to protect France’s AAA credit rating, after he said growth next year will slow to about 1 percent. Speaking for more than an hour on national television late yesterday, Sarkozy said the French economy will expand less than the 1.75 percent his government forecast in August. To compensate for less tax revenue, he’ll announce budget cuts of between 6 billion euros and 8 billion euros within 10 days, he said. He’s also considering some tax increases. Sarkozy pledged to trim the budget deficit as investors pressure France to improve its finances in the face of stalling growth after a two-year long European sovereign debt crisis. The move also comes about six months before Sarkozy faces presidential elections in France. “We will have to revise and adapt our budget plan to the new reality in the next 10 days,” Sarkozy said. “It’s because of this debt crisis that we find ourselves in a situation of having to defend France’s triple-A.” France’s Aaa credit rating is under pressure from deterioration in debt metrics and the potential for additional liabilities from the Europe’s debt crisis, Moody’s Investors Service said Oct. 17. France is among euro-region sovereigns likely to be downgraded in a stressed economic scenario, Standard & Poor’s said four days later. Sarkozy said France needs to align itself as closely as possible with Germany, Europe’s largest economy. “We have to stop looking at fiscal questions in a national way, we have to look at them in relation to Germany,” he said. “We need to reflect on convergence and competitiveness,” he said, adding that corporate and sales taxes should be harmonized across the two countries.
  • Europe Pact Only Buys Time: Rogoff. European leaders’ agreement to expand a bailout fund to stem the region’s debt crisis only buys time as the problem worsens, Harvard University economist Kenneth Rogoff said. “They don’t have any idea what the end game is here,” Rogoff said as a compensated speaker at the Bloomberg FX11 Summit in New York today. “It’s pretty darn clear the euro does not work.” European leaders bolstered their crisis-fighting toolbox by boosting the heft of their rescue fund to 1 trillion euros ($1.4 trillion) and persuading bondholders to take 50 percent losses on Greek debt. Measures also included a recapitalization of European banks and a potentially bigger role for the International Monetary Fund in strengthening the bailout fund. Still to be worked out in negotiations, which may fall prey to fresh bouts of political infighting and investor revolt, is just how the firepower of the 440 billion-euro rescue facility will be leveraged and what banks will get in return for accepting the Greek haircut. As next week’s Group of 20 summit looms, nations from Greece to Italy remain under pressure to restore fiscal order and the onus is on a Mario Draghi-run European Central Bank to keep buying bonds. One goal of the agreement is to lower Greece’s debt as a percentage of gross domestic product to 120 percent. Nations historically have run into trouble when public debt exceeds 90 percent of GDP, according to Rogoff.
  • EU Crisis Deal Buys Time for Greece: Papandreou. Prime Minister George Papandreou urged Greeks to support his efforts to revamp the economy after euro-area leaders hammered out a new bailout package for the country and imposed deeper losses on bondholders. “The crisis gives us the opportunity and this agreement gives us time,” Papandreou said on television late yesterday after he and fellow government chiefs forced investors to accept 50 percent writedowns on Greek debt. “We negotiated and managed to erase a very important part of our debt. Tens of billions of euros have been lifted from the backs of the Greek people.” European Union leaders boosted their rescue fund’s capacity to 1 trillion euros ($1.4 trillion) and carved out the second aid package for Greece at a crisis-fighting summit in Brussels lasting into the early hours of yesterday. The 17-nation currency and stocks climbed while bond spreads narrowed on optimism Europe might contain turmoil threatening its economy. “If Greece had declared bankruptcy, it would have been a process that would have escalated,” French President Nicolas Sarkozy said on French television late yesterday. “Greece can save itself, but it has to make efforts.” The reworked deal on Greece will cut the debt ratio to 120 percent of gross domestic product by 2020 from a forecast of about 170 percent for next year. The 130 billion euros in public funding plus the 50 percent writedown on Greek debt follows a fully taxpayer-funded package of 110 billion euros in May 2010. Papandreou needs support from his voters to push through measures including job cuts to turn around an economy that is set to shrink 5.5 percent this year.
  • China's Economic Hard-Landing Has Begun, Jim Chanos Says. (video) China's fundamentals have just started to deteriorate, hedge fund manager Jim Chanos says in a Bloomberg TV interview. China is on “a bigger and faster treadmill” than ever as a slowdown in the property market has already started, said Jim Chanos, president and founder of $6 billion hedge fund Kynikos Associates Ltd. Property transactions in Chinese first- and second-tier cities he tracks are down 30-40%. He does not believe hard cash will to to Europe from China and that Europe hasn't really solved its problems.
  • Copper Traders See Rally Ending as China Use Slows: Commodities. Copper traders and analysts are forecasting an end to the biggest weekly rally since at least 1986 on concern demand will slow in China while Europe’s lingering financial crisis limits growth. Eleven of 23 people surveyed by Bloomberg say copper will drop next week, eight predicted a gain, and four said prices will be little changed. The last time respondents were mostly bearish, on Sept. 23, the metal slumped 4.6 percent in the following week. Traders also predicted lower sugar prices next week, and gains in gold, corn and soybeans. While copper surged 14 percent this week as European leaders agreed to expand the region’s bailout fund, the metal is down 20 percent from a record on Feb. 15, the common definition of a bear market. Global output exceeded demand in the eight months through August, the World Bureau of Metal Statistics said on Oct. 19. Goldman Sachs Group Inc. and UBS AG cut their copper forecasts for 2012 this month, and economists surveyed by Bloomberg predict slower growth next year in Europe and China, the world’s largest metal user. “We’re probably heading into a recession in the euro- region, and there are hard landing risks in China,” Michael Lewis, the head of commodities research at Deutsche Bank AG in London, said yesterday by telephone. Purchasing by Chinese manufacturers “won’t be as powerful now because prices have come back up,” Lewis said.
  • Corzine Copying Goldman(GS) at MF Sends Stock Down as Bet Fails. Jon Corzine, who won the top job at Goldman Sachs Group Inc. by leading the firm’s fixed-income unit, now says he’s responsible for trading decisions that have almost wiped out the stock-market value of his futures brokerage. Since Corzine became chairman and chief executive officer of New York-based MF Global Holdings Ltd. (MF) in March 2010, he’s increased the firm’s risk and used its own money to trade, including investments in European sovereign debt that have tumbled in value. This week, the firm reported its biggest quarterly loss ever, Moody’s Investors Service cut its rating to one level above junk, shares plummeted 61 percent and 6.25 percent bonds issued in August fell into distressed levels. “On a personal note, our positions and the judgment about risk-mediation steps are my personal responsibility and a prime focus of my attention,” the 64-year-old former New Jersey Democratic governor and U.S. senator said Oct. 25 on an earnings conference call with analysts.
  • Regulators Must Rein In Banks Gaming Capital Rules, FSB Says. Regulators must find ways to rein in banks that seek to shift risks off their balance sheets and minimize the amount of capital they need to hold, the Financial Stability Board said yesterday. A report from the FSB, which brings together regulators and finance ministries from the Group of 20 nations, said that “bank-sponsored shadow banking entities” may create “an opportunity for regulatory arbitrage.” The Basel Committee on Banking Supervision, a separate policymaking group of global regulators, will report to the FSB with recommendations by July. “The key aim is to enhance transparency and to limit the support banks provide to shadow banking entities that are not under appropriate prudential measures,” the FSB said in its report. The shadow-banking system had liabilities of about $16 trillion in the first quarter of 2010 and has contributed to real estate asset-price bubbles, according to a report by the Federal Reserve Bank of New York last year. FSB Chairman Mario Draghi said in April that the board would enlarge “the regulatory perimeter” to include the “most important segments” of shadow banks. The board also recommended setting tougher global limits on how much banks can invest in the shadow-banking system, which includes mortgage insurance companies, money market funds and some credit hedge funds.
  • Ousted First Solar(FSLR) CEO's $30 Million Pay Tops Chevron's(CVX) Chief. Rob Gillette, who stepped down as chief executive officer of First Solar Inc. this week after boosting panel manufacturing capacity during a slump, may be eligible for an $8.9 million severance package and collected $29.9 million for his initial 15 months on the job. The world's biggest maker of thin-film solar panels rewarded Gillette while its shares fell 60 percent from the day he started in October 2009 through Oct. 24, the day before he resigned. Compensation for Gillette, 50, is at least 19 percent more than Chevron Corp. CEO John Watson earned over the same period, when the U.S. energy company's shares gained 54 percent. Gillette's pay, described in regulatory filings for 2009 and 2010, also show a $5 million signing bonus to lure him from Honeywell International Inc. First Solar received $3.07 billion in loan guarantees from the U.S. government to support projects using its technology, which is a rival to silicon-based cells made by Chinese companies led by Suntech Power Holdings Co. “Gillette's compensation was unusually front-loaded, so when it came time to throw him out he had them on the hook for a lot of money,” Graef Crystal, a compensation expert and Bloomberg News consultant based in Las Vegas, said in an interview. “This wasn't pay for performance, it was pay for future performance.”
  • Occupy Wall Street Clashes Show Risks to Democrats in Embracing Protesters. Clashes between members of the Occupy Wall Street movement in Atlanta and Oakland with police followed by dozens of arrests underscore the hazards for Democrats in embracing the burgeoning movement.
  • Thailand Faces 'Double Whammy' From Floods. Thailand may be compelled to cut interest rates as the worst floods in half a century that have begun overwhelming the capital combine with slowing export growth to serve a “double whammy” on the economy. The floods may wipe as much as 3 percentage points off gross domestic product growth this year, said Credit Agricole CIB strategist Frances Cheung, while Moody’s Investors Service estimates damage from the disaster may be more than 200 billion baht ($6.5 billion), or equivalent to 2 percent of GDP. The expected hit to growth exceeds recent estimates by the central bank, scheduled to release updated growth forecasts today.
  • Warren Buffett Visits Suburban Chicago to Boost Obama Campaign. Warren Buffett attended a Chicago- area fundraiser tonight to benefit President Barack Obama’s re- election, the second time this year the billionaire investor has lent his appeal to help collect campaign cash for the man who has named a tax-increase proposal after him. The event in Obama’s political base and north of his hometown follows a Sept. 30 gathering in New York City that Buffett also attended. Tonight’s event was held at a private home in Winnetka, Illinois. The home, on the Lake Michigan shoreline, is owned by Byron Trott, the managing partner and chief investment officer at BDT Capital Partners in Chicago. Trott, a former managing director at Goldman Sachs Group Inc., has a longstanding business relationship with Buffett. Admission was $35,800 per person, the maximum allowed under federal fundraising rules. Buffett, 81, the chairman and chief executive officer of Berkshire Hathaway Inc., is a longtime Obama supporter. He hosted an August 2007 fundraiser in Omaha, Nebraska, for Obama and has served as an informal economic adviser.
Wall Street Journal:
  • Cheers and Skepticism Greet European Deal. Europe's new strategy to tame its debt woes invigorated global financial markets despite lingering questions over how the plan will work and whether it will be enough to end the two-year-old crisis.
  • There's a 30% Chance of Another Global Downturn - Bridgewater Founder Dalio. There is a high probability of another global downturn featuring low growth, says a hedge fund manager who is worried about the stalemates being created in the current political environment in the U.S. "There's a 30% chance of a downturn," said Ray Dalio, founder and co-chief investment officer of hedge fund Bridgewater Associates, speaking at the Buttonwood Gathering organized by the Economist in New York. "We are close to a zero growth situation in the US and Europe," he said, noting the U.S. will likely see only 2% growth for the next few quarters. His bearish view extends to China, which he said is "in a fragile situation." The situation in Europe can only be solved by the transfer of wealth or by printing more money, he said. Within 18 months, the European Central Bank may have to resort to printing more money as the European sovereign debt crisis rages on. Among the factors "puzzling" him, Dalio said are the structural low growth environment without private wealth creation and the political situation where there are multiple stalemates. Also, banks are leveraged "15:1" which means they carry a lot of risk, Dalio said. "I'm concerned they will have to be recapitalized." Answering a question about whether he is investing in gold, Dalio skirted the question, saying "I believe that every investor should have a strategic allocation mix." He then added he makes "tactical deviations and a lot of uncorrelated bets."
  • Dollar's Plunge Hurts Hedge Funds Holding Bullish Bets. Many hedge funds managed to exit their bets on the dollar before its tumble Thursday. But an unfortunate few didn't make it out in time. The dollar plunged 2% against the euro to $1.419 Thursday afternoon in New York - its biggest one-day percentage drop since July 2010 - and saw even steeper losses against the Australian dollar and other currencies.
  • Default Insurance Market Takes Hit. A vast market in which banks, hedge funds and investors trade insurance against debt defaults got a jolt Thursday, sparking worries of new strains in the global financial system. Under the broad deal reached this week to stem the euro-zone's financial crisis, holders of credit-default swaps on Greek government bonds aren't expected to receive any payout, even though a preliminary agreement between financial institutions and European policy makers would recognize just half the face value of some Greek debt. The decision not to trigger the swaps raises questions about the value of the insurance-like contracts and exposes the limitations of the hedging strategies that banks and investors have come to rely on. The swaps are widely used by bondholders and major banks to defuse a wide range of risks, and by traders to bet on market trends. If the swaps don't pay out when bonds default, banks and funds that bought the insurance may face losses they thought they had hedged. Global markets applauded the euro-zone deal, with stock and bond prices rallying. But some market observers warn that Thursday's decision could prompt investors to back away from trading swaps on other European countries, potentially reducing demand for government bonds and further constraining credit. "You need the real money guys, the banks, to view [credit-default swaps] as a viable contract for CDS to be a real market," said Adam Fisher, chief investment officer at hedge fund Commonwealth Opportunity Master Fund Ltd., and a trader of sovereign credit-default swaps. The deal reached Thursday, he said, could "kill off the market." The failure of the swaps to pay out could push some investors out of the market for European government debt, some investors said. "If you owned a sovereign bond and you got scared because you bought CDS thinking it would pay out, you'll realize you would have been better off just selling your bond—and you'll just get rid of everything," said Ashish Shah, co-head of credit at AllianceBernstein. The cost of default insurance on Greece tumbled Thursday but remains high, showing the country is still far from resolving its debt woes even with the latest deal. Analysts say Greece could still end up defaulting on its obligations or forcing all bondholders to take losses, an outcome that could trigger swap payouts.
  • Greek CDS Triggers: Still Armed and Dangerous. Think the all-clear has been sounded on a Greece default? Not so fast, says Barclays Capital. They warn that that credit default swaps on Greece could still be triggered despite the so-called “voluntary” exchange. They note that there’s a key unknown about how much “voluntary” participation is being counted on by European officials to make the deal work. And even if they reach that unknown number, there’s still the little matter of whether Greece will be able to pay its remaining debts… Here’s what they have to say:
  • California Proposes to Curtail Workers' Benefits. California Gov. Jerry Brown on Thursday unveiled what would be one of the nation's widest-reaching pension overhauls, a proposal that would raise the retirement age and shift more investing responsibilities to public workers. The 12-point plan includes meshing a 401(k)-style component into newly hired workers' retirement plans, raising the age at which some future employees retire to 67 from 55 now and boosting pension contributions for current workers. Labor groups immediately expressed disapproval. "We're disappointed that the governor is proposing pension changes that will undermine retirement security for public employees," said Dave Low, chairman of Californians for Retirement Security.
  • 4 Reasons Keynesians Keep Getting It Wrong.
  • Everyone Bails Out Everyone. European deal has something for everyone, except the real problem.
Business Insider:
Zero Hedge:
  • Buffett, Champion of Bailout, Is Also Leading Beneficiary. (April 5th, 2009) Billionaire investor Warren Buffett has been lauded for his plainspoken denunciation of the greed and foolishness behind the economic crisis. He's pushed the massive federal bailout of imploding banks as the essential response to an "economic Pearl Harbor." When Buffett speaks, people in high places listen. He's so highly regarded that in a fall debate, both presidential candidates said they'd consider him for Treasury secretary. A Sacramento Bee examination of regulatory records has found that his extensive holdings in financial firms have made Buffett, the world's second-wealthiest person behind Microsoft Chairman Bill Gates, one of the top beneficiaries of the banking bailout. Buffett's company, Berkshire Hathaway, hasn't received any of that federal aid, but Berkshire, based in Omaha, Neb., owns stock valued at more than $13 billion in the top recipients of TARP funds, including Goldman Sachs Group, US Bancorp, American Express and Bank of America, which analysts all thought were in deep trouble before TARP was approved in October. That total, The Bee found, ranks Berkshire fifth among all investors in TARP-assisted companies. Berkshire's TARP holdings constitute 30 percent of its publicly disclosed stock portfolio, and that proportion reflects at least twice as much dependence on bailed-out banks as any other large investor. Berkshire, for instance, is the largest shareholder in San Francisco-based Wells Fargo, which got $25 billion — 91 percent of the TARP funds invested in institutions headquartered in California. Buffett increased his bank holdings in September, while he was arguing in the media that Congress should approve the bailout to prevent the collapse of the global financial system. "People can draw their own conclusions" about Buffett's stake in the bailout, said Richard Coppes, an expert in business ethics at the international law firm Jones Day, and a former general counsel of the California Public Employees' Retirement System. "But it shows one reason Buffett is so intensely interested in TARP." Some say that large shareholders such as Buffett have been the primary, and perhaps only significant beneficiaries of TARP. Critics, however, worry that TARP propped up Wall Street against bankruptcy at the expense of taxpayers. The Treasury Department expected TARP to get loans flowing again, but the market has barely thawed, and unemployment has surged. When told of The Bee's findings, Robert Kuttner, the author of a recent best-seller on the economic crisis, said they reveal a bailout program designed out of public view, and one that "reeks of favoritism and special treatment." "TARP was designed that way," Kuttner said, "to concentrate power with almost no effective oversight. That, to me, is the scandal." "The Obama administration said it would offer transparency and openness. But the single most important thing they are doing is being done largely behind closed doors, and the design is by, for and in the interest of large banks, hedge funds and private equity companies," he said. "Because there are no explicit criteria, it's very hard to know if a Citigroup or a Goldman got special treatment." The Bee's findings follow a recent controversy over some Buffett holdings that may have contributed to the economic crisis. Berkshire owns more than 20 percent of Moody's, a top credit rating agency, making it by far the largest stakeholder. Moody's has been faulted for enabling the global crisis by overvaluing mortgage assets. Although Buffett has been outspoken about the need for government intervention in the crisis caused by the mortgage meltdown, he's said nothing publicly about the role of a company in which his firm is a minority holder. Buffett also has decried "credit default swaps" — which are similar to insurance policies, in which mortgage bonds and other financial instruments are insured against default — as "financial weapons of mass destruction." He criticized the profligate use of these unregulated financial tools, or derivatives, widely blamed as a root of the credit collapse. Yet Berkshire has issued tens of billions of dollars in derivatives. Simon Johnson, a professor at MIT's Sloan School of Management and the former chief economist for the International Monetary Fund, said that despite the banking collapse, financial leaders such as Buffett have retained surprising control over the government. "There's this general presumption that Wall Street knows best. But they may not know best for the taxpayer," Johnson said. "We've gotten into the habit of deferring to them a little too much — including Warren Buffett."
Kaiser Health News:
  • State Medicaid Spending Skyrockets. (graph) The end of federal stimulus spending is going to mean nothing but pain for state Medicaid programs in fiscal 2012. State Medicaid spending is projected to grow by an average of 29 percent in the budget year that began July 1, the biggest increase in the history of the federal-state health insurance program for the poor and disabled, according to a report released Thursday. The recession drove up Medicaid enrollment sharply, but the federal government stepped in with extra funds beyond its usual share to help states cover the costs. Now, states are scrambling to make up for the end of billions of dollars in federal stimulus funding that helped sustain the program from March 2009 through June 2011.
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 19% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-two percent (42%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -23 (see trends).
  • Exclusive: U.S. Considers Unusual Arms Deal for Turkey. The Obama administration is consulting Congress on an unusual proposal to transfer U.S. Marine Corps attack helicopters to Turkey, U.S. officials said on Thursday, as Ankara tries to exact revenge for a major attack by Kurdish separatists. Turkey, a NATO ally, has been seeking AH-1 SuperCobra helicopters to replace those lost in its long struggle against separatist rebels from the Kurdistan Workers' Party, or PKK. Under the administration's plan, the Marines would get two new, late-model Textron Inc Bell AH-1Z SuperCobras in exchange for the three AH-1W aircraft that would be transferred to Ankara from current inventory, a congressional official said. The officials declined to be identified because of the matter's sensitivity and because they were not authorized to speak on the record. The idea to take weapons from the U.S. arsenal was rare, they said. Turkey last week launched air and ground assaults on Kurdish militants in northern Iraq, vowing to exact "great revenge" after 24 Turkish troops were killed on October 19 in one of the deadliest Kurdish attacks in years.
  • Iron Ore-Spot Stretches Losses as Cargoes Flood Market. Iron ore price offers fell further on Thursday as slow Chinese demand and hefty spot supplies extended the losing streak of the steelmaking raw material whose value has fallen by more than 30 percent since September. Sellers of Australian, Brazilian and Indian ore to top importer China cut prices by $5-$8 a tonne from Wednesday, said Chinese consultancy Umetal, as miners, many of whom continue to produce at full capacity, tried to clear shipments that have piled up. "Miners are flooding the market with cargoes and that's putting a lot of pressure on the spot market and rates are coming off," said a Singapore-based iron ore trader.
  • Japan September Industrial Output Falls More Than Expected. Japanese factory output fell more than expected in September in a sign the economy's recovery from a devastating March earthquake is tailing off in the face of a global economic slowdown, the strong yen and Europe's debt woes. Industrial output fell 4.0 percent, nearly twice as much as a median market forecast for a 2.1 percent decline, and followed a 0.6 percent rise in August, data showed on Friday.

  • Daiwa Securities will cut about 20% of its workforce in Europe. The company has 800 employees in Europe.
People's Daily:
  • The Blackstone Group LP doesn't have much interest in China's real estate at present, citing CEO Stephen Schwarzman. High property prices are not conducive to investing in China's real estate market, he said. Schwarzman sees investment opportunities after China's economy slows.
China Securities Journal:
  • Speculative "hot money" flowing into China totaled $155.6 billion in the first half of the year, compared with a peak of $300 billion for all of 2008, citing SWS Research Co. Continued pressure on inflows remains, according to the report.
Shanghai Securities News:
  • China Signals Expansion of Property Tax Trial. The government may gradually impose property taxes nationwide after expanding the trial to cities beyond Shanghai and Chongqing, citing Centaline Property analyst Zhang Dawei. The Chinese government will accelerate the imposition of property taxes and make them a tool for regulating the housing market, assistant finance minister Wang Baoan told congress yesterday.
Evening Recommendations
Citigroup Global Markets:
  • Reiterated Buy on (CPO), target $76.
Night Trading
  • Asian equity indices are +.50% to +1.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 168.50 -27.5 basis points.
  • Asia Pacific Sovereign CDS Index 147.25 -5.75 basis points.
  • FTSE-100 futures +.42%.
  • S&P 500 futures -.28%.
  • NASDAQ 100 futures -.10%.
Morning Preview Links

Earnings of Note
  • (AXL)/.42
  • (ACI)/.14
  • (B)/.38
  • (BIIB)/1.52
  • (BWA)/1.04
  • (CVX)/3.42
  • (CI)/1.23
  • (CMC)/.19
  • (CEG)/.81
  • (D)/.94
  • (GT)/.27
  • (HMSY)/.17
  • (ITT)/1.17
  • (LEA)/1.22
  • (MRK)/.91
  • (WHR)/2.61
  • (WY)/.11
  • (SUP)/.34
  • (COL)/1.13
  • (NWL)/.43
Economic Releases
8:30 am EST
  • The 3Q Employment Cost Index is estimated to rise +.6% versus a +.7% gain in 2Q.
  • Personal Income for September is estimated to rise +.3% versus a -.1% decline in August.
  • Personal Spending for September is estimated to rise +.6% versus a +.2% gain in August.
  • PCE Core for September is estimated to rise +.1% versus a +.1% gain in August.
9:55 am EST
  • Final Univ. of Mich. Consumer Confidence for October is estimated to rise to 58.0 versus a prior estimate of 57.5.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Italian Bond Auction could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by financial and real estate shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

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