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Portfolio Manager's Commentary on Investing and Trading in the U.S. Financial Markets

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Sunday, May 31, 2015

Weekly Outlook

Posted by Gary .....at 10:35 PM
Wall St. Week Ahead by Reuters.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on
Fed rate hike worries, global growth fears, European/Emerging Markets debt angst, technical selling, yen strength and earnings concerns. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.
0 comments

Saturday, May 30, 2015

Today's Headlines

Posted by Gary .....at 9:07 PM
Bloomberg:  
  • Greek Talks With Creditors Deepen as Payment Clock Ticks. Greek officials and creditor institutions are locked in talks for another weekend as both sides work against a payment deadline to avert default and a euro-region exit. “The key issue is to resolve the situation so that Greece can remain a member of the euro area,” the European Commission’s vice president, Jyrki Katainen, told Finland’s YLE TV1. “Unfortunately over the past six months things have turned for the worse in Greece, purely for political reasons.”
  • Carter Warns China on Sea Tensions While Urging Conduct Code. U.S. Defense Secretary Ashton Carter called for a diplomatic settlement of rival territorial claims in the South China Sea, saying China and its neighbors should agree on a long-delayed code of conduct for the waters before year’s end. “There is no military solution to the South China Sea disputes,” Carter told a conference of regional defense ministers and military chiefs on Saturday in Singapore. “Right now, at this critical juncture, is the time for renewed diplomacy, focused on finding a lasting solution that protects the rights and interests of all.”  
  • Futures Show Bullish Dollar Bets Rekindled After Eight Week Drop. Futures show that hedge funds and other large speculators are back on board for the dollar rally, after adding to bullish wagers on the U.S. currency for the first time in nine weeks. The difference in the number of bets on a rise in the dollar compared with those on a loss against eight of the greenback’s major peers increased by 48,829 contracts in the week ended May 26, according to Commodity Futures Trading Commission data compiled by Bloomberg. So-called net long positions is 275,021 contracts, down from a record 448,675 in January.
  • Scott Walker Has Early Lead in Iowa Poll as Jeb Bush Faces Challenges. Marco Rubio is a popular second choice, a potential indication of strength if he can convert that support to his own.
  • Republicans Demand Records in New Attack on FSOC Transparency. Republican lawmakers stepped up their criticism of a council of U.S. regulators that rules on which companies pose a potential risk to the financial system and demanded documents showing how those decisions are made. Representative Jeb Hensarling, chairman of the House Financial Services Committee, and the heads of five of the panel’s subcommittees sent a letter dated May 26 to Treasury Secretary Jacob J. Lew complaining of “serious deficiencies” in how the Financial Stability Oversight Council decides which companies are systemically important. Lew is the FSOC’s chairman.
MarketWatch.com:
  • OPEC may condemn the world to an oil glut for years as big meeting looms. 
ZeroHedge:
  • US-Trained Special Forces Chief Joins ISIS, Vows To Bring Jihad To Russia & America.
  • Europe Has A Solution For The Unemployment Problem: Fake Jobs.
  • Robert Shiller: Unlike 1929 This Time Everything - Stocks, Bonds And Housing - Is Overvalued. (graph)
  • The End Of Markets: Central Banks Took Over Everything, Changed Everything. (graph)
  • A Generation Of Rate-Hike Rookies Makes Jeff Gundlach Nervous.
  • 5 Things To Ponder: Is The Stock Market Rational Or Nuts? (graph)
  • Worst Economic Data Day Of 2015 Ends With Some Folks Selling In May. (graph)
  • France's National Front Party Joins UK In Call For EU In/Out Referendum.
  • Something Smells Fishy.
  • Former SEC Officials Demand SEC Chief: Stop Protecting Corporate Cronyism.
  • The Bond Market Is Still Broken, JPMorgan Says.
  • When, Not If. (graph)
  • What Do Falling Corporate Profits Mean With Stocks Near Their Highs? (graph)
Business Insider:
  • There is nothing Japan can do if the yen were to suddenly collapse.
  • China is getting slammed for its 'militarization' of the South China Sea.
  • MORGAN STANLEY: Russia's consumer crisis today is 'much harsher' than it was during the global financial crisis.
  • US Treasury Secretary: Europe is courting disaster with the Greek debt crisis.
  • ISIS' favorite tactic for overrunning cities is brilliant, devastating, and insane.
  • All right folks, it's time I reminded you how frighteningly expensive and risky stocks are ... (graph)
  • ISIS is making the biggest threat to oil prices even worse.
  • Here's how much stock buybacks are boosting earnings per share. (graph)
  • Things are getting ugly in Spain.
Reuters:
  • Russia imposes travel ban on 89 EU politicians. Russia has imposed an entry ban on 89 European politicians and military leaders, according to a list seen by Reuters, a move that has angered Europe and worsened its standoff with the West over Moscow's role in the Ukraine conflict.
Telegraph: 
  • If China's economy stumbles, the world falls. The shape and future direction of the global economy is being determined by China. 
0 comments

Friday, May 29, 2015

Market Week in Review

Posted by Gary .....at 3:57 PM
  • S&P 500 2,110.53 -.92%*
 photo bye_zpsnoertciv.png

The Weekly Wrap by Briefing.com.

*5-Day Change
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Weekly Scoreboard*

Posted by Gary .....at 3:53 PM
Indices
  • S&P 500 2,110.53 -.92%
  • DJIA 18,048.60 -1.29%
  • NASDAQ 5,078.85 -.24%
  • Russell 2000 1,248.06 -.67%
  • S&P 500 High Beta 34.73 -2.0% 
  • Goldman 50 Most Shorted 143.70 +.58% 
  • Wilshire 5000 22,076.60 -.87%
  • Russell 1000 Growth 1,012.18 -1.02%
  • Russell 1000 Value 1,033.94 -.96%
  • S&P 500 Consumer Staples 500.59 -1.24%
  • Solactive US Cyclical 138.74 -1.03%
  • Morgan Stanley Technology 1,049.61 -.42%
  • Transports 8,306.83 -2.74%
  • Utilities 587.02 -.26%
  • Bloomberg European Bank/Financial Services 119.15 -2.05%
  • MSCI Emerging Markets 41.38 -2.68%
  • HFRX Equity Hedge 1,226.34 -.02%
  • HFRX Equity Market Neutral 987.46 -.17%
Sentiment/Internals
  • NYSE Cumulative A/D Line 240,139 -.73%
  • Bloomberg New Highs-Lows Index -98 -151
  • Bloomberg Crude Oil % Bulls 30.77 -23.08%
  • CFTC Oil Net Speculative Position 343,431 +7.25%
  • CFTC Oil Total Open Interest 1,621,198 -6.38%
  • Total Put/Call 1.17 +39.08%
  • OEX Put/Call .81 -84.71%
  • ISE Sentiment 97.0 -27.61%
  • NYSE Arms 1.20 +25.0%
  • Volatility(VIX) 13.90 +16.76%
  • S&P 500 Implied Correlation 61.71 +2.36%
  • G7 Currency Volatility (VXY) 10.10 +3.17%
  • Emerging Markets Currency Volatility (EM-VXY) 9.37 +3.54%
  • Smart Money Flow Index 17,567.84 -.84%
  • ICI Money Mkt Mutual Fund Assets $2.614 Trillion +.18%
  • ICI US Equity Weekly Net New Cash Flow -$5.390 Billion
  • AAII % Bulls 27.0 +7.1%
  • AAII % Bears 25.1 +.6%
Futures Spot Prices
  • CRB Index 223.17 -2.22%
  • Crude Oil 60.18 -.86%
  • Reformulated Gasoline 208.58 +.22%
  • Natural Gas 2.65 -10.93%
  • Heating Oil 195.53 -1.52%
  • Gold 1,191.0 -1.27%
  • Bloomberg Base Metals Index 171.09 -.98%
  • Copper 272.60 -4.33%
  • US No. 1 Heavy Melt Scrap Steel 231.67 USD/Ton unch.
  • China Iron Ore Spot 61.85 USD/Ton +3.15%
  • Lumber 273.40 +1.45%
  • UBS-Bloomberg Agriculture 1,057.26 -3.11%
Economy
  • ECRI Weekly Leading Economic Index Growth Rate 1.4% -10.0 basis points
  • Philly Fed ADS Real-Time Business Conditions Index -.2721 +5.22%
  • S&P 500 Blended Forward 12 Months Mean EPS Estimate 124.69 +.18%
  • Citi US Economic Surprise Index -54.20 +7.9 points
  • Citi Eurozone Economic Surprise Index -11.10 -13.0 points
  • Citi Emerging Markets Economic Surprise Index -13.90 +1.3 points
  • Fed Fund Futures imply 56.0% chance of no change, 44.0% chance of 25 basis point cut on 6/17
  • US Dollar Index 96.90 +.73%
  • Euro/Yen Carry Return Index 142.40 +1.83%
  • Yield Curve 150.0 -9.0 basis points
  • 10-Year US Treasury Yield 2.1% -11.0 basis points
  • Federal Reserve's Balance Sheet $4.426 Trillion -.37%
  • U.S. Sovereign Debt Credit Default Swap 16.67 +1.73%
  • Illinois Municipal Debt Credit Default Swap 229.0 +.91%
  • Western Europe Sovereign Debt Credit Default Swap Index 22.08 +1.85%
  • Asia Pacific Sovereign Debt Credit Default Swap Index 58.31 unch.
  • Emerging Markets Sovereign Debt CDS Index 311.36 +2.13%
  • Israel Sovereign Debt Credit Default Swap 65.21 -.43%
  • Iraq Sovereign Debt Credit Default Swap 651.86 +90.44%
  • Russia Sovereign Debt Credit Default Swap 309.57 +6.78%
  • iBoxx Offshore RMB China Corporates High Yield Index 120.09 +.47%
  • 10-Year TIPS Spread 1.84% -6.0 basis points
  • TED Spread 28.75 +1.5 basis points
  • 2-Year Swap Spread 24.5 -1.75 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -21.5 -.75 basis point
  • N. America Investment Grade Credit Default Swap Index 64.49 +1.09%
  • America Energy Sector High-Yield Credit Default Swap Index 1,117.0 +.73%
  • European Financial Sector Credit Default Swap Index 76.51 +3.81%
  • Emerging Markets Credit Default Swap Index 290.09 +1.40%
  • CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 87.50 unch.
  • M1 Money Supply $2.969 Trillion -.31%
  • Commercial Paper Outstanding 945.20 -2.0%
  • 4-Week Moving Average of Jobless Claims 276,250 -4,750
  • Continuing Claims Unemployment Rate 1.7% +10 basis points
  • Average 30-Year Mortgage Rate 3.87% +3.0 basis points
  • Weekly Mortgage Applications 399.90 -1.62%
  • Bloomberg Consumer Comfort 40.9 -1.5 points
  • Weekly Retail Sales +1.80% -20 basis points
  • Nationwide Gas $2.74/gallon unch.
  • Baltic Dry Index 588.0 -.68%
  • China (Export) Containerized Freight Index 890.42 -.14%
  • Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 40.0 -20.0%
  • Rail Freight Carloads 281,090 +.35%
Best Performing Style
  • Small-Cap Growth -.4%
Worst Performing Style
  • Large-Cap Growth -1.1%
Leading Sectors
  • Semis +3.9%
  • HMOs +2.3%
  • Hospitals +1.7%
  • Networking +1.2%
  • Computer Hardware +.9%
Lagging Sectors
  • Homebuilders -3.1% 
  • Steel -3.3%
  • Gaming -3.6%
  • Oil Service -4.2%
  • Coal -11.2%
Weekly High-Volume Stock Gainers (8)
  • RALY, CBMG, BRCM, AAOI, TWC, TIF, ANF and TMUS
Weekly High-Volume Stock Losers (8)
  • STE, TPUB, PLAY, SERV, CGI, SMTC, WDAY and OTIC
Weekly Charts
ETFs
  • High-Volume Gainers
  • High-Volume Losers
Stocks
  • High-Volume Gainers
  • High-Volume Losers
*5-Day Change
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Stocks Falling into Afternoon on Rising Global Growth Worries, Escalating Eurozone Debt Angst, Fed Rate Hike Fears, Transport/Financial Sector Weakness

Posted by Gary .....at 2:37 PM
Broad Equity Market Tone:
  • Advance/Decline Line: Modestly Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • Volatility(VIX) 13.64 +2.48%
  • Euro/Yen Carry Return Index 142.30 +.40%
  • Emerging Markets Currency Volatility(VXY) 9.37 -.21%
  • S&P 500 Implied Correlation 61.60 +2.67%
  • ISE Sentiment Index 93.0 +24.0%
  • Total Put/Call 1.16 +7.41%
  • NYSE Arms 1.18 +4.70% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 64.0 +.19%
  • America Energy Sector High-Yield CDS Index 1,108.0 +1.71%
  • European Financial Sector CDS Index 76.51 +2.74%
  • Western Europe Sovereign Debt CDS Index 23.37 +5.84%
  • Asia Pacific Sovereign Debt CDS Index 59.63 +2.25%
  • Emerging Market CDS Index 290.30 +.56%
  • iBoxx Offshore RMB China Corporates High Yield Index 120.09 +.11%
  • 2-Year Swap Spread 24.5 +.75 basis point
  • TED Spread 28.75 +1.25 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -21.50 -.5 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .00% unch.
  • Yield Curve 149.0 -2.0 basis points
  • China Import Iron Ore Spot $61.85/Metric Tonne -.77%
  • Citi US Economic Surprise Index -54.20 +2.6 points
  • Citi Eurozone Economic Surprise Index -13.90 -2.1 points
  • Citi Emerging Markets Economic Surprise Index -20.4 -1.6 points
  • 10-Year TIPS Spread 1.83 +2.0 basis points
Overseas Futures:
  • Nikkei 225 Futures: Indicating -132 open in Japan 
  • China A50 Futures: Indicating -124 open in China
  • DAX Futures: Indicating +21 open in Germany
Portfolio: 
  • Higher: On gains in my biotech sector longs, index hedges and emerging markets shorts
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 25% Net Long
0 comments

Today's Headlines

Posted by Gary .....at 2:12 PM
Bloomberg: 
  • Greece Vows to Hold Out Another Week as EU Aims to Wind Up Talks. The Greek government said it can survive another week without defaulting on the International Monetary Fund as European officials warned the window for accessing aid is closing. Greece will be able to scrape together enough cash to make a payment of about 300 million euros ($329 million) due to the IMF on June 5, Economy Minister George Stathakis said in an interview with Real News newspaper published Friday.
  • Greece Creditors at G-7 Say Budget Is Red Line as Payment Looms. The euro area’s largest economies told Greece its efforts to get more aid will come to nothing if the debt-swamped nation doesn’t overhaul its finances. With the clock ticking on the country’s bailout arrangement, European policy makers who gathered in the German city of Dresden for a Group of Seven meeting warned a deal to unlock a further loan disbursement was still not in sight after months of negotiations.
  • Credit Suisse Says Chinese Stocks are Overvalued by More Than 20 Percent. A market out of sync. Has the market departed from fundamentals? We believe so. Our regression model suggests the market is 23% overbought and has 15% potential U.S. dollar downside to year-end 2015 based on Credit Suisse macro forecasts ... Moreover, equity market price momentum has decoupled away from earnings revisions which remain deeply embedded in negative territory.
  • Canada’s GDP Contracts the Most Since 2009. Canada’s economy shrank between January and March, the first contraction in four years and the largest since the 2009 recession as collapsing energy prices prompted a plunge in business investment. Gross domestic product fell at a 0.6 percent annualized pace in the first quarter, Statistics Canada said Friday in Ottawa. The drop exceeded all 22 economist forecasts in a Bloomberg News survey, in which the median call was for an expansion of 0.3 percent. The agency revised its fourth-quarter growth estimate to 2.2 percent, from 2.4 percent previously.
  • Emerging Stocks Drop as Asia Declines Offset U.S. Rate Outlook. Emerging-market stocks slumped for a fifth straight day as Asian shares sank amid volatility in China’s equity market, offsetting economic data that weakened the case for an increase in U.S. interest rates. The MSCI Emerging Markets Index dropped 0.4 percent to 1,005.19 at 11:25 a.m. in New York, bringing its retreat in May to 4.1 percent. Brazil’s real weakened 0.7 percent to a two-month low against the dollar as a Bloomberg gauge tracking 20 developing-nation currencies headed for a monthly decline.
  • Germany and France Lead European Stocks Lower Amid Greek Concern. German and French stocks dragged European shares to their biggest decline in a month amid investor concern Greece won’t reach an agreement with creditors in time for a debt repayment.
    The Stoxx Europe 600 Index tumbled 1.7 percent to 399.87 at the close of trading, trimming its monthly gain to 1 percent. Benchmark gauges of French and German stocks fell at least 2.3 percent as automakers led declines among industry groups. Greece’s ASE Index slid 1.4 percent.
MarketWatch.com:
  • This typical sign of a stock market bubble is misleading.
CNBC:
  • Snapchat in process of raising new money, values company at up to $16B: Sources.
  • US oil drillers pull 13 rigs, biggest drop in 4 weeks. (video)
ZeroHedge:
  • "Welcome To The Contraction": Q1 GDP Drops By 0.7%, Corporate Profits Crash. (graph)
  • Here We Go Again: Latest "Greece Will Make Payment" Headline Sends Stocks Surging. (graph)
  • A Tale Of Two Bubbles: China vs Nasdaq. (graph)
  • U.S. Households Under Pressure: Stagnant Incomes, Rising Basic Expenses. (graph)
  • GDP Report Confirms Global Trade Is Crashing, And Why That Is Good News For Some. (graph)
  • UMich Consumer Sentiment Slumps To 6-Month Lows, Current Conditions Tumble. (graph)
  • Chicago PMI Bounce Is Dead, Crashes Back Near 6 Year Lows. (graph)
  • Is The Oil Glut Real?
  • Greece Slides Back Into Recession As Deposits Hit 11-Year Low. (graph)
  • 3 Things: Oil Trouble. (graph)
  • China Deploys Artillery On "Sand Castles" In South China Sea. (map)
Business Insider: 
  • The latest Clinton cash intrigue involves a Czech model and a 'distasteful' $500,000 donation.
  • Sepp Blatter reelected as FIFA president 2 days after bombshell arrests.
  • Obama is defending Iranian anti-Semitism to spin his nuclear deal. 
  • The amount of trading going on in China's stock markets is mind-boggling. (graph)
  • CONFIRMED: Elite Russian soldiers are fighting in Ukraine right now.
  • China's explosive stock market looks more and more like a bubble — while international cash surges in. (graph)
  • Chinese shares fell more than 11% in under a day.
Financial Times:
  • Foreigners pile into China stocks as red flags loom. Chinese equity funds took in $4.6bn from overseas investors in the past week, according to data from EPFR released on Friday, more than double the previous high set in the second quarter of 2008. At that time, Chinese stocks were in the middle of a long and painful downturn after the popping of the 2007 stock market bubble. China allocations within pan-Asian and global emerging market funds have also risen to a record high, EPFR data show.
Telegraph:
  • IMF warns of Grexit threat as judgment day approaches. Christine Lagarde admits "it's very unlikely that we'll reach a comprehensive solution in the next days", as talks take Athens to the edge of default. 
  • ECB fears 'abrupt reversal' for global assets on Fed tightening. The ECB’s financial stability report describes a 'fragile equilibrium' in world markets, with a host of underlying risks.
Corriere della Sera:
  • Political Will Missing on Greece Deal. Political will "on behalf of all parties" still missing to reach agreement, Greek Deputy Prime Minister Yannis Dragasakis says in interview.
0 comments

Bear Radar

Posted by Gary .....at 1:06 PM
Style Underperformer:
  • Large-Cap Growth -.41%
Sector Underperformers:
  • 1) Coal -1.77% 2) Road & Rail -1.22% 3) I-Banks -.93%
Stocks Falling on Unusual Volume:
  • ULTA, ZPIN, URI, SPLK, PLUS, VEEV, SWFT, DECK, KNX, AAWW, BIG, CP, ATHN, RYAAY, ARCB, GCO, CNW, QADA, WBC, ODFL, ANF, POT, GEF, A, KSU, RAX, CNW and TEX
Stocks With Unusual Put Option Activity:
  • 1) PFE 2) DECK 3) XLNX 4) ULTA 5) CLF
Stocks With Most Negative News Mentions:
  • 1) URI 2) ARG 3) CNW 4) DECK 5) POT
Charts:
  • ETFs Falling on Unusual Volume
  • Stocks Falling on Unusual Volume
0 comments

Bull Radar

Posted by Gary .....at 12:07 PM
Style Outperformer:
  • Large-Cap Value -.51%
Sector Outperformers:
  • 1) Airlines +.38% 2) Semis +.34% 3) Biotech +.17%
Stocks Rising on Unusual Volume:
  • HRTX, KANG, GME, EYES, ALTR, SHAK and FLO
Stocks With Unusual Call Option Activity:
  • 1) HRTX 2) ESI 3) LLY 4) URI 5) SUNE
Stocks With Most Positive News Mentions:
  • 1) CPRT 2) TITN 3) AVGO 4) GME 5) Q
Charts:
  • ETFs Rising on Unusual Volume 
  • Stocks Rising on Unusual Volume
0 comments

Morning Market Internals

Posted by Gary .....at 11:10 AM
NYSE Composite Index:
  • Volume Running 13.0% Below 100-day average
  • 1 Sector Rising, 9 Sectors Declining
  • 24.5% of Issues Advancing, 71.7% Declining
  • 32 New 52-Week Highs, 39 New Lows
  • 53.1% of Issues Above 200-day Moving Average
  • Average 14-Day RSI 42.3
  • Vix 14.3
  • Total Put/Call 1.39
  • TRIN/Arms 1.10
0 comments

Thursday, May 28, 2015

Friday Watch

Posted by Gary .....at 11:48 PM
Evening Headlines 
Bloomberg: 
  • Greece Creditors Say No Deal Near as Frustration Vented at G-7. Greece’s creditors said a deal to unlock rescue aid isn’t imminent as they demanded the debt-ravaged nation make stronger commitments to overhaul its economy and strengthen public finances. The Greek government saw its optimism over an agreement scoffed at as European officials gathered in Germany for a Group of Seven meeting and said much more effort is needed. Greece had claimed a solution could be reached by Sunday. The two sides are “certainly not the three quarters of the way” there, European Economic Commissioner Pierre Moscovici told reporters in Dresden on Thursday where finance ministers and central bankers from the world’s largest economies discussed the global economy. “We need to work day and night.”
  • The U.S. Suddenly Sounds an Alarm on Greece. In the world’s most pressing financial crisis, Greece’s potential default on its debt, the U.S. has adopted a quiet, behind-the-scenes role. That’s changing. Until recently, President Barack Obama and his top financial advisers have made few public statements on Greece’s debt crisis, which threatens to drive the country out of the euro zone. Yet this week U.S. Treasury Secretary Jacob J. Lew voiced frustration over a stalemate in the talks between Greece and its European creditors.
  • China Reforms Head Down Path Littered With Crisis Casualties. “History shows that if China prematurely opens the capital account before properly sequencing in other reforms the results could be disastrous for financial stability and longer-run growth prospects,” said Kevin Gallagher, an associate professor of international relations at Boston University who co-wrote a paper on China’s cross-border capital deregulation. “I worry that they are forgetting the past.”   
  • China's Asset Bubble Is Scary: Sanibel Captiva's Dorsey. (video)
  • Evergrande Stock Sinks After Developer Sells Shares Below Range. Evergrande Real Estate Group Ltd., among China’s most indebted developers, plunged the most in five-and-a-half years after it was forced to cut the price of a share offering in order to successfully raise capital. The company raised HK$4.6 billion ($593 million) net proceeds from a sale of 820 million shares at HK$5.67 each, according to a statement to the Hong Kong stock exchange Friday. The price represents an 18 percent discount to Evergrande’s last close. 
  • Abenomics Heads Toward Debt Meltdown, Reflation Enemies Warn. Two years after unleashing record monetary stimulus, Bank of Japan Governor Haruhiko Kuroda and his allies are confronting increasingly vocal opposition from the opponents of reflation who once dominated the policy debate. Hundreds of economists filed in to a Saturday symposium on BOJ policy at a Japan Society of Monetary Economics semiannual gathering in Tokyo May 16. Backers of Kuroda’s 2 percent inflation target squared off against advocates of monetary restraint, who say the BOJ’s bond purchases are delaying a crucial overhaul of public finances to deal with record debt.
  • Macquarie Sees Ticking Bomb for India as Restructured Loans Fail. India’s state-run banks’ restructured loans are souring at a record pace, threatening their appetite for new lending with profitability already at a seven-year low. Reworked assets that turned bad almost doubled to 570 billion rupees ($8.9 billion) in the year ended March 31, industry data show. There’s another 2.9 trillion rupees in the category, which must be reclassified as delinquent or healthy within two years. Macquarie Group Ltd. has called this debt a ticking time bomb. Standard & Poor’s predicts a record portion will fail in the year ending March 2016 as Fitch Ratings Ltd. sees lenders’ return on equity falling to the least since 2006.
  • Asian Stocks Pare Monthly Loss as Yen Rises; China Extends Drop. Asian stocks rallied, trimming their first monthly drop this year, as the yen rebounded from a 12-year low and oil gained. Chinese shares declined after plunging on record turnover on Thursday. The MSCI Asia Pacific Index climbed for the first time in four days, adding 0.2 percent by 9:49 a.m. in Hong Kong. The Shanghai Composite index dropped 2.4 percent, after a 6.5 percent slump the previous day.
  • Wall Street’s Young Guns Brace for First Big Test. Magdy El Mihdawy remembers exactly where he was when the stock market tanked in 2009. He was on Spring Break in Florida -- as a 22-year-old undergrad. Today, El Mihdawy is part of a Wall Street demographic whose own trial by fire awaits: traders who’ve never known anything but a post-crisis world of rock-bottom interest rates and ever-rising markets.
  • Bullard Warns Delaying Fed Rate Rise Boosts Asset-Bubble Threats. Federal Reserve Bank of St. Louis President James Bullard warned that keeping interest rates near zero risks inflating asset-price bubbles, saying officials should raise borrowing costs this year as the economy improves. A prolonged accommodative stance is a “recipe for asset-price bubbles and a lot of mischief to happen,” Bullard said Thursday in a Bloomberg Radio interview from St. Louis. “Asset price bubbles have been a devastating feature for the U.S. economy in the last 15 years.”
Wall Street Journal:
  • NYSE Looks to Ease Late-Day Pileup. Exchange plans midday auction for thinly traded shares. The New York Stock Exchange is preparing a new plan to make it easier to buy or sell the shares of thousands of listed companies, an effort to counter the slow midday trading and uneven liquidity plaguing U.S. stock markets. Officials at the NYSE, a unit of Intercontinental Exchange Inc., plan to launch a midday auction for thinly traded shares after winning the blessing of the Securities and Exchange Commission last week. Already, the NYSE and its chief rival, the Nasdaq Stock Market, operated by Nasdaq OMX Group Inc.,...
  • Wipeout in Europe Bond Funds Tests Investors’ Resolve. Recent rout in government debt pummels funds’ strong start to the year. A strong start to the year for many of Europe’s biggest bond funds was all but wiped out by an abrupt selloff in the region’s credit market, testing the mettle of investors who rely on the asset class for its steady returns. Europe has been at the center of the global bond-market turmoil that began in mid-April. About €344 billion ($375 billion) was wiped off the value of eurozone-government bonds when prices fell abruptly after rising for several months to record levels, according to...
Fox News:
  • Feds indict ex-House Speaker Hastert for allegedly hiding payments to apparent blackmailer. Federal prosecutors indicted former U.S. House Speaker Dennis Hastert Thursday on charges he allegedly hid payments he made to an apparent blackmailer in order to compensate for and conceal “prior misconduct.” 
  • 'Sales are next to nothing': Merchants worry crime crisis could cast pall over Baltimore downtown. (video) An epidemic of murder that has gripped Baltimore in the month following the Freddie Gray riots is threatening to undo decades of rebirth in the city's popular downtown -- and in the process, wipe away tens of millions of tourist dollars.
Zero Hedge:
  • In Shocking Move, Goldman Slashes America's Long-Run "Potential GDP" From 2.25% To 1.75%.
  • Putting The 'Great' In Great Depression, Stephen Roach Warns On TPP's Currency Rules.
  • States Turn To Pension Ponzi Scheme To Close Funding Gaps.
  • Martin Armstrong Warns "This Time Is Very Different".
  • Dead Markets Drifting As Dollar Drops. (graph)
  • Chinese Housewives Displeased After Biggest Stock Market Drop In 2 Years. (graph)
  • Emergency Powers Give Barack Obama Authority Over Just About Everything During A Major National Crisis.
  • Paul Craig Roberts Rages "Free Financial Markets Are A Hoax".
  • Elizabeth Warren Needs You To Help Her "Blow Debt Free College Wide Open".
  • The Clinton Foundation Paid Sidney Blumenthal $10K/Month As He Gave Horrible Libya Advice To State Dept.
Business Insider:
  • One of Putin's leading critics was just poisoned.
  • Social media apps are tracking your location in shocking detail.
  • Putin just made troop deaths during peacetime a 'state secret' and now people are worried.
  • 3 uber-bearish studies predict doom for this bull market. (graph)
  • GameStop(GME) is surging after earnings beat expectations.
  • 570 hedge funds are members of the $1 billion club.
  • The US is spending $100 million to get more ethanol to gas stations.
  • South Korean industrial production just posted a big miss for April.
NY Post:
  • Intel(INTC) Nears $15B Deal to Purchase Altera(ALTR).
Reuters:
  • Unexpectedly weak household spending casts doubt on BOJ's optimism. Japan's household spending unexpectedly slumped in April and consumer inflation was roughly flat, casting doubt on the central bank's view that a steady economic recovery will help accelerate inflation toward its 2 percent target. Households spent less on leisure, travel and dining out even as real income rose for the first time in 19 months and the jobless rate fell to a 18-year low, underscoring the challenges of eradicating the sticky "deflationary mindset" that has beset Japan for nearly two decades.
  • Google(GOOG) shows off virtual reality collaboration with GoPro(GPRO). Action camera maker GoPro Inc and Google Inc introduced a virtual reality system using 16 cameras and Google software, sending GoPro shares up nearly 7 percent on Thursday.
Financial Times:
  • Greek exit from euro is ‘a potential’, says Lagarde. The head of the International Monetary Fund has acknowledged that Greece could leave the euro, while insisting that this would not mark the end of the single currency.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.25% to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 107.0 +1.0 basis point.
  • Asia Pacific Sovereign CDS Index 58.25 -.25 basis point.
  • S&P 500 futures -.03%.
  • NASDAQ 100 futures -.01%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (BIG)/.59
  • (FRO)/.12
  • (GCO)/.68 
Economic Releases 
8:30 am EST
  • 1Q GDP is estimated to fall -.9% versus a prior estimate of a +.2% gain.
  • 1Q Personal Consumption is estimated to rise +2.0% versus a prior estimate of a +1.9% gain.
  • 1Q GDP Price Index is estimated to fall -.1% versus a prior estimate of a -.1% decline.
  • 1Q Core PCE is estimated to rise +.9% versus a prior estimate of a +.9% gain.
9:00 am EST
  • ISM Milwaukee for May is estimated to rise to 50.0 versus a reading of 48.08 in April.
9:45 am EST
  • Chicago Purchasing Manager for May is estimated to rise to 53.0 versus a reading of 52.3 in April.
10:00 am EST
  • Final Univ. of Mich. Consumer Sentiment for May is estimated to rise to 89.5 versus 88.6 in April.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The UK GDP report, ASCO annual meeting and the (TOT) annual meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
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The positions and strategies discussed on BETWEEN THE HEDGES are offered for entertainment purposes only and are in no way intended to serve as personal investing advice. Readers should not make any investment decision without first conducting their own thorough due diligence. Readers should assume the editor of this blog holds a position in any securities discussed, recommended or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in anyway, considered liable for the investment performance of any securities or strategies discussed.

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