Irish Rescue Plan Turns Focus to Southern Europe: Euro Credit. Ireland’s plan to seek a European rescue risks escalating, rather than alleviating, the sovereign debt crisis as investors turn their focus to the high budget- deficit nations of southern Europe. Ireland’s Nov. 21 decision to request emergency aid from the European Union and the International Monetary Fund did little to reverse the jump in borrowing costs. The extra yield investors demand to hold Spanish and Portuguese 10-year debt rather than German bunds rose yesterday. The spread between Spanish and Italian yields also widened, indicating investors see increasing threats for Spain compared with Italy. Even as EU leaders said Ireland’s bailout will stem contagion in the euro region, investors are turning their attention to Portugal, which hasn’t cut government spending and has barely grown for a decade. A rescue of Portugal may increase pressure on its high budget-deficit neighbor Spain, whose gross domestic product is almost twice the size of Portugal, Greece and Ireland combined. After Portugal “the next question would be Spain and then Italy and then France and then the EU,” said Antonio Garcia Pascual, chief southern European economist at Barclays Capital in London. “Spain is bit too big to be bailed out, the size of a rescue required would use up all the funds available and then you have Italy with contagion as well,” prompting “a situation where the euro itself is put into question.”
U.S. Commercial Property Prices Jump Most on Record. U.S. commercial property prices rose 4.3 percent in September from the previous month, the biggest gain in a decade of records, Moody’s Investors Service said. The Moody’s/REAL Commercial Property Price Index climbed 0.3 percent from a year earlier as a small number of high-priced deals drove up values, Moody’s said in a statement today. The measure had fallen to an eight-year low in August. “Each of the summer months this year recorded declines in the 3 percent to 4 percent range, followed by this month’s sizeable uptick,” Nick Levidy, a Moody’s managing director in New York, said in the statement. “The relatively large swings seen in the index recently are due in part to the uncertain macroeconomic environment and the effects of a thin market with low transaction volumes.”
Medtronic(MDT) to Buy Ardian for $800 Million to Gain Novel Hypertension Device. Medtronic Inc.,the world’s largest heart device maker, said it will acquire Ardian Inc., a closely held company developing a hypertension device that destroys nerves near the kidney, for $800 million. Medtronic, based in Minneapolis, said it will pay $800 million in cash plus milestones based on Ardian’s revenue through 2015. Medtronic already owns 11 percent of the Mountain View, California, device company.
China Inflation May Prove Too Hot for Controls Amid Cash Glut. Standing near his 12-table noodle shop on Beijing’s Yonghegong Avenue, owner Liu Heliang says meat and vegetable prices have climbed 10 percent in a year and staff wages are up 40 percent. “I’m struggling to make ends meet with costs going up like this,” said Liu, a native of Sichuan province who pays his workers as much as 1,800 yuan ($271) a month, or 88 percent more than the Beijing minimum wage, to serve up a staple Chinese meal. “Raising prices is the only way out,” he said, predicting he won’t be able to hold out beyond two months. “They are just not addressing the fundamental problem at all,” said Patrick Chovanec, an associate professor at Beijing’s Tsinghua University. With the expansion of credit and cash in the economy stemming from China’s response to the global crisis, “you’re sitting on a volcano,” said Chovanec.
China's State-Planned Economy is Doomed to Flop: David Pauly. The biggest obstacle to China becoming the world’s No. 1 economy is China. The communist nation’s determination to keep as tight a rein on its economy as it has on its citizens will lead to failure -- just as it has for other countries that embraced central planning schemes. China is reversing its flirtation with a type of quasi- capitalism that allowed entrepreneurs to thrive and propelled the economy forward at an annual rate of about 10 percent. The Chinese now follow the so-called Beijing consensus, a belief that concentrating more control of industry in government hands will avoid the financial debacles caused by free markets. The nation’s state-owned companies are buying up independent businesses in the auto, steel and energy industries. A government-run company even plans its own Internet search business to compete with Baidu Inc., whose shares trade on stock exchanges.
White House Loses Two Top Economic Advisors.Two more of the Obama administration's top economic advisers are departing, at a time when the White House is facing growing opposition to its economic policies on Capitol Hill. White House National Economic Committee Deputy Director Diana Farrell and Treasury Department Assistant Secretary for financial institutions Michael Barr are both planning to leave within weeks, people familiar with the matter said. Both played central roles in the Obama administration's response to the financial crisis, acting as lead architects of the financial regulation overhaul law that President Barack Obama signed into law in July.
Assembly Pushes to Oust Iran President. Iran's parliament revealed it planned to impeach President Mahmoud Ahmadinejad but refrained under orders from the Supreme Leader Ayatollah Ali Khamenei, exposing a deepening division within the Iranian regime. Lawmakers also launched a new petition to bring a debate on the president's impeachment, conservative newspapers reported Monday. The reports of impeachment efforts came as a retort to a powerful body of clerics that urged Mr. Khamenei to curb the parliament's authority and give greater clout to the president. In a report released Sunday and discussed in parliament Monday, four prominent lawmakers laid out the most extensive public criticism of Mr. Ahmadinejad to date.
With New Power, GOP Takes on Consumer Agency. Republican Reps. Spencer Bachus of Alabama, the leading contender to take the reins of the House Financial Services Committee, and Illinois Rep. Judy Biggert, the top Republican on the panel's oversight and investigations subcommittee, sent letters to the inspectors general of both the Treasury Department and the Federal Reserve, directing them to conduct an investigation into the work being done to establish the new bureau. The lawmakers wrote that the agency warrants "rigorous" oversight by the inspectors general because it will play a significant role in credit availability for consumers and small businesses. GOP lawmakers have also sent letters to regulators on the legal bills incurred by former executives of government-controlled mortgage finance giants Fannie Mae and Freddie Mac and the economic impact of the financial-overhaul rules being written by the Securities and Exchange Commission. The letters are the strongest signals yet of how the new House Republican majority plans to use its oversight powers to hobble elements of the Obama agenda.
CNBC:
Velma Hart, Who Questioned Obama's Policies, Loses Job. Velma Hart, who told President Obama she was "exhausted" of defending him and became the face of disappointed Americans this fall, has lost her job. In another casualty of a weak national economy, Ms. Hart learned late last week that she'd been laid off as chief financial officer of AmVets, a non-profit veterans service organization based outside of Washington, D.C.
It's Crazy How Inbred the Hedge Funds in This Huge Insider Trading Scandal Are. Everyone involved in the insider trading scandal that's blowing up the hedge fund world right now seems to have ties to each other - and to Steve Cohen's SAC Capital. Three funds were raided on Monday, and Charlie Gasparino says that up to twelve hedge funds will be named in the huge investigation, so we're anticipating that more will be raided in the days to come. What's happened, it seems, is that the government has discovered a huge "ring" of friends or acquaintances who all know each other. They seem to have found a number of witnesses, one of whom is Nicos Stephanou, who are aware of an advanced networking scheme that the feds suspect amounts to insider trading.
J.Crew(JCG) Nears a Sale to Chairman and Buyout Firms. J. Crew, the trendy clothier of choice for the likes of Michelle Obama, is near a deal to sell itself for about $2.8 billion to the buyout firms TPG Capital and Leonard Green & Partners, people with direct knowledge of the matter told DealBook on Monday. Under the terms of the proposed deal, TPG — a former owner of the retailer — and Leonard Green would work with the company’s chairman and chief executive, Millard S. Drexler, these people said. The buyout firms are expected to pay about $43.75 a share, a 16 percent premium to Monday’s closing price of $37.65.
Rasmussen Reports:
Two-Thirds Favor Cutting Federal Payroll by 10%. Sixty-six percent (66%) of voters nationwide favor a proposal to cut the federal payroll by 10% over the coming decade. A new Rasmussen Reports telephone survey found that just 22% are opposed and 12% are not sure.
Best Buy(BBY) Sees Better Black Friday Sales. U.S. consumer electronics chain Best Buy Co Incanticipates higher sales on "Black Friday," the kick-off to the all-important holiday selling season, a top executive said. The news boosted its shares by about 2 percent. "There is pent-up demand out there," Shari Ballard, executive vice president of Best Buy, told Reuters in an interview on Monday, adding that the retailer is planning for better holiday sales this year versus 2009. "We are actually enormously excited about the holidays," Ballard said, adding: "From a year perspective, it has been a little bit lumpy in terms of customer demand."
BP's(BP) $20 Billion Compensation Fund Should be Enough - FT. A $20 billion fund for the economic victims of the BP Plc Gulf oil spill should be enough to compensate those affected, the Financial Times reported, citing the lawyer administering claims. Fund administrator Kenneth Feinberg, appointed by the Obama administration to handle the compensation, told the newspaper he had paid $2 billion to 125,000 people, but had approved fewer than half of the claims made. "Based on what I've seen so far I'm cautiously optimistic that $20 billion is more than enough," the newspaper quoted Feinberg as saying.
Ireland Set for Nervy Two Weeks Until Budget Vote. Ireland begins two nervous weeks of political manoeuvring on Tuesday as the government dares the opposition to block an austerity budget on which a multi-billion euro EU/IMF bailout is riding. Irish Prime Minister Brian Cowen defied mounting pressure to quit on Monday, saying he would stay in office until parliament passed the budget, then call an early election.
Analog Devices(ADI) Sees Revenue Growth Resuming in Q2. Microchip maker Analog Devices Inc forecast a sequential revenue drop in the first quarter, but expects growth to resume in the second quarter on helped by the industrial segment. "Typically second quarter is very strong for us. Usually the industrial business has its strongest sequential improvement in the second quarter," Chief Financial Officer Dave Zinsner told Reuters. Analogue Devices expects its industrial segment -- the company's biggest unit -- to "grow nicely" in 2011 and beyond, driven by growth in the Asian markets.
Raided Hedge Funds Slammed by Departures, Outflows. The three hedge funds raided by U.S. authorities on Monday have faced investor outflows or seen some high profile staff departures in the past year.
U.S. Truck Tonnage Up .8% in October - ATA. An index that tracks the tonnage hauled by U.S. trucks rose in October, its second gain in two months and a sign of a strengthening economy. The American Trucking Association's advance seasonally adjusted For-Hire Truck Tonnage Index rose 0.8 percent in October, after rising a revised 1.8 percent in September. Year-on-year, tonnage hauled climbed a seasonally adjusted 6 percent, well above the 5.3 percent gain in September. October tonnage levels were the highest in three months, even after seasonal changes were accounted for, according to the ATA. "This is a pleasant surprise. It shows the economy has legs, even if it's not strong yet," said Bob Costello, ATA's chief economist.
China Business News:
Chinese banks still face "severe" risks because of the "difficult" global economic recovery and the "arduous" task of domestic structural adjustments, citing a circular that the China Banking Regulatory Commission issued to its local branches and banks.
Evening Recommendations Susquehanna:
Rated (TGT) Positive, target $67.
Rated (WMT) Positive, target $66.
Night Trading
Asian equity indices are -1.75% to -.50% on average.
Asia Ex-Japan Investment Grade CDS Index 103.50 +1.5 basis points.
Asia Pacific Sovereign CDS Index 99.50 -.75 basis point.
Preliminary 3Q GDP is estimated to rise +2.4% versus a prior estimate of a +2.0% gain.
Preliminary 3Q Personal Consumption is estimated to rise +2.5% versus a prior estimate of a +2.6% gain.
Preliminary 3Q GDP Price Index is estimated to rise +2.3% versus a prior estimate of a +2.3% increase.
Preliminary Core PCE is estimated to rise +.8% versus a prior estimate of a +.8% gain.
10:00 am EST
Existing Home Sales for October are estimated to fall to 4.48M versus 4.53M in September.
2:00 pm EST
Release of Nov.2-3 FOMC minutes.
Upcoming Splits
(MGA) 2-for-1
Other Potential Market Movers
The Treasury's Geithner speaking, $35 Billion 5-Year Treasury Notes Auction, Richmond Fed Manufacturing Index, weekly retail sales reports, weekly ABC consumer confidence report, (JEC) analyst day, (PRE) investor day and the (SLF) investor day could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by real estate 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.
North American Investment Grade CDS Index 91.91 bps +.98%
European Financial Sector CDS Index 131.33 bps +23.90%
Western Europe Sovereign Debt CDS Index 168.33 bps +3.27%
Emerging Market CDS Index 221.18 bps +1.16%
2-Year Swap Spread 18.0 +1 bp
TED Spread 16.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .12% -1 bp
Yield Curve 233.0 -4 bps
China Import Iron Ore Spot $164.40/Metric Tonne +.98%
Citi US Economic Surprise Index +29.70 unch.
10-Year TIPS Spread 2.13% unch.
Overseas Futures:
Nikkei Futures: Indicating -35 open in Japan
DAX Futures: Indicating +16 open in Germany
Portfolio:
Slightly Higher: On gains in my Retail, Biotech and Technology long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades just modestly lower despite China inflation concerns, rising financial sector pessimism and increasing euro sovereign debt angst. On the positive side, Gaming, HMO, Disk Drive and Gold shares are especially strong, rising more than 1.0%. Cyclical and small-cap shares are substantially outperforming. (IYR) is bucking (XLF) weakness. Tech shares have also been relatively strong throughout the day. The 10-year yield is falling -7 bps to 2.8%. On the negative side, Homebuilding, Bank, Road&Rail, I-Banking and Steel shares are under pressure, falling more than 1.0%. (XLF) has substantially underperformed throughout the day. Copper is falling -1.74% and Gold is gaining +.76%. The Greece sovereign cds is jumping +5.69% to 1,039.14 bps, the Portugal sovereign cds is surging +9.68% to 453.97 bps, the Spain sovereign cds is climbing +7.73% to 282.08 bps, the UK sovereign cds is rising +3.81% to 62.52 bps and the Ireland sovereign cds is gaining +3.29% to 522.29 bps. While the huge jump in the euro financial sector cds index is very troubling, it is still only at the upper end of the trading range it has been in since early July. Given the jump in eurozone debt angst, recent equity gains, China inflation fears, insider trading scandals and financial sector Basel III concerns, the broad market remains impressively resilient. Some market-leading growth stocks trade very well. As has been the case for most of the year, those companies that can post relatively strong earnings growth in most economic environments are seeing p/e multiple expansion and continue to hugely outperform the S&P 500. If the market can continue to consolidate recent gains in a healthy fashion during this period of heightened eurozone debt angst, any calming of fears should produce another upside surge in stocks. I expect US stocks to trade mixed-to-higher into the close from current levels on technical buying, short-covering, tech sector optimism, seasonal strength and bargain-hunting.
Irish Aid Bid Prompts Moody's Warning, Threat of Elections. Ireland’s bid for financial aid may trigger a cut in the country’s credit rating, the demise of the government and an exodus of multinational companies. The euro fell and Irish bonds pared their advance after Moody’s Investors Service said a “ multi-notch” downgrade in Ireland’s Aa2 credit rating was “most likely” because the aid would increase the country’s debt burden. The prospect of January elections loomed as the Green Party said it would pull out of Prime Minister Brian Cowen’s coalition. A rescue package that Goldman Sachs Group Inc. estimates may total 95 billion euros ($130 billion) failed to damp speculation that Portugal and Spain would follow Ireland in tapping the fund set up by the European Union and International Monetary Fund after the Greece rescue. “It probably won’t halt contagion,” said Sylvain Broyer, chief euro-region economist at Natixis in Frankfurt. “The sovereign crisis isn’t yet over. Ireland is in the middle of a difficult crisis.”
North Korea Calls U.S. Sanctions Bluff With Latest Nuclear Plant Display. North Korea stunned U.S. scientists on a tour of its latest nuclear plant this month, showcasing technological advances that highlight the failure of sanctions to force Kim Jong Il’s regime back to disarmament talks. "The control room was astonishingly modern," Stanford University professor Siegfried S. Hecker wrote in his Nov. 20 report of the visit eight days earlier to the main reactor site at Yongbyon. "We saw a modern, clean centrifuge plant of more than a thousand centrifuges," he said, a reference to the high- speed spinning devices that enrich uranium. The findings from the tour, conducted on the same day President Barack Obama attended a global summit 300 kilometers (188 miles) away in Seoul, prompted him to send the U.S. envoy on North Korea to Asia to coordinate a response. While the uranium program is “another in a series of provocative moves,” it doesn’t pose a crisis, Stephen Bosworth said today in Seoul. "The U.S. is now at the crossroads of engagement and pressure, and sanctions are clearly not working," said Yang Moo Jin, a professor at the University of North Korean Studies in Seoul. The Obama approach to North Korea "has done nothing but bolster North Korea’s nuclear capabilities," he said.
China October Copper Imports Decline to One-Year Low. Refined copper imports by China, the world’s largest consumer, tumbled to the lowest level in a year, as high international prices and ample domestic supplies cut the demand for overseas shipments. Refined copper imports declined 30 percent to 169,897 metric tons from 241,711 tons in September, according to Bloomberg News calculations based on data from General Administration of Customs. Inbound shipments dropped for the second consecutive month to the lowest since October 2009. Stockpiles at Shanghai Futures Exchange-monitored warehouses expanded for a third week to the highest level in five months last week, adding 11,313 tons to 126,736 tons, according to the bourse.
Netflix(NFLX) Starts Streaming-Only Subscription Plan for $7.99 a Month in U.S. Netflix Inc., the mail-order and online movie-rental service, introduced its first streaming-only subscription plan in the U.S. for customers to watch movies and TV shows online for $7.99 a month. The plan had been tested in the U.S. after a streaming-only option started in Canada two months ago surpassed the company’s expectations, Los Gatos, California-based Netflix said today in a statement. The company is also boosting the price of combination streaming and mail-order DVD plans.
Novell(NOVL) to Be Bought by Attachmate for $2.2 Billion. Novell Inc., the maker of Linux operating-system software, agreed to be bought by Attachmate Corp. for $2.2 billion, ending an 8-month strategic review aimed at reviving a company that had struggled to sustain growth. Novell investors will get $6.10 a share, Attachmate, a software company owned by private-equity firms including Golden Gate Capital Corp., said today in a statement. That’s 9.1 percent more than Novell’s closing price on Nov. 19.
BMW Shortens Christmas Breaks on Surging 5-Series, X1 Demand. Bayerische Motoren Werke AG, the world’s largest maker of luxury autos, will shorten Christmas breaks at its factories because of surging demand for the revamped 5-Series and new X1 compact sport-utility vehicle. “We are producing as much as we can and are happy for every additional shift we can get,” spokesman Michael Rebstock said today by telephone. “Production capacity is the limiting factor at the moment.”
Northern Trust(NTRS) Forecasts Better US Economy. Northern Trust Corp. (NTRS) thinks the U.S. economy is primed to grow more quickly and has shifted client investments toward stocks and high-yield debt.
Sovereign CDS Costs Rise, Ireland's Politics in Focus. The cost of insuring a basket of European sovereign debt using credit default swaps rose Monday, as the prospect of financial aid for Ireland failed to ease concerns about peripheral euro-zone government debt. Shortly after 1300 GMT, the iTraxx SovX Western Europe index, which allows investors to buy or sell default protection on a basket of 15 sovereign borrowers, was 0.08 percentage point wider from Friday’s close, at around 1.71 percentage points, according to index owner Markit.
Business Insider:
FBI Raids Two Connecticut Hedge Funds. The huge insider trading investigation just ensnared the hedge funds Diamondback and Global Level in its vast web, says the Wall Street Journal. What's really interesting is that both funds raided are run by former SAC traders.
FBI Raids a Third Hedge Fund. The huge insider trading investigation just ensnared the hedge funds Diamondback, Global Level -- and now Loch Capital in its vast web, says the Wall Street Journal.
Apple(AAPL) TV is About to Get a Lot Sexier Today. Apple is rolling out a major new software update today for the iPad, iPhone, and iPod touch: iOS 4.2, which brings features like background processing to the iPad. But the new update is also a big boost for Apple TV, the company's living room gadget. This could, in turn, improve Apple TV sales.
Quadrangle Kaput. Quadrangle Group, the media-focused private equity outfit founded by former car czar Steve Rattner, is winding down, The Post has learned. Sources familiar with the firm's plans, which have been in the works since the end of the summer, said Quadrangle will cease to exist in its current form as it tries to reinvent itself under a new name in the coming weeks.
LA Times:
Task Force Wants Jerry Brown to Create Climate Change Panel. A task force of California politicians, business people, academics and environmentalists is calling on incoming Gov. Jerry Brown to appoint a climate risk council within his office to focus statewide attention on adapting to the effects of global warming. In a report to be released Monday, the 23-member California Adaptation Advisory Panel, a group convened by the Los Angeles-based Pacific Council on International Policy calls for stepped-up data-gathering, monitoring and coordination among state agencies and in the private sector to prepare for a steep sea level rise, diminishing water supplies and the spread of wildfire, as studies have predicted.
Mosque Money Shocker. The so-called Ground Zero mosque recently applied for a $5 million federal grant from a fund designed to rebuild lower Manhattan after 9/11, reports The Daily Beast’s John Avlon.
Politico:
View From Middle East: President Obama is A Problem. H and e has managed to forge surprising unanimity on at least one topic: Barack Obama. A visit here finds both IsraelisPalestinians blame him for the current stalemate — just as they blame one another.
Reuters:
Chinese trust companies halted property loans and investment on government orders, citing four people at Ping An Trust, Zhongrong Intl. Trust and China Credit Trust.
Chinese central bank adviser Li Daokui said the nation should raise deposit rates moderately.
Chinese central bank adviser Li Daokui said curbing inflation is the nation's top priority.
DigiTimes:
HP(HPQ) Sees Strong Notebook Shipments in November and December. Hewlett-Packard (HP) is expected to see its notebook shipments surpass four million units in both November and December 2010, up from only three million units in October as consumer demand for the year-end holidays in western countries is stronger than expected and the growth will also benefit HP's Taiwan-based upstream suppliers including Quanta Computer, Foxconn Electronics (Hon Hai Precision Industry) and Inventec. In addition to the year-end holidays, Intel's new Huron River platform is also a driver for the strong shipment growth, with new notebook models to start shipping by the end of November, targeting the Lunar New Year holidays in China, the sources noted.
