Friday Watch

Evening Headlines 
Bloomberg: 

• Draghi Makes OMT Policy Weapon of Choice as ECB Relegates Rates. Mario Draghi’s bond-buying plan has become the European Central Bank’s weapon of choice to reduce interest rates even before it has been activated. ECB President Draghi yesterday praised the impact of the so-called OMT program in lowering borrowing costs, while playing down the prospect of further ECB rate cuts. “Market confidence has visibly improved on the back of our decisions as regards Outright Monetary Transactions,” he said. The announcement “by itself produced an easing of financial-market conditions.”
• Euro Drops to Two-Month Low After Ministers Delay Aid to Greece. The euro fell to a two-month low versus the dollar after European Union finance ministers said they will delay for “weeks” the decision to give Greece its next round of aid. The single currency declined as European Central Bank President Mario Draghi said economic growth was expected to remain weak. The yen gained against all of its main peers as investors sought safer assets amid concern re-elected U.S. President Barack Obama will struggle to avert the fiscal cliff. South Africa’s rand tumbled as mining output fell the most in five months.
• Obama Victory Leads Wealthy to Make Quick Pre-2013 Moves. The race is on for wealthy Americans to save on taxes before Jan. 1. President Barack Obama’s re-election means his administration will push to let tax cuts enacted during the George W. Bush era expire for high earners, as scheduled, at year-end. Obama wants to increase the top federal income tax rate to 39.6 percent from 35 percent, boost rates on long-term capital gains to as much as 23.8 percent, and shrink exemptions from estate-and-gift taxes. “If you have to put a movie title on what’s going to happen from now until the end of the year it would be: ‘The Fast and the Furious,’” said Jeff Saccacio, a personal financial services partner at New York-based PricewaterhouseCoopers LLP. “The wise, smart people are preparing themselves for a sunset of the Bush tax cuts.” Wealthy investors have about a month and a half to examine their investment gains and losses left over from previous years, as well as to consider ways to move income into 2012 and transfer assets to heirs, Saccacio said. Now is the time to start running the calculations, he said. “Acceleration of investment income is clear,” said Elda Di Re, partner and personal financial services area leader for Ernst & Young LLP in New York. “If anyone was planning on realizing a gain in the next two to three years on either securities or real estate, there’s a considerable amount of money to be saved.” 
• Gold Traders More Bullish After Obama’s Re-Election: Commodities. Gold traders are the most bullish in 11 weeks and investors accumulated record bullion holdings on speculation U.S. policy makers will add to stimulus following President Barack Obama’s re-election. Twenty-five of 33 analysts surveyed by Bloomberg expect prices to rise next week and three were bearish. A further five were neutral, making the proportion of bulls the highest since Aug. 24. Investors boosted assets in gold-backed exchange-traded products to an all-time high of 2,592 metric tons on Nov. 7, valued at $143.1 billion, data compiled by Bloomberg show.
• Palestinians Defy Obama With UN ‘Observer State’ Bid. Palestinians defied newly re-elected U.S. President Barack Obama by pushing ahead with a second statehood bid at the United Nations that will raise their profile at the world body and highlight the stagnation of the Mideast peace process. The Palestinian Authority yesterday circulated a resolution to put the Palestine Liberation Organization on a par with the Holy See, according to a draft that will be put to a vote in the UN’s 193-member General Assembly, where the initiative has enough support to pass and the U.S. lacks veto power. The latest steps by the Palestinians present Obama with his first foreign-policy challenge three days after he won a second term.
• Priceline(PCLN) Buys Kayak for $1.8 Billion Expanding in Travel. Priceline.com Inc. (PCLN), the most valuable online-travel agency, is buying Kayak Software Corp. (KYAK) for $1.8 billion in cash and stock, adding profitable search tools to its reservation services.

Wall Street Journal: 

• Pressure Rises on Fiscal Crisis. White House, Lawmakers Try to Push Ahead Amid New Warnings Over Inaction. The White House and Republican lawmakers faced pressure to reach a solution to the looming budget crisis after a nonpartisan agency detailed Thursday how inaction would push the U.S. economy back into recession next year, and skittish investors continued to drive stocks lower. Economists from the Congressional Budget Office detailed new warnings of an economy speeding toward a so-called fiscal cliff created by a combination of government spending cuts and tax increases set to take effect Jan. 1.
• Heartland Draws Hispanics to Help Revive Small Towns.
• Battle Plan Shifts on Dodd-Frank. Many bankers and investors who supported Mitt Romney hoped the Republican's election would pave the way for a paring back of the 2010 Dodd-Frank financial overhaul. But while President Barack Obama's victory means the law will stand, the finance industry could yet trim some parts of the law because changes now are politically less risky for the administration and Democrats in Congress. "The door is open for modifications that can produce economic growth," said Jaret Seiberg, Washington analyst with Guggenheim Securities.
• China Village Hits Democracy Limits. A Year After Promises to Return Land, Progress Is Slow; Liberalization Hopes Turn to a Party Pushed by Web-Savvy Public.
• California's Liberal Supermajority. Taxpayers are going to get all the government they ever wanted.

MarketWatch.com: 

• Australia central bank cuts growth forecasts. Australia's central bank trimmed its growth forecasts on the back of cooling investment in the nation's mining sector and a softer global outlook. It comes as a number of major mining companies, including BHP Billiton Ltd. (BHP), have shelved expansion plans and shed staff in recent months amid weaker prices for industrial commodities. In a quarterly outlook released Friday, the Reserve Bank of Australia, or RBA, said it now expected growth to average 3.0% in the current fiscal year, compared with an August forecast for growth of between 3.0% and 3.5%.
• Fed policy may be easier than understood: Bullard.
• Groupon(GRPN) punished on third-quarter miss. Shares fall hard as European weakness hurts sales growth.

CNBC: 

• El-Erian: Really Depressing Numbers Out of Greece. The jobless rate for 15- to 24-year-olds is 58% – 58%! And there is reason to believe future employment reports will be even worse. This is a distressingly sad situation.
• Stock Market Gets More Manic as Fiscal Cliff Fears Escalate. Stocks are breaking key technical levels, a possible sign of more selling, as anxiety builds about Washington’s handling of the 'fiscal cliff. 
• Tax Hike ‘Not Going to Happen’: GOP Official. A top congressional Republican on Thursday expressed hope that a budget deal would be reached that gives both parties some of what they want — unless it involves a tax increase. House Chief Deputy Whip Peter Roskam made overtures toward avoiding the so-called “fiscal cliff,” which would trigger automatic federal spending cuts and the expiration of the Bush tax cuts. Although Obama had campaigned on a platform of raising marginal tax rates, Roskim dismissed such talk as “flowery rhetoric that he used to pump up his base.” “I predict he will do it again, simply because the House is not going to pass a tax hike,” he said. “It’s just not going to happen.”
• Disney(DIS) Earnings Meet Expectations, Revenue Misses. Walt Disney reported quarterly earnings on Thursday that matched analysts' expectations, while revenue fell short.
• Why Inflation in China Will Raise Its Head Again. China’s October Inflation numbers came in below expectations, proving to be of little concern to the country’s policymakers at the moment, but economists warn the inflation rate could double by mid-2013 as growth in the world’s second largest economy gains momentum.
• Eurozone Faces Brinkmanship on Greece. Eurozone leaders face a new round of brinkmanship over Greece’s €174bn bailout after international lenders failed to bridge differences on how to reduce Athens’ burgeoning debt levels, pushing the country perilously close to defaulting on a €5bn debt payment due next week.

Zero Hedge: 

• A Snapshot In Charts: You Are Here.

Business Insider: 

• Climate Change Killed Off THE MAYAS.
• Drone Propaganda Site Pops Up Just In Time For Obama's Second Term.
• Facebook(FB) COO Sheryl Sandberg Sells Another $3.75 Million In Stock.

NY Times: 

• Debt Ceiling Complicates a Tax Shift. Come January, should Congress fail to act, the United States will face more than immense tax increases and spending cuts. It will also run out of room to finance its large running deficits.

Forbes:

• Gas Rationing: New Yorkers, Welcome to the Third World. The shortage of gas in New York appears to be affected principally by two dynamics:

Reuters: 

• Exclusive: SEC left computers vulnerable to cyber attacks - sources. Staffers at the U.S. Securities and Exchange Commission failed to encrypt some of their computers containing highly sensitive information from stock exchanges, leaving the data vulnerable to cyber attacks, according to people familiar with the matter. While the computers were unprotected, there was no evidence that hacking or spying on the SEC's computers took place, these people said.
• CME Group(CME) sues to freeze CFTC swap reporting rules. Exchange operator CME Group asked a U.S. court on Thursday to prevent the chief U.S. derivatives regulator from enforcing swap reporting rules passed after the 2008 financial crisis. Thursday's lawsuit, filed in federal court in Washington D.C., is the third industry challenge to the Commodity Futures Trading Commission (CFTC) in its history.
• Wall St gadfly Warren stands good chance of Senate banking seat. The chances are good, but not guaranteed, that Elizabeth Warren will secure a highly coveted seat on the Senate Banking Committee, a move that would dramatically elevate her campaign against Wall Street excess. Senior Senate Democratic aides, speaking on condition of anonymity, said the Massachusetts senator-elect is a logical fit for the committee, even though it is rare for a freshman senator to get such a plum assignment. If she gets the slot, Warren's bully pulpit would be replaced with real power.
• China slaps anti-dumping tariffs on European, Japanese steel tubes. China said it will impose five-year anti-dumping tariffs on high-performance stainless steel tube imports from the European Union and Japan, highlighting commercial tensions between Beijing and major trading partners. The tariff will range from 9.2 percent to 14.4 percent and will become effective on Friday, the Ministry of Commerce said in a statement on its website on Thursday.
• Nvidia(NVDA) eyes lower quarterly revenue, starts dividend. Nvidia forecast revenue below expectations due to a slowdown in tablet-processor shipments and a troubled PC market but shares of the graphics chipmaker rose on the announcement of a quarterly dividend. With PC sales suffering from economic uncertainty and a growing consumer preference for tablets, Nvidia has staked its future on leveraging its graphics expertise to make high-performance processors for mobile devices.

Telegraph: 

• The Greek books are still being cooked. This week saw yet more austerity measures voted by the Greek parliament for yet another bail-out that won’t be repaid.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.50% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 121.0 +2.0 basis points.
• Asia Pacific Sovereign CDS Index 87.25 -.25 basis point.
• FTSE-100 futures -.05%.
• S&P 500 futures +.39%.
• NASDAQ 100 futures +.44%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FSS)/.07
• (FWLT)/.44
• (JCP)/-.01
• (STRA)/.31
• (WCRX)/.77

Economic Releases
8:30 am EST

• The Import Price Index for October is estimated unch. versus a +1.1% gain in September.

9:55 am EST

• Preliminary Univ. of Mich. Consumer Confidence for November is estimated to rise to 83.0 versus 82.6 in October.

10:00 am EST 

• Wholesale Inventories for September are estimated to rise +.4% versus a +.5% gain in August.

Upcoming Splits

• (HBNC) 3-for-2
  

Other Potential Market Movers

• The China retail sales/industrial production/fixed asset investment data and Eurozone CPI could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly mixed. The Portfolio is 25% net long heading into the day.

Stocks Dropping into Final Hour on Election Pessimism, Rising Eurozone Debt Angst, US Fiscal Cliff Worries, Global Growth Fears

 Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
• Volume: Slightly Below Average
• Market Leading Stocks: Underperforming

Equity Investor Angst:

• VIX 18.17 -4.77%
• ISE Sentiment Index 70.0 -4.2%
• Total Put/Call 1.09 -9.92%
• NYSE Arms 1.09 -52.91%

Credit Investor Angst:

• North American Investment Grade CDS Index 103.46 bps +3.23%
• European Financial Sector CDS Index 175.03 bps +.28%
• Western Europe Sovereign Debt CDS Index 112.59 bps +1.27%
• Emerging Market CDS Index 232.55 bps +.45%
• 2-Year Swap Spread 11.5 +1.25 basis points
• TED Spread 22.25 +.5 basis point
• 3-Month EUR/USD Cross-Currency Basis Swap -25.75 -.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .09% unch.
• Yield Curve 136.0 -1 basis point
• China Import Iron Ore Spot $121.40/Metric Tonne -.16%
• Citi US Economic Surprise Index 59.60 +9.1 points
• 10-Year TIPS Spread 2.46 -1 basis point

Overseas Futures:

• Nikkei Futures: Indicating -73 open in Japan
• DAX Futures: Indicating -1 open in Germany

Portfolio:

• Slightly Lower: On losses in my tech and retail sector longs
• Disclosed Trades: Added to my (AAPL) long, covered some of my (IWM)/(QQQ) hedges, then added them back
• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg: 

• Greek Aid Payment Call Won’t Be Made Next Week, EU Official Says. Euro-area finance ministers may not make a decision on unlocking funds for Greece until late November as they await a full report on the country’s compliance with the terms of its bailout, a European Union official said.
  Finance chiefs won’t make the call to release 31.5 billion euros ($40.1 billion) of aid for Greece that has been frozen since June when they meet in Brussels on Nov. 12, the official said today on condition of anonymity because the deliberations are private. Ministers will await a final report from the so-called troika that oversees euro-area bailouts on Greece’s efforts to meet the conditions of its second bailout since 2010 before taking action, the official said. That report isn’t finished yet, the official said, and while a preliminary version may be available for the Nov. 12 meeting, that won’t be enough for ministers to base their decision on.
• Weidmann Shapes ECB Even in Defeat as Spain Resists Rescue. Jens Weidmann might not be as defeated as it seems. While the European Central Bank pushed ahead with its bond- purchase plan over the Bundesbank president’s objections, the conditions attached are giving Spain second thoughts about applying for the program. Economists and central bank officials say those conditions were partly a response to Weidmann’s opposition, showing that even in his apparent isolation on the ECB council, he is still shaping policy. Conditionality “was devised to appease the traditional Bundesbank allies” like the Netherlands, Finland, Belgium and Luxembourg, said former ECB chief economist Juergen Stark. “So Weidmann’s influence may still be working on a more subtle level.”
• ECB Holds Rates as Economy Worsens, Spain Resists Aid Request. The European Central Bank kept interest rates on hold today as the economic outlook worsens and Spain resists asking for a bailout that would open the door to ECB bond purchases. Policy makers meeting in Frankfurt left the benchmark rate at its historic low of 0.75 percent, as predicted by 62 of 63 economists in a Bloomberg News survey. One forecast a cut to 0.5 percent. ECB President Mario Draghi will brief reporters on the decision at 2:30 p.m.
• Greek Unemployment Rate Increases as Recession Deepens. Greece’s jobless rate climbed to more than a quarter of the workforce in August, extending its record high as Prime Minister Antonis Samaras pushed through more austerity measures linked to the country’s bailouts. The rate rose to 25.4 percent from a revised 24.8 percent in July, the Athens-based Hellenic Statistical Authority said in an e-mailed statement today. That’s the highest since the agency began publishing monthly data in 2004. The recession and deepening labor slump have been exacerbated by spending cuts and tax increases imposed to trim a budget deficit that was more than five times the euro-area limit in 2009. Violence flared outside the parliament yesterday after more than 50,000 protesters ringed the building as lawmakers debated an austerity bill, approved in the early hours of this morning, with more measures needed to keep rescue loans from the euro area and the International Monetary Fund flowing.
• European Stocks Drop as Carmakers Slide. European (SXXP) stocks fell, extending yesterday’s biggest decline in two weeks, as a selloff in auto manufacturers overshadowed results from Swiss Re Ltd. and Hermes International (RMS) SCA that beat analysts’ estimates. PSA Peugeot Citroen SA (UG) and Valeo SA (FR) both lost more than 4 percent as analysts downgraded their shares.
• U.S. Jobless Claims Fall as Storm Starts to Affect Data. Fewer Americans than forecast filed claims for unemployment insurance last week as the effects of Hurricane Sandy started to show up.
• Any release of copper stockpiles from bonded warehouses in China due to rising financing costs will probably be limited, Barclays Plc said. Some stockpiles in the warehouses, which are effectively locked up to obtain financing, may be released as exports because the domestic market is weak and borrowers need to raise cash to repay banks, Sijin Cheng, a Barclays analyst, said in a report today. Copper stockpiles in China's bonded warehouses climbed to a record 700,000 metric tons, according to Goldman Sachs Group Inc. Imports of refined metal jumped 17% in September from the month before, customs data show. A rise in bonded inventories may indicate an increase in financing deals in addition to a weaker Chinese market, according to Barclays.
• Goldman Sachs(GS) is "increasingly cautious" about copper in the short term because of the so-called fiscal cliff facing the U.S. "Our economists believe the markets may be required to 'incentivize' a 'fiscal cliff' bargain," Max Layton, an analyst at Goldman in London, said today. Refined copper was in surplus for the past few weeks and copper stockpiles in bonded warehouses in China have risen to a record high of 700,000 metric tons, according to the report. 
• Obama Finds What’s Good for GM Not So Good for Taxpayers. The bailout of General Motors Co. (GM) played an important role in the re-election of President Barack Obama, who stumped on the issue in Midwestern swing states. Now comes the hard part: unloading the government’s stake, probably at a big loss. GM received $51 billion from the U.S. Treasury in 2009. Taxpayers have recouped $24 billion and still own 32 percent of the company. The problem is that GM shares are trading at less than half the price the government said it needs to break even. Selling the shares was politically precarious before the election because that would have locked in a loss -- $14 billion at yesterday’s closing price. Now that the election is over, cutting the stake could be good for GM’s image and its stock.\
• Iran to China Threaten Obama’s Second-Term Promises.

Barron's: 

• Apple(AAPL): Oppenheimer Pounds Table; ‘Legitimate’ Issues Will Pass.

CNBC: 

• Sandy-Torn Northeast Deals With 200,000 New Outages. Utility crews worked to restore power to an additional 200,000 customers in the New York area after a nor'easter blasted the region that's still trying to recover from Super Storm Sandy. 
• Europe’s Paymaster Heading for Recession: Economists. A stream of weak economic figures from Germany is prompting economists to predict that the country is fast approaching a recession — and the vortex of the euro zone’s economic crisis. Figures released on Thursday showed exports in September fell at their fastest pace since December 2011 and on Tuesday, data revealed that manufacturing and services activity shrunk for the sixth consecutive month in October. Industrial production figures released on Wednesday revealed a 1.8 percent fall in September from August, well below expectations of a 0.7 percent decline.
• Europe’s New Austerity: Corporate Cutbacks. Earnings season in the euro zone has been marked with a raft of job cut announcements, demonstrating how the sovereign debt crisis is affecting the private sector and signaling more trouble ahead for the region.
• Two-Tier Global Housing Market Could Lead to Bubble: Goldman. A two-tier housing market amongst developed economies has sprung up as some countries have rebounded faster from the global financial crisis than others, according to new research by Goldman Sachs, which warns the situation could lead to several bubbles.

Zero Hedge: 

• Europe's Scariest Chart Hits Peak Scariness Levels, And Rising. 
• Chart Of The Day: When $0.99 Becomes Unaffordable, We Have A Problem. (graph)
• We Aren't In Kansas Anymore.

Business Insider: 

• China Is Relentlessly Messing With Japan In The East China Sea.

CNN:

• First On CNN:  Iranian Jets Fire on U.S. Drone. Two Iranian Su-25 fighter jets fired on an unarmed U.S. Air Force Predator drone in the Persian Gulf last week, CNN has learned. The incident raises fresh concerns within the Obama administration about Iranian military aggression in crucial Gulf oil shipping lanes. The drone was in international airspace east of Kuwait, U.S. officials said, adding it was engaged in routine maritime surveillance. Although the drone was not hit, the Pentagon is concerned. Two U.S. officials explained the jets were part of Iran's Revolutionary Guard Corps force, which has been more confrontational than regular Iranian military forces. The Obama administration did not disclose the incident, which occurred just days before the presidential election on November 1, but three senior officials confirmed the details to CNN.

Financial Times:

• Eurozone faces brinkmanship on Greece. Eurozone leaders face a new round of brinkmanship over Greece’s €174bn bailout after international lenders failed to bridge differences on how to reduce Athens’ burgeoning debt levels, pushing the country perilously close to defaulting on a €5bn debt payment due next week.

Telegraph: 

• Who will stop the Sado-Monetarists as jobless youth hits 58pc in Greece?
• Merkel warns Britain against European Union exit. Germany's Angela Merkel on Wednesday warned Britain not to turn its back on Europe and urged its Prime Minister David Cameron to work with her to avoid deadlock at European Union budget talks later this month.

Financial Times Deutschland:

• German Economy Ministry notes demand from Germany and from outside is weakening, citing an analysis by the ministry. The ministry sees a weaker economy in the "winter half year." The weaker economy is making itself increasingly felt at the job market, the ministry said.

Handelsblatt:

• The UK Seeks Veto in European Banking Athority. The UK wants veto rights on the European Banking Authority to ensure that the country won't be overruled by the ECB on the EBA's board, citing EU diplomats. 

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.20%

Sector Underperformers:

• 1) Education -3.30% 2) Oil Service -2.81% 3) Gaming -2.53%
  

Stocks Faling on Unusual Volume:

• SMG, AAPL, DO, REXX, SMBL, CRZO, VVUS, PHH, MTZ, EBIX, AWI, PANL, GHDX, CNQR, LGCY, OEH, BWC, ALR, APEI, THR, EBIX, HRZN, NVO, SGEN, PHH, MYRG, FSYS, CXO, GNRC, HAR, DWRE, THC, ROSE, KLIC, RP, FL, HSP, MAKO, WFM, HCA, CLR, KSS, MPW and PRGO

Stocks With Unusual Put Option Activity:

• 1) KORS 2) GT 3) USB 4) CTL 5) SAN
  

Stocks With Most Negative News Mentions:

• 1) DPS 2) PRGO 3) MCD 4) FB 5) CXO
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value -.12%

Sector Outperformers:

• 1) Oil Tankers +2.23% 2) Networking +1.83% 3) Airlines +1.57%
  

Stocks Rising on Unusual Volume:

• QCOM, TTM, AMCX, CTL, SD, PTNR, TVL, OAS, EZCH, SLXP, BLMN, BIOS, RGR, AMCX, SAPE, VHC, NXTM, CONN, RGR, VRSN, CTL, DDS, SWHC and DF

Stocks With Unusual Call Option Activity:

• 1) WLL 2) PANL 3) AEO 4) FLR 5) WFM
  

Stocks With Most Positive News Mentions:

• 1) MSFT 2) ALXN 3) BBY 4) JNPR 5) JPM

Charts:

• ETFs Rising on Unusual Volume 
• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg: 

• ‘Sad and Depressed’ CEOs See No Light at End of Partisan Impasse. Business leaders, who generally didn’t support President Barack Obama’s policies in the past four years or his re-election bid, weren’t in a more-gracious mood after the results were in. Today’s decline in the U.S. stock markets, the biggest since June, didn’t help. Andrew Puzder, chief executive officer of Hardee’s burger chain owner CKE Inc., said he was “sad and depressed” after Republican Mitt Romney’s defeat and expects the economy “to stay bad with the possibility of being horrific.” Aetna Inc. CEO Officer Mark Bertolini said the insurer may freeze hiring or cut jobs if Obama and Republicans don’t avoid next year’s so- called fiscal cliff of tax increases and spending cuts. 
• Big Texas Welcome to Californians.  A slim majority of Californians did something strange on Election Day. They voted to make themselves worse off while boosting the economies of Texas, Arizona, Nevada and other states. They did this by passing Proposition 30, the brainchild of Democratic Governor Jerry Brown. The ballot initiative raises the sales tax from 7.25 percent to 7.5 percent and imposes higher income-tax rates on many Californians. The top marginal tax rate goes from the current 10.3 percent to 13.3 percent, one of the highest in the nation. The higher income taxes will lapse in seven years -- but are retroactive to Jan. 1, 2012! In Proposition 30, Brown entreated Californians to join him in a soak-the-rich scheme, sold as a panacea for the state’s financially stressed school systems. However, Proposition 30 will hit almost all Californians. Both rich and poor families will pay higher sales taxes.
• Americans Forget Disaster of Big Government 1970s. Do Americans suddenly like tax increases and bigger government? Or did they simply forget what happens when you raise taxes and make government larger? These are questions to ask as we analyze the yesterday’s election results to discern the fiscal consequences.
• Samaras Wins Greek Austerity Bill in Race to Secure Aid. Greek Prime Minister Antonis Samaras mustered the support of enough lawmakers to secure approval of austerity measures needed to unlock bailout funds, after more than 50,000 protesters ringed Parliament. The bill on pension, wage and benefit cuts was approved with 153 votes in favor in the 300-seat Parliament early today, according to acting Parliament speaker Athanasios Nakos. A total of 128 voted against the bill, with 18 voting “present.” One lawmaker was absent. The voting was televised on state-run Vouli TV. The vote took its toll on Samaras’s government, with Samaras expelling one lawmaker from his New Democracy party for failing to support the bill. Samaras’s main coalition partner, Pasok, which provides Samaras with the majority he needs to rule, expelled six lawmakers after the vote for their failure to support the legislation.
• Spain Said to Consider Palace Sales to Raise Cash. The Spanish government is considering a sale of a small, century-old palace in the heart of Madrid’s business district as part of a plan to raise cash from 100 prime properties, a person with knowledge of the matter said. Castellana 19, built in 1903 and later used to house Spain’s stock-market regulator, would be sold outright rather than leased, said the person, who asked not to be identified because the plan’s details aren’t public. The property was valued at 28.7 million euros ($37 million) in 2010, the year before the agency moved out. The government said last month it had selected 100 buildings that could be privatized by the end of 2016.
• Asian Equities Slide, Yen Advances as U.S. Fiscal Cliff Looms. Asian stocks slid the most in six weeks and the yen advanced as President Barack Obama’s re- election set up a budget showdown to avert the so-called fiscal cliff. New Zealand’s dollar declined after the nation’s unemployment rate unexpectedly surged. The MSCI Asia Pacific Index (MXAP) dropped 1 percent as of 12:27 p.m. in Tokyo.
• Japan Machinery Orders Fall More Than Forecast on Exports. Japan’s machinery orders fell more than expected in September as slowing global demand hurts exports, while the nation’s current account surplus narrowed to its lowest level for the month since at least 1985. Orders, an indicator of capital spending in three to six months, declined 4.3 percent from the previous month, the Cabinet Office said today in Tokyo. The median of 29 estimates in a Bloomberg News survey was for a 2.1 percent drop.
• China’s Economic Growth at Stake as Communist Party Meets. China’s Communist Party kicked off a congress in Beijing to choose its fifth generation of leaders since taking power in 1949, a decision that will shape the nation’s economic and financial policies for the next decade. At the opening ceremony of the congress, President Hu Jintao walked onto the stage in China’s Great Hall of the People with his predecessor, Jiang Zemin, 86, who served as general secretary from 1989 through 2002. Hu spoke of the progress China’s economy had made under his tenure. He said China must further overhaul the economy and reduce income gaps. The backgrounds of the successful candidates to fill the top Politburo Standing Committee -- likely all men -- will give investors clues to their appetite for policy shifts that the World Bank says China must embrace to become a high-income economy.
• N.Z. Jobless Rate Surges to 13-Year High, Currency Plunges. New Zealand’s unemployment rate unexpectedly rose last quarter to a 13-year high, adding to evidence of a faltering recovery and sending the best-performing Group of 10 currency this year plunging. The jobless rate jumped to 7.3 percent from 6.8 percent in the second quarter, Statistics New Zealand said in a report today in Wellington. That’s the highest since the first quarter of 1999 and was more than the 6.7 percent median estimate in a Bloomberg survey of economists.
• Gold Rises as Investors Increase ETP Holdings to All-Time High. Gold gained as investors boosted holdings in exchange-traded products to a record and as a drop from the highest price in two weeks encouraged buying. Spot gold advanced as much as 0.2 percent to $1,720.50 an ounce and traded at $1,719.53 at 10:21 a.m. in Singapore. A fourth day of gains would be the longest since August. The metal reached $1,731.82 yesterday, the most expensive since Oct. 23. Holdings in ETPs backed by bullion rose the most in a month to 2,591.995 metric tons, data compiled by Bloomberg show.

Wall Street Journal: 

• What County-by-County Results Tell Us About the Election. (map)
• 7 Exit Poll Voter Trends. (video) 
• What Obama's Victory Means for Business. 
• House GOP Set to Keep Hammering Obama's Energy Plans. The loudest critics of President Barack Obama's energy policies were re-elected to Congress on Tuesday, teeing up two more years of battles over signature Republican issues such as U.S. oil production and environmental regulation. 
• The President's Cliff Walk. Boehner offers a fiscal olive branch to the White House. So much for the post-election honeymoon. The financial markets took a header Wednesday on (take your pick) the return of European troubles, the risk of a Beltway breakdown over the looming tax cliff, or the greater prospect of a major tax increase arriving in 2013. The most important question now is how a re-elected President Obama is going to deal with this economic policy mess. Specifically, is he going to consider his re-election to be a mandate to repeat his first-term record of rejecting all GOP ideas and insisting on his priorities?

CNBC: 

• Traders Fear a Nasty Season For Stocks.
• Wintry Storm Brings New Woe to Hard-Hit US Northeast.

Zero Hedge: 

• In September Uncle Sam Continued To Hand Out Car And Student Loans Like A Drunken Sailor. (graph) 
• On Long-Term Fiscal Probity? Or Another 'Quick Fix'...
• US Credit Euphoria Suggests More Caution Ahead. (graph)

Business Insider: 

• Get Ready For The Government To Eat Billions In Loan Modifications. Democrats want to go back to the good old days when Fannie and Freddie were tools of both the Congress and the Administration. The Dems want the D.C. mortgage agencies to write off all underwater loans. The goal is to socialize the losses that borrowers are faced with.
• Here's What We Know About The Man Everyone Thinks Will Soon Control China's Economy. 
• Legalizing Marijuana Is A 'Conflict That's Going To be Huge' In The Workplace. 
• If You Think Elizabeth Warren Is Going To Act Like A Junior Senator, Think Again.

NY Times:

• Obama Victory Fails to Thrill European Business. European citizens and political leaders welcomed President Barack Obama’s re-election Wednesday. European money was less enthusiastic. Many business executives and investors in Europe, like their counterparts in the United States, would have welcomed a president who was one of their own. They had more faith in Mitt Romney to steer the U.S. economy, by far the biggest market for European exports. “The business community was clearly in favor of Romney, that’s no secret,” said Fred B. Irwin, president of the American Chamber of Commerce in Germany. “The business community felt that the Obama administration ignored them.”

Reuters: 

• U.S. panel urges wariness as Chinese investment grows. China's fast-growing direct investment in the United States has created jobs and helped some firms and localities, but the security and economic risks posed by the large Chinese state role made such investment a "potential Trojan horse," a congressional advisory panel said in a study on Wednesday.
• China submarines soon to carry nukes, draft US report says. China appears to be within two years of deploying submarine-launched nuclear weapons, adding a new leg to its nuclear arsenal that should lead to arms-reduction talks, a draft report by a congressionally mandated U.S. commission says. China in the meantime remains "the most threatening" power in cyberspace and presents the largest challenge to U.S. supply chain integrity, the U.S.-China Economic and Security Review Commission said in a draft of its 2012 report to the U.S. Congress. China is alone among the original nuclear weapons states to be expanding its nuclear forces, the report said.
• Big real estate investors say Sandy hurts lower Manhattan values. Lower Manhattan office building values are likely to suffer as a result of damage inflicted by Superstorm Sandy that has left thousands of downtown Manhattan workers unable to return to their offices, major real estate executives said at a conference on Wednesday. "I think there's been value erosion downtown," Howard Lutnick, chairman and CEO of Cantor Fitzgerald LP and BGC Partners Inc, said during the New York University Schack Institute of Real Estate Capital Markets in Real Estate conference. "It had just started to come back. The concept now of fear of flooding is going to affect values."
• Qualcomm(QCOM) revenue beats Street, shares rise. Qualcomm Inc posted quarterly earnings and revenue that blew past Wall Street expectations and sent its shares up 8 percent as demand increased for chips used in devices such as the Apple Inc iPhone and it overcame a supply shortage. 
• Monster Bev.(MNST) profit misses, again rejects safety claims. Monster Beverage Corp, facing investigations into the safety of its energy drinks, reported a smaller-than-expected quarterly profit as it stepped up promotional spending. Shares in Monster, which again rejected the safety concerns as "baseless," slid 12 percent in after-hours trading even as the company reported rising sales.
• Spain faces long-term debt demand test. Spain will test appetite for its longer-term debt on Thursday for the first time in a year and a half, and decent demand could give it some leeway to delay a request for a European bailout as its borrowing needs for the year would be met. 
• Whole Foods(WFM) sees sales hit from Sandy, shares down. Whole Foods Market Inc, the largest U.S. natural and organic grocery chain, on Wednesday reported a profit rise in line with forecasts but said Superstorm Sandy has dragged sales this quarter, which sent its shares down 2 percent after hours.

Passauer Neue Presse:

• Peter Bofinger, member of the economic panel advising German Chancellor Angela Merkel, says Europe's debt crisis is worsening, citing an interview. The crash that happened in Greece may follow in Spain, he said. The actions of the ECB don't change the fundamental problems, Bofinger said. A fundamental problem in all countries is that the business cycle is heading into recession.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.50% to -1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 119.0 +6.0 basis points.
• Asia Pacific Sovereign CDS Index 87.50 +.5 basis point.
• FTSE-100 futures +.49%.
• S&P 500 futures +.34%.
• NASDAQ 100 futures +.38%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DDS)/.71
• (FCN)/.60
• (AAP)/1.21
• (SMG)/-.57
• (WEN)/.05
• (MWW)/.05
• (VMC)/.15
• (DUK)/1.44
• (KSS)/.88
• (DIS)/.68
• (NVDA)/.36
• (PSA)/1.68
• (ENR)/1.55
• (IGT)/.32
• (JWN)/.72
• (MCHP)/.48
• (CECO)/-.45

Economic Releases
8:30 am EST

• The Trade Deficit for September is estimated to widen to -$45.0B versus -$44.2B in August.
• The Initial Jobless Claims are estimated to rise to 365K versus 363K the prior week.
• Continuing Claims are estimated to fall to 3257K versus 3263K prior.  

Upcoming Splits

• (HMST) 2-for-1
  

Other Potential Market Movers

• The Fed's Bullard speaking, Spanish bond auction, BoE rate decision, ECB rate decision, Draghi press conference, China inflation data, 30Y T-Bond auction, weekly Bloomberg Consumer Comfort Index, (K) analyst day, (MMM) investor meeting and the (LRCX) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by financial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.