Monday, January 07, 2013

Monday Watch

Posted by Gary .....at 12:38 AM

Weekend Headlines 
Bloomberg: 
  • Senate Minority Leader McConnell Says Spending Must Be Cut. Senate Minority Leader Mitch McConnell said now is the time for the U.S. Congress to cut government spending. Speaking in an interview on ABC’s “This Week” program, the Kentucky senator said Congress has finished dealing with taxes. “The tax issue is finished, over, completed,” McConnell said on ABC. “Now the question is what are we going to do about the biggest problem confronting our country and our future and that’s our spending addiction.”
  • Lagarde Says Debt Ceiling, Euro Crisis Threaten Global Growth. Failure to find a solution to the U.S. debt-ceiling debate and matters in Europe will result in a “major world economic crisis,” International Monetary Fund Managing Director Christine Lagarde said. Without a resolution, there will be a crisis “due to the size of the economies of these two and their relationship with other countries in terms of trade and investment,” she told reporters in the Malawian capital, Lilongwe, today. While the U.S. Congress approved a deal to avoid raising taxes on most Americans in the so-called fiscal cliff, policy makers need to agree on raising the $16.4 trillion debt ceiling, which it reached on Dec. 31, according to the Treasury Department. Extraordinary measures the agency is taking will be exhausted as early as mid-February, the Congressional Budget Office said.
  • Plosser Says Fed Must Defend 2% Explicit Target for Inflation. Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank should take the steps necessary to ensure inflation stays near its goal of 2 percent. “It is important that the Fed credibly commit to defending that target either on the upside or the downside,” Plosser said today to a meeting of economists in San Diego. “Right now, it would not be good either for our credibility or for the economy for us to have deflation. For the Fed at this point, we have established a target and we need to defend that target.”
  • China Stock Rally May End Without Reform, Shanghai Alliance Says. China’s new leaders need to push ahead with reform of state-owned companies to extend the biggest monthly gain for Chinese stocks in two years, according to the Shanghai government’s investment arm. The new generation of Communist Party leaders headed by Xi Jinping needs to break the monopoly of government enterprises by introducing more competition and to ease financing for smaller companies to keep economic growth at about 7 percent to 8 percent over the next 10 years, Pang Yang, chief executive officer with the financial-service advisory unit of Shanghai Alliance Investment Ltd., said in an interview at a Bloomberg hedge-fund forum in Shanghai on Jan. 5.
  • Banks Win Watered Down Liquidity Rule to Prevent Lending Squeeze. Global central bank chiefs agreed to water down and delay a planned bank liquidity rule to counter warnings that the proposal would strangle lending and stifle the economic recovery. Lenders will be allowed to use an expanded range of assets including some equities and securitized mortgage debt to meet the so-called liquidity coverage ratio, or LCR, following a deal struck by regulatory chiefs meeting yesterday in Basel, Switzerland. Banks will also have an extra four years to fully comply with the measure.
  • Hedge Funds Squeezed With Shorts Beating S&P 500 by Most in Year. Speculators are abandoning money- losing bets that stocks with the closest links to the U.S. economy will fall as America’s most-hated shares stage the best rally in a year relative to the broader market. The 20 stocks with the highest short sales in the Standard & Poor’s 500 Index (CYC) rose an average of 5.1 percent in December, compared with 0.7 percent for the full gauge, according to data compiled by Bloomberg. The performance gap is the widest since January 2012.
  • Bulls Boost Wagers as Prices Rally for Fourth Week: Commodities. Speculators increased their bullish commodity wagers for the first time since November as signs of accelerating growth in China and the U.S. drove prices higher for a fourth consecutive week. Hedge funds and other money managers raised their net-long positions across 18 U.S. futures and options by 2.4 percent to 691,832 contracts in the week ended Dec. 31, the first gain since Nov. 27, U.S. Commodity Futures Trading Commission data show. Cotton holdings climbed to the highest since September 2011, and those for sugar reached a nine-week high. Gold wagers rose for the first time in three weeks.
Wall Street Journal: 
  • U.S. Tax Bonanza May Be Tapped Out. Windfall (wĭnd'fôl,): an unexpected, unearned, or sudden gain or advantage.
    All the talk about the fiscal cliff and the inadequacy of the last-minute deal to avert it obscures one fact: It probably provided the government with tens of billions of dollars in unexpected tax receipts. The bad news: This bonanza didn't come free. It may have robbed the Treasury Department of significant future revenue. Its daily reports may soon begin to make that clear. 
  • Fiscal Cliff: Live Stream.
  • Bank-Foreclosure Settlement Nears. Federal Reserve's Acquiescence Clears Way for Agreement Valued at $10 Billion. 
  • Defiant Assad Rules Out Talks With Rebels. Syrian President Bashar al-Assad issued a defiant call to war to defend the country against what he called a foreign-inspired rebellion, ruling out talks with rebels and rejecting international peace efforts for a political plan of his own that keeps him in power. The proposal, made Sunday in Mr. Assad's first national address in six months, dims any chance of a quick resolution to the longest, deadliest and most complicated of the Middle East's Arab Spring revolts. After the speech to a cheering audience of supporters in Damascus, international critics repeated calls for Mr. Assad, whose family's four-decade rule of Syria sparked an uprising in 2011, to step down. A U.S. State Department spokeswoman called his proposal for political reforms "another attempt by the regime to cling to power."
  • For Newly Minted M.B.A.s, a Smaller Paycheck Awaits. Like many students, Steve Vonderweidt hoped that a master's degree in business administration would open doors to a new job with a higher paycheck. But now, about eight months after receiving his M.B.A. from the University of Louisville, Mr. Vonderweidt, 36 years old, hasn't been able to find a job in the private sector, and continues to work as an administrator at a social-service agency that helps Louisville residents obtain food stamps, health care and other assistance. He is saddled with about $75,000 in student-loan debt—much of it from graduate school.
  • White House to Go on Offense for Hagel Pick. Aides Say Obama to Stand Firm on Defense Secretary Choice Despite GOP Criticism of Ex-Senator's Stance on Israel, Iraq. 
  • Law-Firm Partners Face Layoffs. 
  • Inconvenient Truths About Al Jazeera. Al Gore's due diligence must have missed the on-air party, with cake, for a deadly terrorist. Al Gore and his co-investors just sold liberal cable channel Current TV to Al Jazeera, the network bankrolled by the emir of Qatar. How much in carbon offsets does Mr. Gore need to balance his estimated $100 million from the sale to an oil sheik? But there's a more serious issue here than hypocrisy. Current's owners could have simply said they sold to the highest bidder, with the emir paying an estimated $500 million for a network with viewership of only 22,000. Instead they glorified Al Jazeera.
  • The Education of John Boehner. Leverage for the next clash: GOP willingness to let the spending sequester take effect. What stunned House Speaker John Boehner more than anything else during his prolonged closed-door budget negotiations with Barack Obama was this revelation: "At one point several weeks ago," Mr. Boehner says, "the president said to me, 'We don't have a spending problem.' "
Fox News:
  • Pelosi says upcoming fiscal deals should include greater tax increase. House Minority Leader Nancy Pelosi said Sunday that recent tax increases are “not enough” to solve the country’s fiscal problems and argued that additional hikes should be included in upcoming deficit-reduction deals. "The president had originally said he wanted $1.6 trillion in revenue," the House’s top Democrat told CBS’ "Face the Nation." "He took it down to $1.2 (trillion) … but that is not enough on the revenue side."
  • Budget watchdogs extend campaign, say recent fiscal deal doesn't cut it. Budget watchdogs are warning that the hard-fought, highly touted fiscal deal doesn’t cut it – literally. Sure, President Obama signed a last-minute deal crafted by the Senate and finally passed by the Republican-controlled House that avoided tax increases for most middle-class earners. But the agreement failed to cut the country’s estimated $16.4 trillion debt or resolve other major fiscal concerns, the watchdog groups argue. “We don’t think it’s time for a standing ovation and slaps on the back,” says the bipartisan group Fix the Debt. Washington lawmakers “haven’t actually solved anything yet. In fact, they punted on the most difficult issues.”
CNBC:  
Zero Hedge:
Business Insider:
New York Times:
Washington Examiner:
  • Feud over Obama health care reforms to intensify in coming months. The spotlight on President Obama's health care overhaul will intensify in coming months as states and businesses gear up for sweeping changes that could determine whether the public embraces the president's signature legislative achievement or decries it as government overreach.
Reuters: 
Passauer Neue Presse:
  • Wolfgang Ischinger, organizer of the Munich Security Conference, says annual investment in defense has been cut by 6% in Europe due to the financial crisis, threatening the continent's safety.
YLE:
  • Half of Finns are ready to stop financial aid to crisis-stricken euro countries even at the risk of a break-up of the single currency, citing a poll. 50% say no to bailouts even at the risk of a euro break-up, 33% say bailouts should continue. 67% of Finns think the worst of the crisis isn't over, 18% say the worst is past.
Il Messaggero:
  • Berlusconi party PDL is close to agreement with Northern League to run jointly at next elections, citing interview with PDL head Angelino Alfano.
corriere.it:
  • Former Italian Prime Minister Silvio Berlusconi ruled out any future collaboration with Prime Minister Mario Monti, saying his image has collapsed.
Weekend Recommendations
Barron's:
  • Bullish commentary on (D), (SO), (DUK), (EMC), (BP), (FCX), (MCP), (WFT), (POT) and (DAL).
  • Bearish commentary on (ASYS), (STP), (TSL), (MBTN), (YGE), (PPO) and (FSLR).
Night Trading
  • Asian indices are -.25% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 100.5 -1.0 basis point.
  • Asia Pacific Sovereign CDS Index 79.25 +.5 basis point.
  • FTSE-100 futures +.10%.
  • S&P 500 futures -.18%.
  • NASDAQ 100 futures -.18%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (TISI)/.60
  • (CMC)/.17
Economic Releases 
  • None of note
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone PPI, JPMorgan Healthcare Conference, CES and the Citi Internet/Media/Telecom Conference 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 lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.

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