“It is not how right or how wrong you are that matters, but how much money you make when right and how much you do not lose when wrong” — George Soros

1. GDP rate revised to 2.5% — the economy grew at a 2.5% annualized pace in the quarter, revised up from the initial estimate of 2.0%, the government said in its second estimate of quarterly gross domestic product. Growth in gross domestic product was 1.7% during the second quarter.
2. North Korea fires rockets at South Korea — North Korea fired artillery rockets at the South Korean island of Yeonpyeong, killing two soldiers, and wounding 16 soldiers and three civilians.
3. Irish PM to dissolve government — Irish Prime Minister Brian Cowen said he would dissolve the government after the country passes its crucial 2011 budget in early December, paving the way for new elections that will almost certainly see Cowen voted out. The announcement came just a day after Ireland agreed to seek an estimated €80B ($110M) bailout from the EU and IMF, and adds the threat of political instability to the eurozone’s financial crisis.
4. S&P cuts Ireland’s sovereign credit rating — Standard & Poor’s Ratings Services late Tuesday cut its long-term sovereign credit rating on Ireland to A from AA-, and its short-term rating to A-1 from A-1+. The new ratings reflect the agency’s view that the Irish government appears likely to borrow “over and above” the agency’s previous projections to fund further bank capital injections into Ireland’s banking system.
5. Portugal passes budget, denies bailout talk — Portugal’s parliament passed its 2011 budget plan, as expected, adding to controversial austerity measures. The epicenter of Europe’s sovereign-debt crisis shifted from Ireland to the Iberian peninsula on Friday, with European Union, Portuguese and Spanish officials scrambling to head off speculation that Lisbon or Madrid could soon be forced to seek help to meet their borrowing needs.

The week ahead — Economic data from Econoday.com:

1. GM sees high demand in IPO — General Motors (GM) priced its initial public offering at $33 and sold around 478M common shares as well as $4.35B in preferred shares; if underwriters exercise options to cover overallotment, GM’s IPO could reach $18.1B, the second-largest in U.S. history.
2. Irish bail-out talks begin — talks between the Irish government and EU and IMF officials are set to begin today over Ireland’s troubled banks and the possible need for an aid package.
3. Fed orders new stress tests — the Federal Reserve plans to do another round of stress tests on top U.S. banks, and requested the top 19 banks submit capital plans by early next year showing their ability to withstand losses under ‘adverse’ circumstances.
4. China lifts banks’ reserve requirements 0.5% — The People’s Bank of China announced late Friday it will raise the reserve requirement ratio for banks by 0.5%, as the nation steps up efforts to combat inflationary pressures. The move marks the third such liquidity-draining hike since September.
5. Bullish Sentiment Sees Largest Drop in Nearly Two Years — weekly survey of bullish sentiment from the American Association of Individual Investors (AAII) at its lowest point since early September when the S&P 500 was struggling to get over 1,100. This is a drastic change from last week ‘shigh of 57.6% .
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The week ahead — Economic data from Econoday.com:

1. Fed details bond buying schedule — the Federal Reserve announced its tentative Permanent Open Market Operations schedule, consisting of around $105B in government bond purchases over the next month.
2. Moody’s upgrades China — Moody’s upgraded China’s sovereign debt rating this morning to Aa3 from A1 and maintained a positive outlook.
3. Ireland on the brink as budget crunch looms — after promising a 15 billion euro ($20.7 billion) austerity package of spending cuts and tax hikes, Ireland’s government may be facing its last chance to avoid a bailout by persuading markets that the country can repay its debts.
4. Portugal, Ireland, Spain CDS spreads hit records — fears surrounding sovereign-debt problems on the periphery of the euro zone drove the cost of protecting the debt of Ireland, Portugal and Spain to record highs on Thursday, according to data provider Markit. The spread on five-year Portuguese credit-default swaps widened to 505 basis points from around 491 on Wednesday, topping the 500-level for the first time.

Interesting video from a well-respected Fund manager Jeremy Grantham regarding stocks valuation — from CNBC.

The week ahead — Economic data from Econoday.com:

1. Australia’s unexpected rate hike — the Reserve Bank of Australia unexpectedly raised its benchmark interest rate by a quarter percentage point to 4.75%, strengthening its currency toward parity with the U.S. dollar.
2. India also raised its benchmark rates — The Reserve Bank of India raised the repurchase rate by 25 bps to 6.25%, and raised the reverse repurchase rate by a similar margin to 5.25%. It’s India’s sixth rate hike this year as the country tries to pull inflation under control.
3. Mortgage insurer Ambac may declare bankruptcy by the end of the year — the bond insurer decided to skip an interest payment on senior notes due in 2023.
4. Republicans win House, Democrats keep Senate — The Republican Party took control of the House of Representatives in Tuesday’s election, but Democrats narrowly clung to a majority in the Senate.
5. FOMC rolls out QE2 — the Fed launched a second round of quantitative easing via $600B in purchases of longer-term Treasurys by the end of June, at the rate of around $75B/month. Continued POMO reinvestments could total $250B-300B during the same period, and the Fed reserved the right to take more action if growth and inflation don’t pick up.
6. GM files for IPO — General Motors filed its long-awaited IPO, and will offer 365M shares at $26-29 each. The move will cut the Treasury’s stake in the carmaker to 43% from 61%. GM also plans to sell around $3B of preferred shares that would convert to common shares under mandatory provision.
7. New chief for Fannie, Freddie — Spencer Bachus, the Republican expected to take over chairmanship of the House Financial Services Committee, said yesterday that mortgage giants Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) should be in liquidation, not conservatorship.

The week ahead — Economic data from Econoday.com:

“The crowd is most enthusiastic and optimistic when it should be cautious and prudent; and is most fearful when it should be bold.” Humphrey Bancroft Neill

1. U.K. GDP grows twice as fast as expected — Britain’s economy grew twice as fast as economists had expected in Q3, posting 0.8% growth on the back of a sustained recovery in services and construction.
2. Q3 Earnings Season Statistics — courtesy from Bespoke Investment Group, below are charts highlighting the current and historical earnings season “beat rate,” which is the percentage of companies that beat earnings per share estimates. The first chart shows how the beat rate has progressed since the third quarter reporting period started on October 7th. The beat rate moved above 70% last Friday, hit a high of 76.6% yesterday, and dropped to 74.1% after all of this morning’s numbers came out.

The second chart highlights the quarterly earnings beat rate going back to 1999.

3. New 52-Week Highs by Sector — another article from Bespoke Investment Group highlights the new 52-Week Highs broken down by Sector.

4. Foreclosure ‘epidemic’ spreads — the foreclosure crisis is intensifying across a majority of large U.S. metropolitan areas, according to a report by RealtyTrac. Though California, Nevada, Florida and Arizona are still the states hardest-hit by foreclosures, cities like Chicago and Seattle saw a sharp increase in foreclosure warnings this summer. RealtyTrac’s Rick Sharga characterized the trend by saying “the epidemic is spreading from the states at the ground zero of the foreclosure problems out into areas that hadn’t been previously affected.”
5. BoJ holds rate steady — the Bank of Japan held its key overnight call rate unchanged, as expected, and cut its growth outlook. Economic growth for the fiscal year through March 2011 is now expected to come in at +2.1%, down from the +2.6% forecast issued three months ago. The bank also moved its next policy meeting to Nov. 4-5 from a previously scheduled Nov. 15-16, setting up the meeting to immediately follow an expected QE2 announcement from the U.S. Fed on Nov. 3.
6. Bullish Sentiment Hits 2.5 Year High — The latest AAII sentiment survey showed a 2.5 year high in bullish sentiment at 51.6%. This is the highest reading since May 8th, 2008 and just shy of the all-time high in the S&P 500.

The week ahead — Economic data from Econoday.com: