“The secret to business is to know something that nobody else knows.” — Aristotle Onassis

1. Fitch warns on U.S. outlook following debt-talks failure — the Congressional supercommittee confirmed it wouldn’t be able to agree to a deal to make $1.2T in budget savings. The announcement prompted Fitch to reiterate its warning that such a failure would probably lead to “a revision of the (U.S.’s) rating Outlook to Negative,” although a downgrade is less likely.
2. Moody’s warns on French rating outlook — Moody’s warned France last Monday that a sustained rise in its debt yields coupled with weakening economic growth could harm its ratings outlook, fuelling concern the euro zone’s second largest economy might lose its coveted AAA status.
3. Lawmakers abandon deficit-cutting effort — according to Reuter, the Supercommittee abandoned their high-profile effort to rein in the country’s ballooning debt in a sign that Washington likely will not be able to resolve a dispute over taxes and spending until 2013.
4. Eurozone debt crisis hits Germany in disastrous bond auction — an auction of German government bonds technically failed, underlining fears that Europe’s long-running sovereign debt crisis now threatens the core of the euro zone.
5. Fitch: French rating at risk if crisis worsens — Fitch Ratings said that France’s triple-A credit rating would be at risk if a further intensification of the euro-zone crisis resulted in a much sharper economic downturn in France and a material increase in the risk of contingent liabilities.
6. Manufacturing contracts in Europe and China — data showed that the eurozone’s manufacturing PMI fell to 46.4 in November from 47.1 in October. Markit said the data suggests that the eurozone is contracting at 0.6% in Q4 2011. “Malaise has spread from the periphery to the core, with Germany stagnating and France contracting by around 0.5%,” Markit said. China’s PMI was just as gloomy, falling to 48 in November from 51 in October.
7. Fed targets large banks with stress-test according to the Fed, new bank stress tests in which lenders will be forced to model a severe eurozone recession – a 6.9% decline in real GDP – and a skying domestic unemployment rate. In addition, the six largest U.S. banks will need to estimate losses “stemming from a hypothetical global market shock,” similar to that of late autumn 2008.
8. S&P warns of Japan Downgrade — Standard & Poor’s said Japanese Prime Minister Yoshihiko Noda’s administration hasn’t made progress in tackling the public debt burden, an indication it may be preparing to lower the nation’s sovereign grade.
9. S&P Downgrades Belgium — S&P cut Belgium’s sovereign rating to AA from AA+, citing broader financial market pressures.

The week ahead — Economic data from Econoday.com:

“If all you have is a hammer, everything looks like a nail.” Bernard Baruch

1. BHP Billiton to spend around $4.5 bln on shale gas in 2012 — BHP Billiton plans to spend around $4.5 billion on developing shale gas in 2012 following two shale gas acquisitions this year.
2. Italian yields head back towards 7 percent — Italian government bond yields climbed back towards 7 percent and even non-German triple-A rated issuers saw premiums over safe-haven Bunds mark new highs as a change of government in Italy failed to ease the euro zone debt crisis.
3. Harrisburg misses deadline for bankruptcy plan — the capital of Pennsylvania will let the state or a federal bankruptcy judge determine how it will get out of $318 million in debt after missing the last deadline on Monday to come up with a solution of its own as reported by Reuter.
4. Spain Under Siege As Euro Debt Crisis Hits New Stage — Spain’s borrowing costs climbed to the highest level in the euro era, even after the European Central Bank bought the country’s bonds according to IBD.
The 10-year yield rose about 10 basis points to 6.44%, rapidly approaching the unsustainable 7% level.
5. Fitch warns on U.S. exposure to eurozone — Fitch warned that the credit worthiness of U.S. banks faces a “serious risk” of worsening if the crisis spreads beyond the five most-troubled nations of Greece, Ireland, Italy, Portugal and Spain.

The week ahead — Economic data from Econoday.com:

“I measure what’s going on, and I adapt to it. I try to get my ego out of the way. The market is smarter than I am so I bend.” Martin Zweig

1. Greek unity government to form following PM’s resignation — while the turmoil in Italy intensifies, Greece is inching towards a resolution of its political problems. The accord increases the likelihood that Parliament will pass the latest bailout-austerity bill, and comes as eurozone finance ministers meet to speed up their work on strengthening the bailout fund in order to enhance its market credibility.
2. Buffett Broadens Portfolio by Investing $23.9B — according to Bloomberg news, Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) invested $23.9 billion in the third-quarter, the most in at least 15 years, as he accelerated stock purchases and broadened the portfolio beyond consumer and financial-company holdings.
Berkshire bought almost $7 billion of equity securities in the three months ended Sept. 30, compared with $3.62 billion in the second quarter and $834 million in the first, the Omaha, Nebraska-based company said Nov. 4 in a filing. Stockholdings labeled “commercial, industrial and other” soared 62 percent in the three months to $17.4 billion on a cost basis, surpassing equity investments in financial and consumer-product firms.
3. Japan’s debt to exceed 1 quadrillion yen — Japan’s national debt is on track to exceed 1 quadrillion yen ($12.8 trillion) by the end of the fiscal year next March, with the debt rising faster than Ministry of Finance forecasts because of spending tied to aid and rebuilding from the devastating earthquake and tsunami earlier this year, according to a report in the Nikkei newspaper. A quadrillion is equivalent to 1,000 trillion.
4. NASDAQ High Yielders — below is the chart of Nasdaq high yielders courtesy from the Bespoke Investment Group.

5. Italian borrowing costs at breaking point — Italian 10-year bond yields shot above the 7 percent level that is widely deemed unsustainable even after Prime Minister Silvio Berlusconi’s promise to resign failed to raise optimism about the country’s ability to deliver on long-promised economic reforms. Scenerios for what happens next for Italy is noted here.
6. Greece names Lucas Papademos new prime minister — Lucas Papademos, a former vice president of the European Central Bank, was named the new prime minister of Greece, following several days of negotiations to form a coalition government, according to a statement by the office of the Greek president.
7. Jefferson files for biggest ever municipal bankruptcy — Jefferson County in Alabama filed for chapter 9 bankruptcy protection in the largest municipal failure in U.S. history. The county owes over $3B in debt for sewer treatment plants, with creditors such as JPMorgan (JPM) facing substantial losses.
8. Jim Grant on the ECB — courtesy of Bloomberg News Network.

The week ahead — Economic data from Econoday.com:

“The main purpose of the stock market is to make fools of as many men as possible.”Bernard Baruch

1. MF Global filed bankruptcy protection — MF Global (MF) filed for bankruptcy protection and sold its assets to discount brokerage firm Interactive Brokers (IBKR) for about $1B in a court-supervised auction, The Wall Street Journal reported.
2. Greece rediscovers democracy, markets sent into chaos — Global markets tumbled after shock announcement that Greece would hold a referendum on the severe austerity measures it would have to take in return for last week’s EU-IMF bailout proposal.
3. Asian manufacturing slow — Asian factory activity in October indicates that the eurozone debt crisis and recessionary trends are sapping global economic growth. China’s official PMI unexpectedly fell to 50.4 from 51.2 in September, while South Korean PMI remained below 50 – and therefore contracted – for a third consecutive month. Taiwan, meanwhile, hit an almost three-year low of 43.7.
4. ECB unexpectedly cuts rates — the European Central Bank cut its key lending rate by a quarter point to 1.25% in the face of deteriorating economic data and persistent market turmoil inspired by Europe’s ongoing debt crisis in the first policy meeting presided over by new ECB President Mario Draghi.
5. G20 may let IMF print money to help solve EU debt crisis — the G20 is considering allowing the IMF to print up to $250B more of its special currency to help resolve the eurozone crisis, The Wall Street Journal reported. However, for the IMF to issue the Special Drawing Rights, which are IOUs that countries can exchange for cash, the EU has to finalize a credible strategy to solve its problems.
6. Country Exposure to Greece Debt — below is the chart from Asha Bangalore, Northern Trust – Daily Economic Commentary, November 3, 2011.

The week ahead — Economic data from Econoday.com:

DUE TO POWER OUTAGES, LAST WEEK ‘S BLOG WAS POSTED LATE. SORRY FOR ANY INCONVENIENCES.

1. White House to ease home refinancing — In an effort to boost the economy, President Obama is set to today announce an overhaul of the underused HARP program to make it easier for underwater homeowners to refinance their mortgages. The changes will include allowing borrowers to obtain cheaper loans regardless of how far their homes have dropped in value, thereby eliminating previous limits.
2. German parliament backs more EFSF firepower — the German Bundestag passed a motion effectively giving Chancellor Angela Merkel permission to work toward a plan to boost the lending power of the 440 billion euro ($613 billion) European Financial Stability Facility. The measure outlined two strategies for levergaing the fund that won’t require additional contributions from member states.
3. Italian government on the brink as EU plan stalls — the Italian government and a broad European plan to save the euro were both at risk, with Premier Silvio Berlusconi locked in a high-stakes battle with coalition partners to muster support for emergency growth measures demanded by the European Union.
4. U.S. economy grows 2.5% in third quarter — U.S. growth accelerated in the third quarter as consumers and businesses ramped up spending, a report that shows the economy remained resilient in the face of strong headwinds. Gross domestic product in the July-through-September period expanded at a 2.5% annual rate. That’s nearly double the 1.3% rate of growth in the second quarter and much faster than the first quarter’s tepid increase of 0.4%.
5. EU agrees debt deal; 50% Greek debt haircut — Europe will also boost rescue fund firepower, recapitalize banks; European leaders announced a deal in which private investors in Greek government debt will take a 50% writedown on the value of their holdings as part of a wide-ranging package of measures designed to stem the euro-zone debt crisis. Additionally, the European Financial Stability Facility will be increased by as much as five-fold or about €1 trillion. At present, the €440-billion fund has between €250 billion and €275 billion available after the bailouts of Greece, Ireland and Portugal.
6. Rail Traffic expand Year-over-Year — according to the weekly rail traffic, rail traffic continues to expand despite persistent fears of a renewed downturn. Chart courtesy from the Pragmatic Group.

7. Portugal enters ‘Grecian vortex’ — according to the UK Telegraph Data released by the European Central Bank show that real M1 deposits in Portugal have fallen at an annualised rate of 21pc over the past six months. The M1 data – cash and current accounts – is watched by experts as a leading indicator for the economy six months to a year ahead. It has been an accurate warning signal for each stage of the crisis since 2007.

The week ahead — Economic data from Econoday.com: