“If you do not know who you are, the stock market is an expensive to find out.” — George Goodman

1. Germany dampens ECB bond-buying speculation — Germany’s Bundesbank stepped up its opposition to the European Central Bank’s plan to buy more government bonds, warning that any move to share “solvency risks” across the euro zone should be decided by governments and not the ECB. The speculation has sent Spanish yields plummeting.
2. BHP shelves $20B copper expansion as China slowdown — in one of the biggest signs of how China’s falling growth has stalled the global mining boom, BHP Billiton (BHP) is abandoning a $20B expansion of its Olympic Dam copper project in Australia and will look at a “less capital intensive option” instead reported by Reuters.
3. Greece stalls on making tough cuts — as reported by the BBC, Greece’s Prime Minister, Antonis Samaras, is preparing for the first of a series of meetings in which he will ask the country’s lenders for more time to implement spending cuts and reforms. At issue is whether Greece has done enough to receive its next instalment of loans worth 31.5bn euros ($39.3bn; £24.7bn) that it needs to avoid defaulting on its vast public debts, and possibly even leaving the euro.
4. Fed minutes show active discussion of QE3 — Members of the Federal Reserve got closer to decide on a new round of bond purchases even as a less-aggressive step of altering language on a low-rate pledge seems to be in the works, according to the latest FOMC meeting minutes.
5. Chinese factory activity contracts at faster pace in August — the August preliminary HSBC PMI for China fell to a nine-month low of 47.8 from 49.3 in July. New orders and new export orders contracted at a faster rate than in July, while inventories rose at a speedier pace.
6. S&P500 Performance YTD vs. Net New Highs — stocks with smaller market caps have lagged in this rally and being led by megacaps (like AAPL). Chart courtesy of the Bespoke Investment Group.

The week ahead — Economic data from Econoday.com:

“I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.” — Warren Buffett

1. Eurozone risks double-dip recession looms as euro economy contracts — Eurozone GDP fell a quarterly 0.2% in Q2, which was in line with forecasts but was down from unchanged in Q1. Germany’s GDP growth slowed to 0.3% from 0.5%, with the meager growth helped by exports and private and public consumption.
2. Housing Building Permits Rebound — below is the chart depictings a rebound in housing.
3. Second quarter earnings beat rate slow — chart courtesy of the Bespoke Investment Group showing percent of companies beating revenue estimates from 2000 to present.

4. Peregrine CEO Russell Wasendorf Indicted on 31 Counts — per Bloomberg, Russell R. Wasendorf Sr., chief executive officer of the collapsed commodity firm Peregrine Financial Group Inc., was indicted by a federal grand jury on 31 counts of making false statements to regulators. Wasendorf, who allegedly stole as much as $215M from customers over a 20-year period, was arrested in early July after attempting suicide and is facing up to 155 years in prison and a $7.8M fine.
5. Government proposes restricted drilling for Alaska — Interior Secretary Ken Salazar proposed opening 12M acres of Alaska’s National Petroleum Reserve for oil and natural-gas drilling but restricting production on the remaining 11M acres due to conservation reasons. The area for drilling is thought to contain 550M barrels of economically recoverable oil and 8.7T cubic feet of natural gas.
6. Buffett’s Berkshire exits Intel, buys more banks — based on the latest disclosure, Berkshire sold 7.7M Intel (INTC) shares just nine months after buying into the chipmaker. Berkshire also significantly reduced its holdings in Johnson & Johnson (JNJ), Kraft (KFT) and Procter & Gamble (PG), while buying into Phillips 66 (PSX) and National Oilwell Varco (NOV).
7. China Bad Loans Rise for Third Quarter as Economy Slows — per Bloomberg, Non-performing loans rose by 18.2 billion yuan ($2.86 billion) in the three months ended June 30 to 456.4 billion yuan, the China Banking Regulatory Commission reported. Bad loans increased for a third straight quarter, the longest streak of deterioration in eight years.
8. China’s Premier Wen Jia Bao indicates that more easing in the near future — Chinese Premier Wen Jiabao has struck an upbeat note about the economy, saying that while downward pressure is “relatively large,” there have been “some positive changes” recently, especially in July.
9. Spain’s bank bad loans hit record high in June — according to Reuters, Spanish banks’ bad loans rose to a record high in June as assets tied to the country’s deflating property market soured further. In the same month that Spain sought a European bailout of up to 100 billion euros for its struggling lenders, their non-performing loans rose to 9.42 percent of outstanding portfolios from 8.95 percent in May.

The week ahead — Economic data from Econoday.com:

“Wall Street never changes. The pockets change, the suckers change, the stocks change, but Wall Street never changes because human nature never changes.” – Jesse Livermore

1. Germany and Italy near blows over euro — per The Telegraph, German politicians from across the spectrum have reacted furiously to warnings by Italy’s Mario Monti that Bundestag control over EU debt policies threatens to bring about the “disintegration” of the European project.
2. Eurozone gets ever tougher with Greece — Greece plans to raise about €6bn of short-term funds this week from local banks after its eurozone partners turned down a request for a bridge loan to repay a bond held by the European Central Bank that matures later this month.
3. S&P lowers its outlook on Greece to negative — S&P has revised its outlook on Greece’s long-term rating to negative, reflecting the potential for a downgrade if the country fails to secure the next disbursement from the EU/IMF financing program.
4. US 10-year yields — yields have a positive correlation with risk assets. Below is the chart that depicts perhaps a false breakdowns in bond that typically provides enough fuel for equity to rally.

5. Saudi cuts oil output to 9.8 mln bpd in July — per Reuter, top oil exporter Saudi Arabia pumped 9.8 million barrels per day (bpd) of crude oil in July, cutting output by 300,000 bpd from June.
6. U.S. corn crops suffer, global food prices rise — the UN’s index of global food prices increased 6% in July, its largest rise since November 2009, boosted by too much rain in Brazil, not enough rain in the U.S., and a hot summer in Russia.

The week ahead — Economic data from Econoday.com:

“Who can be patient in extremes?” — William Shakespeare

1. Consumer spending falls again in June — according to MarketWatch, U.S. consumers reduced spending for the second straight month despite a sharp increase in wages, boosting their savings rate to the highest level in a year. The savings rate jumped to 4.4% from 4.0% in May.
2. Massive India power outage affects 600 million — A massive power outage in northern and eastern India left 600 million people, about half the country’s population, without electricity last Tuesday. The outage, which further aggravated a grid failure that had disrupted life in the country’s north for several hours the day before, reportedly stranded travelers and commuters, trapped miners and caused traffic jams.
3. India GDP growth forecast cut, but inflation view raised — GDP growth for the year ending March 31, 2013 was cut to 6.5% from the central bank’s previous estimate of 7.3%. At the same time, the RBI raised its wholesale price index-based inflation target for the current financial year to 7% from 6.5%.
4. Congress set to extend government funding for six months — Reuter reported that the House and Senate leaders have struck a deal to fund the U.S. government for the first six months of FY 2013. If passed by Congress, the deal for a six-month spending extension eliminates one layer of difficult year-end wrangling for Congress just after the election as it deals with the “fiscal cliff” of expiring tax cuts, automatic spending cuts, a debt-limit increase and other fiscal deadlines.
5. FOMC stands pat — The FOMC did even less than expected and announced neither additional stimulus, nor an extension of the low-rate pledge past late-2014. The Fed did talk about closely monitoring the economy, which is a bit of a change from the previous statements.
6. U.S. Oil Reserves Jumped in 2010 — according to the IEA, the U.S.’s proven oil reserves jumped 13% in 2010 to 25.2B barrels and those of natural gas 12% to 318T cubic feet, the EIA said in its annual report, with the gains the largest since the agency started keeping records in 1977. Horizontal drilling and fracking played a major role in the increases.
7. San Bernardino files for bankruptcy with over $1 billion in debts — San Bernardino filed for bankruptcy protection citing more than $1 billion of debts and making it the third California city to seek protection from creditors. In the past two months, the cities of Stockton and Mammoth Lakes have also filed for Chapter 9 bankruptcy protection, a special bankruptcy provision for municipalities.

The week ahead — Economic data from Econoday.com: