“Sometimes paranoia’s just having all the facts.” — William S. Burroughs

1. Weyerhaeuser (WY), forest products comp., names new CEO — Weyerhaeuser (WY) appointed Doyle Simons, the former head of Temple-Inland, to replace retiring CEO Dan Fulton. Weyerhaeuser is also acquiring 645,000 acres of high-quality timberlands in Washington and Oregon from Brookfield Asset Management (BAM) for $2.65B. Weyerhaeuser will explore “strategic alternatives” for WRECO, its homebuilding and real-estate development business, including a merger, sale, or spin-off.
2. Obama indicates that FOMC Chief Bernanke’s time is drawing to an end — Bloomberg, reported President Obama told Charlie Rose that the chairman has already stayed “a lot longer than he wanted or he was supposed to.” Bernanke’s second four-year stint at the central bank is due to end on January 31.
3. Japan Exports Surge Most Since 2010 — Bloomberg, Japan’s exports rose more than forecast in May as a weaker yen boosted the value of overseas sales, underscoring the profit boon for manufacturers from Prime Minister Shinzo Abe’s reflation campaign. With imports climbing 10%, Japan generated a trade deficit for the 11th consecutive month as the figure widened 13% on month to ¥993.9B ($10.4B).
4. Chinese manufacturing PMI shrinks further — HSBC Chinese manufacturing PMI has fallen to a nine-month low of 48.3 in June from 49.2 in May and vs consensus of 49.4. “Manufacturing sectors are weighed down by deteriorating external demand, moderating domestic demand and rising de-stocking,” says HSBC. Because of Beijing’s preference for reform over stimulus, the bank expects “slightly weaker growth in Q2.”
5. More trouble in store for mortgage-bond investors — Holders of mortgage bonds may be facing billions of dollars of undisclosed losses after a review of investor documents showed that individual houses are being reported as being in foreclosure long after they’ve been sold or the loans paid off. The reporting lag has enabled banks and servicers to continue charging investors monthly fees, and could lead to new litigation. The companies involved include Bank of New York Mellon (BK), Wells Fargo (WFC), Ocwen Financial (OCN) and Bank of America (BAC).
6. FOMC Chairman Bernanke signals the end of QE — Reuter, Global markets across multiple sectors sold off after Ben Bernanke signaled that the Fed may soon start turning down the money printing presses, saying that the bond-buying could end in mid-2014.

The week ahead — Economic data from Econoday.com:

“To win you have to risk loss.” — Jean-Claude Killy (skier)

1. S&P revises U.S. outlook to stable from negative — MarketWatch, Standard & Poor’s revised its long-term outlook on its U.S. credit rating to stable from negative. The rating agency downgraded the sovereign rating to AA+ from its top rating of AAA in 2011. The rating agency cited economic strength and the dollar’s status as a reserve currency as the primary drivers of the outlook revision.
2. Germany’s top court weighs ECB bond buys — Germany’s Federal Constitutional Court has started a two-day hearing today over the compatibility of the ECB’s Outright Monetary Transactions (OMT) program, which allows the bank to buy government bonds in the secondary market, with German law.
3. Senate Passes Bill to End Direct Payments to Farmers — the Senate overwhelmingly passed a $955B agriculture bill that would reduce farm spending by $18B over the next decade, partly by ending the practice of making direct payments to farmers irrespective of crop yields, market prices and the economy.
4. Nikkei (DXJ) plunges into bear market — The Nikkei’s 6.4% drop put it 21.9% off from its intraday peak reached on May 23. Uncertainty about the Fed’s QE program continues to grip global markets.
5. Fed Likely to Push Back on Market Expectations of Rate Increase — WSJ’s Hilsenrath, quoted officials as saying that a tapering of asset purchases doesn’t mean an end to asset purchases, and a hike in short-term interest rates isn’t anywhere close to being on the radar at this point.

The week ahead — Economic data from Econoday.com:

“Volatility is greatest at turning points, diminishing as a new trend becomes established.” — George Soros

1. Nikkei sinks towards bear territory — the Nikkei (EWJ) has lost over 19% since hitting a 52-week high on May 23 – a drop of 20% would put the index in a technical bear market.
2. Chinese PMI (Purchasing Manager Index) comes in mixed — China’s HSBC PMI for May fell a bit more than the “flash” read — at 49.2 vs. 50.4 in April. The downward revision “suggests a marginal weakening of activities towards the end of last month, due to deteriorating domestic demand conditions,” says HSBC.
3. Turkish markets plunge after protests continued — the Istanbul National 30 index down 6.6%; Turkish shares (TUR) have plummeted after demonstrations in Istanbul over the preservation of a park turned into a vehicle for an outpouring of anti-government anger amid accusations that it has become increasingly authoritarian.
4. Japan’s Premier Lines Up New Overhauls — WSJ, Abe’s ‘Three Arrows’ Aim for Long-Term Economic Boost, With New Policies on Industry, Investment and Taxes to pull his country out of deflation. The program includes allowing Japan’s massive public pension funds to buy more stocks, the creation of special economic zones, free-trade agreements, privatization, and power-market reform. The hope is to raise average income by 3%, which is greater than the two-year inflation target of 2%.
5. U.S. oil output surpasses imports — WSJ, U.S. crude oil production exceeded imports last week for the first time in 16 years. Since January 1997, weekly U.S. crude imports averaged around 9.2M bpd, topping domestic output by 3.5M bpd. But by late 2014, U.S. crude oil output should surpass imports by nearly 2.5M bpd.
6. NSA taps in to user data of Google, Skype and others, secret files reveal — theguardian reported government electronic surveillance have widened to include several of the country’s largest technology companies under a program called PRISM. A National Security Agency document reportedly shows that it has “direct access” to the servers of Microsoft (MSFT), Yahoo (YHOO), Google (GOOG), Facebook (FB), Paltalk, AOL (AOL), Skype, YouTube and Apple (AAPL).
7. Japan’s $1 trln public pension cuts govt bond weighting, lifts stocks — Reuters, Japan’s public pension fund, the world’s largest with a pool of $1.1 trillion, announced the most significant shift in its asset allocation since 2006 so it can take on greater risk by shifting into stocks and away from Japanese government bonds. It is increasing its Japanese stocks allocation to 12 percent of its portfolio from 11 percent, while lowering its JGB weighting to 60 percent from 67 percent.
8. AAII Bullish Sentiment Falls — bullish sentiment declined to 29.5% from last week’s reading of 36.0%. After reaching a short term peak of 49% two weeks ago, bullish sentiment has now declined by 19.5 percentage points in just the last two weeks.

The week ahead — Economic data from Econoday.com:

There will not be any re-cap for the week of May 31 2013. We are away for some needed R&R.

Have a good week.

The staffs at EGS.

There will not be any re-cap for the week of May 24 2013. We are away for some needed R&R.

Have a good week.

The staffs at EGS.