“You cannot ignore the market – ignoring a source of investment opportunities would obviously be a mistake – but you must think for yourself and not allow the market to direct you.” — Seth Klarman

1. World stocks recover as Putin downshift tensions — Global equity markets recovered from sharp losses early in the week in what could be interpreted as a de-escalation of tensions by the Russian as some military units are back to their bases after a surprise training exercise. Some of the drills took place near the border with Ukraine, exacerbating fears about a possible Russian invasion of its neighbor.
2. Obama looks to expand tax break for the low-paid — President Obama is due to propose expanding the Earned Income Tax Credit to 13.5M childless workers when he unveils his annual $1.014T budget plan today. The 10-year $60B cost would be met by closing two tax loopholes for some self-employed professionals and investment-fund managers. Obama also wants to spend $302B on highways, bridges and transit projects, and increase the minimum wage.
3. China maintains growth goal of 7.5% — Reuters, in an address to the annual meeting of the National People’s Congress, Chinese Premier Li Keqiang reiterated his commitment to reform to make growth more sustainable to the goal of 7.5%. The government main goals were to focus on reforming the economy and reining in the ‘shadowing banking’ system.
4. Ukraine Crisis Pressures U.S. on Gas Exports — WSJ, the crisis in Ukraine has sparked renewed calls among Republicans and energy state Democrats for an easing of restrictions on foreign sales of natural gas. Russia supplies Europe with 30% of its gas, so there are those who are wary of imposing major sanctions on the country. Increasing U.S. gas exports could reduce that reliance and give the West a freer hand in dealing with Russia, particularly in the long term.
5. Histical Bull Markets — courtesy of BIG, and PensionPartners, the tables below provide an update of where the current bull market stands in comparison to prior bull markets in terms of duration and magnitude. The S&P500 is less than three weeks away from taking out the 1982 – 1987 period as the fifth longest bull market of all time.


6. China suffers first corporate-bond default — Bloomberg, China’s onshore bond market experienced its first default as a solar-cell maker failed to pay full interest on its bonds. The number of Chinese companies whose debt is double their equity has surged since the global financial crisis, suggesting this first onshore bond default won’t be the nation’s last. Publicly traded non-financial companies with debt-to-equity ratios exceeding 200 percent have jumped 57 percent since 2007.

The week ahead — Economic data from Econoday.com:

“‘A bull market is like sex. It feels best just before it ends.'” — Barton Biggs

1. Ukraine calls for urgent aid after Yanukovich ousted — per Reuters, cash-strapped Ukraine appealed for urgent financial assistance to prevent a default, saying it needed $35 billion over two years to stop the economy “heading into the abyss”. Ukraine has called for a donor’s conference that will involve the EU, the U.S. and the IMF. The plea for a bailout comes after parliament ousted President Viktor Yanukovych. A warrant has been put out for Yanukovych’s arrest after he fled the capital before his removal. Acting President Oleksandr Turchinov said yesterday that Ukraine was close to default, with the economy facing an abyss.
2. JPMorgan (JPM) to cut thousands of extra jobs at its mortgage business — FT reports JPMorgan (JPM) plans to slash thousands more jobs at its mortgage business and at its branches amid plummeting demand for home loans and the increased automation of clerical jobs,. The cuts would be part of a new efficiency program and would add to the 10,000-15,000 positions that JPMorgan has already axed.
3. Japan Sees Key Role for Nuclear Power — WSJ, Japan intends to revive nuclear energy as a major source of electricity, the government disclosed in a draft document about its long-term energy strategy. Japan’s nuclear plants were idled following the Fukushima disaster almost three years ago, which has caused the country to significantly increase its energy imports.
4. Russian troops put on alert amid Ukraine crisis — MarketWatch, Russian President Vladimir Putin ordered a test of combat readiness for troops stationed in a region that touches Ukraine’s northern border. The move comes amid growing tension between Russia and Ukraine, whose pro-Russian president, Viktor Yanukovych, was ousted by European-leaning protesters at the weekend following violence in which more than 80 people were killed. A warrant for his arrest was issued this week.
5. Japanese economic activity bumps up ahead of sales-tax hike. Japanese industrial production grew at the fastest pace since June 2011 in January, jumping 4% on month after a drop of 0.9% in December. Retail sales leapt 4.4% vs +2.5%. The strong figures are not a total surprise, as a bump in economic activity has been expected ahead of a rise in sales tax in April, which is forecast to then drag on the economy. Core inflation held steady at 1.3% on year in January, while the unemployment rate was unchanged at 3.7%.

The week ahead — Economic data from Econoday.com: