“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:

“I made my money by selling too soon & never lost money by turning a profit” Bernard Baruch

1. China growth slows — China’s Q3 GDP rose 9.1% Y/Y, shy of expectations for 9.3%, and down from 9.5% in Q2. Though the numbers are relatively healthy, it marks the country’s slowest growth since 2009 and raises concerns that the eurozone debt crisis and general global malaise are taking their toll on China’s momentum.
2. New Mortgage Plan Floated by the government — State and federal officials are pushing a plan that could help some “underwater” borrowers get refinancing assistance in the latest government bid to break a legal impasse with big banks over alleged foreclosure abuses and ease problems in the housing market. The proposal was raised in a meeting last week between government negotiators and giant lenders as part of an effort to settle allegations of questionable foreclosure practices.
3. Lack of liquidity spooks traders — according to the WSJ, Hedge-fund traders and other professional investors are finding that a lack of liquidity is making it increasingly difficult to trade individual stocks without causing large price swings.
4. Country YTD performance — below is the chart of 78 countries performance courtesy of the Bespoke Investment Group.

5. Draft Proposes Fast, Flexible Bailout Fund — A draft of the guidelines seen by The Wall Street Journal outlines how the €440 billion ($605.44 billion) European Financial Stability Facility would implement the basic principles agreed by European leaders at the July 21 summit. The guidelines provide the EFSF with the ability to purchase sovereign debt directly from countries issuing new bonds or on the open market.
6. Citigroup settles with the SEC — Citigroup (C) will pay $285M to settle charges brought by the SEC that it misled investors in its sale of a mortgage bond deal. The SEC had been investigating whether Citigroup misled investors in the deal, a CDO created from other CDOs backed by subprime mortgages.

The week ahead — Economic data from Econoday.com:

“Never pay the slightest attention to what a company president ever says about his stock. “Bernard Baruch

1. Dexia bank rescued — Dexia agreed to the nationalization of its Belgian retail bank and secured 90 billion euros ($121 billion) in state guarantees, in a rescue that raises pressure on other euro zone countries to strengthen their banks.
2. Greece likely to get aid tranche in November — Greece is likely to receive an 8 billion euro ($10.9 billion) tranche of aid in early November from its international lenders. This allows the troubled euro-zone nation to avert a near-term default.
3. Senate OKs bill pressuring China over yuan — the Senate approved a bill that would allow new duties on goods from China and other countries that lawmakers say manipulate their currencies.
4. Obama’s jobs bill falls in the Senate — as expected, the Senate late yesterday blocked consideration of President Obama’s $447B jobs plan, with the chamber voting 50-49 in favor of advancing the package, well short of the 60 needed to overcome procedural hurdles.
5. China Export Growth Dwindles to Slowest Pace in Seven Months as Yuan Gains — China ‘s Exports rose a less-than-forecast 17.1 percent in September from a year earlier, the bureau’s data showed in Beijing. The trade surplus was $14.51 billion, the smallest since May. Growth in shipments to Europe, China’s biggest export market, slumped to 9.8 percent, from 22 percent, amid the sovereign-debt crisis in euro-region nations.
6. Fitch Ratings downgraded UBS AG and placed seven other U.S. and European banks on credit watch negative — The ratings agency lowered UBS’s long-term issuer default rating to A from A+. Fitch is also reviewing ratings for Barclays Bank Plc BARCBB.UL, BNP Paribas (BNPP.PA), Credit Suisse Group AG (CSGN.VX), Deutsche Bank AG (DBKGn.DE), Societe Generale SOGNNY.UL, Bank of America Corp (BAC.N), Morgan Stanley (MS.N) and Goldman Sachs Group Inc (GS.N) for further possible downgrades.
7. G20 finance chiefs meet as S&P downgrades Spain — Spain is once again the center of attention after S&P downgraded the country’s long-term debt to “AA-” from “AA” following a similar move from Fitch last week.

The week ahead — Economic data from Econoday.com:

“A speculator is a man who observes the future, and acts before it occurs”. Bernard Baruch

1. Greece will miss deficit targets — the Greek cabinet approved the draft 2012 budget and will present it to parliament; However, but while the government agreed to an additional €6.6B ($8.8B) of austerity measures demanded by the troika, the country won’t meet its deficit target this year. Greece’s 2011 deficit is now expected to be 8.5% of GDP vs. its 7.6% target; for 2012, the deficit is set to fall to 6.8%, still above the 6.5% target.
2. China says U.S. yuan bill may spark trade war — China criticized a U.S. Senate decision to move ahead with a bill designed to pressure Beijing on its currency policy, saying the move fosters distrust and could spark a trade war.
3. Moody’s Downgrades Italy — the ratings agency cut Italy’s sovereign debt by 3 notches to A2 with a negative outlook.
4. Q3 key ETFs performance — below is the table depicting 3Q 2011 performance of selected ETFs courtesy of the Bespoke Investment Group.

5. EU’s President wants coordinated bank recapitalization — the European Union’s executive proposed coordinated recapitalization of banks as the bloc’s regulators met to review capital buffers of stressed lenders.
6. AAII Bullish Sentiment Rises
7. Fitch downgrades Italian, Spanish debt ratings — The Fitch agency downgraded its sovereign credit rating for Italy and Spain on Friday and said its long-term outlook for both countries was negative, citing high debt and poor prospects for growth.
Separately, Fitch also said it was keeping Portugal’s debt rating on watch for a possible downgrade, with a decision due by the end of the year.

The week ahead — Economic data from Econoday.com:

“The market is better at predicting news than the news at predicting the market” — Gerald Loeb.

1. Multi-trillion plan to save the eurozone being prepared — reported by The Telegraph European officials are working on a grand plan to restore confidence in the single currency area that would involve a massive bank recapitalisation, giving the bail-out fund several trillion euros of firepower, and a possible Greek default.
2. Senate approves budget stop-gap — the Senate approved, in a 79-12 vote, stop-gap measures to fund the government for an additional six weeks and avert a shutdown. It also approved, on a voice vote, a one-week extension to give the House time to consider the funding bill; House approval is expected.
3. German parliament approves expanded EU bailout fund — Chancellor Merkel achieved her majority after intense lobbying. A large majority in the German parliament has approved expanded powers for the EU’s main bailout fund. All 17 countries that use the euro must ratify the commitment to expand the powers of the EFSF and boost its bailout guarantees to 440bn euros (£383bn). So far, 10 have approved the measure.
4. Italy and Spain extended their bans on short-selling due to ongoing volatility, according to European regulator ESMA — Italy extended until Nov. 11, while Spain didn’t set a date, saying its decision was based on “protracted instability in European securities markets.”
5. Justice Department probing Chinese accounting — The U.S. Justice Department is investigating accounting irregularities at Chinese companies listed on U.S. stock exchanges, said an official with the Securities and Exchange Commission, suggesting criminal charges may be brought in addition to civil proceedings.

The week ahead — Economic data from Econoday.com:

“If everyone is thinking alike, then somebody isn’t thinking.” George S. Patton

1. S&P cuts Italy’s sovereign credit ratings — S&P lowered Italy’s long-term credit rating to A from A-plus and cut its short-term rating to A-1 from A-1-plus, citing a weak economic outlook and ongoing political gridlock. S&P also said the outlook for Italy’s ratings is negative, meaning a further cut is possible.
2. Japan’s trade deficit widens — Japan’s trade deficit gapped wider than expected in August, coming in at ¥775.3B ($10.1B) vs. July’s ¥72.5B surplus, as growth in exports weakened. Exports rose 2.8% Y/Y and imports jumped 19.2%.
3. Fed decides on $400 billion bond swap — the Fed said it will buy $400 billion of Treasury securities in the 6- to 30-year range and sell an equal amount of maturities of 3 years or less. The purchases would be completed by the end of June 2012.
The Fed also announced a new plan to purchase agency mortgage-backed securities with proceeds of maturing securities.
4. Moody’s downgrades BAC, WFC & C — Moody’s downgraded Bank of America (BAC) to Baa1 from A2. The move comes from a decrease in the probability the government would support the bank, if necessary, but “do(es) not reflect a weakening of the intrinsic credit quality of BofA.” Moody’s cut Wells Fargo (WFC) to A2 from A1 for the same reason. With Citigroup (C), Moody’s confirmed the company’s long-term rating, saying the bank’s stand-alone credit profile has improved, but downgraded the holding company’s short-term rating to Prime-2 from Prime-1.
5. Moody’s Cuts Eight Greek Bank Ratings by 2 Notches — in a widely expected move, Moody cuts The agency cut National Bank of Greece, EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, Agricultural Bank of Greece and Attica Bank downgraded to Caa2 from B3.

The week ahead — Economic data from Econoday.com:

“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in”John D. Rockefeller

1. Talks of China to make investment in Italy — The Wall Street Journal and Financial Times said Italy’s finance minister met last week with a delegation of Chinese officials — including the head of China’s sovereign-wealth fund — in an attempt to persuade Beijing to buy a large amount of Italian sovereign debt.
2. Moody downgraded French banks — Moody’s downgraded Credit Agricole’s (CRARY.PK) credit rating to Aa2 from Aa1 and Societe Generale’s (SCGLY.PK) to Aa3 from Aa2, but maintained its Aa2 rating on BNP Paribas (BNPQY.PK), saying the bank’s “profitability and capital base currently provide an adequate cushion to support its Greek, Portuguese, and Irish
3. Treasury to Accommodate Fed on ‘Twist’ — according to sources, “Operation Twist”, the central bank would buy more longer-term Treasury securities to drive down long-term interest rates by reducing the amount of such debt available to other investors. Operation Twist is one of a number of options the Fed will consider when it next meets on Sept. 20.
4. Central Banks Pour Dollars Into Europe — The European Central Bank said it would coordinate with the U.S. Federal Reserve, Bank of England, Bank of Japan and Swiss National Bank to ensure banks unlimited dollar funding through the end of the year to quell fears that the region’s lenders could fall victim to the euro-zone’s government debt crisis.
5. Economists say recession more likely — A WSJ poll of 53 economists sees a 1-in-3 chance – the highest ratio since the start of the recovery – of the economy slipping into recession over the next year.

The week ahead — Economic data from Econoday.com: