“Be who you are and say what you feel, because those who mind don’t matter and those who matter don’t mind.” — Bernard Baruch

1. Forex Manipulation Probes at JPM Trader — WSJ the U.K. – in its investigation of the potential manipulation of currency markets – is looking at the activities of former RBS (RBS) trader Richard Usher, who now works for JP Morgan (JPM).
2. Regeneron (REGN) drug slashes cholesterol in late-stage trial — Reuters, a new type of cholesterol drug being developed by Regeneron Pharmaceuticals Inc (REGN) and Sanofi SA, when used by itself, cut levels of “bad” LDL cholesterol almost in half in the first of a dozen late-stage trials of the injectable medicine. Regeneron and Sanofi’s treatment, called Alirocumab, is part of a new class of injectable cholesterol medicines that block a protein called PCSK9. Analysts suggested drugs could each generate sales of $3B or more.
3. Congress Agreed to end Government Shutdown — Congress approved a deal to finance the U.S. government until January 15 and raise the debt limit so that the country can continue to increase its borrowing until February 7.
4. Stock Market Back to Overbought — from BIG, just from this time last week, the S&P 500 and all ten sectors closed out the day in overbought territory. Sectors such as Energy, Financials and Health Care at extreme over-bought levels (>2 standard deviations above the 50-day moving average).

5. Latest AAII Bullish Sentiment — the lastest report from AAII shows investors have been growing increasingly bullish. Over the last week, bullish sentiment increased from 41.33% to 46.28%. This is the third straight week where bullish sentiment increased.

6. China’s GDP growth accelerates to 7.8% — China’s economy expanded at its fastest rate this year in Q3, rising 7.8% vs 7.5% in Q2. The growth reflected a “mini fiscal stimulus” that included railway spending and tax cuts.

The week ahead — Economic data from Econoday.com:

“The risk of a wrong decision is preferable to the terror of indecision.” – Maimonides

1. Obama Picks Janet Yellen as Fed chief Replacing Bernanke — President Obama nominated Janet Yellen as the first woman Chairperson of the Federal Reserve. The Senate still have to confirm the appointment of Yellen.
2. Refiners exporting record amounts of fuel — the U.S. energy boom has helped allow refiners to export more fuel than ever, with sales abroad hitting a record 3.8M barrels a day in July, almost 65% above the 2010 level. U.S. refiners are increasingly using locally produced crude that is cheaper than North Sea oil; they can then sell products such as gasoline, diesel and jet fuel to overseas customers at bargain prices. Companies that are benefiting include Marathon Petroleum (MPC), Valero Energy (VLO) and Enterprise Products Partners (EPD).
3. Chinese Premier Sees China Growth Topping 7.5% in First Nine Months — Bloomberg, Chinese Premier Li Keqiang said the nation’s economic growth probably exceeded 7.5 percent in the first nine months of the year
4. Japan’s machinery orders rise to highest since 2008 — Japan’s machinery orders, a leading capex indicator, reached the highest level in five years in August, climbing 5.4% on month to ¥819.3B ($8.4B) vs no growth in July. The increase is important for Japan’s government especially because one of its aims is to boost corporate investment as part of its economic reforms.
5. Most on FOMC members continue to see taper Bond Buy later this year — the minutes of the September 17-18 meeting show most members on the FOMC expect the tapering of the Fed’s QE program to start later this year. The decision not to reduce the bond-buying last month a “close call.” FOMC members were aware that the non-taper would be a surprise to the markets.
6. US overtaking Russia as top oil producer — Reuters, the US will become the world’s largest oil producer next year overtaking Russia, thanks to the American shale oil boom. The IEA said “With output of more than 10 million barrels per day for the last two quarters, its highest in decades, the nation is set to become the largest non-OPEC liquids producer by the second quarter of 2014, overtaking Russia. And that’s not even counting biofuels and refinery gains,”

The week ahead — Economic data from Econoday.com:

“October. This is one of the peculiarly dangerous months to speculate in stock. The others are, July, January, September, April, November, May, March, June, December, August and February” — Mark Twain

1. Earnings at top five banks seen taking major hit — analysts have cut their earnings estimates for the top five U.S. banks by over $1B in total, due to increasing fears about a sharp fall in trading revenue – especially from fixed-income operations – and higher legal costs. JPMorgan (JPM) has been particularly affected, with consensus for net income down $526M to below $5B. The company’s legal woes are seen adding $2B to expenses. Bank of America (BAC), Goldman Sachs (GS), Morgan Stanley (MS) and Citigroup (C) are the other banks to be affected.
2. Abe Orders Japan’s First Sales-Tax Increase Since ’97 — Bloomberg, Japan will go through with a plan to raise sales tax in April to 8% from 5%, a move that is set to raise ¥8T. To offset the economic impact of the hike, Prime Minister Shinzo Abe has unveiled a ¥5T ($51B) stimulus package that will include spending on public works and tax breaks to encourage companies to boost capital expenditures and wages.
3. ‘Obamacare’ launches amid government shutdown — BBC, a central provision of President Barack Obama’s healthcare reform law has taken effect, having survived Republicans’ years-long effort to undermine it. The opening of the private health insurance marketplaces, or exchanges, was the culmination of more than three years of political combat in Washington over the Patient Protection and Affordable Care Act, signed into law by President Barack Obama in 2010 and known to both sides as Obamacare.
4. PMI surveys show eurozone recovery gaining momentum — Eurozone services PMI climbed to 52.2 in September from 50.7 in August, while composite output rose to 52.2 from 51.5. “The eurozone enjoyed its strongest quarter of expansion for just over two years in the third quarter,” says Markit, adding that this bodes well for further growth in Q4. Germany led the way, France returned to expansion, Spain stabilized, and Ireland and Italy impressed.

The week ahead — Economic data from Econoday.com:

I hated every minute of training, but I said, ‘Don’t quit. Suffer now and live the rest of your life as a champion.’ — Muhammad Ali

1. Chrysler files for $100M IPO amid valuation dispute with Union— WSJ reported that Chrysler Group LLC has filed to sell up to $100M in stock. Fiat SpA (FIATY.PK) owns 58.5% of the company and the United Auto Workers union health trust can’t agree on the value of their 41.5% stake.
2. China sovereign wealth fund takes 12.5% stake in potash producer — China Investment Corporation is now the second largest shareholder in Uralkali (URALL.PK), the potash producer whose exit from one of the world’s two potash cartels sparked fears of a price war and triggered a steep sell-off in the chemical’s price earlier this year.
3. Merkel Gets Biggest Victory Since Kohl’s Reunification Vote — Bloomberg reported Angela Merkel won an overwhelming endorsement from German voters, putting the country’s first female chancellor on course for the biggest election tally since Helmut Kohl’s post-reunification victory of 1990. Merkel will probably have to form a coalition with the left-of-center Social Democrats, which came in second, or the Greens.
4. Chinese manufacturing activity hits six-month high — China’s HSBC flash manufacturing PMI climbed to a six-month high of 51.2 in September from 50.1 in August, boosted by improvements in external and domestic demand. The reading adds to a string of data that indicate that China’s economy is bouncing back after a slowdown.
5. Average price of insurance under Obamacare $328 a month — the average cost of a mid-tier health-insurance plan under Obamacare is $328 a month, price data from the government showed. The figure released just a week before enrollment in the healthcare overhaul to begin on October 1. Insurers that intend to sell plans on exchanges include UnitedHealth (UNH), Aetna (AET), WellPoint (WLP) and Humana (HUM). Molina Healthcare (MOH) is also set to play a role.
6. Government shutdown looms as GOP, Democrats stand firm — Conservative Republicans and Democrats continued to hold their respective positions on the budget and debt-cap. In the House, GOP representatives won’t accept a six-week government spending bill that looks set to pass in the Senate today and would avert a shutdown on Tuesday. The legislation would add funding for Obamacare, which Republicans want to strip out.
7. Bullish Sentiment Declines — courtesy of BIG, the latest sentiment survey from AAII shows bullish sentiment came in at a level of 36.05%, which was a 9.06 percentage point decline from last week’s level of 45.11%. This week’s decline was also the largest decline in bullish sentiment since Aug. 1.

The week ahead — Economic data from Econoday.com:

How economic machine works

‘An appeaser is one who feeds a crocodile, hoping it will eat him last.’Winston Churchill

1. Larry Summers withdraws from consideration for Fed Chief — Mr. Summers has dropped out from the race to become the next Chairman of the Federal Reserve, saying that “any possible confirmation process for me would be acrimonious,” and would not serve the interests of the Fed, the government or the economy. The remaining top contenders are Janet Yellen and Don Kohn, both of whom helped shape the Fed’s super easy money policy.
2. U.S., Russia agree to deal on Syrian chemical-weapons disarmament — Reuters, the U.S. and Russia have reached a deal whereby Syria will have a week to provide information about its chemical weapons and then until the middle of next year to let international inspectors destroy them. Mr. Obama stressed that force remains an option if Assad reneges and U.S. forces remain in position. Russia still opposes military action but now backs possible U.N. sanctions for non-compliance.
3. North American shale boom could go global — FT reported that countries such as Argentina, Russia and Algeria hold shale oil deposits that could be even more bountiful than the regions at the center of the U.S.’s energy revolution. The 23 most promising “tight” oilfields outside the U.S. and Canada have the potential to extract 5M bpd in the 2020s, a report from research firm IHS has estimated.
4. Fed decides not to ‘taper’ — MarketWatch, the Federal Reserve stuck to its massive bond-buying strategy last Wednesday, citing softer U.S. growth in a move that stunned financial markets. By a 9-to-1 vote, the Fed chose to keep buying $85 billion a month in debt and said it would wait for more evidence of economic progress. The bank cited rising mortgage rates and reduced federal spending as headwinds that “could slow the pace of improvement in the economy”.
5. JPMorgan faces $900M in fines, will admit wrongdoing in Whale case — JPMorgan (JPM) will pay in excess of $900M in fines and admit to wrongdoing in an effort to settle multiple investigations into the whale-sized blunder that took place in Q1 2012 at the firm’s London CIO office, the NY Times’ Jessica Silver-Greenberg and Ben Protess reported. The government authorities across the settlement table reportedly are the SEC, the OCC, the Fed, and the Financial Conduct Authority in London.
6. September Starts Strong — September has historically been the worst month of the year for stocks, but this year the month has bucked the trend. All of the cyclical sectors are doing even better, with Industrial stocks leading the way with an average MTD gain of 8.34%. Materials and Technology are averaging the second and third best gains.

The week ahead — Economic data from Econoday.com:

“The first rule is not to lose. The second rule is not to forget the first rule.” — Warren Buffett

1. GE to IBM Ending Retiree Health Plans in Historic Shift — Bloomberg, America’s biggest employers, from GE, IBM and Time Warner Inc. (TWX) are increasingly moving retirees to insurance exchanges where they select their own health plans, an historic shift that could push more costs onto U.S. taxpayers. While retiree health benefits have been shrinking for years, the newest cutbacks may quickly become the norm.
2. Japan Wins Olympic bid & GDP update sends Tokyo higher — the Nikkei jumped 2.5% after Q2 GDP growth was revised up to 3.8% from a prior reading of +2.6% and Tokyo won the bid for the 2020 Summer Olympics. The improved GDP number was fueled by a more positive read on capital expenditures, while it also increased the chances that the government will go through with a hike in sales tax. Also, the Olympics is forecast to boost the economy by ¥2.96T ($30B) over the next seven years and create 150,000 jobs.
3. Chinese industrial-output growth increase — the latest industrial data shows the country’s economy is stabilizing and will avoid a hard landing. The industrial-production growth accelerating to 10.4% on year in August from 9.7% in July and beating consensus of 9.9%.
4. Large Banks Face Physical Commodity Curbs — WSJ, the Federal Reserve is expected to publish guidelines that would restrict banks’ involvement in physical-commodities businesses. The new rules, which would be designed to limit banks’ risky activities, could accelerate the withdrawal of JPMorgan (JPM), Morgan Stanley (MS) and Goldman Sachs (GS) from sectors such as metals warehousing and power generation.
5. Government shutdown begins to loom as funding bill delayed — the House Republican leaders postponed a vote that would have approved the financing of the government through December. The delay came because of opposition among conservative Republicans to parts of the legislation related to the funding of Obamacare, which they want to strip out. The government faces a shutdown if legislation isn’t approved by September 30. Democrats and Republicans also have until mid-October to agree on measures to lift the debt ceiling.
5. Druckenmiller, noted HedgeFund Manager on Bloomberg TV interviews

The week ahead — Economic data from Econoday.com:

“The fight is won or lost far away from witnesses – behind the lines, in the gym, and out there on the road, long before I dance under those lights.” — Muhammad Ali

1. Chinese PMI services and manufacturing shows growth — China’s non-manufacturing PMI slipped to 53.9 in August from 54.1 in July but stayed firmly in expansion territory. The reading shows China’s manufacturing industry is growing as well.
2. Eurozone business activity grows at fastest pace in two years — the eurozone composite PMI rose to 51.5 in August from 50.5 in July, indicating the fastest rate of expansion since 2011. The services index climbed to 50.7 from 49.8, representing the first increase in activity for a year and a half.
3. Manufacturing Expanded for the third straight month — US factory growth expanded to a 2-year high of 55.7 in Aug according to the latest ISM number. The data suggests that the economy is strengthening more than anticipated.
4. U.S. Car Sales Soar to Pre-Slump Level — WSJ, U.S. light vehicle sales hit 1.5M in August to record the best month for the industry since May 2007. At 16.09M, the annual U.S. automobile selling rate topped the estimates of most analysts and shows the sector is set up well with new model introductions arriving this fall amid tight inventory.
5. Fed ‘s Beige Book – Summary of Commentary on Current Economic Conditions by Federal Reserve District — FOMC, reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand at a modest to moderate pace during the reporting period of early July through late August. Robust demand for autos and housing-related goods fueled an increase in consumer spending across most districts, residential real-estate activity “increased modestly,” credit quality showed improvement, and lending activity was characterized as “mixed.”
6. World Powers Remain Divided Over Syrian Action at G-20 — WSJ, World leaders gathering for a summit remained divided over whether to back punitive military strikes on the Syrian regime, reflecting the domestic political concerns many of their leaders are facing. Italy is reportedly concerned about sparking a wider conflict, Germany wants to take the matter to the ICC and Russia is reluctant to take a stance against Assad.

The week ahead — Economic data from Econoday.com:

“The essence of portfolio management is the management of risks, not the management of returns.” — Benjamin Graham

1. Japan’s debt-funding costs to hit $257 bln next year — Reuters, Japan’s Ministry of Finance reportedly wants to allocate a record ¥25.3T ($257B) to service the country’s mammoth debt of ¥1,000T ($10T) – which is double the size of its economy – for the next fiscal year. The expected provision is 13.7% higher than for this FY.
2. Obama seeks congress approval on a military strike against Syria — Bloomberg, Oil reached a two-year high and energy shares led gains in U.S. stocks, while emerging-market currencies weakened, amid growing speculation there will be an American-led military strike against Syria. The UK voted against military intervention. Many Asian and European share indices sold-off, with some emerging-market asset classes continuing to suffer.
3. Indian currency continues its free-fall — the Indian rupee’s collapse shows no sign of waning, the rupee hitting yet another record low of 68.71 to the dollar as the tension in the Middle East adds to the Fed’s prospective tapering and domestic economic problems as reasons to sell.
4. Emerging Markets Currency Movement — MarketWatch, below is a chart which explains the recent Emerging-Market slump. Late last week, the Reserve Bank of India said it would sell dollars to the country’s major oil companies. With oil India’s biggest import item, the action is aimed at removing $400-500M worth of demand a day for the dollar from the spot market and reducing downward pressure on the rupee.

5. German jobless rate holds steady — Germany’s unemployment rate was unchanged at 6.8% in August, although the number of people without a job unexpectedly rose by 7,000 vs a fall of 7,000 in July and consensus for a drop of 5,000.

The week ahead — Economic data from Econoday.com:

“Once we realize that imperfect understanding is the human condition there is no shame in being wrong, only in failing to correct our mistakes.” — George Soros

1. J.P. Morgan Faces New Probe on Energy Trades — the Department of Justice is reportedly investigating JPMorgan (JPM) over whether it manipulated U.S. energy markets. The speculation comes less than a month after the bank agreed to pay $410M to the Federal Energy Regulatory Commission to settle charges related to such manipulation. The latest probe adds to inquiries over the London Whale, metal warehouses and mortgage bonds problems.
2. Moody’s lifts outlook on U.S. states — WSJ, the ratings agency changed its collective outlook on U.S. states to stable from negative, where it has been for the past five years. Credit quality among the 50 states is generally high, Moody’s said, with 30 states rated at triple-A or Aa1, the two highest ratings. Moody stated the slowly recovering economy has helped states’ revenue and reserves.
3. China manufacturing sees surprise rebound — MarketWatch, the “flash” reading of the China manufacturing PMI, compiled by HSBC and Markit, rebounded to a four-month high of 50.1 from a final reading of 47.7 in July, an 11-month low.
A reading below 50 indicates contraction in sector activity, while one above 50 shows growth.
4. Eurozone business growth hits two-year highs — Eurozone flash manufacturing PMI has increased to a 26-month high of 51.3 in August from 50.3 in July and exceeded consensus of 50.8. Services also showed expansion, as did the composite figure.
5. Emerging markets selloff intensifies after Fed — Reuters, after the FOMC minutes released late last week, which caused the recent spike in U.S. debt yields has caused borrowing costs to increase globally, which, along with the rising dollar, has not been healthy for emerging markets with large current account deficits, such as India. The country’s rupee, along with Turkey’s lira, hit new record lows, while the currencies of Indonesia, Malaysia and Thailand dropped to multi-year troughs.
6. Deficit Budget Deal Talk Break-Down — NYTimes, budget talks between the White House and Senate Republicans have gone nowhere since Congress began its summer recess, increasing chances of a fiscal stalemate that could lead to a government shutdown in October or the threat of a government default later in the fall.
7. AAII Bullish Sentiment — from BIG, according to the weekly survey from American Association of Individual Investors (AAII), bullish sentiment dropping to its lowest levels since early 2012.

The week ahead — Economic data from Econoday.com: