“The best traders have no ego. You have to swallow your pride and get out of the losses.” — Tom Baldwin

1. Markets fall as China cuts GDP target — China has lowered its GDP target to 7.5% from the 8% goal that’s been in place since 2005. Chinese leaders are determined to cut reliance on exports and capital spending in favor of consumption.
2. Iran Offers To Resume Nuclear Talks, Allow Inspectors Into Military Site — Iran stated it would be willing to allow inspectors from the UN’s International Atomic Energy Agency (IAEA) to visit its Parchin military complex, which the West believes is part of a suspected Iranian nuclear weapons program.
3. China to cap expansion of major industries — China is planning to limit growth in some of its largest industries, according to a work report Premiere Wen Jiabao recently delivered to the nation’s legislature. The report lists four sectors in which capacity increases should be curbed: auto manufacturing, steel making, shipbuilding and cement production.
4. European Central Bank leaves rates unchanged — Mario Draghi expected to take a wait-and-see approach after the completion last week of the ECB’s second, three-year long-term refinancing operation, or LTRO. The Feb. 29 LTRO saw 800 banks snap up nearly 530 billion euros ($700.3 billion) in three-year loans fixed to the ECB’s 1% refi rate.
5. Over 80% of Greek creditors accepted debt swap — Greece avoids default with debt swap. Greece said €172B of bonds were tendered by private investors in its debt swap, making the participation rate 85.8%. The country intends to amend the terms of all Greek law governed bonds, bringing the participation rate to 95.7%. However, the country’s activation of collective action clauses will likely force the ISDA’s hand in declaring a “credit event,” triggering payouts on CDS.

The week ahead — Economic data from Econoday.com:

“I’m not nearly so concerned about the return on my capital as I am the return of my capital.” Will Rogers (American Humorist and Celebrity, 1879-1935)

1. G-20 Defers Move On Aid for Europe — G-20 officials met. Issues raised were the potential of rising oil prices to hurt a global recovery and the need to change the part of the Volcker Rule which bans prop trading of foreign sovereign debt. Ministers delayed consideration of new international support for Europe until the G-20’s next gathering in April.
2. Blackstone bets on natgas — Blackstone (BX) announced $2B investment in Cheniere Energy Partners (CQP) that will allow the company to build a gas-liquefaction plant in Sabine Pass, La., the first of its kind in the continental U.S.
3. Warren Buffet Posted 2011 Annual Letter — click here for the link to Buffet’s annual letter.
4. ECB allots $713 billion to banks in LTRO — The European Central Bank on Wednesday allotted a larger-than-expected 529.5 billion euros ($713.4 billion) in loans to euro-zone banks in its second and possibly last three-year long-term refinancing operation. The ECB said a total of 800 banks were allotted funds under the LTRO.
5. China slashes dollar reserves — WSJ reported that China has sharply cut the share of its foreign reserves held in dollars, Dow Jones calculates. Although the exact composition of China’s $3.2T reserves has always been a mystery, the portion of dollar holdings appears to have dropped to a decade-low 54% as of June 2011 from 65% in 2010 and 74% in 2006.
6. Banks Park $1 Trillion of Cheap Money Back at ECB — reported by CNBC, Commercial banks parked a record 777 billion euros ($1.03 trillion) with the ECB overnight, roughly three-quarters of the money the central bank has shovelled into the financial system in two injections of ultra-cheap three year funding since December. The deposits at the ECB highlight the continued lack of trust between European banks.

The week ahead — Economic data from Econoday.com:

“The worst trades are generally when people freeze and start to pray and hope rather than take some action” — Robert Mnuchin

1. Europe agrees to second Greek bailout — European finance ministers and other top European officials said they stand ready to provide up to 130 billion euros ($171.9 billion) of extra financial aid to Greece until 2014. The Eurogroup said they had the “expectation that the International Monetary Fund will make a significant contribution” to the new Greek aid program.
2. Oil climbs as Iran Stops Selling Oil to U.K., France — Iran said it had stopped selling crude to British and French companies, in retaliation for the EU’s import ban.
3. Fitch Downgrades Greece, Says Default ‘Highly Likely’ — AP reported that Fitch ratings agency says it has downgraded Greece further into junk status, from ‘CCC’ to ‘C’ following the announcement of the details of the country’s debt swap deal with private creditors. The agency said the downgrade indicated “that default is highly likely in the near term.”
4. Moody’s reviewing thousands of U.S. muni obligations — Moody’s Investors Service is sweeping a magnifying glass over thousands of U.S. municipal sector obligations that are linked to 26 banks currently under review for possible credit rating downgrades.
5. Tensions grow over Iran — the IAEA says it failed to win access to Iran’s suspected nuclear-related military base during two days of talks. Meanwhile, Iran said it would consider preemptive action if it felt threatened, underscoring the real possibility of a military conflict in a region holding half the world’s oil reserves.
6. Payroll-tax cuts extended — President Obama signed the payroll tax bill into law, which will extend payroll-tax cuts through the end of 2012, prolong extended unemployment benefits, and prevent a cut in pay for doctors who treat Medicare patients.

The week ahead — Economic data from Econoday.com:

“Securities pricing is, in every sense a psychological phenomenon that arises from the interaction of human beings with fear. Why not Greed and Fear as the equation is usually stated? Because Greed is simply Fear of not having enough”. — John Bollinger

1. Moody Downgraded 6 European Countries — Spain gets the worst of fresh Moody’s cuts. Triple-A France, Britain, Austria outlooks cut to negative. Moody’s also cut debt ratings on Italy and Portugal by one notch, along with Slovakia, Slovenia and Malta.
2. Euro Zone Economy Shrinks — The euro zone economy shrank at the end of 2011 and will flirt with a mild recession under the weight of the sovereign debt crisis, but strength in France and resilience in Germany may keep it above water. Economic output in the 17-nation currency area fell 0.3 percent in the fourth quarter from the third.
3. Greece battles to salvage bailout package — Greece’s leaders battled to salvage a new 130-billion-euro ($170 billion) EU/IMF bailout. But with mistrust of Athens high, several EU sources told Reuters that finance officials in the 17-state currency union were studying whether it was possible to delay part or all of the rescue deal while still avoiding a disorderly default.
4. Moody’s Warns Downgrade on Major Banks — Moody’s warned it may cut the credit ratings of 17 global and 114 European financial institutions in another sign the impact of the euro zone government debt crisis is spreading throughout the global financial system.
5. Foreclosure Filings Fall 19% In January — Mortgage default notices rose by over 20% on year in several states in January, including Connecticut, Massachusetts and Florida, indicating that the 2011 freeze in repossessions – which was due to the robo-signings scandal – is beginning to thaw.
6. Swiss police seize $6 trillion in fake U.S. bonds — Swiss authorities, at the request of Italian prosecutors, seized $6 trillion in fake U.S. bonds from three safety deposit boxes in Zurich, the BBC reported. The BBC noted that the seized bonds amounted to almost half the U.S. debt.

The week ahead — Economic data from Econoday.com:

“The worse a situation becomes the less it takes to turn it around, the bigger the upside.” — George Soros.

1. German Industrial Production Unexpectedly Fell in December — Production fell 2.9 percent from November, when it stagnated, the Economy Ministry in Berlin reported.
2. Greece to Lay Off 15,000 Public-Sector Workers — according to WSJ, Greece has agreed to lay off 15,000 public-sector workers by the end of 2012, a government minister said Monday, as international pressure mounts on Athens to accept austerity measures needed to secure major new debt agreements.
3. Farmers Plan Biggest Crops Since 1984 — U.S. farmers will plant the most acres in a generation this year, led by the biggest corn crop since World War II, taking advantage of the highest agricultural prices in at least four decades. Drought damage in Brazil and Argentina will probably spur the USDA to cut its global and U.S. grain-supply forecasts for the current season on Feb. 9.
4. Greek bailout hopes rise amid ECB concession — European Central Bank reportedly agreed to exchange Greek government bonds at less than face value in an effort to further reduce the nation’s debt load.
5. Santorum sweeps to shock victories in three states — Rick Santorum has caused an upset in the GOP nomination race by surprisingly winning Colorado, Minnesota and Missouri, although none of the contests will result directly in the awarding of delegates.
6. Amazon and Viacom close to Web video deal — according to Reuter, Viacom, which owns TV shows and movies from MTV Networks, Nickelodeon and Paramount Studios, would be the latest of several partners Amazon has made deals with for its Prime Instant Video service. So far, major studios such as CBS Corp, Time Warner Inc’s Warner Bros, News Corp’s Fox, Sony Corp, Comcast Corp’s NBC Universal and Walt Disney Co have licensed programming to the retailer.
7. Banks and States Reached $26 Bil. Settlements — After more than a year of negotiations, the biggest banks, states and federal authorities announced the largest housing settlement ever — for more than $26 billion — over foreclosure practices that is expected to offer relief to more than one million U.S. homeowners. The settlement is with five big banks: Bank of America Corp (BAC), J.P. Morgan Chase & Co(JPM), Citigroup Inc. (C), Wells Fargo & Co.(WFC) and Ally Financial Inc., the company formerly known as GMAC.

The week ahead — Economic data from Econoday.com:

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

1. Mitt Romney Wins Florida’s Republican presidential primary — Romney rolled to an impressive triumph in Florida, winning 46 percent of the vote to Gingrich’s 32 percent in a key battleground state. The next contest in the state-by-state battle for the Republican nomination to face Obama, a Democrat, in the November 6 U.S. election is in Nevada. That is followed on Tuesday by caucuses in Colorado and Minnesota and a primary in Missouri.
2. California Faces Cash Shortfall by March on Low Receipts, Controller Says — according to Bloomberg news, California (STOCA1)’s cash may be exhausted by March as tax collections trail budgeted amounts, Controller John Chiang said in a letter to lawmakers.
3. Obama seeks to revive housing market with refinancing plan — President Obama is expected to lay out today a fresh attempt to revive the housing market by letting millions of homeowners refinance their mortgages with lower-interest federally insured loans.
4. Spain sees good demand in $6 billion bond sale — Spain raised euro4.56 billion ($6 billion) Thursday in a bond auction that showed strong investor demand and a drop in the country’s borrowing rates; It sold euro2.5 billion in three-year bonds at an average yield of 2.9 percent, down from 3.4 percent in the last such auction on Jan. 17. Demand was 1.6 times the amount on offer, less than the 1.8 oversubscription rate seen last month.
5. U.S. adds 243,000 jobs in January ‘big surprise’ — Jobless rate falls to 8.3%; November, December — gains revised higher; U.S. companies hired the most workers in nine months and the nation’s unemployment rate fell to the lowest level in nearly three years, according to the government’s employment report for January.
6. U.S. factory orders up 1.1% in December — Factory orders rose 1.1% in December, the Commerce Department reported Friday. Economists polled by MarketWatch had expected a 1.4% rise. But the report was bolstered by an upward revision to November, where orders were revised to a 2.2% increase from an initially reported 1.8% rise.
7. Senate votes to ban insider trading in Congress — the Senate voted 96-3 to pass the Stop Trading On Congressional Knowledge Act, or Stock Act, which will ban legislators from trading shares based on insider information they pick up on Capitol Hill.

The week ahead — Economic data from Econoday.com:

“In my experience, selling a put is much safer than buying a stock” — Kyle Rosen (Boston Capital Mgmt)

1. EU bans Iranian oil, Tehran responds with threats — EU governments agreed to an immediate ban on all new Iranian oil imports and transportation contracts, and sanctions against the country’s central bank, as the bloc looks to up the ante against Iran’s nuclear program. Also, the U.S., U.K. and France sent six warships through the Strait of Hormuz, which Iran has threatened with closure in response to the increased international measures.
2. Obama urges taxing the rich, reining in Wall Street — Obama unleashed a partisan attack over taxes and vowed no return to “the days when Wall Street was allowed to play by its own set of rules.” based on his State of the Union address. He called for a minimum 30% tax rate on those earning at least $1M and promised fresh investigations into the mortgage crisis. Obama’s other proposals included a minimum rate on companies’ overseas profits, a tax credit for firms moving jobs back home, and help for homeowners to get mortgage relief.
3. Rates To Stay Low Longer — the Fed said rates will remain near zero until at least late 2014, extending the timeline from mid-2013.
4. Creditors accept lower rate on Greek debt — according to the latest report from Dow Jones Newswires, Private-sector lenders are ready to accept a coupon rate of less than 4% on new Greek bonds that will be issued in a voluntary debt swap.

The week ahead — Economic data from Econoday.com:

“It’s allright to have butterflies in your stomach, just set them to fly in formation” — Colin Powell

1. IMF Seeks $500B Boost to Lending Resources — The International Monetary Fund is proposing to raise its lending capacity by as much as $500 billion to insulate the global economy against any worsening of Europe’s debt crisis. The IMF is pushing China, Brazil, Russia, India, Japan and oil-exporting nations to be the top contributors, according to a G-20 official, who spoke on condition of anonymity because the talks are private. The fund wants a deal struck at the Feb. 25- 26 meeting of G-20 finance ministers and central bankers in Mexico City, the official said.
2. China’s economy slows — China’s GDP growth slowed to an annualized 8.9%, the lowest expansion since mid-2009, but ahead of expectations of +8.7%.
3. Feds step up S&P mortgage ratings probe — Federal prosecutors are pushing forward with their probe of S&P’s (MHP) ratings of troubled mortgage securities, sources say, after a delay that led many to believe the investigation had been all but abandoned.
4. France, Spain hold strong bond auctions— France has passed its first test following S&P’s downgrade last week, attracting strong demand and obtaining lower yields in an auction of €7.965B ($10.28B) of medium-term bonds. Meanwhile, Spain sold over €6.6B ($8.46B) of bonds with maturities of up to 10 years, with demand beating forecast and yields roughly in line with expectations.
5. Greek Debt-Swap Talks Set for Second Day in Push for Accord — Greece’s government heads into a second day of talks with private creditors in a push to reach an accord that would slash the nation’s debt and avert a collapse of the economy. Greece needs to seal the agreement in time to meet a debt repayment of €14.5B ($18.5B) in March.

The week ahead — Economic data from Econoday.com:

“I made my money by selling too soon.” – Bernard Baruch

1. German economy shrank in Q4 as crisis weighs — according to Reuter, Germany showed first signs of feeling the pain from the euro zone’s debt crisis as the economy shrank in the last three month of 2011, despite outperforming its peers for main part of the year thanks to strong domestic demand and exports.
2. Saudis may not be able to counter effect of Iran sanctions — Saudi Arabia is reportedly nearing its oil output capacity limit and may have little room to respond to potential shortages caused by sanctions on Iran. Currently pumping just under a record 10M bpd, the country has an on-paper capacity of up to 12.5M bpd.
3. Romney gains momentum with New Hampshire win — Mitt Romney has taken another important step in gaining the GOP nomination for the presidency, comfortably winning the New Hampshire primary ahead of a crucial test in South Carolina next week.
4. S&P500 Approaching Technical Resistance — view the chart listed below

5. Sears loses source of ready cash flow — Sears (SHLD) has taken another hit after CIT Group said it will stop factoring accounts payable for it – cutting off a source of ready cash flow for the embattled retailer.
6. Yields fall sharply at Spanish, Italian debt sales — according to Reuter, The Spanish Treasury raised 10 billion euros ($12.7 billion) from the auction of three bonds, doubling its target of up to five billion, and yields dropped by about 1 percentage point. Italy also fared well, paying less than half what it did a month ago to sell one-year bills at its first auction of the year. A major reason for the success was that local banks used the ECB’s ultra-cheap lending to support the sale.
7. European Central Bank holds rates steady — The ECB Governing Council left its key lending rate at 1%, matching its historic low. The central bank also left the interest rate on its marginal lending facility unchanged at 1.75% and maintained the interest rate on its overnight deposit facility at 0.25%.
8. Hedge funds hunker down for Greek debt — according to Reuter, The deal asks creditors to voluntarily write down 50 percent of the notional value of their bond holdings. Hedge funds may opt out. The stakes for Greece are high. Without the deal, the international lenders will not bail Athens out a second time, which means it will likely default around March 20, when a 14.5 billion euro (12.1 billion pounds) bond falls due.
9. S&P hits euro zone with downgrades — late Friday (1/13/2012), Ratings agency Standard & Poor’s (S&P) cut France, Austria, Malta, Slovakia and Slovenia by one notch, stripping France and Austria of rare triple-A ratings that were key to their ability to support efforts to rescue struggling euro zone members. The ratings agency also downgraded by two notches Italy, Spain, Portugal and Cyprus. Portugal and Cyprus were cut to junk status.

The week ahead — Economic data from Econoday.com:

HAPPY NEW YEAR!!

1. Greece must clinch bailout deal or face euro exit-spokesman — Greece faces an exit from Europe’s common currency bloc unless it clinches a deal on a second, 130 billion euro bailout with its international lenders. EU, IMF and ECB inspectors are expected in Athens mid-January to flesh out the new bailout plan agreed in principle by EU leaders in October.
2. Tensions rise in Persian Gulf — Iran threatened Tuesday to take action if the U.S. Navy moves an aircraft carrier into the Gulf, Tehran’s most aggressive statement yet after weeks of saber-rattling as new U.S. and EU financial sanctions take a toll on its economy.
3. World’s Biggest Economies Face $7.6T Debt — Governments of the world’s leading economies have more than $7.6 trillion of debt maturing this year, with most facing a rise in borrowing costs. Japan leads the way with $3T, followed by the U.S. with $2.8T. Crucially, Italy will need to raise $428B and pay another $70B in interest.
4. Romney Wins Iowa — Romney edged out Rick Santorum, a conservative former Pennsylvania senator, by only eight votes in Iowa’s caucuses, the first presidential nominating contest of 2012, as each received about 25 percent of the vote.
5. France sells 8B euros of debt, 10-year yield rises — Marketwatch, The French government sold 8 billion euros ($10.3 billion) of various government bonds, including 4.02 billion euros of 10-year bonds. France’s debt agency said the 10-year auction attracted 6.61 billion euros of bids, producing a yield of 3.29%. That’s up from 3.18% in a December sale. Bids exceeded the amount sold 1.6 times, down from a bid-to-cover ratio of 3.1 in December.
6. Kodak faces Chapter 11 — Eastman Kodak (EK) plans to file for bankruptcy protection if efforts in the next few weeks to sell a horde of digital patents fall flat, The Wall Street Journal reports.
7. German industrial orders plummet — German new industrial orders for November have indicated more woe for the eurozone’s economic engine with a monthly fall of 4.8%, well below a rise of 5% in October and a forecast of -1.7%.
8. Iran to hold new naval exercises — Iran’s Revolutionary Guards will hold new naval exercises in the strategic Strait of Hormuz in February, the semiofficial Fars news agency reported.

The week ahead — Economic data from Econoday.com: