“The worse a situation becomes the less it takes to turn it around, the bigger the upside.” — George Soros
1. News Corp. contagion spreading — U.K. MPs have been listening to police testimony about the hacking scandal at News Corp. (NWSA), which has widened to include other problematic practices and spread to The Sun and The Times newspapers. 2. China economic growth slows to 9.5% — China’s economy expanded a fraction faster than expected in the April-to-June quarter, while other data released last Wednesday suggested domestic conditions remain relatively upbeat, even as concerns spread over the resilience of the global economy. 3. Moody’s downgrades Ireland to “junk” — Moody’s Investors Service on Tuesday lowered Ireland’s foreign- and local-currency government bond ratings by one notch to non-investment grade of Ba1 from Baa3. 4. Moody’s Investors Service put the U.S. credit rating on review for possible downgrade — Moody’s has become the first ratings agency to place the U.S.’s AAA rating on review for a possible downgrade, citing the “rising possibility” that the $14.29T borrowing limit won’t be raised.
“Markets are constantly in a state of uncertainty and flux and money is make by discounting the obvious and betting on the unexpected” — George Soros
1. NY AG probes life insurers — New York AG Eric Schneiderman issued subpoenas to at least nine life insurers in an investigation into payouts for deceased customers, sources say, as the scrutiny of the industry grows. The insurers include MetLife (MET), Genworth Financial (GNW), Manulife Financial (MFC) and Prudential (PRU). 2. Moody’s: China’s bank ratings threatened on muni debt — Moody’s may go negative on its outlook for China’s banking system after it identified $540B of loan exposure to local governments beyond the $1.6T discovered by a national audit. 3. China raises interest rates — People’s Bank of China hikes lending and deposit rates by 0.25%, the third such tightening seen this year. 4. Portugal downgrade stokes contagion fears — a downgrade of Portugal’s credit rating to junk status put fears of another adverse turn in the euro-zone’s long-running debt crisis back on display. 5. ECB delivers rate hike — The European Central Bank delivered its second rate hike in three months, as expected, lifting its refi rate to 1.5% from 1.25% as investors seek clues on the pace of further moves and the central bank’s response to the euro zone’s ongoing debt crisis. 6. IMF to OK €3B tranche for Greece — the IMF is set to approve today transferring just over €3B ($4.3B) in loans to Greece to help it avoid a default, and is expected to discuss whether a second bailout should be dependent on private sector participation. 7. Deal could end ethanol tax break — a bipartisan trio of senators, including two from ethanol-producing states, agreed to repeal the $6B/year ethanol tax credit by the end of July. The deal, which must now be passed by Congress, could raise costs for ethanol blenders such as Valero Energy (VLO) and Marathon Oil (MRO), although it’s unlikely to reduce demand for corn.
“In the short-run, the market is a voting machine; in the long-run, the market is a weighing machine” — Benjamin Graham.
1. Lagarde named as new IMF chief — the IMF’s appointed French Finance Minister Christine Lagarde as the fund’s first ever female Managing Director. 2. Congress may increase self-regulation of investment advisors — Congress is considering replacing the SEC with the Financial Industry Regulatory Authority in overseeing almost 12,000 investment advisers who manage about $40T. 3. Greece passes austerity implementation law — the Greek parliament passed legislation implementing added austerity measures, the Associated Press reported, clearing the way for the debt-strapped nation to receive bailout funds seen as necessary to avoid a default. 4. B. of A. settlement — blue-chip bank agrees to settle mortgage-backed securities claims for $8.5 billion while making a $5.5 provision that will mean a second-quarter net loss. 5. Regulators to evaluate banks’ risk models — global banking regulators are preparing to assess how banks set risk weightings amid criticism that the firms’ calculations are inconsistent, a source said. The news comes a few days after regulators decided that the world’s largest banks will have to hold core Tier 1 capital of as much as 9.5% of their total risk-weighted assets. 6. Fed capped debit-card fees at $0.21 per transaction — this amount is almost double the original proposal of $0.12. The Fed will also give banks until Oct. 1 to comply with the new rules, instead of July 21. 7. ECB signals rate rise — the ECB signalled again it will begin raising interest rates next week from 1.25% after June CPI came in at 2.7%, well above the bank’s target of below 2% – ending speculation it might delay a hike in light of the Greek crisis and fears of contagion. 8. QE2 ends June 30 — the Fed ends its $600B bond-buying program with opinions mixed as to whether it was a success and whether another round of easing is likely to follow. The end of QE2 comes as growth has slowed, inflation has risen and unemployment remains above 9%, and leaves the Fed as the largest holder of Treasurys with around 17% of U.S. marketable debt. 9. China manufacturing growth slows further — China’s official Purchasing Managers’ Index slipped to 50.9 in June from 52.0 in May, just above the 50 mark that separates expansion from contraction, according to data released by the China Federation of Logistics and Purchasing and National Bureau of Statistics.
“Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars.” — Bernard Baruch
1. Regulators to increase embeds at banks — as part of efforts to prevent another financial crisis, the New York Fed and the Office of the Comptroller of the Currency are increasing the number of examiners who work at the offices of the banks they regulate. 2. Plane orders worth $20B announced in just one day — plane makers disclosed bookings for over 200 aircraft with a total value of more than $20B on the first day of the Paris Air Show. Airbus (EADSY.PK) led the charge, announcing several orders for its fuel-efficient A320neo jet, a competitor to Boeing’s (BA) 737. 3. FTC probes oil trading — the FTC is investigating whether oil companies, refiners and traders have engaged in anticompetitive practices or manipulated crude oil prices. The inquiry follows soaring refining margins and reports that refiners were using less of their capacity than they did last year, as well as other developments. 4. FOMC cuts 2011 GDP growth to 2.7%-2.9% from a 3.1%-3.3% — Ben Bernanke said the Fed doesn’t “have a precise read on why this slower pace of growth is persisting,” adding that weak housing and problems in the banking system might be “more persistent than we thought.” At the meeting, the FOMC kept rates at 0%-0.25% and said it would maintain this level for an ‘extended period.’ The Fed also confirmed it would end its bond-buying program on schedule, sending the dollar higher. 5. S&P 500 and sector P/E ratio charts — recent downturn for the S&P 500 has caused its P/E ratio (trailing 12-month) to drop from nearly 16 to 14.74. Below chart courtesy from the Bespoke Investment Group. 6. EU to provide Greece with funds — the EU and IMF have pledged to provide Greece with a €12B tranche of its bailout to stop it from defaulting in July after refusing to allow the country to soften its austerity measures. Greek Prime Minister George Papandreou now needs to get the program passed through parliament on Thursday next week. EU heads of government, who have been meeting in Brussels, are also nearing approval of a new rescue package to take Athens until the end of 2014. 7. Trading in Italian banks halted — trading in Italian bank stocks was suspended briefly following steep drops after Moody’s yesterday put them on negative outlook. 8. House passes patent bill — the House yesterday approved a bill that favors inventors who file their patent applications first as opposed to the current system that operates on a first-to-invent basis. The change will bring the U.S. into line with Europe and Japan. 9. IEA to release oil reserves — the 28-nation Int’l Energy Agency will release 60 mil. barrels from strategic reserves over 30 days, to cut prices and lift flagging growth just as fiscal and monetary stimulus end.
“The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell.” – Benjamin Graham.
1. China’s consumer inflation hits 5.5% — Chinese consumer inflation accelerated to a three-year high in May, in line with expectations and bolstering the case for tighter credit conditions to help contain prices. 2. BOJ keeps rate at zero, expands lending facility — the Bank of Japan has kept its key rate at 0%-0.1% and slightly raised its outlook. “Japan’s economy continues to face downward pressure, mainly on the production side due to the effects of the earthquake disaster, but is showing some signs of picking up,” 3. Banks get another month to fix foreclosure practices — regulators have given leading mortgage servicers a further 30 days to submit plans for revamping their business practices, in particular loan modifications and foreclosures. The banks, which include Bank of America (BAC), Wells Fargo (WFC), JPMorgan (JPM) and Citigroup (C), also need to identify and compensate borrowers who may have suffered financial harm due to improper repossessions. 4. Fed mulls adopting inflation goal — Fed officials are in talks about setting an explicit inflation target, beyond the theoretical debates the FOMC has held on the issue for over a decade, sources said. Ben Bernanke has long supported such a strategy, and it is practiced by central banks around the world, including in the U.K. and Canada. 5. India hikes interest rates by quarter point — the Reserve Bank of India on Thursday hiked interest rates for the tenth time in 15 months, lifting its key repo rate by a quarter point to 7.50% as it noted inflation pressures persisted even amid recent signs of cooling in the economy. 6. SEC may charge ratings agencies — the SEC may bring civil fraud charges against credit-rating companies for their role in the financial crisis, sources said. The regulator is investigating S&P (MHP) and Moody’s (MCO), and is focusing on whether the agencies committed fraud by not doing the research necessary to adequately rate the subprime mortgages and other loans that underpinned mortgage-bond deals. 7. Biggest banks set for higher capital requirements — the world’s largest banks are facing an extra capital requirement of 2.5% of their assets that would be on top of the ‘Basel III’ minimum of 7% set by regulators last year. Sources said the banks include Citigroup (C), JPMorgan (JPM), Bank of America (BAC), HSBC (HBC) and Barclays (BCS). 8. Latest sentiment figures from the American Association of Individual Investors (AAII), Bullish Sentiment shows a modest uptick; However, less than a third of investors are currently in the bullish camp (29%), which is less than half the levels we saw towards the end of 2010. Chart courtesy from the Bespoke Investment Group. 9. Market short-Term oversold — chart below displays the VIX (fear indicator). VIX measures of the implied volatility of S&P 500 index options.
“The problem with socialism is that eventually you run out of other people’s money [to spend].” — Margaret Thatcher
1. Greece’s Q1 GDP grew at a slower than expected 0.2%, after shrinking for four consecutive quarters. On a year-over-year basis GDP growth declined 5.5%. Investment plunged 19.2%. 2. Goldman the subject of yet another probe — the SEC is investigating whether Goldman Sachs (GS) and other major banks may have broken bribery laws in dealings with Libya’s sovereign-wealth fund, sources said. Officials are scrutinizing a $50M fee Goldman offered to pay the fund as part of a proposal to help the latter recoup losses of 98% on $1.3B that it invested with the bank. 3. Debt talks to continue as Fitch warns of downgrade — Congressional leaders and White House officials met last Wed. to continue talks on raising the U.S.’s $14.3T borrowing limit and cutting the deficit, a day after Fitch became the third ratings agency to threaten to downgrade the government’s credit status if the ceiling isn’t lifted. Republicans and Democrats have until August 2 to reach a deal or risk the U.S. defaulting. 4. Fed now largest holder of U.S. Treasurys — following its multiple quantitative easing operations, the Fed surpassed China as the largest holder of U.S. Treasurys at the end of the first quarter. By the time QEII ends this month, the Fed will hold 16% of U.S. paper vs. 12% for China. 5. AAII Sentiment Survey: Bearish Sentiment Surges to 47.7% — this is the lowest level of optimism recorded since August 26, 2010. Bullish sentiment has now been below its historical average for eight consecutive weeks. 6. Notable video from Jim Rogers– courtesy from MarketWatch.
“When I have to depend upon HOPE in a trade, I get out of it” — Jessie Livermore
1. S&P lowers Italy’s credit-rating outlook — Standard & Poor’s Ratings Services late last week lowered its outlook on Italy’s A-plus sovereign credit rating from stable to negative, citing potential political gridlock that could derail the government’s plan to balance its budget by 2014. 2. Greek PM rules out restructuring — Greek Prime Minister George Papandreou was due to hold a cabinet meeting today about a new four-year fiscal plan to reduce the country’s €340B ($484B) of sovereign debt after yesterday ruling out a restructuring of that debt. 3. Moody’s considering downgrades for U.K. banks — Moody’s is placing 14 U.K. banks on review for downgrades, including Lloyds (LYG) and Royal Bank of Scotland (RBS), due to the authorities indicating that they will be less likely to bail out the banks in the future. The rating agency also changed Barclays’ (BCS) outlook to negative and maintained the same prognosis for HSBC (HBC). 4. Pressure on banks from probes intensifies — despite their protestations of innocence, the scrutiny on banks by the authorities continues to increase. The SEC is examining whether Bank of New York Mellon (BK) and State Street (STT) fairly charged pension-fund clients for currency trading, a source said. The probe follows investigations by the Justice Department and three state attorney generals. Meanwhile, other sources said New York AG Eric Schneiderman has extended his probe into mortgage practices at leading banks to include Royal Bank of Scotland (RBS), UBS (UBS), JPMorgan Chase (JPM) and Deutsche Bank (DB), bringing to seven the number of firms under scrutiny. 5. First-quarter GDP growth remains at 1.8% — In the first quarter, the U.S. economy expanded at the same 1.8% clip that was initially forecast, the Commerce Department said in its second estimate of quarterly gross domestic product released Thursday. The second estimate comes in well below expectations of 2.2%. 6. Foreclosure sales tick higher — sales of homes in foreclosure rose to 28% of all home sales in Q1, nearly six-times as much as in a typical healthy housing market. “It’s an astronomically high number,” RealtyTrac’s Rick Sharga said, though it is down from a peak of 37.4% in 2009. 7. Latest sentiment figures from the American Association of Individual Investors (AAII), bullish sentiment declined from 26.7% to 25.6% — chart courtesy from the Bespoke Investment Group.
“New Indicator:CFO Magazine gave Excellence awards to Worldcom’s Scott Sullivan (1998), Enron’s Andrew Fastow (1999), and to Tyco’s Mark Swartz (2000). All were subsequently indicted” — R. Lowenstein
1. Strauss-Kahn arrest clouds Greek bailout talks — Dominique Strauss-Kahn, head of the IMF, was arraigned in Manhattan attempted rape charges. 2. U.S. hits $14.3 trillion debt limit — the government maxed out its borrowing ability, raising fears of a US default. To stave off a cash shortage, Treasury Sec’y Timothy Geithner diverted money to be invested in two big gov’t pensions for use elsewhere. He warned the US faces default by Aug 2 2011 if the debt ceiling isn’t raised. 3. Strauss-Kahn steps down as head of IMF — Dominique Strauss-Kahn has resigned as managing director of the IMF following his arrest on sex-assault charges in the U.S. John Lipsky, the organization’s first deputy managing director, remains as the acting head. 4. Japan slides back into recession — Japan’s GDP fell 0.9% in Q1 2011 from the previous quarter as the earthquake, tsunami and nuclear crisis in March hurt business and consumer spending as well as supply chains. The fall was greater than a forecast drop of 0.5% and represented a 3.7% annualized decline. With GDP contracting 0.8% in Q4 2010 from the previous period, Japan officially entered recession in Q1. 5. European Central Bank threatens to pull the plug on Greek lending — The European Central Bank has threatened to stop lending to banks using Greek government bonds as collateral if Athens changes the terms of the debt, a move which could bring down the country’s banking system.
“With enough inside information and a million dollars, you can go broke in a year.” – Warren Buffet
1. Standard & Poor’s downgrades Greece’s rating — Standard & Poor’s Ratings Services downgraded Greece’s credit rating, dealing another blow to the debt-laden European nation. S&P lowered its long- and short-term ratings on Greece to B and C, respectively, from BB- and B previously. The ratings remain on credit watch with negative implications. 2. China hikes reserve requirement ratio for banks — The People’s Bank of China lifted the ratio of funds domestic banks must set aside as reserves on May 12, the fifth such hike this year amid persistent inflation concerns. 3. Finland approves Portugal aid plan — Finland’s caretaker government has won support from the opposition Social Democratic Party that enables it to approve the €78B ($112.4B) EU-IMF bailout for Portugal. 4. Deficit on course to exceed $1T again — a 45% year-on-year increase in tax revenues in April couldn’t prevent a deficit of $40.5B for the month, putting annual net spending on track to pass $1T for the third year in a row. The deficit is set to reach $1.4T this year, up from $1.29T in 2010. 5. House to propose bill to replace Fannie and Freddie — a bipartisan-sponsored bill set to debut in the House today would replace Fannie Mae and Freddie Mac with at least five private companies that would issue mortgage-backed securities with explicit federal guarantees.
“Commodity takes the stairs up and the elevator down” — anonymous
1. President Obama announced that the United States has killed Osama bin Laden, the leader of al Qaeda. 2. India steps up rate-hike pace to curb inflation — The Reserve Bank of India on Tuesday hiked interest rates by a larger-than-expected 50 basis points, saying that containing inflation has become more important than short-term growth. 3. Australia keeps interest rates on hold — The Reserve Bank of Australia Tuesday kept its key cash rate on hold 4.75%, a level it has been at since November. 4. U.S. gets three more weeks to avoid default — the Treasury will begin to take ‘extraordinary measures’ on Friday that, along with better-than-expected tax revenues, will extend by three weeks the date at which the U.S. will hit its $14.29T debt ceiling. 5. Portugal secures €78B bailout — Portugal has reached a deal with the EU and IMF for a €78B ($116B) three-year bailout that sets a target of reducing the budget deficit to 3% of GDP by 2013 from 9.1% last year.
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