Morning Report

Vital Statistics:

Last Change Percent
S&P Futures 1261.3 17.8 1.43%
Eurostoxx Index 2379.1 36.630 1.56%
Oil (WTI) 102.34 1.380 1.37%
US Dollar Index (DXY) 78.375 -0.250 -0.32%
10 Year Govt Bond Yield 2.10% 0.07%

Markets are rallying on the new Italian austerity plan proposed by Mario Monti. Hit proposal includes 30 billion euros of emergency economic measures funded by property taxes, a tax on luxury goods, and a plan to tie pensions to worker contributions. Italian markets are reacting favorably, with the Mibtel up 3% and Italian government bond yields down 59 basis points to 6.09%. The S&P futures are up 18 points pre-market.

Merger Monday is back with a big deal in the cloud computing space: SAP AG is buying SuccessFactors (SFSF) in a $3.3 billion deal. They paid a handsome premium – 52% over Friday’s close. Whenever someone like SAP buys someone, the follow on question is “What will Larry do?” – meaning Larry Ellison of Oracle. The early betting seems to be Taleo (TLEO) which is up 16% pre-market.

As predicted Herman Cain threw in the towel over the weekend and endorsed Newt Gingrich. From what I hear on the Wall Street money raising front, Newt doesn’t even register. It is all going to go to Romney. That money sat on the sidelines hoping that Chris Christie would run, but has now coalesced around Romney. Lots of big fund raisers coming up for Romney. Given the implosion of all of his rivals, he has managed to stay pretty clean and hasn’t had to spend money yet.

16 Responses

  1. From Dealbook:"Buffeted by lackluster profits and turmoil in the global markets, Wall Street is bracing for one of the worst bonus seasons in recent memory. But in the alchemy of high finance, bankers are hoping to turn the slump to their advantage. Financial firms are preparing to dole out huge amounts of stock at depressed prices, the value of which could rise substantially in a few years. 'This year is the perfect situation where they can say it is a modest bonus season, but in the end, it could end up making many of them zillionaires,' said Jonathan R. Macey, a professor of corporate law and finance at Yale. 'Not all banks may do well in the long run, but most will.' "

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  2. The big "if" in all of this is "if" the banks don't need to raise more capital. If the value of their mortgage portfolio continues to decline, or if the Euro crisis coalesces into something worse, then they will need to raise capital again, and that will depress their stock prices for years to come.

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  3. Scott:I should've gone short. LOL

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  4. john:Yeah…I am a little bit surprised. But I still think you'll get another chance. We haven't seen the last of 3% long-bond, I don't think.

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  5. Making it up elsewhere. Oil is the key. It's a win-win situation. If Europe pulls through, it will rise, and even if Europe has isseus, the problems in the MIddle East are about to take on new urgency. I don't foresee any situation where we see anything more than a very temproary drop in price in the next 3-6 months.

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  6. Are you buying WTI or Brent?

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  7. Suppose you are a free trade exponent.Suppose you oppose government energy subsidies.Suppose the allegations in this lawsuit are true:http://www.csmonitor.com/Business/Latest-News-Wires/2011/1203/Renewable-energy-US-probe-protectionism-China-saysWhat would be your response? I assume it is not "roll over and play dead for China".Mine is to push hard for the tariffs, assuming again that the allegations are true.

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  8. More on Iran from the LA Times yesterday if anyone's interested.Like the deaths, the explosions have drawn special scrutiny in the think tanks of Washington, where Iran watchers have tracked reports of unexplained blasts in Iranian gas pipelines, oil installations and military facilities.In October, Iranian news services reported three such explosions in a 24-hour period. The blasts killed two people. Another large blast was reported last week in Esfahan, Iran's third-largest city.Some analysts suspect that the CIA and Israel's intelligence agency, Mossad, are involved, with possible help from the MEK, a fringe Iranian group that the State Department lists as a terrorist organization, although it has many allies in Washington's foreign policy establishment. Based in Iraq, the group is believed to have links to dissident networks inside Iran.Iran claims to have arrested dozens of CIA informants in recent months, and U.S. officials acknowledge that a handful of informants in Iran have been exposed. What they did, or where, is unknown. In October, U.S. officials announced that they had uncovered an Iranian plot to assassinate the Saudi ambassador in Washington.Some analysts caution against assuming the CIA is orchestrating all the attacks in Iran, arguing it gives U.S. intelligence far too much credit. But that doesn't preclude U.S. support for allied spy services in Europe and the Middle East that also target Iran. Still, there is more speculation at this point than hard evidence.A cyber expert who works closely with U.S. intelligence said he is convinced that Israel, not the U.S., launched the Stuxnet attack because U.S. government lawyers would not approve use of a computer virus that could spread far beyond the intended target, as Stuxnet apparently did. That caution, of course, presumes the lawyers knew the virus would spread, and that's not clear. The expert would not speak publicly about classified matters.Whether the White House would authorize the targeted killing of Iranian scientists is far from certain. An executive order signed by President Reagan in 1981 prohibits direct or indirect involvement in assassinations, although the term is not defined.President Obama has authorized the killing of Al Qaeda members and other suspected militants, including at least one U.S. citizen in Yemen.Some analysts claim that the U.S. would not back a bombing campaign that has killed Iranian workers at oil refineries and other civilian sites. It would amount to sponsoring terrorism, a charge Washington regularly levels at Tehran.

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  9. A cyber expert who works closely with U.S. intelligence said he is convinced that Israel, not the U.S., launched the Stuxnet attack because U.S. government lawyers would not approve use of a computer virus that could spread far beyond the intended target, as Stuxnet apparently did. That caution, of course, presumes the lawyers knew the virus would spread, and that's not clear. The people developing Stuxnet knew it would spread far beyond the intended target–everybody involved would have known, because that was the method of delivery of the payload. It would be like saying government planners didn't realize that planes would be used in the dropping of bombs when they signed off on bombs being dropped. The development and delivery of Stuxnet required a great deal of money, break in and theft of assets at US domestic companies, and tampering (probably involving physical break-ins) with a wide variety of vendors who would deal directly with the sorts of people who did development that would eventually touch nuclear facilities in Iran. Any domestic agency directly implicated would get in huge trouble, while I suspect Israel is largely and will remain largely untouchable on the issue. Also, the execution was amazing, spy-movie worthy stuff, and I'm not sure we're quite up to pulling off Stuxnet domestically. Whether the White House would authorize the targeted killing of Iranian scientists is far from certainAre they terrorists by some definition? Then, yes.

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  10. "Mine is to push hard for the tariffs, assuming again that the allegations are true."Considering that we will need them to finance out debt, even with the massive taxes coming and proposed,!is it really wise to antagonize the PRC?

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  11. I think so, if the allegations are true.If China can play by different rules and dump lower priced goods on the world market by cheating, without a response from the countries that play by the rules, we might as well shut the USA down now. [IMHO]

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  12. Mark,Do you think the increased cost of borrowing will be less than the losses from Chinese cheating? I'm all for making it more difficult to borrow by the way.

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  13. Latest on the Postal Service:"WASHINGTON — The cash-strapped U.S. Postal Service said Monday it is seeking to move quickly to close 252 mail processing centers and slow first-class delivery next spring, citing steadily declining mail volume.The cuts are part of $3 billion in reductions aimed at helping the agency avert bankruptcy next year. It would virtually eliminate the chance for stamped letters to arrive the next day, a change in first-class delivery standards that have been in place since 1971.The plant closures are expected to result in the elimination of roughly 28,000 jobs nationwide."Facing bankruptcy, US Postal Service plans unprecedented cuts to first-class mail next spring

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  14. Bret:Your namesake for the short term, WTI for the longer term. The turn around in the Seaway pipeline will pay huge dividends, but not immediately.

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  15. Regarding stuxnext, I'm no computer guy, but it's components have already spread far beyond Iran, even when they don't attack systems elsewhere. The architecture is being borrowed by other nations, and one of them will send it back to us, minus the built-in failsafes that currently make it only work in Iran.

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  16. john: but it's components have already spread far beyond Iran, even when they don't attack systems elsewhere.Again, that's part of the payload delivery design. It was inevitable. But they have to get into a lot of computers because they dependent on the infection happening several steps away from the initial infection point. And they knew it would infect numerous industrial machines and even end up infecting similar centrifuges in other countries (as they have, just without triggering the payload). They did what they could to make it clean up after itself and obscure the functionality, and the most pernicious parts arguably involve breaking into secure buildings and stealing ssl certificates, among other things, so I imagine the calculation was that it's eventual discovery would be a manageable threat. There are bits that should make it tough to duplicate–or duplicate in such a way that makes it worse than anything the Russian mob is developing on it's own. The architecture is being borrowed by other nations, and one of them will send it back to us, minus the built-in failsafes that currently make it only work in Iran.They can send it back, but it won't be easy. Also, the more general the execution, the more rapidly it will reveal itself, and the more rapidly it can be weeded out. It'll be tough to pull off a Stuxnet again–either against us, or anyone else (including Iran). That being said, I suspect it was Israel, not us, that actually delivered it. I think we would have been too preoccupied with the intentional infection of domestic companies, and the breaking into domestic companies to steal stuff . . . I dunno. I don't think it was the U.S.

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