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U.S. Equity Futures Mixed, European Markets Lower on Final Day of UK in the EU; U.S. Imposed New Tariffs Against the EU as Part of Civil Aircraft Dispute

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ECB Says Euro-Area Banks to Repay 0.65B Euros of 3-Year LTRO Loans Next Week

<div class="widget-wrapper"><a class="Covestor_hook" href="http://covestor.com/vista-investment-management/core-holding"> </a>
<script class="Covestor_injector" type="text/javascript" src="http://widgets.covestor.com/chart/vista-investment-management/core-holding"></script></div>
<a href="http://blog.covestor.com/content/2011/08/VistaIM.jpg"><img class="alignleft size-full wp-image-11630" title="VistaIM" src="http://blog.covestor.com/content/2011/08/VistaIM.jpg" alt="" width="127" height="154" /></a>Author: <a href="http://covestor.com/vista-investment-management">John Frankola, Vista Investment Management</a>
Covestor models: <a href="http://covestor.com/vista-investment-management/core-holding">Core Holding</a>, <a href="http://covestor.com/vista-investment-management/core-equity">Core Equity</a>
<a id="internal-source-marker_0.8915034154533844" href="http://www.bloomberg.com/markets/stocks/">Equity markets</a> rallied strongly in the first quarter of 2012 as the US economy continued to show signs of improvement and fears of a debt crisis in Europe subsided. The S&amp;P 500 Index generated  a 12.6% total return for the quarter. It was the <a href="http://blogs.wsj.com/marketbeat/2012/03/30/thats-a-wrap-stocks-register-record-first-quarter/">best quarterly performance </a>since the third quarter of 2009 and the strongest first quarter since 1998.  It was the second quarter in a row which produced double-digit gains. In the past six months the <a href="http://www.bloomberg.com/quote/SPX:IND">S&amp;P 500</a> has risen 25.9%.
However, those gains primarily represent a recovery from bear market territory.  As can be seen in the table below, returns for the one-year period are single digit for S&amp;P 500 and negative for the other indices.
<img src="https://lh3.googleusercontent.com/afkcsMtPUNaYIFJG_47rQojtXu2GzTjLh8yEN2ekEnOwkVUtl_Qm0w17w70xMBoGItvEfYArkFeB4pkUWpn3AI0pZ__ScllAeGCgfKBm2gJwjHbxn_A" alt="" width="692px;" height="198px;" />
The mixed performance and wild swings in equity prices over the last 12 months primarily reflect disappointing economic results for most major economies. According to the <a href="http://online.wsj.com/article/SB10001424052970203824904577215143354029590.html">Wall Street Journal Economic Forecast Survey</a>, at this time last year economists were forecasting US GDP growth of 3.5% for 2011. Actual growth was just 1.6%. European Union (<a class="ticker" href="/stock/eu#">EU</a>) GDP grew at 1.5% in 2011, with Germany's 3.0% growth (20% of EU GDP) helping to offset weakness in the United Kingdom (+0.8%), Italy (+0.4%), Spain (+0.7%), Greece (-6.8%), and Portugal (-1.6%). Emerging market economic growth slowed as well. According to the <a href="http://www.imf.org/external/index.htm">International Monetary Fund</a>, emerging market GDP growth declined from 7.3% in 2010 to 6.4% in 2011.
The recovery in stock prices from the lows of last fall seems to reflect that risk of another global financial meltdown has been significantly reduced by actions taken to resolve the European sovereign debt crisis. However, numerous other concerns persist. Global economic growth remains weak and unemployment in most western economies is above acceptable levels. Government deficits and debt remain high. Rising oil and gasoline prices pose a threat to further economic growth. Geopolitical tensions, especially related to Iran's nuclear program and a possible preemptive attack by Israel, represent a risk to markets.
One of the more positive trends in the first quarter was a significant reduction in <a href="http://finance.yahoo.com/q?s=%5EVIX">volatility</a> – especially negative volatility. During the last five months of 2011, the S&amp;P 500 Index closed 2% higher or lower than the previous day's closing price on 30% of all trading days. In the first quarter, there were no days when the market moved more than 2%. There were just five days when the market moved by more than 1% - and four of those days the market closed higher. Because most investors see volatility as a significant investment risk, the lower volatility likely helped to bolster investor sentiment.
In addition to lower volatility supporting the market, I see the potential for three other major trends to provide positive market support over the near and long term.
Higher stock prices provide a positive wealth effect for investors, which should be stimulative for the economy. The Great Recession and collapse of the stock market had a negative wealth effect. Many investors deferred purchases as their portfolios shrunk. As investors see their net worth advance, they are more likely to replace an old car, buy a home, go on a vacation, or make a major purchase. In addition, higher stocks should produce higher tax revenues related to capital gains and allow more individuals to retire (opening up jobs in the work force).
As investors regain faith in the stock market, money is likely to shift from fixed income and money market investments back into equities. With the <a href="http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/">10-year Treasury bond</a> yielding just 2.2% and money markets funds yielding close to 0%, investors are likely to seek out higher returns in equities. The Investment Company Institute <a href="http://www.ici.org/">(<a class="ticker" href="/stock/ici#">ICI</a>)</a> reports that there is currently $2.6 trillion invested in money market mutual funds – all this money earning next to nothing.
Housing prices declined for the <a href="http://www.amosoproperties.com/blog/entry/2817243/home-prices-down-for-fifth-consecutive-year">fifth consecutive year</a> in 2011. The current economic recovery has occurred without any help from the housing industry. Economists are currently forecasting flat housing prices for 2012. A stabilization or modest increase in housing prices should have an extremely positive impact on the economy and stock market.
Fixed income investments generated modest returns in the first quarter as interest rates nudged higher. The <a href="http://en.wikipedia.org/wiki/Barclays_Capital_Aggregate_Bond_Index">BarCap Aggregate Bond Index</a>, which measures the performance of the taxable bond market, generated a 0.3% return during the quarter. <a href="http://etfdb.com/index/barclays-capital-municipal-bond-index/">The BarCap Municipal Bond Index</a> produced a 1.8% return. The yield on the benchmark 10-year Treasury bond increased from 1.88% to 2.22% during the quarter.
Fixed income investments will likely suffer as the economy and stock market recover. Having served as a safe haven during a period of slow growth and high uncertainty, money is likely to shift out of this investment class as investors accept greater risk for the possibility of higher returns.
Clearly, the general public is still hesitant to put money into the stock market considering the weak performance of the last 5 and 10-year periods and lingering risks to the global economic recovery. However, this caution has kept equity investments in a reasonably-valued range, which should allow for attractive returns for investors with a long-term focus.
Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at <a href="http://site.covestor.com/help/disclosures" title="http://site.covestor.com/help/disclosures">http://site.covestor.com/help/disclosures</a>. For information about Covestor and its services, go to <a href="http://covestor.com" title="http://covestor.com">http://covestor.com</a> or contact Covestor Client Services at (866) 825-3005, x703.

A virtuous economic cycle may boost stocks higher

Threshold Pharmaceuticals, Inc. (NASDAQ: <a class="ticker" href="/stock/thld#NASDAQ">THLD</a>) today announced the European Commission has granted Orphan Drug Designation for TH-302, a hypoxia-targeted drug, for the treatment of soft tissue sarcoma. 

"Receiving orphan designation for TH-302 in soft tissue sarcoma in the European Union (<a class="ticker" href="/stock/eu#">EU</a>) is an important achievement for Threshold," said Barry Selick, Ph.D., CEO of Threshold. "Soft tissue sarcoma is an aggressive form of cancer for which there is a significant unmet medical need. TH-302 was designed to selectively target hypoxic regions within tumors, which are believed to not be effectively treated with current therapy. The Orphan Drug Designation was granted as early studies of TH-302 have shown that it might be of significant benefit for patients with soft tissue sarcoma when combined with doxorubicin."

THLD

Threshold Pharmaceuticals' TH-302 Receives Orphan Drug Designation in the European Union for the Treatment of Soft Tissue Sarcoma  

Greece is edging closer to having enough of the private sector holders of the country's outstanding debt accept a debt restructuring deal would see the face value of their bonds take a major, while reducing the financial burden of the nearly bankrupt Greek government. The agreement is needed in order for Greece to avoid a potentially catastrophic default by receiving the latest round of bailout funds from the the European Union (<a class="ticker" href="/stock/eu#">EU</a>) and the International Monetary Fund (<a class="ticker" href="/stock/imf#">IMF</a>).

A group of 30 of Greece's largest private sector creditors who hold nearly 40 percent of Greece's outstanding debt announced on Wednesday that they would participate in the debt swap, bringing Greece closer to its goal of at least 75 percent participation in the debt swap. With Greece's largest banks and most of the country's pension funds now saying that they will agree to the deal as well, Bloomberg news reported today that 58 percent of the private sector holders of Greek debt plan to agree to the debt swap so far.

Greek Finance Minister Evangelos Venizelos complained that the Greek pension funds that refused to participate in the deal were sending a negative message to international investors but it is unlikely that the Greek hold outs will have much influence on other bond holders' decisions. Despite the Greek pension funds that are still refusing to accept the debt swap, the wide spread acceptance among major banks, insurance companies, pension funds and other institutional investors makes it more likely that Greece will reach its minimum goal of 75% voluntary participation in the deal by tomorrow's deadline.

The Greek government has warned hold out owners of Greek debt who are subject to Greek law that it could use collective action clauses to force them to accept the terms of the debt swap. However, a minority of about 10% of the private sector holders of Greek debt are subject to British or international, and many of these bond holders could decide against participating in the debt swap in hopes of getting a better deal.

The European Union and International Monetary Fund agreed to loan Greece another 130 billion euros last month but euro zone finance ministers made several demands that they say must be met before the funds are released, including private sector acceptance of the debt swap that would see the face value of the investors' bonds reduced drastically.

Euro zone finance ministers have said that Greece must come to a debt restructuring agreement with the holders of the country's debt, in which they accept a "voluntary" debt swap, by Thursday night in London before they will release the latest round of bailout funds to the troubled country. Greece needs to receive the bailout funds in order to avoid an all out default. The euro zone finance ministers plan to announce their decision during a conference call on Friday

The markets will surely react negatively if Greece doesn't get the voluntary participation in the debt swap that is required for the euro zone finance ministers to continue to prop up the Greek government.

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General

Greece Closer To A Deal With Private Sector Bond Holders

Irish Prime Minister Enda Kenny announced today that the Irish people will be given the choice of whether or not to accept the European Union's new fiscal treaty. The fiscal compact requires national budgets to either be in balance or be in surplus and contains correction mechanisms that will automatically go into effect if the balanced budget rule is broken.

Kenny previously said that he would sign the fiscal compact but later decided that he would instead put it to a vote because of legal advice he received from Attorney General Maire Whelan. Prime Minister Kenny was notified by Attorney General Whelan that because the new fiscal treaty would require constitutional changes, a referendum must be called in order to pass it.

The Irish referendum is the latest obstacle faced by European leaders who are trying to avert a financial disaster from destroying the euro zone. Important European Union treaty changes have already been defeated in Irish referendums twice in the last ten years, so it's not out of the question that the Irish could say no to the new fiscal treaty. Although Irish leaders managed to pass the referendums in subsequent attempts, a no vote on the fiscal compact from Ireland could stun the markets.

Because passage of the treaty is considered vital to the euro zone's survival, European leaders decided that the treaty only needs 12 of the 17 euro zone countries to approve it in order for it to go into effect. Although the new European Union (<a class="ticker" href="/stock/eu#">EU</a>) fiscal treaty only needs to be approved by 12 of the euro zone's 17 member states, a no vote could be a precursor to Ireland leaving the euro zone.

An important provision in the new treaty says that any country that votes against the new treaty will not be allowed to receive any financial aid from the European Stability Mechanism bailout fund. Failure to pass the referendum could see Ireland's borrowing costs skyrocket, which would increase the chances of an Irish default.

Irish supporters of the fiscal treaty are calling it a vote on Ireland's membership of the euro zone. Polls suggest that a majority of the Irish people support the treaty but the margin is slim and could easily shift before the vote takes place on a yet to be announced date.

Opponents of the fiscal treaty argue that it could lead to more of the painful austerity measures that troubled euro zone countries were forced to accept in order to receive bailout funds. The austerity measures are unpopular wherever they are put in place because the combination of tax increases and spending cuts limit the chances of economic growth and help push some countries further into recession.

Although the Irish vote by itself won't determine the future of the euro zone, investors should pay close attention to the results because they could signal the direction that the euro zone is headed.

 

<div id="action-items">ACTION ITEMS: Bullish: Traders who believe that the Irish referendum will pass might want to consider the following trades: <ul><li>European banking stocks like Deutsche Bank (NYSE: <a class="ticker" href="/stock/db#NYSE">DB</a>), Barclays (NYSE: <a class="ticker" href="/stock/bcs#NYSE">BCS</a>) and Banco Santander (NYSE: <a class="ticker" href="/stock/std#NYSE">STD</a>), as well as an ETF like the CurrencyShares Euro Trust (NYSE: <a class="ticker" href="/stock/fxe#NYSE">FXE</a>), could all benefit if the Irish people approve the new fiscal treaty. With the future of the euro zone facing less risk, European banking stocks and the euro could climb higher.</li></ul>Bearish: Traders who believe that the Irish will once again vote down a referendum on Europe may consider alternative positions: <ul><li>The ProShares UltraShort Euro (NYSE: <a class="ticker" href="/stock/euo#NYSE">EUO</a>) and the ProShares UltraShort MSCI Europe (NYSE: <a class="ticker" href="/stock/epv#NYSE">EPV</a>) ETFs could both see their share prices move higher if an Irish vote of no makes investors feel that the euro's days are numbered.</li></ul>Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.</div>

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Ireland to Hold Vote on EU Fiscal Treaty

<a href="http://feedads.g.doubleclick.net/~a/inY_GeTk_MVHF70EhhKU9gJe-w0/0/da"><img src="http://feedads.g.doubleclick.net/~a/inY_GeTk_MVHF70EhhKU9gJe-w0/0/di" alt="di" /></a> <a href="http://feedads.g.doubleclick.net/~a/inY_GeTk_MVHF70EhhKU9gJe-w0/1/da"><img src="http://feedads.g.doubleclick.net/~a/inY_GeTk_MVHF70EhhKU9gJe-w0/1/di" alt="di" /></a>By <a href="http://www.econmatters.com/search/label/EconMatters">EconMatters</a> Oil futures spiked more than 2% in one day to their highest level in nine months on Tuesday Feb. 21.  WTI front month contract closed at $105.84, while Brent ended at $121.66 on ICE, primarily on investors fear of potential conflict over the escalating tensions between the US, Europe, Israel, and Iran.  A second Greek bailout deal of €130bn (£110bn; $170bn) also helped to inject some optimism into the market (which would seem totally mis-placed as we may need to <a href="http://www.econmatters.com/2012/02/latest-leaked-psi-terms-greek-could-re.html">relive this Greek drama in two years</a>).  Nevertheless, the fact remains crude oil market supply and demand has not changed a bit to warrant a 2%+ price jump in one day. The U.S. and its allies believe Iran is building nuclear weapons, which Tehran has vehemently denied. Last week, the European Union (<a class="ticker" href="/stock/eu#">EU</a>) imposed a ban on Iran oil imports effective July 1, and froze the assets of its central bank. In December, the U.S. said it would "blacklist" companies in the U.S. market if they do business with Iran's central bank. In retaliation, over the weekend, Iran announced that it <a href="http://www.econmatters.com/2012/02/iran-halts-oil-sales-to-british-and.html">halted oil exports to France and the United Kingdom</a> and warned European companies that it would halt their supplies unless they sign long-term contracts.  However, France and UK do not import a significant portion of crude oil from Iran, and Europe could most likely still get alternative crude supplies from other sources like Saudi, or Russia. Despite Iran oil ministry spokesman Alireza Nikzad's statement that "we will sell our oil to new customers," according to Financial Times, <a href="http://www.upstreamonline.com/live/article304172.ece">Tehran is “struggling” to find a new buyer</a> for the estimated 500,000 barrels of oil per day left as surplus from its decision to halt sales to France and the UK.  And another<a href="http://www.reuters.com/article/2012/02/09/us-iran-wheat-idUSTRE8180SF20120209"> Reuters report</a> quoting commodities traders that 

<blockquote>"Iran is turning to barter - offering gold bullion in overseas vaults or tankerloads of oil - in return for food as new financial sanctions have hurt its ability to import basic staples for its 74 million people....Difficulty paying for urgent import needs has contributed to sharp rises in the prices of basic foodstuffs, causing hardship for Iranians."</blockquote>

<table><tbody><tr><td><a href="http://1.bp.blogspot.com/-2QRLmTsfNew/T0Rro2XLGXI/AAAAAAAAA2s/EjEE3yLxvCk/s1600/iran-oil-exports.jpg" style="margin-left:auto;margin-right:auto;"><img height="360" src="http://1.bp.blogspot.com/-2QRLmTsfNew/T0Rro2XLGXI/AAAAAAAAA2s/EjEE3yLxvCk/s640/iran-oil-exports.jpg" width="640" alt="iran-oil-exports.jpg" /></a></td></tr><tr><td>Chart Source: <a href="http://globalpublicsquare.blogs.cnn.com/2012/01/14/lindsay-where-iran-exports-oil/">CNN</a></td></tr></tbody></table>Earlier report <a href="http://www.tokyotimes.co.jp/2012/india-defies-sanctions-wont-cut-iran-oil-imports/">from AP</a> suggested that Iran still had support from its major Asian buyers as India has joined China in saying it will not cut back on oil imports from Iran.  But the latest development, according to Reuters, is that China, India and Japan<a href="http://www.reuters.com/article/2012/02/21/us-iran-asia-crude-idUSTRE81K0ZU20120221"> are now planning cuts</a> of at least 10% in Iranian crude imports as tightening U.S. sanctions make it difficult to keep doing business with Iran. China, India and Japan together buy about 45% of Iran's crude exports.  So the cut-back on Iranian oil imports from these three big clients will be yet another serious blow to Iran. Iran is OPEC's second-largest producer after Saudi Arabia, and exports 2.5 million barrels of oil per day, about 3% of world supplies. About 500,000 barrels go to Europe and most of the rest goes to China, India, Japan and South Korea. Earlier this month, the International Energy Agency <a href="http://online.wsj.com/article/SB10001424052970203824904577214710375566808.html">cut its 2012 oil-demand growth forecast</a> for the second time in just a few weeks and said the decrease in demand would leave the oil market with enough flexibility to adjust to any loss of Iranian crude exports when sanctions take effect in July.  So similar to the "<a href="http://www.econmatters.com/2011/04/red-herring-libya-oil-export-offline.html">Libyan sweet crude supply crisis</a>" of last year, even if oil exports from Iran goes completely off line, the shortfall would not be such a crisis as priced in right now by investor's fear. However, the reality remains that crude oil prices get disproportionately distorted and detached from supply and demand fundamentals whenever there's a whiff of geopolitical tension and conflict. Right now, it seems Iran could be the one blinks first (war or peace) with multiple sanctions putting mounting pressure on the country's basic necessity imports, while hurting its oil revenue.  But with Iran still a volatile unknown, analysts say oil could continue to rise and expect to see gasoline at $4 a gallon, and some even see $5, heading into the summer driving season. If the analysts were right, $4 or $5 gasoline by summer time would certainly be detrimental to the nascent U.S. recovery, and debt-troubled Europe, which could bring demand destruction pushing oil prices back down. Crude oil prices or Iran, no matter who blinks first, one thing for certain is that consumers most likely will end up footing the bill of higher fuel costs, and world economy would suffer as a whole in the process as well. © <a href="http://www.econmatters.com/">EconMatters</a> All Rights Reserved | <a href="http://www.facebook.com/EconMatters">Facebook</a> | <a href="http://twitter.com/#!/EconMatters">Twitter</a> | <a href="http://feedburner.google.com/fb/a/mailverify?uri=EconForecast">Post Alert</a> | <a href="http://astore.amazon.com/econforecast-20?_encoding=UTF8&amp;node=25">Kindle</a>

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Crude Oil vs. Iran: Who Blinks First?

Amylin
Pharmaceuticals, Inc. (Nasdaq: <a class="ticker" href="/stock/amln#Nasdaq">AMLN</a>) and Eli Lilly and Company (NYSE: <a class="ticker" href="/stock/lly#NYSE">LLY</a>)
today announced that the Committee for Medicinal Products for Human Use (<a class="ticker" href="/stock/chmp#">CHMP</a>)
of the European Medicines Agency (<a class="ticker" href="/stock/ema#">EMA</a>) has issued a positive opinion in the
European Union (<a class="ticker" href="/stock/eu#">EU</a>) for the expanded use of BYETTA® (exenatide twice-daily) as
an add-on therapy to basal insulin, with or without metformin and/or Actos®
(pioglitazone), for the treatment of type 2 diabetes in adults who have not
achieved adequate glycemic control with these agents. The CHMP's decision is
now referred for final action to the European Commission, which has the
authority to approve medicines for the EU. The Commission usually decides on
CHMP recommendations within two to three months.

AMLN

CHMP

CHMP Recommends Approval of BYETTA for Use With Basal Insulin

Guided Therapeutics, Inc. (OTCBB: <a class="ticker" href="/stock/gthp#OTCBB">GTHP</a>) (OTCQB: GTHP) today announced that it has submitted the application for CE Mark approval for LuViva® Advanced Cervical Scan. The CE Mark is required to market LuViva in the 27 nations that comprise the European Union (<a class="ticker" href="/stock/eu#">EU</a>). 

"The filing of our CE Mark approval application for LuViva is a significant milestone for the company and puts us on track, when approved, for a full-scale European launch in the third quarter of this year," said Mark L. Faupel, Ph.D., president and CEO of Guided Therapeutics. “We view the international market segment as significant opportunity for LuViva because of the product's versatility and ability to adapt to the various diagnostic routines in different countries.” 

Distribution agreements are currently in various stages of completion for several EU and Asian countries, including Germany, the United Kingdom and several South Asian countries. The company also has initial orders for clinical and demonstrations units in hand for European and Asian countries.

GTHP

Guided Therapeutics Submits CE Mark Approval Application for LuViva® Advanced Cervical Scan   

<a title="just measures" href="http://justmeasurescs.com" target="_blank"><img src="http://johngaltfla.com/wordpress/wp-content/uploads/2011/05/jm800.jpg" alt="" width="460" height="110" border="0" /></a>
By John Galt 
December 18, 2011 – 18:59 ET
Just wow.
Besides the obvious extremist rhetoric expressed by Ambrose Evans-Pritchard, the warning he issues to the extreme leftist loons of Socialist Europe is best expressed in the first four sections of his commentary from tomorrow morning's print edition of the U.K. Telegraph:
<div>
<blockquote>Almost 97pc of the European Union's population is now governed by conservative or Right-leaning coalitions, or EU-imposed mandarins. All that is left to social democrats is Austria (8.4m), Denmark (5.5m), and Slovenia (2.1m).
The whole machinery of the European Union (<a class="ticker" href="/stock/eu#">EU</a>) system is under the control of the Right, with variants of Rhenish corporatism in the Council, and pre-modern Hayekians at the European Central Bank (ECB). Whether you regard this Hegelian ascendancy as good or bad, it certainly has profound consequences.
</blockquote>
</div>
<div>
<blockquote>For just as former Prime Minister Margaret Thatcher protested at Bruges that “we have not successfully rolled back the frontiers of the state in Britain, only to see them reimposed at a European level”, the Left might equally protest that they have not fought the long, hard struggle for worker rights in their own democracies to see social welfare rolled back by Brussels and Frankfurt.
In Italy, EU viceroy Mario Monti has more or less been ordered to reform the labour code, to break union power by shifting to “firm-level” wage deals and rewrite Article 18 that protects workers against sacking for economic reasons – the issue that led to the assassination of two labour reformers by the Red Brigades since 1998.
</blockquote>
The hilarity of the article in question? Read the headline and click on the title to read the story in full:
</div>
<h2><a href="http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8964183/Workers-of-Europe-unite-youve-only-euro-chains-to-lose.html" target="_blank">Workers of Europe unite, you've only euro chains to lose</a></h2>
What I think the respectable Mr. Evans-Pritchard ignores is that the European “right” is the equivalent of the North American left! The problem for Europe is not what he proclaims as a final opportunity for the “workers” and left to act one last time to preserve the failed system, nay, it is a fear of freedom and liberty which lead to the establishment of the United States and provide the dominance of the last century guaranteed by our freedom, innovation, and willingness to challenge the future with individualism versus statism as a solution to economic and political issues of the day.
Tis' a shame that Ambrose fails to advise the “workers” of Europe to abandon the 20th Century spew and adopt a future founded on their own initiative or innovation, rather than relying on the state or a centralized political unit for solutions for the masses.

12/18 AEP: Workers of Europe unite, you've only euro chains to lose

JP Morgan has published a research report on Gilead Sciences (NASAQ: GILD) updating the company's November HIV trends.

In the report, JP Morgan writes, "November monthly Rx's were released by IMS this morning, and we are updating our comprehensive and proprietary analysis of HIV market trends Monthly Rx trends for the first two months of 4Q are trending below expectations, showing +0.5% q/q volume growth for Gilead products. The consensus estimate is 2.9% q/q growth (JPMe: +4.3% q/q). In contrast, weekly Rx's through the first 9 weeks of 4Q11 indicate +3.7% q/q growth. Total HIV market Rx grew flat q/q and 6% y/y in November, compared with the 3-mo moving average of 1% q/q and 6% y/y. We believe updated DHHS HIV Treatment
Guidelines with respect to CD4 count at initiation should sustain y/y market growth in the high-single digits. Indeed, Gilead indicated on its 1Q call that median CD4 cell count at the initiation of therapy was 318 cells/mm3 (<a class="ticker" href="/stock/us#">US</a>) and 294 cells/mm3 (<a class="ticker" href="/stock/eu#">EU</a>), a dramatic uptick from 280-290 cells/mm3 in 2009."

JP Morgan maintains its Overweight rating and $55 price target on Gilead Sciences, which closed yesterday at $38.59.

Analyst Color

Reiteration

Pre-Market Outlook

Analyst Ratings

JP Morgan Posts Update on Gilead Sciences' November HIV Trends

<a href="http://feedads.g.doubleclick.net/~a/__7LdjT5pbYT4mcvNfHZQ3tNuAQ/0/da"><img src="http://feedads.g.doubleclick.net/~a/__7LdjT5pbYT4mcvNfHZQ3tNuAQ/0/di" alt="di" /></a> <a href="http://feedads.g.doubleclick.net/~a/__7LdjT5pbYT4mcvNfHZQ3tNuAQ/1/da"><img src="http://feedads.g.doubleclick.net/~a/__7LdjT5pbYT4mcvNfHZQ3tNuAQ/1/di" alt="di" /></a>By <a href="http://www.econmatters.com/search/label/EconMatters">EconMatters</a> Exactly 20 years to the day after the creation of the European Union (<a class="ticker" href="/stock/eu#">EU</a>) and the Euro currency, German Chancellor Angela Merkel <a href="http://www.reuters.com/article/2011/12/09/eurozone-idUSL5E7N900120111209">successfully secured an historic agreement </a>from all 27 current members of the EU, except Britain, forging a deeper economic integration in the euro zone on Friday, 9 Dec. The Euro crunch summit also came away with an agreement to provide up to €200 billion ($268 Billion) in bilateral loans to the International Monetary Fund (<a class="ticker" href="/stock/imf#">IMF</a>) to help it tackle the crisis, with 150 billion euros of the total coming from the euro zone countries. The date that the European Stability Mechanism (ESM), capped at €500 billion ($666 billion), operation was also pushed up, the pledge to make private investors absorb losses in any future bailout for a euro nation is also to be scrapped. While this new pact might be better to prevent future such sovereign debt crisis, others (including<a href="http://www.cnbc.com/id/45630431"> the US</a>, and <a href="http://www.cnbc.com/id/45630118">the IMF</a>) view is that the summit has failed to adequately address the more immediately and urgent issues. Ticking Euro Debt Bombs Euro zone has to repay or roll over more than 1.1 trillion euros, around $1.5 trillion, debt due in 2012, with about €519 billion, or $695 billion, of Italian, French and German debt maturing in the first half alone, according to <a href="http://mobile.bloomberg.com/news/2011-12-09/euro-states-to-shift-267-billion-to-imf-as-focus-shifts-to-deficit-deal?category=%2Fnews%2Ffrance%2F">Bloomberg</a>.  (See Graphic below from Spiegel with a shorter time frame sans Germany). 

<table><tbody><tr><td><a href="http://3.bp.blogspot.com/-HfXS7qFYTVw/TuT5cR029iI/AAAAAAAAAqc/HivNjkcBxFE/s1600/image-287703-galleryV9-bcfp.jpg" style="margin-left:auto;margin-right:auto;"><img height="352" src="http://3.bp.blogspot.com/-HfXS7qFYTVw/TuT5cR029iI/AAAAAAAAAqc/HivNjkcBxFE/s640/image-287703-galleryV9-bcfp.jpg" width="640" alt="image-287703-galleryV9-bcfp.jpg" /></a></td></tr><tr><td>Graphic Source: Spiegel.de, 29 Nov. 2011</td></tr></tbody></table>

 With Euro Zone sovereign bond yield spiking to record levels, probability is quite low for Italy and Spain to refinance next year at a sustainable rate going forward as there's not an effective backstop firewall Germany, France would most likely need to pay a much higher interest rate due to this debt crisis contagion.  <a href="http://www.econmatters.com/2011/11/belgium-is-no-giips-but-theres-no-way.html">Belgium is no GIIPS yet</a>, but its sovereign bond interest rate is closing in the the 7% threshold that could require external bailout aid. 

<table><tbody><tr><td><a href="http://3.bp.blogspot.com/-u_7LMuSQps4/TuT6Rbv8KEI/AAAAAAAAAqk/yy0Slu3kHkw/s1600/image-287708-galleryV9-ngwu.jpg" style="margin-left:auto;margin-right:auto;"><img height="529" src="http://3.bp.blogspot.com/-u_7LMuSQps4/TuT6Rbv8KEI/AAAAAAAAAqk/yy0Slu3kHkw/s640/image-287708-galleryV9-ngwu.jpg" width="640" alt="image-287708-galleryV9-ngwu.jpg" /></a></td></tr><tr><td>Graphic Source: Spiegel.de, 29 Nov. 2011</td></tr></tbody></table>

 European Banks Need $153 Billion in Fresh Capital There are also problems at the heart of the European banking system. According to the European Banking Authority (EBA) in London (from <a href="http://news.businessweek.com/article.asp?documentKey=1376-LVW73R0YHQ0X01-0PFGV96R8P765NHA3F63RQB33R">BusinessWeek</a>), 

<blockquote>"....Banks in the European Union must raise €114.7 billion ($152.8 billion) in fresh capital as part of measures introduced to respond to the euro area's sovereign-debt crisis."</blockquote>Back in July, eight European banks failed the regularly scheduled stress tests with a combined capital shortfall of €2.5 billion. And things have deteriorated since then.  The updated figures from EBA take into account bank's sovereign holdings through the end of September. Step-by-step Is Killing The Euro Zone Europe, even with the aid from the IMF, would have a very difficult time covering between the sovereign debt rollover and shoring up the banks capital structure.  Essentially, the '<a href="http://www.bloomberg.com/news/2011-12-08/eu-battles-to-save-euro-as-merkel-eyes-step-by-step-solution-to-crisis.html">step-by-step' crisis solution</a> as described by Merkel is a killing the Euro Zone. The European Union of course is fully aware that markets are unlikely to be in the forgiving mood without some 'bazooka'. The inaction could suggest 

<ol><li>The actual 'hole' is a lot more substantial than figures floating in public out there.  Kicking the can down the road as far as possible is probably the only viable option in the short-to-medium term</li><li>Politics truly trumps economics as Germany could be using this crisis as a cudgel to gain power and control over the EU and on the global stage.  This also seems to indicate Germany has plenty of resource for this step-by-step waiting game.  </li></ol>

 Another Backdoor Taxpayer Bailout Across the Pond? Germany is reportedly still against the idea of <a href="http://www.econmatters.com/2011/11/euro-bond-europes-only-way-out-for-now.html">a collective Euro Bond</a> (although Italy's <a href="http://www.reuters.com/article/2011/12/11/eurobonds-italy-monti-idUSL6E7NB0A820111211">Monti seems confident </a>that Germans would eventually see the light), and does not like the European Central Bank (ECB) embarking on large-scale bond purchases, like the U.S. Federal Reserve have been doing, either. One of the messages out of the crunch summit is that private investors would not 'absorb losses in any future bailout for a euro nation,' which could suggest banks would get 100 cents on the dollar of the future troubled sovereign debt of Italy and  Spain, etc. So we could also be looking at yet another backdoor taxpayer bailout of the banks -- similar to <a href="http://www.econmatters.com/2011/08/wall-street-bailout-feds-12-trillion.html">the U.S. Fed's '$1.2 trillion secret loan to banks</a>, with <a href="http://www.econmatters.com/2011/08/wall-street-bailout-too-big-to-collect.html">repayment optional</a>) --so banks would support buying the European sovereign bonds, while keeping the banking financial system afloat. Somebody, somewhere has to put up the money and take the loss of the Euro Zone, and it does not look like EU would rise up to the occasion.  Eventually the markets would get past the Euro crisis and the world would move on.  But it seems the European taxpayer, just like their American counterpart, could end up being the last hero standing saving the global financial system, <a href="http://www.econmatters.com/2011/11/expect-global-recession-no-matters-what.html">along with the world</a> as we know it. © <a href="http://www.econmatters.com/">EconMatters</a> All Rights Reserved | <a href="http://www.facebook.com/EconMatters">Facebook</a> | <a href="http://twitter.com/#!/EconMatters">Twitter</a> | <a href="http://feedburner.google.com/fb/a/mailverify?uri=EconForecast">Post Alert</a> | <a href="http://astore.amazon.com/econforecast-20?_encoding=UTF8&amp;node=25">Kindle</a>

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Euro Debt Crisis: Another Day, Another Backdoor Taxpayer Bailout?

By <a href="http://www.benzinga.com/users/paul-quintaro" Target=_blank>Paul Quintaro</a> 
Benzinga Staff Writer
The European Summit—which had been anticipated all week—concluded early Friday.
Given expectations, the results seemed to be underwhelming. Yet, US equity futures were trading up Friday morning, perhaps evidence of the fact that investors had bought into the deal enough so as to calm concerns.
On Monday, France's Nicolas Sarkozy and Germany's Angela Merkel drafted proposals that would form the basis of the summit. Merkel and Sarkozy (dubbed ‘Merkozy' in the press) were to set to unveil measures that would limit spending in profligate countries in the Eurozone and set strict limits to punish violators.
Although the summit may have been seen to be an effort to save the euro currency, all 27 members of the European Union (<a class="ticker" href="/stock/eu#">EU</a>) participated, including the 10 who do not officially use the euro.
Given the events of the summit, further agreements over the fate of the euro may be decided solely by the members actually using the currency.
During the summit, the UK's Prime Minister David Cameron clashed with “Merkozy,” asking for concessions that the European diplomats were unable to agree to.
Those expecting Friday's summit to produce a new treaty for the Eurozone may have been disappointed. Rather, what came out of the summit is the same as what has come out of previous European summits—more promises and plans for the future.
Now, European officials will attempt to negotiate bilateral agreements between countries to alter the rules of their union. Although comments were made stating that Europe would do its best to continue to function as a unit of 27 member states, given the UK's resistance, a “two-track” Europe may emerge from the crisis.
One thing helping to split the Eurozone may have been a proposed financial transactions tax. Given that the UK is home to the City of London, the resistance to any taxes on financial transactions would presumably be tremendous.
The EUR/USD pair traded lower on Friday, dropping below $1.332 price level.
As the summit failed to produce anything definitive, traders may be expecting the European Central Bank to step in with more bond purchase programs.
Yet, yesterday, the ECB appeared to squash that theory, when the ECB's Mario Draghi made comments in a press conference following the ECB's rate decision.
Draghi stated that current EU treaties prevented the ECB from monetizing debt (purchasing bonds of indebted countries to pay for their governments' spending). Thus, expectations of further bond purchases may be unrealistic.
While Friday's summit failed to produce anything truly definitive, the euro lives on. Yet, the question dominating the minds of investors may remain: how much longer can Europe kick the can down the road? 
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How Much Longer Can Europe Kick the Can Down the Road?

The European Summit—which had been anticipated all week—concluded early Friday.

Given expectations, the results seemed to be underwhelming. Yet, US equity futures were trading up Friday morning, perhaps evidence of the fact that investors had bought into the deal enough so as to calm concerns.

On Monday, France's Nicolas Sarkozy and Germany's Angela Merkel drafted proposals that would form the basis of the summit. Merkel and Sarkozy (dubbed 'Merkozy' in the press) were to set to unveil measures that would limit spending in profligate countries in the Eurozone and set strict limits to punish violators.

Although the summit may have been seen to be an effort to save the euro currency, all 27 members of the European Union (<a class="ticker" href="/stock/eu#">EU</a>) participated, including the 10 who do not officially use the euro.

Given the events of the summit, further agreements over the fate of the euro may be decided solely by the members actually using the currency.

During the summit, the UK's Prime Minister David Cameron clashed with Merkozy, asking for concessions that the European diplomats were unable to agree to.

Those expecting Friday's summit to produce a new treaty for the <a href="http://www.portfolio.com/business-news/2011/12/07/benzinga-makes-five-predictions-for-europe-in-2012">Eurozone</a> may have been disappointed.

Rather, what came out of the summit on Friday is the same as what has come out of previous European summits—more promises and plans for the future.

Now, European officials will attempt to negotiate bilateral agreements between countries to alter the rules of their union. Although comments were made stating that Europe would do its best to continue to function as a unit of 27 member states, given the UK's resistance, a "two-track" Europe may emerge from the crisis.

One thing helping to split the Eurozone may have been a proposed financial transaction tax. Given that the UK is home to the City of London, the resistance to any taxes on financial transactions would presumably be tremendous.

The EUR/USD pair traded lower on Friday, dropping below $1.332 price level.

As the summit failed to produce anything definitive, traders may be expecting the European Central Bank to step in with more bond purchase programs. That could weaken the euro.

Yet, yesterday, the ECB appeared to squash that theory, when the ECB's <a href="http://www.benzinga.com/news/11/12/2188308/markets-tumble-on-draghis-refusal-to-print">Mario Draghi</a> made comments in a press conference following the ECB's rate decision.

Draghi stated that current EU treaties prevented the ECB from monetizing debt (purchasing bonds of indebted countries to pay for their governments' spending). Thus, expectations of further bond purchases may be unrealistic.

Of course, if the ECB does not purchase bonds, it may actually weaken the euro, as investors become increasingly concerned over the potential that the currency could break apart.

The EUR/USD pair should continue to be active in coming weeks. While Friday's summit failed to produce anything truly definitive, the euro lives on. Yet, the question dominating the minds of investors may remain: how much longer can Europe kick the can down the road?

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Intraday Update

As we all wait 1265 to be broken (sitting right below it for hours), since everyone is now a technical trader.....some other subject to pass the time.
The ECB meeting this week is getting some serious hype.  Not only is a 25 basis point cut expected, some are calling for 50 basis points (easy money for all!), along with some other technical adjustments over and above the rate cut, to ease strains.  Of course the big bazooka is the ECB pulling a Bernanke (and Japan, and UK) and going full quantitative ease.  Although technically that has already begun as apparently not all the bond purchases of late have been steralized... but we're talking a big bazooka, not a rounding error.  Steve Liesman of CNBC, who in movies and stories since, had become quiet the media front man for government leaks (i.e. what Hank Paulson or Fed members wanted the market to know)<a href="http://www.cnbc.com/id/45551121"> says market expectations could be too high</a> on this latter (bazooka) point, at least in the near term.
<ul>
<li>Markets appear to have high hopes for this week's summit meeting in Europe to begin putting an end to the financial crisis.  Yet there's ample reason to believe the market's hopes will be dashed again.</li>
<li>Specifically, it seems unlikely that whatever is agreed to this week by leaders will be sufficient to prompt the European Central Bank  to wield the proverbial bazooka that markets await so desperately.</li>
<li>There are many complicated, legal and technical reasons why this is likely true, but there's also a simple one: Germany is not going to allow the ECB to make an unlimited commitment to buy bonds of European governments.</li>
<li>This idea was repeated to me in meetings with German officials in Berlin and Frankfurt last week — the ECB is not the answer, however much markets say it's the necessary and only solution.</li>
<li>The German strategy at this point is two-fold: First, put as much pressure on governments now to fix their deficit problems, so that markets see the troubled countries are clearly on improving fiscal paths. Letting the ECB backstop troubled sovereigns would take the pressure off governments, countering the German's own strategy.  Second, work for long-term changes to the European Union treaties, for example, allowing deficit violators to be sued in the European Court of Justice in the hopes of avoiding such problems in the future.</li>
<li>These changes eventually — one day in the distant future — allow the ECB to backstop either individual sovereign issues or a Eurobond. But it's not going to happen this week or next month, maybe not even next year.</li>
<li>Several times I heard comments such as this one from an official: “The bazooka requires ignoring of the German constitution and the (<a class="ticker" href="/stock/eu#">EU</a>) treaty.” Neither the Merkel government nor the Bundesbank, as far as I can tell, has any intention of ignoring either. The obvious implication: unlimited ECB purchases will require changes to both before they can happen.</li>
<li>Which is not to say that rules can't be bent. Already the ECB has purchased $200 billion of bonds. There was speculation among German market participants I spoke with that the number could be quietly increased to $300 billion or $400 billion. But remember, even that first $200 billion was so controversial that it prompted the departure of two German officials from the ECB.</li>
<li>There's also talk of lending from individual central banks to a fund controlled by the International Monetary Fund  that could be used to lend to troubled countries. The idea itself is troubled in a variety of different ways, but what I heard is that the Bundesbank would not support such a fund if funded only by European central banks and meant only for European countries. It could, however, support a regular IMF program designed for all IMF members.</li>
</ul>
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<div><a href="http://www.cnbc.com/id/45551121">Continue here</a> for the rest of the story.</div>
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Steve Liesman of CNBC Still Believes no ECB Bazooka Coming - at Least Anytime Soon

Italian Prime Minister Mario Monti is asking his country's parliament to pass another round of austerity measures aimed at preventing an Italian default.

The latest set of austerity measures being presented to the Italian Parliament is said to be around 30 billion euros ($40 billion). The measures include tax increases as well as an unpopular plan to raise retirement ages. While unions have voiced opposition to the measures and few politicians have enthusiastically back them, they are seen a necessary evil if Italy hopes to avoid a fate similar to that of Greece, Ireland and Portugal.

Each of those countries were forced to seek bailouts from the European Union (<a class="ticker" href="/stock/eu#">EU</a>) and the International Monetary Fund (<a class="ticker" href="/stock/imf#">IMF</a>) after yields on their bonds rose to levels that were unsustainable. Italian bond yields surged to nearly 8% last week at an auction of 7.5 billion euros ($10 billion) worth of Italian bonds. The eurozone was nearly in panic mode over the skyrocketing borrowing costs of the Italian government. Although Greece, Ireland and Portugal were able to avoid defaults after seeking bailouts, Italy's debt level is much higher and the eurozone would not be able to bailout Italy as easily as it did the three smaller countries.

Although the Italian Parliament is expected to pass the austerity measures, it's unclear how the Italian public will respond to them. Large scale protests and nationwide strikes have become common place in the European Union, as people from Greece to the United Kingdom voice show their disapproval of measures that are being introduced across the European Union in order to reduce fiscal deficits.

So far, the market has reacted well to the plans of Italian Prime Minister Mario Monti and the yields on Italian bonds have fallen. However, if the unions announce strikes like the ones that recently brought the United Kingdom and Greece to standstills, those yields could start creeping back up.

Critics of the austerity measures say that although they may be effective at reducing government spending, they are bad for the economy because they raise taxes and reduce spending at a time of economic uncertainty. The Greeks, for example, have seen their economy fall further into recession because of the country's austerity measures. Traders should watch carefully not just to see if the austerity measures are passed by the Italian Parliament but also how the Italian public reacts to them over the next few weeks.

ACTION ITEMS: Bullish: Traders who believe that Italian Prime Minister Mario Monti is leading the country in the right direction might want to consider the following trade: 

<ul><li>The iShares MSCI Italy Index Fund (NYSE: <a class="ticker" href="/stock/ewi#NYSE">EWI</a>) should move higher if market confidence is restored in Italy's ability to pay its debts.</li></ul>

Bearish: Traders who believe that the austerity measures will do more harm to the Italian economy before they do any good may consider an alternate position: 

<ul><li> Prime Minister Monti's plan will raise taxes on luxury goods, so shorting Luxottica Group (NYSE: <a class="ticker" href="/stock/lux#NYSE">LUX</a>) may prove profitable regardless of how successful the austerity measures are at bringing Italy's borrowing costs down.</li></ul>

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Italy Considering 30 Billion Euros of Austerity Measures

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<img class="size-full wp-image-11113 alignleft" title="Eric Linser Green Valley Wealth" src="http://blog.covestor.com/content/2011/08/Eric-Web2.jpg" alt="Eric Linser Green Valley Wealth" width="160" height="160" />Author: <a href="http://covestor.com/green-valley-wealth">Eric Linser</a>, Green Valley Wealth Advisors
Covestor model: <a href="http://covestor.com/green-valley-wealth/eagle-portfolio">Eagle Portfolio</a>
We got more tricks than treats on the Halloween trading day and continuing into All Saints' Day, but for all of October we got lots of treats — US stocks were up very sharply after the S&amp;P 500 made a <a href="http://www.google.com//finance?chdnp=0&amp;chdd=1&amp;chds=1&amp;chdv=1&amp;chvs=maximized&amp;chdeh=0&amp;chfdeh=0&amp;chdet=1319832000000&amp;chddm=148737&amp;chls=IntervalBasedLine&amp;q=INDEXSP:.INX&amp;ntsp=0">13 month low</a> on the first trading day of the month. October turned out to be the biggest monthly advance since 1991 for the S&amp;P 500 and 2002 for the Dow, and we also snapped a five month losing streak for the S&amp;P.
<a href="http://abnormalreturns.com/sad-and-the-halloween-indicator/">The Halloween indicator</a> is flashing orange, black, and well, green. The Halloween indicator is the opposite of the adage (or curse) of “Come May, Go Away” and come back sometime around Halloween, as historically the best performing months are November through April.
This year we jumped the gun on the Halloween indicator as investors came back a few weeks earlier than expected. The whole premise is pretty simple, but it's worked this year and last. Obviously such a simple timing process excludes taxes and trading costs and has a rather doubtful basis (no rational decision making), but it's fascinating how well it's worked as of late.
Dia de los Muertos 
The day of the dead – an apt description for Greece. Like a ghost, this seemingly inconsequential country comes back to haunt us and spook the markets.
We have vacillated between despair and excitement that European policymakers get it and that a credible strategy will address their myriad of problems and restore confidence.
It seems like we've been fixated on Greece and Europe for the past 1 ½ years and understandably so, given the systematic risks that the region represents to the global economy and financial markets. The <a href="http://en.wikipedia.org/wiki/Economy_of_the_European_Union">European Union (<a class="ticker" href="/stock/eu#">EU</a>) represents about 25% of global GDP</a>, roughly equivalent to that of the US.
European leaders <a href="http://www.marketwatch.com/story/greek-bondholders-to-take-50-haircut-2011-10-26">cajoled Greek bondholders</a> (mostly European banks) into accepting a 50% write-down on their holdings. Will it be enough? Probably not. That's why they boosted the European rescue fund's capability to $1 trillion euros (US $1.4 trillion) and are asking the International Monetary Fund (<a class="ticker" href="/stock/imf#">IMF</a>) to increase funding. The objectives are to protect the euro currency, keep Greece in the EU, and ring-fence Italy and Spain from further financial contagion.
But wait…now it appears the Greek populace will vote on a referendum to stay in the EU or not. No, wait…<a href="http://www.nytimes.com/2011/11/04/world/europe/greek-leaders-split-on-euro-referendum.html?pagewanted=all">no referendum</a> but a new government to renegotiate the EU bailout package. Wow! It amazes me how much sway Greece holds over the ongoing viability of the Eurozone with possibly severe financial implications hanging in the balance for the region and the global markets.
There were finally some (brief) moments in late October that European leaders were progressing towards negotiating a viable rescue plan to ensure stability in their financially fragile currency union. Investors came rushing back in and global stock indices soared, bolstered by bullish corporate earnings here at home coupled with encouraging developments in the Eurozone.
Add it all up and it's quite evident why we continue to trade in a fairly tight trading range since early August, and why stock shares have pushed back from the top end of the range after just recently breaking out.
Focus on the Home Front 
In October it appeared we were finally starting to focus on other catalysts for the capital markets to move higher – US economic fundamentals and corporate earnings, not the daily headlines of Europe's debt problems.
Surprising to most, American economic growth actually accelerated in the 3rd quarter. In late October we received the government's report on 3rd quarter gross domestic product (<a class="ticker" href="/stock/gdp#">GDP</a>), the value of all goods and services produced. <a href="http://abcnews.go.com/Business/gdp-grew-25-percent-boosted-consumer-spending-double/story?id=14821833">Real GDP rose</a> at a 2.5% annualized rate, up from 1.3% in the 2nd quarter. GDP grew at the fastest pace in a year as gains in consumer spending and business investment helped support a recovery on the brink of faltering. The report confirms the more favorable domestic economic readings of the past few weeks and tones down some of the exaggerated recessionary fears.
Market Fundamentals 
Valuations look pretty attractive, earnings expectations are starting to become more realistic and credit conditions have improved dramatically from the beginning of October. We've come a long way in a short period of time. Positive economic surprises (especially for those anticipating a double dip recession), incremental progress in Europe (fingers crossed), and good earnings reports have helped to nurture a relief rally in risk assets such as domestic and global stocks and corporate bonds/debt obligations of various quality.
While there will always be a fair amount of uncertainty, I believe strengthening confidence in a US recovery will spur global economic recovery. Slowly but surely, investors will gradually reallocate capital back into risk assets. I assess valuations as very low relative to historical measures, and you don't have to make outrageous assumptions on multiples to get reasonable returns over the next year or two.
Looking to 2012 
Time will tell how global economic growth pans out for next year; so far it's stunted but still positive. It appears that we'll avoid a dreaded double-dip recession and the corresponding decline in profits that come. Seeing as valuations have been reined in considerably over the summer on the possibility of a poor showing in corporate results, the market has a strong potential to rally from here, particularly on any positive surprises.
Part 2 of the Financial Crisis 
This isn't 2008 all over again; this is the second act. The sovereign debt crisis is a manifestation that grew out of it; here in the US, municipal budgets are equally stressed. This is continuation of a painfully slow deleveraging process we're all feeling. This isn't a new problem, and it will get resolved.
The only thing that reminds me of 2008 is a correlation of all financial assets moving in lock-step. When investors leave an asset class (risk off), they often don't distinguish between holdings; they head for the exit. Some investors are forced to exit in a Minsky moment, while others do so voluntarily. Suddenly long term growth prospects of emerging Asian and South American economies fall on deaf ears; feeding and fueling a world populace of 7 billion quickly seems of lesser importance.
One of the facets of economic globalization is the growing integration of financial markets. It's like the adage “When America sneezes, the world catches cold”, but it now goes both ways. Sometimes the extent and complexity of global financial integration remains hard to identify and to quantify, either for the layperson or a professional money manager.
Additionally it's hard to quantify the political theatrics occupying Washington and Europe. Policymakers seem incapable of working together. They are paralyzed (polarized?) at a time when we need them to act decisively to lead our economies on the road to recovery. For now, I won't go into the work that the Congressional super committee must do to cut $1.2+ trillion from our federal government's debt load over the next 10 years, cuts that must OK'd by year-end.
As Jimmy Cliff sings, “I'm sitting here in limbo.” Things aren't getting worse and things don't appear to be improving at a fast enough pace for most of us to get excited either. The uncertainty of resolution on many fronts has meant that we're waiting for something to give.
Changing Seasons Ahead 
Given one of the most challenging and polarized environments I've witnessed over the course of my career so far, I believe the most prudent course to investing is to find an adequate balance of growth, income and capital preservation knowing the solutions to what ails us won't come suddenly or easily.
We do, however, need to stay in the game. I know it's tempting to bail out given the heightened volatility and downside risks that remain, but attempting to time the market is a fool's errand. You wind up getting skinned twice, once on the way down and again when you're on the sidelines and get left behind when the market ultimately moves back up, which it always has – over longer periods. Historical data suggests a bull market is in the offing for stocks, but investors have to have confidence and courage to take advantage of the current situation.
For now, investors remain too pessimistic, meaning the rally will continue as they change their mind. As long as there's money on the sidelines, the rally is apt to continue. As I like to say, Mr. Market always does the opposite of what's expected.
2 years ago I shared a chart that outlined <a href="http://www.gvwealth.com/market-commentary?range=more&amp;phrase=&amp;id=33">the 4 Stages of a Typical Secular Bear Market and Its Aftermath</a>. I show it again below, and overlay actual results so you can see how it's tracking.
<a href="http://blog.covestor.com/content/2011/11/Aftermath-of-Secular-Bear-Markets.jpg"><img src="http://blog.covestor.com/content/2011/11/Aftermath-of-Secular-Bear-Markets.jpg" alt="" title="Aftermath of Secular Bear Markets" width="600" class="aligncenter size-full wp-image-13266" /></a>
<a href="http://blog.covestor.com/content/2011/11/SP500_Implied_Price_Movement.jpg"><img src="http://blog.covestor.com/content/2011/11/SP500_Implied_Price_Movement.jpg" alt="" title="SP500_Implied_Price_Movement" width="600" class="aligncenter size-full wp-image-13267" /></a>
What the charts imply is that there are long periods of going sideways and that the payoff for perseverance in staying invested is rewarded in time.
With interest rates extremely low, CDs and Treasury bond yields are incapable of meeting the vast majority of retirement needs. Using the <a href="http://www.gvwealth.com/market-commentary?range=keywords&amp;phrase=Rule%20of%2072">Rule of 72</a>, it would take nearly 36 years to double your money in an investment returning 2% annually, such as a 10 year Treasury bond. I see no path to secure retirement for people other than investing in a diversified portfolio that contains a healthy allocation to stocks over the long term. To garner the money you'll need later in life, put funds aside frequently and start early!
There will always be near-term concerns and unexpected events that can distract us from our long term objectives. But despite these unforeseen events, economies have grown, companies have prospered, stock markets have generated positive returns, and ultimately we've always found our way forward. As Winston Churchill said, “You can always count on Americans to do the right thing, after they've tried everything else.”
Wishing you good health, wealth and success.
Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at <a href="http://site.covestor.com/help/disclosures">http://site.covestor.com/help/disclosures</a>. For information about Covestor and its services, go to <a href="http://covestor.com">http://covestor.com</a> or contact Covestor Client Services at (866) 825-3005, x703.

Sitting Here In Limbo

New product introductions totaled 275 in the first ten months of 2011.  October saw 27 new ETPs come to market, consisting of 17 ETFs and 10 ETNs.  Three ETFs closed and liquidated, putting the net gain in listed products at 24 for October.  The quantity of U.S. listings now stands at 1,359 (1,163 ETFs and 196 ETNs).  There were two closures and one launch among the actively managed ETF subset.  The current count of actively managed funds is just 39, representing less than 3% of the ETP population.
The surge in stock prices brought assets back to $1.1 trillion, with <a href="http://investwithanedge.com/etf-stats-for-september-2011-assets-slip-below-1-trillion" target="_blank">September now being the only month this year where assets failed to hold above the trillion-dollar mark</a>.  Trading activity declined nearly 5% for the month, which is not at all encouraging in a month of huge price gains.  Dollar volume averaged just $92.5 billion per day.
The number of ETFs averaging more than $1 billion in daily trading activity (the Billion Dollar Club) slipped from 20 to 18 and accounted for more than 70% of all ETP dollars traded.  Products averaging more than $100 million of trading per day increased slightly from 86 to 89 and accounted for 92.2% of dollar volume.

<table class="wptable rowstyle-alt" id="wptable-112" cellspacing="1" cellpadding="2">
<thead>
<tr>
<th class="sortable" style="width:250px" align="left">October 2011 Month End</th>
<th class="sortable" style="width:70px" align="center">ETFs</th>
<th class="sortable" style="width:70px" align="center">ETNs</th>
<th class="sortable" style="width:70px" align="center">Total</th>
</tr>
</thead>
<tr>
<td style="width:250px" align="left">Currently Listed U.S.</td>
<td style="width:70px" align="center">1,163</td>
<td style="width:70px" align="center">196</td>
<td style="width:70px" align="center">1,359</td>
</tr>
<tr class="alt">
<td style="width:250px" align="left">Listed as of 12/31/2010</td>
<td style="width:70px" align="center">967</td>
<td style="width:70px" align="center">132</td>
<td style="width:70px" align="center">1,099</td>
</tr>
<tr>
<td style="width:250px" align="left">New Introductions for Month</td>
<td style="width:70px" align="center">17</td>
<td style="width:70px" align="center">10</td>
<td style="width:70px" align="center">27</td>
</tr>
<tr class="alt">
<td style="width:250px" align="left">Delistings/Closures for Month</td>
<td style="width:70px" align="center">3</td>
<td style="width:70px" align="center">0</td>
<td style="width:70px" align="center">3</td>
</tr>
<tr>
<td style="width:250px" align="left">Net Change for Month</td>
<td style="width:70px" align="center">+14</td>
<td style="width:70px" align="center">+10</td>
<td style="width:70px" align="center">+24</td>
</tr>
<tr class="alt">
<td style="width:250px" align="left">New Introductions 6 mths</td>
<td style="width:70px" align="center">119</td>
<td style="width:70px" align="center">39</td>
<td style="width:70px" align="center">158</td>
</tr>
<tr>
<td style="width:250px" align="left">New Introductions YTD</td>
<td style="width:70px" align="center">205</td>
<td style="width:70px" align="center">70</td>
<td style="width:70px" align="center">275</td>
</tr>
<tr class="alt">
<td style="width:250px" align="left">Delistings/Closures YTD</td>
<td style="width:70px" align="center">9</td>
<td style="width:70px" align="center">6</td>
<td style="width:70px" align="center">15</td>
</tr>
<tr>
<td style="width:250px" align="left">Net Change YTD</td>
<td style="width:70px" align="center">+196</td>
<td style="width:70px" align="center">+64</td>
<td style="width:70px" align="center">+260</td>
</tr>
<tr class="alt">
<td style="width:250px" align="left">Actively-Managed Listings</td>
<td style="width:70px" align="center">39</td>
<td style="width:70px" align="center">0</td>
<td style="width:70px" align="center">39</td>
</tr>
<tr>
<td style="width:250px" align="left">Assets Under Mgmt ($ billion)</td>
<td style="width:70px" align="center">$1,066</td>
<td style="width:70px" align="center">$15.0</td>
<td style="width:70px" align="center">$1,081</td>
</tr>
<tr class="alt">
<td style="width:250px" align="left">% Change in Assets for Month</td>
<td style="width:70px" align="center">+11.3%</td>
<td style="width:70px" align="center">+3.4%</td>
<td style="width:70px" align="center">+11.1%</td>
</tr>
<tr>
<td style="width:250px" align="left">Monthly $ Volume ($ billion)</td>
<td style="width:70px" align="center">$1,907</td>
<td style="width:70px" align="center">$36.4</td>
<td style="width:70px" align="center">$1,943</td>
</tr>
<tr class="alt">
<td style="width:250px" align="left">% Change in Monthly $ Volume</td>
<td style="width:70px" align="center">-4.5%</td>
<td style="width:70px" align="center">-23.2%</td>
<td style="width:70px" align="center">-4.9%</td>
</tr>
<tr>
<td style="width:250px" align="left">Avg Daily $ Volume > $1 Billion</td>
<td style="width:70px" align="center">17</td>
<td style="width:70px" align="center">1</td>
<td style="width:70px" align="center">18</td>
</tr>
<tr class="alt">
<td style="width:250px" align="left">Avg Daily $ Volume > $100 Million</td>
<td style="width:70px" align="center">87</td>
<td style="width:70px" align="center">2</td>
<td style="width:70px" align="center">89</td>
</tr>
<tr>
<td style="width:250px" align="left">Avg Daily $ Volume > $10 Million</td>
<td style="width:70px" align="center">246</td>
<td style="width:70px" align="center">11</td>
<td style="width:70px" align="center">257</td>
</tr>
</table>

 Data sources:  AUM from National Stock Exchange, daily prices and volume of individual ETPs from Norgate Premium Data, fund counts and all other information compiled by Invest With An Edge.
New products launched in October (in chronological order), along with links to my initial analysis of each:
<ol>
<li>CurrencyShares Chinese Renminbi Trust (<a class="ticker" href="/stock/fxch#">FXCH</a>) [<a href="http://investwithanedge.com/a-dozen-new-etfs-in-the-first-dozen-days-of-october" target="_blank">A Dozen New ETFs in the First Dozen Days of October</a>]</li>
<li>ProShares Ultra VIX Short-Term Futures ETF (<a class="ticker" href="/stock/uvxy#">UVXY</a>)</li>
<li>ProShares Short VIX Short-Term Futures ETF (SVXY)</li>
<li>AdvisorShares TrimTabs Float Shrink ETF (TTFS)</li>
<li>Russell Small Cap Aggressive Growth ETF (<a class="ticker" href="/stock/sggg#">SGGG</a>)</li>
<li>Russell Small Cap Consistent Growth ETF (<a class="ticker" href="/stock/scog#">SCOG</a>)</li>
<li>Russell Small Cap Contrarian ETF (<a class="ticker" href="/stock/sctr#">SCTR</a>)</li>
<li>Russell Small Cap Low P/E ETF (<a class="ticker" href="/stock/sclp#">SCLP</a>)</li>
<li>UBS ETRACS Monthly 2x Leveraged ISE Cloud Computing TR Index ETN (LSKY)</li>
<li>ProShares Ultra DJ-UBS Natural Gas (BOIL)</li>
<li>ProShares UltraShort DJ-UBS Natural Gas (KOLD)</li>
<li>Market Vectors Renminbi Bond ETF (CHLC)</li>
<li>VelocityShares 3x Long Gold ETN (UGLD) [<a href="http://investwithanedge.com/velocityshares-launches-eight-precious-metals-etns" target="_blank">VelocityShares Launches Eight Precious Metals ETNs</a>]</li>
<li>VelocityShares 3x Inverse Gold ETN (DGLD)</li>
<li>VelocityShares 3x Long Silver ETN (USLV)</li>
<li>VelocityShares 3x Inverse Silver (DSLV)</li>
<li>VelocityShares 2x Long Palladium ETN (LPAL)</li>
<li>VelocityShares 2x Inverse Palladium ETN (IPAL)</li>
<li>VelocityShares 2x Long Platinum ETN (LPLT)</li>
<li>VelocityShares 2x Inverse Platinum ETN (IPLT)</li>
<li>iShares Emerging Markets Local Currency Bond Fund (<a class="ticker" href="/stock/lemb#">LEMB</a>) [<a href="http://investwithanedge.com/lemb-joins-crowded-emerging-markets-local-currency-niche" target="_blank">LEMB Joins Crowded Emerging Markets Local Currency Niche</a>]</li>
<li>iShares MSCI USA Minimum Volatility Index Fund (USMV) [<a href="http://investwithanedge.com/new-ishares-low-volatility-suite" target="_blank">New iShares Low Volatility Suite</a>]</li>
<li>iShares MSCI EAFE Minimum Volatility Index Fund (<a class="ticker" href="/stock/efav#">EFAV</a>)</li>
<li>iShares MSCI All Country World Minimum Volatility Index Fund (<a class="ticker" href="/stock/acwv#">ACWV</a>)</li>
<li>iShares MSCI Emerging Markets Minimum Volatility Index Fund (<a class="ticker" href="/stock/eemv#">EEMV</a>)</li>
<li>Schwab US Dividend Equity ETF (SCHD) [<a href="http://investwithanedge.com/schwab-grabs-lowest-cost-dividend-etf-crown" target="_blank">Schwab Grabs Lowest Cost Dividend ETF Crown</a>]</li>
<li>RBS Global Big Pharma ETN (DRGS) [<a href="http://investwithanedge.com/rbs-launches-questionable-pharma-etp" target="_blank">RBS Launches Questionable Pharma ETP</a>]</li>
</ol>
Product closures/delistings in October:
<ol>
<li>PowerShares Active AlphaQ (<a class="ticker" href="/stock/pqy#">PQY</a>) [<a href="http://investwithanedge.com/active-etfs-continue-to-struggle-pqz-and-pqy-close" target="_blank">Active ETFs Continue to Struggle: PQZ and PQY Close</a>]</li>
<li>PowerShares Active Alpha Multi-Cap (<a class="ticker" href="/stock/pqz#">PQZ</a>)</li>
<li>Direxion Airline Shares (<a class="ticker" href="/stock/flyx#">FLYX</a>) [<a href="http://investwithanedge.com/flyx-fails-to-fly" target="_blank">FLYX Fails to Fly</a>]</li>
</ol>
Product changes in October:
<ol>
<li>ProShares Ultra Silver (<a class="ticker" href="/stock/agq#">AGQ</a>) had a 2-for-1 split effective 10/13/11.</li>
<li>ProShares UltraShort Yen (<a class="ticker" href="/stock/ycs#">YCS</a>), ProShares UltraShort Real Estate (<a class="ticker" href="/stock/srs#">SRS</a>), and ProShares UltraShort Utilities (<a class="ticker" href="/stock/sdp#">SDP</a>) had 1-for-3 reverse splits effective 10/13/11.</li>
<li>WisdomTree Dreyfus Euro Fund <a href="http://www.wisdomtree.com/etfs/fund-details-fixed-income.asp?etfid=61" target="_blank">changed its objective and its name</a> to WisdomTree Euro Debt Fund (<a class="ticker" href="/stock/eu#">EU</a>) effective 10/19/11.</li>
<li>Five SPDR ETFs formerly based on KBW indexes <a href="https://www.spdrs.com/resources/news/article.seam?newsId=1893134650" target="_blank">changed to S&amp;P Select Industry indexes effective 10/24/11</a>.  The new fund names are SPDR S&amp;P Bank ETF (<a class="ticker" href="/stock/kbe#">KBE</a>), SPDR S&amp;P Capital Markets ETF (<a class="ticker" href="/stock/kce#">KCE</a>), SPDR S&amp;P Insurance ETF (<a class="ticker" href="/stock/kie#">KIE</a>), SPDR S&amp;P Mortgage Finance ETF (<a class="ticker" href="/stock/kme#">KME</a>), and SPDR S&amp;P Regional Banking ETF (<a class="ticker" href="/stock/kre#">KRE</a>).</li>
<li>WisdomTree Dreyfus New Zealand Dollar Fund (<a class="ticker" href="/stock/bnz#">BNZ</a>) <a href="http://www.wisdomtree.com/about/pdf/WisdomTree-AUNZ-Debt-Fund-Now-Trading-786.pdf" target="_blank">changed its objective, name, and ticker symbol</a> to WisdomTree Australia &amp; New Zealand Debt Fund (<a class="ticker" href="/stock/aunz#">AUNZ</a>) effective 10/25/11.  The fund had a <a href="http://www.wisdomtree.com/about/pdf/WisdomTree-BNZ-Declare-Distributions-785.pdf" target="_blank">special distribution of $3.05</a> prior to the change.</li>
<li>QuantShares U.S. Market Neutral Beta Fund (BTAH) changed its name to QuantShares U.S. Market Neutral High Beta Fund (BTAH) effective 10/26/11.</li>
<li>EGShares Emerging Markets High Income Low Beta ETF (<a class="ticker" href="/stock/hilo#">HILO</a>) changed its name to EGShares Low Volatility Emerging Markets Dividend ETF (<a class="ticker" href="/stock/hilo#">HILO</a>) effective 10/28/11.</li>
</ol>
Announced Product Changes for Coming Months:
<ol>
<li>Direxion plans to reverse split six ETFs effective 11/10/11.  The affected funds are FAS, EDC, TMV, DRV, and LBJ at 1-for-5 and RUSL at 1-for-3.  <a href="http://www.direxionshares.com/pdfs/DirexionPressReleaseETFNovemberReverseSplits.pdf" target="_blank">Press release</a> (pdf). </li>
<li>All <a href="http://www.direxionshares.com/2xto3x" target="_blank">Direxion Shares 2x Bull and Bear ETFs will convert to 3x</a> on 12/1/11</li>
<li>Van Eck Global and Merrill Lynch <a href="http://www.vaneck.com/holdrs/press-release" target="_blank">announced</a> an agreement to seek SEC and shareholder approval for a <a href="http://www.vaneck.com/holdrs/overview/" target="_blank">fourth quarter 2011 exchange of six HOLDRS products into similar to-be-released Market Vector ETFs</a> under the same ticker symbols.  The new funds will be Market Vectors Oil Services ETF (<a class="ticker" href="/stock/oih#">OIH</a>), Market Vectors Semiconductor ETF (<a class="ticker" href="/stock/smh#">SMH</a>), Market Vectors Pharmaceutical ETF (<a class="ticker" href="/stock/pph#">PPH</a>), Market Vectors Biotech ETF (<a class="ticker" href="/stock/bbh#">BBH</a>), Market Vectors Retail ETF (<a class="ticker" href="/stock/rth#">RTH</a>), and Market Vectors Bank and Brokerage ETF (<a class="ticker" href="/stock/rkh#">RKH</a>).</li>
</ol>
Previous monthly ETF statistics reports are available <a href="http://investwithanedge.com/category/etf-statistics" target="_blank">here</a>.
Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.
<img src="http://investwithanedge.com/?ak_action=api_record_view&amp;id=14648&amp;type=feed" alt="" />

ACWV

AUNZ

Wisdom tree Drefus New Zeland Dollar Fund

EEMV

EFAV

FLYX

FXCH

HILO

LEMB

Merrill Lynch Pharmaceutical HOLDRs Trust

Merrill Lynch Retail HOLDRS Trust due 12/31/41

SCLP

SCOG

SCTR

SGGG

UVXY

ETF Stats for October 2011: YTD Launches At 275

It is still amazing how the stock market reacts to all of the news coming out of Europe. The reaction from all of the Greek news is somewhat comical. Why in God's earth would the Greek government not default? It is absolutely in their best interest to simply go bankrupt. They have milked the European Central Bank (ECB), the International Monetary Fund (<a class="ticker" href="/stock/imf#">IMF</a>), and the American tax payer who is the largest contributor to the IMF for all they can. If the Greek government goes bankrupt at this time they can create their own central bank and begin to print the Drachma once again.

Believe it or not, a new currency that is not tied to all of the other nations in the European Union would boost tourism in Greece. It would even boost olive oil sales. Just think about all of the business that the country has lost over the years because of the Euro currency. If you ever visited Greece in the 1990's you know how cheap and inexpensive it was to visit a beautiful country. The Euro absolutely ruined that country and now Greece looks to be ruining the European Union. The bottom line, if you cannot pay your bills, bankruptcy is the only real option. The foolish move for the Greek government would be to continue receiving bailout money and remaining part of the Euro-zone.

Should Greece leave the European Union (<a class="ticker" href="/stock/eu#">EU</a>) it would be likely to see Portugal, Ireland, and Belgium flee the EU as well. What would really be the carrot that would keep these countries in the EU? They know that they are all dead broke and the money to keep this failed science project together is not available by investors. The only way that the European Union could be bailed out would be to start printing money the way the United States does. So basically, the European Union will begin to monetize their debt following the model set by the Federal Reserve.

Spain, Italy, and France are the real problem nations in the European Union. These countries have a lot of debt that could be considered too big to bailout. Again, the only way to bailout these countries will be to print and create more money out of thin air. When a central bank does this there will be repercussions and it is usually in the form of inflation. Today, the European Central Bank lowered their benchmark interest rate by 25 basis points to 1.25 percent. The reason why rates where even at 1.50 percent in the first place is because inflation was hurting these countries. Now inflation will begin to tick higher again over the next few months making goods such as energy more expensive. This game of hot potato with money just gets more comical by the minute. Traders and investors can expect to hear more news and fiscal game playing out of Europe each and every day. Welcome to the European Circus.

Nicholas Santiago
InTheMoneyStocks.com

The European Circus

<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://1.bp.blogspot.com/-oagvimk05wU/Tq_bBTBeiZI/AAAAAAAAC54/HH-fiKsuYls/s1600/GPap.jpeg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 277px;" src="http://1.bp.blogspot.com/-oagvimk05wU/Tq_bBTBeiZI/AAAAAAAAC54/HH-fiKsuYls/s400/GPap.jpeg" alt="" id="BLOGGER_PHOTO_ID_5669991271215565202" border="0" /></a>Jeremy Gaunt of Reuters reports that Greece's shock decision to hold a referendum on its euro zone bail-out package sent investors scurrying for safer investments on Tuesday, <a href="http://ca.reuters.com/article/businessNews/idCATRE79N45620111101">hammering stocks and punishing the euro</a>:

<blockquote>Greek Prime Minister George Papandreou's announcement on Monday that he will put Greece's bailout to a referendum immediately cast doubt on the euro zone's plan to hand Athens 130 billion euros and arrange a 50-percent write-down on its huge debt.
 
It raised the possibility of a disorderly default on its debt if Greeks vote against the plan.
 
But more broadly it also threw into chaos the euro zone's wider attempts to stop the debt crisis spreading to more significant economies such as Italy.
 Attempts to get countries such as China and Brazil to fund an enhanced euro zone rescue fund, for example, will have hit a major barrier, given that it is not clear that the euro zone's grand compromise agreed last week will stand.</blockquote>
Think it is safe to assume that neither China nor Brazil will be participating in any European bailout fund. This bizarre Greek twist has irritated European leaders. Dina Kyriakidou and Harry Papachristou of Reuters report, <a href="http://ca.reuters.com/article/topNews/idCATRE79U5PQ20111101">Greek referendum ignites German anger</a>: 
<blockquote>Prime Minister George Papandreou's shock decision to call a referendum on Greece's bailout drew veiled threats from Germany on Tuesday and hammered markets edgy over the euro zone crisis. 
European politicians complained that Athens was trying to wriggle out of the rescue deal agreed only last week, concerned not so much about the fate of Greece as the possibly dire consequences for the entire currency union.
 
One senior German parliamentarian suggested the euro zone might have to cast Athens adrift, cutting off its aid lifeline and allowing the nation to default.
 
Others were stunned by Papandreou's apparent bolt from the blue on Monday on the plan for a 130 billion-euro bailout and a 50-percent write-down on Greece's huge debt, which has unleashed fury among Greeks due to its price -- yet more austerity.
 
But they also urged caution as the exact question to be put to the Greek people remains unknown. EU officials said they had yet to be officially notified of the vote.
 
The reaction from Germany, which funds a large part of European Union rescues for Greece as it struggles with a huge debt, was of scarcely disguised fury.
 
A leader in German Chancellor Angela Merkel's center-right coalition said he was "irritated" by Papandreou's announcement and said the euro zone would have to consider turning off the flow of money which has kept Greece afloat over the past year.
 
"This sounds to me like someone is trying to wriggle out of what was agreed -- a strange thing to do," said Rainer Bruederle, parliamentary floor leader for the Free Democrats and a former German economy minister.
 
"One can only do one thing: make the preparations for the eventuality that there is a state insolvency in Greece and if it doesn't fulfill the agreements, then the point will have been reached where the money is turned off."
 
INVESTORS SCURRY
 
Financial markets, which had drawn encouragement from the euro zone deal on a new bailout for Greece, took Papandreou's bombshell badly. Players scurried for safer investments, hammering stocks and punishing the euro.
 
"The risk is that a 'no' from the Greeks will completely derail the rescue efforts," a Paris-based share trader said. "We can kiss the year-end rally goodbye."
 
European stocks were down close to 3 percent and MSCI's all-country world stock index shed 1.7 percent, due not only to the possibility of a disorderly Greek default but chaos surrounding the euro zone's attempts to stop the debt crisis spreading to more significant economies such as Italy.
 
On foreign exchange markets, the euro fell more than one percent versus the dollar and yen as investors cut exposure to the common currency.
 
"The Greek referendum is a real curve ball. Nobody saw it coming and it injects a lot of uncertainty," said Steven Saywell, head of FX strategy at BNP Paribas.
 
Germans on the streets of Berlin expressed exasperation with the entire euro project.
 
"All I understand is that the Greeks keep causing us problems. We'd be better off without the euro," said Bert Kuehn as he delivered rolls to a bakery.
 
Some politicians urged caution as so much remains uncertain in the fluid world of Greek politics.
 
"If Greece votes 'no' that will mean a political crisis," said Spanish Secretary of State for the European Union Diego Lopez Garrido.
 
"For the moment we must be prudent and wait to see what Papandreou says before the full parliamentary session to explain the exact reach of his proposal," he told Cadena Ser Radio.
 
Papandreou, whose ruling Socialist party has suffered several defections as it pushes waves of austerity measures through parliament while protesters rally outside, said he needed wider political backing for the fiscal measures and structural reforms demanded by international lenders.
 
Analysts said the latest opinion poll showed a majority of Greeks took a negative view of the bailout deal.
 
The renewed uncertainty is likely to be an embarrassment for G20 leaders meeting in France this week trying to coax China into throwing the euro zone a financial lifeline.
 
"If there was to be a referendum, we may reasonably conclude that they may not accept the austerity measures. We may conclude that it will bring the pack of cards tumbling down," said Howard Wheeldon, senior strategist at BGC Partners in London.
 
Nobel prize-winning economist Christopher Pissarides caught the mood of uncertainty: "It is difficult to predict what will happen to Greece if they reject it. It will be bad enough for the European Union and the euro zone in particular, but it will be far worse for Greece.
 
"In the scenario of a 'No' vote Greece would declare bankruptcy immediately, they would default immediately. I can't see them staying within the euro," he said.
 
REFERENDUM ON MEMBERSHIP
 
"The situation is so tight that basically it would be a vote over their euro membership," Finland's Europe Minister Alexander Stubb told broadcaster MTV3.
 
Greek Finance Minister Evangelos Venizelos also warned citizens that euro zone membership was at stake.
 
"It's crunch time," he told lawmakers on Monday. "Citizens will have to answer the question: are we for Europe, the euro zone and the euro?"
 
Early on Tuesday, Venizelos checked into an Athens hospital with stomach pains but was expected to be discharged later.
 
Analysts were divided over whether Greek voters would accept the deal but agreed that a damaging month or two of market volatility lay ahead while European leaders looked on nervously.
 
Opposition New Democracy leader Antonis Samaras will visit President Karolos Papoulias on Tuesday to discuss developments and push for snap elections, party officials said.
 
"Mr. Papandreou is dangerous, he tosses Greece's EU membership like a coin in the air," party spokesman Yannis Michelakis said. "He cannot govern and instead of withdrawing honorably, he dynamites everything."
 
UP TO THE VOTERS
 
Papandreou told the Greek voters it was up to them to decide the country's fate.
 
"We trust citizens, we believe in their judgment, we believe in their decision," he told Socialist party deputies. "In a few weeks the (<a class="ticker" href="/stock/eu#">EU</a>) agreement will be a new loan contract... we must spell out if we are accepting it or if we are rejecting it."
 
Papandreou said the referendum would take place in a few weeks and Venizelos told Greek TV it would probably be held early next year.
 
Opposition parties accused Papandreou of looking for a way out for his embattled party by dragging Greece, which has seen violent clashes between anti-austerity protesters and riot police, through a lengthy period of political instability.
 
"I never expected Papandreou to take such a dangerous and frivolous decision," said Dora Bakoyanni, former foreign minister and leader of the small center-right Democratic Alliance party. "All the international media will say that Greece itself is putting the EU deal at risk."
 
Papandreou also said he would ask for a vote of confidence to secure support for his policy for the rest of his four-year term, which expires in 2013.
 
Analysts said he was likely to win that, despite dissent among his parliamentary team, and parliament officials said the confidence debate would begin on Wednesday, with a vote on Thursday or Friday.
 
MONEY RUNNING OUT?
 
Greece is due to receive an 8 billion-euro tranche in mid-November, but that is likely to run out during January, around the time of the referendum, leaving the government with no funds if there is a "no" vote.
 
A survey carried out on Saturday showed that nearly 60 percent of Greeks viewed the agreement on the bailout package as negative or probably negative.
 
But David Lea of Control Risks struck a more positive note. "It's all in the question. If he can frame it as a sufficiently apple-pie issue, he stands some chance of winning," he said.
</blockquote>
You should read <a href="http://andreaskoutras.blogspot.com/2011/11/v-behaviorurldefaultvmlo.html">Andreas Koutras' thoughts on the Greek referendum</a>. Must admit, don't understand why Papandreou decided to throw a referendum into the pot. But with <a href="http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_25910_31/10/2011_412533">Greece's jobless rate rising to 17.6 percent in July</a>, he was probably under tremendous political pressure by his party members to get the people's approval on this deal. Greece's Parliament is due on Wednesday to begin <a href="http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_6_01/11/2011_412647">three-day deliberations over a confidence vote</a>.
The problem for investors is that more uncertainty means more bad news on risk assets, including those high beta stocks that money managers were hoping to give them some year-end relief from the fiasco in Europe. Hold the champagne and shelve those "bunga bunga" parties, <a href="http://pensionpulse.blogspot.com/2011/10/bunga-bunga-la-dolce-beta_28.html">La Dolce Beta</a> has been "Greeked," and for now, it looks like investors can kiss that year-end rally goodbye. 
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