Felix Salmon submits: I’m back, relaxed, after the longest amount of time I’ve spent off-blog in three years. Trying to get back up to speed this morning, I noticed an interesting twist in the annals of bailed-out too-big-to-fail companies: RBS is being forced to sell some core assets, like its auto-insurance operations, which give stability to its earnings. At the same time, GM has managed to unsell Opel, an equally-core asset which had been going to Canada’s Magma. I like both of these developments. There’s a big difference between a too-big-to-fail bank and a too-big-to-fail automaker: leverage. GM’s failure would have devastating repercussions in terms of midwestern unemployment, which is why the US government bailed it out. But it wouldn’t threaten the international financial architecture in the way that the failure of RBS (RBS) would. So the world’s taxpayers have more interest in shrinking RBS than they do in shrinking GM.Complete Story »

  Brett Steenbarger submits: While stocks have pulled back in recent days, we continue to see firmness in commodities (DBC; top chart), especially gold (GLD; middle chart) and oil (USO; bottom chart). In a contracting world economy, we would expect commodity consumption to be lower and commodity prices to collapse. This would put pressure on the currencies and stock markets of commodity-producing nations.Complete Story »

  Dr. Stephen Leeb submits:Last week, stocks posted their worst showing in eight months. The action was dreadful with all sectors and market segments being clipped. Small caps fared the worst, dropping anywhere from 5 to more than 6 percent, depending the on the average you choose to examine. Market breadth was equally terrible with declining issues outpacing advancers by more than a 7-to-1 margin on the New York Stock Exchange. Markets around the globe responded in kind. Monday it looked like U.S. shares were headed for at least a temporary respite. But the rally was all too brief. Blue chip shares managed to recover by the end of Monday’s trading, but there were plenty of divergences: small caps, the transports and utilities all lost ground. Initially, investors cheered the Institute of Supply Management’s (ISM) Manufacturing Index data of October, which came in at 55.7, well ahead of expectations at 53 and the prior reading of 52.6. But the devil was in the details. The stock market rally fizzled as a breakdown of the ISM data revealed the pace of new orders, supplier deliveries and customers’ inventories all slowed in the month, while prices paid rose. So while the overall report suggested the economy is healthier than it was, key components suggest the recovery remains spotty, at best. There is much more economic data due out this week that could roil the market. For instance, the unemployment rate is expected to reach 9.9 percent, but a double-digit print will bring out the bears in force. From our perspective, even more important with be weekly jobless claims, which remain persistently high. Money supply figures, which continue to contract, could also set off alarm bells. Without more bank lending the economic recovery is doomed. The Federal Reserve’s policy setting committee is meeting again this week, which could also affect the market. No change is expected with short-term interest rates, but the wording in the policy statement will be closely watched. At this point, with the recovery still quite fragile, the last thing the Fed wants to do is get stocks running significantly higher. That would put pressure on Bernanke and company to start raising rates again sooner than they’d otherwise prefer. In fact, the Fed may offer a somewhat more muted assessment of the economy than it did six weeks ago in its last policy statement. The Fed could seek to engineer a modest correction in stocks. By doing so, the central bankers would help keep long-term interest rates down and make it more palatable to continue with its policy of quantitative easing, further aiding the weak banking sector. Whether we see prices erode from here or if stocks can manage another hurrah back toward the recent highs is open to speculation. One thing is certain, the deteriorating market internals tell us that the stock market is moving closer to its first significant pullback since the spring. Our hope is the correction will be limited in scope, but our fear is it could be far greater than most investors care to imagine. Looking further out, we see inflation as being a very real threat. And we’re not the only ones who think so. Warren Buffett’s (BRK.A) decision to buy Burlington Northern Santa Fe (BNI), his biggest acquisition ever, is a massive bet by the Oracle of Omaha on inflation since the railroad is levered to commodity prices. The market is recognizing this by bidding up gold prices sharply to a record high, even in the face of a strong dollar.Complete Story »

  

  Sam Diaz submits: AT&T (T) has filed a lawsuit against Verizon Wireless (VZ) over those “There’s a map for that” commercials - but not because AT&T is disputing the accuracy of those 3G coverage maps. (PDF of complaint) Nope, AT&T thinks that consumers are too dumb to differentiate between 3G and non-3G coverage and it wants those maps changed - specifically, the colors. (Techmeme) The Verizon map is largely covered by red, meant to represent its 3G coverage areas. The AT&T map, by contrast, is sparsely covered by blue - meant to represent its 3G coverage - and has vast sections of the nation covered in white, representing areas without 3G coverage.Complete Story »

  Rohit Chauhan submits: I recently received a comment from "madhav":The question I have on outsourcing IT companies like NIIT, Infosys (INFY), TCS, etc., is, "where is the moat?"Complete Story »

  Brandon Matthews submits: By Brandon MatthewsIn an exclusive Satwaves Radio interview last week with Senior Analyst Jessica Caldwell of Edmunds.com, Miss Caldwell predicted October auto sales of just over 800,000 units. The results are in, and the the total number of new cars and light trucks sold for the month of October is 804,748. Congratulations Jessica on making that call.Complete Story »

  Jim Delaney submits: Heading off the farm this morning but still staying out where you can count the number of traffic lights in town on one hand; driving along in ‘ole MacDonald’s brand spanking new John Deere (DE) and with climate control, GPS and an eight speaker sound system, there is nothing that “runs like a Deere”. The company recently announced they were bringing back 452 of the workers it laid off at its Ottumwa, Iowa factory which makes the equipment used by livestock producers. This also gives a little support to all the pig press from Monday. Back to work is good but it should also be noted that the Deere facility in question employed 980 people before the full on freeze in the global economy hit so over half the original workforce is still walking, not running.Complete Story »

  John Jansen submits: Prices of Treasury coupon securities have posted modest losses in overseas trading. I do not see a strong impetus in the news for the small declines in Treasury prices. Stocks around the globe are trading well with robust gains in Europe and healthy advances in Asia. So I will opine that those gains and futures market indications of solid gains when trading begins in the US are sapping strength from bonds. Bond traders also confront the uncertainty of the FOMC meeting and the policy statement from that group at about 2:15PM New York time. I believe that the FOMC will acknowledge the continued improvement in the economy but will genuflect to the depth of the recession and its associated headwinds and will reaffirm the need to hold the funds rate at an unusually low level “for an extended period”.Complete Story »

  Abbi Adest submits:Hyatt Hotels (H), a global upscale hotel operator and developer owned by the Pritzker family, is expected to go public this week. Family squabbles and corporate governance issues cloud an eagerly anticipated IPO. Business Overview (from prospectus)Complete Story »

  Macro Man submits: Gold has in recent days defied gravity (and the general strength of the dollar) to post fresh all time highs. It's up more than $60 in the last six trading sessions, spurred partially by yesterday's news of India taking down a 200-ton print from the IMF, but more clearly by real buying flow.As is always the case with the yellow metal, there are a dozen stories and theories offered for its performance, and per the usual it is difficult to distinguish fact from fantasy. However, an Occam's Razor analysis might well suggest that someone is taking an (informed?) punt on either financial stability, the maintenance of globally easy liquidity conditions, or both. If the latter, in particular, one would have to posit that the dollar would come under renewed pressure after the Fed (unless punters wish to wait for payrolls).Complete Story »

  The latest economic data published in Asia have shown that the major economies of the region have emerged successfully from the crisis of recent years. Smaller countries such as the Philippines and Indonesia have completely avoided plunging into recession, Singapore emerged from the crisis in the second quarter, while South Korea’s GDP grew 2.9% in the third quarter of this year. India, thanks to increasing flows of direct investment, is likely to come as a positive surprise in the coming months. All this has resulted in an upward revision to IMF’s economic growth estimates for Asia both in 2009 and 2010. The Washington Institute now forecasts 2.8% and a 5.8% growth in Asia in 2009 and 2010 respectively against earlier estimates of 1.2% and 4.3%. But investor attention remains focused on China’s economic growth. The recently published third quarter data has suggested that the worst may be behind for the Chinese economy. The most encouraging indication came from GDP, + 8.9% y/y in real terms from +7.9% y/y in the second quarter and +6.1% y/y in the first quarter. Indeed, it is commonly believed that the Chinese economy needs to grow around 9% a year not to record higher unemployment rates. Further signs of improvement came from industrial production, up 13.9% y/y in September, and exports, whose pace of decline slowed to 15.2% yoy from 23.4% in August. Retail sales should continue to move upward in the medium term (+15.5% y/y in September vs. +15.4% y/y in August), mainly driven by improved sales of cars (+44.5% y/y), furnishing (+34% y/y) and construction materials (30.2% y/y). A boost to private consumption (down from 67% in 1981 to 48% in 2007 as a percentage of GDP) to the detriment of exports was, in fact, considered key by most economists to help rebalance the Chinese economy when the crisis broke out.Complete Story »

  Time Warner (TWX) owns TV channels like TNT, TBS, CNN, HBO, magazines like Fortune, People, Time, the movie studio Warner Brothers, and the internet portal AOL.com. Based on our analysis, we estimate that TNT, TBS & CNN combined constitute about 24% of Time Warner's value while Warner Brothers accounts for 23%. We also estimate that HBO alone constitutes 20% of the company's value. This is an interesting result given that HBO's audience is much smaller than the audiences for TNT, TBS and CNN as well as the audiences for Warner Brothers films. HBO's value is driven by the high revenue per subscriber that it charges pay TV operators (like Time Warner Cable (TWC), Comcast (CMCSA), DirecTV (DTV)) for carrying HBO.At $7 per subscriber per month, HBO has the highest subscriber fee of any Time Warner channel. TNT, TBS & CNN combined make less than $2 per subscriber per month; however, their US TV household penetration levels are 2x that of HBO (82% vs. 39%). In addition, TNT, TBS & CNN make nearly as much money from advertising sales as subscription fees. Since HBO is a premium channel that subscribers pay directly for, it does not feature significant advertising.Complete Story »

  With all of the macro-economic noise in the markets right now, it may seem counterintuitive to focus on something as “old school” and mundane as seasonal tendencies. And yet, despite GDP reports, Buffett buyouts and Chinese manufacturing, the annual, everyday supply/demand cycles of the physical commodities can often hold a much stronger influence on overall price direction than any other factor. While agricultural commodities are often affected by planting and harvest (supply) cycles, there is no market more influenced by demand cycles than the energy markets. Complete Story »