Investors Start Pricing in Chinese Inflation?

Tough Blow for the President—Federal Judge Rules 'Central Plank' in Health Law Unconstitutional (Wall Street Journal) "A federal court ruled Monday that a central plank of the health law violates the Constitution, dealing the biggest setback yet to the Obama administration's signature legislative accomplishment. In a 42-page ruling, U.S. District Judge Henry E. Hudson said the law's requirement that most Americans carry insurance or pay a penalty 'exceeds the constitutional boundaries of congressional power. 'The individual mandate 'would invite unbridled exercise of federal police powers,' wrote Judge Hudson, of the Eastern District of Virginia. "At its core, this dispute is not simply about regulating the business of insurance—or crafting a scheme of universal health insurance coverage—it's about an individual's right to choose to participate."


Tax Cut Package Poised to Sail Through Senate (Reuters) "President Barack Obama's bipartisan tax plan was on its way to passing its first test in Congress on Monday but a major Wall Street firm warned that damage to America's strained finances would outweigh any short-term economic boost. The $858 billion package, which would keep lowered income-tax rates from expiring at the end of the year, picked up 62 votes in the 100-seat Senate. Voting continued but the tax measure had effectively passed a procedural hurdle and will now go to a full vote in the chamber on Tuesday or Wednesday."Next stop: The House.

CNBC's Diana Olick Clarifies the Vagaries of Negative Equity (CNBC) "Just because you owe more on your mortgage than your home is worth doesn't necessarily mean that you are no longer able to afford your mortgage. For many Americans who bought their homes during the housing boom, little has changed for them financially other than what the appraiser has determined on paper. What has changed are attitudes, and attitudes can be dangerous. 22.5 percent of U.S. borrowers were in a negative equity position on their homes at the end of Q3, according to a new report from CoreLogic. That is actually an improvement from Q2, but only because many severely underwater homes went into foreclosure in the quarter, thereby taking them out of the pool. The authors of the study warn that deteriorating home prices now will likely push the percentage back up in Q4."

CNBC's Michelle Lodge on Why Pimco's Kashkari Sees a Return to Toxic Assets as a Positive Sign (CNBC) "The fact that the private sector is 'transacting' in toxic assets again shows a return of confidence to the market, Neel Kashkari, Pimco managing director and head of new investment initiatives, told CNBC Monday.' Obviously, real estate is a big part of what’s driving toxic assets, and the real estate markets have adjusted,' said Kashkari, who previously was an assistant secretary of the US Treasury, during the financial crisis, when TARP (Troubled Asset Relief Program) was administered. In Kashkari's Treasury role, he headed the unit that bailed out troubled banks."

Investors Start Pricing in Chinese Inflation? (Financial Times) "China wants to combat it, the US to create it. The possibility of rising inflation, and the way that could play out around the world is giving some investors a headache, just weeks after they worried about the opposite risk, deflation. 'Inflation is very high up the agenda of institutional investors,' says Keith Wade, UK fund manager Schroders’ chief economist. Latest data on Chinese inflation show consumer prices rose by 5.1 per cent in November, a much higher rise than expected.

Food prices were the biggest contributors and some economists are starting to express concerns over rising non-food commodity prices as well."

A&P Files for Bankruptcy(Bloomberg) "Great Atlantic & Pacific Tea Co., operator of almost 400 supermarkets under names including Waldbaum’s, Food Emporium and Pathmark, filed for bankruptcy after failing to compete with wholesale clubs and drugstores. The Montvale, New Jersey-based retailer, incorporated 110 years ago, also runs stores under its own name, Super Fresh and Food Basics. It listed assets of $2.5 billion and debt of $3.2 billion yesterday in a Chapter 11 filing in U.S. Bankruptcy Court in White Plains, New York. "Shifts in consumer spending patterns—favoring drugstores, wholesale centers, and supercenters—are blamed.

Treasury Market Improves, Slightly (Bloomberg) "Treasuries rose before tomorrow’s Federal Reserve statement on the economy as 10-year note yields near a six-month high attracted investors. Bonds also advanced as a federal judge ruled against the U.S. health-care overhaul, easing concern that the government will struggle to contain record deficits. Less U.S. debt was submitted today for purchase by the Fed under its program of quantitative easing, giving Treasuries a boost.Yield on the ten year note dropped 3 basis points."

Stocks Move Largely Sideways on Light Trading Amid Rumors and Mergers (Yahoo Finance via Reuters) "The Nasdaq closed lower and ended eight straight days of gains on Monday while the Dow and S&P 500 ended flat as optimism faded over China's move to tame its growth. The lightly traded session came as some technical indicators suggested a near-term pullback could be in the cards. About 7.32 billion shares traded on the New York Stock Exchange, the American Stock Exchange and the Nasdaq, well below the year's daily average of 8.62 billion."