Domestic Fund Formation It is a simple process to enter the hedge fund industry; practically anyone with $15k to $20k can start a hedge fund and forming a hedge fund gets easier every year.
Offshore Fund Formation An offshore hedge fund is simply a structure used by hedge fund managers as a way to attract offshore investors (non-U.S. citizens) or U.S. tax-exempt investors such as pension and endowment funds.
Wednesday Watch
Evening Headlines 
Bloomberg:
  • Ukraine Vows to Protect Bank Deposits as Government Vote Delayed. Ukraine is weighing measures to stem cash withdrawals after as much as 7 percent of deposits were taken from banks during last week’s bloody uprising, underscoring the need for action to fend off a default. Withdrawals peaked with as much as 30 billion hryvnias ($3.1 billion) Feb. 18-20 as police and anti-government demonstrators fought in the center of Kiev, Natsionalnyi Bank Ukrainy Governor Stepan Kubiv, 51, appointed Feb. 24, said yesterday in his first interview.
  • Crisis Gauge Rises to Record High as Swaps Avoided: China Credit. China’s credit-market gauges are triggering alarm bells, as banks grow cautious in lending to each other while investors prefer the safest government bonds. The spread between the two-year sovereign yield and the similar-maturity interest-rate swap, a gauge of financial stress, reached 121 basis points on Feb. 19, the widest in Bloomberg data going back to 2007. Two days later, the cost to lock in the three-month Shanghai interbank offered rate for one year reached an eight-month high of 94 basis points over similar contracts based on repurchase agreements, which are considered safer because they involve government securities as collateral. 
  • China Mulls Holidays for Nanjing Massacre, Japan Defeat. China is considering new national holidays to mark the Nanjing Massacre and Japan’s defeat in World War II, the official Xinhua News Agency reported. Sept. 3 may be designated a victory holiday and Dec. 13 a national memorial day for victims of Nanjing, Xinhua said yesterday, citing draft decisions by the Standing Committee of the National People’s Congress. The actual number of Chinese killed in the weeks after Japanese forces captured Nanjing in 1937 is in dispute. China estimates the figure at 300,000, with some Japanese nationalists denying the massacre occurred at all. 
  • China Faces Lost Decade as Stocks Echo Japan: Chart of the Day. China’s stock market is turning Japanese. The CHART OF THE DAY shows the Shanghai Composite Index is repeating a pattern in the Nikkei 225 Stock Average during the 1980s and 1990s. The Japanese gauge tumbled as much as 80 percent from its 1989 peak as a collapse in home prices hobbled the nation’s financial system and led to a decade of tepid economic growth. The Shanghai index has dropped 60 percent since the end of 2007, erasing almost $2 trillion of market value.
  • China’s Yuan Trades Near Seven-Month Low as PBOC Lowers Fixing. China’s yuan traded near the weakest level in seven months as the central bank lowered its daily reference rate amid speculation it is looking to counter one-way appreciation speculation on the currency. The People’s Bank of China cut the yuan’s fixing by 0.01 percent to 6.1192 per dollar, the weakest since Dec. 20. The currency in Shanghai slipped 0.01 percent to 6.1270 as of 10:20 a.m., according to China Foreign Exchange Trade System prices. It touched 6.1351 earlier, the weakest since July 30. The spot rate was 0.13 percent lower than the fixing, after the two converged yesterday for the first time since September 2012.
  • Asia Stocks Pare Drop as Aussie Falls Amid China Concerns. Asian stocks pared declines, with the benchmark index set for a first monthly gain since October, and natural gas headed for its biggest three-day rout since 2007. The Australian dollar weakened against all peers amid concern China’s economy is slowing as financial stress builds. The MSCI Asia Pacific Index slipped 0.1 percent by 12:32 p.m. in Tokyo, after falling as much as 0.4 percent, and has advanced 2.3 percent this month. The CSI 300 Index of shares in Shanghai and Shenzhen traded near its lowest close since December 2012.
  • Copper Trades Near Three-Week Low on Global Growth Concerns. Copper traded near a three-week low after a report showed flagging U.S. consumer confidence and amid concern that China’s growth is slowing, damping demand prospects from the world’s two biggest users. The contract for delivery in three months on the London Metal Exchange was little changed at $7,066 a metric ton by 11:11 a.m. in Tokyo. The metal touched $7,034 yesterday, the lowest since Feb. 6. Futures are down 4 percent this year.
  • Credit Suisse Helped Clients Hide Billions, Senate Says. Credit Suisse Group AG (CSGN) helped American customers hide as much as $10 billion in assets from the Internal Revenue Service, more than double the amount previously known, according to a U.S. Senate committee. A report by the Senate Permanent Subcommittee on Investigations criticized the Zurich-based bank for failing to discipline any senior executives in the face of widespread tax evasion fostered by 1,800 Credit Suisse employees serving U.S. clients. The firm also misled investors about growth in its private banking unit, according to the report.
Wall Street Journal: 
Fox News:
  • Increased domestic spending may be behind proposed military cuts, CBO report suggests. As the Obama administration announces proposed sweeping defense cuts, a Congressional Budget Office report documents how increases in other areas of domestic spending may be forcing the White House to reduce money for the military. The CBO report finds that mandatory spending, which includes Social Security, Medicare and Medicaid, is projected to rise $85 billion, or 4 percent, to $2.1 trillion this year.
Zero Hedge: 
Business Insider:
Reuters: 
  • First Solar(FSLR) profit hit by choppy revenue from projects. U.S. solar company First Solar Inc reported a lower-than-expected quarterly profit and forecast weak first-quarter earnings, hurt by irregular revenue from its solar projects. The solar panel maker’s shares, which have gained three-quarters of their value in the past year, slipped 12 percent after the bell on Tuesday.
China Securities Journal: 
  • China Should Expand Property Tax Reform Trial. China should “actively” expand the property tax reform trial to fight against speculation in the property market, Jia Kang and Liang Ji, researchers at Finance Ministry’s research institute for fiscal science, write in an article
Shanghai Securities News:
  • China to Strengthen Property Land Control This Year. China will strengthen control of land used in property development this year to ensure land prices are “reasonable,” citing Liao Yonglin, head of the land use and management department of Ministry of Land and Resources. The newspaper says such comments signal that property control policies will continue.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 136.0 +2.0 basis points.
  • Asia Pacific Sovereign CDS Index 103.25 -2.5 basis points.
  • FTSE-100 futures -.16%.
  • S&P 500 futures +.23%.
  • NASDAQ 100 futures  +.20%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (DLTR)/1.05
  • (LOW)/.31
  • (CRI)/1.00
  • (CHK)/.40
  • (TJX)/.82
  • (AES)/.29
  • (CVC)/.09
  • (TGT)/1.24
  • (BKS)/.51
  • (ANF)/1.03
  • (JCP)/-.86
  • (LB)/1.61
  • (ADSK)/.34
  • (NDLS)/.12
  • (DFRG)/.38 
  • (PZZA)/.41
Economic Releases
10:00 am EST
  • New Home Sales for January are estimated to fall to 400K versus 414K in December.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,155,000 barrels versus a +973,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -760,000 barrels versus a +309,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,160,000 barrels versus a -339,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.16% versus a -.3% decline the prior week.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed’s Pianalto speaking, Fed’s Rosengren speaking, UK GDP data, $35B 5Y T-Note auction, weekly MBA mortgage applications report, (APA) investor day, (RRD) investor day, (OUTR) analyst day, Simmons Energy Conference, KeyBanc Consumer Conference, Keefe Bruyette Bank Conference and the BofA Merrill Ag Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

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