Israel

• Rough start for fiscal cliff talks (Politico)
• Europe Fails to Seal Greek Debt-Cut Deal in IMF Clash (Bloomberg)
• Japan’s Exports Reach Three-Year Low as Recession Looms (BBG)
• Beggars can be angry: Greek leaders round on aid delay (FT)
• More financial blogs launching soon: Financial Times Deutschland closing (Spiegel)
• China's backroom powerbrokers block reform candidates (Reuters)
• BOE Voted 8-1 to Halt Bond Purchases as QE Impact Questioned (Bloomberg). In the US the vote is 1-11
• UK heads for EU budget showdown (FT)
• Eurodollars - another epic scam: How gaming Libor became business as usual (Reuters)
• Clinton Shuttles in Mideast in Bid for Gaza Cease-Fire (Bloomberg)
• Fed Still Trying to Push Down Rates (Hilsenrath)

After tumbling to lows of 1.2735, and dragging the entire 100% correlated risk complex down with it, the EUR has since seen a straight line push higher despite the sad reality that for all expectations, Europe was embarrassingly simply unable to come to a resolution over Greece and has kicked the can to November 26, leaving Greece with zero cash to fund obligations to European banks, and if anything is left over, to fund domestic operations. The reason for the move up? The market, in all its wisdom, hopes  that 6 short hours after saying "9", Merkel has already softened her stance and that a deal in 5 days is inevitable. Of course, these are the same people who said a deal last night was inevitable. These are the same people who also said that Washington is this close from a reconciliation on the Fiscal cliff, despite this thing called reality (see Rough start for fiscal cliff talks from Politico). Adding to the surrealism was a French spokesman who said the country would "do everything to reach a Greek accord." Since a recently downgraded France will "do" nothing (that's Germany), but will "say" everything, it is safe to say that France is now the comic relief typically attributed to Jean-Claude Jun(c)ker. Finally, and wrapping up the bizarro surreality of central planned markets, the recent spike in Brent on Gaza re-escalations has been interpreted by those uber-complex DE Shaw algorithms as a risk on move, and pushed all risk indicators to overnight highs. With volume today set to be abysmal as trading desks will be empty around noon, expect some more absolutely insane zero volume moves in the SkyNet battleground formerly known as the "market."

Update: Israel launches massive airstrikes on Gaza after Tel Aviv bombing (RT). As expected

So much for hopes of a ceasefire as day 8 of of Operation Pillar of Defense begins. Around midday local time, an explosion took place in a bus in Tel Aviv near the military headquarters. As Jerusalem Post reports, "a total of 16 people were injured in a terror attack in central Tel Aviv on Wednesday, according to a spokesperson from the city's Ichilov Hospital. One person was severely injured, one moderately and one light to moderately. The remainder of the casualties were light or suffering shock. None were in a life threatening condition, though two were already in surgery, the hospital spokesperson said." According to witnesses a man climbed in the bus and threw a bomb on board. The explosion has sent Brent to its session highs over $111, and with Hilary Clinton briefly on location, it appears that Israel may well escalate to the next phase of the conflict which would be a land invasion.

Umm yeah...close-to-close, equity indices were mixed (Dow small red - HP/IBM, NDX/SPX small green on closing rampfest) amid dismal volumes but for anyone that paid attention to the debacle in the markets today, this was another odd one. Thanks to EUR strength's correlated power (retracing last night's France loss), stocks trickled up all morning into the European close; Bernanke suggested he was not omnipotent and stocks dumped 13 S&P points (~1%) to yesterday's day-session open; and then on no news - as Greece remains unfixed and cease-fire deadlines come and go, we pumped ingloriously on small lots and stupid volume up to VWAP/unch - paused for thought - and then ran to the day's highs just after the close day-session close in S&P futures. Treasuries suffered - yields up 5-6bps on the day as our broad risk-asset proxy lifted along with modest moves in FX carry pairs and USD weakness into the close. Oil was headline-maker (away from BBY and HPQ that is) - down almost 4% from the highs yesterday but closing still green on the week just above $87 as Israel re-flared. Credit was less noisy and VIX compressed a little more to 15.11% at the close (lowest in 5 weeks).

Over two years ago, on November 5, 2010, weeks before news broke out that the SEC had caught hedge funds in a massive insider trading scheme involving expert networks, and before the phrase expert network was even mentioned in places away from hedge funds, we wrote an article, titled "Is The SEC's Insider Trading Case Implicating FrontPoint A Sting Operation Aimed At S.A.C. Capital?" that predicted everything that has transpired with SAC since then: we said expert networks would be exposed as the root of virtually all "information arbitrage" alpha by Steve Cohen, more importantly, we exposed various biotech stock trading patterns, where the informational benefits from easily bribable doctors would result in immediate profits courtesy of advance knowledge of Phase 2, 3 and NDA results. Today, we discover not just how deep the SAC insider trading schemes went, but that the profit from such information abuse amounted to hundreds of millions in standalone cases. Adding these together and one can see why Steve Cohen - whose knowledge of these epic inside trading scheme is of course never implied by us: after all, that's what the DOJ, the SEC and the various DA offices are for - was generating 20% returns year after year and able to pocket 3% and 50%.

After plunging 50 pips or so on the France downgrade news, EURUSD trickled back up to yesterday's highs just before the US open and is going out at the EU close unchanged from yesterday as French bond spreads are now 1bp tighter on the week (yes tighter). European stocks extended their gains on the day - playing catch up to yesterday afternoon's US equity ebullience but this time corporate and financial credit are not playing along with the exuberance (though sovereigns are better). The Israel ceasefire prompted some modest risk-off interestingly in stocks (though Shekel strengthened) as Oil plunged (Brent relatively underperformed WTI as they both fell). More squeeze... or basis traders 'arb'ing the 130bps spread between Spain bonds and CDS? In an illiquid market, who knows...

Israel v. Palestine: Yet Another Gas War?

Just following the motions here:

• ISRAEL AND GAZA MILITANTS AGREE TO EGYPTIAN-BROKERED CEASEFIRE - HAMAS OFFICIAL AYMAN TAHA - RTRS
• GAZA TRUCE TO BE ANNOUNCED IN CAIRO AT 9 P.M., CHANNEL 2 SAYS - BBG
• GAZA TRUCE WILL BE DECLARED AT 1900 GMT AND GO INTO EFFECT AT 2200 GMT - HAMAS OFFICIAL SAYS

So who breaches the ceasefire first?

Another day, another melt up overnight wiping out all the post-Moody's weakness, this time coming courtesy of Europe, where following the French downgrade, the EURUSD filled its entire gap down and then some in the span of minutes following the European open, when it moved from 1.2775 to 1.2820 as if on command. And with the ES inextricably linked to the most active and levered pair in the world, it is is no surprise to see futures unchanged. It appears that the primary catalyst in the centrally planned market has become the opening of said "market" itself, as all other news flow is now largely irrelevant: after all the central planners have it all under control.

[And now it’s time for Mr. Obama to start paying for all those votes by reaching deep into our pockets. If you intend to avoid paying your “fair share,” however, please take note: There will be  few places to hide. For a gimlet-eyed view of what may lie in store for taxpayers and citizens of all political persuasions during the next four years, ponder the guest commentary below, from Wayne Siggard, a regular in the Rick’s Picks forum. RA]

Spoiled little investors feeling good today. 

• Israel Ready to Invade Gaza If Cease-Fire Efforts Fail (Bloomberg)
• Petraeus: A Phony Hero for a Phony War (NYT)
• IMF'S Lagarde says Greek deal should be "rooted in reality" (Reuters) "rooted" or "roofied"? And where was it until now?
• ECB's Asmussen says Greece to need aid beyond 2014 (AP)
• EU makes budget plans without (FT)
• Japanese Poll Shows LDP Advantage Ahead of Election (WSJ)
• Shanghai Composite Dips Below, Regains 2,000 Level (Bloomberg)
• Bond investor takes big punt on Ireland (FT)
• Noda defends BoJ’s independence (FT) Indewhatnow?
• Inaba Says BOJ Could Ease More If Government Reins in Debt (Bloomberg) Actually it's the other way around
• Miles Says Bank of England Can Do More If U.K. Slump Persists (Bloomberg) So much for the end of QE
• US tax breaks worth $150bn face axe (FT)

Those looking for fundamental newsflow and/or facts to justify the latest bout of overnight risk exuberance will not find it. To be sure, among the few economic indicators reported overnight in the Thanksgiving shortened week, European construction output for September tumbled -1.4% from August, after rising 0.6% previously. How long until Europe copycats the latest US foreclosure sequestration, "demand pull" gimmick and gives hedge funds risk free loans to buy up housing (aka REO-to-Rent)? More importantly, and confirming that Spain is far, far from a positive inflection point, Spanish bad loans rose to a new record high of 10.7%. This was the the highest level since the records began in 1962. The total value of these loans was €182.2 billion ($233 billion) in September, according to the Bank of Spain (more on this shortly). The relentless rise indicates that the Spanish bad bank rescue fund will be woefully insufficient and will need to be raised again and again. So while there was nothing in the facts to make investors happy, traders looked to hope and prayer, instead pushing risk higher on the much overplayed Friday "news" that politicians are willing to compromise in the cliff (which as we reported was merely a market ramping publicity stunt by Nancy Pelosi et al), and that Greece may be saved at tomorrow's Eurogroup meeting, for the third time. That this will be difficult is an understatement, with the Dutch finance minister saying no final decisions on Greece should be expected, and his German counterpart adding that a Greek debt writeoff is "inconceivable." In other words, even hoping for hope is a stretch, but the market is doing it nonetheless.

Why Israel Is Escalating the Assault on Gaza In November

New intelligence indicates forces in Gaza may be manufacturing long-range rockets locally. If this is the case, a significant ground force offers the Israelis the best chance of finding and neutralizing the factories making these weapons. Meanwhile, Israel continues its airstrikes on Gaza, and Gaza continues its long-range rocket attacks on major Israeli population centers, though Israel claims its Iron Dome defense system has intercepted most of the rockets. While Hamas is preparing for an Israeli ground assault into Gaza, Hezbollah's movements on Israel's northern frontier bear close watching. Iranian Defense Minister Ahmad Vahidi on Nov. 17 called on the Muslim world to retaliate against Israeli actions in Gaza. Naturally, many are looking in the direction of Lebanon, where Hezbollah, Iran's most capable militant proxy, could open a second front against Israel.