Geopolitical Risks Research

· Deficit reduction talks ongoing between Congressional Republicans and the White House.  Under the plan being envisioned, the debt ceiling would be increased in exchange for a deal that includes strict spending reductions.  The details on the plan would be left for a later date (but the broad numbers, such as aggregate spending cuts or deficits as a % of GDP, would be agreed to now).  The “Big 3”, Medicare, Medicaid, and taxes, would be left until after the ’12 elections.  Republican Congressman Paul Ryan appeared to bless the broad points of this plan during remarks on Wed.  WSJ  http://on.wsj.com/jgkLIu

· Debt ceiling deal near says Politico – Politico has a lot of the same details as in the WSJ; says broad targets will be agreed to for deficit reduction but specifics will be deferred.  A vote on this deficit reduction plan, w/along w/a $2T hike in the debt ceiling, could come by the summer break – Politico

· California tax revs come in ~$2B ahead of expectations and analysts expect more good news - State officials are reporting an unexpected $2-billion surge in tax receipts that will help lawmakers close the remaining $15-billion budget deficit.  The windfall may actually harm Brown’s efforts to push through an extension of tax hikes.  LA Times. http://lat.ms/ktOrXi

· High speed traders move to the sidelines amid a reduction in volumes and volatility; volumes are tracking down 15% Y/Y so far as HFTs become less active; some say current levels of volume are more “natural” compared to the elevated trends seen during the financial crisis – WSJ   http://on.wsj.com/mQ1Gvt

· Silver – Carlos Slim’s silver firm ups bet against the metal – Slim’s mining company, Frisco, was short just under 95.759 million ounces of silver as of April 30 compared with a short position of 70.120 million ounces at the end of 2010 (Reuters  http://reut.rs/mNkAwM).  CNBC is reporting that Slim has been selling silver futures for “weeks” in an effort to actively hedge the production in his silver mine (http://bit.ly/isUhty).   

· Silver – CME hikes margins again - Chicago Mercantile Exchange notified traders today that it’ll raise margin requirements for a fourth time in a little more than a week.  Effective after the close Thurs, CME’s initial margin requirements will move from $16,200 up to $18,900.  http://bit.ly/mI0Y1v

· OPEC may raise oil output limits, restore credibility.....Reuters says OPEC is considering raising formal output limits when it meets in June.....some in OPEC see need for group to take action to bring prices back under $100 - Reuters

· Brazil – Siemens has warned Brazil over the level of the real, saying the country risks becoming “deindustrialized” unless it imposes more extreme capital controls and gets its currency under control.  Siemens says the real is “crushing” its export business in the country.  FT   http://on.ft.com/llyyST

· Europe divided over Greece – the WSJ says some German officials are increasingly open to the idea of a voluntary restructuring of Greek debt while others throughout Europeare fighting against such a move.  Germany thinks maturity extensions should be considered in order to avoid more draconian measures later on down the road (like principle haircuts). Greece officials say they are open to a rescheduling, but need political backing from the rest of Europe first.  WSJ    http://on.wsj.com/kIuXyO

· Investors gear up for a pretty important series of speakers/actions this Thurs morning (BOE 7amET; Fed’s Yellen 7:30amET; ECB decision 7:45amET; ECB’s Trichet press conf 8:30amET; Fed’s Dudley 10amET.

· Consumer - COST SSS strong w/Food inflation accelerating; BIG SSS miss; BIG calls out weakness in Lawn & Garden; for HD/LOW neg read-through - this follows SMG & SHLD (appliance); MW on the tape today and is raising its guidance for the Q.

· Giant asteroid heading close to Earth - A giant asteroid weighing 55 million tons will just miss the Earth later this year, Nasa experts have predicted; will miss the earth by just 201K miles; would be the largest object ever to approach the earth so close.  If it were to hit the earth, the asteroid, named YU55, would have an impact equivalent to 65,000 atom bombs and would leave a crater more than six miles wide and 2,000ft deep – London Telegraph.  http://bit.ly/mv4cjL