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.
Friday Watch
Evening Headlines 
  • Ukraine Premier Starts ‘Kamikaze’ Mission as Crimea Anger Flares. With deposed ex-President Viktor Yanukovych claiming he’s still the country’s rightful leader, Yatsenyuk must seal a financial lifeline as investors pull out of Ukraine. Yatsenyuk in an interview before his confirmation yesterday said he was prepared to be “the most unpopular prime minister in the history” of the nation. “The fate of all the members of this cabinet is the fate of a political kamikaze,” Yatsenyuk said on his website after getting the support of protesters on Feb. 26. “The treasury is empty, pensions haven’t been paid in full for more than a month, gold and foreign currency reserves have been robbed
  • Japan’s Output Climbs Most Since ’11 as Tax Rise Looms: Economy. Japan’s industrial production grew the most since 2011, indicating the economy is strengthening as a looming sales-tax bump stimulates demand, while inflation matched the highest level in more than five years. Output rose 4 percent in January from the previous month, the trade ministry said today in Tokyo, more than a 2.8 percent median estimate in a Bloomberg News survey of 33 economists. Consumer prices excluding fresh food climbed 1.3 percent from a year earlier, the statistics bureau said.
  • China Must End Its GDP Worship. For China to get off the growth treadmill would be a giant reform all its own. Why? Well, there are at least three major challenges China will never be able to address if leaders feel obliged to keep growth above a specified level: local government finances, pollution and the shadow-banking system.
  • China Yuan Set for Worst Month in 20 Years on Band-Widening Bets. China’s yuan headed for the worst month in two decades on speculation the government will broaden the currency’s trading band after allowing more volatility in the exchange rate. The yuan in Shanghai slid 1.5 percent in February, according to China Foreign Exchange Trade System prices. That’s the biggest monthly loss in CFETS figures since 2007 and in Bloomberg data before that.
  • Soho China Sells Shanghai Buildings Amid Deepening Office Glut. Soho China Ltd. (410), the biggest developer in Beijing’s central business district, will sell two office buildings in Shanghai as an office glut deepens in the country’s financial center. The company signed an agreement with Financial Street Holdings Co., a developer of Beijing’s central business area, to sell its entire equity stake in Soho Hailun Plaza and related loans, and Soho Jing’an Plaza for about 5.23 billion yuan ($853 million), it said in a statement to the Hong Kong stock exchange today.
  • North Korea Fires Missiles After Recent Easing of Tensions. North Korea fired four short-range missiles, the first confirmed launch in more than nine months, disrupting a period of easing tensions with the South. The missiles were fired into the sea from North Korea’s east coast shortly before 6 p.m. local time yesterday, and had a range of at least 200 kilometers (124 miles), South Korea’s Defense Ministry said. 
  • Asian Stocks Erase Advance as Yuan Drops Most on Record. Asian stocks fell, with the benchmark gauge erasing gains, after China’s yuan posted its steepest one-day loss against the dollar. China’s Shanghai Composite Index lost 1 percent, set for a third monthly slide amid speculation a weaker currency will curb earnings. Hong Kong’s Hang Seng China Enterprises Index slid 1 percent, erasing gains of as much as 0.8 percent, while the benchmark Hang Seng Index fell 0.4 percent. The MSCI Asia Pacific Index declined 0.4 percent to 137.45 as of 11:44 a.m. in Hong Kong after rising as much as 0.2 percent, and is little changed on the week.
  • Yen Gains Versus Euro Amid Crimea Tensions; Oil Falls. Japan’s yen headed for its longest streak of gains versus the euro in 15 months as reports that armed men seized an airport in Ukraine’s Crimea region stoked haven demand. Crude oil fell, trimming its February advance, while South Korea’s won and New Zealand’s dollar climbed. The yen rose 0.2 versus Europe’s currency at 11:01 a.m. in Tokyo, a fifth straight advance.
  • Gold Heads for Second Monthly Advance as Haven Demand Increases. Gold headed for the first back-to-back monthly gain since August as concern that the U.S. recovery may be losing momentum and turmoil in emerging markets boosted haven demand. Assets in bullion-backed exchange-traded products were set for the first monthly increase in 14 months. Bullion for immediate delivery was at $1,332.61 an ounce at 9:26 a.m. in Singapore from $1,331.33 yesterday. Prices are up 7 percent this month and reached a 17-week high of $1,345.46 on Feb. 26. Holdings in ETPs are up 0.3 percent in February after declining last year for the first time since the first product was introduced in 2003, data compiled by Bloomberg show.
  • Gold Fix Study Shows Signs of Decade of Bank Manipulation. The London gold fix, the benchmark used by miners, jewelers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say. Unusual trading patterns around 3 p.m. in London, when the so-called afternoon fix is set on a private conference call between five of the biggest gold dealers, are a sign of collusive behavior and should be investigated, New York University’s Stern School of Business Professor Rosa Abrantes-Metz and Albert Metz, a managing director at Moody’s Investors Service, wrote in a draft research paper. 
  • Natural Gas Heads for Biggest Weekly Drop in New York Since 1996. Natural gas futures fell for a fifth day in New York and headed for the biggest weekly drop in 17 years after a government report showed a U.S. stockpile decline that was smaller than forecasts. Natural gas for April delivery fell as much as 1.3 percent in today’s electronic trading on the New York Mercantile Exchange and was at $4.486 per million British thermal units at 10:08 a.m. in Singapore. Volume for all futures traded was 86 percent below the 100-day average. Gas is down 27 percent this week, approaching the biggest slump since December 1996, and down 9.2 percent for February.
  • Deckers Outdoor(DECK) Falls After Forecasting Surprise Quarterly Loss. Deckers Outdoor Corp. (DECK), the maker of Ugg boots and Teva sandals, dropped as much as 20 percent in late trading after the company forecast an unexpected first-quarter loss. The company, based in Goleta, California, projected a loss of 16 cents a share for the current quarter. Analysts had estimated a profit of 10 cents on average, according to data compiled by Bloomberg.
Wall Street Journal: 
  • People’s Daily Arms Netizens to ‘Kill the Devils’. An online platform for China’s Communist Party is encouraging citizens to take out their hostility toward the Japanese in the virtual world. While Beijing flexes its muscles in a very real way in the East China Sea, ordinary Chinese can now play a game called “Kill the Devils” on the website of the People’s Daily newspaper, the official mouthpiece of the party here.
Zero Hedge:
Business Insider: 
NY Times: 
  • Sovereigns to increase borrowing in 2014 to $7.1 trillion -S&P. Sovereign debt borrowing is expected to rise by 2.7 percent to $7.1 trillion this year, with the biggest relative increase coming in sub-Saharan Africa, a new study by Standard & Poor’s showed on Thursday. The increase in long-term debt borrowing, equivalent to $185 billion, will be led mainly by the United States and Japan, which will account for 57 percent of the total in 2014. The next biggest sovereign borrowers this year are projected to be Italy, China and Brazil.
Shanghai Securities News:
  • China Should Set Up Shadow Banking Regulatory Indicators. China should set up a “regulatory indicator system” for shadow banking risks, according to a commentary by Lei Wei, a researcher with the Development Research Center of the State Council. China should strengthen regulations on shadow banking risks for liquidity, maturities mismatches, leverage ratios and counterparties, Lei wrote.
  • China’s Property Industry Can’t Maintain High Growth. China’s property industry can’t maintain the high growth of recent years because the nation’s economy has entered a period of medium-high growth, citing Li Wei, head of the Development Research Center of the State Council. The supply-demand situation in the property market will see major changes after more than 10 years of high growth, the report cites Li as saying.
Evening Recommendations
 BNP Paribas:
  • Cut (BIDU) to Reduce, target $130.
  • Rated .
Night Trading
  • Asian equity indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 133.0 -4.0 basis points.
  • Asia Pacific Sovereign CDS Index 102.25 -.75 basis point.
  • FTSE-100 futures -.03%.
  • S&P 500 futures -.18%.
  • NASDAQ 100 futures  -.11%.
Morning Preview Links

Earnings of Note

  • (DDD)/.20 
  • (BSFT)/.41
  • (IRM)/.22
  • (NRG)/.17
  • (PMC)/.38
  • (SUP)/.23
Economic Releases
8:30 am EST
  • 4Q GDP is estimated to rise +2.5% versus a prior estimate of a +3.2% gain.
  • 4Q Personal Consumption is estimated to rise +2.9% versus a prior estimate of a +3.3% gain.
  • 4Q GDP Price Index is estimated top rise +1.3% versus a prior estimate of a +1.3% gain. 
  • 4Q Core PCE is estimated to rise +1.1% versus a prior estimate of a +1.1% gain.
9:45 am EST
  • Chicago Purchasing Manager for February is estimated to fall to 56.4 versus 59.6 in January.
9:55 am EST
  • Final Univ. of Mich. Consumer Confidence for February is estimated at 81.2 versus a prior estimate of 81.2.
10:00 am EST
  • Pending Home Sales for January are estimated to rise +1.8% versus a -8.7% decline in December.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed’s Kocherlakota speaking, Fed’s Evans speaking, Fed’s Plosser speaking, China Manufacturing PMI, Eurozone Flash CPI, German retail sales report and the (ETN) analyst conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology 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 50% net long heading into the day.

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