- Dealers of credit-default swaps plan to overhaul the $28 trillion market in March to make the derivatives more like bonds and create a body that will arbitrate disputes. For the first time, the market will have a committee of banks and investors making binding decisions that determine when buyers of the insurance-like derivatives can demand payment and could influence how much they get, industry leaders said yesterday at a conference in New York. Traders also will revamp the way the contracts are traded, including requiring upfront payments to make them more like the bonds they’re linked to.
- Plunging DVD sales threaten to reduce profit for studio owners Time Warner Inc.,Walt Disney Co., Viacom Inc. and News Corp., and may force them to write down the value of movies, analysts said. Fourth-quarter shipments fell 32 percent in the U.S. and Canada to 453.6 million DVDs, according to Los Angeles-based Digital Entertainment Group. The drop is the biggest since the industry-funded researcher started keeping track in 1997. The decline is being fueled by viewer shifts toward rental services such as Netflix Inc.(NFLX), the U.S. recession and technology that makes it easier to stream Web videos to televisions.
- Northern Trust Corp.’s withdrawal from exchange-traded funds foreshadows a shakeout that will reduce the number of U.S. funds for the first time, according to Ronald E. Rowland, chief investment officer of Capital Cities Asset Management.
Wall Street Journal:
- Peter Schiff predicted a collapse of the U.S. financial system. The bust-up he didn't foresee was the one that made mincemeat of investors who took his advice in 2008. Mr. Schiff's Darien, Conn., broker-dealer firm, Euro Pacific Capital Inc., advised its clients to bet that the dollar would weaken significantly and that foreign stocks would outpace their U.S. peers. Instead, the dollar advanced against most currencies, magnifying the losses from foreign stocks Mr. Schiff steered his investors into. Investors open accounts at Euro Pacific to take advantage of Mr. Schiff's investment advice, which generally involves shunning investments in dollars. Individual returns can vary. Some investors may like gold-mining stocks, while others prefer energy-focused stocks. Most had one thing in common last year: heavy losses. A number of investors said their Euro Pacific portfolios lost 50% or more in 2008, worse than the 38% drop in the Standard & Poor's 500-stock index last year. People familiar with the firm say that hardly any securities recommended by Euro Pacific brokers gained ground in 2008. In 2008, investors nervous about the state of the U.S. economy who were impressed by Mr. Schiff's track record poured money into Euro Pacific, nearly doubling the number of accounts to 16,000. But many did so at the worst time possible, much like investors who piled into Internet stocks as the dot-com bubble peaked. Mr. Schiff is still riding high on his housing-market call. This week, he spoke at a global competitiveness conference in Riyadh, Saudi Arabia, alongside former heads of state, prime ministers and American gold-medal swimmer Michael Phelps. He is the subject of more than 3,000 YouTube videos, including one called "Peter Schiff Was Right." His admirers even created Web sites supporting a possible run for the U.S. Senate in 2010. Mr. Schiff, who was economic adviser to independent presidential candidate Ron Paul in 2008, says he has no plans to run for the Senate but "anything's possible." Early last year, Richard De Gennaro, a retired Harvard University librarian, put $100,000, about 15% of his assets, into a Euro Pacific account that included Canadian Oil Sands Trust, which focuses on crude-oil projects in Canada, and the India Capital Growth Fund, which holds investments in companies that do business in India. Both investments took big hits in 2008, compounded by the fact that the Canadian dollar and the Indian rupee fell 18% and 19%, respectively, against the U.S. dollar. The 83-year-old retiree's account is now worth about $37,000, a 63% plunge. Mr. Schiff "goes around saying that he was right," says Mr. De Gennaro. "He was right about one thing and wrong about everything else."
- The nation's top economic officials are discussing a new way to stabilize the financial system by buying a portion of banks' bad assets and offering guarantees against future losses on some of the remainder, in an effort to help banks while trying to mitigate the cost to taxpayers.
- A month after imposing a property tax increase, Mayor Michael R. Bloomberg is expected to call for a $900 million increase in the city’s sales tax on Friday, as the city confronts a loss of revenue due to the economic downturn. New York City already has one of the highest sales taxes in the nation, at 8.375 percent, and retailers are likely to fight the increase.
- A day after handing labor unions a major victory by signing an equal-pay law, President Obama today issued a series of executive orders that he said should "level the playing field" for labor against management. The orders, which union officials say will undo Bush administration policies that favored employers, will:
- The Obama administration is delaying a planned crackdown on federal contractors that hire illegal immigrants to determine if the electronic system set up to check workers' documents can handle the surge in workload, Homeland Security Secretary Janet Napolitano said yesterday. The federal government planned to require all contractors to use that government system, known as E-Verify, to screen all workers on contracts worth more than $100,000 after Jan. 15, but the Bush administration delayed the rule until Feb. 20 because of a lawsuit filed by the U.S. Chamber of Commerce. This week, the new administration postponed it until May 21 to give itself "an adequate opportunity to review the rule."
- President Barack Obama is considering picking Republican Senator Judd Gregg of New Hampshire as commerce secretary, a Democratic source said on Thursday. If Gregg left the Senate, the state's Democratic governor, John Lynch, could name a Democrat to replace him. If that occurred and Al Franken survives a court challenge to his apparent narrow victory in Minnesota, the Democrats would have a majority of 60 seats in the Senate, enough to prevent procedural roadblocks to legislation. But the source predicted Lynch would more likely appoint a Republican, saying that naming a fellow Democrat "could be a highly unpopular move in the state." Obama's first pick for the commerce post, New Mexico Governor Bill Richardson, withdrew from consideration earlier this month in the face of a legal inquiry.