Bloomberg:
- Raj Rajaratnam, the billionaire founder of the hedge fund firm Galleon Group, and ex-directors at a Bear Stearns Cos. hedge fund were among six people charged in a $20 million insider trading scheme by federal prosecutors. Also accused were Rajiv Goel, who worked at Intel Capital as a director in strategic investments, Anil Kumar, who worked as a director at McKinsey & Co., and IBM Corp. executive Robert Moffat. The former officials at Bear Stearns Asset Management are Danielle Chiesi and Mark Kurland, who were affiliated with the firm’s New Castle Partners, which managed about $1 billion.
- The Obama administration may adjust its mortgage-modification program to help lower-income Americans with housing payments deemed affordable under current standards, executives at the two largest loan servicers said. The change would be meant to boost the amount of borrowers able to qualify, by allowing debt to be reworked for certain homeowners with mortgage bills already below 31 percent of their pretax incomes.
- The dollar advanced from almost a 14-month low against the euro after some investors bet that the currency’s four-day decline to that level was overstated given signs of a U.S. economic recovery. The Dollar Index pared a second straight weekly drop after a Federal Reserve report showed U.S. industrial output expanded last month more than three times as much as economists forecast. The pound headed for its biggest weekly gains versus the euro and the dollar in four months on speculation the Bank of England will suspend quantitative easing. “The U.S. dollar is trading better on better news now,” said Adam Cole, head of global currency strategy at RBC Capital Markets in London.
- The U.S. Securities and Exchange Commission named Adam Storch, a 29-year-old from Goldman Sachs Group Inc.’s(GS) business intelligence unit, as the enforcement division’s first chief operating officer. Storch, who joined the SEC Oct. 13, was named to the newly created post of managing executive in the enforcement unit, charged with making the division more efficient, the SEC said today in a statement. At New York-based Goldman Sachs, he had worked since 2004 in a unit at that reviewed contracts and transactions for signs of fraud. “Adam’s skill in technology systems, workflow process, and project management will greatly benefit the division,” SEC enforcement chief Robert Khuzami said in the statement. “He will help to make us more efficient and nimble and permit us to put more of our investigators on the front lines.”
- U.S. stocks will probably keep rising for six to nine months, adding to gains that sent the Dow Jones Industrial Average above 10,000 for the first time in a year, according to Quantitative Analysis Service. The Jersey City, New Jersey-based firm bases its forecasts on four indicators: two measures of momentum and gauges of supply and demand. While the indicators have yet to vouch for the market’s long-term health, they are moving in the right direction, said Kenneth Tower, senior vice president at QAS. “Our work suggests that there is not much risk in the equity markets until sometime, maybe late spring, next year,” Tower said in a telephone interview. “The four factors are working together in a very positive way.”
- Spending in the U.S. on luxury goods and services spurted 29 percent in the third quarter from the previous three months, as consumers with the highest incomes unleashed pent-up demand, according to Unity Marketing. Spending among 1,067 consumers with average annual income of $228,800 rose to $18,826 each in the three months ended in September from $14,554 a quarter earlier, the Stevens, Pennsylvania-based luxury-market research firm said today. They cut spending by 3.2 percent in the second quarter. The increase was driven by consumers with the highest income levels, starting at $250,000 a year, said Pam Danziger, Unity’s Marketing’s president. Spending was strongest in the home, travel and dining segments, she said.
- President Barack Obama told a group of Democratic Party donors in San Francisco he’s determined to outlast his critics to move ahead on his agenda, including revamping the health-care system and financial regulations. “Some of our opponents think they are going to wear us down,” Obama said at a fundraiser for the Democratic National Committee last night at the Westin St. Francis Hotel in San Francisco. “I’m not tired, I’m refreshed.” Obama has been stepping up political fundraising, attending at least one fundraiser a month since May. He held his first in March, also on behalf of the DNC. He’s also headlined events for Democratic Senators Harry Reid of Nevada and Arlen Specter of Pennsylvania and gubernatorial candidates Jon Corzine of New Jersey and Creigh Deeds in Virginia. Obama was joined at the tonight’s event by House Speaker Nancy Pelosi, who represents San Francisco. More than 150 people paid $30,400 per couple to have dinner with Obama and 900 paid between $500 and $1,000 to attend a reception.
- The record rally in the price of loans owed by the riskiest corporate borrowers may end a two- year drought in leveraged buyouts. Banks provided almost $7.5 billion of high-yield loans in the U.S. and Europe since July 1 to finance acquisitions, more than double the amount in the three months ended June 30 and more than four times the figure in the first quarter, according to Standard & Poor’s LCD. Borrowers seeking a $1 billion loan now would pay about $60 million less in interest annually than in December.
- Confidence among U.S. consumers fell more than forecast in October, a reminder that households remain nervous about the strength of the emerging economic recovery. The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 69.4 from 73.5 in September. The highest unemployment rate in 26 years threatens to restrain consumer spending as the U.S. enters the Christmas- holiday shopping period. The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, fell to 67.6 from 73.5 in September.
- Chrysler Group LLC, the U.S. automaker run by Fiat SpA, is asking suppliers to plan to make enough parts for more than 100,000 Fiat 500 small cars to be built in Mexico, people familiar with the matter said. Chrysler plans to sell three-fourths of the minicars in the U.S., Mexico and Canada and 25 percent in South America, said one of the people, who asked not to be named because the matter is private.
- Roark Capital Group, the Atlanta- based owner of brands including Carvel ice cream, plans to invest the most in its eight-year history next year as the private-equity industry thaws. Roark, named for Ayn Rand’s protagonist in “The Fountainhead,” invested $180 million last month in a pet retailer and a garbage hauler, managing partner Neal Aronson said. That’s almost triple the $65 million the fund committed in the previous 20 months, he said in an interview this month. “We finally feel that the economy has stabilized,” Aronson, who manages $1.55 billion in assets, said. “Business owners are picking up their heads and saying, ‘We have more visibility into the future.’” Private-equity transactions will accelerate in the second quarter of 2010 following a two-year freeze triggered by the global credit crisis, said Aronson, 44.
- General Electric Co.’s(GE) third-quarter profit declined 45 percent as the company scaled back real estate and consumer lending and sold fewer medical machines, leading to a steeper drop in sales than analysts projected. Chief Executive Officer Jeffrey Immelt is shrinking the finance unit and weighing a reduced stake in NBC Universal as he builds energy, transportation and health-care businesses to help emerge from the recession.
Wall Street Journal:
- Cash-for-clunkers programs have no lasting economic benefit and could even lead to a "substantial weakening" in euro-zone automobile sales next year, the European Central Bank said. The findings, though far from original, amount to an official slap on the wrist to European governments including those of Germany, France and Spain that rolled out the popular programs to stoke demand in their auto sectors at the height of the financial crisis.
- China praised its growing energy and trade ties with Iran in remarks that further diminished any expectation that Beijing will support efforts by the U.S. and its allies to sanction Iran over its nuclear program. "The Sino-Iran relationship has witnessed rapid development, as the two countries' leaders have had frequent exchanges, and cooperation in trade and energy has widened and deepened," Premier Wen Jiabao said in a meeting with visiting Iranian Vice President Reza Rahimi, according to the state-controlled Xinhua news agency. The comments Thursday came a day after Russia also pushed back on any possible sanctions. Russia's Prime Minister Vladimir Putin, in Beijing for the Shanghai Cooperation Organization summit, said Wednesday it is "premature" to threaten sanctions against Tehran. Resistance from China and Russia, which can veto sanctions proposed through the United Nations Security Council, could derail attempts to use sanctions to punish Iran. China has pledged billions of dollars in energy-infrastructure investment in Iran in exchange for guaranteed supplies of oil and natural gas, a growing relationship that has made it difficult to economically isolate the Persian Gulf country.
- Wal-Mart Stores Inc.(WMT) launched a brash price war against Amazon.com Inc.(AMZN) on Thursday, saying it would sell 10 hotly anticipated new books for just $10 apiece through its online site, Walmart.com. That was just the beginning. Hours later, Amazon matched the $10 price, squaring off in a battle for low-price and e-commerce leadership heading into the crucial holiday shopping season. Wal-Mart soon fired back with a promise to drop its prices to $9 by Friday morning -- and made good on that vow by early evening Thursday.
- The nation's construction industry, nearly paralyzed during the downturn, should see modest gains next year, as a rise in building of single-family houses, apartment buildings, and highways and bridges offsets drops in commercial and manufacturing property, according to a new report. The closely watched McGraw-Hill construction forecast released Friday is another indicator that the economy will remain choppy in the wake of the longest and steepest recession since the Great Depression. New development will continue to be dragged down by high unemployment and tight credit markets. This year was particularly tough for the construction industry, with the value of starts expected to plunge 25% to $419 billion. Next year, starts are expected to climb 11% to $466.2 billion, according to McGraw-Hill. Construction starts indicate future construction spending and often correlate strongly with actual spending.
- Online gamers can get aggressive. They're nothing compared with Chinese bureaucracies engaged in a turf war. Popular online fantasy game "World of Warcraft" is at the center of one such battle. Concerns that it could be banned from China have hit the stock price of Nasdaq-listed NetEase(NTES), which licenses the game in China from Activision Blizzard.
- Iraq is planning to drill around 150 oil wells next year which will increase the country's crude oil production by 250,000 barrels a day, head of the state-run Iraqi drilling company said Friday. Iraq, which holds the world's third largest oil reserves, desperately needs to increase its oil production, now standing at around 2.4 million barrels a day.
- Cnooc Ltd. (0883.HK, CEO) is in talks with Norway's StatoilHydro ASA (STL.OS, STO) over a deal that would open the U.S. Gulf of Mexico to China's oil companies for the first time, a person familiar with the matter said. The move is significant as Cnooc's aborted $18.5 billion bid for California-based Unocal Corp. (UCL) in 2005 is widely seen as having deterred state-owned Chinese oil giants from investing in U.S. oil and gas assets.
- No one ever went broke underestimating political cynicism, but these days even we can't keep up: On Wednesday, President Obama announced that he wants to send every American senior a $250 check. "Even as we seek to bring about recovery, we must act on behalf of those hardest hit by this recession," Mr. Obama said. Of course it's a mere coincidence that these checks are being proposed, and probably passed, just as Congress is about to vote on health care.
CNBC:
- While it might seem like a $2 trillion new carbon market will be created overnight with a presidential signature, the current players in this new commodity have been quietly building its infrastructure for several years already. In addition to the usual specialized brokerage and accounting services any commodity might need, carbon markets also require established standards to ensure all credits are reliably similar, and registries to track all of these credits from birth to retirement. Work has already begun on those key back office functions, using the nascent American carbon markets, says Katherine Hamilton, managing director of Ecosystem Marketplace, an environmental markets information firm. The carbon accounting business has grown dramatically in the last couple of years, and features everything from integrated teams of consultants to simple software package installations. There are over 50 firms in this field, from large players like Microsoft(MSFT), SAP(SAP) and Computer Associates(CA), to smaller niche start-ups. Then there’s a whole new group of service providers dedicated to managing the value of your emissions portfolio. While firms like TerraPass offer clients like Ford(F) and American Express(AXP) one-stop, carbon-asset management, new emissions brokerages have sprung up to buy and sell carbon credits from offset projects. In this arena, pure emissions brokers, like White Plains-based Evolution Markets, vie with emissions operations of established firms, like Cantor Fitzgerald’s CantorCO2e group.
NY Times:
Washington Post:
- Congressional budget analysts have given House leaders cost estimates for two competing versions of their plan to overhaul the health-care system, concluding that one comes within striking distance of the $900 billion limit set by President Obama and the other falls below it. House leaders have been working to lower the cost of the $1.2 trillion health-care package they offered in July. The report from the Congressional Budget Office, a copy of which was obtained by The Washington Post, puts the cost of one plan at $859 billion over the next decade and the other at $905 billion. The cheaper version would rely heavily on a more dramatic expansion of Medicaid, the government health plan for the poor that is funded partly by the states -- meaning already-strapped governors would have to pick up more of the cost of reform. Compared with the original package, the two new proposals would offer less generous subsidies for people who need help buying insurance and do not have access to affordable employer coverage. Additional savings would come from reducing employer tax credits. Both packages are based on the original House framework, which proposes to extend coverage to more than 30 million Americans by expanding Medicaid eligibility and subsidizing private insurance for people who lack access to affordable coverage through an employer. Each would expand the ranks of the insured to more than 95 percent of Americans by 2019, and each would create a government-run insurance plan to compete with private insurance companies. Under the $905 billion version favored by liberals, compensation rates for medical providers in the government-run insurance plan would be based on Medicare rates, which are significantly lower than private rates. That idea, which Senate liberals also support, would hold down costs for the government, according to the CBO, but it would create a problem for providers in rural areas where Medicare rates tend to run much lower than the national average.
- The World Health Organization urged doctors Friday to treat suspected swine flu cases as quickly as possible with antiviral drugs, warning that the virus can cause potentially life-threatening viral pneumonia much more commonly than the typical flu, sometimes in relatively young, otherwise healthy people.
Boston Globe:
- Hedge fund managers - a secretive, lightly regulated group portrayed by some as villains in last year’s financial meltdown - appear to have a new degree of clout on Capitol Hill in shaping legislation that will determine how they will be regulated. To gain that clout, industry leaders are using a congressman-turned-lobbyist, a major increase in campaign donations, and a strategy that relies heavily on advancing their own reform ideas, making them active players in the legislative process and perhaps staving off more rigorous regulation measures. Few might have predicted such an outcome just months ago for the hedge fund industry, which has a major presence in Boston and whose future will be largely decided in key committee votes this week and next. To critics, hedge funds have been the face of what is wrong with how Washington allowed the financial industry to operate without enough oversight or accountability in recent years. Hedge funds advisers have not been required to register with the government, putting them in a relatively regulation-free zone that has fueled their growth. “The assumption is that they did play a destabilizing role’’ in last year’s meltdown, said Michael Greenberger, a specialist on hedge funds who is a former director of the Division of Trading and Markets at the Commodities Futures Trading Commission. As they make their case to Congress, hedge fund representatives have dramatically increased their spending on lobbying, going from less than $1 million in 2006 to nearly $8 million in 2008, according to the Center for Responsive Politics. They also recently began contributing much more heavily to politicians, especially as Democrats took power in the White House and Capitol Hill. They nearly quadrupled their contributions from 2006 to 2008, to $16.8 million, the center said. In the current 2010 election cycle, hedge fund officials have continued their historic tilt toward the Democrats, who received 71 percent of the $1.3 million in industry contributions. Many hedge fund managers are Democrats, including George Soros, who runs Soros Fund Management and has given millions of dollars to Democratic causes, including the liberal group MoveOn.org.
Newsweek:
Detroit Free Press:
- Despite Michigan's worst-in-the-nation unemployment rate, not many jobs -- 400 or so -- have been created or saved in the state so far by federal contracts under the stimulus bill, according to new data released Thursday by the Obama administration. On a per-capita basis, the value of the contracts in Michigan lags most other states, including Indiana and Ohio. Contractors and the state's lead official for implementing the $787-billion federal Recovery Act say the details released Thursday are only a snapshot -- representing less than 5% of overall stimulus spending. Jobs will be added as contractors hire to complete projects, they said. So far, the jobs saved or created in Michigan by federal contracts under the federal stimulus bill have cost about $300,000 apiece. In Michigan, some of the other big winners so far: • Smithgroup, an architectural, planning and engineering firm, with a $4.2-million contract for work at McNamara Federal Building in Detroit. It reported the creation or retention of 4.45 jobs. • SER-Metro Detroit Jobs for Progress of Detroit, with a $1.1-million contract to teach work-based skills to low-income youths. It reported the creation or retention of one job to date. • Industrial Maintenance Services of Escanaba, with a $3.5-million contract to repair the breakwater at Petoskey’s harbor. It reported the creation or retention of 10 jobs. Some of the Michigan contracts benefited companies in other states. Walsh Construction, based in Chicago, received a $14.5-million contract to provide research and development equipment to the U.S. Army Tank Automotive Research Development and Engineering Center (TARDEC) for its work in ground vehicle power and energy technology. The lab is based in Warren.
Rassmussen:
Politico:
- At a meeting last April with corporate lobbyists, aides to President Barack Obama and Sen. Max Baucus (D-Mont.) helped set in motion a multimillion-dollar advertising campaign, primarily financed by industry groups, that has played a key role in bolstering public support for health care reform. The role Baucus’s chief of staff, Jon Selib, and deputy White House chief of staff Jim Messina played in launching the groups was part of a successful effort by Democrats to enlist traditional enemies of health care reform to their side. No quid pro quo was involved, they insist, as do the lobbyists themselves. The result has been a somewhat unlikely alliance between an administration that came into power criticizing George W. Bush for his closeness to Big Business and groups such as the Pharmaceutical Research and Manufacturers of America and the American Medical Association. The previously undisclosed meeting April 15 at the offices of the Democratic Senatorial Campaign Committee led to the creation of two groups — Americans for Stable Quality Care and a now-defunct predecessor group called Healthy Economy Now — that have spent tens of millions of dollars on TV advertising supporting health reform efforts. In the most recent ad sponsored by Americans for Stable Quality Care, Obama speaks directly into the camera for 60 seconds, extolling the virtues of health care reform, while text at the bottom of the screen encourages viewers to visit the websites of the White House and the Finance Committee, which this week approved a 10-year, $829 billion health overhaul. Both coalitions operate independently of the administration and Senate Democrats, and spokesmen for both the White House and Baucus said that no pressure — implicit or otherwise — to join the pro-health-care reform groups was applied to industry representatives at the meeting.
CNNMoney.com:
- Hedge funds are finally getting their heads above water. The average fund could soon regain the high water mark at which its manager starts minting performance fees again. In hindsight, though, this fee structure doesn't work well. There are better options. In most cases, if a hedge fund loses money for investors, the typical 20% performance fee disappears and the fund has to make up losses before it kicks in again -- living, meanwhile, on management fees alone. That's no cause for sympathy -- but it does cut some funds' revenues sharply, potentially making it difficult to retain their best people. It also skews fund managers' incentives. Traders could lose interest because their high water marks, and hence big bonuses, seem distant. Alternatively, they could feel they've nothing to lose by making big, risky bets in the hope of recouping losses quickly. Neither mindset is good for investors. Whatever their current situation, many fund managers see that the simple high water mark idea is flawed. One alternative is what's called the Lone Pine model. Under this structure a hedgie whose fund loses, say, 10% still collects a performance fee as the fund recovers. But on the way back up to the old peak the usual 20% fee is cut in half, and it stays reduced for another one-and-half-times whatever the loss was -- in this case up to 115% of the old high water mark -- when the full fee kicks back in. Under this approach investors pay less in fees along the way than they would have done -- and the fund manager's revenue is less volatile, too. It's an improvement on the simpler structure, but shouldn't be the end of the story. Fees that consider several years of performance and do not pay out for illiquid gains make even better sense.
USAToday:
- A bad economy and low inflation are starting to drag down wages for millions of everyday workers and freeze benefits for millions of retirees. Average weekly wages have fallen 1.4% this year for private-sector workers through September, after adjusting for inflation, to $616.11, a USA TODAY analysis of Bureau of Labor Statistics data found. If that trend holds, it will mark the biggest annual decline in real wages since 1991.
Reuters:
- A weekly index of future U.S. economic growth edged down in the latest week, but its yearly growth rate rose to a new record high that further suggests signs of a tapering recession, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index slipped to 128.1 in the week to Oct. 9 from an upwardly revised 129.1 the previous week, which was originally reported as 128.3. But the index's yearly growth rate climbed to a fresh all-time high of 27.9 percent from 27.4 percent the prior week, which was revised higher from an original 26.1 percent. The group's data has posted annualized economic growth at record high rates since September. "Such a pronounced, pervasive and persistent upswing in the WLI and its components assures that this economic recovery can overcome any obstacles in the months ahead," said ECRI Managing Director Lakshman Achuthan.
- Kraft Foods Inc (KFT) is in talks to sell its Maxwell House coffee business to Sara Lee Corp (SLE) in a move that would give it more money to increase its bid for Cadbury Plc, the New York Post reported on Friday, citing one source.
- Treasury Secretary Timothy Geithner said on Friday the dollar's role as a reserve currency carries special responsibilities, including the need to control inflation and get the nation's finances in order. In an interview on CNBC television, Geithner was asked about the dollar's recent decline and what the Treasury was doing to guard its value. "The dollar's role in the system confers special obligations and responsibility on us as a country," he said. "It is very important that Americans understand that we need to do everything possible to sustain confidence in our ability to keep inflation low and stable over time and to make sure we're getting our fiscal house in order."
Financial Times:
- Eurozone exports tumbled unexpectedly sharply in August, raising fresh doubts about the strength of the 16-country region’s economic recovery. Exports to countries outside the eurozone fell 5.8 per cent compared with July, reversing a 4.7 per cent increase seen in the previous month, according to Eurostat, the European Union’s statistical office. The latest decline is a blow to the eurozone’s economic prospects because a pick-up in global demand for its exports had appeared likely to drive a rebound in the second half of this year. But even before the latest data, economists had worried that a strengthening euro would act as a significant brake on growth.
Globe and Mail:
- Their proponents say they could represent a multibillion-dollar business for investment banks. Their opponents say they are risky, poorly understood investments that place bets on human lives. And Canada's biggest credit rating agency has found itself caught in the middle of the debate. They're called "death bonds" - or, more formally, life settlement securitizations - a burgeoning class of financial products that have caught the eye of financial innovators at some of Wall Street's biggest banks, which are eager to find new ways to make money after the popping of the mortgage bubble. The bonds are created by intermediaries that buy up life-insurance policies from policy holders - typically seniors looking to cash out their policies - bundling them together, and selling off small slices to investors. The profit comes when the policy holders die and the investment funds, as the designated beneficiaries, collect the payouts. It may sound macabre, but the products have become increasingly popular in private investment transactions this decade - and have suddenly caught the attention of U.S. lawmakers. They are worried that Wall Street is preparing to repeat the same mistakes it made with subprime mortgages, and that bond rating agencies will be willing to put their stamp of approval on dubious offerings, just as they did during the credit boom earlier this decade.
- Analysts are now tripping over themselves with higher target prices on Google. Analysts at Bank of America, Deutsche Bank, RBC Dominion Securities, UBS, JPMorgan Chase & Co. and Canaccord Adams have raised their target prices by as much as 25 per cent. Jeff Rath, the analyst at Canaccord Adams, raised his target price to $700 from $560 – implying a price-to-earnings ratio of 23.3, based on his estimated 2010 earnings. Mr. Rath explains: “Improved YouTube monetization appears to be ramping materially, supporting the notion that a second product cycle may be about to begin in order to sustain Google’s high level of growth, as its accumulation of search share begins to wane.”
Imerisia:
- Titan Cement Co SA’s Greece, US and Balkan units haven’t seen any recovery in demand for the building material.
Diario Economico:
- The Tupi field offshore Brazil is producing about 20,000 barrels a day, citing Guilherme Estrella, director of exploration and production at Petrobras. Production at that project will reach about 100,000 barrels a day in December 2010.
Digitimes:
- Google(GOOG) will launch a Chinese-language version of mobile voice research service for handset users a few weeks later, with China, Taiwan and Hong Kong to be target markets, according to the company's engineering vice president Vic Gundotra at an October 15 press conference in Beijing, China. This is the second version of Google mobile voice search service following the launch of an English one in November 2008, Gundotra noted. The Chinese-language mobile voice search service will be initially available for handsets based on Nokia S60, iPhone and Android platforms, Grundotra indicated.
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