Monday Watch

Weekend Headlines
Bloomberg:

- Hynix Semiconductor Inc., the world’s second-largest computer-memory chipmaker, was raised to “buy” from “hold” by Daewoo Securities Co., which cited a high-than-expected gain in spot prices.

- U.S. taxpayers may have to share in the losses on $301 billion of Citigroup Inc. loans and securities covered by federal guarantees after unemployment reached a 26-year high, according to the Congressional panel overseeing bank-bailout programs. The Federal Reserve Bank of New York projected a year ago that the Treasury Department might have to pay $3.96 billion on the guarantees if unemployment hit 9.5 percent, the panel said in a Nov. 6 report.

- China’s domestic vegetable oil market faces “supply pressures” because of high levels of stockpiles, Wang Yinji, deputy general manager at Cofco Oils & Grains Co., said at a conference today. “We can’t be too pessimistic on the market outside of China because of the unprecedented liquidity,” Wang said. “But there are supply pressures inside China, because of high stockpiles.”

- China’s imports of refined copper will “sharply decline” in 2010 from this year as demand growth slows amid high stockpiles, said an analyst at Beijing Antaike Information Development Co. Imports are likely to fall from an estimated 3 million metric tons this year, Yang Changhua, from Antaike, said at a conference in Wuhan, China. Copper use in the world’s largest consumer will grow 8 percent to 5.8 million tons, slowing from this year’s 10 percent gain, Yang said. Copper, used in pipes and power cables, has doubled in London this year as China’s 4 trillion yuan ($586 billion) stimulus spending and state stockpiling boosted imports to a record. Inventories of copper at warehouses monitored by the Shanghai Futures Exchange are almost six times the level at the beginning of the year. “China has over-imported this year as can be seen from current high stocks, partly due to a sharp decline of scrap copper” availability, Yang said. “Imports of scrap will recover due to improved availability and prices.” Inventories of copper at Shanghai warehouses stand at 104,275 tons, the highest in more than five years and up from 17,822 tons at the start of the year.

- The unemployment rate in the U.S. jumped to 10.2 percent in October, the highest level since 1983, threatening the emerging economic recovery and giving President Barack Obama and Democrats a bigger hurdle to overcome before next year’s Congressional elections. Payrolls fell by 190,000 last month, more than forecast by economists, a Labor Department report showed yesterday in Washington. The jobless rate rose from 9.8 percent in September. Factory payrolls dropped by the most in four months, and the average workweek held at a record low. Treasury two-year notes rallied on bets the Federal Reserve is more likely to maintain its pledge to keep interest rates near zero. The figures prompted Obama, who signed a bill yesterday extending jobless benefits, to promise new measures to find jobs for some of the 15.7 million unemployed Americans. “This will have a chilling effect on consumer confidence and business confidence,” said Joseph Brusuelas, a director at Moody’s Economy.com in West Chester, Pennsylvania. “It does look like unemployment will creep much higher.”

- If Jamie Dimon ever needs fatherly advice, he can turn to his newest employee: Dad. Theodore “Ted” Dimon, the 78-year-old father of JPMorgan Chase & Co.’s chief executive officer, quit Bank of America Corp.’s Merrill Lynch unit yesterday to join his son’s firm, according to a person familiar with the matter.

- The Federal Reserve said a U.S. judge erred in ruling that the central bank should identify companies that received emergency loans last year, according to court papers filed to overturn the decision. U.S. District Judge Loretta Preska improperly used the standard of “imminent harm” to a borrower’s competitive position rather than a lesser standard of “likely harm,” according to papers filed yesterday by Fed lawyers led by Senior Counsel Yvonne Mizusawa. Bloomberg News, a unit of Bloomberg LP, the New York-based company majority-owned by New York City Mayor Michael Bloomberg, won a ruling in Manhattan federal court on Aug. 24 affirming the right of U.S. taxpayers to know about the financial firms that borrowed money. Bloomberg’s response to the Fed’s appeal to the U.S. Court of Appeals in Manhattan is due Dec. 7 and a hearing is expected to be held the week of Jan. 4. The information sought by Bloomberg would demonstrate the central bank’s tactics in its bailout of the U.S. banking system.

- Group of 20 governments split on whether to tax financial trading as part of a broader strategy to ensure the global economy’s expansion is less crisis-prone. U.K. Prime Minister Gordon Brown told a meeting of finance chiefs in St. Andrews, Scotland yesterday that such a levy could prevent excessive risk taking and fund future bank rescues, adding momentum to a debate begun by France. U.S. Treasury Secretary Timothy Geithner said a “day-by-day” tax on speculation is “not something we’re prepared to support.” The dispute over a so-called Tobin tax suggests that the unity the G-20 showed in battling the worst financial crisis since the Great Depression is unraveling as its focus intensifies on how far to rein in the banking system. The outcome may determine the strength of markets as the recovery builds as well as the scope for banks to profit from them. “The initial market reaction to talk of a Tobin tax is likely to be negative,” said Julian Jessop, a former U.K. Treasury official and now chief international economist at Capital Economics Ltd. in London.

- Venezuelan President Hugo Chavez told the military and civil militias today to prepare for war as a deterrent to a U.S.-led attack after American troops gained access to military bases in neighboring Colombia. Chavez said a recently signed agreement that gives American troops access to seven Colombian bases is a direct threat to his oil-exporting country. Colombia has handed over its sovereignty to the U.S. with the deal, he said. “Generals of the armed forces, the best way to avoid a war is to prepare for one,” Chavez said in comments on state television during his weekly “Alo Presidente” program. “Colombia handed over their country and is now another state of the union. Don’t make the mistake of attacking: Venezuela is willing to do anything.”

Wall Street Journal:

- Speaker Nancy Pelosi defied policy logic and public opinion late Saturday night, ramming through the House a nearly 2,000-page health-care leviathan that counts as the biggest expansion of the federal government since the New Deal. As President Obama likes to say, this was a "teachable moment" about our current government. The vote was 220 to 215, with 39 House Democrats joining all but one Republican in opposition. Mrs. Pelosi had to cajole and bribe her way to the magic 218, and the list of her promises must be stacked to the ceiling. The lone Republican, Joseph Cao, represents a Democratic-leaning Louisiana district and extracted a promise that Mr. Obama would increase Medicaid payments to his state, and even then he only voted after Democrats had already hit 218. Let no one suggest this was the "bipartisan" health reform that Mr. Obama has long promised. The bill is instead a breathtaking display of illiberal ambition, intended to make the middle class more dependent on government through the umbilical cord of "universal health care." It creates a vast new entitlement, financed by European levels of taxation on business and individuals. The 20% corner of Medicare open to private competition is slashed, while fiscally strapped states are saddled with new Medicaid burdens. The insurance industry will have to vet every policy with Washington, which will regulate who it must cover, what it can offer, and how much it can charge.

- A senior U.S. senator on Sunday said the shootings at Fort Hood could have been a terrorist attack, and that he would launch a congressional investigation into whether the U.S. military could have prevented it. Sen. Joe Lieberman, an independent from Connecticut who heads the Senate's Homeland Security and Government Affairs Committee, said initial evidence suggested that the alleged shooter, Army Major Nidal Hasan, was a "self-radicalized, home-grown terrorist" who had turned to Islamic extremism while under personal stress. Mr. Hasan, an Army psychiatrist, had opened fire Thursday at a soldier processing center at Fort Hood, Tex., killing 13 and wounding 29 in the worst mass shooting on a military facility in the U.S. Mr. Lieberman, appearing on "Fox News Sunday," cautioned that it remained too early to draw any definitive conclusions. He said his comments were based on "reports that we are receiving" about Mr. Hasan's actions and comments.

- The new tax break for businesses signed into law on Friday will result in a windfall valued at hundreds of millions of dollars for the biggest home builders, boosting the cash hoard the companies are tapping as they limp toward recovery. The tax break would give companies big refunds to help make up for recent losses. Specifically, it would let large firms claim cash refunds on taxes they paid going back five years, to offset current losses. Previously, the carry-back period for large firms was two years. Although the new tax break would apply to a variety of companies, it will be of particular benefit to home builders, whose earnings have gyrated more widely than companies in some other industries.

- The widening investigation of insider trading on Wall Street is expected to examine transactions at Steven A. Cohen's SAC Capital Advisors, one of America's largest and most successful hedge funds, according to people familiar with the matter. A plea agreement between the government and a cooperating witness in the investigation, Richard Choo Beng Lee, indicates that Mr. Lee has agreed to provide information to prosecutors about a hedge fund where he worked between 1999 and 2004. That firm is SAC, according to people familiar with the matter.

- Sands China Ltd. (1928.HK), the Macau unit of Las Vegas Sands Corp. (LVS), seeks to raise up to US$3.83 billion in a Hong Kong initial public offering to repay borrowings and help revive suspended construction works.

- General Electric Co. and Comcast Corp. have settled on how to value NBC Universal now and in the future, clearing a key obstacle to giving Comcast control of GE's television and movie company, according to people familiar with the matter. After weeks of wrestling, both sides have agreed to value NBC Universal at around $30 billion, people close to the talks said.

- Demand for Barnes & Noble Inc.'s yet-to-be-released electronic-book reader is so strong that the retailer is telling customers that new pre-orders won't ship until Dec. 11. In October, the nation's largest bookstore chain told its first wave of customers for the $259 Nook that the wireless device would ship Nov. 30. A second wave of customers was told it would ship Dec. 7. Now new customers are being told that their pre-orders will ship Dec. 11.

- Consumers will face an onslaught of elves and jolly snowmen in the coming weeks, as companies such as Target, Wal-Mart Stores, Kmart and Gap boost their holiday advertising spending beyond last year's levels. For the first two weeks of October, retailers reached 35% more viewers—their "ad weight" in industry parlance—on national cable and network television than they did in the same period a year ago, according to TNS Media Intelligence, an ad-tracking service owned by WPP.

- Northrop Grumman Corp.(NOC) agreed to sell its TASC consulting unit to private-equity firms General Atlantic LLC and Kohlberg Kravis Roberts & Co. for $1.65 billion, the latest in a flurry of deals signaling the return of leveraged buyouts after a two-year dormant stretch.

- Kraft Foods Inc.(KFT) is expected on Monday to officially launch a hostile bid for Cadbury PLC valued at roughly £10 billion ($16.59 billion), setting in motion a tussle for control of the famed British confectionary company.

MarketWatch.com:

- StarHub Ltd. Monday said it reached an agreement with Apple Inc.(AAPL) to start offering the iPhone in Singapore later this year.

Forbes:

- The Obama administration famously refused to bail out California earlier this year on the rationale that one state bailout could well become 50. But thanks to the Build America Bonds program, part of the stimulus package passed in February, the federal government is committed to covering a portion of interest payments on at least $8 billion of the state's taxable debt for decades to come. In effect, what California saves by selling Build America Bonds gets billed to U.S. taxpayers. Taxpayers will pay a bill for decades to fix what the bond market – now that it's healthy again – could well handle on its own.

NY Times:

- Silicon Valley may have discovered the perfect business: charging real money for products that do not exist. These so-called virtual goods, like a $1 illustration of a Champagne bottle on Facebook or the $2.50 Halloween costume in the online game Sorority Life, are no more than a collection of pixels on a Web page. But it is quickly becoming commonplace for people to spend a few dollars on them to get ahead in an online game or to give a friend a gift on a social network. Analysts estimate that virtual goods could bring in a billion dollars in the United States and around $5 billion worldwide this year — all for things that, aside from perhaps a few hours of work by an artist and a programmer, cost nothing to produce.

- Hoping to encourage bankers and managers to stay, Citigroup has begun dispensing several million stock options to more than a quarter of its workers in a way that could result in a sizable gain for them, The New York Times’s Eric Dash reports.

- New York’s cabbies howled when the city began forcing them to take credit cards. Some even went on strike, calling the requirements a kowtow to tourists and a burden on drivers. But two years later, the back-of-the-cab swipe has emerged as an unlikely savior for New York’s taxi industry, even as other cities’ fleets struggle to find fares in a deep recession. Overall ridership and revenue have increased. More and more fares are being paid with credit cards, even for shorter rides. And tips for drivers, usually an early casualty of tough times, are up sharply, double over the pre-plastic days. Even cabbies are conceding that credit cards are good for business.

- Amid a global frenzy fed by multibillion-dollar hedge funds, wealthy speculators and governments all rushing to stock up on the precious yellow metal, the price of gold briefly surpassed $1,100 an ounce on Friday, a record high. Long considered the ultimate refuge for nervous investors, gold has climbed as the dollar has steadily weakened, budget deficits have expanded in the United States and Europe, and central banks have continued to pump trillions of dollars into weak economies, creating fears of another asset bubble that will ultimately pop. “It’s not that gold has changed, but gold buyers have changed,” said Suki Cooper, a precious-metals strategist for Barclays Capital. “It’s a structural shift we’re seeing on the investing side, from Asian central banks right down to individual investors buying ingots and coins.”

- A nascent Web site called Rent the Runway is hoping to make high-end fashions much more accessible and almost as easy as renting a movie from Netflix. The mail-order service, which finishes the testing phase on Monday, allows women to rent dresses from notable fashion designers like Diane Von Furstenberg, Hervé Léger and Proenza Schouler for roughly one-tenth of what they would cost to buy in a retail store.

The Business Insider:
- Really, Goldman? SNL Skewers Bank Over Swine Flu Vaccine. (video)

- Gold smashed through an all-time high of $1,100 an ounce on Friday, bringing some solace to gold bugs who have been losing money on the metal since the 1980s. Gold still hasn't come anywhere near its late-1980's peak on an inflation-adjusted basis ($1,800 or so), belying the general theory that it's a great inflation hedge. As the world gold frenzy really takes hold, however, $2,000-an-ounce predictions are coming fast and furious, so there's always hope. The NYT surveys the gold landscape, checking in on the ultimate symbol of the rush--the bars on sale at the counters of Harrods:

NY Post:

- After South Carolina Rep. Joe Wilson shouted, "You lie!" as President Obama pitched health care to a joint session of Congress, even Republicans ran from their rude colleague. Two months later, however, most Americans are reaching a similar conclusion about Obama, and not just on health care. They now believe Obama was not honest about how he would govern. His campaign promises, they say, bear little resemblance to the president he is. They believed him when he said he was a moderate who would lead from the center. But a clear majority, 54 percent, now says the president is "mostly liberal" and his policies tilt left. They're not happy, because that's not what they expected or wanted. That's the finding of a USA Today/Gallup survey that could be the most important of Obama's rocky tenure. It goes a long way to explaining why he could not rescue fellow Democrats in New Jersey and Virginia gubernatorial races and why his signature policies, from the stimulus to health care to cap-and-trade, are unpopular. Quite simply, the president is squandering the trust the American people vested in him. It could not be otherwise when so many suspect he pulled the wool over their eyes to get elected.Gallup editor Lydia Saad writes that only 48 percent of the 1,521 adults surveyed in mid-October say Obama has kept his campaign promises, a sharp decline from the 65 percent who felt that way in April. She calls this a "re-evaluation of Obama's ideological orientation" and says it is a "fundamental indicator" of his falling approval ratings.

CNNMoney.com:

- Who says Parisians are blasé? Tout Paris, it seems, turned out Saturday morning for the opening of Apple's (AAPL) first retail outlet in France. The video posted below the fold shows lines of shoppers that stretched for blocks.

Business Week:
- For years it has been fashionable to dump on Detroit's cars as lacking in style, quality, and fuel-efficiency. But if Ford Motor's (F) third-quarter results—the first profit since 2005—are any indication, there may be life in American car brands after all.

MercuryNews.com:

- Interview: Kevin Johnson, CEO Juniper(JNPR) Networks.

LA Times:

- As concern spreads about H1N1 flu, a new survey of California voters found that while most consider the vaccine safe, a majority had no plans to get vaccinated. The poll also found that blacks and Latinos are far more likely than other groups to say they believe the vaccine could be unsafe. Only 5% of those surveyed said they already had been inoculated, a figure that remained consistent across income groups. Of the rest, 52% said they did not plan to get vaccinated. Among the 40% who said they wanted the vaccine, 12% said they already had attempted to find it but failed.

- Democratic consultant says he got a warning from White House after appearing on Fox News. At least one Democratic political strategist has gotten a blunt warning from the White House to never appear on Fox News Channel, an outlet that presidential aides have depicted as not so much a news-gathering operation as a political opponent bent on damaging the Obama administration. The Democratic strategist said that shortly after an appearance on Fox, he got a phone call from a White House official telling him not to be a guest on the show again. The call had an intimidating tone, he said. The message was, "We better not see you on again," said the strategist, who spoke on condition of anonymity so as not to run afoul of the White House. An implicit suggestion, he said, was that "clients might stop using you if you continue." "I have heard that they've done that to others in not too subtle ways. I find it appalling. When the White House gets in the business of suppressing dissent and comment, particularly from its own party, it hurts itself." Some observers say White House officials might be urging consultants to spurn Fox to isolate the network and make it appear more partisan. A boycott by Democratic strategists could help drive the White House narrative that Fox is a fundamentally different creature than the other TV news networks.

San Francisco Chronicle:

- Social media going corporate.

Politico:

- As health reform shifts back to the Senate, Majority Leader Harry Reid is facing dissent from fellow Democrats worried that he has no final bill, no Democratic consensus on the way ahead and no guarantee he’ll finish by year’s end. Even before Saturday’s House vote, senators had begun to question why Reid suddenly shifted course two weeks ago and threw his weight behind a public option plan, laying bare the deep divisions in his caucus between liberals and moderates. In the process, Senate action on health care has stopped dead, raising the possibility the Senate won’t even begin floor debate until after Thanksgiving. Reid said he’s confident the Senate will pass health reform legislation but left open the chance the final bill could slip until early next year. That remark earned him a visit from White House chief of staff Rahm Emanuel, who showed up in the majority leader’s office the next day to press him on the urgency of a Christmas deadline, according to two Senate aides. But it’s not just timing. Senate moderates are clearly growing nervous about the process ahead — the difficulties of merging a still nonexistent Senate bill with the more liberal House bill, one that has received the blessing of President Barack Obama and the momentum from Saturday night’s historic vote. In a private meeting last week with Finance Committee Chairman Max Baucus (D-Mont.), a half-dozen moderate Democrats aired a long list of concerns about the differences between the two approaches. They cited the $1.2 trillion price tag of the House bill, its reliance on a “millionaire’s tax” to fund the overhaul and the House’s refusal to include a tax on so-called Cadillac health plans because the tax is opposed by Democrats’ allies in organized labor.

- Minnesota Gov. Tim Pawlenty used his Iowa debut as a potential presidential candidate Saturday to excoriate President Obama and congressional Democrats for not doing more to address the still-wheezing economy. “They should be focused like a laser on jobs, not acting like a manure-spreader in a wind storm,” Pawlenty told Iowa Republicans gathered in an exhibition hall at the state fairgrounds, criticizing Democrats for their efforts on healthcare and energy. Noting that unemployment in October crested 10 percent, he mocked the Obama administration officials who earlier said that threshold would be breached only if Congress didn’t agree to the stimulus the White House called for, and received. “As a senior aide to President Clinton once said: It’s the economy, stupid,” Pawlenty quipped, channeling the 1992 James Carville line. He proposed making some of the Bush-era tax cuts permanent and cutting the payroll tax and rates on small business and research and development to help bolster the economy.

zerohedge:

- “The Chief Executive of One of the Country's Biggest Block Trading Dark Pools Was Quoted Two Weeks Ago as Saying That the Amount of Money Devoted to High-frequency Trading Could ‘QUINTUPLE Between this Year and Next’" In a must-read essay, Senator Ted Kaufman reveals that - despite all of the talk coming out of Washington - high-frequency trading is set to explode: We've gone from an era dominated by a duopoly of the New York Stock Exchange and Nasdaq to a highly fragmented market of more than 60 trading centers. Dark pools, which allow confidential trading away from the public eye, have flourished, growing from 1.5 percent to 12 percent of market trades in under five years. Competition for orders is intense and increasingly problematic. Flash orders, liquidity rebates, direct access granted to hedge funds by the exchanges, dark pools, indications of interest, and payment for order flow are each a consequence of these 60 centers all competing for market share. Moreover, in just a few short years, high frequency trading - which feeds everywhere on small price differences in the many fragmented trading venues - has skyrocketed from 30 to 70 percent of the daily volume. Indeed, the chief executive of one of the country's biggest block trading dark pools was quoted two weeks ago as saying that the amount of money devoted to high-frequency trading could "quintuple between this year and next." Mr. President, we have no effective regulation in these markets.

- The $26.5 trillion (gross notional) CDS market is under siege. Or such is the latest news from the formerly pervasive (ab)user of CDS trading strategies, David Einhorn. In an op-ed in the FT, Einhorn states "I think that trying to make safer credit default swaps is like trying to make safer asbestos,” he writes in a recent letter to investors, adding that CDSs create “large, correlated and asymmetrical risks” having “scared the authorities into spending hundreds of billions of taxpayer money to prevent speculators who made bad bets from having to pay." His full opinion can be found here, while for an extended blame session on CDS we refer readers to his complete VIC speech we posted earlier. We agree with Mr. Einhorn's cautionary perspective in principle: his warning that CDS has a feedback loop quality, and a negative convexity nature courtesy of a much increased correlation among various assets, is quite obvious to anyone who has traded or is familiar with the product. Which Mr. Einhorn undoubtedly is, having made hundreds of millions precisely courtesy of leveraged bets using CDS. The "about face" coming now from the Greenlight founder is surprising, although we have some thoughts that explain it.

cnet:

- The new Verizon Droid, like many a high-profile smartphone just coming onto the market, has been hailed by some as a potential--you know what's coming--iPhone killer. (Chronicling the very first Droid sales in ManhattanUnited States. (In some other countries, Apple has deals with multiple carriers.) The latest posting to suggest an imminent rapprochement between Verizon and the iPhone comes from the AppleInsider blog, which on Friday said that it's gotten wind of Apple having contracted to build a Verizon iPhone that would debut in the third quarter of 2010. More broadly, according to AppleInsider, the new "hybrid iPhone" will work on both the GSM/UMTS and the CDMA systems, meaning that Apple will be able "to sell a single global handset to all carriers, and specifically to Verizon Wireless in the US.” the other day, CNET's Maggie Reardon observed that the gadget may actually turn out to be more of a BlackBerry killer.) But does Verizon Wireless want to deliver a knockout to the iPhone? There's long been speculation that the carrier would sooner or later be offering the Apple smartphone, which since its launch has been solely in the hands of AT&T in the

San Diego Union-Tribune:

- Mexican soldiers detained six suspects Saturday at the site of a tunnel near the U.S. border fence west of A.L. Rodriguez International Airport. The entrance dropped more than 30 feet beneath the floor of a vacant house and was about 400 feet long, according to a statement from Baja California's Second Military Zone. The builders still had about 471 feet to go to the border. The tunnel apparently was being built to smuggle drugs into the United States.

Reuters:

- China hopes that the United States will keep its deficit to an appropriate size to ensure basic stability in the U.S. dollar exchange rate, Chinese Premier Wen Jiabao said on Sunday. "We have seen some signs of recovery in the U.S. economy ... I hope that as the largest economy in the world and an issuing country of a major reserve currency, the United States will effectively discharge its responsibilities," Wen told a news conference in Egypt. "Most importantly, we hope the United States will keep an appropriate size to its deficit so that there will be basic stability in the exchange rate, and that is conducive to stability and the recovery of the global economy," he added. The Chinese premier had expressed concern in March that massive U.S. deficit spending and near-zero interest rates would erode the value of China's huge U.S. bond holdings. China is the biggest holder of U.S. government debt and has invested an estimated 70 percent of its more than $2 trillion stockpile of foreign exchange reserves, the world's largest, in dollar assets. "I follow very closely Chinese holdings of U.S. assets because that constitutes a very important part of our national wealth. Our consistent principle when it comes to foreign exchange reserves is to ensure the safety, liquidity and good value of the reserves," Wen said.

- Sprint Nextel Corp (S). is preparing to pump at least $1 billion more into Clearwire Corp., the Wall Street Journal reported on Sunday, citing two people familiar with the matter.

Financial Times:

- Hedge funds will have a weaker hand during a crucial week for regulatory reform, according to people in Congress and the industry, as the alleged insider trading case involving Galleon Group’s founder dents their image. “I think that this is just one more bit of bad PR for the hedge fund industry,” said Brad Sherman, a Democrat congressman who sits on the House financial services committee. “For one thing, I think it definitely enhances the already certain prospect that hedge funds will be regulated by the federal government,” said Harvey Pitt, a former chairman of the Securities and Exchange Commission and head of Kalorama Partners, a consulting firm. “I think this will encourage the SEC to require hedge funds to adopt the same kind of insider trading policies and procedures that the law already requires for mutual funds and registered investment advisers,” he added. Before the Galleon probe came to public attention on Friday, hedge funds looked likely to escape the most onerous effects of financial regulatory reform. They had made the case – through the Managed Funds Association, the industry trade group, and sometimes via individual lobbyists – that they had not caused the crisis, had not taken government bail-out money and did not deserve to be constrained by tighter oversight. On Wednesday, the House financial services committee is due to mark up a bill that forces all but the smallest hedge funds to register with the SEC, subjecting themselves to examination and providing information to assess whether they are systemically significant.

- Five battery-operated robotic hamsters costing about $10 each have become the must-have toy of Christmas 2009, with parents in North America and the UK snapping them up as soon as they arrive on retailers’ shelves. Zhu Zhu Pets, sold in the UK as Go Go Pets, are the hottest toy of the season, according to Jerry Storch, chief executive of Toys R Us, the retailer, a phenomenon on a par with Teenage Mutant Ninja Turtles, the smash hit of Christmas 1987.

- The European Union’s public debt could by 2014 rise to 100 per cent of gross domestic product – a year’s economic output – unless governments take firm action to restore fiscal discipline, EU finance ministers will be warned on Monday. The stark message is contained in a European Commission analysis, which highlights the rapid deterioration in EU public finances caused by emergency measures in the past 12 months to rescue Europe’s financial sector and combat recession.

TimesOnline:
- I’m doing ‘God’s work’. Meet Mr. Goldman Sachs(GS). The Sunday Times gains unprecedented access to the world’s most powerful, and most secretive, investment bank. Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said bankers do “God’s work” in an interview. Lenders serve a “social purpose” because they help companies secure capital to expand and create jobs, Blankfein said. Goldman Sacs’ bonus system is a just reward for performance, he said.

- Beijing today launched an inquiry into allegations that American carmakers such as General Motors and Ford dumped government-subsidized cars on to the Chinese market in the latest flare-up of trade tensions between the two huge economies. The anti-dumping investigation adds sports utility vehicles to a growing list of products embroiled in an acrimonious trade spat that includes chicken and tires. China’s deliberately high-profile announcement swiftly followed last night’s decision by Washington to impose hefty tariffs on steel pipes imported from the Chinese manufacturers. The Chinese commerce department described the tariffs as “discriminatory” on its website. Beijing’s move is seen as a double escalation of the trade row. The targeting of American carmakers – and the prospect of punitive fines -- aims a potentially savage blow at a US industry still wrestling for survival in dreadful domestic and European markets.

Telegraph:

- Bank of England says financiers are fuelling an economic ‘doom loop’. The banking sector must be overhauled as profoundly as in the wake of the Great Depression or financiers will "game the state" over and over again, the head of the Bank of England's financial stability arm has warned.

Tele Congo:

- Congo Republic plans to increase oil production by 20% by the end of this year, citing officials. Output may rise to 300,000 barrels per day from the current 250,000 barrels per day.

Korea Central News Agency:

- North Korea’s Minju Josun newspaper called contingency measures reportedly planned by South Korea and the US an unforgivable insult and an explicit provocation. Such plans promote confrontation and war, KCNA said.

Haaretz.com:

- Concerns are growing in Israel's government over the possibility of a unilateral Palestinian declaration of independence within the 1967 borders, a move which could potentially be recognized by the United Nations Security Council. Prime Minister Benjamin Netanyahu recently asked the administration of U.S. President Barack Obama to veto any such proposal, after reports reached Jerusalem of support for such a declaration from major European Union countries, and apparently also certain U.S. officials. The reports indicated that Palestinian Prime Minister Salam Fayyad has reached a secret understanding with the Obama administration over U.S. recognition of an independent Palestinian state. Such recognition would likely transform any Israeli presence across the Green Line, even in Jerusalem, into an illegal incursion to which the Palestinians would be entitled to engage in measures of self-defense.

TheNational:

- Japanese builders are owed billions of dollars on projects that include the Dubai Metro and Palm Island, according to a top diplomat and leading contractors from the country,
Japanese builders have played a pivotal role in Dubai’s construction boom, spearheading work on the Dh28 billion (US$7.6bn) Metro and helping to build Nakheel’s palm-shaped islands off the emirate’s coast. But as the global financial crisis brought many projects to a standstill, an increasing number of foreign companies, especially builders, have reported payment problems mainly linked to Dubai developers. “Some Japanese construction companies are facing very serious debt problems as Dubai can’t pay,” said Seiichi Otsuka, the Japanese consul general in Dubai.

Weekend Recommendations
Barron's:
- Made positive comments on (JPM), (SHW), (LLL), (MO), (JDSU), (PBCT) and (AMP).

- Made negative comments on (APOL).

Citigroup:

- Reiterated Buy on (AMAT), target $17.

Night Trading
Asian indices are unch. to +1.0% on avg.

Asia Ex-Japan Inv Grade CDS Index 116.50 +2.0 basis points.
S&P 500 futures +.33%.
NASDAQ 100 futures +.27%.

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- None of note

Other Potential Market Movers
- The Treasury’s 3-year Note Auction, Fed’s Tarullo speaking, (UNM) analyst meeting, (KCI) analyst day, (NTGR) analyst day and the (QSII) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and financial stocks in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.