Monday, November 09, 2009

Today's Headlines


- Insurers such as WellPoint Inc. and Blue Cross Blue Shield and drugmakers are redoubling their efforts to fight proposals to overhaul the U.S health-care system, adding another obstacle as legislative hurdles mount. The insurers oppose competition from a new government-run program that’s included in both the House and Senate plans. The trade group representing drugmakers such as Pfizer Inc. says a House provision to allow the government to negotiate drug prices for Medicare would cost tens of thousands of jobs. House Speaker Nancy Pelosi won passage of her version of the legislation on Nov. 7 only after forcing her party’s liberal wing to make concessions and can’t count on those votes for a final version. In the Senate, time is running out to get a bill passed this year, leaving the effort vulnerable to a loss of momentum and a new backlash from Republicans in 2010. “They know they don’t have 60 votes,” said former Senator John Breaux, who now heads a lobbying firm that represents the Pharmaceutical Research and Manufacturers of America, the drug industry’s Washington trade group. “They have to go back to the drawing board” on the plan to set up a government-run insurer, he said. Without Snowe and Lieberman, Reid is at least one vote shy of the 60 he needs, and he risks losing weeks to a fruitless push for the public option. Should work spill into next year, breaks in the schedule and looming elections may open the effort up to the same types of criticism that dogged Democrats during their August recess. Reid faces additional pressure because just one senator can effectively block legislation through procedural means. His colleagues say he will struggle to find enough votes to even begin a debate that senators say may last as long as six weeks. “We are far from the end of the debate in the Senate,” said Senator Jack Reed, a Rhode Island Democrat, on yesterday’s “Face the Nation” program on CBS. The Blue Cross and Blue Shield Association, a federation of plans that it says cover more than 100 million members, released a statement criticizing the House plan minutes after it passed. The legislation “undermines the goals of comprehensive health-care reform,” the group said. “This legislation will significantly increase health-care costs and force many Americans to accept changes to the insurance plans they currently have and value,” said Angela Braly, chief executive officer of Indianapolis-based WellPoint, in an Oct. 28 earnings conference call. At least on the House side, the insurers’ battle is being joined by drugmakers. “While well-intentioned, the bill -- as passed -- would have the unintended consequences of killing tens of thousands of jobs in our industry,” said Ken Johnson, senior vice president of PhRMA, which represents New York-based Pfizer, Whitehouse Station, New Jersey-based Merck & Co. and other drug manufacturers. Pelosi lost the votes of 39 House Democrats this weekend and can’t count on all the votes she did win for a House-Senate compromise. Some Democrats who favor abortion rights and voted for the legislation said they won’t support a final bill that contains the funding restriction. “To say that this amendment is a wolf in sheep’s clothing would be an understatement of a lifetime,” Representative Diana DeGette, a Colorado Democrat, said during the debate. The prospect of having the bill fail may force negotiators to include scaled-back versions of both proposals, said Clinton Stretch, a former congressional aide and principal at the Deloitte Tax LLC consulting firm in Washington. “The political risks of failure are pretty high,” he said.

- Stocks around the world are falling at the fastest rate since the worst of the credit crisis on concern central banks will start raising rates, a signal that triggered the biggest rallies over the past three decades. Benchmark indexes from New York to Tokyo to Frankfurt have lost an average of 3.3 percent since Oct. 19 on speculation policy makers will curtail stimulus measures before the global economy revives. History shows stocks have climbed 92 percent of the time in the six months before government borrowing costs began the biggest increases, data compiled by Bloomberg show. “You should buy stocks now,” said Duessel, who helps manage $400 billion. “There’s an idea that they’re taking away the punch bowl by indicating they’re raising interest rates. But you can still get a decent rally after that.” The S&P 500 rose an average 8.4 percent in the six months before the last five increases in the Fed’s target rate for overnight loans between banks and added another 82 percent in the bull markets that followed, Bloomberg data show. “You absolutely want to front-run the Fed,” said Douglas Ciocca, who helps oversee $1.7 billion as the managing director at Renaissance in Leawood, Kansas, and recommended corporate bonds in November 2008 before they rallied 30 percent, according to Merrill Lynch & Co. indexes. “If I’m an investor and I see that there’s a small progression toward stimulus extraction, it says to me that the economy is being re-established on a much firmer footing, and that’s very positive.” Investors should buy stocks before rates rise, wrote Tobias Levkovich, a New York-based strategist at Citigroup, in an Oct. 28 report to clients. Since 1915, the S&P 500 climbed in 25 of the 38 years when the benchmark U.S. discount rate increased. Energy, information technology, industrial and commodity stocks tend to outperform just before the Fed tightens policy, he said.

- Oil and natural gas companies in the Gulf of Mexico are evacuating workers and halting some output as Tropical Storm Ida blows through the region, which accounts for more than a quarter of U.S. crude production.

- Iraq expects three of its oilfields will together pump more than 6 million barrels a day once foreign companies complete development work they were awarded this year. BP Plc and other international oil companies have signed contracts for the Rumaila, Zubair and West Qurna fields, which were originally offered in Iraq’s first post-war licensing round in June. “Total production from the three fields exceeds 6 million barrels a day and this is higher than what we were hoping for from all the eight fields in the first bid round,” Oil Minister Hussain al-Shahristani said in an interview recorded in Baghdad yesterday.

- China, the world’s second-largest energy user, will raise gasoline, diesel and jet fuel prices by as much as 8 percent tomorrow, the first increase in more than two months, as crude costs and demand climbed.

- Fannie Mae(FNM) is reviewing whether it will have to write down $5.2 billion in low-income housing tax credits after the U.S. Treasury rejected its request to sell the investments, the mortgage-finance company said today. The Treasury found an agreement to sell about half of Fannie Mae’s credits would have cost taxpayers more than the company would gain from the deal, according to a letter sent Nov. 6 to the Washington-based company. The Treasury was considering whether to let Goldman Sachs Group Inc.(GS) buy credits, which could be used to lower the firm’s tax bill.

- Goldman Sachs Group Inc.(GS) is underwriting $400 million of bonds backed by an Ohio real estate company’s shopping centers in the first sale to tap a U.S. program to unlock lending in the commercial mortgage market. The bond is backed by 28 properties owned by Developers Diversified Realty Corp., according to people familiar with the transaction who declined to be identified because terms are private. The offering comes a month after Goldman Sachs made a loan to the Beachwood, Ohio-based company in part to repay debt on the properties and others.

- OPEC is increasing output at the fastest pace in two years, adding to near-record inventories and threatening speculators betting on $100 crude with losses. The number of options contracts to buy oil at $100 by March almost quadrupled in October and increased another 5.9 percent so far this month. As traders piled in, OPEC boosted production 4 percent, or 1.1 million barrels a day, since March amid the worst global recession since World War II. The prospect of more supply comes with inventories in industrial countries already the highest since 1998, when oil collapsed to $10. “It’s not in OPEC’s interest to see $100 oil,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “They know that it’s the speculators that are the main driver in sending prices higher. At some point this market will implode, because this isn’t sustainable.” Inventories are mounting as the Organization of Petroleum Exporting Countries produced 28.76 million barrels a day in October, up 80,000 from September and the highest in 10 months, according to data compiled by Bloomberg. Saudi Arabia has raised shipments in four of the past six months, the data show. The desert kingdom has idled about 4 million barrels a day, or one-third of its capacity, according to data from the country’s oil ministry. “The Saudis can close or open the valve and control the flow of oil at any time,” said Robert Ebel, chairman of the energy and national security program at the Center for Strategic and International Studies in Washington. “They realize it’s not in their interest to see prices climb to an unacceptable level.” “Prices are probably at the upper end of what they are comfortable with right now because they are concerned about the health of the global economy,” said David Kirsch, an Overland Park, Missouri-based analyst with PFC Energy, an energy strategist to companies and governments.

- Electronic Arts Inc.(ERTS), the world’s second largest video-game publisher, will acquire Playfish Inc., a maker of games played on Facebook’s Web Site, for $400 million in a bet that social networking will be a platform for growth.

- RadioShack Corp.(RSH), the second-largest U.S. electronics chain, climbed to its highest level in two years in U.S. trading after announcing plans to start selling Apple Inc.’s iPhones in the U.S. next year. The Forth Worth, Texas-based retailer surged $2.55, or 14 percent, to $20.29 at 10:50 a.m. in New York Stock Exchange composite trading, after reaching $20.57, the highest intraday price since November 2007.

- Abercrombie & Fitch Co.(ANF) jumped the most in five months in intraday trading after Goldman Sachs Group Inc. added the U.S. retailer to its “conviction buy” list, citing the potential for international sales growth. Abercrombie, based in New Albany, Ohio, rose $2.48, or 7.1 percent, to $37.49 at 10:56 a.m. in New York Stock Exchange composite trading.

- Google Inc.(GOOG), owner of the world’s most popular Internet search engine, agreed to pay $750 million in stock for AdMob Inc., a mobile-phone advertising startup backed by Google investor Sequoia Capital. The purchase is designed to shore up Google’s position in the market for mobile advertising as the growth of Internet ads on desktop computers slows. AdMob, which sells ads displayed on the small screens of wireless devices, has benefited from the popularity of smart phones, such as Apple Inc.’s iPhone and Research In Motion Ltd.’s BlackBerry. “Mobile advertising has enormous potential as a marketing medium and while this industry is still in the early stages of development, AdMob has already made exceptional progress in a very short time,” Susan Wojcicki, Google’s vice president of product management, said in the statement.

Wall Street Journal:

- Is the Environmental Protection Agency trying to stifle dissenting views on climate change? The EPA has told two longtime agency veterans and outspoken critics of the administration’s cap-and-trade plan to remove any references to the agency in their critiques and to get approval for any future “outside writing projects.” That includes removing their critical video from You Tube. Laurie Williams and Allan Zabel, a married couple and EPA lawyers in San Francisco, have been railing against cap-and-trade proposals for a while. Most recently, they had a sharply-worded op-ed in the Washington Post that said current legislation would be ineffective and even counterproductive. The couple stressed that the views they expressed were their own—not the agency’s. But they also stressed that their years of experience with the EPA, and specifically working on other cap-and-trade programs, informed their views. Now Public Employees for Environmental Responsibility has jumped into the fray. The organization, which groups public-sector employees concerned with environmental questions, has re-posted the banned video and come out in defense of the two attorneys: “EPA is abusing ethics rules to gag two conscientious employees who have every right to speak out as citizens,” stated PEER Executive Director Jeff Ruch, who has re-posted the original video and its script. “EPA reversed itself because someone in headquarters had a tantrum about their Washington Post essay.” Even folks who shudder at the lawyers’ arguments worry that the current spat doesn’t look good for free speech, notes Dave Roberts at Grist.

- Wall Street firms that agreed to pay $100 million to settle a lawsuit accusing them of propping up American Business Financial Services Inc. had doubts about the subprime lender's business practices long before it collapsed, according to court documents. ABFS funded its operations partly by selling subordinated debt notes directly to the public, pitching them in newspaper ads and mass mailings that promised above-market interest rates. When ABFS filed for bankruptcy in 2005, the uninsured notes became worthless, leaving 26,000 investors with more than $600 million in losses. Many of the investors were elderly.

- Most investment banks have yet to lay out how they will implement new international guidelines on pay, which means those rules are unlikely to lead to the level playing field that regulators hope to create on compensation, according to industry professionals and consultants. Since the rules were published in September and then clarified by several national authorities including France, Switzerland and the U.K., most large investment banks have said they will become "G-20-compliant" by the start of next year. However, many say firms are nowhere near finalizing details on how new rules will work in practice.

- A U.S. Army hospital spokesman said the man suspected in a deadly shooting spree at Fort Hood is conscious and able to talk.
- Pfizer Inc.(PFE) said Monday it will "significantly" reduce research and development at some of its sites and shut down six out its 20 sites.


- Civil War is breaking out on the board of directors of Bank of America(BAC) over the selection of a successor to CEO Ken Lewis, pitting board members favoring Greg Curl, a long-time BofA executive located in the bank's home city of Charlotte, N.C., with those who favor Brian Moynihan, who came to the company after its purchase of the Boston-based Fleet Financial, people close to the company say.

- On the way down and on the way up, home prices always lag sales, but they may be beginning to catch up. A new report from finds home values stabilized in the third quarter of this year, as sales of new and existing homes grew. "While 116 metropolitan areas experienced Q3 year-over-year declines in home values, only nine metropolitan areas saw accelerating year-over year home value declines," according to the report. That is resulting in slightly improved negative equity. Zillow finds 21 percent of single-family home owners are in a negative equity position in Q3, as compared to 23 percent at the end of Q2.

- Investors snapped up a record $40 billion in three-year notes as the first leg of another big Treasury auction kicked off to a solid start.

NY Times:

- The Singapore central bank warned Monday that more measures could be needed to curb the risk of speculation in the country’s property market, which has been bolstered by low borrowing costs. The comments underscored a growing concern among policy makers in Asia, who are worried about the possibility of a bubble in residential markets in financial centers like Hong Kong, Singapore and Seoul.

The National Law Journal:

- The nation's largest law firms this year suffered the deepest cuts in their attorney numbers since the NLJ began tracking their census figures more than 30 years ago. It's never been like this. In the three decades that The National Law Journal has been counting lawyers at big law firms, headcount has nearly always grown. In fact, the two times it has dropped, the decline was 1% or less. This year, headcount dived by nearly 4% — or, as Associate Editor Leigh Jones notes in her overview on this year's results, enough to fill a couple of huge law firms. Actually, the numbers are even more stark. For 20 years, the average annual growth rate for the NLJ 250 has been close to 4%. So this year's decline, when coupled with the usual growth rate, is more like 8%. In rough terms, that's 10,000 lawyers.

The Business Insider:

- The idea of a financial transaction tax has never made much sense. But this time it makes less sense than ever.

Washington Post:

- Federal investigators are examining possible links between Fort Hood shooting suspect Maj. Nidal M. Hasan and an American-born imam who U.S. authorities say has become a supporter and leading promoter of al-Qaeda since leaving a Northern Virginia mosque, officials said. Hasan attended the Dar al-Hijrah mosque in Falls Church in 2001, when its spiritual leader was Anwar al-Aulaqi, a figure who crossed paths with al-Qaeda associates, including two Sept. 11, 2001, hijackers, one senior U.S. official said. New leads are being pursued based on information gleaned from a methodical review by investigators of Hasan's computer and his multiple e-mail accounts. Those include visits to Web sites espousing radical Islamist ideas, another senior official said.


- Sentiment Overview: A Scarcity of Bulls.


- The contract price for the supply of the 2-Gbyte small outline dual-in-line memory modules in the DDR2 DRAM 800-MHz format has increased to $41 from $36 in the first half of November, a jump of 14 percent, according to DRAMexchange Technology Inc., a Taiwan-based market analysis company. The so-called "high" contract price has surpassed the spot price and reached $50 per module, according to the company. The DDR2 contract price is expected to retain upward momentum in November given increased shipments of middle-priced PCs by OEMs, the company said.


- Verizon's(VZ) droid is pitching itself as the anti-iPhone, and nowhere is that more evident than in the look and feel of its campaign -- a blanket push you won't be able to escape. The integrated campaign, the largest in Verizon history, will receive an estimated $100 million in support, most of it spent before the end of the year.


- Over the weekend, Democratic leaders spoke of an historic moment as health care reform legislation passed the House of Representatives. But that legislative victory failed to significantly move public opinion. The latest Rasmussen Reports national telephone survey finds that 45% now favor the health care plan proposed by President Obama and congressional Democrats. Most (52%) remain opposed. Only 25% Strongly Support the plan while 42% are Strongly Opposed.


- Within minutes of Saturday’s historic House vote on health care reform, Republicans pronounced the political death of Rep. Thomas Perriello (D-Va.), pointing to the vulnerable freshman congressman’s vote in favor of the bill. And in the aftermath of the politically charged vote, Perriello wasn’t the only Democratic congressman whose fortunes were being reassessed. The GOP, which voted nearly in lock step against the measure, began crowing about the demise of various other vulnerable members and seized on the moment as a milestone in the path back to a House majority.

Lloyd’s List:

- EA Gibson Shipbrokers Ltd. estimates the amount of oil being stored at sea has climbed to the highest level in 10 years, citing the broker’s data and its head of research, Steve Christy. There are 19.2 million metric tons of crude and oil products being stored at sea. That equates to 143 million barrels, it said.


- Last month Skype was in talks to acquire VoIP startup Gizmo 5. It was a perfect backup plan in case all that IP litigation didn’t work out. – Gizmo5’s SIP infrastructure could theoretically replace Skype’s proprietary P2P back end. After the Skype settlement, though, Gizmo5’s strategic value to Skype sort of plummeted. In the meantime, Google bought them, say multiple sources with knowledge of the deal, for around $30 million in cash. The deal is done, say our sources, and will be announced shortly. Gizmo5 is a good fit with a number of Google products.


- Angola's oil industry is booming as money pours in after the end of three decades of civil war, and officials say output could increase by as much as two-thirds over the next five years. Buoyed by a scramble for energy and raw materials by China and other emerging nations, oil companies are spending tens of billions of dollars drilling oil and gas wells deep below the Atlantic many miles off the African coast. Production capacity has increased steadily over the last two years and oil analysts say Angola could now comfortably pump at least 2 million barrels per day (bpd) and is increasingly only held back by political constraints. Angola is a member of the Organization of the Petroleum Exporting Countries (OPEC), holding the presidency of the 12-member grouping this year, and has been limiting output with other OPEC states to help stabilize oil prices in the wake of the global economic crisis. But dozens of new Angolan oilfields will come on stream between 2011 and 2015 and oil analysts expect output to increase steadily to between 2.5 and 3.0 million over this period. "By 2015, Angola should be looking at oil production closer to 3 million bpd," said Thomas Pearmain, African energy analyst at IHS Global Insight. Angola has probable oil reserves of 13-19 billion barrels, giving it the third largest hydrocarbon resources in Africa behind Libya and Nigeria, analysts say, but the rate of discovery of new Angolan oilfields is outpacing its rivals and its production is beginning to accelerate.

- Forget the buzz over the next "Twilight" film or James Cameron's "Avatar." The biggest entertainment hit of the holiday season may come on Tuesday, when "Call of Duty: Modern Warfare 2" hits stores. The video game published by Activision Blizzard Inc (ATVI) is the most highly anticipated of the year, winning accolades from gaming blogs and Wall Street analysts alike.

- Russian car sales fell 52 percent in October year-on-year to 116,700 units, figures compiled by the Association of European Businesses in the Russian Federation (AEB) showed on Monday.

Financial Times:

- General Electric(GE) India is resetting its targets from the ambitious $8bn in revenue a year goal by 2010 it forecast three years ago as it juggles businesses affected by the global slowdown. Tejpreet Singh Chopra, president and chief executive of GE India, said the group had scaled back some of its businesses, such as unsecured consumer lending and was pushing ahead with others, such as healthcare and bids for government fighter jet and train contracts.

- Iran has charged three US citizens with spying two months after the trio were arrested having walked across the border from neighboring Iraq, a top judiciary official said On Monday. “Their charge is espionage,” Abbas Jafari Dolatabadi, Tehran’s prosecutor general told the official IRNA news agency, adding that the results of the ongoing investigation would be announced in the “not-so-distant future”. The charges could further sour relations between Iran and the US. Hillary Clinton, US secretary of state, immediately called on Tehran to release the three hikers. ”We believe strongly that there is no evidence to support any charge whatsoever,” Mrs Clinton said on a visit to Berlin.

Globe and Mail:

- General Motors Corp. will invest about $94 million to increase production capacity at one of its Canadian auto assembly plants.

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