- Chinese stocks slid, dragging the region’s benchmark to its third straight decline, after regulators told some of the nation’s banks to limit lending. The dollar gained against 14 of 16 of the most-traded currencies. The Shanghai Composite Index lost 2.9 percent and Hang Seng Index slipped 1.9 percent, leading declines in Asia.
- The US dollar and yen rose against most of their major counterparts as steps by China to limit bank lending reduced demand for higher-yielding assets. The euro fell to a five-month low versus the dollar as Greece’s bonds tumbled.
- Hedge funds’ best year in a decade is giving little comfort to Jason D. Papastavrou. The founder of New York-based ARIS Capital Management LLC, which has about $250 million invested in hedge funds, is still waiting to get back $155 million from 22 managers that restricted withdrawals in 2008. “We don’t object to the illiquidity,” Papastavrou said in an interview. “We object to how some managers are abusing the situation and holding investors’ money hostage to generate fees.”
- Funds of hedge funds trailed the recovery in the broader market last year and still bear the scars of investments in Bernard Madoff’s $65 billion Ponzi scheme, according to data from Hedge Fund Research Inc. The firm’s fund of funds index rose 11.6 percent last year, compared with a 20 percent jump in HFR’s Fund-Weighted Composite Index. That’s the biggest gap since the company began keeping records in 1990, HFR President Ken Heinz, told reporters today in London.
- Hiring for this year’s US census may distort employment figures to a greater degree than previous population counts did, if only because so many more jobs have to be filled. To conduct the 2010 count, the Census Bureau expects to hire about 1.15 million temporary workers in this year’s first half. Workers previously hired to prepare for the count bring the total to about 1.4 million, up from about 500,000 for the prior census, completed 10 years ago. The increase reflects the availability of funds from the economic-stimulus plan that President Barack Obama signed last February. In 1990 and 2000, the number of government employees reached its high in May. That’s likely to happen again this year, according to Nicholas Colas, chief market strategist at BNY ConvergEx Group. Colas estimated that the hiring of census workers will reduce the US unemployment rate to 9.5% in this year’s first half.
- Gold fell the most in a month as a stronger dollar reduced demand for the precious metal as a store of value. Platinum dropped from a 17-month high. The dollar rose as much as 1.1 percent against a basket of six major currencies on concern that the global recovery will slow as China acts to limit bank lending. Before today, gold gained 36 percent in the past year, touching a record last month, as the dollar slipped 8 percent. “Gold’s on the defensive because the dollar’s rallying,” said Marty McNeill, a trader at R.F. Lafferty Inc. in New York. “We’ve broken some technical support areas.”
- Exxon Mobil Corp.’s(XOM) $30 billion acquisition of XTO Energy Inc.(XTO) would expand natural gas production in shale formations, boosting the U.S. economy without harming the environment, Rex Tillerson, Exxon’s chief executive officer, told Congress. “We can now find and produce unconventional natural gas supplies miles below the surface in a safe, efficient and environmentally responsible manner,” Tillerson said in testimony today at a hearing before the House Energy and Environment subcommittee.
- General Re Corp., the reinsurer owned by Warren Buffett’s Berkshire Hathaway Inc.(BRK/A), agreed to pay more than $60 million to end a U.S. investigation of its role in a sham transaction that misled American International Group Inc. investors, people familiar with the matter said. The agreement includes a $19.5 million payment and forfeiture of $12.2 million in alleged profit, said the people, who declined to comment because the talks aren’t public. They said much of the full obligation will be covered by a related settlement with AIG investors that was previously disclosed. The deal lets Gen Re avoid prosecution by the Justice Department and resolves civil claims by the Securities and Exchange Commission, the people said. General Re was involved in sham transactions with AIG in 2000 and a Prudential Financial Inc. division from 1997 to 2002 that helped those two companies manipulate financial statements, the SEC said in a complaint in federal court in Manhattan today. The AIG dealings allegedly helped AIG overstate loss reserves, a key indicator of an insurer’s health, by $500 million. “Gen Re and its senior management were aware that the true purpose of the transactions was to permit AIG to record and report phony loss reserves to calm analysts’ criticism,” the agency wrote in the complaint. The U.S. inquiry led to convictions of four former Gen Re executives, including ex-Chief Executive Officer Ronald Ferguson, 68, and one from AIG. The fraud cost AIG shareholders from $544 million to $597 million, a federal judge in Hartford, Connecticut, found. Two other Gen Re executives pleaded guilty.
- Goldman Sachs Group Inc.(GS), facing pressure from lawmakers to rein in pay, was sued by a shareholder who contends the bank’s executive compensation plan shortchanges investors. The Goldman Sachs board wasn’t acting in shareholders’ best interests when it approved executive pay and bonuses amounting to almost half the New York-based bank’s net revenue, the Southeastern Pennsylvania Transportation Authority said in a lawsuit filed yesterday in Delaware.
- The head of the FBI said the threat of a terrorist attack against the U.S. is becoming more worrisome “with each passing day.” Robert Mueller, director of the Federal Bureau of Investigation, told the Senate Judiciary Committee that law enforcement agencies have disrupted several plots in the past year as terrorists “remain determined to strike the United States.”
Wall Street Journal:
- A major aid organization that has been providing health care in Haiti for two decades warned that 20,000 quake victims are dying daily because of a lack of medical care, especially surgery. The alarm raised the possibility that because of Haiti's dire poverty and demolished port, far more victims will die in the second and third weeks than is normal in earthquakes, where most casualties occur in the first days. The country was rattled Wednesday morning by an aftershock, which alarmed residents but appeared to cause significant new destruction. The aftershock, which measured a 5.9 magnitude, was the largest of 49 aftershocks of magnitude 4.5 or greater that have followed the 7.0 quake on Jan. 12, according to the Associated Press. Even the mild damage caused by the aftershocks complicated efforts to bring desperately needed medical help.
- Worries about Greece’s fiscal woes may be spreading outward to other highly-indebted nations on Europe’s periphery. One sign of trouble: Investors are demanding higher yields to compensate for the increased risk of holding Portuguese, Spanish, Irish and Italian government bonds. On Wednesday, the “spread,” or difference, between yields on such bonds and safer German debt — a gauge of market fear — has jumped higher.
- Trading started Wednesday on a new credit-default swap index referencing sovereign borrowers from central and eastern Europe, the Middle East and Africa. The Markit iTraxx Sov-X CEEMEA index, which will enable investors to buy or sell default insurance on a basket of sovereign debt from the region, was recently quoted at 209/210 basis points in five year maturity, according to one market participant. Meanwhile, the 10-year maturity was trading around 211/214 basis points, according to the participant. The SovX CEEMEA constituents are Turkey, Hungary, Bulgaria, Qatar, Latvia, Kazakhstan, Russia, Abu Dhabi, Poland, Lithuania, Ukraine, Romania, the Czech Republic, South Africa and Croatia.
- NBC and “The Tonight Show” host Conan O’Brien continued Tuesday evening to close in on a deal for the comedian to exit the network, but a handful of issues remained outstanding, according to people familiar with the situation. One final obstacle, among others, is the amount of severance for staff of “Tonight,” the people said. Under the agreement, Friday night’s show would be the last for Mr. O’Brien and his staff. Other issues also remain in play, including smaller points about non-disparagement and the timing of severance payments, the people said. The deal currently on the table includes a payout of roughly $32 million to $35 million for Mr. O’Brien, along with about $12 million for the show’s staff, although those figures could still change, people familiar with the situation said. Mr. O’Brien’s representatives are asking for roughly $600,000 to cover several months of pay for staff, rather than weeks, those people said.
- Semiconductor inventories remain lean at electronic distributors and in most segments of the chip-supply chain, according to iSuppli Corp. Some analysts, including Mark Lipacis of Morgan Stanley (MS), recently have said semiconductors are shipping ahead of demand and semiconductor inventories are building. But ISuppli analyst Carlo Ciriello said the research firm's data indicate that inventory levels at distributors are well below the historical average. Distributors controlled 36.9 days of inventory at the end of the third quarter, down 15% from a year earlier, according to iSuppli. In dollar terms, distributors held $4.8 billion worth of semiconductor inventory at the end of the third quarter, down 22%. iSuppli expects to see a small rise in inventory dollars once fourth-quarter figures are released, but said days of inventory at distributors should continue to decline. At the end of the fourth quarter, days of inventory were 19% less than the three-year historical average, the firm estimates. Days of inventory at semiconductor makers also decreased 11% to 66.4 at the end of the third quarter from a year earlier. Chip inventories are low in most other segments of the electronics supply chain, including at makers of personal computers, storage devices and cell phones, meaning higher demand for those products is likely to boost semiconductor sales. Worldwide semiconductor revenue is expected to grow 15% this year after falling an estimated 12% last year, iSuppli predicts.
- Shares of German solar companies declined on Wednesday, as the government in Berlin proposed a 15% cut in the subsidies it provides. Germany's environment minister, Norbert Roettgen, proposed on Wednesday a 15% reduction in feed-in tariffs for solar power, according to media reports. The cut will go into effect in April for roof installations and in July for open-field sites. It's been widely expected that the center-right government of Chancellor Angela Merkel will implement some cuts to the solar feed-in tariffs.
- As Goldman Sachs'(GS) employees await word on the size of their bonuses, the gold-plated bank is hoping to tamp down some of the expected public rage by delaying details of the payments for at least another week -- after the bank reports earnings tomorrow and after rivals reveal their compensation plans. Typically, banks will provide compensation details at the same time they report earnings. Goldman is expected to report full-year results tomorrow. However, some sources told The Post they suspect Goldman CEO Lloyd Blankfein is delaying when he tells his employees about compensation to deflect attention from the firm, especially since other firms, including rival Morgan Stanley, will report earlier than Goldman.
The Business Insider:
- It's not just perma-skeptics like Jim Chanos warning about a massive real estate bubble in China. The latest is Fred Hu, the Goldman Sachs Inc.(GS) Chinese Chairman. ChinaPost reports (via Alphaville) that Hu told a conference in Taipei that Singapore, Hong Kong, and Mainland China all need to be on the lookout. Bear in mind this isn't just talk from the bank. Earlier this month it emerged that Goldman has been dumping real estate holdings in Shanghai.
- He’s Done Everything Wrong by Mort Zuckerman. Obama punted on the economy and reversed the fortunes of the Democrats in 365 days. He’s misjudged the character of the country in his whole approach. There’s the saying, “It’s the economy, stupid.” He didn’t get it. He was determined somehow or other to adopt a whole new agenda. He didn’t address the main issue. This health-care plan is going to be a fiscal disaster for the country. Most of the country wanted to deal with costs, not expansion of coverage. This is going to raise costs dramatically. In the campaign, he said he would change politics as usual. He did change them. It’s now worse than it was. I’ve now seen the kind of buying off of politicians that I’ve never seen before. It’s politically corrupt and it’s starting at the top. It’s revolting. I’m very disappointed. We endorsed him. I voted for him. I supported him publicly and privately. I hope there are changes. I think he’s already laid in huge problems for the country. The fiscal program was a disaster.
- Warren Buffett opposes President Barack Obama’s proposed levy on financial institutions because firms including Goldman Sachs Group Inc.(GS) and Wells Fargo & Co.(WFC) already repaid bailout funds, he told CNBC. ‘It just doesn’t make any sense to me,” said Buffett, whose Berkshire Hathaway Inc. is an investor in Wells Fargo and Goldman Sachs, in an interview on the cable business news network. “A tax that is enacted with the idea that a certain amount of vengeance will be achieved, I don’t think that will be a good idea,” said Buffett, who supported Obama in the 2008 election. Berkshire invested $5 billion in Goldman Sachs in 2008, acquiring preferred stock that pays a 10 percent dividend. The Omaha, Nebraska-based company also gained five-year warrants to buy $5 billion of common stock at $115 per share.
- Newell Rubbermaid Inc.(NWL) is recalling 1.5 million strollers after reports of children’s fingertips getting caught in the products’ hinges, resulting in cuts and amputations, the U.S. Consumer Product Safety Commission said. Newell Rubbermaid’s Graco unit received reports of five amputations and two lacerations after children placed their fingers in the strollers’ hinges while the canopy was being opened or closed, the agency said.
- New Jersey’s unemployment rate climbed to an almost 33-year high of 10.1 percent in December, according to the state’s labor department. The rate was above the national level, now 10 percent, for the first time since October 2006, the department said in a statement today.
- Labor leaders, who spent the first year of Barack Obama’s presidency taking advantage of renewed influence in Washington, may struggle to achieve their agenda after Republican Scott Brown won a Senate seat in Massachusetts. “Labor is the real loser in last night’s election,” said Gary Chaison, an industrial relations professor at Clark University in Worcester, Massachusetts, in an interview today. “Labor was ineffective in getting out the vote for a Democrat. The administration under these circumstances is not going to push for their agenda.”
- The White House National Security Council recently directed U.S. spy agencies to lower the priority placed on intelligence collection for China, amid opposition to the policy change from senior intelligence leaders who feared it would hamper efforts to obtain secrets about Beijing's military and its cyber-attacks. The downgrading of intelligence gathering on China was challenged by Director of National Intelligence Dennis C. Blair and CIA Director Leon E. Panetta after it was first proposed in interagency memorandums in October, current and former intelligence officials said.
- Veeco Instruments Inc. (VECO) announced today the introduction of the TurboDisc K465i gallium nitride (GaN) Metal Organic Chemical Vapor Deposition (MOCVD) System for the production of high-brightness light-emitting diodes (HB LEDs). Veeco's industry-leading beta site customers rapidly qualified the K465i for volume production, and the Company has received orders for the system from multiple LED customers throughout the Asia Pacific region.
- Forty-seven percent (47%) of U.S. voters rate President Obama’s handling of the health care issue as poor, according to a new Rasmussen Reports national telephone survey. Only 32% say the president has done a good or excellent job on the issue that has increasingly come to dominate the national political debate as the plan proposed by Obama and congressional Democrats struggles through Congress.
- Voters aren’t happy with the latest tax proposed to help pay for the trillion-dollar national health care plan, and they’re even unhappier with exempting labor unions from that tax. A new Rasmussen Reports national telephone survey finds that just 33% of U.S. voters support enacting a significant excise tax on the most expensive health insurance plans provided by employers. Sixty-three percent (63%) oppose the excise tax on so-called “Cadillac” health insurance plans, up five points from late December. Only 10% Strongly Support it and 42% Strongly Oppose the excise tax. To keep union support for the overall health care plan, President Obama and Democratic leaders agreed last week to exempt union members from the tax for five years and modify it in other ways so they don’t pay as much. Voters really frown on that action. Only 27% support the excise tax if it exempts union members, while 70% are opposed. But even more significantly, if the union members are exempt 11% Strongly Support the tax while 51% Strongly Oppose it.
- Rep. Barney Frank (D-Mass.) released a statement Tuesday night warning that it would be wrong "to pass a health care bill as if the Massachusetts election had not happened." The statement seems to advocate against ramming reform through Congress before Republican Scott Brown is seated and acknowledges that the House-Senate-White House negotiations are likely over. The liberal congressman said he was "disappointed" in Tuesday's election results—and that with Brown's victory, "a reasonable compromise" between the House and Senate bills is no longer possible and support from GOP senators is now required to move the legislation. "I feel strongly that the Democratic majority in congress must respect the process and make no effort to bypass the electoral results," Frank said.
- Scott Brown's opposition to congressional health care legislation was the most important issue that fueled his U.S. Senate victory in Massachusetts, according to exit poll data collected following the Tuesday special election. Fifty-two percent of Bay State voters who were surveyed as the polls closed said they opposed the federal health care reform measure and 42 percent said they cast their ballot to help stop President Obama from passing his chief domestic initiative. "I'm not surprised it was the top issue, but I was surprised by how overwhelming an issue it was. It became a focal point for the frustration that has been brewing with voters, and it's a very personal issue that affects everyone," said Tony Fabrizio of Fabrizio, McLaughlin & Associates, a Republican firm that conducted the exit poll of 800 voters.
- Scott Brown has turned this town upside down. Usually, the tendency among political reporters and operatives alike is to overreact and overinterpret elections. And there are caveats to the stunner in Massachusetts. Yes, this was a special election, which often produces unusual results. Yes, Democrat Martha Coakley ran a timid, sometimes terrible, campaign for Ted Kennedy’s old Senate seat. And it’s true that Massachusetts is not as liberal as many people assumed. But none of that counters the stunning reality of an election where breathtaking results more than justify breathless analysis. Here’s why:
- The Iraqi Oil Ministry will sign a final deal to develop the 12.9 billion barrel supergiant West Qurna Phase Two oilfield with Russia's Lukoil and Norway's Statoil on Jan. 31, an Iraqi official said.
- Energy analyst Olivier Jakob from Petromatrix has crunched through the CFTC’s proposals on position limits released last week. His findings are worth flagging up because they differ to the consensus view that the proposals, if enforced, would be a benign influence on energy markets. First, he guesstimates the limits would certainly affect at least one large Wall Street investment bank offering a leading commodity index. And while the bank — which he does not name — could apply for an exemption to a maximum of 130,000 WTI contracts on a single month, they would then be prohibited from holding speculative positions. In other words, would it be worth it? According to Jakob, therefore, the limits create an uncomfortable situation for some of the larger Wall Street investment banks offering commodity indices — and could force them to choose between operating index and swap businesses versus proprietary books. Furthermore, there isn’t an easy side-route out of the restrictions, say by starting subsidiary hedge funds or physical operations. That’s because the limits are imposed on an aggregate basis per owner institution — and when exemptions are granted, speculative operations are restricted. In smaller markets like heating oil, meanwhile, this could pose an even greater challenge for the banks, according to Jakob. And while ETFs like the United States Natural Gas fund — which famously broke through accountability limits in 2009 – may have prepared for the CFTC ruling by moving into the bilateral and unregulated OTC swap market, they too might be restricted by the CFTC’s swap-dealer ruling.