Weekend Headlines
Bloomberg:
- U.S. Companies See 'Diminishing' Access in China. U.S. companies in China are being constrained by a host of new regulations restricting their market access, a survey by the American Chamber of Commerce in China shows. For the first time in the survey’s 12-year history, U.S. firms reported that their biggest challenge was “inconsistent regulatory interpretation” on the part of China’s government, such as new rules mandating purchases of home-grown technology and irregular enforcement of laws. In past years personnel issues, such as hiring experienced managers, were top concerns. “These policies appear to be diminishing the ability of foreign companies to access the Chinese domestic market, right at the time China shifts from being an export-led economy to a more domestic-consumption-led economy,” John Watkins, Amcham’s chairman, said in a preface to today’s report.
- China's Central Bank Sees New Asset Bubbles Emerging. China’s central bank said asset bubbles are emerging in parts of the world and in certain industries that may burst unless supported by real economic recovery. Rapid asset price increases in major markets since 2009 have been pushed by “ultra-loose” monetary policies by governments around the world and “don’t mean real economies have recovered or will recover strongly,” the People’s Bank of China said in a report posted on its Web site today. Such gains “unless they receive sufficient support from macroeconomic fundamentals, may lead to a new round of asset bubbles that may burst,” the Beijing-based bank said. Governments worldwide have spent more than $2 trillion in fiscal stimulus to spur growth and may face difficulty coordinating exit strategies because of the “unbalanced global recovery,” the central bank said. The withdrawal of support, together with the threat of inflation and the risks surrounding the sovereign debt of some economies complicate the process, the PBOC said. The PBOC’s comments today echo those of other international central bank officials. Donald Tsang, Hong Kong’s chief executive, said Nov. 13 that he was “scared” that money flowing into Asia because of low interest rates in the U.S. could lead to another crisis in the region. World Bank President Robert Zoellick told Australian Financial Review on Jan. 13 that a liquidity-driven world recovery faces the risk of asset price inflation.
- Japan's $15 Trillion Not Enough to Make It a Buy: William Pesek. Every few years, investors get all enthusiastic about Japan. This time the recovery is for real, they argue. This time real change is afoot. This time buy yen-denominated assets and don’t look back, they conclude. The end result tends to be disappointment. This latest episode of euphoria is likely to be more of the same.
- Goldman Sachs(GS) Fund Buys Stake in Ganek's $4 Billion Hedge Fund. A Goldman Sachs Group Inc. buyout firm bought a minority stake in David Ganek’s $4 billion Level Global Investors LP, adding a hedge fund that can bet on rising as well as falling stock prices globally.
- Oil Climbs to 17-Month High on Speculation Demand Recovering. U.S. crude oil stockpiles have posted nine straight weekly increases and held 354.2 million barrels on March 26, 6.5 percent above the five-year average for the period, the Energy Department said last week. The Organization of Petroleum Exporting Countries pumps about 40 percent of the world’s oil and slashed output in January 2009 to prevent a glut. The group left its production targets unchanged when ministers met in Vienna on March 17.
- JPMorgan(JPM), Citigroup(C) Resist Nuns' Proposal on Swaps Disclosure. Goldman Sachs Group Inc. and JPMorgan Chase & Co. aren’t doing “God’s work” when it comes to derivatives, according to investor groups of nuns and priests. Shareholders will vote starting this month on proposals sponsored by the Sisters of Charity of Saint Elizabeth and 14 other religious organizations, asking Goldman Sachs, JPMorgan, Citigroup Inc. and Bank of America Corp. to give more information on the collateral used in their derivatives trading. It’s the first time the four banks, among the largest U.S. swaps dealers, will put to a nonbinding vote a call to explain how collateral of derivatives customers is used and to keep it from other accounts.
- Prozac Pilots May Fly as FAA Drops Ban on Medicines. Pilots taking Prozac will be permitted to fly as U.S. regulators drop a decades-old ban on four antidepressants including the Eli Lilly(LLY) drug.
- Apple(AAPL) May Sell 7.1 Million iPads in 2010, ISuppli Predicts. Apple Inc. may sell 7.1 million iPads globally this year, driven by “early adopters” and users attracted by its “touch-screen-based interface,” said El Segundo, California-based researcher iSuppli Corp.
- Putin Signs Accords With Chavez in Venezuela Trip. Russian Prime Minister Vladimir Putin signed billions of dollars in energy, agriculture and commercial accords with Venezuelan President Hugo Chavez today in Caracas during his first visit to the OPEC nation. Under the agreements, a group of Russian energy companies including OAO Gazprom and OAO Lukoil will work with Petroleos de Venezuela SA in an $18 billion project to develop an oil field that will eventually produce 450,000 barrels per day, Oil Minister Rafael Ramirez told reporters on March 31.
- Verizon(VZ) Joins AT&T(T) in Booking Costs From Health-Care. Verizon Communications Inc., the second-largest U.S. phone company, became the latest company to record a cost related to the U.S. health-care overhaul, saying it will incur a $970 million expense. Verizon follows AT&T Inc., the biggest U.S. carrier, Deere & Co., Caterpillar Inc. and other companies in disclosing similar expenses after losing a tax benefit for retiree plans. The costs may reduce corporate profits by as much as $14 billion as companies account for the impact of the health-care reforms, according to benefits consulting firm Towers Watson. “While it is a non-cash charge, it does reflect real value destruction, based on expected cash flows over the life of the company,” said Jonathan Schildkraut, an analyst at Jefferies & Co. in New York. The almost $1 trillion program is meant to provide medical coverage to uninsured Americans and force insurance companies to lift restrictions, such as denying coverage based on pre- existing conditions. The federal government pays a subsidy to companies that provide retiree prescription drug coverage. Under prior law, those subsidies were tax-exempt. The new law eliminates the tax break starting in 2013. Verizon said in February that it had about 213,000 retirees at the end of last year. “This is having an impact on the bottom line and that can cut jobs,” said Chetan Sharma, an independent wireless analyst in Issaquah, Washington. “I am not sure the final story has been told on this” because most companies still don’t know exactly how the new law will affect them, he said. In a note to employees after the law was passed, Verizon said that the law would make the federal subsidy to provide retiree benefits less valuable to employers and so “may have significant implications for both retirees and employers.” Craig Mathias, founder of wireless consultant Farpoint Group, said consumer prices for communications services may climb in about a year as the economy recovers. “The money is going to come from somewhere,” Mathias said. “Guess where it’s going to come from? Us customers.”
- Silicon Valley Gears Up for Acquisitions as Economy Improves. Silicon Valley companies looking to put their cash to work may drive a wave of mergers this year, bankers and venture capitalists say.
- Geithner Counts on Delay to Let China Strengthen Yuan. Treasury Secretary Timothy F. Geithner, by delaying a report on global currency policies, is betting international diplomacy will work better than U.S. pressure to get China to strengthen the yuan. In an April 3 statement, Geithner announced the delay of the report, scheduled for April 15, and urged China to move toward a more flexible currency. He said a series of meetings over the next three months will be “critical” to bringing policy changes that lead to a stronger, “more balanced” global economy. The decision came days after Chinese President Hu Jintao announced plans to visit Washington for a nuclear summit April 12-13.
- Iran Nuclear Ring Probed. Western Authorities Investigate China Connection in Export of French Valves. An Iranian firm closely linked to Tehran's nuclear program acquired special hardware for enriching uranium, despite sanctions intended to keep such equipment out of Iran, according to officials with knowledge of the matter. In recent weeks, the officials said, an Iranian procurement firm obtained critical valves and vacuum gauges made by a French company that until December was owned by U.S. industrial conglomerate Tyco International(TYC).
- Federal Prosecutors Leaning Against Charges in AIG(AIG) Probe. Federal prosecutors, after a two-year investigation, may soon decide not to charge American International Group Inc. executives for their role surrounding financial contracts that nearly brought down the company, according to people familiar with the matter. Recently obtained evidence has prosecutors leaning against pursuing charges, though no final decision has been made by Justice Department prosecutors in Washington, these people said. A Justice Department spokeswoman declined to comment.
- SandRidge to Acquire Arena Resources. Oil and gas exploration firm SandRidge Energy is acquiring west Texas rival Arena Resources Inc. for $1.6 billion, a deal that shifts SandRidge further into conventional oil-field assets amid a continued fall in natural-gas prices. SandRidge will pay Arena shareholders $2.50 in cash and 4.77 shares of stock for each Arena share, which values Arena at $40 per share. That is a 17% premium from its Friday close of $34.26.
- Iran Sanctions Yield Little.
- SEC Lawyer One Day, Opponent the Next. The revolving door can turn swiftly at the Securities and Exchange Commission. Steven Richards left the SEC in July 2008 as a top accountant in the enforcement division to join the global business advisory firm FTI Consulting. Five days later, he signed on to represent a client involved in a "nonpublic investigation" by his old division. In August 2008, Andrew Dunbar left his job as an enforcement lawyer in the SEC's Los Angeles office to take a job with the law firm Sidley Austin. Eleven days later, he was tapped to help a client answer an "informal request for information" from the same office.
- Unserious About Iran. Obama is Acting as if He Believes a Nuclear Tehran is Inevitable. 'Our aim is not incremental sanctions, but sanctions that will bite." Thus did Secretary of State Hillary Clinton seek to reassure the crowd at the American Israel Public Affairs Committee two weeks ago about the Obama Administration's resolve on Iran. Three days later, this newspaper reported on its front page that "the U.S. has backed away from pursuing a number of tough measures against Iran" in order to win Russian and Chinese support for one more U.N. sanctions resolution. This fits the pattern we have seen across the 14 months of the Obama Presidency.
- Ugg Brand's Staying Power Drives Growth For Footwear Maker. Legg bought her first pair of Ugg boots, made by Deckers Outdoor (DECK), when she moved to Chicago four years ago. She was so impressed with the boots, she's since bought four pairs of Ugg clogs and Ugg flip-flops.
- Criticism of Chavez Stifled by Arrests. When Judge María Lourdes Afiuni issued a ruling in December that irked President , he did little to contain his outrage. The president, contending on national television that she would have been put before a firing squad in earlier times, sent his secret intelligence police to arrest her. Then the agents took her to the overcrowded women’s prison in this city of slums near Caracas. They put her in a cell near more than 20 inmates whom Judge Afiuni had sentenced on charges like murder and drug smuggling. “I’ve received threats from inmates telling me they will burn me alive because they see me as a symbol of the system that put them in prison,” said Judge Afiuni, 46, in her prison cell. “I’m in this hell because I had the temerity to do my job as a judge in a way that didn’t please Chávez.” Since Judge Afiuni’s imprisonment, a dizzying sequence of other high-profile arrests has taken place, pointing to Mr. Chávez’s recent use of his security and intelligence apparatus to quash challenges to his grip on the country’s political institutions.
- Sharp Increase in March in Personal Bankruptcies. More Americans filed for bankruptcy protection in March than during any month since the federal law was tightened in October 2005, a new report says, a result of high unemployment and the housing crash. Federal courts reported over 158,000 bankruptcy filings in March, or 6,900 a day, a rise of 35 percent from February, according to a report to be released on Friday by Automated Access to Court Electronic Records, a data collection company known as Aacer. Filings were up 19 percent over March 2009. The previous record over the last five years was 133,000 in October.
- How Washington Abetted the Bank Job. A FEW weeks ago, two Republican House members asked Ben Bernanke, the chairman of the Federal Reserve, whether the Fed knew — before Lehman’s bankruptcy examiner revealed it — about the bookkeeping scam at Lehman known as “Repo 105.” This scam allowed Lehman to disguise how much debt it was carrying, right up until it collapsed. Lehman got new loans to pay off old loans, pretended the new loans were “sales,” and through a complicated series of steps made both the old and new loans disappear just in time for its quarterly reports.
- Dimon Mulls JPMorgan Chase(JPM) Succession Plan. One of Wall Street's kings is preparing his succession plan. According to people familiar with the matter, JPMorgan Chase CEO Jamie Dimon will be borrowing a page from the military's playbook and shuffling the roles of his key lieutenants in order to set the stage for his eventual successor. Among those likely to see their jobs change in the next few months is CFO Michael Cavanagh; Charlie Scharf, CEO of the bank's massive retail-services unit; and Samuel "Todd" Maclin, CEO of commercial banking. All three are considered potential successors to Dimon and could be asked to either swap roles or take on fresh assignments at the bank to develop their "leadership skills."
- Rick Bookstaber: Want To Know Where The Next Crisis Is Brewing? Check Out The Muni Market. On his personal blog he lays out where to look next for a serious crisis, and his answer is the municipal debt market. But first, he lays out six preconditions for a serious crisis:
- Markets No Longer Buying Europe's Bailout Talk On Greece, Bond Yields Now Rising Again.
- 600,000-700,000 iPads Sold On First Day, Says Munster, Who Called Stores.
- Goldman(GS) Joins JPMorgan(JPM) On The PR Offensive Against The US Middle Class, As Americans Find A Surprise Champion In The Face Of Fed's Tom Hoenig. The campaign by the big banks against the people of the US is getting louder by the day. First, it was JP Morgan' Jamie Dimon, who segued into the Goldman "god' banker" refrain that all megabanks are not just critical but need to get even bigger in the form a 36-page lament to shareholders (in which among other things he repeats that even though JPM was bailed out, and even though it was handed Bear with Maiden Lane I left to pick up all the crap he did not want, none of those activities by the US taxpayers were necessary), and today it is none other than Goldman Sachs, which after prudently keeping a low public profile for a few months, is about to remind everyone who runs the world. And with the US public comprised of phlegmatic sheep, or morts as Michael Lewis put it very graphically, it appears that nobody is willing to stand up to those who run not just the markets, the economy and the administration, than the Fed's contrarian Tom Hoenig.
The Chicago Tribune:
- $20 Million in Loans to Felons. Broadway Bank lending, when Alexi Giannoulias was senior loan officer. The family bank of Democratic Senate candidate Alexi Giannoulias loaned a pair of Chicago crime figures about $20 million during a 14-month period when Giannoulias was a senior loan officer, according to a Tribune examination that provides new details about the bank's relationship with the convicted felons. Broadway Bank had already lent millions to Michael Giorango when he and a new business partner, Demitri Stavropoulos, came to the bank in mid-2004. Although both men were preparing to serve federal prison terms, the bank embarked on a series of loans to them. Alexi Giannoulias took a senior position at the bank at about the same time and used it as a launching pad for his political career. But as he campaigns to step up from state treasurer to the U.S. Senate, he has tried to distance himself from the bank's business with the pair and has been reluctant to detail his role.
- Pickens: Drilling Isn't the Answer. T. Boone Pickens, the famous Texasoilman, billionaire investor and energy evangelist, listened the other day to President Obama'splan to expand offshore oil and natural-gas drilling. He was not particularly impressed. "It was kind of disappointing," Pickens said Thursday in the office of BPCapital L.P., the hedge fund at the center of his empire. He's fine with offshore drilling. But he said that there were no substantial Atlantic oil reserves where Obama lifted a ban on drilling, and that untapped oil in Alaskawould provide only a fraction of the nation's supplies. Neither would aim the country where Pickens said it needs to go - energy independence from America's "enemies" in OPEC. Pickens told New York listeners he was mystified by the uproar gas drilling had caused in the Marcellus Shale region, where environmentalists oppose hydraulic fracturing (fracking), an extraction technology involving high-pressure injections of sand and drilling fluids into a well. The EPA recently announced it would study fracking. "You've been fracking wells in Texas and Oklahoma for 50 years," Pickens said. "I've never heard anybody complain about your damaging the water. We're just amused that people in Pennsylvania and New York are crying about messing up their water."
- Hedge Fund 'Golden Boys' Bet on Bailouts; Win Big. The world’s top hedge fund managers made hay last year with record pay because their much-maligned sector bet heavily on recovery of the financial sector after it received state aid, a survey showed. The 25 chief executives of global financial heavyweights pocketed a total of 25.33 billion dollars (18.6 billion euros), doubling their earnings from 2008, according to a ranking by industry magazine AR Absolute Return+Alpha. “The world may still be coming out of the Great Recession, but for the richest hedge fund managers, 2009 was the best year ever. And it couldn’t have happened without the carnage of 2008,” the magazine said. Seven hedge fund managers broke the one-billion-dollar mark last year, while the last one on the top-25 list made 350 million dollars. George Soros, the legendary US financier of Hungarian origin who once made a fortune correctly hedging that Britain would leave the European exchange rate mechanism, took the second spot with 3.3 billion dollars. For the record, we have no problem with people, even hedge fund managers, making buckets of money. That’s capitalism. But, the increasing intersection of the financial markets and government is troubling. As we all know, George Soros directs rivers of money into leftist advocacy groups, who promote the very bailout programs that supported his financial bets. John Paulson has given millions to the Center for Responsible Lending, who also advocates for these programs. There is an emerging trend of using leftist public policy groups for private profit. We’ll have more to say on this in the coming weeks.
- Asset Plunge Hits Top 25 Hedge Fund-of-Funds Firms. Aggregate assets managed by the 25 largest hedge fund-of-funds managers dropped more than one-third in the rocky 18 months ended Dec. 31, according to survey data.
- Investment Bank Fee Frenzy. Investment bank revenues (read: fees) actually rose last year. That’s not surprising, really. Investment banks often do well when markets are distressed, and deals abound for those with money. The fee frenzy in some sectors, however, is remarkable. The real estate sector saw its highest year-on-year increase in fee generation — 46 percent, to roughly $3 billion. Revenues generated by financial institutions (commercial banks, credit unions, insurance companies and the like) hit $22.9 billion, an increase of 1 percent from 2008. Federal home loan banks were the largest payer of fees. (Background: the Federal Home Loan Bank System, more than 8,000 community banks, is a prime source of low-cost funding in the U.S.) Merger and acquisition fee revenue, reflecting a falloff in global deals, declined 41 percent last year, to $12.9 billion from $21.9 billion in 2008. The Asia-Pacific’s share of global revenue increased, to 20 percent from 13 percent. JPMorgan(JPM) was the top-earning bank by far, with $5.46 billion in global net revenue, followed by Bank of America Merrill Lynch ($4.06 billion) and Goldman Sachs ($4.04 billion). All of which goes to the common wisdom that banks, not unlike savvy politicians, never let a crisis go to waste.
Boston Globe:
- Short-Term Customers Boosting Health Costs. Thousands of consumers are gaming Massachusetts’ 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage, a practice that insurance executives say is driving up costs for other people and small businesses.
- Hyundai to Include an iPad in New Luxury Car. The carmaker, known for its budget wheels, is tapping into the hype over Apple's(AAPL) new tablet computer to add cachet to its Equus sedan.
- Despite Dire Budget Warnings, Los Angeles' Payroll Continued to Grow. The mayor and City Council continued to expand L.A.'s workforce and awarded generous union contracts as they were being warned of the looming recession and the need for cutbacks. Threats this week by Los Angeles' powerful municipal utility to withhold $73 million from the treasury helped reveal a city that has become increasingly dependent on indirect and onetime sources of revenue to pay its bills. Combined with the worst economic decline since the Depression, those dwindling sources of cash have forced city officials to confront a problem they have long tried to ignore -- a steady growth of the city payroll for the last decade. The city's core 35,000-member workforce increased by at least 3,000 between 2000 and 2009. During the same time, Los Angeles' yearly pension contributions more than tripled to $723 million, fueled by investment losses but also by the larger payroll.
- Senate Challenges Signal Deep Unrest. How deep does the anti-Washington sentiment run? The number of senators in both parties facing serious primary challenges this year — a figure that has grown in the past six weeks — offers a clue.
- Starbucks(SBUX) Goes Upmarket with Seattle Test Cafe.
- Tesoro(TSO) Refinery Fire Ignited Suddenly: Safety Board. Seven workers at Tesoro Corp's Anacortes, Washington, refinery had no time to escape after a large hydrocarbon vapor release ignited within seconds, the lead investigator for the U.S. Chemical Safety Board said on Sunday.
- New Fears Over Speed of China's Growth. China Construction Bank Corp. Chairman Guo Shuqing said economic growth of 9.5% would be "very problematic" for the nation. Such rapid economic expansion "will mean more duplication of construction, more excess capacity and higher waste of capital," Guo said in an interview. "We have some problems with oversupply of money and liquidity increased dramatically and we are definitely going to pay some costs for that in the form of asset bubbles or rising inflation," Guo said.
BBC:
- South Korea Ship Torpedo 'likely' - Defence Minister. Kim Tae-young said it was a "likely possibility" the Cheonan had been hit by such a missile, but that all possibilities needed to be considered. Mr Kim did not say who would have fired a torpedo or under what circumstances it could have happened. Rescuers are still searching for 46 sailors missing on board the ship.
- France may cut an extra 100,000 civil service jobs between 2011 and 2013 to reduce state expenditures, citing the head of the ruling UMP party's parliamentary group, Jean-Francois Cope. Cutting public debt should be achieved by reducing public spending and not by increasing taxes for households and companies, Cope said.
- The IMF says the ECB should keep its benchmark interest rate low to help sustain the economic recovery, citing a draft of a report scheduled to be published later this month. "The recovery is still weak, and therefore the outlook for inflation remains low," the IMF said in a draft of its next World Economic Outlook. "It's appropriate to keep interest rates exceptionally low and to act very slowly in abandoning quantitative measures and changing collateral requirements."
- Inside the iPad: Samsung, Broadcom(BRCM) Snag Multiple Wins. Report shows 64-bit memory path, three touch-screen chips. The Apple iPad sports an unusually high processor-to-memory channel, an abundance of touch-screen silicon and a novel case design, according to a teardown report from UBM TechInsights, a sister division of EE Times. The report shows Samsung and Broadcom are among the major silicon suppliers in the system released to much fanfare Saturday (April 3).
- Record Sales Seen for Optoelectronics, Sensors, Discretes. Sales of optoelectronics, sensors/actuators and discrete semiconductors are all expected to reach record highs in 2010 following a down year in 2009, according to market research firm IC Insights Inc. Sales of optoelectronics are projected to increase 27 percent to $23.3 billion, while sensor/actuator revenue is expected to increase 33 percent to $6.8 billion, according to IC Insights' 2010 O-S-D Report. Sales of discrete semiconductors are expected to grow 29 percent to $19.7 billion in 2010, according to the report. Within the sensors/actuators market segment, sales of devices made with microelectromechanical systems (MEMS) technology are projected to grow 34 percent to $5.6 billion in 2010 after declining 5 in 2009 to $4.2 billion, IC Insights (Phoenix) said.
- Finds Fuel Deep-Sea Oil Rush. THREE significant new oil and gas regions have been identified off Australia's coast, raising the potential for a wave of offshore exploration that could create booming new resources hubs around the nation.
- China wants developed countries to devote public funds and allocate their budgets to finance the global battle to address climate change, citing Assistant Finance Minister Zhu Guangyao. Developed countries must take responsibility for their historic roles in emitting greenhouse gases and stick to their commitments made at the Copenhagen climate change conference, Zhu said. The world needs to raise $100 billion a year to deal with climate change by 2020, citing Zhu.
Barron's:
- Made positive comments on (SONC), (KALU), (DVA), (CVS), (RS), (WPO), (MDR), (GILD), (HRB), (CVE), (LINTA) and (NEM).
- Asian indices are -.25% to +50% on average.
- Asia Ex-Japan Investment Grade CDS Index 94.50 -3.5 basis points.
- S&P 500 futures +.43%.
- NASDAQ 100 futures +.61%.
Earnings of Note
Company/Estimate
- None of note
10:00 AM EST
- The ISM Non-Manufacturing Index for March is estimated to rise to 54.0 versus 53.0 in February.
- Pending Home Sales for February are estimated to fall -1.0% versus a -7.6% decline in January.
- None of note
- The Treasury's $8B 10-Year TIPS auction could also impact trading today.
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