Today's Headlines

Bloomberg:

• Trial Begins in First SEC Insider Default-Swap Case. A Deutsche Bank AG salesman’s trial began in U.S. regulators’ first case targeting insider trading in credit-default swaps.
• Greek Default Unavoidable Without More Aid, Jen Says. Greece may default on its debt as early as this year without “extraordinary” financial assistance from the European Union and International Monetary Fund, said Stephen Jen at BlueGold Capital Management LLP. The challenges facing Greece are similar to those that confronted Argentina, which defaulted on $95 billion of debt in 2001, as the government enacts austerity measures to narrow the European Union’s biggest budget deficit, Jen, managing director at the hedge fund, said today in an interview in London. That may drive the Mediterranean nation into a recession, he said. “A default may be ultimately unavoidable,” Jen said. “That eventuality may only be postponed by aid many times bigger than the 25 billion euros ($33 billion) people have in mind.” Any assistance needs to “impress the market,” he said.
• Gold Climbs to 12-Week High on Demand for Currency Alternative. Gold jumped to a 12-week high on demand for an alternative investment to currencies as the euro weakened against the dollar. Gold priced in euros reached a record today after a report showed Europe’s economic growth stalled in the fourth quarter. The euro fell against the dollar on mounting concerns that a financial-rescue plan for Greece may falter. The euro slid 1.4 percent against the dollar in the past three sessions.
• Buy McDonald's(MCD) Call Options Before Profit Report, Goldman Says. Investors should buy bullish McDonald’s Corp. options because they are at near record lows and the world’s largest restaurant company may rally on stronger-than-estimated earnings and a smoothie introduction, Goldman Sachs Group Inc. said.
• Apple(AAPL) iPad's Components May Cost $260, iSuppli Says.
• Los Angeles Rating Cut to Aa3 by Moody's on $3.2 Billion Bonds. Los Angeles had the credit rating on $3.2 billion of debt cut to Aa3 from Aa2 by Moody’s Investors Service a day after Mayor Antonio Villaraigosa called for a twice-a-week shutdown of “nonessential” services. The one-level downgrade for the nation’s second-largest city by population cited the difficulty of quickly rebalancing its budget. Moody’s maintains a negative outlook on the city’s debt, meaning the rating could be lowered further.
• Chief Executive Officers in U.S. Turn More Optimistic. Chief executive officers in the U.S. turned more optimistic in the first quarter as sales grew, boosting the prospect that employment and spending will climb, a survey showed. The Business Roundtable’s economic outlook index rose to 88.9 in the first three months of the year, the highest level since the second quarter of 2006, the Washington-based group said today. Readings higher than 50 are consistent with economic expansion.
• Bernanke Says Joblessness, Foreclosures Challenges to Recovery. “We are far from being out of the woods,” Bernanke said today in a speech in Dallas. While the financial crisis has abated and economic growth will probably reduce unemployment over the next year, the U.S. faces hurdles including the lack of a sustained rebound in housing, a “troubled” commercial real estate market and “very weak” hiring, he said.

Wall Street Journal:

• Wal-Mart(WMT) Ramps Up Online Efforts Globally. Wal-Mart Stores Inc. is stepping up its international e-commerce expansion, looking for staff, talking to vendors and mapping its approach to what could become one of the world's biggest Internet initiatives. Wal-Mart wants to mix the best of what is already offered with new elements that could allow the company to sell from the U.S. into overseas markets and use its presence in other countries as a springboard for online sales, said Steve Nave, general manager of Walmart.com.
• Answering the SEC's New Questionnaire. The SEC recently began sending a questinnaire to newly-registered hedge fund advisers. Guy Talarico, chief executive of Alaric Compliance, talks to columnist Suzanne Barlyn about what to expect and how advisers should respond. (video)
  

MarketWatch:

• OECD Sees Double-Dip Recession in Germany. The German economy was the only one out of the Group of Seven industrialized nations to have contracted during the first quarter, according to estimates released by the Organization for Economic Cooperation and Development on Wednesday. According to the OECD, Germany's economy shrank at a 0.4% quarter-on-quarter rate, after a stagnant fourth quarter. The VDO trade association said on Tuesday that German car sales plunged 27% in March. In the second quarter, the OECD expects the G7 to grow by 2.3% and for the U.S. to grow 2.3%.
• Fed's Hoenig Seeks Cautious Rate Hikes to 1% Soon.
  

CNBC:

• Fmr. Citi(C) Exec Warned Rubin About Mortgage Risk. A former executive of Citigroup Inc. is telling a panel investigating the roots of the financial crisis that he warned former chairman Robert Rubin and other bank leaders about the coming mortgage crisis back in 2006. Richard Bowen says other Citigroup executives were violating the bank's own risk management standards starting in 2006. He says he discovered in the middle of that year that over 60 percent of the mortgages bought and resold by subprime subsidiary Citifinancial Mortgage were defective. Bowen was chief underwriter for the division. Bowen says he issued many warnings to management about the mortgage risk starting in 2006, and e-mailed Rubin in November 2007.
• Subprime Delinquencies Fall for First Time in 4 Years. With serious delinquencies up for the 34th consecutive month, U.S. prime RMBS late-pays have now eclipsed 10 percent, according to Fitch Ratings in the latest edition of Performance Metrics. Conversely, subprime delinquencies fell for the first time in nearly four years.
• Treasury Auction Finds Strong Demand For 10-Year Notes.
• Five More States Join Suit Against Healthcare Law. Five more U.S. states are to join a Florida-led group of states in a collective lawsuit challenging President Barack Obama's overhaul of the U.S. healthcare system, Florida's attorney general said Wednesday. The joint lawsuit led by Florida and now grouping 18 states was filed on March 23. It claims the sweeping reform of the $2.5 trillion healthcare system violates state-government rights in the U.S. Constitution and will force massive new spending on hard-pressed state governments. South Carolina, Nebraska, Texas, Utah, Louisiana, Alabama, Colorado, Michigan, Pennsylvania, Washington, Idaho, and South Dakota had previously joined Florida's lawsuit.

NY Post:

• Bam Man Pitching National Sales Tax. Acknowledging it would be a highly unpopular move, White House economic adviser Paul Volcker said yesterday the United States should consider imposing a "value added tax" similar to those charged in Europe to help get the deficit under control. A VAT is a national sales tax that, like state and city sales taxes, would be collected by retailers. Volcker, at the New-York Historical Society, told a panel on the global financial crisis that Congress might also have to consider new taxes on carbon and energy. The VAT suggestion was immediately met with outrage by Republicans. "It shouldn't surprise anyone that the Obama White House would advocate a European-style tax to help finance their European-style government health-care plan," said Brian Walsh, a spokesman for the National Republican Senatorial Campaign Committee. "When you hear things like this, though, it's almost as if the Democrats think the American people will forget that we're in this situation because of their reckless spending agenda." Volcker, a former chairman of the Federal Reserve, told the global economic panel that a VAT is "not as toxic an idea as it has been in the past." He added, "If, at the end of the day, we need to raise taxes, we should raise taxes." The tax has long had backing from House Speaker Nancy Pelosi (D-Calif.), who last year said it is "on the table" for dealing with the country's fiscal woes. It's a quick way for governments to raise cash, but the tax could wind up being a burden on the poor, critics say.
• The Bad-Nukes Myth. Tossing away a vital deterrent.
  

NY Times:

• China Again Hopes to Drive U.S. Rail Construction. Nearly 150 years after American railroad companies imported thousands of Chinese laborers to build rail lines across the West, China is poised once again to play a role in American rail construction. But this time it would be an entirely different role: supplying the technology and engineers to build high-speed rail lines. The Chinese government has signed cooperation agreements with the state of California and General Electric to help build such lines.

Business Insider:

• CNBC Developing New Lunchtime Show Starring David Faber.

LA Times:

• Greenspan Defends Fed's Handling of Subprime Mortgage Market. Greenspan said the selling of the soaring number of subprime mortgages in securities to investors was the trigger for the financial crisis. He blamed affordable housing mandates set by federal officials on the government-sponsored housing enterprises Fannie Mae and Freddie Mac, and their subsequent large-scale purchase of securities backed by subprime mortgages, for the housing bubble that later burst, sending financial markets reeling.

market folly:

• Third Point Still Net Long Distressed Debt & MBS: Latest Exposure & Positions.

The Detroit News:

• UAW Suit Says GM Owes $450M. The United Auto Workers union sued General Motors Co. in federal court Tuesday, contending the Detroit automaker owes a union-run retiree health care fund $450 million. The suit, filed in U.S. District Court in Detroit, contends that General Motors Corp. agreed in June 2007 to pay $450 million to settle a UAW claim against Delphi Corp., GM's former parts unit, in the supplier's bankruptcy. GM filed for bankruptcy in June. The automaker's best assets were acquired by a government-sponsored entity known as General Motors Co. The UAW contends in its lawsuit that the "new" GM agreed to assume all of its labor contracts with the UAW -- including the 2007 deal among GM, Delphi and the UAW.

FINalternatives:

• CalSTRS Seeks Consultant For Global Macro Hedge Fund Program. The California State Teachers’ Retirement System is ready to take the plunge into global macro hedge funds, but the $132.5 billion pension fund needs some help. CalSTRS is looking for a hedge fund consultant to assist in setting up its global macro strategy, which will initially include between three and six managers and $200 million.

Chitika Labs:

• iPad Stats. Estimated number of iPads sold 516,222.

Politico:

• Rubio's Path. Marco Rubio's remarkable fundraising haul — $3.6 million this quarter, he just announced — is a reminder of the scale of his stardom inside the Republican Party, all of whose core constituencies seem to like the guy. He's already hearing every day (and brushing it off) that he should run for president in 2012, and at the inevitable moment in the cycle (as in every party, every cycle) when Republicans panic about their field of nominees, he's likely to be uniquely attractive: young, conservative, Hispanic and from a swing state besides.

Reuters:

• Ahmadinejad Attacks Obama on Nuclear "Threat". Iran's president made a scathing and personal attack on U.S. President Barack Obama on Wednesday as an "inexperienced amateur" who was too quick to threaten to use nuclear weapons against enemies of the United States. Iran, which says its nuclear programme is for entirely peaceful ends, also repeated warnings to Israel not to attack. "If they (Israel) attack Iran, possibly no trace will be left from the Zionist regime (Israel)," Defence Minister Ahmad Vahidi was quoted as saying by semi-official Mehr news agency. A deputy of Iran's Supreme Leader Ayatollah Ali Khamenei in the elite revolutionary Guards made similar threats on Tuesday. Russia, which, like China, is under intense Western pressure to support tougher U.N. sanctions has so far failed to deliver a S-300 anti-aircraft system Iran has ordered, a move which has irritated Iranian officials. But Defence Minister Vahidi said Russia had no intention of breaking the agreement to sell the missile system. "Russia is committed to our agreements over the S-300 system. They have told us that the system will be delivered to Iran on time." Analysts say the S-300 could help Iran to thwart any attempt by Israel or the United States -- which have refused to rule out military action if diplomacy fails to resolve the atomic row -- to bomb its nuclear facilities.
• Global PMI Jumps to Highest Since July 2007. The pace of global growth accelerated in March, expanding at its fastest pace since July 2007, with a slight gain in employment for the first time since April 2008, a survey showed on Wednesday.

Financial Times:

• Why The Greek Rescue Isn't Going to Plan by Mohamed El-Erian. It should be apparent to all by now: despite the rhetoric out of some European capitals, the Greek rescue package is not going according to plan. The triumphant Greece/European Union/International Monetary Fund announcement of a couple of weeks ago has not calmed markets, nor has it lowered Greek borrowing costs. In fact, market measures of risk signal more concern today than before the announcement. Meanwhile, worries are mounting about the health of the Greek banking system, raising the spectre of disorderly outflows of deposits. Society is not buying into the government’s adjustment plan. And the EU/IMF external financing package lacks the operational clarity that is required in these circumstances. Unfortunately, it is likely that things will get worse for Greece before they get better. In the short run, the persistence of alarming risk spreads will lead to even more cautious behaviour among depositors and investors. Late movers will sell Greek assets rather than buy, putting even greater pressure on the government’s ability to raise sustainable funding for its forthcoming debt maturities in May. Against this background, we should expect an intensification of the European blame game in the weeks ahead. The Greek government is having difficulty convincing its people of the magnitude of the country’s problems and the required internal adjustments. As a result, Greece is unable to provide sufficient assurances to its creditors, thereby further complicating an already tough situation. This accentuates the hesitancy of exceptional financiers, such as Germany, who resist having to again pay the bill after others have partied. And without exceptional financing, the Greek government finds it even more difficult to embark on an adjustment program that relies on only one instrument – that of fiscal austerity. It is a classic co-ordination failure in game theory. Any first mover will become worse off. Indeed, it is in the interest of any single party to wait for others to move first. As a result, no meaningful progress is made, the problems fester, and the risks of a disorderly outcome increase. Buoyed by a cyclical recovery, markets around the world have yet to recognise the complexity of this situation. When they do, it will also become apparent that Greece is part of a wider, and historically unfamiliar phenomenon – that of a simultaneous and large disruption to the balance sheet of many industrial countries. Tighten your seat belts.

Guardian:

• Goldman Sachs(GS) Denies 'Betting Against Clients'. Nine months after being labelled "a great vampire squid wrapped around the face of humanity", Goldman Sachs has issued a wide-ranging justification of its conduct before, during and after the financial crisis. The letter appears to be a detailed response to some of the allegations made nine months ago by Rolling Stone journalist Matt Taibbi. His article, which argued that Goldman had repeatedly profited by inflating unsustainable financial bubbles, received widespread coverage. It included the claim that the company was "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money". One of Taibbi's key charges was that Goldman had helped to fuel the housing boom during the last decade by packaging hundreds of millions of dollars worth of housing loans into complicated financial products such as collateralised debt obligations (CDOs). These CDOs were sold on to other banks and investors such as pension funds, who suffered big losses when the sub-prime housing bubble burst. Goldman, though, actually profited from the fiasco by short-selling the market before the credit crunch struck in summer 2007.