- Homebuilders in U.S. Less Pessimistic as Tax Credit Lifts Sales. Homebuilders in the U.S. turned less pessimistic in April as customers took advantage of a government tax credit before it expires. The National Association of Home Builders/Wells Fargo index of builder confidence increased to 19, exceeding the median forecast of economists surveyed by Bloomberg News, from 15 the prior month, data from the Washington-based group showed today. The builders group’s index of current single-family home sales rose to 20 in April from 15 a month earlier. The last time the measure was that high was in March 2008. The gauge of buyer traffic rose to 14, the highest since September, from 10 in March. A measure of sales expectations for the next six months increased to 25 from 24.
- Mortgage Rates on 30-Year U.S. Loans Fall to 5.07%. U.S. mortgage rates fell this week after a month of increases coinciding with the Federal Reserve ending its purchases of home loan debt. Rates for 30-year fixed loans dropped to 5.07 percent for the week ended today from 5.21 percent, mortgage finance company Freddie Mac said in a statement.
- Manufacturing Advances, Labor Market Struggles. Manufacturers are charging ahead as sales and inventories grow, spearheading a U.S. economic recovery that shows scant signs of lifting labor markets. Factory production climbed 0.9 percent after rising 0.2 percent in February, the Federal Reserve said today in Washington. Regional data indicated the gains extended into this month, while figures from the Labor Department showed unemployment claims climbed unexpectedly last week to the highest level in two months. “Manufacturing is doing pretty well,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “It is still very much in the lead. The labor market is a concern and a puzzle.” The Labor Department report showed the number of Americans filing claims for jobless benefits rose by 24,000 to 484,000 in the week ended April 10. A government spokesman said the jump had due more to with administrative factors reflecting volatility around the Easter holiday than economic reasons. The four-week moving average of initial claims, a less volatile measure than the weekly figures, increased to 457,750 last week, from 450,250. “We’re not making rapid progress,” Neal Soss, chief economist at Credit Suisse Holdings USA Inc. in New York, said in an interview with Bloomberg Radio. “Job growth over the course of this year will be sufficient to bring the unemployment rate down.” Reports from the New York and Philadelphia Fed Banks showed manufacturing accelerated in April. New York’s Empire State index climbed to 31.9, a ninth consecutive month of growth, from 22.9 in March. Philadelphia’s general economic index rose to 20.2 from 18.9. Readings greater than zero signal expansion.
- CEOs Seek to 'Dust Off' Merger Ideas, Braunstein Says. JPMorgan Chase & Co.(JPM) investment- banking head Douglas Braunstein said his clients increasingly asked bankers in recent weeks to “dust off” their work on old takeover ideas. The requests signal the mergers and acquisitions business, which dropped to the slowest in six years in 2009, may rebound in the coming months, Braunstein, 49, said in a speech to M&A lawyers in New Orleans today. “The number of inbound calls we have had from clients who’ve said ‘Please dust off your work on the following target’ have increased dramatically in the last several weeks,” Braunstein said.
- China Index Futures Trading May Hedge Bubble Risks. China’s stock-index futures begin trading tomorrow, giving investors a tool to hedge against potential risks from an overheating economy and asset bubbles. The contracts are part of China’s push to make more investment options available to local investors and ease market fluctuations after the Shanghai Composite Index slumped the most among global markets this year following an 80 percent rally in 2009. They will be based on the CSI 300 Index, tracking the 300 biggest stocks on the Shanghai and Shenzhen bourses. “They can be used obviously for speculation but importantly, they can also be used for hedging,” Hugh Young, who helps oversee $232 billion of assets as head of equities at Aberdeen Asset Management Plc in Singapore, said in a Bloomberg Television interview. Last year’s rally in Chinese stocks and property prices have prompted analysts including former Morgan Stanley economist Andy Xie to call the nation’s asset markets a bubble that will burst once the government curbs credit. China is “on a treadmill to hell,” with growth driven by the “heroin of property development,” hedge fund manager James Chanos said last week. The trading of stock-index futures on the China Financial Futures Exchange in Shanghai follows the introduction of margin trading and short selling on March 31.
- Commodity Inflows Slowed in Quarter, Barclays Says. Commodities attracted $11.6 billion in the first quarter, down from $18.5 billion in the previous three months, with less money going into exchange-traded products tracking gold and oil, Barclays Capital said. Commodity assets under management reached $283 billion at the end of the first quarter, or $5.4 billion more than at the end of 2009, the bank said in a report. Assets under management jumped $36 billion in the fourth quarter of last year. Assets in exchange-traded products dropped $1.7 billion to $109.5 billion in the first three months of 2010, the bank said. “While retail investors have been very fickle and pessimistic towards commodity investments, asset allocation from institutional investors and hedge funds remained strong this quarter,” analysts Suki Cooper, Kevin Norrish, Amrita Sen and Quitterie Valette wrote in the report.
- Obama Wind Farm Goals Threatened by Indian Rites, Kennedy Wish. An Indian tribe’s sunrise ceremony, Nantucket’s whaling-era architecture and a parting wish of Senator Edward Kennedy may block the first wind farm in waters off the U.S. and stymie a potential $270 billion industry. Interior Secretary Ken Salazar says he will rule this month on Cape Wind, a proposal to invest more than $1 billion placing 130 wind-powered turbines in the shallow waters of Nantucket Sound off Massachusetts. A federal advisory council recommended on April 2 that Salazar reject the project because of the “destructive” effects on historic sites. President Barack Obama campaigned for office pledging to double renewable energy from the wind, sun and biodegradable waste in three years, and the Energy Department says wind can supply 20 percent of U.S. power by 2030 compared with 1.8 percent today. That won’t be achieved if projects are blocked by local opponents like those opposing Cape Wind, said former Energy Secretary Spencer Abraham. “When we talk about what’s made America’s energy policies so challenging to devise it’s in no small measure this whole not-in-my-backyard sentiment,” Abraham, President George W. Bush’s first energy secretary, said in an interview. “Every time you think you’ve satisfied protest group No. 1, there’s protest group No. 2.”
- Apache(APA) to Buy Mariner for $2.7 Billion in Cash, Stock. Apache Corp., the second-largest independent U.S. oil producer, agreed to buy Mariner Energy Inc. for $2.7 billion in cash and stock to boost production and reserves in deep waters of the Gulf of Mexico. Mariner owners will get 0.17043 a share of Apache and $7.80 in cash for each of their shares, or $26.22 at yesterday’s closing price, the Houston-based companies said today in a statement. The value is 45 percent higher than Mariner’s closing price yesterday. Apache will assume $1.2 billion of debt.
- U.S. Post Office May Go Broke by October, Potter Says. The U.S. Postal Service may run out of cash as early as October unless Congress drops a requirement to prefund health benefits for retirees, Postmaster General John Potter told lawmakers today. Potter asked the House Oversight and Government Reform Committee to let the service cut Saturday delivery and stop paying health costs in advance. Dropping the funding requirement would allow the agency to be solvent when the next fiscal year begins Oct. 1, Potter said. “Today we stand on the brink of financial insolvency,” Potter told committee members who expressed skepticism about endorsing his plan to reduce mail deliveries to five days from six. “If Congress is unable to act this fiscal year on broader legislation, our projections show that we will risk running out of cash the first month of fiscal year 2011.” The Postal Service has said it may lose a cumulative $238 billion by 2020 and last month proposed changes to trim the deficit.
- Bank of America(BAC) Leads Decline in Late U.S. Card Loans. Bank of America Corp., the second- biggest U.S. credit-card lender, said overdue loans fell last month to the lowest in more than a year, signaling a decline in future write-offs after 2009’s record losses. Card payments at least 30 days late fell to 7.07 percent in March, the lowest since December 2008, compared with 7.23 percent in the previous month, the bank said in a filing today. Write-offs of uncollectible loans also dropped to a 10-month low of 12.54 percent from 13.51 percent in February. Delinquencies decreased at five of the six biggest card- issuers, including No. 1 JPMorgan Chase & Co. and American Express Co. The results underscore JPMorgan Chief Executive Officer Jamie Dimon’s comments yesterday that a “broad-based” economic rebound has bolstered bank earnings.
- Bank of America(BAC) Said to Arrange $500 Million Loan CDO. Bank of America Corp. is arranging a $500 million collateralized loan obligation that will be managed by Symphony Asset Management LLC as leveraged-loan prices soar, according to people familiar with the transaction. Symphony CLO VII Ltd., a type of collateralized debt obligation, will bundle leveraged loans and slice them into securities of varying risk, said the people, who declined to be identified because terms aren’t public. “The market is returning to the status quo that existed from 2004 to 2007,” said Christopher Garman, chief executive officer of Garman Research LLC in Orinda, California. “Structured products were the major backbone of leveraged-loan demand.”
- Euro Falls on Renewed Concern Greece Bailout Package Not Enough.
- GE(GE) Options Traders Boost Bullish Bets Before Earnings Tomorrow.
Wall Street Journal:
- Goldman(GS) Director in Probe. Wall Street's most powerful firm is being drawn into the government's sprawling insider-trading investigation. Prosecutors are examining whether a Goldman Sachs Group Inc. board member gave inside information about the Wall Street firm to Galleon hedge-fund founder Raj Rajaratnam during the height of the financial crisis, people close to the situation told The Wall Street Journal. Goldman's name emerged in a government letter listing companies whose trading, by Mr. Rajaratnam and others in the Galleon case, the U.S. is investigating.
- Greece Requests IMF Talks. Greece on Thursday took another step towards the first sovereign bailout in the history of the euro-zone, amid growing doubts that the country could continue raising money on financial markets. In a letter to European and International Monetary Fund officials, Finance Minister George Papaconstantinou asked that formal "discussions" on an aid package begin, in the event Greece would need to avail itself of that aid.
- China Firm Denies Link to Iran Nuclear Ring. A Chinese company denied any role in an alleged supply chain that—according to officials familiar with the matter—allowed an Iranian company with links to Tehran's nuclear program to gain access to special hardware for enriching uranium.
- Economists Split Over Inflation. Economists were evenly divided between those who fear inflation will accelerate over the next year and those who see a bigger risk that the inflation rate will slow from already low levels, according to the latest Wall Street Journal forecasting survey.
- IRS May Withhold Tax Refunds to Enforce Health-Care Law. The Internal Revenue Service won't audit you to make sure you have purchased health insurance under provisions of the new health-care law—but it may withhold your tax refund if you can't demonstrate that you are insured, an IRS official said Thursday.
Hedge Funds Review:
- Hedge Fund Fees Continue to Fall. Hedge fund fees slipped further away from the 2 and 20 industry standard last year, with less than 40% continuing to charge 2% management and 20% performance fees. The average management fee charged by single-manager funds at the end of 2009 was 1.65% with an average performance fee of 18.89%, according to a report by information provider Preqin. For funds of hedge funds (FoHFs) the average management fee is 1.44% and the average performance fee is 11.54%. A total of 38% of single manager funds stuck with the 2 and 20 structure that is still seen as traditional for hedge funds.
- Survey: Hedgies Feeling Bullish. For hedge fund managers, the U.S. economy increasingly looks just right, according to a new survey. More than seven in 10 managers think that corporate earnings will rise 10% or more over the next year, and the number of managers expecting both above-trend growth and below-trend inflation soared from 21% in March to 32% this month, according to the Bank of America Merrill Lynch Survey of Fund Managers. Indeed, fully 42% of respondents say there will be no Federal Reserve interest rate hikes this year at all, up from 38%. “April’s survey shows a growing number of investors envisaging a Goldilocks scenario of above-trend growth and benign inflation,” Michael Hartnett, chief global equities strategist, said. “The findings are consistent with the view that the U.S. consumer, far from remaining in intensive care, is on the path back to good health.” And so hedge funds are piling back into stocks, with 52% overweight equities, up from 33% in February. And average cash holdings have fallen, as well, from 3.8% last month to 3.5% this month.
- Viking Global Bets Big on Visa(V): Portfolio Update. Here are their top 10 positions:
- Volumes Surge at Top Box Ports. THE world’s largest box ports continue to show significant increases in container volumes for the first quarter of 2010 versus 2009. Singapore, the world’s number one box port, saw first quarter volumes up 14.2% to 6.7m teu at the terminals operated by container port giant PSA.
- 51% in New Jersey Favor Repeal of Health Care Bill. Fifty-one percent (51%) of voters in New Jersey, a state Barack Obama carried handily in 2008, now favor repeal of the recently-passed national health care bill. That includes 41% who strongly favor repeal. A new Rasmussen Reports telephone survey of voters in the Garden State finds that 45% oppose repeal of the health care plan, with 38% who strongly oppose it.
- Federal Emergency Management Agency Faces Own Fiscal Emergency. Money’s so short at the Federal Emergency Management Agency these days that it may soon declare an emergency of its own — to raise cash for the next disaster facing the United States. That’s the upshot of a letter to Congress from FEMA Director W. Craig Fugate, who warns that relief funds are running dry and FEMA is poised to invoke an emergency exception to get around budget statutes and provide limited aid in the event of a new disaster. The crisis, building for months, is an apt metaphor for many of the ills that beset this Congress. Much as President Barack Obama sees himself as a champion of big ideas, his administration keeps tripping over smaller, practical steps in everyday governance.
- Net Neutrality: The Nuclear Option.
- Dems, Not GOP, Have Taken Side of Wall Street. It's not hard to predict how the coming fight over financial regulation legislation will be framed by most of the mainstream media. Democrats like Christopher Dodd, the sponsor of the pending Senate bill, will be portrayed as cracking down on greedy Wall Street operators. Republicans will be portrayed as letting Wall Street operators have their way. That might be a fair characterization if Republicans concentrate their fire on the consumer protection agency the bill would establish in the Federal Reserve. But that's a peripheral issue, and Republicans would be well advised to leave the opposition to CEOs like JPMorgan Chase's(JPM) Jamie Dimon, a Democratic contributor, who argues persuasively that regulators should just do a better job of enforcing already existing rules. The real heart of the Dodd bill is the provision creating a $50 billion fund collected from large financial firms and authorizing the FDIC to use the funds to reorganize any such firm it decides is failing. Under the bill, the FDIC would use this "resolution authority" rather than have the firm go into bankruptcy courts, as Lehman Brothers did after it collapsed in September 2008. This sounds reassuring. But actually it's very dangerous. It amounts to granting "too big to fail" status to financial firms like Goldman Sachs(GS) and JPMorgan Chase(JPM). As my American Enterprise Institute colleague Peter Wallison and University of Pennsylvania law professor David Skeel explain in The Wall Street Journal, it tells those firms' creditors and shareholders that Uncle Sam will bail them out if they make what turn out to be imprudent loans. The Dodd bill specifically authorizes the agency to treat "creditors similarly situated" differently -- i.e., it can pay off creditors who would get little or nothing in bankruptcy proceedings. Granting large firms "too big to fail" status is dangerous on two counts. It can be hugely expensive to taxpayers. The bailouts of Fannie Mae and Freddie Mac have cost more than $120 billion so far. In addition, "too big to fail" status means that, as Wallison and Skeel write, "large financial firms will be seen as protected by the government and, with lower funding costs, will squeeze out their Main Street competitors." Little wonder that Goldman Sachs likes the idea. It will be able to borrow at lower cost than small competitors and will be assured that its large counterparties will qualify for government bailouts. Big firms tend to favor regulation because it insulates them from competition and protects them against loss. Republicans owe no political debt to the big Wall Street firms. In the 2008 campaign cycle, according to the Center for Responsive Politics' opensecrets.org website, Goldman Sachs personnel contributed $4.5 million to Democrats and just $1.5 million to Republicans. Add in three other big Wall Street firms -- Morgan Stanley, JPMorgan Chase and Citigroup -- and the total take was $12.7 million to Democrats and $6.7 million to Republicans. The image of Wall Streeters as solid Republicans is as dead as J. P. Morgan himself. The big media tend to portray Republicans as opposed to all financial regulation. But every intelligent person knows that some form of financial regulation is necessary. And the 2008 financial collapse shows we need smarter regulation that will discourage, not encourage, government bailouts of Wall Street.
- Morgan Stanley(MS) to Handle Greece Dollar Bond Sale: Source. Morgan Stanley will serve as lead underwriter for Greece's U.S. dollar bond sale, which is going ahead as planned starting with a roadshow after April 20, a source close to the deal said on Thursday.
- UAL(UAUA), Continental(CAL) in Merger Talks - Source. UAL Corp, parent of United Airlines, has entered merger talks with Continental Airlines, a source familiar with the talks said on Thursday.
- Ford(F) Overtakes VW as Top-Selling Marque in Europe. Ford Motor said on Thursday that it had unseated Volkswagen as Europe’s best-selling car brand in March, as it reported its biggest monthly market share in more than 11 years. The US carmaker, which is reporting rising sales worldwide thanks to popular models like its small Fiesta, used the buoyant data release to argue against government bailouts for its weaker competitors, including General Motors Europe’s Opel/ Vauxhall business. The US carmaker said it sold 192,500 cars in Europe cars last month and reported market share of 10.4 per cent, its best since August 1998. It said that its strong performance last month owed largely to its “exceptionally strong” performance in the UK, its biggest market, where March is traditionally one of the strongest month for car sales because of a licence changeover. In the year to date, Ford said that it was Europe’s second best-selling carmaker, behind VW but ahead of France’s PSA Peugeot Citroën. Ford has not been Europe’s top-selling carmaker on a monthly basis since September 2008. In the US, Ford’s market share grew by 2.7 percentage points from January to March, the biggest three-month increase since 1977. It now stands at 17.4 per cent, behind GM’s 18.7 per cent. Trade-in values for Ford models have risen this year for the first time in more than a decade. In the US, Ford was helped by Toyota’s much-publicised quality woes. Its image has also been enhanced by being the only Detroit carmaker not to accept a government bailout.
- Greek government reforms to the country's pension system will lead to a cut of as much as 30% in benefits. A new method to calculate pensions will reduce the pensions received by between 20% and 30% from 2018.