Today's Headlines

Bloomberg:

• Fed to Buy Extra $600 Billion of Treasuries to Boost Growth. The Federal Reserve will buy an additional $600 billion of Treasuries through June, expanding record stimulus and risking its credibility in a bid to reduce unemployment and avert deflation. Policy makers, who said new purchases will be about $75 billion a month, “will adjust the program as needed to best foster maximum employment and price stability,” the Fed’s Open Market Committee said in a statement in Washington. The central bank kept its pledge to keep interest rates low for an “extended period.” He’s risking a strategy that may either fail or fuel inflation and asset bubbles, said Scott Pardee, a former New York Fed official who now teaches at Middlebury College in Vermont. “Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the committee judges to be consistent, over the longer run, with its dual mandate,” the FOMC said. “Progress toward its objectives has been disappointingly slow.” The dollar weakened and stocks fluctuated in the minutes after the announcement. Treasury notes were lower. Including Treasury purchases from reinvesting proceeds of mortgage payments, the Fed will buy a total of $850 billion to $900 billion of securities through June, or about $110 billion per month, the New York Fed said in accompanying statement. The panel kept its benchmark interest rate at zero to 0.25 percent, where it has been since December 2008. The one of the five who has a vote this year, Kansas City Fed President Thomas Hoenig, today cast his seventh straight dissent, the most at consecutive regular policy sessions since 1955. “The risks of additional securities purchases outweighed the benefits,” and the “continued high level of monetary accommodation” may eventually “destabilize the economy,” the statement said of Hoenig’s opposition.
• Washington State Rejects Income Tax on Wealthiest Residents. Washington state voters rejected a ballot measure to impose an income tax on the wealthiest residents that pitted Bill Gates Sr. against Microsoft Corp., the company co-founded by his son. The income-tax measure, Initiative 1098, failed 65 percent to 35 percent, with 59 percent of precincts counted, according to the Associated Press.
• California Voters Reject Legalization of Marijuana for Recreational Use. California voters rejected a ballot measure that would have legalized marijuana for recreational use, blocking efforts to expand the industry beyond medical purposes in the most populous U.S. state. Proposition 19 was failing 54 percent to 46 percent, with 78 percent of precincts counted, according to the Associated Press. Supporters included billionaire investor George Soros, who contributed $1 million to support the effort.
• Billionaire Ken Fisher Sees 16% S&P 500 Rally After Elections. The Standard & Poor’s 500 Index may rally as much as 16 percent in the next six months because yesterday’s election will stymie legislative initiatives in Congress, billionaire investor Kenneth Fisher said. Equities have surged since July as odds that Republicans would take control of the U.S. House of Representatives increased. Fisher’s optimism is based in part on history. Stocks average gains of 11 percent in the third year of U.S. presidencies and haven’t fallen since 1939 when the Dow Jones Industrial Average lost 2.9 percent, according to data since 1833 compiled by the Stock Trader’s Almanac. The fourth year, when elections are held in November, is second-best, with an average advance of 5.8 percent.
• ADP Estimates U.S. Companies Added 43,000 Workers to Payrolls. Companies in the U.S. boosted payrolls by more than forecast in October, data from a private report showed today. Employment increased by 43,000 after a revised 2,000 drop in September, according to figures from ADP Employer Services. The median estimate of 38 economists surveyed by Bloomberg News called for a 20,000 gain. Forecasts ranged from a decline of 10,000 to a 50,000 increase.
• U.S. Service Economy Expanded More Than Forecast in October. Services in the U.S. expanded in October at the fastest pace in three months, indicating the recovery is gaining strength even as central bankers are poised to loosen monetary policy. The Institute for Supply Management’s index of non- manufacturing businesses, which covers about 90 percent of the economy, rose to 54.3 from 53.2 in September. The Commerce Department said factory orders in September rose 2.1 percent. The figures also signaled spending on equipment and software, which helped the U.S. rebound from recession, may cool less than previously estimated. The ISM non-manufacturing employment gauge rose to 50.9 in October, matching the July level that was the highest since the recession started in December 2007. The measure of new orders increased to a three-month high.
• Ireland Debt Swaps at Record High as Allied Signals 63% Chance of Default. The cost of insuring Irish sovereign debt surged to a record as credit-default swaps on Allied Irish Banks Plc subordinated debt signaled a 62 percent probability of default within five years. Contracts insuring 10 million euros ($14 million) of Allied Irish’s junior bonds cost about 3.25 million euros upfront and 500,000 euros annually, according to data provider CMA. That’s up from 400,000 euros a year in April. Swaps on the government’s debt jumped 27 basis points to 545. Swaps on Allied Irish’s senior debt increased 25.5 basis points to a record 706, CMA prices show. Ireland problems weighed on Europe’s indebted peripheral nations, with swaps on Portugal climbing 9.5 basis points to 418 and Spain up 3.5 at 228.5. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 3 to a five-week high of 161. The cost of insuring corporate bonds was little changed, with the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increasing 3 basis points to 451, according to JPMorgan Chase & Co. The Markit iTraxx Europe index of 125 investment-grade companies was unchanged at 96.75 and the Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers rose 3.5 to 128.5.
• World Bank Says China Needs to Raise Rates Further. The World Bank said China should raise interest rates and allow a stronger yuan to damp inflation, along with guarding against a surfeit of capital inflows. “Further normalization of the macroeconomic stance is needed to guard against macro risks,” the World Bank said in a periodic report on the Chinese economy released today, citing asset-price gains, bad loans and “strained” local-government finances. “Interest rates will need to rise further.”
• Fed Easing May Spur Deflation in Europe, Mundell Says. Federal Reserve debt purchases to stimulate the U.S. economy may send the euro rising against the dollar, sparking deflation in Europe, said Nobel Prize-winning economist Robert Mundell.

Wall Street Journal:

• Doubts Cloud Gold's Bright Future.Demand Has Overwhelmed Fundamentals; Supplies Up, Jewelry Sales Down. The outlook for gold prices is tarnished by the erosion of several longstanding factors that have proven supportive for the yellow metal in the past.

Business Insider:

• The Federal Reserve Just Slammed Savers and Gave a Huge Gift to the Banks.
• GOP Leader: Here's How We're Going to Save the Economy.
  

New York Times:

• Solar-Panel Maker to Close a Factory and Delay Expansion. Solyndra, a Silicon Valley solar-panel maker that won half a billion dollars in federal aid to build a state-of-the-art robotic factory, plans to announce on Wednesday that it will shut down an older plant and lay off workers. The cost-cutting move, which will reduce the company’s previously announced production capacity, is a sign of the notable shift in the prospects for cutting-edge American solar companies, which now face intense price competition from Chinese manufacturers that use more established photovoltaic technologies.

LA Times:

• San Francisco Bans Happy Meals. The city's board of supervisors votes to forbid restaurants from giving away toys with meals that have high levels of calories, sugar and fat.

InvestorsOffshore:

• Fund Managers Downbeat On US Equities. Hedge fund managers remain downbeat on US equities according to the TrimTabs/BarclayHedge Survey of Hedge Fund Managers for October. About 39% of the 102 hedge fund managers the firms surveyed in the past two weeks are bearish on the S&P 500, up from 37% in September. “The lean toward bearishness surprises us a bit because extreme caution in September produced substantial underperformance,” said Sol Waksman, CEO of BarclayHedge. “We suspect managers will invest much more aggressively in the current quarter. Stock prices keep grinding higher, and hedge funds hauled in USD18.8bn in the past three months. Managers have to put that fresh cash to work.” About 32% of managers cite currency wars as the biggest threat to global financial stability, and 36% feel world leaders should focus on the problem of too-big-to-fail institutions at the November 11-12 G-20 Summit in Seoul. About 28% of hedge fund managers are bearish on the 10-year US Treasury note, the largest share since the inception of the survey in May. In contrast, 32% of managers are bullish on the US dollar index, the largest share since June. Only 9% of managers aim to decrease leverage in the coming weeks, while 19% plan to increase it.

National Real Estate Investor:

• Quantitative Easing: Are the Consequences Worth the Benefits? The next round in the Federal Reserve Bank’s risky plan to stimulate growth by suppressing long-term interest rates — Quantitative Easing 2 — will strengthen the bottom line for many commercial real estate investors, experts say. But inflationary side effects may do more harm than good to the U.S. economy, and the plan is unlikely to generate the job growth landlords need to drive absorption. “We’re trying to cure the problem with the hair of the dog that bit us,” observes Robert Bach, chief economist at real estate services provider Grubb & Ellis. In this case, the dog in question was excess money and credit, which fueled overspending by consumers and investors alike. As the Fed buys Treasury bonds with newly printed money in the coming months, it will add hundreds of billions in additional dollars to the monetary system. “The Fed is trying to flood the economy with even more liquidity,” says Bach. “The fear is that all of this money sloshing around the financial system has nowhere to go, no way to express itself, except in terms of higher inflation.”
  

Politico:

• Oklahoma Bans Sharia Law. Oklahoma on Tuesday approved a ballot measure blocking judges from considering Islamic or international law when making a ruling. Nearly 70 percent of voters in the state cast ballots approving the measure.
• White House Aide: President Obama Will Heed Election Message. A top aide to President Barack Obama said not to look for a change in his “fundamental principles, but certainly there were messages that have to be heeded, and we will.” “If you believe in democracy, we were swept in by a big wave, so you have to pay attention to these results and what people are saying,” the aide said. “They want us to work together, to focus on the economy – for jobs and growth — and we’re going to do that.” The tone was more humble than is customary for this White House, and the aide promised a period of introspection. The aide also mentioned deficits as an area that the parties can do a better job of working together. “There are lessons for us, and there are lessons for [Republicans], as well,” the aide said. “This wasn’t a vote for more partisanship, for more ideology. … This wasn't a vote to refight the old battles, or re-empower the special interests. This was a vote for cooperation and pragmatism.” “And [voters] want responsible, open, accountable government, including real steps to discipline the budget deficits,” the aide added. “We ran to bring that to Washington and they're telling us we have to do better."
• Inside White House, Calls for Shake-Up. Some of the calls for a White House shake-up are now coming from inside the building. Frustrated current and former West Wing staffers, speaking on condition of anonymity, told POLITICO they hoped Tuesday night’s humbling losses would persuade President Barack Obama to pursue a much more sweeping fix than just the “natural” post-election churn of personnel his administration has insisted will take place.
• Barack Obama Vows to Work With GOP After 'Shellacking'.
  

USA Today:

• Airlines May Test Do-It-Yourself Traveler Bad Tagging.

Reuters:

• Senator Reid Says Willing to "Tweak" Healthcare Law. Senate Majority Leader Harry Reid on Wednesday said he is willing to make changes to the landmark healthcare reform legislation passed earlier this year. "If there's some tweaking we need to do with the healthcare bill, I'm ready for some tweaking," Reid, a Democrat, said in an interview on CNN, after Republicans captured the U.S. House of Representatives in Tuesday's midterm elections.
• Ford(F) Shares Hit One-Year High on Strong October Sales. Ford Motor Co (F.N) shares hit their highest level in nearly six years on Wednesday, after the company reported stronger-than-expected October sales and showed evidence that it is seizing market share. So far this year, Ford is No. 2 in the U.S. market, overtaking Toyota Motor Corp (7203.T) and following General Motors Co GM.UL. Shares of Ford rose as high as $14.84 Wednesday. The last time shares traded at that level was December 2004. So far this year, Ford shares are up about 47 percent, while the S&P 500 .SPX is up 6.7 percent.
• U.S. Election Results Could Speed Foreclosure Deal. Half of the state attorneys general heading a nationwide probe into U.S. home foreclosures will not be in their jobs next year, a development lenders hope could help speed a resolution, industry lawyers said on Wednesday.
• Boehner Wants Bush Tax Cuts Extended For All.
• U.S. Republicans Promise to Roll Back Obama Agenda.
  

Financial Times:

• QE2 is Risky and Should be Limited by Martin Feldstein. The Federal Reserve’s proposed policy of quantitative easing is a dangerous gamble with only a small potential upside benefit and substantial risks of creating asset bubbles that could destabilise the global economy. Although the US economy is weak and the outlook uncertain, QE is not the right remedy. Under the label of QE, the Fed will buy long-term government bonds, perhaps one trillion dollars or more, adding an equal amount of cash to the economy and to banks’ excess reserves. Expectation of this has lowered long-term interest rates, depressed the dollar’s international value, bid up the price of commodities and farm land and raised share prices. Like all bubbles, these exaggerated increases can rapidly reverse when interest rates return to normal levels. The greatest danger will then be to leveraged investors, including individuals who bought these assets with borrowed money and banks that hold long-term securities. These risks should be clear after the recent crisis driven by the bursting of asset price bubbles. Although the specific asset prices that are now rising are different from last time, the possibility of damaging declines when bubbles burst is worryingly similar. The problem now extends to emerging markets, a group not directly affected in the last crisis. The lower US interest rates are causing a substantial capital flow to those economies, creating currency volatility. The economies hurt by the increasing value of their currencies are responding with measures to protect their exports and limit their imports, measures that could lead to trade conflict. Ahead, when the US economy does begin to grow, the increased cash on banks’ balance sheets will make the Fed’s exit strategy harder. It was previously “cautiously optimistic” it would be able to contain the inflationary pressures that could be unleashed by banks with a trillion dollars of excess reserves. This will be harder if the amount of excess reserves is doubled. This could lead to much higher interest rates to restrain demand or to an unwanted rise in inflation. Although its real focus is on reducing unemployment, much of the rhetoric of Ben Bernanke, the Fed chairman, is about preventing deflation because some members of the Fed’s open market committee think the Fed should focus exclusively on price stability. But there is no deflation. Core consumer prices are rising and inflation is expected to average 2 per cent over the next 10 years. The truth is there is little more that the Fed can do to raise economic activity. What is required is action by the president and Congress: to help homeowners with negative equity and businesses that cannot get credit, to remove the threat of higher tax rates, and reduce the out-year fiscal deficits. Any QE should be limited and temporary.

Vedomosti:

• PhosAgro Considers Rival Bid for Potash Corp. OAO PhosAgro, Russia's largest maker of phosphate fertilizers, is considering a bid for Potash Corp.(POT), citing a company document. PhosAgro Chairman Vladimir Litvinenko wrote to Russian Prime Minister Vladimir Putin on Oct. 20 asking for state credits to make the acquisition, the Moscow-based daily said, citing the letter. Putin forwarded the request to Deputy Prime Minister Igor Sechin, who contacted relevant ministries and state banks, said Vedomosti, without citing anyone. One possibility is a merger of PhosAgro and Potash Corp., it cited a person close to PhosAgro as saying. Canadian Industry Minister Tony Clement plans to announce his decision on whether to approve BHP Billiton Ltd.’s $40 billion bid for Potash Corp. today after markets close in New York, said an official familiar with the announcement.

Irish Examiner:

• Irish Finance Minister Brian Lenihan will disclose the scale of the government's 2011 budget deficit reduction plan tomorrow. The full budget will be unveiled on Dec. 7.

DigiTimes:

• LED TV Panel Demand to Increase Significantly in January-February 2011, Says Lextar President. Demand for LED-backlit LCD TV panels will increase significantly in January-February 2011 as TV vendors are planning to launch new models in March, according to David Su, president of Taiwan-based LED epitaxial wafer and chipmaker Lextar Electronics, a subsidiary of AU Optronics (AUO).

Haaretz.com:

• Outgoing Intel Chief: Iran Can Already Produce Nuclear Bomb. Iran is busy setting up two new nuclear installations, according to the head of Military Intelligence, Major General Amos Yadlin. Speaking before the Knesset Foreign Affairs and Defense Committee, Yadlin said that MI has indications that work has began on the installations, but did not comment on the sources. Yadlin also told the MKs that Iran has sufficient enriched uranium to manufacture a single nuclear device and may soon have enough for making another bomb.