North American Investment Grade CDS Index 85.18 +.04%
European Financial Sector CDS Index 152.60 bps -4.1%
Western Europe Sovereign Debt CDS Index 204.83 bps unch.
Emerging Market CDS Index 200.28 -1.07%
2-Year Swap Spread 20.0 +1 bp
TED Spread 18.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .12% +1 bp
Yield Curve 270.0 -1 bp
China Import Iron Ore Spot $170.10/Metric Tonne unch.
Citi US Economic Surprise Index +14.60 -.1 point
10-Year TIPS Spread 2.28% -1 bp
Overseas Futures:
Nikkei Futures: Indicating +2 open in Japan
DAX Futures: Indicating +13 open in Germany
Portfolio:
Slightly Higher: On gains in my Medical and Ag long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite recent stock gains, some weakness in European equities and China inflation worries. On the positive side, Gaming, Oil Service, Alt Energy, Ag, Telecom, Wireless, I-Banking, HMO, Homebuilding and Road & Rail shares are especially strong, rising more than .5%. Cyclicals are outperforming. Copper is jumping another +1.74% and the S&P GSCI Ag Spot Index is rising +2.28%. The 10-year yield is falling -7 bps to 3.29% despite recent positive economic data, the rise in commodities and "hot" prices paid readings. Put/call readings for the broad market are showing more bearishness today, which is a positive. The Shanghai Composite surged +1.76% last night, finishing at session highs, and is now back above its 200-day moving average. The Belgium sovereign cds is falling -3.17% to 217.93 bps and the UK sovereign cds is declining -5.57% to 72.41 bps, which are also positives. On the negative side, Education and Internet shares are under mild pressure, falling more than .5%. The Euro Financial Sector CDS Index remains near its highest level since mid-June and the Western Europe Sovereign CDS Index is right at a record high, despite the recent bounce in the euro currency. The broad market continues to trade in a healthy fashion as it grinds slowly higher and then consolidates. One of my longs, (AAPL), is resting after its recent run to record highs and +52.8% gain YTD. I still see further significant upside in the shares from current levels longer-term and expect the stock to strongly outperform the S&P 500 again next year. I expect US stocks to trade mixed-to-higher into the close from current levels on seasonal strength, short-covering, technical buying, lower long-term rates, less financial sector pessimism, more economic optimism, buyout speculation and investment manager performance angst.
Credit-Default Swaps Little Changed on Last Trading Day of 2010. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 0.1 basis point to a mid-price of 85.2 basis points as of 10:49 a.m. in New York, according to index administrator Markit Group Ltd. The index, which typically rises as investor confidence deteriorates and falls as it improves, has declined from 99.4 basis points on Nov. 30.
Corn, Soybean Prices Head for Best Second-Half Performance in 50 Years. Corn and soybeans rose, heading for their best second-half performances in at least five decades, as stockpiles tumbled and adverse weather threatened crops in South America. U.S. corn inventories before next year’s harvest will decline to the lowest since 1996 and global consumption will outpace supplies for a second year in the season ending Aug. 31, U.S. Department of Agriculture data show. “Damage is occurring daily and it is irreversible,” said Jim Gerlach, the president of A/C Trading Inc. in Fowler, Indiana. “These prices have not slowed demand.”
Copper Advances to Record on Speculation Supply Shortage Poised to Worsen. Copper futures rose to a record for the fourth time this week as speculation heightened that a supply deficit will widen as China, the world’s biggest consumer, leads a rebound in demand for industrial metals. The price reached an all-time high of $4.432 a pound as the global economy recovered from its deepest recession since World War II. Supplies of copper, used in wiring and pipes, will lag behind demand by 825,000 metric tons next year, almost double this year’s deficit of 449,000 tons, Barclays Capital says.
Cotton Futures Poised for Biggest Yearly Gain Since 1973 on China Demand. Cotton rose, heading for the biggest annual gain since 1973, as inventories plunged, adverse weather damaged global crops and demand surged in China, the world’s biggest user. Stockpiles monitored by ICE Futures U.S. tumbled 72 percent in 2010, the biggest annual decline since at least 2003, when the data begins.
CVS(CVS) to Buy Universal American Unit for $1.25 Billion. CVS Caremark Corp. agreed to buy the Medicare Part D unit of Universal American Financial Corp. for about $1.25 billion, more than doubling the size of its program after pharmacy-benefits management sales fell for two quarters.
Wall Street Journal:
Portugal Confident on Debt Program. Portugal has the means to resolve its financing problems through ambitious targets to cut public debt and to put public finances under control, the country's Minister of the Presidency Pedro Silva Pereira said Thursday. "We are confident in the capacity of the Portuguese economy to confront the current situation,"Mr. Pereira told reporters after a cabinet meeting, rejecting any notion that the country may be forced to seek European Union aid early next year, as many economists fear.
Debunking Krugman(Again): On The Shift From Net to Gross Income Tax Basis. It seems anywhere one looks there days, one reads a refutation of Paul Krugman's tortured "economist" logic. Lately, the NYTer has fallen into the crosshairs of many due to his contention that currently taxes, based on some chart which the Nobelist probably mislabeled again, are at 20th century lows. Of course, cherrypicking data that fits the theory is precisely what economists do. Which is why Krugman may be excused for missing out on a trend so subversive that we have seen it only mentioned by tax attorneys at Weil Gotshal: namely the gradual transition in the definition of taxable income from a "net" to a "gross" tax basis. As Weil's Kimberly Blanchard explains:
High IPO Fees Weigh on U.S. Firms, Study Finds. American companies could save more than $1 billion a year if banks charged the same fees for initial public offerings as banks do in Europe, according to a new study by three British academics.
E.P.A. Limit on Gases to Pose Risk to Obama and Congress. With the federal government set to regulate climate-altering gases from factories and power plants for the first time, the Obama administration and the new Congress are headed for a clash that carries substantial risks for both sides. “These are hand grenades, and the pins have been pulled,” said William K. Reilly, administrator of the environmental agency under the first President George Bush. He said that the agency was wedged between a hostile Congress and the mandates of the law, with little room to maneuver.
Washington Post:
Government by Regulation. Shhh. Obama knows he has only so many years to change the country. In his first two, he achieved much: the first stimulus, Obamacare and financial regulation. For the next two, however, the Republican House will prevent any repetition of that. Obama's agenda will therefore have to be advanced by the more subterranean means of rule-by-regulation. But this must simultaneously be mixed with ostentatious displays of legislative bipartisanship (e.g., the lame-duck tax-cut deal) in order to pull off the (apparent) centrist repositioning required for reelection. This, in turn, would grant Obama four more years when, freed from the need for pretense, he can reassert himself ideologically and complete the social-democratic transformation - begun Jan. 20, 2009; derailed Nov. 2, 2010 - that is the mission of his presidency.
Boy Genius Report:
Citibank(C): Apple's(AAPL) App Store Will Generate $2 Billion in 2011. And if research firm Gartner’s forecasts are accurate, that number could be low. Gartner believes the global app market in 2010 totaled $4 billion, and that revenues will climb to a staggering $27 billion over the next two years.
Climate PR Effort Heats Up. Hey America! Are you ready to get wonky on global warming? After a year that started with fallout from the “Climategate” e-mail release, saw the cap-and-trade bill die in Congress, and ended with a gang of Republican climate skeptics winning House and Senate seats, global warming experts are going back to basics.
Environmentalists, scientists and lawmakers have renewed public relations efforts to put global warming plainly before Americans' eyes. "Folks are enraged about this, rightly so, and are looking for ways to educate," said Peter Frumhoff, director of science and policy at the Union of Concerned Scientists.
Reuters:
Molycorp(MCP) In Talks With More JV Partners: CEO. The top executive of rare earth mining company Molycorp Inc (MCP.N) said on Thursday his company is in discussions with a number of potential joint venture partners and customers scrambling to find other suppliers of the critical minerals in the wake of China's supply cut. In an interview with Reuters, Molycorp Chief Executive Mark Smith said the company was "absolutely" in negotiations to reach deals similar to the ones it announced earlier this month with Hitachi Metals Ltd (5486.T) and Sumitomo Corp (8053.T).
Greece in Talks on Extending Debt Repayment. Greece is in talks with commercial banks on extending the repayment of its outstanding debt, in line with a similar plan to stretch out paying back its EU/IMF bailout, an Athens weekly reported on Friday.
Global Stock Fund Inflows Gain, Bonds Slow - EPFR. Money flows to global equity and other stock funds accelerated during the fourth quarter, signaling a possible twist in 2011 from the record investments made in bond portfolios over the last year, according to a report published by EPFR Global on Friday.
Hedge Funds Offered Weak Returns in 2010. Hedge funds often claim to offer strong returns that are not correlated with broader markets, but in 2010 many failed on both of those counts. That failure came in large part because hedge funds cannot make as many bets with borrowed money, analysts said. Hedge funds on average returned just 4.52 percent this year to December 28, according to Hedge Fund Research's HFRX index. That is short of the FTSE 100's .FTSE 10.5 percent jump or the Standard & Poor's 500 Index .SPX 12.7 percent rise.
Blockbuster Deal Coming to IMAX. The curtain on a mergers and acquisitions boom could go up early in 2011. Wall Street and IMAX could light the blue touch paper because red-hot rumours suggest that the giant screen movie operator is attracting the admiring glances of Sony Corporation. Whispers that the Japanese multinational conglomerate is prepared to pay north of $40 a share lifted IMAX stock $0.62 to $26.23 in early trade yesterday.
Kathimerini:
Greece plans to gradually reduce the size of the public sector by 30%, starting with the redeployment of tens of thousands of state employees, who will change roles and departments in the first six months of 2011. The transfers, part of an efficiency drive, will affect workers in state-owned enterprises as well as those employed directly by the state.
DigiTimes:
Solar Cell Spot Prices Continue Slide in December. Solar cell spot prices have slid to US$1.20-1.25/W in December 2010, down from a peak of US$1.40-1.43/W in November, according to industry sources. Prices continued to be dragged down by seasonality and new capacity at suppliers. The downward price trend will likely hurt revenues performance of solar cell companies in December, the sources claimed. Some unspecified solar cell makers have admitted that December revenues will not be able to remain at high levels, due to falling demand and prices. They expect to manage single-digit drops sequentially through effective quote reductions.
Corporate Bonds Signal Recovery as Junk Leads. Corporate bonds capped their best two-year global performance ever as signs of an accelerating U.S. recovery outweighed concern the European Union will fail to contain its fiscal crisis. Company debt returned 7.1 percent this year, following a record 16.3 percent in 2009, according to Bank of America Merrill Lynch index data. Bonds issued by the neediest borrowers led the rally, with junk-rated debt in the U.S. gaining 15 percent in 2010. “Corporate balance sheets are exceptionally strong,” said Mark Kiesel, the global head of corporate bond portfolio management at Newport Beach, California-based Pimco, manager of the world’s biggest bond fund. “That’s been the story of 2009 and 2010, the amazing deleveraging of corporate America and the free-cash-flow generation.” The extra-yield investors demand to own speculative-grade debt instead of Treasuries narrowed 107 basis points this year to 532 basis points, following a record 11.73 percentage points of tightening in 2009, Bank of America Merrill Lynch data show.
PIMCO to Pay $92 Million to Settle Futures Lawsuit. Pacific Investment Management Co., manager of the world’s biggest bond fund, agreed to pay $92 million to settle a private class action lawsuit that accused it of manipulating the price of Treasury futures contracts. Pimco, which manages about $1.2 trillion, was accused of cornering the market for contracts on the 10-year notes in May and June 2005 on the Chicago Board of Trade. The lawsuit, which sought as much as $600 million in damages, alleged that Pimco used its holdings to drive up the price for traders who had sold the securities short, betting they would fall.
New Drug Approvals Fall in 2010 as Safety Concerns Slow U.S. FDA Decisions. Twenty-one new drugs were approved in the U.S. this year, the fewest since 2007, as the Food and Drug Administration showed more willingness to delay or reject medicines with potential safety risks. The tally, compiled by Bloomberg from an FDA database, compares with 25 approvals last year and 24 in 2008, according to the FDA’s website. Nineteen new drugs were cleared in 2007, the fewest in 24 years.
China Ministries to Assess Foreign Property Investments, China Daily Says. China’s housing ministry will regularly assess foreign capital’s entry into the property market with the Ministry of Commerce and the nation’s currency regulator, the China Daily reported, citing unidentified industry people. China will enhance regulation of foreign institutions’ investment in the country’s property market and home purchases by non-Chinese citizens as part of its efforts to curb the inflow of hot money and tightening of the real estate sector, the China Daily reported, citing Jiang Weixin, minister of Housing and Urban-Rural Development.
China's Stocks Rise, Paring World's Worst Annual Loss in 2010. The Shanghai gauge’s advance for a third day narrowed its decline for the year to 15 percent, the worst performer among the 14 biggest world benchmark indexes, according to data compiled by Bloomberg. A measure tracking property developers, brokerages and banks in the CSI 300 Index fell 28 percent this year, the most among the 10 industry groups.
Bumpy Climb for Stocks in 2010. Investors Endured a Year of Wobbles and Worries, but Market Rewarded Them. Stocks turned in another solid year, the Dow Jones Industrial Average gaining nearly 11% and the Nasdaq doing better still.
Housing Pain Pits Neighbor Against Neighbor in Florida. Few things agitate Sid Schulman, who often shoots the breeze with other retirees and flirts with women friends at their condominium complex here. But it galls him when neighbors stop paying their mortgages and maintenance fees, and leave the cost of community upkeep to others.
Retailers Swipe at Credit-Card Plan. Fed Rule Would Restrict Credit Cards for Some Consumers; Women's Rights Issue. The Credit Card Act signed into law last year was supposed to stop financial institutions from sleazy antics. But instead, some retailers say, it may restrict stay-at-home moms. Dress Barn Inc., Home Depot Inc., Citigroup Inc. and other companies are urging the Federal Reserve to drop a proposed rule that would require credit-card issuers to consider only a borrower's "independent" income rather than household income. The new standard, which would apply to new credit-card accounts and requests to increase limits on existing accounts, could make it difficult for some customers to get credit on the spot, especially stay-at-home moms.
China Clamps Down on Internet-Phone Use: Report. Chinese regulators are clamping down on Internet telephony that isn't provided by one of the country's two state-owned telecommunications companies, a move that could make services like Skype SA unavailable in the world's most populous country, according to a report in The People's Daily on Thursday.
IBD:
Wave of Tablets Could Give Chipmaker ARM a Hand. At next week's Consumer Electronics Show, Microsoft (MSFT) is widely expected to announce its own tablet operating system to compete with Apple's (AAPL) iPad and other products that run on Google's (GOOG) Android operating system. Who might win in that fight? ARM Holdings (ARMH).
Google(GOOG): Your New Phone Carrier? Google has assembled all the pieces it needs to be a mobile provider like Verizon, AT&T (T, Fortune 500) or Sprint (S, Fortune 500).
USA Today:
Investors Are Beginning to Turn Away From Bonds, Embrace Stocks. It appears investors are beginning to get comfortable with risk again. Not only are they pulling money out of bond mutual funds at the fastest pace in two years, but they're slowly starting to embrace stocks again.
Skype Adds Video-Calling to iPhone App. Internet phone company Skype is bringing live video calls to iPhone and iPad screens in an aggressive bid to cash in on the popular devices and build momentum for its imminent public stock offering.
Medicare to Swell With Baby Boomer Onslaught. Baby Boomers are about to create a record population explosion in the nation's health care program for seniors. Starting on Saturday, Baby Boomers begin turning 65 and qualifying for Medicare — one every eight seconds. A record 2.8 million will qualify in 2011, rising to 4.2 million a year by 2030, projections show. In all, the government expects 76 million Boomers will age on to Medicare. Even factoring in deaths over that period, the program will grow from 47 million today to 80 million in 2030. At the same time, health care costs are projected to outpace inflation, and medical advances will extend lives, straining the program's finances. It's expected to cost $929 billion by 2020, an 80% increase over 10 years. The prospect of a growing senior population that's living longer and costing more is the biggest fiscal problem facing the government, budget and health experts say. It will put more pressure on President Obama and Congress to reduce Medicare benefits, increase co-payments or raise the qualifying age. "We're at the beginning of the age wave, which will bring a tsunami of spending associated with the Medicare program," says David Walker, a former U.S. comptroller general now heading the Comeback America Initiative, a fiscal watchdog group. "It serves to reinforce the need to reform existing entitlement programs and restructure existing health care promises in order to make them affordable and sustainable."
China Securities Journal:
China's first round of rare earth export quotas for next year were actually cut by about half from first round quotas for 2010, citing an official.
Evening Recommendations
None of note
Night Trading
Asian equity indices are -.50% to +.50% on average.
Asia Ex-Japan Investment Grade CDS Index 103.0 -1.0 basis point.
Asia Pacific Sovereign CDS Index 103.0 -.5 basis point.
The Bloomberg FCI Monthly could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 85.15 -.36%
European Financial Sector CDS Index 159.19 bps +4.16%
Western Europe Sovereign Debt CDS Index 204.83 bps +1.28%
Emerging Market CDS Index 200.21 -1.68%
2-Year Swap Spread 19.0 unch.
TED Spread 19.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .11% -1 bp
Yield Curve 271.0 +1 bp
China Import Iron Ore Spot $170.10/Metric Tonne -.06%
Citi US Economic Surprise Index +14.70 +8.4 points
10-Year TIPS Spread 2.29% +1 bp
Overseas Futures:
Nikkei Futures: Indicating -28 open in Japan
DAX Futures: Indicating +13 open in Germany
Portfolio:
Slightly Higher: On gains in my Tech, Retail and Ag long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades just slightly lower despite recent stock gains, rising euro sovereign debt angst, weakness in European equities and China inflation worries. On the positive side, Education, Hospital, Disk Drive, Steel, Ag and Coal shares are especially strong, rising more than 1.0%. Small-Caps are also outperforming. Oil is lower despite a year-end short-covering rally in the euro and better US economic data. Moreover, the 10-year yield is stable despite the better economic data. Copper is rising another +1.46%. The AAII % Bulls fell to 51.61 this week, while the % Bears rose to 20.05, which is also a positive. On the negative side, Tobacco shares are under mild pressure, falling more than .5%. The Greece sovereign cds is climbing +2.97% to 1,065.30 bps. The Euro Financial Sector CDS Index remains at the highest level since mid-June and the Western Europe Sovereign CDS Index is making another new record high, which is a big negative. The broad market continues to trade in a healthy fashion as it grinds slowly higher and then consolidates. I expect US stocks to trade mixed-to-higher into the close from current levels on seasonal strength, short-covering, technical buying, stable long-term rates, more economic optimism, buyout speculation and investment manager performance angst.
Business Activity in U.S. Grows at Fastest Pace in Two Decades. Businesses in the U.S. expanded in December at the fastest pace in two decades, adding to evidence the world’s largest economy is accelerating heading into 2011. The Institute for Supply Management-Chicago Inc. said today its business barometer rose to 68.6 this month, exceeding the most optimistic forecast of economists surveyed by Bloomberg News and the highest level since July 1988. “The economy is gathering momentum,” John Silvia, chief economist at Wells Fargo Securities Inc. in Charlotte, North Carolina, said in an interview on Bloomberg Television. “New orders will follow the better business confidence that is showing up. Once the American consumer starts kicking in, we will see stronger orders data.” The median forecast of 49 economists surveyed by Bloomberg News projected the gauge would fall to 61. The Chicago group’s production gauge rose to 74, the highest level since October 2004, from 71.3 in November. The gauge of new orders climbed to 73.6 from 67.2. The employment measure increased to 60.2, last exceeded in April 2005, from 56.3 the prior month.
Jobless Claims in U.S. Fall to Lowest Level Since July 2008. Initial U.S. jobless claims fell last week to the lowest level since July 2008, a sign that the labor market is improving heading into 2011. First-time filings for unemployment insurance decreased by 34,000 to 388,000 in the week ended Dec. 25, compared with the median forecast of 415,000 in a Bloomberg News survey, Labor Department figures showed today in Washington. There were no special factors behind the drop, an official at the agency said as the data were released. The four-week moving average, a less-volatile measure, dropped to 414,000 last week, the lowest since July 26, 2008, from 426,500, today’s data showed. The number of people continuing to receive jobless benefits rose by 57,000 in the week ended Dec. 18 to 4.13 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. The unemployment rate among people eligible for benefits rose to 3.3 percent in the week ended Dec. 18, from 3.2 percent in the prior week, today’s report showed. Thirty-three states and territories reported an increase in claims, while 20 reported a decline.
MBIA(MBI) Climbs Most in Two Months as It May Resume Coverage of Municipal Debt. Bond insurer MBIA Inc. gained the most in more than two months after a court development raised prospects it may resume guaranteeing city and state debt. The company has held off insuring municipal bonds because of a 2009 lawsuit by Bank of America Corp., JPMorgan Chase & Co., UBS AG and 15 of the world’s largest financial companies challenging MBIA’s decision to separate its municipal bond insurance business from its structured-finance guarantees. JPMorgan and Barclay’s are now withdrawing from the litigation. “There is going to be a market for public finance insurance and if the split is upheld, I think the market would invest in a pure municipal finance insurer,” Brian Charles, an analyst with R.W. Pressprich & Co. in New York, said in a telephone interview.
Crude Oil Falls the Most in Six Weeks as Supplies Drop Less Than Estimated. Futures retreated below $90 a barrel for the first time in more than a week after supplies decreased 1.26 million barrels to 339.4 million in the seven days ended Dec. 24, the Energy Department said today. Stockpiles of distillate fuel, a category that includes heating oil and diesel, unexpectedly increased. “Two out of the three headline numbers were bearish, and that’s what’s dominating the trade here,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. Crude oil for February delivery fell $2, or 2.2 percent, to $89.12 a barrel at 12:22 p.m. on the New York Mercantile Exchange.
China Officials Shared Concerns About Asset Bubbles With U.S. Chinese officials shared concerns about growing asset bubbles in their nation’s economy in meetings in January with the U.S., according to American diplomatic cables released by Wikileaks. “On an overheating economy, Vice Minister Liu He pointed to asset bubbles as a potential problem for China’s recovery,” said the unclassified cable dated Feb. 10 from the U.S. Embassy in Beijing and posted by Wikileaks on Dec. 26. Liu, a senior adviser who works with the Central Leading Group on Financial and Economic Affairs, “did not yet see the problem as serious” while also noting that people were withdrawing money from banks to invest in assets, the cable said.
U.S. Consumer Spending May Prompt Acceleration in Mergers. U.S. consumers put the brakes on dealmaking in 2010. They may be the accelerator next year. Chief executives maintained record levels of cash this year as the recession-weary consumer fueled doubts about an economic recovery. While mergers and acquisitions topped $2 trillion in 2010 -- the first increase in three years -- the amount failed to approach 2007’s $4 trillion peak in global takeovers. Shoppers may help bring 2011 closer to that total. Holiday sales jumped 5.5 percent in the U.S., the best performance in five years, on purchases of clothing and jewelry, according to MasterCard Advisors’ SpendingPulse. As spending rises, companies are more optimistic and willing to take on risk, according to Joseph Gromek, chief executive officer of New York-based Warnaco Group Inc., owner of the Calvin Klein and Speedo brands. “There will be a very aggressive approach,” Gromek said. “The companies that have strong balance sheets with lots of cash on hand will try to be as opportunistic as possible."
Rousseff Is No Lula as Brazil Stock Index Slumps in Runup to Inauguration. Brazil’s President-elect Dilma Rousseff, faced with the highest inflation in 23 months and a growing budget deficit, is failing to convince investors that she can match her mentor Luiz Inacio Lula da Silva’s record for spurring economic growth. The Bovespa index of most-traded stocks has fallen 2.4 percent since Rousseff was elected Brazil’s first female president Oct. 31 and yesterday, as traders stepped up bets the central bank will raise interest rates next year to keep consumer prices in check. The index gained 0.5 percent this year through yesterday, heading toward its worst-ever annual performance when measured against the MSCI Emerging Markets index, which has risen 15 percent.
Wall Street Journal:
Bank Failures at Highest Level Since 1992. More banks failed in 2010 than any year since the savings-and-loan crisis ended in 1992, but regulators said Wednesday that they believe failures have passed their peak.
Illinois Politicians Studying Derivatives On State's Debt. Illinois politicians are reviewing whether to follow in California's footsteps by forcing its bond underwriters to disclose what credit derivatives they have entered into on the state's debt. Staff members working for Illinois House of Representatives Speaker Michael Madigan reached out to California officials on Wednesday for information about how the Golden State has gone about improving disclosures relating to credit default swaps on its own state debt. Hedge funds are increasingly using municipal CDS to speculate on the likelihood of state defaults rather than as legitimate risk mitigation tools.
New York City sanitation bosses think they've got it so bad that theyintentionally delayed snow-removal, according to the NY Post. So how bad have they got it? City workers enjoyed steady employment through the recession, killer benefits and a generous pension package. Then there's the pay. 315 sanitation workers earned over $100,000 in 2009, according to SeeThroughNY. The top guy, John Doherty, earned $205,180. There are also perks that come with the job. While delaying clean-up for the city, sanitation workers promptly plowed the street in front of Doherty's Staten Island home, according to the Daily News.
Hedges Clipped. The normally boisterous and upbeat hedge fund crowd is limping into 2011 bearing the heavy weight of lackluster performance and an ominous insider-trading probe -- leading some industry watchers to wonder if the new year could be marred by another round of fund closures. In 2010, the number of hedge funds to close their doors permanently declined 32 percent to just 585 firms through the end of the third quarter, according to fund tracking outfit Hedge Fund Research. But fund watchers say the recent downturn in closures may just represent a lull in the storm. In terms of performance, the hedge fund industry -- which prides itself on being smarter than the Average Joe and charging clients 2 percent management fees and 20 percent on the profit -- struggled to eke out superior returns this year, leading the average hedge fund to close 2010 up a mere 7.5 percent, according to Hedge Fund Research. That's below returns for average stock market indexes like the S&P 500, which is up 13 percent this year.
New York Times:
New York Growing as a Base for Tech Companies. In the first three quarters of 2010 compared with a year earlier, the number of venture capital deals grew more than three times faster in the city than it did in Silicon Valley.
LA Times:
Amazon(AMZN) Patents System to Stop Bad Gifts. Amazon.com has been awarded a patent for an online system that would give users the ability to exchange unwanted gifts before receiving them. The technology could prevent the shipment of thousands of superfluous ties to fathers, ugly sweaters to grandchildren and various other lackluster presents that are currently being bought and shipped through the online retail giant.
Forbes:
Obama's New 'Unreasonable' Standard. Last week we saw a troubling new pattern: The Obama administration is embracing an “unreasonable” standard — pun not necessarily intended, but it fits — for deciding if it likes what private sector companies are doing. The unreasonable standard is being applied to both private sector health insurers and companies that provide Internet service. But expect the White House to impose the standard on a lot more industries as the Obama blob continues to absorb every aspect of the economy. What it means is that we are abandoning the rule of law for the rule by bureaucrats. Unelected officials have been given the power to fundamentally remake industries based on their political and value judgments.
The Detroit News:
Ford(F) Offers Smartphone Traffic App That Syncs With Sync. A new smartphone app is available for owners of 2010 and 2011 Ford Motor Co. vehicles equipped with the Sync system offering traffic and navigation information. Ford launched the free mobile app today that works with Apple and Android-based devices. Blackberry smartphones will be able to use the app in the near future, the automaker said.
Reuters:
U.S. Losing IPO Pole Position: Survey. The United States is losing its appeal as leading global center for stock market flotations, hit by restrictive regulations and competition from other financial centers, a survey of American lawyers showed on Thursday. Just over 70 percent of a 50-strong sample of transaction attorneys, whose firms advised on three-quarters of initial public offerings (IPO) listed on major U.S. exchanges this year, said the country is losing its attraction as IPO venue of choice. "The simple fact is that as the U.S. regulatory environment has become more restrictive, other global exchanges have become more sophisticated and liquid and therefore have gained market share," said Joshua Ford Bonnie, a partner at Simpson Thacher & Bartlett.
AP:
Ex-Car Czar Rattner Settles NY Probe for $10M. The investment banker who helped lead the Obama administration's auto industry overhaul has agreed to pay $10 million to settle influence-peddling allegations in New York. Former "car czar" Steven Rattner admitted no wrongdoing as part of the deal, which was announced by state Attorney General Andrew Cuomo on Thursday. Cuomo's office had filed civil lawsuits against Rattner in November, accusing him of paying kickbacks to help his company land $150 million in state pension fund investments. He denied the charges. The attorney general had initially sought $26 million in fines and penalties and a lifetime ban from the securities industry. The settlement announced Thursday only bars Rattner from doing business with any public pension fund in the state for five years.
MailOnline:
Kloppers Back on the Bid Trail. Speculation now suggests that BHP Billiton(BHP) is lining up a $90 a share cash offer for Anadarko Petroleum(APC), one of the world's largest independent oil and gas exploration companies, which also has coal and industrial mineral mines interests. Strongly supported of late, Anadarko's share price advanced $1.02 to $70.18 in active early trading on Wall Street yesterday.
Der Spiegel:
Chancellor Angela Merkel's government is drawing up a plan for a future euro-region bailout mechanism that includes mandatory "debt brakes" in countries seeking aid.
Imerisia:
Greece's Finance Ministry is considering a new state-backed guarantee package for the country's banks worth as much as $26.5 billion. The package is being examined to avoid any possibility of systemic risk and liquidity problems in the event rating services proceed with downgrading Greek sovereign and bank debt instruments. Any downgrade may lead to a higher so-called haircut for Greek government bonds that banks use as collateral for liquidity lines at the ECB.
Kathimerini:
Bad loans at Greek banks in 2011 are likely to exceed $41 Billion, or 12% of total loans, up from 10% this year, citing bank officials. The deterioration is probable because of falling household and business incomes, amid recession and rising unemployment. This year's bad loans ratio for households alone is likely to be about 20%, up from 16.7% at the end of June.
GE(GE) Leads $3.19 Trillion in Corporate Bond Sales. Corporate bond sales worldwide topped $3 trillion for a second straight year, led by the highest-ever issuance of junk-rated debt, as borrowers locked in the lowest yields on record.
MBIA(MBI) Shares Rise After JPMorgan(JPM), Barclays(BCS) Drop Suit Over Insurance Split. MBIA Inc. shares surged after JPMorgan Chase Bank NA and Barclay’s Bank Plc said they are withdrawing from a lawsuit over the company’s decision to split its insurance unit in two. The bond insurer’s stock rose 8.8 percent to $10.36, the most in the Russell 1000 Index today and its biggest gain since Oct. 14.
Rice Prices Soar Most Allowed by Chicago Exchange on Global Supply Concern. Rice futures rose the most allowed by the Chicago Board of Trade on expectations for lower production from Thailand, the world’s biggest exporter, because of flooding. Output from Thailand’s main harvest, which started in October, may drop 5.3 percent, the Office of Agricultural Economics said last week. As of Dec. 16, U.S. export sales in the marketing year that started Aug. 1 were 22 percent higher than a year earlier, government data show.
Fed's Dudley Scheduled Meetings With Wall Street, Global Chiefs. Federal Reserve Bank of New York President William Dudley scheduled meetings with top Goldman Sachs Group Inc. and Citigroup Inc. officials in his first days on the job, his daybook showed today. Dudley, a former partner and chief U.S. economist at Goldman, had an appointment to meet that bank’s chairman, Lloyd Blankfein, on Feb. 6, 2009, according to his schedule for 2009 and the first nine months of 2010.
Pimco Says U.S. Will Keep Reserve-Currency Status. The U.S. dollar will keep its reserve status in 2011 because China and Europe aren’t developed enough for their currencies to replace it, according to Pacific Investment Management Co., which runs the world’s biggest bond fund. “Rising powers such as China are not yet ready to absorb the $9 trillion in reserve assets the world holds, particularly because their bond markets are immature,” Anthony Crescenzi, a money manager at Pimco in Newport Beach, California, wrote in a report yesterday. “Europe, amid all of its financial woes, isn’t even close to ready to take the mantle.”
North Korea Boosts Special Forces, Deploys New Battle Tanks, Yonhap Says. North Korea bolstered the size of its special forces, deployed new battle tanks and increased its focus on unconventional warfare, Yonhap News reported, citing a white paper from the South Korean Defense Ministry. The number of lightly equipped special forces, trained to quickly infiltrate South Korea, increased by 20,000 to 200,000 over the past two years, according to the report, citing a biennial defense paper released in Seoul.
U.S. Files New Insider Charges, Says Hedge Funds Got Data. A former Primary Global Research LLCexpert-networking consultant was charged by U.S. prosecutors in Manhattan with selling inside information to portfolio managers at three unidentified hedge funds.
Wall Street Journal:
Banks Open Loan Spigot. Some big U.S. banks are starting to increase their lending to businesses as demand for loans rises and healthier banks seek to grab customers from weaker rivals. After declining steadily for most of the past two years, the amount of commercial and industrial loans held by commercial banks inched upward during the past two months, according to the Federal Reserve.
Obama Bypasses Senate to Fill Posts. President Barack Obama, sidestepping Congress, named the first U.S. ambassador to Syria in nearly six years and a deputy attorney general in recess appointments after the nominations ran into trouble among Republicans. Robert Ford will be sent to Damascus, restoring a top-level presence cut off in 2005 when then-President George W. Bush pulled the ambassador over the assassination of former Lebanese Prime Minister Rafik Hariri. Many Lebanese blamed Syria for ordering the murder, a charge Syria has denied.
China Considers Further Rare-Earth Quotas. China is considering issuing export quotas for rare-earth alloys in a bid to further regulate the exports of the minerals used in a variety of high-tech industries, a person close to the discussion of the plan said Tuesday.
U.S. Seeks Chief For Financial Consumer Agency. White House adviser Elizabeth Warren and a top lieutenant are quietly asking business and consumer groups for names of people who might run the new Consumer Financial Protection Bureau, people familiar with the matter said. The hunt suggests that Ms. Warren, a lightning rod for some bankers, might not be selected to lead the bureau, a centerpiece of the Dodd-Frank financial overhaul bill that passed this summer. Still, many liberal groups will push to get her in the post. President Barack Obama's choice could signal how he intends to deal with resurgent Republicans in Congress. The feelers to business groups serve as a reminder that any nominee would likely need support from at least seven Republicans in the Senate to win confirmation. Among the names being discussed are Iowa's attorney general, Tom Miller; New York state bank regulator Richard Neiman; and former Office of Thrift Supervision director Ellen Seidman.
Big Gas Find Sparks A Frenzy in Israel. Israel is at the center of a gas bonanza that has investors, international oil companies, Israeli politicians and even Hezbollah, Israel's sworn enemy, clamoring for a piece of the action.
House Appraisals Under Fire. Home appraisals, which were blamed for being too generous during the housing boom, are now being criticized by some homeowners for being too stingy, preventing them from refinancing or borrowing against their houses. The criticism is being leveled at computerized real-estate appraisals, which depend on models that use prices from home sales and other data to determine the value of a house. Because of the volatility in the housing market, they are underestimating prices, some homeowners, real-estate agents and fee appraisers say.
'Death Panels' Come Back to Life. The FDA's restrictions on the drug Avastin are the beginning of a long slide toward health-care rationing.
CNBC:
Bad Year for Buffett-Backed BYD. A missed sales target caps a tough year for shares of BYD, the Chinese electric car company backed by Warren Buffett's Berkshire Hathaway.
Companies Exempt From Derivatives Rules May Yet Get Hit. The new financial regulations coming out of Washington are packed with exemptions – perhaps none greater than the promise to excuse Shell Energy, United Airlines and thousands of other nonfinancial companies that use derivatives from complying with proposed rules for the shadowy $600 trillion market. But some corporations and even some lawmakers now say the so-called end-user exemption — the provision in the Dodd-Frank financial overhaul law protecting nonfinancial companies from new regulations — could be a fallacy. Although one section of the 2,300-page law exempted the companies from some new rules, another provision could expose them to tough new margin requirements. “The end-user exemption has never been the Holy Grail that other people have thought it was,” said Joel Telpner, a partner at the law firm Jones Day, which represents end users and banks that arrange derivative transactions.
John Hancock Tower Sells for $930 Million. The John Hancock Tower, a 62-story glass skyscraper in Boston’s Back Bay, was one of the first real estate trophies to run into trouble when the speculative property boom abruptly ended two years ago.
Online Holiday Shopping: $30.8 Billion Spent. Holiday shopping online was strong right through Christmas, with consumers spending a record $30.8 billion for the season, according to a research firm report issued Wednesday. Online sales for the 56 days ended Dec. 27 rose 13% from the same period in 2009, according to Reston, Va,-based comScore. There was a 17% year-over-year surge in the week that ended Dec. 26 -- the day after Christmas.
US Fears Faster Iran Nuclear Arms Progress. US officials are worried Iran could use new technology in coming months that would shorten the time needed to reach nuclear weapon status and reduce the scope for diplomacy. Washington is particularly concerned that Tehran might deploy a new generation of centrifuges to enrich uranium, a process that can yield nuclear fuel and weapons-grade material.
China Securities Journal:
China won't relax property tightening measures because it will take about two to three years for the government to balance home demand and supply, the Journal said in an editorial on the newspaper's front page.
Financial News:
Chinese academic Guo Tianyong said the country has room to raise interest rates once or twice in the first half of 2011. Guo is head of the China Banking Research Center at the Central University of Finance and Economics.
Evening Recommendations
None of note
Night Trading
Asian equity indices are -.50% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 104.0 unch.
Asia Pacific Sovereign CDS Index 103.5 +1.0 basis point.
Initial Jobless Claims for last week are estimated to fall to 415K versus 420K the prior week.
Continuing Claims are estimated to rise to 4084K versus 4064K prior.
9:45 am EST
Chicago Purchasing Manager for December is estimated to fall to 61.0 versus a reading of 62.5 in November.
10:00 am EST
Pending Home Sales for November are estimated to rise +.8% versus a +10.4% gain in October.
11:00 am EST
Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,850,000 barrels versus a -5,333,000 barrel decline the prior week. Gasoline supplies are expected to rise by +1,500,000 barrels versus a +2,400,000 barrel increase the prior week. Distillate inventories are estimated to fall by -625,000 barrels versus a -589,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.1% versus a -.3% decline the prior week.
Upcoming Splits
None of note
Other Potential Market Movers
The NAPM-Milwaukee report and weekly EIA natural gas inventory report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 85.46 -.26%
European Financial Sector CDS Index 161.18 bps +5.76%
Western Europe Sovereign Debt CDS Index 202.25 bps +4.93%
Emerging Market CDS Index 201.61 -2.06%
2-Year Swap Spread 19.0 unch.
TED Spread 18.0 +2 bps
Economic Gauges:
3-Month T-Bill Yield .12% -2 bps
Yield Curve 270.0 -3 bps
China Import Iron Ore Spot $170.20/Metric Tonne -.35%
Citi US Economic Surprise Index +6.30 -.2 point
10-Year TIPS Spread 2.28% -3 bps
Overseas Futures:
Nikkei Futures: Indicating +6 open in Japan
DAX Futures: Indicating +13 open in Germany
Portfolio:
Higher: On gains in my Biotech, Tech, Retail and Ag long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite recent stock gains, rising euro sovereign debt angst and China inflation worries. On the positive side, Airline, Education, Restaurant, Homebuilding, Computer Service, Disk Drive, Paper, Steel, Ag, Oil Service, Energy, Oil Tanker and Coal shares are especially strong, rising more than 1.0%. Cyclicals are also outperforming. Oil is slightly lower despite a year-end short-covering rally in the euro. The 10-year yield is plunging -15 bps to 3.33%. The Shanghai Composite reversed opening losses and finished at session highs overnight. On the negative side, I-Banking shares are under mild pressure, falling more than .5%. The Greece sovereign cds is climbing +3.02% to 1,067.37 bps, the China sovereign cds is rising +3.46% to 70.44 bps and the Italy sovereign cds is climbing +3.57% to 241.92 bps. The Euro Financial Sector CDS Index remains at the highest level since mid-June and the Western Europe Sovereign CDS Index is making a new record high, which is a big negative. Moreover, the Illinois municipal cds is jumping +6.04% to 350.0 bps, which is getting close to its late-June record of 370.0 bps. Gold is rising another +.37%. The broad market continues to grind higher in a healthy fashion despite high short/intermediate-term levels of investor complacency. I still believe the odds of a short-term gap higher in stocks are fairly high as shorts and underperforming longs capitulate. I expect US stocks to trade mixed-to-higher into the close from current levels on seasonal strength, short-covering, technical buying, buyout speculation and investment manager performance angst.
Credit-Default Swaps Index Little Changed From Near 8-Month Low. The cost to protect U.S. corporate bonds was little changed from near an eight-month low. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, fell 0.1 basis point to a mid- price of 85.6 basis points as of 11:17 a.m. in New York, according to index administrator Markit Group Ltd.
London Copper Stockpiles May Be 80% to 89% Held by One Company, LME Says. The potential share of London Metal Exchange copper stockpiles held by one unidentified company fell to 80 percent to 89 percent, from at least 90 percent. The holding covers inventory already owned and contracts expiring in the next two trading days, according to the Dec. 23 data, released today. One party actually owned 50 percent to 79 percent of the stockpiles, not counting open futures positions, as of Dec. 23, according to the exchange.
India's New Home Sales Drop Up to 25% on Higher Rates, Knight Frank Says. India’s new home sales fell as much as 25 percent after prices reached a record earlier this year and aren’t expected to recover in the next six months following six interest rate increases, Knight Frank LLP said. “The first half of next year will be damp for home sales and prices,” Mumbai-based Anand Narayanan, national director of residential agency at the Indian unit of real-estate brokerage Knight Frank, said in an interview yesterday. “We could see a 5 percent correction in prices through incentives given by builders to woo customers.”
Potash Corp.(POT) Shares Advance as Corn, Soybeans Seen Extending Price Gains. Potash Corp. of Saskatchewan Inc., the world’s largest producer of its namesake crop nutrient, rose the most in more than two months in New York amid speculation corn and soybean futures will extend price gains into next year. Potash Corp. climbed $7.41, or 5.1 percent, to $152.08 at 12:51 p.m. in New York Stock Exchange composite trading.
Blackstone(BX) Said Among Bidders Interested in Centro Properties. Blackstone Group LP, the world’s largest private-equity firm, has made a preliminary bid for assets of Australian shopping-mall owner Centro Properties Group, according to a person briefed on the offer.
Wall Street Journal:
Insurers Bid for State Medicaid Plans. Health insurers are preparing to capitalize on $40 billion of new opportunities to run privately managed Medicaid plans for the states, which would position insurers to benefit from the health overhaul's expansion of Medicaid in 2014. Medicaid, the state and federal program for the poor, has become a growth area for big insurers such as UnitedHealth Group Inc. and more specialized plans such as Molina Healthcare Inc. Texas and Georgia will solicit new contracts for their private Medicaid plans early next year, while California, Florida and others are likely to meaningfully expand their programs, companies and states have said.
Capitol Friends With Benefits. In 2010, short-sellers scored a knockdown against for-profit education stocks, but a well-financed lobbying campaign could spur Congress to punch back on the industry's behalf.
Oil Industry Cranks Up Spending. Big Jump in Capital-Expenditure Budgets for 2011 Signals Rising Demand, Rebound in Fuel Prices.
CNBC:
Treasurys Bounce Back as Traders Flock to 7-Year Sale. The bond market recovered Wednesday from the previous day's miserable auction, receiving strong demand for a $29 billion sale of seven-year notes in a sale that helped push Treasurys prices higher.
US Foreclosures Jump in 3Q: Regulators. U.S. home foreclosures jumped in the third quarter and banks' efforts to keep borrowers in their homes dropped as the housing market continues to struggle, U.S. bank regulators said on Wednesday.
OPEC Not Likely to Stand in the Way of $100 Oil. Oil has burst above top exporter Saudi Arabia's preferred $70-$80 range and yet OPEC is unlikely to stop the rally, helping to prepare the way for the market to bound above $100 a barrel.
Private-Equity Firm Mulls Hostile Takeover of BJ's(BJ). BJ's Wholesale Club still isn't safe from the clutches of private equity. Leonard Green & Partners -- a Los Angeles buyout firm that disclosed a 9.5 percent stake in the warehouse chain in July -- remains keen to acquire the retailer and may launch a hostile bid if an auction isn't initiated in the coming weeks, sources told The Post.
New York Times:
Suspicious Death Ignites Fury in China. The photograph is so graphic that it appears cartoonish at first glance. A man lies on a road with his eyes closed, blood streaming from his half-open mouth, his torso completely crushed under the large tire of a red truck. One arm reaches out from beneath the tire. His shoulder is a bloody pile of flesh. His head is no longer attached to the flattened spinal cord. The man in the photograph, Qian Yunhui, 53, has become the latest Internet sensation in China, as thousands of people viewing the image online since the weekend have accused government officials of gruesomely killing Mr. Qian to silence his six-year campaign to protect fellow villagers in a land dispute. Illegal land seizures by officials are common in China, but the horrific photographs of Mr. Qian’s death on Saturday have ignited widespread fury, forcing local officials to offer explanations in a news conference.
California Woman Charged in Insider Trading Inquiry. Federal authorities on Wednesday charged Winifred Jiau of Fremont, Calif., with conspiracy and securities fraud in the ever-widening insider trading investigation. Prosecutors say that Ms. Jiau provided two money managers at different hedge funds with nonpublic information about Marvell Technology Group and other companies.
Google(GOOG) and Yahoo(YHOO): Buy Both, Analyst Says. For Google, which yesterday closed a little under $600, he sets a $750 target. “Continued product improvements, accelerated shift of local advertising dollars online, and growth from emerging countries should drive double-digit search growth over the medium term,” he writes, adding that “mobile searches are quickly becoming material” – and incremental – to the top line. And he contends that “the risks from social networks and other emerging online businesses are overblown.”
Washington Post:
Stimulus On the Slow Track. When Democratic senators and representatives voted to approve the $787 billion stimulus package nearly two years ago, the ones who came from swing states and districts knew they were taking a political risk. What they didn't know was that the economic benefits of the stimulus would become so entangled in red tape that even today, much of that money remains unspent. A story that ran Sunday in the Los Angeles Times estimated that only a quarter of the $630 million in federal funds allotted to the city of Los Angeles had been spent. Los Angeles is in no way exceptional.
AppleInsider:
Apple's(AAPL) iTunes Rental Service Believed to be 10% the Size of Netflix(NFLX). Though it is half as old as Netflix, Apple's iTunes rental service is believed to be about one-tenth the size of the competing rental service, one analyst has projected. Analyst Brian Marshall with Gleacher & Company said Wednesday he believes Apple sells about 475,000 rentals daily through iTunes, compared to the 5.1 million daily rentals seen by Netflix. iTunes rentals began in 2005, while Netflix first launched in 1999. If Apple can grow its rental business at the same rate as Netflix, Marshall believes annual TV and movie rental revenue from iTunes could exceed $1 billion within 5 years. Assuming Apple keeps about 30 percent of that, it would be another $300 million per year for Apple's bottom line.
Promises and Riots by Thomas Sowell. Economists are the real "party of No." They keep saying that there is no such thing as a free lunch-- and politicians keep on getting elected by promising free lunches. Such promises may seem to be kept, for a while. There are ways the government can juggle money around to make everything look OK, but it is only a matter of time before that money runs out and the ultimate reality hits, that there is no free lunch. We are currently seeing what happens, in fierce riots raging in various countries in Europe, when the money runs out and the brutal truth is finally revealed, that there is no free lunch.
Supplies of grain are likely to be tight until well into 2011, according to Alberto Weisser, the chief executive officer of Bunge Ltd.(BG), a U.S. company that trades in agricultural products.
Chilly Tests Loom for Eurozone Bonds. Banks forecast eurozone nations could attempt to borrow up to €80bn in January. The European Union and the European financial stability facility, the eurozone’s bail-out fund, are likely to be in the market for up to €13bn to go towards the Irish bail-out.
Telegraph:
G20 and EU 'Posturing' Could Exacerbate Future Banking Crises. The efforts of the G20 and European Union to overhaul financial regulations have been lambasted for being "disingenuous political posturing" that are "increasing the likelihood of future meltdowns", an influential think-tank has warned. TheTaxPayers' Alliance has published a paperaccusing politicians and regulators of basing their response to the financial crisis on a "mistaken view of its causes" and "political considerations". The paper, which was co-written with the Lagatum Institute, an academic group that focuses on wealth, attacks the key aim of politicians including Prime Minister David Cameron and Chancellor George Osborne for internationally co-ordinated regulation. It warns that "global regulation causes global crises". The authors, Dalibor Rohac of the Legatum Institute and Matthew Sinclair of the Taxpayers' Alliance, said in the report: "Common capital adequacy rules, while increasing transparency, also encourage homogeneity in investment strategy and undertaking of risk, leading to a high concentration of risk. That means that global regulations can be dangerous because they increase the amplitude of global credit cycles." The paper adds: "The Basel regulations may still be procyclical, imposing more onerous requirements on institutions at times when the system is in trouble." The authors claim the new regulations, including the G20-sponsored Basel rules and the Capital Requirements Directive of the EU, have been based on too narrow a view that "greed and insufficient regulation" were the causes. They argue that "regulations and poor policy choices" were also to blame - and that the authorities are in danger of making similarly dangerous mistakes. The paper claims that parts of the G20 agenda are "completely irrelevant" to reducing risk in the system. It argues: "The idea that "tax havens" and banking secrecy are among the issues that contributed to the financial crisis is completely unfounded. If anything, tax competition could curb some of the excesses of the big, fiscally irresponsible, welfare states by making it difficult for governments to impose too onerous fiscal burdens on mobile tax bases."
Kathimerini:
Residential property prices in Greece are likely to fall 5-10% next year because of a squeeze on income, unemployment and a drop in bank lending, citing Babis Charalampopoulos, president of the Hellenic Institute of Valuation. Price declines may be higher in some areas, reaching 15% in northern regions including Thessaloniki, Greece's second-largest city.
Xinhua:
China needs to stabilize commodity prices, boost employment and maintain social stability, citing Chinese President Hu Jintao.
China will "resolutely" enhance property measures and curb excessive price gains in 2011, citing Housing Minister Jiang Weixin. The nation plans to increase its housing supply in 2011 and the government is preparing more macro control policies.
DigiTimes:
NAND Flash Contract Prices Flat in 2H December. Late December 2010 contract prices for most MLC NAND flash chips have remained flat with mainstream 16Gb and 32Gb parts quoted at US$3-3.50 and US$4-5, respectively, according to industry sources. The sources expect prices for the first quarter of 2011 to be buoyed by Toshiba's NAND supply cutback as well as demand coming from the tablet PC sector. A recent power outage in Yokkaichi, Japan hit Toshiba's shipments, with NAND flash chips estimated to fall by up to 20% in January and February. A reduction in global supply is anticipated simultaneously to prop up prices during the period, the sources said. Meanwhile, if consumption of NAND flash in tablet devices expands at a fast pace, chip prices will see more significant growth in the first quarter of 2011, the sources indicated.
21st Century Business Herald:
China won't loosen curbs on the property market in 2011 and will continue to crack down on speculative housing purchases, citing Jiang Weixin, minister of Housing and Urban-Rural Development.
