Friday, January 14, 2011

Today's Headlines

Posted by Gary .....at 3:11 PM

Bloomberg:
  • U.S. Economy: Retail Sales, Production Gains Point to Pickup in Growth. Retail sales and industrial production both rose in December, indicating that the U.S. economic recovery is picking up as the new year begins. Purchases climbed 0.6 percent, capping the biggest annual increase in more than a decade, Commerce Department figures showed today in Washington. Output at factories, mines and utilities increased 0.8 percent, the most in five months, according to data from the Federal Reserve. Americans this year are forecast to boost the spending that accounts for 70 percent of the economy as tax cuts put more money in their pockets, increasing demand for Ford Motor Co. cars and Apple Inc. iPads. At the same time, an unexpected drop in consumer confidence indicates that rising gasoline prices and unemployment stuck above 9 percent pose a risk for sales. “The expansion should no longer be described as fragile,” said Dean Maki, chief U.S. economist at Barclays Capital in New York, who today raised his forecast for fourth-quarter growth to 3.5 percent from 3 percent. The pickup in sales “is an important signal that consumers are more comfortable spending than they have been.” The Thomson Reuters/University of Michigan preliminary index of consumer sentiment for this month dropped to 72.7, the lowest since November, from 74.5 in December. Economists surveyed by Bloomberg News projected a gain to 75.5, according to the median forecast. Americans anticipated stagnant incomes this year along with rising inflation, a product of the highest gasoline prices at the pump since October 2008. The cost of living climbed 0.5 percent in December, led by higher fuel and food prices, figures from the Labor Department also showed today. Eight of 13 major retail categories showed increases last month, led by a 2.6 percent jump at non-store retailers, which include Internet vendors. The increase was the biggest in more than two years. Demand at auto dealers climbed 1.1 percent. The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, increased to 68.2, the highest since June 2010.
  • Lacker Says Economic Outlook Merits Re-Evaluation of Asset Buying by Fed. Federal Reserve Bank of Richmond President Jeffrey Lacker said the economy will probably grow this year between 3.5 percent and 4 percent, prompting a re- evaluation of the Fed’s plan to buy $600 billion in bonds. “While the outlook may not have improved enough yet to warrant adjusting our purchase plans in the near-term, I anticipate earnest re-evaluation as economic developments unfold in the months ahead,” Lacker said today in prepared remarks of a speech in Richmond, Virginia. “I believe we have emerged from that soft patch and have begun a phase of the recovery in which growth can be sustained at an above-trend rate,” Lacker said in a speech to members of the Richmond Chapter of the Risk Management Association. Lacker said he expects the economy to improve further because of a firming labor market and reduced household debt. “Given these stronger fundamentals, it’s not a stretch to project robust growth in consumer spending this year,” Lacker said. Economic forecasters have been raising economic forecasts in recent weeks to 4 percent growth for this year, Lacker said, and “if I had to write down a forecast today, it would be pretty close to that -- somewhere between 3.5 and 4 percent.”
  • Greece's Long-Term Debt Ratings Are Cut to Junk by Fitch; Outlook Negative. Greece lost its last investment grade rating as Fitch Ratings downgraded the country’s debt one notch to BB+, or junk. The cut was foreshadowed by a warning last month and puts the rating at the same level as at Moody’s Investors Service and Standard & Poor’s. The Fitch grade has a negative outlook, indicating that the credit evaluator is more likely to cut it than to raise it or keep it unchanged. The country’s "heavy public debt burden renders fiscal solvency highly vulnerable to adverse shocks," Fitch analysts led by London-based Chris Pryce said in a report today.
  • Commodity Options Traders Make Record Bearish Bets After U.S. ETF Advances. Commodity options traders have increased bearish bets to a record against an exchange-traded fund tracking energy and metals prices after a rally to a two- year high. The open interest for puts to sell the iShares S&P GSCI Commodity-Indexed Trust doubled this week to a record 18,797 outstanding contracts, lifting the ratio of puts per call to a three-year high of 3.28-to-1. “Investors see the potential for downside,” said Paul Justice, director of ETF research at Morningstar Inc. in Chicago. “You’re going to see less investor interest in commodities as the economy continues to recover and people feel more comfortable getting back into stocks.”
  • AIG(AIG) Repays Fed, Swaps Treasury Investment for Common Stock. American International Group Inc. repaid the last $21 billion it owed on a Federal Reserve credit line and swapped the Treasury Department’s preferred stake for common stock as the U.S. unwinds its investment in the company. Treasury now owns 1.66 billion shares of New York-based AIG, or about 92 percent of the company, and will sell the securities to repay an investment of about $49 billion through the end of last year, the regulator said in a statement today.
  • Gold Falls as Confidence in Europe Recovery Cuts Investor Demand for Haven. Gold fell to the lowest price in a week on speculation that European Union leaders will stabilize the region’s economy, eroding the appeal of the metal as a haven. The euro was headed for the biggest weekly gain against the dollar in almost two years. German Chancellor Angela Merkel said this week she would do “whatever is needed to support the euro.” European Central Bank President Jean-Claude Trichet said yesterday he may increase interest rates if needed to control inflation. “The marketplace believes the worst is over regarding the crisis of the euro zone,” said Daniel Briesemann, a Frankfurt- based analyst with Commerzbank AG. “Trichet regained some confidence in the ECB’s interest-rate policy, which led to a lower need to be trading gold as a safe haven.” Gold futures for February delivery fell $22.40, or 1.6 percent, to $1,364.60 an ounce at 10:24 a.m. on the Comex in New York.
  • Copper Futures Rise on Report of U.S. Industrial Production. Copper futures advanced for the third time in four days as expanding industrial output in the U.S. boosted prospects for metal demand.
  • India's Inflation Accelerates to 8.43%, Adding Pressure for Higher Rates. India’s inflation accelerated as food costs increased, adding pressure on the central bank to extend last year’s fastest round of monetary tightening in Asia. The benchmark wholesale-price index rose 8.43 percent in December from a year earlier after a 7.48 percent gain in November, according to a commerce ministry statement in New Delhi today.
  • JPMorgan(JPM) Net Rises 47% on Lower Credit Costs, Tops Estimates. JPMorgan Chase & Co., the second- biggest U.S. bank by assets, posted a record $4.83 billion profit, buoyed by $2 billion in reserves added back to earnings as credit quality and the U.S. economy improved. Fourth-quarter net income, which rose 47 percent, was $1.12 a share, compared with $3.28 billion, or 74 cents, in the same period of 2009, the New York-based company said today in a statement. The results compared with an average per-share estimate for adjusted earnings of $1 projected by 25 analysts surveyed by Bloomberg. The shares rose as much as 2.9 percent to a nine-month high.

Wall Street Journal:
  • Venture Industry Seeks More Flexibility In SEC Registration Rules. The National Venture Capital Association, which represents more than 400 venture firms, wants some wiggle room in complying with the venture capital exemption to registration requirements imposed on private equity and hedge funds by the Dodd-Frank overhaul of financial markets. In a comment letter submitted Thursday to the Securities and Exchange Commission, the NVCA asks that venture firms be allowed to use up to 15% of a fund’s committed capital to pursue activities outside the agency’s proposed definition of venture capital while still qualifying for the registration exemption.
  • Treasury Says It Cannot Sanction WikiLeaks or Julian Assange.
  • Non-Core Euro-Zone Default Insurance Costs Fall Further. The cost of insuring debt issued by non-core euro-zone sovereigns using credit default swaps fell in early trading Friday, as sentiment towards financially weaker countries continued to improve following successful bond auctions by Portugal, Spain, and Italy this week. Portugal's five-year CDS showed the biggest fall, dropping 15 basis points to 470/490 basis points, according to one trader. Portuguese sovereign CDS were trading around 550 basis points at the beginning of the week. Spain's five-year sovereign CDS were 9 basis points lower at 297/304, Italy was seven basis points lower at 205/215, Ireland dropped four basis points to 610/630, and Belgium fell four basis points to 203/213. The SovX Western Europe index, which lets investors buy or sell credit protection on 15 sovereigns, is indicated at 196 basis points, from 200 basis points at close and 222 basis points on Jan. 10.
  • Giffords Continues to Progress, but Breathing Tube Remains. Critically wounded U.S. Rep. Gabrielle Giffords is "continuing to make all the right moves in all the right directions" as she attempts to recover from last weekend's shooting, her doctor said Friday.
CNBC:
  • China Has $1.5 Trillion 'Hidden' Debt: Lawmaker. Billions of dollars of debt racked up by local Chinese governments during their investment sprees are likely to sour as the projects they finance near completion, Yin Zhongqing, a prominent Chinese lawmaker, said this week. In an interview with Reuters Insider, Yin said local governments had incurred at least 10 trillion yuan ($1.5 trillion) of "hidden" debt, which they have concealed by creating thousands of investment vehicles that serve as borrowers. Yin said it is not yet clear which loans will sour because they do not have to be repaid until the projects are completed. "The large amount of debt that local governments took on since the end of 2008 to battle the impact of the global financial crisis will become a heavy burden for our development going forward," said Yin, who is a member of the finance and economic affairs committee in China's parliament. He highlighted the high risk of default in the low-level county governments, which Yin said have little financial resources. "Seventy percent of the loans from these investment and financing platforms in 2009 and 2010 were generated at the county level, where governments don't have much assets, and some cannot even afford to pay their staff," he said. "Debts accumulated from these platforms, even with government financial guarantees, simply cannot be paid back. In other words, when they borrowed the money, local governments did not plan to pay it back." Local Chinese governments are barred by law from borrowing directly. To pay for their ambitious growth plans for cities, they set up investment vehicles that take out bank loans backed by assets - typically land - or implicit government guarantees. They do not show up in official central government debt accounts. But Yin said these debts will ultimately have to be written off by Chinese banks and Beijing. "In 2009 and 2010, we encouraged them (local governments) to increase debt and run deficits to stimulate investment. Local governments' debt problems will come to light in 2011," Yin said. Yin warned against complacency, however, and said China's debt ratio was much higher than what official data suggests.
  • US Debit Fee Caps May Hurt Poorest Customers: Dimon.
MarketWatch:
  • Intel's(INTC) Spending Plan Boosts Chip-Equipment Stocks. Novellus(NVLS), Applied Materials(AMAT) gain on chip giant's projection. Intel Corp.’s heftier-than-expected budget for building up its manufacturing muscle triggered a sharp rise in shares of chip-equipment makers on Friday. Intel (INTC) on Thursday announced that it expected capital spending for 2011 to total $9 billion, plus or minus $300 million, as it ramps up its manufacturing capabilities. That’s substantially higher than the roughly $5.2 billion the company spent last year. The announcement prompted a sharp jump in shares of major chip-equipment companies, led by Novellus Systems Inc. (NVLS), shares of which soared 10%, and Applied Materials Inc.(AMAT), which was up 5.4%. KLA-Tencor Corp. (KLAC) also gained 5.7%, while Lam Research Corp.(LRCX) added 3.1% and Form Factor (FORM) traded up more than 6%. “We have to admit we were blindsided by this large number, and expect equipment stocks to trade up,” Citigroup analyst Timothy Arcuri said in a note. Last month, Gartner reported that semiconductor-capital-equipment spending was on track to reach $38.4 billion in 2010, up 131% from the previous year. But Gartner also projected spending in 2011 to be “essentially flat,” totaling $38 billion, or down 1% from last year.
Business Insider:
Zero Hedge:
New York Times:
  • Among Hedge Funds, Worry Over New California Lobbyist Law. Starting this month, anyone who solicits money for private investment managers from the two largest public pension plans in California must register as a lobbyist and can no longer be paid incentive fees for successful commitments. The two pensions are the California Public Employees Retirement System, or Calpers, which manages more than $200 billion in retiree money, and the California State Teachers Retirement System, which manages more than $140 billion.
Institutional Investor:
  • OTC Risk Indicators Continue Easing. Growth in the notional amount of outstanding over-the-counter derivatives has been slowing, and the troublesome category of credit default swaps has been shrinking, for about the last three years, according to tracking surveys by the International Swaps and Derivatives Association. Now from derivatives infrastructure servicer TriOptima come further indications that notional exposures are coming down, reducing the aggregate risks in OTC markets that have been of particular concern to financial regulators around the world.
Washington Post:
  • GM(GM) and Chrysler, Owned by the Government, Lobby the Government. General Motors and Chrysler, the bailed-out automakers still partially owned by the government, have joined an industry coalition that this week lobbied against proposed federal rules on fuel efficiency. The attempt to push back against regulations pursued by environmental groups follows the automakers' efforts last year in which they opposed measures in an auto safety bill, which had been supported by the Obama administration. The notion of federally owned companies lobbying the government - at times on the opposite side of the architects of their bailout - has drawn repeated criticisms from environmental organizations, safety advocates and watchdog groups. They say the government should have used its influence to block the companies from interfering with legislation that could improve the public welfare, such as environmental controls and safety enhancements.
mocoNews.net:
  • MasterCard(MA) Hires Orange Exec to Run Its Mobile Business. With news that RIM(RIMM) might be joining the still-small ranks of handsets makers putting NFC chips into its devices, there is increasing belief that we could be reaching some kind of critical mass for mobile payments using contactless techology. Today MasterCard made a key hire from the mobile industry to ensure its role in it all. MasterCard has hired Mung-Ki Woo as its head of mobile, a newly-created role in the company. Woo is at France Telecom’s mobile operation Orange, where he has been the VP in charge of mobile payments technologies.
TechCrunch:
  • Amazon's(AMZN) Diapers.com and Soap.com Bring E-Commerce to Facebook Pages. E-commerce on Facebook has steadily been ramping up as both small retailers and big brands set up online store fronts on the social networks. With access to Facebook’s nearly 600 million members, it makes sense for retailers to bring e-commerce and the shopping experience to the social network. Today, Quidsi, which Amazon acquired for $540 million last Fall, is launching an shopping experience on Facebook for Soap.com and Diapers.com.

Electronista:
Charlotte Observer:
  • Wells Fargo(WFC) Settles Suit Over Pick-A-Payment Loans. 10 states reach agreements to modify mortgage loans; Carolinas not among them. Homeowners to get relief. Working to clean up problem mortgages inherited in its 2008 Wachovia purchase, Wells Fargo & Co. in recent weeks has reached a settlement in a class-action lawsuit and signed loan modification agreements with 10 states, with more likely to come. The architects of the agreements say they guarantee relief for consumers, including billions of dollars in potential principal reduction on risky mortgages sold by Wachovia and predecessor Golden West Financial. Wells, which didn't make the loans, pays more than $100 million to borrowers and states in return for more certainty about its legal costs.
Real Clear Markets:
  • Extreme Budget Illogic At the CBO. Hold onto your budget scorecards. With the House of Representatives likely to vote next week on H.R. 2, Repealing the Job-Killing Health Care Law Act, the Congressional Budget Office has announced that eliminating this 2010 Democratic entitlement program for 32 million uninsured people will cause the deficit to increase by $230 billion over the next decade. With such logic, we could cut the deficit by passing a new entitlement program. Indeed, we could solve the whole budget problem by passing new entitlement programs every day of the year.
Rasmussen Reports:
Politico:
USA Today:
  • Police Turn to Drones for Domestic Surveillance. Police agencies around the USA soon could have a new tool in their crime-fighting arsenal: unmanned aircraft inspired by the success of such drones on the battlefields of Iraq and Afghanistan. Local governments have been pressing the Federal Aviation Administration for wider use of unmanned aerial vehicles, or UAVs — a demand driven largely by returning veterans who observed the crafts' effectiveness in war, according to experts at New Mexico State University and Auburn University. Police could use the smaller planes to find lost children, hunt illegal marijuana crops and ease traffic jams in evacuations of cities before hurricanes or other natural disasters.
Reuters:
  • BP(BP) in Share Swap with Russia's Rosneft - Sky News. Oil major BP Plc, recovering from its Gulf of Mexico oil spill, is to announce an exchange of shares with Russian state-controlled oil company Rosneft on Friday, Sky television news said. BP invited reporters to a press conference, to be addressed by Chief Executive Bob Dudley and scheduled for 2100 GMT on Friday, at its headquarters in London a few hours before the event. Sky news said BP would announce the tie-up with Rosneft at the press conference.
  • U.S. to End "Virtual" Fence On Mexican Border. President Barack Obama's administration plans to pull the plug on the troubled "virtual fence" project that was meant to better guard stretches of the U.S. border with Mexico, a senior lawmaker said on Friday. The project, being run by Boeing Co, has cost about $1 billion so far and was meant to pull together video cameras, radar, sensors and other technologies to detect smugglers trying to cross the porous border. "The SBInet program has been a grave and expensive disappointment since its inception," Representative Bennie Thompson, the senior Democrat on the House of Representatives Homeland Security Committee, said in a statement which noted that the Department of Homeland Security was ending the project.
Resource Investor:
El Confidencial:
  • Spain's government may recapitalize savings banks with at least 30 billion euros, citing people familiar with the situation. In an "extreme" case the amount could rise to 80 billion euros.
Kronenzeitung:
  • European Central Bank Governing Council member Ewald Nowotny doesn't see a breakup of the euro area, citing an interview. "There is no breakup of the euro zone, but a difficult adjustment phase for some countries," Nowotny said.

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