Evening Headlines
Bloomberg:
- Stress Tests Pass Fed's Flim-Flam Standard: Jonathan Weil. The most important thing to understand about the Federal Reserve’s latest stress tests is what they were not intended to do. Their purpose wasn’t to test whether the nation’s biggest banks could survive a financial blowup like that of 2008 without government assistance. Rather, the Fed designed its tests to measure the effects a hypothetical crisis would have on banks’ regulatory capital. Capital is the financial cushion a company has available to absorb future losses. While the Fed would like for us to believe that regulatory capital is the same thing, it’s quite different. And too often it bears little resemblance to reality. That’s why the results of the Fed’s “comprehensive capital analysis” are more about public relations and manufacturing confidence than they are about disseminating reliable information on banks’ health. Citigroup Inc. (C) was deemed well capitalized under the government’s methodology when it got bailed out in 2008. So was CIT Group Inc. when it filed for bankruptcy in 2009. Just because some banks flunked doesn’t mean the test was credible. Quite the contrary, to buy into the Fed’s conclusions, you would have to accept the theory that market values for many types of financial instruments don’t matter in a crisis. This would be foolhardy.
- Securitization Risk Rising as Standards Ease, Moody's Says. The riskiness of new securities backed by assets from car loans to commercial mortgages is rising from the lows seen after Lehman Brothers Holdings Inc.’s 2008 collapse, according to Moody’s Investors Service. Easing underwriting standards and “untested” issuers and assets are contributing to the trend, along with structural features of transactions that can boost risk, the New York-based ratings firm said today in a report. Greater dangers are likely to follow, analysts Claire Robinson and Joseph Snailer wrote. Shoddy securitizations helped fuel a lending bubble last decade that sparked the worst U.S. housing slump and global financial crisis since the 1930s. Moody’s and competitor Standard & Poor’s drew criticism after awarding top grades to risky mortgage debt that later experienced record defaults, with the Financial Crisis Inquiry Commission created by lawmakers calling them “key enablers of the financial meltdown.”
- How Credit-Default Swaps Worked, and Can Still Improve.
- Unions Send Doctor Bills to Taxpayers: Steven Greenhut. The U.S. public pension mess, with its $2 trillion to $3 trillion in unfunded liabilities, is such a volcano of gloom that it takes a potentially bigger problem to turn our eyes away from it. Turn your attention instead to the size of the taxpayer- backed health-care obligations for public employees. “Frankly, if you want to look at a truly scary set of unfunded liabilities, health care for retirees is a better choice than pensions,” said California Treasurer Bill Lockyer in an October speech meant to play down the pension crisis. Not that Lockyer or his Democratic and union allies want to reduce any benefits that are at the heart of the problem. In their view, the real scourge is “pension envy” or perhaps “health-care envy” -- the failure of the private sector to keep up with government-benefit levels.
- Nomura Debt Rating Cut by Moody's to Lowest Investment Grade. Nomura Holdings Inc. (8604)’s debt rating was cut to the lowest investment grade by Moody’s Investors Service, which said global competition raises questions over the profitability of Japan’s biggest securities firm. The one-step reduction brings Nomura’s long-term debt rating to Baa3, one level above junk. Moody’s has a “stable” outlook on the rating, it said in a statement.
- China Corporate Espionage Boom Knocks Wind Out of U.S. Companies.
- NY Fed: ECB, BoJ Tap $1.708B From Dollar Swap Facility In 3/14 Week.
- CFTC Targets Rapid Trades. A top U.S. regulator said his agency plans to widen day-to-day monitoring of the commodities and futures markets, targeting the high-speed trading firms that are a growing force. Instead of just policing completed futures trades, the Commodity Futures Trading Commission will seek to watch the fleeting buy and sell orders that increasingly influence the market, CFTC Chairman Gary Gensler said in an interview.
- Cheap Natural Gas Unplugs U.S. Nuclear-Power Revival. The U.S. nuclear industry seemed to be staging a comeback several years ago, with 15 power companies proposing as many as 29 new reactors. Today, only two projects are moving off the drawing board. What killed the revival wasn't last year's nuclear accident in Japan, nor was it a soft economy that dented demand for electricity. Rather, a shale-gas boom flooded the U.S. market with cheap natural gas, offering utilities a cheaper, less risky alternative to nuclear technology.
- China Purge Sets Up Scramble at Top. The fall of a Communist Party leader who led a Maoist revival could inflame an increasingly public struggle for China's top leadership, as two opposing wings of the party elite angle for dominance. In an apparent victory for the party's liberal reformists, the removal of Bo Xilai as party chief of southwestern megacity Chongqing ended the political career of a man seen until recently as a front-runner for promotion to the party's very top.
- Goldman(GS) Heir Speaks: Greg Smith Was Right, They Ruined My Great-Grandfather's Company. Henry Goldman III, the great-grandson of Goldman Sachs founder Marcus Goldman, says he agreed with Greg Smith's New York Times op-ed criticizing the firm's predatory culture. "I thought it was spot on," Goldman told Business Insider in an exclusive interview.
- Young Americans Are Refusing To Fly The Coop.
- A Huge Oil Find Off The Coast Of Ireland Could Turn The Entire Country's Economy Around.
- Wall Street's Worst Nightmare: The 'Millionaire Madam' Is Getting Ready To Make A Deal.
- Terminated CBO Whistleblower Shares Her Full Story With Zero Hedge, Exposes Deep Conflicts At "Impartial" Budget Office.
- Summing Up All That Is Wrong With Greece.
- Iran Buys U.S. Wheat Again, Trade Set to Grow. Iran has purchased 60,000 metric tonnes of U.S. wheat, the U.S. government said on Thursday, raising the two-week tally to 180,000 tonnes, which industry sources said reopened grain trade ties between the two countries embroiled in a stand-off over Tehran's nuclear ambitions. Iran's purchases of U.S. wheat this year are its first in three years, and the sources said the OPEC member was close to completing purchases of another 220,000 tonnes to be shipped as early as April, and in talks with exporters to buy another undisclosed amount. The price tag for the 400,000 tonnes -- 180,000 confirmed and 220,000 yet to be formally declared -- could be around $160 million, export sources said. Trade sources said grain giants Cargill Inc. and Bunge Ltd were the likely suppliers to Iran, but the two companies declined to comment.
- China Halts 10 More Airbus Orders: Sources. China has suspended the purchase of 10 more Airbus jets, two people familiar with the matter said on Thursday, raising the stakes in a potentially damaging trade row over European Union airline emissions charges. The move to delay the purchase of extra A330 planes brings to $14 billion the value of European aircraft caught up in tensions over the EU's Emissions Trading Scheme, which has angered countries including China, India and the United States.It comes amid urgent efforts to find a solution to the row, which airlines fear could provoke an aviation trade war capable of causing travel disruption and hitting air traffic rights. The row is over a cap-and-trade scheme which could levy charges for carbon emissions for flights in and out of Europe. Foreign governments say the EU is exceeding its legal jurisdiction by charging for an entire flight, as opposed to just the part covering European airspace. The European Commission argues the scheme is needed to cut rising emissions and help the world fight climate change.
- Continental Resources(CLR) CEO Harold Hamm Takes On President Obama's Energy Policy. Responding to President Obama’s comments earlier in the day in which he called his critics part of “the Flat-Earth Society,” Hamm expressed surprise. “The technology that’s out there today, what we’re doing with horizontal drilling, unlocking a virtual renaissance of new development of oil and gas in this country, I can’t believe the president would say anything like that,” he said. “We’ve obviously brought drilling into another realm, whole new paradigm.” On “The Kudlow Report,” Hamm spoke about the potential held in the Bakken Shale in north-central North Dakota, which he estimated held 24 billion barrels of oil that “could not have been possible without horizontal drilling.” Hamm also criticized the idea of releasing supply from the Strategic Petroleum Reserve, something he said should be used for an emergency, not for political expediency. “That’s not what it’s for,” he said. “What we need to be doing is developing our own resources, becoming less dependent upon foreign oil. And certainly we have the ability to do that today.”
IBD:
- Scarce Oil? U.S. Has 60 Times More Than Obama Claims.
- Fossil(FOSL) to Boost Watch Business With Skagen Buyout.
NY Times:
- Bad Loans at State-Run Banks Add to India's Woes. When people talk about Europe’s “government debt problem” they mean something easy to describe: countries that borrowed more money than they can easily pay back. In India, it’s a bit more complicated.
- Glenn Beck Closes In On The $100 Million Mark. Leaving Fox News has turned out to be a pretty good business move for Glenn Beck. By the end of this year, 18 months after he got out of the 24-hour cable news business and struck out on his own as an internet broadcasting pioneer, Beck will have doubled the revenues of his company, Mercury Radio Arts, from $40 million to $80 million, according to The Wall Street Journal. The extra $40 million is the amount that Beck’s new internet channel, GBTV, is on pace to meet or exceed in 2012. Viewers pay a monthly subscription fee of up to $9.95 for access to programming that includes Beck’s two-hour daily broadcast, a children’s show and a reality show. More than 300,000 subscribers have already signed up, a number that, as WSJ notes, already exceeds the average audience of many cable channels, including CNBC and Fox Business Network.
- Inside The New iPad: Samsung, Broadcom, Elpida, Qualcomm, Toshiba. The gadget teardown artists at iFixit got their hands on the new iPad a day before the rest of the world, thanks to an airline ticket to Australia. What they found, after prying off the front panel and display with the help of a heat gun, guitar picks, and heavy duty suction cups: a device packed with parts from Samsung, Texas Instruments, Broadcom, Elpida, Fairchild, Qualcomm, Toshiba, Triquint, and Avago.
- Poetic Justice and Obama's $2 Trillion Health Care Law. When President Obama pitched his national health care legislation to a joint session of Congress in Sept. 2009, he declared that, "the plan I'm proposing will cost around $900 billion over 10 years." This week, a new report by the Congressional Budget Office exposed the dishonesty of this claim.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 26% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-one percent (41%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -15 (see trends).
- Arizona 2012: Obama Trails Romney, Ties Santorum. A new Rasmussen Reports telephone survey of Likely Arizona Voters shows the former Massachusetts governor with 51% support against Obama’s 40%.
- AK Steel(AKS) Sees 1Q Loss on Weak Shipments. AK Steel Holding Corp forecast a net loss for the first quarter, compared with analysts' expectations of a profit, as it sees shipments falling about 8 percent amid weak demand. The company, which produces steel for markets ranging from automotive to infrastructure and manufacturing to construction, expects a net loss of 11 cents to 15 cents per share. Analysts polled by Thomson Reuters I/B/E/S were expecting a profit of 3 cents per share.
- Facebook(FB) Summons Wall St for Pre-IPO Briefing. Facebook Inc is taking the next step on its IPO journey and has summoned research analysts from Wall Street banks to its Menlo Park headquarters early next week for a pre-roadshow briefing to discuss the finer points of its business and books.
- Some Chinese insurance companies have redeemed stock funds to control risk, citing a person with knowledge of the matter.
CSFB:
- Rated (SBAC) Outperform, target $67.
- Rated (AMT) Outperform, target $75.
- Asian equity indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 139.0 -5.5 basis points.
- Asia Pacific Sovereign CDS Index 119.0 +.25 basis point.
- FTSE-100 futures +.05%.
- S&P 500 futures -.04%.
- NASDAQ 100 futures -.04%.
Earnings of Note
Company/Estimate
- None of note
8:30 am EST
- The Consumer Price Index for February is estimated to rise +.4% versus a +.2% gain in January.
- The CPI Ex Food & Energy for February is estimated to rise +.2% versus a +.2% gain in January.
9:15 am EST
- Industrial Production for February is estimated to rise +.4% versus unch. in January.
- Capacity Utilization for February is estimated to rise to 78.8% versus 78.5% in January.
9:55 am EST
- Preliminary Univ. of Mich. Consumer Confidence for March is estimated to rise to 76.0 versus 75.3 in February.
Upcoming Splits
- (ALK) 2-for-1
Other Potential Market Movers
- None of note
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