Bloomberg:
- Basel Becomes Babel as Conflicting Rules Undermine Safety. The first Basel agreement on global banking regulation, adopted in 1988, was 30 pages long and relied on simple arithmetic. The latest update, known as Basel III, runs to 509 pages and includes 78 calculus equations. The complexity is emblematic of what happened over the past four years as governments that injected $600 billion to rescue failing banks.
- China Poised for 2013 Rebound as Debt Risks Rise for Xi. Incoming President Xi Jinping may find China’s investment-driven economic recovery in the Year of the Snake jeopardized by mounting risks in the finance industry. Gross domestic product is poised to expand 8.1 percent this year, up from 7.7 percent in 2012, according to the median estimate of economists surveyed last month by Bloomberg News. At the same time, an increase in lending fueled by trust companies and underground banks enhances the risk of loan defaults that would be “severely damaging” to the economy, Standard Chartered Plc says. The danger is that an economic rebound lulls policy makers into complacency, delaying market-driven changes needed to reduce dependence on investment for growth. “If China tries to sustain growth by adding debt and investing it inefficiently it will be like cotton candy: a short-term high with no lasting value,” said Loevinger, now an Asia analyst in Los Angeles at TCW Group Inc., which oversees about $135 billion. “The U.S. got into trouble because institutions like Fannie Mae (FNMA) and Freddie Mac were too big to fail and had a toxic mix of private shareholders and implicit government guarantees. China’s financial system is full of Freddies and Fannies.” Xi and his team are inheriting an economy more leveraged than the one President Hu Jintao took over in 2003. Government, corporate and consumer debt rose last year by 15 percentage points to an estimated 206 percent of GDP, Standard Chartered said in a November report. In March 2003 it stood at 150 percent. Borrowers are using some new loans to “plaster over non- performing credits” while so-called shadow banking is growing too fast, said economists led by Stephen Green. They estimated that a bad-loan ratio of 12 percent would erase the banking industry’s 7.5 trillion yuan ($1.2 trillion) in capital.
- Paulson Named in ACA’s Revised Goldman Sachs(GS) CDO Suit. Hedge fund Paulson & Co. was named as a defendant in a proposed revised lawsuit by ACA Financial Guaranty Corp. (MANF) against Goldman Sachs Group Inc. (GS) over a collateralized debt obligation called Abacus. Paulson and Goldman Sachs conspired to induce ACA to provide financial guaranty insurance for the Abacus deal, which was “doomed to fail,” the firm said in papers filed today in New York State Supreme Court in Manhattan. ACA, which sued Goldman Sachs in 2011, is seeking court permission to file a revised complaint adding Paulson as a defendant.
- Google(GOOG) Said Set to Resolve FTC Antitrust Probe Tomorrow. Google Inc. (GOOG) will resolve a 20-month antitrust probe by U.S. regulators tomorrow with a voluntary agreement and a consent decree on the company’s alleged misuse of patents, three people familiar with the matter said.
- Deductions Limits Will Affect Many. One of the biggest tax increases in the fiscal-cliff bill is also one of the least understood: a set of limits on tax deductions and other breaks that will hit far more households than the bill's rate increases for top earners. The bill that cleared Congress Tuesday boosts the tax rate for single filers making more than $400,000 and married couples filing jointly making more than $450,000, or roughly the top 1% of filers. But provisions that reduce the value of personal exemptions as well as most itemized deductions, including those for mortgage interest and state income-tax payments, will affect about twice as many people since they carry a lower income threshold—$250,000 for singles and $300,000 for married couples. Those new limits drew complaints from some groups that benefit from deductions, particularly charities that depend on tax-deductible donations. They worry that new curbs on deductions, coupled with other taxes on higher-income Americans, will put a damper on giving.
- Cliff Fix Hits Small Business. Many Small Entities or Firms May Face Higher Taxes This Year After the Deal. It's likely to be a year of painful decision-making for small-business owners like Tom Secor of Norwalk, Ohio, one of hundreds of thousands of Americans who could face a higher tax bill after Washington's last-minute deal to avoid the fiscal cliff.
- Electricity Use on Wane in the U.S. Americans are using more gadgets, televisions and air conditioners than ever before. But, oddly, their electricity use is barely growing, posing a daunting challenge for the nation's utilities. The Energy Information Administration is projecting that electricity use in the U.S. will rise an average of just 0.6% a year for industrial users and 0.7% for homes through 2040. That's a far cry from the middle decades of the past century, when utilities could rely on electricity-consumption growth rates of more than 8% a year.
- Risk Seen in Some Mortgage Bonds. After a surge in bonds backed by mortgages on commercial properties, some investors are finding cracks in the foundations. Investors piled into these bonds, which are made up of pools of loans linked to properties such as shopping malls and hotels, because of the relatively high yields they offered. But that demand has sent prices soaring, and yields tumbling to record lows. As well, some investors remain worried that defaults on these loans remain at historically high rates.
- Weak Demand Turns Tables on Potash Firms. The world's biggest potash producers bet for years on ever-growing demand for fertilizer. Now they find themselves at the mercy of small farmers like Virender Kumar Rai. On his patch of land in eastern India, Mr. Kumar Rai is switching from potash to cheaper crop nutrients, like urea, for his rice, wheat and vegetable crops. "Urea suits me fine now," he says.
- Islamist Split in Egypt Buoys Radical Wing. Ahead of Parliamentary Vote, Ultraconservative Faction Breaks Away From Popular Salafi Party to Push for Shariah Law. A radical faction within Egypt's most conservative Islamist party is breaking away, threatening to pull the nation's politics further rightward ahead of a vote to elect a new Parliament. The split is also fracturing the Islamist Nour Party, which has allied with President Mohammed Morsi's Muslim Brotherhood but is more religiously conservative. The next polls are critical because the new Parliament will draft laws fleshing out Egypt's new Islamist-tinged constitution.
- It Was a Blue Christmas for Retailers. We have all heard of Black Friday. Last week, though, retailers had an awfully dark Wednesday—and not because Dec. 26 is also one of the busiest shopping days of the year. A report from SpendingPulse, a service of MasterCard Advisors, said holiday spending in the two months up to Christmas rose by just 0.7% from a year earlier—a deep disappointment.
- Fred Barnes: The President Who Wants It All. The essence of bipartisan deals is win-win: Both sides are satisfied. Obama's approach is he alone wins.
- Pressure builds to nix gift of tanks, F-16s to Egypt. Later this month, the new government in Egypt is scheduled to begin taking delivery of 10 F-16 fighter jets and 200 Abrams tanks – courtesy of U.S. taxpayers. The $213 million deal is part of a foreign aid package signed when American ally Hosni Mubarak was president, but a growing chorus of critics say the Obama administration should pull the plug. They cite Egypt’s new Muslim Brotherhood government’s mixed signals to the U.S. and Israel, as well as America’s fiscal problems, as reasons for rescinding the deal.
- Fiscal deal includes estimated $12.1 billion in tax credits for wind energy industry. The fiscal deal cemented Tuesday night includes a one-year extension of tax credits for the wind-energy industry that will cost taxpayers an estimated $12.1 billion.
- More Steps Needed to Save US Credit Rating: Moody's. The United States must do more than the recently passed "fiscal cliff" measures if the country is to rescue its Aaa debt rating from its current negative outlook, rating agency Moody's Investors Service said on Wednesday.
- Despite Cliff Deal: 'Nothing Really Has Been Fixed'. An emergency deal reached after weeks of rancorous negotiations will keep the U.S. from driving off the "fiscal cliff," but higher taxes and continued political bickering in Washington threaten to shake the fragile economy well into 2013.
- Watch Out, Asia. Inflation Is Coming. Inflation in Asia may be under control now, but prices across the region could soon start to creep higher, with India and Southeast Asia the most vulnerable, warns independent economist Andy Xie.
- Why Did A Train Carrying Biofuel Cross The Border 24 Times And Never Unload? Wondering why rail traffic has been somewhat surprisingly consistent despite uncertainty? Concerned at government's tenticular reach into each and every aspect of our lives? This somewhat stunning anecdotal report from OilPrice.com might shed some light:
NY Times:
CNN:- Al Jazeera Acquires Al Gore's Current TV. Al Jazeera on Wednesday completed a deal to take over Current TV, the low-rated cable channel that was founded by Al Gore and his business partners seven years ago. Current will provide the pan-Arab news giant with something it has sought for years: a pathway into American living rooms. Current is available in about 60 million of the 100 million homes in the United States with cable or satellite service.
- Smaller paychecks coming - bosses say, don't blame us. Everyone's paycheck is about to take a hit, and it's not the boss' fault. But some business owners say it's a tough talk to have. The rate of workers' payroll taxes, which fund Social Security, has been 4.2% for the past two years. As of Jan. 1, it's back to 6.2%, on the first $113,700 in wages.
- Investor enthusiasm over fiscal cliff deal will be short-lived. It doesn't take a math genius to understand that this grand compromise to avoid the dreaded fiscal cliff is highly inadequate.
- Business groups: Cliff deal won't spur investment. Wall Street investors cheered the deal to avert the fiscal cliff — but some executives who invest in job-creating plants and equipment gave it a much cooler reception.
- After 'fiscal cliff,' US conservatives eye Republican primaries. The U.S. Congress prevented hefty tax hikes and spending cuts with a "fiscal cliff" deal this week, but grassroots conservatives are already seeking 2014 primary challengers for high-profile Republican lawmakers who backed the deal.
- CEOs pan fiscal cliff deal, vow to continue debt fight. U.S. executives largely panned the congressional deal to steer America away from the "fiscal cliff," saying Washington wasted an opportunity to address the nation's long-term debt, but said they would continue to agitate for a better budget plan.
- Fiscal cliff: US must do more, says IMF. The International Monetary Fund has said that US actions to avoid the fiscal cliff did not go far enough to address the country's long-term fiscal deficit and debt problems.
- None of note
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 100.5 -12.75 basis points.
- Asia Pacific Sovereign CDS Index 80.5 -5.25 basis points.
- FTSE-100 futures n/a.
- S&P 500 futures -.29%.
- NASDAQ 100 futures -.15%.
Earnings of Note
Company/Estimate
- (WOR)/.41
- (PRGS)/.34
- (FDO)/.75
- (SUN)/.71
8:15 am EST
- The ADP Employment Change for December is estimated to rise to 140K versus 118K in November.
- Initial Jobless are estimated to rise to 360K versus 350K the prior week.
- Continuing Claims are estimated to rise to 3210K versus 3206K prior.
- Fed minutes from 12/12 meeting.
- None of note
- The weekly MBA mortgage applications report, Challenger Job Cuts report for December, German Unemployment report, China HSBC Services PMI report, RBC Consumer Outlook Index for January, ISM New York for for December and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
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