Today's Headlines

Bloomberg:

• EU Crisis Damage Seen in Worst Quarter Since Lehman Wake. Euro-area economic data due this week will probably show the damage inflicted by the region’s sovereign debt crisis with the worst quarterly decline in output for almost four years. Gross domestic product shrank 0.4 percent in the fourth quarter, according to the median of 45 estimates gathered by Bloomberg News. That would be the biggest decline since the first quarter of 2009, when GDP fell 2.8 percent in the wake of the collapse of Lehman Brothers Holdings Inc. The data is due to be published on Feb. 14.
• Fed Joining in Alarm Over Distortion It Enabled: Credit Markets.A Federal Reserve governor is joining those warning that junk-debt investors are poised for losses, while his institution’s policies spur them to keep buying the debt. “High-yield is as overbought as I have ever seen it,” Dan Fuss, whose $22.7 billion Loomis Sayles Bond Fund beat 98 percent of its peers in the past three years, said in an interview in London last month. “This is absolutely, from a valuation point, ridiculous.” “We are seeing a fairly significant pattern of reaching- for-yield behavior emerging in corporate credit,” the Fed’s Stein said in a Feb. 7 speech in St. Louis. If the observation is accurate, he said, “it does not bode well for the expected returns to junk bond and leveraged-loan investors.” “The idea here is to keep rates low enough for a long enough time that the economy builds up enough steam,” Tawil said. “I don’t know if our economy is capable of picking up the steam necessary.”  
• Bill to Limit Too-Big-to-Fail Bank Risk Prepared in U.S. House. U.S. Representative John Campbell plans to offer legislation aimed at reducing the size of “too- big-to-fail” banks by requiring them to hold more capital including long-term debt. Campbell’s bill comes as a number of lawmakers and regulators from both parties -- including Federal Reserve Governor Daniel Tarullo -- argue that the 2010 Dodd-Frank Act failed to curb the growth of large banks and express support for renewed efforts to limit the kind of systemic risk that fueled the 2008 financial crisis.

Wall Street Journal:

• Economic Anxiety Shadows State of the Union. Four times, President Barack Obama has stood in the well of the House of Representatives and delivered a State of the Union address—and four times economic anxieties have largely overshadowed his efforts to push a broad agenda.

MarketWatch.com:

• At the retail level, economy could stutter. Payroll tax hike might weigh on growth in January. Trouble ahead?

Fox News:

• Speculation mounts on who will be next pope. The likely successor to Pope Benedict XVI will continue his conservative vision with a younger, more energetic outlook and perhaps hail from Africa, Asia or Latin America, religious experts told FoxNews.com.

CNBC:

• Accounting Risk Clouds Big US Business Bets in China. Tales of shady business practices abound in China — fake revenues, phony invoices, sham factories - but until recently, the problem seemed confined mostly to Chinese companies. No longer. Concern is growing about risks to U.S.-based multinationals in a country where American audit regulators are locked out by the Chinese government and bribery and fraud are routine.Questions about transparency and integrity weigh heavily on China.

Zero Hedge: 

• Show This To Anyone That Believes That "Things Are Getting Better" In America. (graphs)
• Households On Foodstamps Rise To New Record. (graph)
• Italian Stocks Slump As Berlusconi Proclaims Himself Poll Leader. 
• Spain Kickback Scandal Threatens Rajoy As 79% Find Corruption "Explanations" Weak.

Business Insider:

• New Details Are Leaking Out About The Sen. Bob Menendez Case, And It's Looking Worse And Worse. 
• FTC: There Could Be Something Wrong With 42 Million Credit Reports. 
• A Raid Is Coming On Social Security. 
• MAJOR CONTRARIAN SELL SIGNAL: Investors Are More Bullish Than In 99% Of All Periods Since 2002. (graph) 
• A Crack In The Stock Market's Foundation Is Getting Bigger. (graphs)

New York Times:

• Obama Plans to Cut US Nuclear Arsenal by One-Third. 
• Stalled Out on Tesla’s(TSLA) Electric Highway. As I discovered on a recent test drive of the company’s high-performance Model S sedan, theory can be trumped by reality, especially when Northeast temperatures plunge.

Reuters: 

• METALS-Copper slips on Europe.

Financial Times:

• Caterpillar(CAT) digs into trouble in China. Caterpillar has come badly unstuck. It has been bleeding market share as homegrown companies – many deploying suspiciously similar technology – have grabbed sales. Caterpillar’s chief Chinese rival, Sany Heavy, surpassed it in market share for excavators for the first time in 2011. Last year, a drop-off in construction pushed all-important excavator sales down more than 30 per cent from the previous year, according to Barclays data. As if that were not bad enough, Caterpillar has been forced to make a costly and embarrassing goodwill impairment charge of $580m after uncovering alleged accounting misconduct at a Chinese mining equipment company it acquired six months before.

Telegraph:

• UK Business confidence falls to lowest level in 21 years. Hopes that the economy is finding its feet were dealt a blow as a report showed business confidence has slumped to its lowest level in 21 years.