Evening Headlines
Bloomberg:
- Fed's Lacker Says More Purchases 'Hard Case to Make'. Federal Reserve Bank of Richmond President Jeffrey Lacker said a new round of asset purchases by the central bank “would be a hard case to make” with economic growth in line with his outlook. The Beige Book report released by the Fed today shows “what I expected several months ago,” which is an economic expansion of about 2 percent during the second half, Lacker told reporters in College Park, Maryland. He said he would make up his mind on monetary policy when Fed officials meet in two weeks.
- China Interest-Rate Boost May Take 'Hot Air' Out of Stocks, Aberdeen Says. A rally by China’s stocks may lose momentum after the government’s surprise decision to raise interest rates, according to Aberdeen Asset Management Plc. “It could take some hot air out,” Nicholas Yeo, who helps oversee China equities fund at Aberdeen Asset which manages $261 billion globally, said in a phone interview from Hong Kong.
- 'Savage' Austerity Is in US's Future, Buiter Says: Tom Keene. Fiscal austerity measures detailed today by the U.K. government will soon be needed in the U.S., according to Willem Buiter, Citigroup Inc.’s chief economist. Britain’s deepest budget cuts ever, outlined by Chancellor of the Exchequer George Osborne, will eliminate almost 500,000 public-sector jobs and impose a levy on banks. The moves are part of a plan to reduce the 156 billion-pound ($245 billion) deficit, which is forecast to be 10.1 percent of gross domestic product this year, to 2.1 percent in the 2014-15 fiscal year. “The only question was really the timing and the composition,” given the finite willingness of financial markets to endure budget shortfalls, New York-based Buiter said in a roundtable interview today on “Bloomberg Surveillance Midday” with Tom Keene. “This is very savage, but no more savage than what the U.S. will have to endure when it gets going.”
- Death Rate From Strokes Dropped 26% in Hospitals. The death rate from strokes in U.S. hospitals fell 26 percent as treatment technology improved. The rate declined to 92 deaths per 1,000 stroke patients in 2007, from 125 deaths per 1,000 seven years earlier, according to data released today by the U.S. Agency for Healthcare Research and Quality.
- Gene Therapy for Depression in Mice May Lead to Tests in Monkeys, Humans. Gene therapy eased symptoms of depression in a mouse study that may spur new research in humans, scientists said.
- ObamaCare's Incentive to Drop Insurance by Philip Bredesen. One of the principles of game theory is that you should view the game through your opponent's eyes, not just your own. This past spring, the Patient Protection and Affordable Care Act (President Obama's health reform) created a system of extensive federal subsidies for the purchase of health insurance through new organizations called "exchanges." The details of these subsidies were painstakingly worked out by members of my own political party to reflect their values: They decided who was to benefit from the subsidies and what was to be purchased with them. They paid a lot of attention to their own strategies, but what I believe they failed to consider properly were the possible strategies of others. Our federal deficit is already at unsustainable levels, and most Americans understand that we can ill afford another entitlement program that adds substantially to it. But our recent health reform has created a situation where there are strong economic incentives for employers to drop health coverage altogether. The consequence will be to drive many more people than projected—and with them, much greater cost—into the reform's federally subsidized system. This will happen because the subsidies that become available to people purchasing insurance through exchanges are extraordinarily attractive. In 2014, when these exchanges come into operation, a typical family of four with an annual income of $90,000 and a 45-year-old policy holder qualifies for a federal subsidy of 40% of their health-insurance cost. For that same family with an income of $50,000 (close to the median family income in America), the subsidy is 76% of the cost. One implication of the magnitude of these subsidies seems clear: For a person starting a business in 2014, it will be logical and responsible simply to plan from the outset never to offer health benefits. Employees, thanks to the exchanges, can easily purchase excellent, fairly priced insurance, without pre-existing condition limitations, through the exchanges. As it grows, the business can avoid a great deal of cost because the federal government will now pay much of what the business would have incurred for its share of health insurance. The small business tax credits included in health reform are limited and short-term, and the eventual penalty for not providing coverage, of $2,000 per employee, is still far less than the cost of insurance it replaces. For an entrepreneur wanting a lean, employee-oriented company, it's a natural position to take: "We don't provide company housing, we don't provide company cars, we don't provide company insurance. Our approach is to put your compensation in your paycheck and let you decide how to spend it." But while health reform may alter the landscape for small business in unexpected ways, it also opens the door to what is a potentially far larger effect on the Treasury.
- U.S. Seeks Global Pact for Big Banks. A key plank of the U.S. financial overhaul, aimed at preventing a potential collapse of a large financial firm, is being complicated by international disagreement over what, if any, additional steps such firms should take to withstand potential losses.
- Niche Lawyers Spawned Housing Fracas. The paperwork mess muddying home foreclosures erupted last month. But the legal strategy behind it traces to a lawyer's gambit in 2006 that has helped keep one couple in their home six years beyond their last mortgage payment.
- WikiLeaks Prompts U.S. Alert to Iraqis. A Pentagon team has been reviewing copies of Iraq war documents the website WikiLeaks may release in coming days and plans to notify Iraqis named in the documents in an effort to minimize potential damage from the security breach, defense officials said.
- Regulator for Fannie Set to Get Litigious. The federal regulator overseeing Fannie Mae and Freddie Mac hired a law firm specializing in litigation as the agency considers how to move forward with efforts to recoup billions of dollars on soured mortgage-backed securities purchased from banks and Wall Street firms.
- Geithner's Goal: Rebalanced World Economy. Treasury Secretary Timothy Geithner said he would use weekend meetings of G-20 finance ministers to advance efforts to "rebalance" the world economy so it is less reliant on U.S. consumers, to move toward establishing "norms" on exchange-rate policy, and to persuade others the U.S. doesn't aim to devalue its way to prosperity. In an interview with The Wall Street Journal, Mr. Geithner said the world sorely needs to agree on guidelines for exchange-rate policy. "Right now, there is no established sense of what's fair," he said.
- Lenders Talking to States. Several lenders and their legal advisers have initiated discussions with state attorneys general as they take initial steps to resolve a nationwide investigation of foreclosure practices.
- Obama's Incoherent Closing Argument. While the economy is the No. 1 issue, the president constantly changes the subject.
Business Insider:
- Here Are The 5 Key Arguments Against Quantitative Easing.
- Walt Mossberg: Windows Phone 7 is "Inferior," Lacking "Killer Innovation".
- Apple's(AAPL) New MacBook Air is the Laptop I've Been Waiting For. I've never been a big fan of laptop computers, for the simple fact that they've always been too heavy to carry around on a daily basis, taking them everywhere I go. But the new MacBook Air seems to finally be lightweight enough to carry around all the time, and cheap enough to justify buying as a secondary computer.
Politico:
- Soros Gives $1 Million to Media Matters. So much for not wanting to get in the way of an avalanche. George Soros announced that he has given $1 million to Media Matters “to hold Fox News accountable for the false and misleading information they so often broadcast.” Fox commentators frequently describe Media Matters, a frequent Fox critic, of being funded by Soros, but Media Matters has long denied that connection. In today’s joint announcement, Soros denied it too – at least until today. Media Matters has received funding from or formed partnerships with several groups that Soros funds or has funded. These include the Tides Foundation, Democracy Alliance, Moveon.org and the Center for American Progress.
- Netflix(NFLX) May Offer U.S. Web Service in 2010, Shares Up. Netflix Inc, which rose to success with its by-mail DVD rental service, may add a streaming-only service in the United States this year, as it expands its reach in the digital market. The company also reported on Wednesday another quarter of strong subscriber growth, and its shares rose in after-hours trading. Its Canadian streaming-only service -- where users pay to watch video instantly off the Internet -- is a hit and on track to become profitable in late 2011, encouraging Netflix to test this model in its home market. Shares in Netflix -- known for its signature red envelopes and mail-in DVD rentals -- jumped more than 9 percent after it posted better-than-expected third-quarter subscriber growth.
- EBay(EBAY) Beats and Raises, Sees Improved Holiday. EBay Inc posted a better-than-expected quarterly profit and forecast stronger holiday earnings as the Internet commerce company enjoys robust growth at PayPal while striving to reinvigorate its main marketplaces unit. The company also raised its full-year revenue and profit forecast and its shares rose 7.3 percent in after-hours trading.
- Obama Aides: US Mortgage Woes Not "Systemic". The Obama administration said it found no sign so far of "systemic" home foreclosure troubles that threaten U.S. financial stability, or structural problems that could undermine investments linked to mortgages.
- Schnitzer Steel(SCHN) Q4 Profit Beats on Ferrous Metal Sales. n">Schnitzer Steel Industries' fourth quarter profit blew past estimates as its metal recycling business, the largest contributor to revenue, was helped by strong ferrous metal sales.
- n">Billionaire Fisher Lambasts Dour Sentiment, Eyes US Bull Market. "The six and 12 months after mid-term elections have always been positive because political risk aversion falls and when political risk aversion falls, total risk aversion falls," said Fisher, who oversees $37 billion in assets as founder of Fisher Investments in Woodside, California.
- German Exporters Wary Over Currency Wars. German exporters are expressing growing anxiety about the appreciation of the euro against the US dollar and the prospect of a currency war. Germany, the world’s second-largest exporter after China, is on track for 16 per cent growth in foreign trade to €937bn ($1,307bn) this year, mostly spurred by buoyant demand from emerging markets.
- Apple's(AAPL) iPhone and iPad Apps Move to Mac. Having succeeded beyond all expectations in making phones more like computers, Apple is now trying to make its computers more like phones. The company on Wednesday brought its free video calling service from the iPhone and iPod touch to Mac computers and said that a version of the App Store would come to its home and mobile computer lines within three months.
- Fury over £1bn green stealth tax in spending review. Businesses have condemned an "appalling" £1bn a year green stealth tax that will add 11pc to the energy bills of British companies.
- North Korea may be making preparations for a third nuclear test, citing an unidentified South Korean government source.
- Japan may have a rare-earth shortage of 10,000 tons, or 30% of the country's annual demand, next year, citing an estimate by trading company Sojitz Corp. Since late September, only two companies were able to buy rare earths from China, citing Japan's Trade Ministry.
- China plans to allow brokerages to borrow stocks and cash for margin trading and short-selling.
Citigroup:
- Reiterated Buy on (COF), target $55.
- Reiterated Buy on (RHI), target $33.
- Reiterated Buy on (ETN), target $105.
- Reiterated Buy on (AAPL), target $390.
- Reiterated Buy on (MDR), target $20.
- Rated (MCK) Positive, target $78.
- Rated (ABC) Positive, target $39.
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.0 -12.0 basis points.
- Asia Pacific Sovereign CDS Index 101.5 +2.5 basis points.
- S&P 500 futures -.15%.
- NASDAQ 100 futures -.02%.
Earnings of Note
Company/Estimate
- (PPG)/1.45
- (STI)/.00
- (APD)/1.32
- (TRV)/1.47
- (DO)/1.29
- (HSY)/.79
- (MO)/1.01
- (VFC)/2.11
- (CAT)/1.09
- (LUV)/.25
- (UPS)/.88
- (MCD)/1.24
- (FCX)/2.19
- (T)/.55
- (GR)/1.13
- (NUE)/.10
- (CMG)/1.31
- (CB)/1.40
- (SNDK)/1.05
- (CAKE)/.34
- (CA)/.47
- (RVBD)/.27
- (AMZN)/.48
- (AXP)/.84
- (BUCY)/1.15
- (CTXS)/.49
- (BAX)/.97
- (CAL)/2.03
- (LLY)/1.15
8:30 am EST
- Initial Jobless Claims for last week are estimated to fall to 455K versus 462K the prior week.
- Continuing Claims are estimated to rise to 4420K versus 4399K prior.
- Leading Indicators for September are estimated to rise +.3% versus a +.3% gain the prior week.
- Philly Fed for October is estimated to rise to 2.0 versus -.7 in September.
- None of note
- The Fed's Hoenig speaking, Fed's Bullard speaking, weekly EIA natural gas inventory report and the (PSS) investor conference could also impact trading today.