Bloomberg:
- So now we know the value Goldman Sachs Group Inc.(GS) places on salving its conscience for screwing up what Chief Executive Officer Lloyd Blankfein called “God’s work.” It seems that $500 million is all it takes to compensate the world for Goldman’s role in creating the credit crunch. Goldman said yesterday it’s setting up a “10,000 Small Businesses Initiative.” It will shell out $200 million to educational institutions to help guide business owners, with a further $300 million invested for lending and philanthropy aimed at community development groups. Billionaire investor Warren Buffett, whose Berkshire Hathaway Inc. is the largest Goldman shareholder, is joining the initiative. Here’s another way of looking at this sudden burst of supposed generosity. Goldman has $16.7 billion stashed in its bonus pot from the record profit earned in the first nine months of the year, which works out at $527,192 per staffer. That means those 10,000 small businesses the securities firm says it wants to help are worth the equivalent of about 1,000 Goldman employees. Alternatively, a Goldmanite’s average contribution to society is pitched at the equivalent of 10 small enterprises, based on that bonus-versus-charity calculation. Even at the Stakhanovite work rates the firm legendarily squeezes out of its staff, that’s quite a stretch. The idea that one banker is worth 10 businesses is the kind of math that got us into this mess, with finance falsely elevated until it became an end in itself, rather than a means to providing services to the real economy. The public isn’t likely to fall for this charade. The financial community has already spent too many years parading its charitable contributions to help divert attention from its risk-taking adventures. Tax-deductible gestures are no longer sufficient to comfort those who have seen their pension pots devastated by the credit crisis; even with this year’s rallies, the total value of the major global stock exchanges is still a bit less than $45 trillion, down from a peak of almost $62 trillion at the end of 2007, before the subprime meltdown wrecked the global economy. If he worked for anyone other than Goldman Sachs, Blankfein would probably be out of a job by now. His remark earlier this month to the Sunday Times magazine that bankers are “doing God’s work” is the kind of indiscretion that loses you the key to the executive bathroom at most public companies. No matter how many charitable donations it makes, Goldman will struggle to shake off the moniker bestowed on it by Matt Taibbi in Rolling Stone magazine earlier this year. Taibbi described the firm as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Goldman and its peers need to practice humility and contriteness for an extended period, rather than seeking image-buffing headlines with token gestures.
- The Federal Housing Authority, which insures home purchases with as little as 3.5 percent down payments, may create another crisis in the lending industry, said Robert Toll, chief executive officer of Toll Brothers Inc. “Yesterday’s subprime is today’s FHA,” Toll, whose Horsham, Pennsylvania-based company is the largest builder of luxury homes in the U.S., said today at a New York conference for builders sponsored by UBS AG. “It’s a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money.” The FHA’s losses are greater than the agency can withstand, Edward Pinto, a former chief credit officer with government- backed mortgage lender Fannie Mae, said in testimony before Congress in October.
- Natural gas tumbled more than 5 percent, the biggest drop this month, as mild weather trimmed demand for the heating and power-plant fuel. Inventories rose to a record 3.813 trillion cubic feet in the week ended Nov. 6. “People had banked on getting to that 3.8 level and then coming off from there,” said Cameron Horwitz, an analyst at SunTrust Robinson Humphrey Inc. in Houston. “It looks like it’s just going to keep going higher for at least the next two or three weeks.” Horwitz estimates that another 40 billion cubic feet of natural gas may be put into storage between now and the end of November instead of a typical decline of 70 billion in that period. Storage sites are now at 98 percent of peak capacity, which the Energy Department estimates at about 3.9 trillion cubic feet. Futures may dip below $4 as the price threatens to plunge through recent lows, said Stephen Briggs, a partner at Intermarket Management LLC in Verona, New Jersey, a brokerage and energy risk-management firm. “There’s just no reason for gas to be high and once you get above $5, no one is into that at this stage,” said Briggs.
- Federal Reserve Bank of St. Louis President James Bullard said past experience suggests policy makers may not start to raise interest rates until early 2012, while concern borrowing costs have stayed “too low for too long” may prompt an earlier move. “If you look at the last two recessions, in each case the FOMC waited two and a half to three years before we started our tightening campaign,” Bullard said today in a speech in St. Louis. “If we took that as a benchmark, that would put us in the first half of 2012.”
Wall Street Journal:
- Federal regulators are considering whether the government should take greater control of the Internet and ask consumers to pay higher phone charges in order to provide all Americans with cheaper access to broadband Internet service. The Federal Communications Commission Wednesday will lay out the case for expanding broadband Internet service, outlining current obstacles to making it widely available. The agency is considering whether to force Internet providers to share their networks with rivals and raise fees charged on consumer phone bills to pay for the broader access.
- While the economy has finally started to grow, the disturbingly high unemployment rate is increasing pressure from the left to double down on this year's poorly designed fiscal stimulus bill. Since the stimulus bill was signed, the ranks of the unemployed have grown by over three million (over four million if involuntary part-time and discouraged workers are included). The unemployment rate, which the Obama administration projected the stimulus would contain at 8%, is now 10.2%. There is little likelihood that another round of similar fiscal stimulus would yield much more than the paltry return on the first one. The original transfer payments and tax rebates barely nudged consumer spending, and the federal spending has been painfully slow. The delayed infrastructure spending—the shovels are still in the shed—will have a bigger impact, though less than claimed. Some of the funds to state and local government did reduce layoffs. The stimulus bill surely ranks dead last compared to the natural dynamics of the business cycle, the Fed's zero interest rate policy, and the automatic stabilizers in the tax code (which have reduced taxes proportionally more than income) as far as explanations for the improvement in the economy. But to evaluate the stimulus properly we should consider not just what we got for the $787 billion cost but the effects of alternative policies that might have been enacted. My Stanford colleague Pete Klenow and Rochester economist Mark Bils estimated that cutting the payroll tax by six percentage points (of the 12.4% Social Security component) would, under standard assumptions, increase employment by three million to four million workers—an amount equal to all the job losses since the stimulus was passed.
- Many casino operators are increasingly, albeit not always confidently, ready to call a bottom to their current woes, but another group of industry players is almost certainly in for a winning run over the next few years: slot machine makers. Visitors may be staying away from Sin City in droves and, to a lesser degree, cutting back their time and money spent at regional casinos. But at the same time, cash-strapped state and local governments are moving to vastly expand betting opportunities for their citizens in order to help plug yawning budget gaps. From video poker in Illinois bars to one-armed bandits at New York racetracks to casinos in Pennsylvania and new jurisdictions across the globe, the makers of gambling devices could be looking at selling hundreds of thousands of new units in the not-too distant future. Companies that stand to benefit the most include perennial market leader International Game Technology (IGT), WMS Industries Inc. (WMS), Australia-based Aristocrat Leisure Ltd. (ALL.AU) and Bally Technologies Inc. (BYI), none of which seem to have stinted on either their lavish displays or new product rollouts at the Global Gaming Expo, the industry trade show taking place this week.
- U.S. President Barack Obama arrived in South Korea, ready to solidify a unified approach toward North Korea but facing friction over free trade with the South. The final stop on his Asian tour will offer Mr. Obama a respite after 2 1/2 rocky days in China. White House aides said Mr. Obama is ready to discuss how to move forward on a U.S.-South Korea free-trade agreement that has been hung up for two years and faces new questions from the Obama administration over barriers to U.S. auto imports. That trade agreement is likely to top the agenda of his host, President Lee Myung-bak.
NY Times:
- President Obama acknowledged for the first time on Wednesday that his administration would miss a self-imposed deadline to close the detention center at Guantánamo Bay, Cuba, by mid-January, admitting the difficulties of following through on one of his first pledges as president.
Quinnipiac University:
- Quinnipiac is out with a poll: President Obama’s job approval is under 50% for the first time, at 48%. Obama is still on the positive side, with just 42% thinking he is doing a poor job. But it is not good news for a President trying to push through a tough set of initiatives, with health care and revamping the Afghanistan war at the forefront. Elsewhere in the survey, Obama gets a 47-46 split on handling the economy — a big drop from October’s 52-43. Voters say 47 - 42 percent that President Obama should send 40,000 more combat troops to Afghanistan as the military commanders on the ground have requested.
The Business Insider:
- He's not just being blamed for the weak dollar and everything else wrong with America. George Soros is also getting a beating for his financial ties to NIAC, a pro-Iranian engagement group. NIAC is in the news for potentially dodging federal rules for the registration of all lobbyists because NIAC isn't registered. A journalist says NIAC lobbies, NIAC says it doesn’t. Soros is taking heat because he funds NIAC, the company whose head of "The New American Policy On Iran" portion, Patrick Disney, is the author of emails that are among other documents suggesting (not very convincingly, it turns out) that NIAC does indeed lobby in breach of federal rules. The leaked emails emerged during a court case against the Iranian-American journalist, Hassan Daioleslam, who was the first to publicly accuse the group of lobbying. The group's leader, Trita Parsi, sued Daioeslam for defamation in 2007. Accusations have since emerged that Soros is tied to the group and that the hedge fund king's speculative "Soros-style" investment habits, of all things, are further evidence of his being anti-American.
- Apple’s(AAPL) Mac And iPod Sales In Good Shape.
- China’s 14 Dominos of Destruction.
ABCNews:
- As Congress crafts legislation to impose new oversight on complex instruments blamed for hastening the financial crisis, a major sticking point has emerged over companies that use the derivatives to hedge risk. Some lawmakers want to exempt so-called "end users" of derivatives from new capital and other requirements in the overhaul legislation. A potent coalition of about 170 companies that use derivatives — including Boeing Co., Caterpillar Inc., Ford Motor Co., General Electric Co. and Shell Oil Co. — has been lobbying Congress to say that regulation of derivatives without exceptions could severely increase costs for corporate America. That could mean higher costs passed on to consumers and imperiled jobs, they contend.
LA Times:
Dealbreaker:
- If the European Union isn’t regulating, it isn’t happy. Stymied by fear and common sense, the EU seems likely to drop the most odious aspects of its proposed new rules on hedge funds and private equity firms. But the Europeans have simultaneously struck upon the only thing more likely to drive hedge funds out of Europe than strict oversight: draconian pay restrictions. And now it’s turned its sights on the insurance industry. The president of the European Central Bank today backed plans to place new encumbrances on the continent’s economy by regulating big insurers the same way it regulates banks.
TechCrunch:
- The debate over Droid v. iPhone rages on, but lots more Android surprises are on the way. Get ready for the Google(GOOG) Phone. It’s no longer a myth, it’s real.The next “super” Android device will almost certainly be a HTC phone that’s much thinner than even the Droid or iPhone – The Dragon/Passion. This is the phone the senior Android guys at Google are now carrying around and testing, at least as of a couple of weeks ago. If you’re willing to give up the Droid’s keyboard, the Dragon/Passion is going to be a really cool phone. It should be fully available very soon.But it isn’t the Google Phone. Everything up until now has just been a warm up to the Google Phone.
Rassmussen:
Politico:
- Mounting evidence that independent voters have soured on the Democrats is prompting a debate among party officials about what rhetorical and substantive changes are needed to halt the damage. Following serious setbacks with independents in off-year elections earlier this month, White House officials attributed the defeats to local factors and said President Barac Obama sees no need to reposition his own image or the Democratic message. Since then, however, a flurry of new polls makes clear that Democrats are facing deeper problems with independents—the swing voters who swung dramatically toward the party in 2006 and 2008 but who now are registering deep unease with the amount of spending and debt called for under Obama's agenda in an era of one-party rule in Washington. A Gallup Poll released last week offered a disturbing glimpse about the state of play: just 14 percent of independents approve of the job Congress is doing, the lowest figure all year. In just the past few days alone, surveys have shown Democratic incumbents trailing Republicans among independent voters by double-digit margins in competitive statewide contests in places as varied as Connecticut, Ohio and Iowa. Obama’s own popularity among independents has fallen significantly, too. A CBS News poll Tuesday showed the president’s approval rating among unaligned voters falling to 45 percent — down from 63 percent in April.
TheStreet.com:
- Citigroup (C)'s credit default swaps (CDS) are "increasingly supportive" of an equity rally, according to a report this week from Tradition Asiel Securities, a research and trading firm that looks for arbitrage opportunities between equities and CDS.
Lloyd’s List:
- Capesize rates surge 25% in two days.
Reuters:
- Nigeria has the potential to pump 3.7 million barrels per day (bpd) of crude oil, its energy minister told Reuters on Wednesday, but OPEC production targets and damage to oil facilities have restricted output for now. The country's output stands at less than 2 million bpd following militant attacks that have cut off around 20 percent of the country's crude oil production.
- Proposed taxes on financial transactions face an uphill battle in the United States with powerful interests opposed and a lack of support among some key U.S. lawmakers. Proposals in the U.S. House of Representatives that would put a 0.25 percent tax on over-the-counter derivatives transactions and stock trades are among ideas being mulled by top lawmakers. But support is lackluster among tax-writing legislators and the idea is likely to hit a roadblock in the Senate, where consensus is harder to achieve.
- Goldman Sachs Group Inc (GS) could have suffered dramatic losses if the federal government had not intervened to prop up American International Group Inc (AIG), according to a government report. The report by the special inspector general for the government bailout program raises doubts about Goldman's previous claims that it was hedged against potential AIG losses. If AIG had collapsed, it would have made it difficult for Goldman to liquidate its trading positions with AIG, even at discounts, the report said. It also would have put pressure on other counterparties that "might have made it difficult for Goldman Sachs to collect on the credit protection it had purchased against an AIG default." Finally, the report said, an AIG default would have forced Goldman Sachs to bear the risk of declines in the value of billions of dollars in collateralized debt obligations. A Goldman spokesman called the risks discussed in the report a "moot point."
- ABC News said on Tuesday that its weekly measure of U.S. consumer confidence continued to rise in the latest week, marking a rate of growth last seen in spring of last year. The ABC Consumer Comfort Index edged higher to -45 in the week ended Nov. 16 from -46 the prior week. In the last six weeks the index has risen at its fastest pace since last spring, according to the report. The year high is -42, which the CCI hit on May 10.
Financial Times:
- ScriptSwitch, the provider of drug comparison software to doctors’ surgeries, has been acquired by UnitedHealth(UNH), the leading US healthcare operator, generating a four-fold return for the Coventry-based company’s private equity backers. The sale of ScriptSwitch – founded by two students and a pharmacist at the University of Warwick in 2001 – illustrates how start-up technology companies can still earn big profits for their private equity backers. ScriptSwitch supplies more than six out of 10 of the UK’s primary care trusts, which use its software to provide doctors with information about cheaper generic drug alternatives, as well as data on patient safety and dosage levels.
Manager-Magazin:
- JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said regulators need to devise a system that allows “big” banks to go bankrupt without hurting the economy and taxpayers, citing an interview. Regulators need to be careful that stricter rules for banks’ capital don’t limit bank lending, he added.
Alrroya Aleqtissadiya:
- Saudi Arabian central bank Governor Muhammad al-Jasser said his country “benefits” from the riyal’s peg to the dollar as long as the US currency remains the main global reserve.