Friday Watch

Late-Night Headlines
Bloomberg:

- As Sony Corp.’s(SNE) e-book devices vie with the Kindle to win over readers, the real showdown may come later: when a shift to electronic textbooks at schools threatens to eclipse the current market for the products. Sony and Amazon.com Inc.’s(AMZN) Kindle are both expanding into the academic world. Students at Blyth Academy in Toronto do all their reading on Sony devices, and five U.S. universities are testing the Kindle. The days of students lugging around heavy textbooks may be numbered, said Sony executive Steve Haber.

- Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said Chinese growth is likely to be hurt by an absence of consumer demand from trading partners such as the U.S. “The Chinese, I suspect, will have a bubble of their own to confront,” Gross said in a Bloomberg Television interview yesterday from Pimco’s headquarters in Newport Beach, California. “It’s gearing up for export that doesn’t find an end consumer, that’s the real problem in China.” The “systemic risk” of new asset bubbles in global economies and markets is rising with the Federal Reserve keeping interest rates at record lows, Gross wrote in his December investment outlook posted on Pimco’s Web site yesterday. The “heavy lifting” will likely be done first by other central banks such as those in Australia and Norway that have already begun to increase interest rates, Gross wrote. “China may abandon its dollar peg within six months’ time and with it, its own easy monetary policy that has fostered more significant mini-bubbles of lending and asset appreciation on the Chinese mainland,” he added.

- Japanese government ministers increased pressure on the central bank to tackle falling prices in the world’s second-largest economy. “My understanding is that Japan is in a deflationary state,” Deputy Prime Minister Naoto Kan told reporters today in Tokyo. The government will tell the central bank that “monetary policy plays a significant role” in fighting deflation, he said.

- A former Pequot Capital Management Inc. employee now at the center of a U.S. insider-trading probe told his psychologist that the hedge-fund firm fired him in 2001 after he stopped delivering secret information on Microsoft Corp., the therapist said in a deposition. David Zilkha, who had previously worked at Microsoft, said he was supervised by Pequot founder Arthur Samberg, who pressed him for insider information, psychologist Peggy Thomson testified in an Oct. 15 proceeding tied to Zilkha’s divorce, according to a transcript obtained by Bloomberg.

- Dell Inc.(DELL), the world’s third-largest maker of personal computers, reported earnings that missed analysts’ estimates after it lost market share and higher PC component costs cut into profit.

Wall Street Journal:

- Chances of business supporting the Obama administration's health overhaul are fading fast, after Senate Majority Leader Harry Reid's bill took a liberal turn. The Obama administration has courted small businesses from the start, and at times executives have shown favor toward Democratic plans such as the bill passed by the Senate Finance Committee last month. But when Mr. Reid decided to include a new public health-insurance plan in his bill and added a Medicare payroll tax increase for high earners, business groups said enough was enough. "We're disappointed," said Bruce Josten, an executive vice president at the U.S. Chamber of Commerce, of the Senate health bill. "If it ends up in that form, I can't imagine the business community supporting it." Several industry groups are banding together to ask Congress to scrap the current bills and start from scratch on a health overhaul. They are stepping up television advertising against Democrats' proposals.

- For General Electric Co.(GE), the timing looks right to change the channel. A deal for GE to merge NBC Universal with Comcast Corp.'s cable channels in a joint venture that would be 51%-controlled by Comcast could be announced next week, according to people familiar with the matter.

- Deadly Labor Wars Hinder India’s Rise.

- TARP Inspector General Neil Barofsky keeps committing flagrant acts of political transparency, which if nothing else ought to inform the debate going forward over financial reform. In his latest bombshell, the IG discloses that the New York Federal Reserve did not believe that AIG's credit-default swap (CDS) counterparties posed a systemic financial risk. Hello? For the last year, the entire Beltway theory of the financial panic has been based on the claim that the "opaque," unregulated CDS market had forced the Fed to take over AIG and pay off its counterparties, lest the system collapse. Yet we now learn from Mr. Barofsky that saving the counterparties was not the reason for the bailout. In the fall of 2008 the New York Fed drove a baby-soft bargain with AIG's credit-default-swap counterparties. The Fed's taxpayer-funded vehicle, Maiden Lane III, bought out the counterparties' mortgage-backed securities at 100 cents on the dollar, effectively canceling out the CDS contracts. This was miles above what those assets could have fetched in the market at that time, if they could have been sold at all. The New York Fed president at the time was none other than Timothy Geithner, the current Treasury Secretary, and Mr. Geithner now tells Mr. Barofsky that in deciding to make the counterparties whole, "the financial condition of the counterparties was not a relevant factor." This is startling. In April we noted in these columns that Goldman Sachs, a major AIG counterparty, would certainly have suffered from an AIG failure. And in his latest report, Mr. Barofsky comes to the same conclusion. But if Mr. Geithner now says the AIG bailout wasn't driven by a need to rescue CDS counterparties, then what was the point? Why pay Goldman and even foreign banks like Societe Generale billions of tax dollars to make them whole?

- General Electric Co.(GE) became the first major U.S. company to sell an Islamic bond, paving the way for other Western firms to tap religiously minded investors in the Middle East and elsewhere. On Thursday, the company's GE Capital unit sold a five-year, $500 million Islamic bond, or sukuk, and suggested more was to come.

- U.S. gasoline demand, hammered by the recession, will never return to 2007's peak, as greater use of biofuels and increased engine efficiency cut consumption of the fossil fuel, BP PLC (BP) Chief Executive Tony Hayward said Thursday. "We will never sell more gasoline in the U.S. than we sold in 2007," Hayward said in an interview with Dow Jones and The Wall Street Journal. U.S. Department of Energy data show consumption of motor gasoline fell 3.2% in 2008, from a peak average of 9.3 million barrels a day in 2007, though a slight uptick from 2008 is expected this year. In 2007, BP sold an average of 1.57 million barrels a day of its gasoline products worldwide, with sales slipping 4.6% in 2008, according to the company's annual reports. Hayward's comments reinforce a widely held view that demand for gasoline in rich countries has entered a secular state of decline, even as overall gasoline consumption is expected to grow as middle classes in China, India and Brazil, among developing countries, buy more cars. The use of fossil fuels to power vehicles has been declining in the U.S. as a result of the economic downturn, greater engine efficiency, increased use of gasoline-electric hybrids, and requirements to include larger amounts of ethanol and other biofuels. As fossil fuel's share of the mix diminishes over time, "we're going to be in the biofuels business," Hayward said. The London-based energy giant is working on developing biobutanol, a plant-derived fuel with higher energy content than ethanol, as well as cellulosic ethanol, which is made from non-food plants. BP and enzyme developer Verenium Corp. (VRNM) have a joint venture called Vercipia that plans to build an ethanol facility in Florida to produce 36 million gallons a year of cellulosic ethanol. Verenium already operates a 1.4 million-gallons-a-year plant in Louisiana, one of the largest U.S. demonstration projects. "We believe we'll figure out how to make that commercial within the next five years," Hayward said.

MarketWatch:

- The dark side of the BRICs.

CNBC.com:

- Banks that are considered too large to fail should be dismantled rather than "coddled," Dallas Federal Reserve Bank President Richard Fisher said on Thursday. Large-scale government bailouts of institutions like insurer American International Group(AIG)have generated widespread controversy following last year's global financial meltdown. Fisher suggested the only way of ensuring that such financial giants do not pose recurrent problems is by making them smaller." This means finding ways not to live with 'em and getting on with developing the least disruptive way to have them divest those parts of the 'franchise,' such as proprietary trading, that place the deposit and lending function at risk and otherwise present conflicts of interest," Fisher said in prepared remarks to the Cato Institute, a libertarian think tank. It was one of the strongest calls to date from a sitting Fed official for an actual breaking up of large financial institutions. Fisher also said the too-big-to-fail problem hinders the effectiveness of monetary policy, perverting incentives and contributing to financial volatility.

IBD:

- Pharmacy benefit management is a controversial industry. Yes, the industry saves health insurers on drug costs. But the giant pharmacy benefit managers, called PBMs, have also been the targets of multiple lawsuits claiming these middlemen earn outsize profits through opaque business practices. That's why it's paid off for SXC Health Solutions (SXCI) of Lisle, Ill., to be relatively small and transparent.

CNNMoney.com:

- Here's a new way to think about the U.S. government's epic borrowing: More than half of the $9 trillion in debt that Uncle Sam is expected to build up over the next decade will be interest. More than half. In fact, $4.8 trillion. If that's hard to grasp, here's another way to look at why that's a problem. In 2015 alone, the estimated interest due - $533 billion - is equal to a third of the federal income taxes expected to be paid that year, said Charles Konigsberg, chief budget counsel of the Concord Coalition, a deficit watchdog group.

Forbes:

- Google(GOOG) Aims To Remake Computers.

paidContent.org:

- Harbinger Capital Partners continues to slice its stake of the New York Times (NYT). Co., selling its second batch of stock in two months. The activist hedge fund that spent more than a half-billion accumulating nearly 20 percent of the publishing company’s stock in 2007 now owns less than 15 percent —14.64 percent, to be exact, based on the number of shares outstanding on Oct. 30. According to SEC filings today (here and here), the fund sold 2.5 million shares of its then-16.4 percent on Nov. 17 at $9 a share; that comes out to $22.5 million.

SmartMoney:

- It’s been dubbed the apology with a half-billion-dollar gift attached. In an attention-grabbing move this week, Goldman Sachs (GS) said it would launch a $500 million initiative to help small businesses with Warren Buffett as a key adviser, an announcement that coincided by hours with a public mea culpa from CEO Lloyd Blankfein for mistakes in the financial crisis. But it turns out Goldman’s program includes its own discount — the kind that only an investment banker could love. According to a review of Goldman’s program by SmartMoney in consultation with corporate tax experts, the ultimate price tag of the initiative could be far less than the heavily publicized $500 million. A big chunk of the money is destined for charitable institutions, creating potentially sizable tax deductions for Goldman, while other portions are being made as loans that Goldman confirms it expects to be repaid with interest. All in all, tax experts say, the ultimate cost to Goldman could total roughly $136 million to $150 million—70% or more below the half-billion figure that helped generate so much publicity for the firm this week. Interest income from the loans could lower the final bill even more.

Politico:

- He doesn’t have the votes — yet — but Senate Majority Leader Harry Reid and fellow Democrats projected confidence they could clear the first hurdle for health reform, a rare Saturday vote to open debate on the sweeping measure. Reid also got one piece of good news as Republicans at least tentatively dropped their plans to force a reading of the 2,074-page bill, in exchange for a daylong debate, starting in the morning and culminating with a vote at about 8 p.m. Saturday. But reminders of how tough it will be to pass health reform in the end popped up Thursday, as well, as a second member of the Democratic Caucus — Nebraska Sen. Ben Nelson — threatened to launch a filibuster to block a final vote, if language restricting federal funds for abortion was not strengthened. “There are a lot of other things that could keep me from supporting it in the end,” Nelson said. He joins Sen. Joe Lieberman (I-Conn.), who said he will vote with Democrats on Saturday, but again on Thursday ruled out supporting a bill with any variation of the public insurance option down the road, even if it means killing the legislation. “I hope it doesn’t happen; I pray it doesn’t happen,” Lieberman said. “But incidentally, I don’t think I would be the only one.”

Rasmussen:

- While the Senate is now preparing to debate Democratic Leader Harry Reid's 2000-plus-page version of the health care reform plan, 47% of Americans still believe the private sector rather than the federal government has the best chance of keeping health care costs down and the quality of medical care up. But a new Rasmussen Reports national telephone survey shows that 33% of adults think the federal government would do a better job of reducing costs and maintaining quality of care.

The Business Insider:

- Chart Of The Day: The Wall Street Journal Has The Richest Readership Among Print Pubs.

USA Today.com:

- Newspaper advertising revenue in the U.S. plunged 28% in the third quarter to $6.4 billion. The figures released Thursday by the Newspaper Association of America leave little doubt newspapers will likely have to manage through the fourth year of a slump that has already killed some publications and wiped out thousands of jobs.

AP:

- Army officials plan to prevent media from covering Sarah Palin's appearance at Fort Bragg on Monday, saying they fear the event will turn into political grandstanding against President Barack Obama. Fort Bragg spokesman Tom McCollum told The Associated Press on Thursday that Army officials had decided to keep media away from Palin's book promotion at the North Carolina base. Other members of the public would be permitted to attend, however. McCollum said the Army did not want the event to become a platform for Palin supporters to express political opinions "directed against the commander in chief." The former Alaska governor and Republican vice presidential candidate began a promotional tour this week for the memoir "Going Rogue."

Reuters:

- Dell (DELL), the world's No.3 PC seller, said on Friday that demand for its PCs picked up "quite substantially" following the launch of Microsoft's (MSFT) new Windows 7 operating system in October. Dell also expected its Asia business to return to revenue growth in the near future, Steve Felice, Dell's president of small and medium business, said in a teleconference, without being giving details.

Financial Times:

- Leading US retailers are this year expanding their Christmas sales drive by targeting smartphone users through the new generation of mobile devices such as the Apple(AAPL) iPhone, the Palm Pre and BlackBerry’s Storm. Retailers that have started selling online via smartphones this year include mass discounters Walmart(WMT) and Kmart(KMT), lingerie retailer Victoria’s Secret, home goods store Crate & Barrel, and youth clothing chains American Eagle(AEO) and Urban Outfitters(URBN). Others, including JC Penney(JCP), Target(TGT), Gap(GPS) and Toys R Us have launched smartphone applications, or apps, that promote deals alongside services such as helping customers locate physical stores or check the availability of items. Raul Vazquez, chief executive of Walmart.com, said the group’s new iPhone app, which was released in November and is linked to its home electronics sales, had so far been downloaded more than 300,000 times. “We expect by the end of the year to get that number up to 1m,” he said of the app, which includes a feature that allows shoppers to fit a profile of a proposed TV purchase on to a photo of a wall or room. Jason Taylor, head of mobile products at Usablenet, which adapts websites to make them easily navigable by mobile devices, said his company had this month launched “around a dozen” new mobile sites for leading retailers, including office-supplies retailer Staples(SPLS) and cosmetics company Aveda. Outdoor goods store REI, and OfficeMax(OMX), another office supplies retailer, are also planning to open mobile commerce sites. “I see a real rush by retailers to have proper mobile channels,” said Mr Taylor.

- Goldman Sachs(GS)’ program for US small businesses could help it meet some of its duties under a law aimed at aiding low-income communities – a sign of the demands created by its conversion to a bank holding company last year. Goldman’s decision to earmark $500m to help 10,000 small companies, which was revealed this week, has been seen as an attempt to defuse the public controversy about its huge profits and its plans to pay large bonuses. But people close to the situation said some of the funds could be used to fulfill the requirements of the Community Reinvestment Act, a 1977 law designed to prevent banks from discriminating against minorities and poorer neighborhoods. Goldman said the small business plan had not been “driven by CRA”, adding that the bank had already set aside funds to meet its CRA needs for 2009. But executives noted that parts of the initiative, which runs for five years, could help it satisfy its CRA requirements in the future. Regulators periodically assess banks’ commitments under CRA and can constrain their activities if they fail to meet goals. This is the first year that Goldman will be scrutinized for its CRA activities. Under CRA, banks must each year devote a portion of their assets, which can range between 0.8 per cent and 1 per cent of US-based deposits, to “meet the credit needs” of low- and moderate-income communities.

- European Union leaders on Thursday night awarded two of its top jobs to politicians relatively unknown on the international stage, after almost a decade of wrangling over how to project Europe’s global presence. At a Brussels summit the EU picked consensus builders rather than star names, choosing Herman Van Rompuy, Belgium’s centre-right prime minister, over Tony Blair as the EU’s first full-time president. Britain secured the position of foreign policy supremo for Lady Ashton, the EU trade commissioner, who has never held publicly elected office and has only been in her post for a year.

Nikkei:

- Tokyo Electron Ltd., which makes semiconductor-manufacturing equipment, may post an operating profit for the January-March period for the first time in six quarters. The company expects improved earnings because semiconductor producers in Taiwan, South Korea and elsewhere are increasing investments, citing an interview with President Hiroshi Takenaka.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (LTD), target $24.

- Reiterated Buy on (PLCE), target $40.

- Reiterated Buy on (PCLN) and (EXPE)..

- Reiterated Buy on (PVH), target $54.

- Upgraded (LINTA) to Buy, target $13.25.

- Downgraded (D) to Sell, target $32.

- Reiterated Buy on (CLF), target $51.

- Reiterated Buy on (GLW), target $20.50.

BMO Capital Markets:

- Rated (INTC) Outperform, target $26.

- Rated (TXN) Outperform, target $33.

- Rated (MRVL) Outperform, target $23.

- Rated (BRCM) Outperform, target $37.

Night Trading
Asian Indices are -1.0% to unch. on average.

Asia Ex-Japan Inv Grade CDS Index 100.5 -4.5 basis points.
S&P 500 futures -.01%.
NASDAQ 100 futures +.13%.

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Earnings of Note
Company/EPS Estimate
- (ANN)/.07

- (DHI)/-.24

- (SJM)/1.04

- (CRMT)/.442

Economic Releases

10:00 am EST

- Existing Home Sales for October are estimated to rise to 5.70M versus 5.57M in September.

Upcoming Splits
- None of Note

Other Potential Market Movers
- The Chicago Fed Nat Activity Index, (MHS) analyst day, Morgan Stanley Consumer/Retail Conference, (CI) analyst meeting, Sidoti Emerging Growth Forum and the Citi Small/Mid-Cap Conference could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by commodity and technology shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

Stocks Finish Lower, Weighed Down by Semi, Oil Service and Gaming Shares

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Stocks Lower into Final Hour on Profit-Taking, Earnings Jitters, More Shorting

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Medical longs, Financial longs and Technology longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is declining and volume is about average. Investor anxiety is very high. Today’s overall market action is bearish. The VIX is rising +6.93% and is high at 23.13. The ISE Sentiment Index is below average at 130.0 and the total put/call is above average at 1.01. Finally, the NYSE Arms has been running very high most of the day, hitting 3.39 at its intraday peak, and is currently 1.75. The Euro Financial Sector Credit Default Swap Index is rising +2.25% to 67.87 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising +3.01% to 102.23 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising +2 basis points to 26 basis points. The TED spread is now down 438 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising +7.25% to 31.44 basis points. The Libor-OIS spread is up +1 basis point to 14 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling -1 basis point to 2.19%, which is down -46 basis points since July 7th. The 3-month T-Bill is yielding .00%, which is down -3 basis points today. Small-cap and cyclical shares are substantially underperforming today. Oil Service, Semi and Gaming stocks are especially weak, falling -3.25%+. The market’s poor reaction to today’s mixed news, is a negative. The US sovereign debt CDS is rising 3 basis points to 31.0 basis points, which is the highest level since Aug., but still well off a high of 100.50 basis points on Feb. 25. Semis are weak on a BofA Merrill downgrade. I think they are too early on their call to sell these shares. I will add to my positions in the group on any meaningful further pullback from current levels. On the positive side, volume is only around average today and investor angst is spiking. Retail shares have traded relatively well throughout the day. I will closely monitor the market’s internal reaction to tomorrow’s economic data and likely weakness in Asia tonight before further shifting market exposure. Nikkei futures indicate a -99 open in Japan and DAX futures indicate an +16 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower energy prices, lower long-term rates and seasonal strength.

Today's Headlines

Bloomberg:

- Manufacturing in the Philadelphia region expanded in November at the fastest pace in more than two years, reflecting gains in orders and sales. The Federal Reserve Bank of Philadelphia’s general economic index rose to 16.7, higher than forecast, from 11.5 in October, figures from the bank showed today. Readings greater than zero signal growth. Rising foreign demand and record declines in inventories are giving factories incentive to rev up assembly lines. A rebound in manufacturing has helped the economy emerge from the worst recession since the 1930s and may further support growth in coming months. “Manufacturing conditions are improving as we get into the recovery,” said Yasmine Kamaruddin, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Companies are still drawing down inventories, filling orders with what they have on stock.” The Philadelphia Fed’s index of new orders climbed to 14.8 from 6.2 the prior month, while the shipments index increased to 15.7 from 3.3. The measure of inventories improved to minus 17.3 from minus 31.8. A negative number means stockpiles are shrinking. The report showed the employment index climbed to minus 0.5 from minus 6.8 compared. As demand improves, companies may need to hire more workers, Fed Chairman Ben S. Bernanke said Nov. 16. The Philadelphia Fed’s gauge of prices paid dropped to 14.9 after 21.3 the prior month, and an index of prices received improved to minus 1.5 from minus 4.3.

- The Organization for Economic Cooperation and Development doubled its growth forecast for the leading developed economies next year and predicted a further acceleration in 2011 as China powers a global recovery. The economy of the group’s 30 member countries will expand 1.9 percent next year and 2.5 percent in 2011, the Paris-based organization said in a report today. Output will contract 3.5 percent this year. The OECD, which advises members on economic policy, forecast 2010 growth of 0.7 percent in June.

- Rates for 30-year fixed U.S. home loans fell for the third straight week, offering a boost to potential buyers who may use a government tax credit to purchase homes. The 15-year rate declined to a record low. The 30-year rate dropped to 4.83 percent from 4.91 percent, the lowest since May, mortgage buyer Freddie Mac of McLean, Virginia, said today in a statement. The average 15-year rate fell to 4.32 percent, the lowest since records began in 1991.

- Republican lawmakers demanded a Congressional hearing to review whether the Federal Reserve Bank of New York was unprepared to deal with the bailout of American International Group Inc. last year. The rescue, which funneled billions of dollars to banks that traded with AIG, amounted to a “backdoor bailout” of the firms, Representatives Roy Blunt of Missouri and Spencer Bachus of Alabama wrote in a letter to Barney Frank, the Massachusetts Democrat who heads the House financial services committee. The New York Fed, led at the time by Timothy Geithner, gave up efforts to save taxpayer money on AIG’s rescue after the insurer’s trading partners refused to make concessions, the special inspector for the Troubled Asset Relief Program said in a report this week. Geithner, now the Treasury Department secretary, needs to tell Congress whether regulators got the best deal possible in the bailout, which swelled to $182.3 billion, the lawmakers said. The inspector general’s report “paints a devastating picture of government regulators ill-prepared to deal with the failure of complex financial institutions like AIG, and who failed to fight for what was in the best interest of the taxpayers,” Blunt and Bachus said in the letter today. The Fed gave up efforts after two days last year to negotiate discounts from banks that purchased credit-default swaps from AIG backing securities, and opted to pay them in full, according to the report from Special Inspector Neil Barofsky. Before the Fed stepped in late last year, AIG tried to persuade banks to accept so-called haircuts of as much as 40 cents on the dollar, according to people familiar with the matter. The Fed’s decision to pay the banks in full may have cost taxpayers $13 billion, or 40 percent of the $32.5 billion AIG paid to retire the swaps, the people said.

- The U.S. economic recovery will extend into next year as manufacturing expands and the pace of firings abates, reports today indicated. The Conference Board’s index of leading indicators, a gauge of the outlook for the next three to six months, rose 0.3 percent in October, preserving a string of gains that began in April. “It’s very clear that the economy is now expanding, but I don’t see it being a vigorous expansion,” said Michael Moran, chief economist at Daiwa Securities America Inc. in New York, who correctly forecast the leading index. “We are seeing a gradual improvement, but the key word is ‘gradual.’”

- Crude oil fell for the first time in four days as equities dropped, signaling that the U.S. economy and fuel demand will rebound at a slower pace. Imports dropped as Hurricane Ida led to the shuttering of terminals along the Gulf Coast. The Louisiana Offshore Oil Port, used by tankers too large for U.S. harbors, was closed for more than three days.

“All I heard about yesterday was the unexpected draw in inventories,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “There was little mention of Ida, which was a one-off, and the drop will be corrected in the next two reports.” Total U.S. daily fuel demand averaged 18.6 million barrels in the past four weeks, down 4.1 percent from a year earlier, yesterday’s report showed. “Demand is weak when you consider that the refinery rates are the lowest in more than a decade” and supplies are above the five-year average, said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. Refineries operated at 79.4 percent of capacity, the lowest level since September 2008 when hurricanes Gustav and Ike stuck the Gulf. The average rate during the second week of November over the previous five years was 87.9 percent of capacity. “The fundamentals are still terrible, no matter how you slice it,” said Chip Hodge, who oversees a $9 billion natural- resource bond portfolio as senior managing director at MFC Global Investment Management in Boston. “The demand numbers stink. I don’t see us going much above $80 for a while.”

- Gold demand climbed 10 percent in the third quarter from the previous three months after investors bought the metal as a currency hedge and jewelry purchases picked up, the World Gold Council said. Global consumption increased to 800.3 metric tons as Chinese demand surged to 120.2 tons, the London-based industry group said in a report today. Total demand was 34 percent lower compared with a year earlier.

- Rigs exploring for or producing oil climbed to an 11-year high last week as a percentage of natural gas rigs. Oil’s price-linked resurgence comes after almost a decade in which gas was king, quadrupling its rig count between 1999 and 2008, based on data from Baker Hughes. Oil drilling has more than doubled since June, spurred by prices near $80 a barrel. US crude-oil output climbed to a four-year high in October as new fields in the Gulf of Mexico started production, according to the API. Output last month average 5.36 million barrels a day, up 15% from a year earlier.

- The price of Facebook Inc. stock on exchanges for private companies has jumped as much as 42 percent in the past four months as membership of the site topped 300 million users and the company turned cash flow positive. Facebook shares are currently selling for about $21 each at SecondMarket, said Adam Oliveri, managing director at the New York-based company. That’s up from $14.77 in July.

- Prime Minister Gordon Brown’s government proposed new powers to suspend “abusive” short selling deemed to be endangering the financial system. The Financial Services Bill, laid before Parliament today and which applies to all financial firms, proposes giving the Financial Services Authority formal jurisdiction to impose “emergency restrictions” on short selling. The FSA would also have powers to force all institutions to permanently disclose short positions in markets.

- Elizabeth Warren, a chief watchdog of the government’s rescue of Wall Street, said the $700 billion bailout hasn’t stopped the “culture of excessive risk-taking” that led to the financial crisis. The Troubled Asset Relief Program also has “injected an unprecedented level of pricing distortions and moral hazard into the marketplace,” Warren said at a hearing today of the Congressional Oversight Panel on TARP, which she leads.

- Terrorists Inside US Increase Attacks, Panel Hears. Terrorist incidents over the past 12 months show that Islamic extremists within the U.S. increasingly are launching attacks against targets such as military bases, anti-terrorist experts said today. “The threat is now increasingly from within, from homegrown terrorists who are inspired by violent Islamist ideology to plan and execute attacks where they live,” Mitchell Silber, director of intelligence analysis for the New York City Police Department, said. Silber was among witnesses testifying to the Senate Homeland Security and Governmental Affairs Committee, which has started an investigation into events leading up to the Nov. 5 shooting rampage at Fort Hood, in which 13 people were killed and 43 were injured.

- Suntech Power Holdings Co.(STP) and Trina Solar Ltd.(TSL) plan to increase production of solar power modules next year after third-quarter sales and profits beat analyst estimates. The companies rose in U.S. trading. Suntech Chief Executive Officer Zhengrong Shi intends to boost capacity 40 percent to 1,400 megawatts by mid-2010. Trina aims to increase cell and module production to 600 megawatts by the end of this year and to as much as 950 megawatts next year. “The market is gaining momentum faster than anyone expected,” Suntech’s Shi said today in a phone interview from China. “We have to expand really fast. In the third quarter, we couldn’t keep up with demand.”

- U.S. consumers may not save money and could wind up paying higher credit-card costs if lawmakers force payment networks including Visa Inc.(V) and MasterCard Inc.(MA) to cut fees charged to merchants, a government watchdog said. “Identifying such savings would be difficult,” the Government Accountability Office said in a report today. “Consumers also might face higher card-use costs if issuers raised other fees or interest rates to compensate for lost interchange fee income.” The report may derail efforts to cut “swipe fees” paid by merchants on each transaction.

- San Francisco Bay Area home prices rose for the first time since November 2007 as fewer foreclosures were sold, MDA DataQuick said. The median price for houses and condominiums increased 4 percent in October from a year earlier to $390,000, the San Diego-based research company said today in a statement. The number of homes sold rose 4.2 percent to 7,933 for the nine- county region. Prices gained 6.8 percent from September. Sales of homes priced over $500,000 made up 36 percent of transactions, up from a low this year of 23 percent in January. Foreclosure sales were 32 percent of the total, the lowest since June 2008, according to MDA DataQuick.

Wall Street Journal:

- Conditions in Cuba haven't improved under Raúl Castro and in some ways are worse than they had been when his brother Fidel was president, according to Human Rights Watch. In a report released Wednesday, the group accuses Raúl Castro's government of systematic repression and creating "a pervasive climate of fear among dissidents and, when it comes to expression of political views, in Cuban society as a whole."

- Birds Eye Foods, the largest frozen-vegetable company in the U.S., will be acquired for $1.3 billion by Pinnacle Brands Corp. Owned by private-equity giant Blackstone Group, Pinnacle is one of the country's largest packaged-food companies with well-known consumer brands such as Duncan Hines baking mixes and Swanson frozen dinners.

- Many employers are planning to reinstate merit increases in 2010, but some compensation experts say base salaries are unlikely to return to pre-recession levels anytime soon, if ever. Of 555 large U.S. employers polled in October, 83% said they will give out raises next year, while only about half did so in 2009, reports Lincolnshire, Ill.-based Hewitt Associates Inc. None anticipate pay reductions next year, after 10% cut salaries in 2009, according to data Hewitt collected. Companies will raise salaries in 2010 by an average of 2.5%, the second-lowest level on record since this year, when salaries dipped to 1.8%, the survey shows. In 2002, companies raised salaries an average 3.6%, then the lowest level on record, which was down from 4.3% in 2001, Hewitt reports. "We're going to be living in the upper 2% and lower 3% neighborhood for a very long time," says Ken Abosch, North American compensation practice leader for Hewitt. "Companies have fought very hard to bring their cost structure under control and they're not going to easily allow costs to creep back."

- News Corp. (NWS) is working on how to charge for its online news at a fair price, James Murdoch, the media group's chairman and chief executive for Europe and Asia, said Thursday, a day after The Times newspaper provided more detail on its plans and a spring 2010 deadline to implement them. News Corp. wants to charge users either reading its stories online or for companies distributing its content on their Web sites.

- A U.S. Senate panel on Thursday battled over whether the country could expand oil and gas drilling in coastal waters without damaging the environment, spotlighting one of the big fights over climate legislation. The debate in the U.S. Senate Environment and Public Works Committee comes as Senate lawmakers are negotiating over legislation to cut greenhouse-gas emissions by more than 80% by 2050. A vote in the panel earlier this year suggested any deal must include expanded oil and gas drilling--even though the environmental wing of the Obama administration's base and some Democratic Senators are opposed. "There's a need for balance," said Sen. Lisa Murkowski (R-Alaska), the top Republican on the panel. She said last month in an interview on C-Span that she would be "open-minded" about supporting climate legislation as long as it was tied to more oil and gas development and more support for nuclear energy. She questioned whether the Obama administration's approach on coastal drilling--it has delayed acting on five-year drilling plan--reflected her concerns. "The oil and gas industry can develop offshore resources with a footprint smaller than ever before," Marvin Odum, the president of Royal Dutch Shell's (RDSA) U.S. operations, said in prepared testimony. He cited a deepwater project in the Gulf of Mexico called Peridido that is to begin producing in the next few months, which Shell touts as the world's deepest drilling and production facility. Among the drilling techniques to be used is a type that allows more wells to be accessed from a smaller surface area on the sea floor.

- The Chicago Board Options Exchange has asked U.S. regulators to continue to allow options traders to use so-called flash orders, despite proposed bans on the practice for both options and cash equities. Bill Brodsky, chairman and CEO of the largest U.S. options exchange, said in a letter to the Securities and Exchange Commission that the practice helps retail investors secure better pricing.

CNBC:

- The Obama administration is promising to change the way it counts the number of jobs saved or created by the economic stimulus program, after the Government Accounting Office revealed measurement flaws in the current system. The GAO report made public today, part of bimonthly tracking of Recovery Act spending, says recent stimulus-related job claims by the administration are inaccurate. The number of jobs created or saved and the accuracy of those figures have been the subject of intense media attention, scrutiny and criticism since the White House touted the Recovery Board’s report that claimed approximately 640,329 jobs had been created or saved through the billions spent on contracts, grants and loans. The GAO says the numbers are incorrect and it provides scenarios where both understating and overstating the figures may have occurred. Here is a sampling of the most glaring flaws noted in the GAO report:

NY Times:

- In nearly a dozen recent terrorism cases in the United States, Britain and Canada, investigators discovered the suspects had something in common: a devotion to the message of Anwar al-Awlaki, an eloquent Muslim cleric who has turned the Web into a tool for extremist indoctrination. Mr. Awlaki, 38, the son of a former agriculture minister and university president in Yemen, has never been accused of planting explosives himself. But experts on terrorism believe his persuasive endorsement of violence as a religious duty, in colloquial, American-accented English, has helped push a series of Western Muslims into terrorism. Maj. Nidal Malik Hasan, the Army psychiatrist charged with killing 13 people at Fort Hood, Tex., on Nov. 5, is only the latest suspect accused of perpetrating or plotting violence to be linked to the cleric.

- Nearly one in 10 homeowners with mortgages were at least one payment behind in the third quarter, the Mortgage Bankers Association said Thursday. That is the highest figure since the association began keeping records in 1972. It is up from about one in 14 mortgage holders in the third quarter of 2008. “Clearly the results are being driven by changes in employment,” Jay Brinkmann, the association’s chief economist, said on a conference call with reporters. Five million more unemployed people over the last year has turned into about two million more overdue loans, he added.

NYPost:
- Microsoft's(MSFT) Xbox Live online service, which is already competing with television networks for viewers, is now making a play for TV advertisers. The software giant wants to court Madison Avenue by measuring its Xbox Live audience in much the same way that Nielsen tracks traditional TV viewers. Microsoft and Nielsen have teamed up for a pilot program that will measure the second season of the Xbox Live game show, "1 vs. 100" using Nielsen's established TV ratings system.

Washington Post:

- Bailout program could be extended. Administration officials are grappling with how best to announce the extension of the Troubled Assets Relief Program(TARP) at a time when the economy is struggling and the unemployment rate is at its highest point in 26 years. No final decision about the fate of the bailout has been made, and officials are keenly aware that their preferred course contains risks. Officials worry that lawmakers, seeking to fund their own projects, may try to tap any large sum of unused money set aside for debt reduction, the sources said, speaking on condition of anonymity because the internal deliberations were private. Congressional Democrats are already eyeing the unexpended bailout cash as a source of funding for new efforts to combat soaring unemployment.

The Business Insider:

- Will the Apple(AAPL) tablet launch in a few months? In a year? Maybe. But as far as Apple's business goes, it doesn't matter. Today, a widely circulated report from Taiwan suggests that Apple's tablet won't launch until late next year. To now, it was believed that the tablet would launch early next year. The report could be hogwash -- the site that reported it, DigiTimes, has a flaky history. But let's assume, for the sake of argument, that it's correct. What does it mean?

Charlotteobserver.com:

- While many of his peers are hunkering down in the financial crisis, U.S. Bancorp(USB) chief executive Richard Davis is on the offensive. This spring, for instance, the Minneapolis-based bank announced plans to open a new capital markets and corporate banking office in Charlotte. On Monday, Davis, 51, was in town to meet employees, visit with clients and check out a trading floor set to open Monday in the bank's Hearst Tower offices. The bank has nearly 150 employees here in corporate banking, capital markets and a corporate trust business purchased from Wachovia Corp. in 2005. It has said it's adding a total of about 70 employees here by the end of next year, although Davis said the number could be higher.

Morningstar:

- Republican lawmakers Wednesday sought to preserve the current Treasury backstop of the private student-loan marketplace, rather than pursue more ambitious plans favored by congressional Democrats and the Obama administration. The House passed a bill in September that would effectively remove all private-market involvement in providing student loans. That vote was almost entirely along partisan lines. The legislation has become bogged down in the Senate, partially due to the continuing haggling in that chamber over health care, but also because of concerns by a growing number of moderate Democratic lawmakers over what has been proposed. According to lobbyists advocating both in favor and against the changes, the number of Democratic senators who have expressed concerns about the proposed student-loan-market overhaul either in public or private ranges from 12 to 20.

The Pragmatic Capitalist:

- What Are The Best Hedge Funds Buying?

Zerohedge:

- 13^th Straight Week of Domestic Equity Fund Outflows As Market Rips 11% Over Same Period.

Cnet news:

- In a troubled economy, companies and consumers are looking for any advantage they can get. So it is that Best Buy(BBY) is jumping the gun by as much as nine days on Black Friday, announcing that, starting immediately, shoppers can get Black Friday bargain pricing on select products. The electronics retailer says that the come-hither pricing will be offered on "certain models of flat panel televisions." It will also feature reduced pricing on some home-theater products. The deals are available in-store and online.

- Windows 7 isn't just getting good reviews, it's also selling well, CEO Steve Ballmer told shareholders Thursday. Delivering opening remarks at Microsoft's shareholder meeting, Ballmer said that Windows 7 was off to a "fantastic start." "We've already sold twice as many units as any OS in a comparable time frame," Ballmer said. "Windows 7 is simply the best PC operating system that we or anyone else has ever built." By last week, Windows 7 accounted for 4 percent of Web-accessing devices, according to Net Applications; it took Vista more than seven months to reach that level. Addressing the overall economy, Ballmer reiterated that things seem to have stabilized.

Rassmussen:

- The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 27% 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 -14. That matches the lowest Approval Index rating yet recorded for this President (see trends).

- To Create Jobs, Voters Say Cut Taxes and Stop Spending. The latest Rasmussen Reports national telephone survey shows that 62% believe tax cuts are a better way to create jobs and fight unemployment. Only 21% believe that additional stimulus spending is a more effective tool.

Politico:

- Treasury Secretary Timothy Geithner is taking fire from both sides of the aisle, as liberals and conservatives are now pushing for him to resign. In a tense exchange before the Joint Economic Committee this morning, Rep. Kevin Brady (R-Texas) asked Geithner to resign over his handling of the economy, AIG bonuses and stimulus spending. “Conservatives agree that as point person you’ve failed," Brady said. "Liberals are growing in that consensus as well … will you step down from your post?” One of the "liberals" Brady was referring to is Rep. Peter DeFazio (D-Ore.), who said on MSNBC Wednesday there is "a growing consensus" that Geithner needs to be replaced.

- Sen. Joe Lieberman’s threat to filibuster any health care bill with a public option could kill health reform this year — and embolden Democratic challengers who’d like to send him packing in 2012. But Lieberman doesn’t seem worried. “I don’t think about that stuff,” Lieberman told POLITICO this week. “I’m just — I’m being a legislator. After what I went through in 2006, there’s nothing much more that anybody [who] disagrees with me can try to do.”

TheStreet.com:

- It isn't Google's (GOOG) Android mobile phone success, nor the upcoming Chrome computer operating system. UBS put a $700 price target on the stock Thursday due to a rebound in good, old Internet ad pricing.

NYDailyNews:

- Former Mayor Rudy Giuliani has decided not to run for governor next - but will run for U.S. Senate instead, sources told the Daily News.

AP:

- Companies fraudulently collected at least $100 million in federal contracts from a $4 billion government program designated for disabled military veterans who run small businesses, congressional investigators charge. The Small Business Administration failed to check if companies were eligible for the no-bid contracts for veterans with service-related injuries, allowing, for example, a contracting employee at a military base in Tampa, Fla., to improperly funnel a $900,000 Air Force contract to his wife's firm. Moreover, because there are few penalties for companies found ineligible, many were still being handed tens of millions of dollars in government work even after they were found to be flouting the rules, according to the report released Thursday by the Government Accountability Office. In many cases, small business owners falsely claimed they had a service-related injury to get the federal work — such as a $7.5 million FEMA contract for Hurricane Katrina work — and were only caught when competitors protested. In other situations, the small veteran-owned businesses were legitimate but then improperly passed the work to large or foreign-based corporations.

Reuters:

- Williams-Sonoma Inc (WSM) posted a higher-than-expected quarterly profit and raised its full-year forecast on Thursday, helped by cost cuts and a move to offer lower-priced home goods. The operator of the Williams-Sonoma cookware and Pottery Barn furnishings chains has updated its styles and slashed prices on some items to woo shoppers in the economic downturn. Throughout the quarter, response to the company's merchandise and marketing efforts was "progressively stronger-than-anticipated," resulting in improved selling margins, Williams-Sonoma Chief Executive Officer Howard Lester said in a statement. "The results are an indication that upper-income consumers are spending a bit more, which is not surprising given the rally in the stock market and the stabilization in the housing market," Barclays analyst Michael Lasser said.

- American Superconductor Corp(AMSC) said it expects fiscal 2010 adjusted earnings per share to grow more than 80 percent, helped by a strong backlog and lower costs, and reaffirmed its outlook for the current financial year. The company, which makes electrical systems for wind farms and turbines, expects adjusted earnings per share to be more than $1.15 for 2010. With more than $300 million of fiscal 2010 backlog in hand, the company has a strong platform to grow total revenue to more than $400 million in the year, Chief Executive Greg Yurek said.

- GameStop Corp's (GME) quarterly profit beat expectations helped by price cuts that stoked video game console demand and as used-game sales boosted margins -- signs a months-long period of gloom may be easing. The optimism is in contrast to months of dour industry sales reports as the sluggish economy discourages consumers from buying $60 games and consoles costing $200 or more. Consumers are returning to the stores for titles like new versions of Microsoft's "Halo" and Electronic Arts' (ERTS) "Madden NFL," as well as Square Enix's "Batman: Arkham Asylum" and Take-Two Interactive's (TTWO) "NBA 2K10." "In this category, it's less about the economy and more about the title catalog, and that started to happen for us in this quarter," Raines said in an interview. "We saw gamers coming back to us."

- U.S. Federal Reserve officials on Thursday said inflation is not an imminent threat and downplayed the consequences of the falling U.S. dollar. Philadelphia Federal Reserve Bank President Charles Plosser and Dallas Federal Reserve Bank President Richard Fisher both said the U.S. recovery was underway but noted risks to growth remain.

- Google Inc (GOOG) is opening its much-anticipated Chrome software to external developers, as the search giant prepares to expand its reach into operating systems. The company hosted a media event on Thursday to show off the free cloud-based software, which it hopes to have on the market in netbooks ahead of the 2010 holiday season. Google executives said they designed Chrome with an emphasis on speed, security and simplicity. The software currently starts up on a PC in seven seconds, and Google said it is hoping to cut the boot time further.

Financial Times:

- A string of countries have edged towards imposing capital controls to stop short-term speculative inflows driving their currencies higher amid concerns about the growth of an emerging market asset bubble. On Thursday Brazil, which surprised the markets a month ago by imposing a 2 per cent tax on the inflow of money destined for financial assets, said it would further tighten those restrictions. The finance ministry imposed a new 1.5 per cent tax on the issuance of depository receipts, assets that allow Brazilian companies to offer shares on foreign exchanges.

Telegraph:

- Britain’s banks are in a worse state than those anywhere else in the developed world and show no signs of recovery, according to the world’s largest credit-checking company.

Leipziger Volkszeitung:

- Chancellor Angela Merkel’s government is prepared to send more troops to Afghanistan and deliver arms to the Afghan army, she said.