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Bloomberg:
- House Democrats will propose more than doubling taxes on money managers at private-equity and venture capital firms to pay for the renewal of 45 tax breaks due to expire soon, a Democratic aide said. President Barack Obama proposed raising taxes on fund executives in his first budget earlier this year. An increase would affect general partners at buyout firms, hedge funds, venture capital firms and other partnerships including real estate and oil and gas investments. The action would force managers to pay ordinary income tax rates instead of capital gains rates on their share of profits. The top ordinary rate is 35 percent and is scheduled to increase to 39.6 percent in 2011; the capital gains rate is 15 percent and will rise to 20 percent in 2011. The House passed such a tax increase in June 2008 for executives at firms such as Blackstone Group LP and Carlyle Group in an effort to fund middle-class tax cuts. The plan failed because of opposition in the Senate and from the Republican administration of then-President George W. Bush. Michigan Representative David Camp, the top Republican on the tax-writing House Ways and Means Committee, said his party would oppose the provision as it has in the past. “I don’t think we should have permanent tax increases on some groups to pay for temporary extensions of law that benefit somebody else,” Camp said. Republicans also believe the tax would hurt investment. “It’s basically a tax increase on every real estate transaction in America,” he said.
- Employers in the U.S. cut the fewest jobs in November since the recession began, and the unemployment rate unexpectedly fell, signaling that the recovery is lifting the labor market out of the worst slump since World War II. Payrolls fell by 11,000, figures from the Labor Department showed today in Washington, compared with the median forecast for a 125,000 decline in a Bloomberg News survey of 82 economists. The jobless rate declined to 10 percent.
- Banks Take Losses on Short Sales as Foreclosures Soar.
- Gold fell for the first time this week, heading for the biggest drop in almost a year, as a rising dollar spurred some investors to sell bullion on the heels of a rally to an all-time high. The U.S. Dollar Index, a six-currency gauge of the greenback’s value, rose as much as 1.3 percent after a government report showed U.S. employers cut fewer jobs last month than forecast. Gold futures fell as much as 4.9 percent from a record of $1,227.50 an ounce, set yesterday in New York. “So many people have piled into gold, so this pop in the dollar is freaking people out,” said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago. “The dollar is rocking and gold is getting its teeth kicked in.” “Not only is speculative length in gold at a record high, history shows U.S. dollar losses in December will be recouped in the first four weeks of the new year,” Deutsche Bank AG analysts said today in a report. Gold’s rally pushed its 14-day relative strength index, a gauge watched by some investors as an indicator of future direction, to 83.5 yesterday. Some analysts and investors who use technical charts view a reading of more than 70 as a signal that the price may soon drop. “Gold is going to fall under its own weight,” said Tom Hartmann, an analyst with AltaVista Worldwide Trading Inc. in Mission Viejo, California. “There aren’t a lot of people out there who have been short on gold.”
- Four OPEC nations said they doubt the group will change supply quotas when it meets in Angola later this month because oil prices are at levels members consider satisfactory. Officials from Kuwait, Algeria, Libya and Qatar attending a meeting of Arab producers in Cairo said they want the Organization of Petroleum Exporting Countries to maintain production targets at its Dec. 22 gathering. Saudi Arabia, OPEC’s biggest producer, said current prices near $75 a barrel are “close to the target.” Kuwaiti Oil Minister Sheikh Ahmed al-Abdullah al-Sabah said that rising global inventories haven’t caused prices to drop because of the weakness of the U.S. dollar and speculation. “We have excess oil supply, but it’s not affecting the price,” al-Sabah told reporters when he arrived at Cairo airport yesterday. “We are satisfied with the current economic situation.”
- Carbon Capitalists Warming to Climate Market Using Derivatives. Masters, 40, oversees the New York bank’s environmental businesses as the firm’s global head of commodities. JPMorgan brokered a deal in 2007 for Land Rover to buy carbon credits from ClimateCare, an Oxford, England-based group that develops energy-efficiency projects around the world. Land Rover, now owned by Mumbai-based Tata Motors Ltd., is using the credits to offset some of the CO2 emissions produced by its vehicles. For Wall Street, these kinds of voluntary carbon deals are just a dress rehearsal for the day when the U.S. develops a mandatory trading program for greenhouse gas emissions. JPMorgan(JPM), Goldman Sachs Group Inc.(GS) and Morgan Stanley(MS) will be watching closely as 192 nations gather in Copenhagen next week to try to forge a new climate-change treaty that would, for the first time, include the U.S. and China. Those two economies are the biggest emitters of CO2, the most ubiquitous of the gases found to cause global warming. The Kyoto Protocol, whose emissions targets will expire in 2012, spawned a carbon-trading system in Europe that the banks hope will be replicated in the U.S. The U.S. Senate is debating a clean-energy bill that would introduce cap and trade for U.S. emissions. A similar bill passed the House of Representatives in June. The plan would transform U.S. industry by forcing the biggest companies -- such as utilities, oil and gas drillers and cement makers -- to calculate the amounts of carbon dioxide and other greenhouse gases they emit and then pay for them. Estimates of the potential size of the U.S. cap-and-trade market range from $300 billion to $2 trillion. Banks intend to become the intermediaries in this fledgling market. Although U.S. carbon legislation may not pass for a year or more, Wall Street has already spent hundreds of millions of dollars hiring lobbyists and making deals with companies that can supply them with “carbon offsets” to sell to clients. JPMorgan, for instance, purchased ClimateCare in early 2008 for an undisclosed sum. This month, it paid $210 million for Eco-Securities Group Plc, the biggest developer of projects used to generate credits offsetting government-regulated carbon emissions. Financial institutions have also been investing in alternative energy, such as wind and solar power, and lending to clean-technology entrepreneurs. The banks are preparing to do with carbon what they’ve done before: design and market derivatives contracts that will help client companies hedge their price risk over the long term. They’re also ready to sell carbon-related financial products to outside investors. As a young London banker in the early 1990s, Masters was part of JPMorgan’s team developing ideas for transferring risk to third parties. She went on to manage credit risk for JPMorgan’s investment bank. Among the credit derivatives that grew from the bank’s early efforts was the credit-default swap. A CDS is a contract that functions like insurance by protecting debt holders against default. In 2008, after U.S. home prices plunged, the cost of protection against subprime-mortgage bond defaults jumped. Insurer American International Group Inc., which had sold billions in CDSs, was forced into government ownership, roiling markets and helping trigger the worst global recession since the 1930s. Now, that story -- and the entire role the banks played in the credit crisis -- has become central to the U.S. carbon debate. Washington lawmakers are leery of handing Wall Street anything new to trade because the bitter taste of the credit debacle lingers. And their focus is on derivatives. Along with CDSs, the most-notorious derivatives are the collateralized-debt obligations they often insured. CDOs are bundles of subprime mortgages and other debt that were sliced into tranches and sold to investors. “People are going to be cutting up carbon futures, and we’ll be in trouble,” says Maria Cantwell, a Democratic senator from Washington state. “You can’t stay ahead of the next tool they’re going to create.” Although U.S. President Barack Obama and his economic team support cap and trade, Washington politics could defeat it. The House bill passed in June by just seven votes, and senators on both sides of the aisle worry that imposing pollution caps on industry will result in higher energy bills for consumers at a time when U.S. unemployment tops 10 percent. Karl Rove, former president George W. Bush’s deputy chief of staff, wrote in Newsweek magazine in November that cap and trade “would put America on a ruinous course.” Republican Senator James Inhofe of Oklahoma, who in 2006 called Nobel Prize winner and former Vice President Al Gore “full of crap” on global warming, boycotted committee meetings on the Senate bill in November.
- Capital One Financial Corp.(COF) warrants held by the U.S. government’s bank bailout program sold for $146.5 million, signaling taxpayers may get less reward than some analysts had predicted for rescuing the financial system. The Treasury Department’s first auction of warrants held by the Troubled Asset Relief Program drew $11.75 each for 12.7 million of the securities, the agency said today in a statement. The results may influence prices in the pending auction for warrants in JPMorgan Chase & Co. and a decision by Bank of America Corp. on whether to buy back its TARP warrants, in which billions of dollars are at stake. “Taxpayers and the government did not appear to get a ‘good deal’ ” when compared with some private-sector forecasts, said Dan Greenhaus, chief economic strategist at Miller Tabak & Co., in an e-mail.
- Investors should buy “screamingly cheap” Treasuries in the expectation that the Federal Reserve will keep interest rates on hold through next year as inflation remains subdued, according to Royal Bank of Scotland Plc. Record-low interest rates will lead to a “wall of liquidity” looking for returns, Andrew Roberts, head of European rates strategy at RBS in London, said in an interview. The best investments will be Treasuries with maturities between five years and seven years, he said. “Next year is the year of the bond,” said Roberts, who joined RBS from Bank of America Corp.’s Merrill Lynch unit last month. “Inflation expectations are way too high and central banks are going to keep rates low through next year.”
- The 17,000 people visiting Denmark for global talks on reducing greenhouse gases will release as much carbon dioxide during the two-week event as about 200,000 U.S. passenger cars do in the period. Environmental activists, government envoys, business leaders and journalists will emit 40,500 tons of the global- warming gas traveling to and within Copenhagen and for electricity and heat in their hotels and meeting rooms, according to an estimate by the United Nations Framework Convention on Climate Change, which oversees the talks. Denmark’s government says it intends to offset the gases. “The fact that all these people are flying into Copenhagen is a wonderful irony,” Adair Turner, chairman of a committee that advises the U.K. government on climate change, said in an interview.
- The Standard & Poor’s 500 Index will be rebalanced after the close of U.S. exchanges today to account for Bank of America Corp.’s sale of 1.286 billion shares. The offering increases Bank of America’s weight in the index, while lowering the proportion of other companies in the equity benchmark, David Blitzer, chairman of the S&P index committee, said in an interview. “If an index fund manager chooses to track the index exactly, he would be increasing his position in Bank of America tonight and selling off, if he doesn’t have cash on hand, small positions in other securities,” said Blitzer, who is based in New York.
Wall Street Journal:
- The Securities and Exchange Commission is expected to ban flash orders on stock exchanges. But the fate of giving market participants a sneak peek at options trades is fuzzy. The options market is much more dependent on flash trading than stock markets, which have received most of the scrutiny from lawmakers and regulators worried that some traders are getting an unfair advantage over other investors. Flash orders allow certain market participants to see orders less than a second or so before the public can trade on those orders.
- The Welfare State and Military Power. Europe-style entitlements mean Europe-sized defenses.
CNBC:
- U.S. lawmakers are looking at ways to limit the damage that large banks, insurers and funds can wreak on the financial system, but breaking up healthy companies is unlikely to be part of the mix because it is too difficult to implement.
MarketWatch.com
Washington Times
- Former Vice President Al Gore on Thursday abruptly canceled a Dec. 16 personal appearance that was to be staged during the United Nations' Climate Change Conference in Copenhagen, which begins next week. As described in The Washington Times' Inside the Beltway column Tuesday, the multimedia public event to promote Mr. Gore's new book, "Our Choice," included $1,209 VIP tickets that granted the holder a photo opportunity with Mr. Gore and a "light snack." The ClimateDepot,com, an online news aggregator that tracks global-warming news reports, referred to the situation as "Nopenhagen," and evidence that popular momentum for the Copenhagen conference "is fading." There are a few floor shows taking place stateside as well. Pajamas Media founder Roger L. Simon and independent filmmaker Lionel Chetwynd -- both members of the Academy of Motion Picture Arts and Sciences and Oscar nominees -- have called on the academy to rescind Mr. Gore's Oscars in light of the Climategate revelations. "In the history of the academy, not to my knowledge has an Oscar ever been rescinded. I think they should rescind this one," Mr. Simon said Thursday. News that British and American scientists had manipulated global warming statistics to suit their agenda was made public two weeks ago after their personal e-mails were posted on the Internet.
The Business Insider:
Rassmussen:
Reuters:
- B.J. Kang may be the most feared man on Wall Street. When Bernie Madoff, who engineered history's biggest Ponzi scheme, was arrested, FBI Special Agent Kang was right at his side. And less than a year later, there was Kang again, in a "perp walk," shuffling alongside a handcuffed Raj Rajaratnam, the former hedge fund star at Galleon accused of earning millions off illegally obtained stock tips. The question on the minds of investors, managers and lawyers inside and outside the hedge fund industry today is, who's next? Of course, no one knows for sure. But court documents and interviews with many industry sources familiar with the case show that agent Kang may be focusing in on Steven A. Cohen and his $12.9 billion SAC Capital Advisors, L.P.
The National:
- The debt restructuring at Dubai World will hit economic growth next year, the IMF said, as credit rating agencies downgraded more Dubai companies. The IMF had expected the global economy to grow by 3 per cent next year, after close to zero growth this year due to the global economic slowdown. “Our anticipation is that there will be a significant reduction in that growth rate, down from 3 per cent, probably somewhere between 1 per cent and 3 per cent,” said Masood Ahmed, the director for the IMF’s Middle East and Central Asia department. Standard & Poor’s yesterday lowered its ratings on six Dubai Government-related entities, taking five of them into “junk” status. The companies downgraded were DIFC Investments, DP World, Jebel Ali Free Zone, Dubai Holding Commercial Operations Group, Emaar Properties and Dubai Multi Commodities Centre Authority, which was already out of investment grade before this latest action. “Standard & Poor’s is of the opinion that, as evidenced in the case of Dubai World and Nakheel, the Dubai Government is either unable or unwilling, or both, to provide extraordinary government support in the form of timely and sufficient financial support to those of its [government-related entities] that provide essential government services on its behalf,” S&P wrote. These six companies remain on watch for further downgrades.
Style Underperformer:
Large-Cap Growth (-.06%)
Sector Underperformers:
Gold (-5.33%), Coal (-2.54%) and Steel (-1.92%)
Stocks Falling on Unusual Volume:
ABX, CDE, CLF, FCX, HES, SU, AAPL, HE, CEG, CSIQ, NANO, KMGB, NUVA, HEAT, PLCE, LIHR, KONG, RGLD, RINO, GOLD, AMZN, PAAS, ILMN, NFLX, SWS, STE, GLD and DD
Stocks With Unusual Put Option Activity:
1) SLM 2) TRV 3) AKAM 4) DD 5) CB
Style Outperformer:
Small-Cap Value (+2.27%)
Sector Outperformers:
Airlines (+4.10%), HMOs (+2.79%) and REITs (+2.71%)
Stocks Rising on Unusual Volume:
PFG, LFC, JCOM, AZN, WFC, JPM, GSK, CAGC, SEED, SIRO, BOBE, EPAY, STST, RMBS, GIII, APKT, FFIN, MRVL, BEAV, CAAS, NAVG, CVLT, KNXA, ROSE, KLAC, GPRE, RECN, BIG, IWC, GWR, ASI, MAN and LUV
Stocks With Unusual Call Option Activity:
1) MRVL 2) OI 3) LUV 4) COF 5) WLP
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