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Bloomberg:
- Chief executive officers in the U.S. are more confident that the world’s largest economy is on the road to recovery as the job market stabilizes and business investment increases, a private survey found. The Business Council’s confidence gauge climbed to 64.7 this month, the highest level in at least four years and up from 63.2 in an October survey, a report from the Washington-based group today showed.
- Fannie Mae and Freddie Mac’s plan to step up purchases of delinquent loans may boost prepayments on their securities to rates that in some cases would erase all of the debt within a year. The difference between their policies caused the price gap between their securities to jump. The constant prepayment rate, or CPR, for Freddie Mac’s 30- year fixed-rate securities with 6.5 percent coupons will likely surge by 70 this month under the plan released yesterday by the McLean, Virginia-based company, based on Bloomberg calculations. The measure, which was 17.2 last month, represents the share of the debt that would be retired in a year at the current pace. Freddie Mac said yesterday that it would buy “substantially all” loans with payments late by 120 days or more from its securities in the next month. Fannie Mae said later that it will “increase significantly” its buyouts, setting a less aggressive timeline. The value of Freddie Mac’s delinquent loans is $70 billion, while Fannie Mae has $130 billion of the debt, according to Citigroup Inc. data. “This is going to be a wad of cash coming into the fixed- income markets and it’s not immediately clear where it’s going to be reinvested,” said Jim Vogel, head of agency-debt research at FTN Financial in Memphis, Tennessee.
- German and French banks’ “enormous” exposure to Portugal, Ireland, Greece and Spain explains why Europe’s biggest economies are moving to rescue their southern neighbors, Societe Generale SA said today. Banks in Germany and France alone have a combined exposure of $119 billion to Greece and $909 billion to the four countries, according to data from the Bank for International Settlements. Overall, European banks have $253 billion in Greece and $2.1 trillion in the so-called PIGS. “The exposure is enormous,” said Klaus Baader, co-chief European economist at Societe Generale in London. “The crisis in Greece isn’t Greece’s problem alone but a concrete problem for Europe’s whole banking sector. That explains the interest of finance ministers in stabilizing the situation.”
- The U.S. Northeast struggled with transportation problems from this week’s blizzard as the threat of another storm caught the eye of forecasters. Snow in Texas canceled flights at Dallas-Fort Worth International Airport. Both Reagan National and Dulles International airports reopened today after being shuttered by a storm that set a seasonal snow total of 54.9 inches in Washington, according to the Metropolitan Washington Airports Authority Web site. The federal government remains closed for the fourth day.
- The number of applications for U.S. jobless benefits dropped last week as states whittled down a year-end backlog, bringing claims down to a level that signals companies are firing fewer workers as the economy recovers. Claims fell by 43,000, more than anticipated, to 440,000 in the week ended Feb. 6, Labor Department figures showed today in Washington. The total number of people getting unemployment insurance and those receiving extended benefits decreased. The blizzard that brought the eastern U.S. to a standstill, signals claims for this week will probably be affected by the weather, Feroli said. The White House’s Council of Economic Advisers today predicted a monthly rise of 190,000 jobs on average next year and 251,000 in 2012, according to its an annual report to the president.
Wall Street Journal:
- Tens of thousands of pro-government demonstrators rallied in Tehran on Thursday as security forces dispersed—sometimes violently—pockets of protesters, who had vowed to show up in large number to demonstrate against the government. President Mahmoud Ahmadinejad, meanwhile, said Iran had successfully produced its first batch of higher-enriched uranium for a medical-research reactor, his latest act of defiance against an international community increasingly worried that the country is pursing nuclear weapons.
- The University of East Anglia said it will launch an independent review of the science published by its Climatic Research Unit, the latest attempt to address questions about the quality of its work that erupted after hundreds of the climate center's emails were disclosed late last year. The university said the Royal Society, the U.K.'s national science academy, will help it identify independent assessors with the requisite expertise and standing to carry out the review. The independent inquiry is in addition to an internal review already under way at the university. The announcement comes more than two months after hundreds of emails -- hacked from the UEA Web site and published online -- appeared to show CRU scientists attempting to prevent access to climate data and keep research from climate skeptics out of the scientific literature.
NY Times:
- As part of the discussion last year over how best to overhaul the nation’s health care system, the insurance industry promised to do its part by tackling the burdensome paperwork involved in paying medical claims. Despite the health care legislation’s impasse in Congress, the insurers say they still plan to make good on their promise. On Thursday, the two main industry trade groups, America’s Health Insurance Plans and the Blue Cross Blue Shield Association, are to announce a pilot program in New Jersey. Five of the state’s largest private insurers plan to offer doctors and hospitals the ability to use a single Web portal to check a patient’s coverage and track claims, regardless of which of those five health plans they are enrolled in.
The Business Insider:
- Long/Short Hedge Funds: Lowest Net Long Exposure Since May 2009.
BusinessWeek:
- Benchmark gauges of credit risk in the U.S. and Europe fell after European leaders announced an accord to contain Greece’s budget crisis. Credit-default swaps on European companies with the lowest ratings, though, rose as investors awaited more details on the accord. The Markit CDX North America Investment Grade Index, a benchmark of credit-default swaps that investors use to hedge against losses on corporate debt, fell 1.5 basis point to a mid- price of 100 basis points as of 12:45 p.m. in New York, according to Barclays Capital. In London, the Markit iTraxx Europe Index fell 0.5 basis point to 87.25 basis points, JPMorgan Chase & Co. prices show.
Sacramento Bee:
- California lawmakers grilled state officials Wednesday over $75 million spent for vehicles, furniture and conferences last year while the state was slashing school, health and social service programs. The purchases by key public agencies came during one of the worst fiscal crises in state history. "We've got to answer to our constituents – and they're screaming at us," Assemblyman Tom Berryhill, R-Modesto, said of state spending.
ABC News:
- Osama bin Laden's son has a chilling warning for those who are hunting his father with drones, secret agents and missile strikes. From Omar bin Laden's up-close look at the next generation of mujahideen and al Qaeda training camps he says the worst may lie ahead, that if his father is killed America may face a broader and more violent enemy, with nothing to keep them in check. "From what I knew of my father and the people around him I believe he is the most kind among them, because some are much, much worse," Omar bin Laden, who was raised in the midst of his father's fighters, told ABC News in an exclusive interview. "Their mentality wants to make more violence, to create more problems."
Seeking Alpha:
- Today we present you with hedge fund Prologue Capital's January investor letter. In its latest market commentary, Prologue's Chief Economist Tomas Jelf covers Prologue's macro thoughts. In reference to the U.S. economic situation, Prologue thinks that the recovery is playing out as it envisioned and has discussed in previous commentaries. The fund continues to expect positive signs throughout the first half of the year due to inventory lift and demand improvement. It also harps on the fact that the main thing to pay attention to is not job creation but rather the extent to which it will reduce unemployment. The hedge fund thinks that even in the most 'bullish' of scenarios for the economy, that the U.S. will have very substantial slack in the labor market throughout 2010 and well into 2011. Prologue also makes special note of the situation in Europe and points out that Europe's economy has notably decelerated since Prologue's last investor letter. Jelf also notes that the inflation outlook in Europe looks stable. In terms of inflation in the U.S., Prologue largely expect the Fed to leave interest rates unchanged until possibly the fourth quarter. Inflationary expectations will remain low and then gradually begin to head higher.
- The new financial derivative designed by credit specialists at Citi (C) should be banned. It's too dangerous to exist, adding unfathomable levels of systemic risk, and depends entirely on arbitraging implicit government backing. You might have heard that Citi has constructed the CLX, which is an index designed to allow firms to sell a kind of insurance against a future liquidity crisis. The idea is that buyers would invest in CLX products that would pay off as funding costs for financial institutions increased and require payments as they decreased. The very first problem with this product is that it is meant to involve no upfront costs. This trade could make the biggest sellers of liquidity protection dangerously important to the financial system. They would wind up as the only fir m's that would need to be bailed out in the event of a crisis, since the firms that bought CLX protection from them would get backdoor bailouts when that protection paid off. This tracks very closely with what we saw with the AIG bailout. The only firms that will be able to sell the insurance will be firms deemed too big to fail. That is, you wouldn't buy this kind of insurance from a firm you believed might also face a liquidity risk.
Rassmussen:
Politico:
- Senate Banking Chairman Chris Dodd and freshman Republican Sen. Bob Corker have teamed up to negotiate financial reform legislation, less than a week after Dodd’s months-long talks with the panel’s top Republican collapsed. “I came here to try to deal with issues that needed to be dealt with. I think this is one that is. And hopefully we can do that,” Corker said in an interview with POLITICO Thursday morning. Dodd called the Tennessee senator Tuesday night and asked him to team up on negotiating the legislation.
- The trial of Khalid Sheikh Mohammed has divided Democrats, as two powerful committee chairmen are backing the Obama administration's push for civil trials, while another high-profile Democrat is endorsing Republican calls for a military tribunal. "We are writing today to endorse the use of our federal criminal courts to prosecute and bring terrorists to justice," Sens. Patrick Leahy (D-Vt.) and Dianne Feinstein (D-Calif.) wrote in a letter to President Barack Obama on Tuesday. Leahy is the chairman of the Judiciary Committee, and Feinstein is chairwoman of the intelligence committee.
Lloyd’s List:
- Most ocean-going oil tankers will be unprofitable for the next five years, citing analysis by McQuilling Services LLC. Losses will average $7,329 a day for supertankers and $9,097 for medium-range tankers, citing Llyod’s.
Real Clear Politics:
- Pelosi Pushes to Bypass GOP If It Continues to Oppose Health Bill’s Passage.
Reuters:
Handelsblatt:
- The European Central Bank has voiced concerns about the Greek government’s plans to cut spending and reduce the budget deficit, citing European Commission officials. The Greek government’s assumptions regarding the country’s economic growth are too optimistic and planned spending cuts lack detail, the official said.
Il Sole 24 Ore:
- Former European Central Bank Chief Economist Otmar Issing said the euro region is at a “dangerous crossroads” and a bailout for Greece will undermine economic reform in other countries, citing an interview. “Once it is decided to help Greece, then it will not be possible to refuse help to any other country in difficulty,” citing Issing. “The next candidates are already standing in line” and waiting for help, he said. Any Greek request for help after failing to abide by European Union budget guidelines amounts to “blackmail,” Issing said. Greece, like Ireland, “must get out of this crisis on its own,” Issing said.
Style Underperformer:
Large-Cap Value (+.63%)
Sector Underperformers:
Education (-.79%), Networking (-.26%) and Utilities (-.13%)
Stocks Falling on Unusual Volume:
EXPE, TRAK, FLIR, CATM, HOLI, SKYW, SWM, MAS, SLF, MFC, BT, ASF, HOS, FE, RE, ECL, DF and EGP
Stocks With Unusual Put Option Activity:
1) S 2) EXPE 3) BNI 4) WFMI 5) CADX
Style Outperformer:
Mid-Cap Growth (+.27%)
Sector Outperformers:
Coal (+2.99%), Road & Rail (+2.03%) and Homebuilding (+2.02%)
Stocks Rising on Unusual Volume:
KSU, VLTR, CSX, NVDA, PTNR, PL, TLEO, ATVI, TKLC, CHBT, CRZO, SCOR, ACLI, HUBG, LUFK, CME, TSTC, ABAX, SPWRA, AYE, CPA, AIG, ATR and HGR
Stocks With Unusual Call Option Activity:
1) AIG 2) S 3) BNI 4) BSX 5) PM
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