Today's Headlines

Bloomberg:

- Germany’s economic recovery unexpectedly stalled in the fourth quarter of 2009 as waning consumption and investment offset export growth. Gross domestic product, adjusted for seasonal effects, was unchanged from the third quarter, when it rose 0.7 percent, the Federal Statistics Office in Wiesbaden said today. The German slowdown weighed on euro-area growth, which slowed to 0.1 percent from 0.4 percent in the previous quarter. Economists had expected 0.3 percent expansion.

- The Greek budget crisis is a symptom of imbalances that will lead to the breakup of the euro region, according to Societe Generale SA strategist Albert Edwards, and Harvard University Professor Martin Feldstein said monetary union “isn’t working” in its current form. Southern European countries are trapped in an overvalued currency and suffocated by low competitiveness, top-ranked Edwards wrote in a report today. Feldstein, speaking on Bloomberg Radio, said a one-size-fits-all monetary policy has fueled big deficits as countries’ fiscal records differ. The problem for countries including Portugal, Spain and Greece “is that years of inappropriately low interest rates resulted in overheating and rapid inflation,” Edwards wrote. Even if governments “could slash their fiscal deficits, the lack of competitiveness within the euro zone needs years of relative (and probably given the outlook elsewhere, absolute) deflation. Any help given to Greece merely delays the inevitable breakup of the euro zone.”

- China’s central bank took the second step in a month to restrain inflation and damp asset prices, ordering lenders on the eve of a weeklong holiday to set aside larger reserves. The reserve requirement will rise 50 basis points, or 0.5 percentage point, effective Feb. 25, the People’s Bank of China said on its Web site yesterday. The existing level is 16 percent for the biggest banks and 14 percent for smaller ones. Policy makers are reining in credit growth after banks extended 19 percent of this year’s 7.5 trillion yuan ($1.1 trillion) lending target in January and property prices climbed the most in 21 months.

- Developing-nation currencies weakened and the MSCI Emerging Markets Index fell for the first time in four days after China raised reserve requirements for banks and Europe’s economic growth trailed estimates. Brazil’s real led declines against the dollar, losing 0.9 percent to 1.8599 at 2:33 p.m. in London. The ruble slid 0.3 percent as Russia’s Micex stock index dropped 1.8 percent. South Africa’s rand weaken 0.8 percent, while Hungary’s forint, the Czech koruna and Polish zloty dropped against the euro. “The withdrawal of liquidity by central banks is one of the main themes this year,” said Elisabeth Gruie, an emerging- market strategist at BNP Paribas SA in London. Slowing growth in western Europe “could have spillover effects on other markets in central Europe, given their dependence on exports to Germany and other euro-area countries.” The extra yield investors demand to own emerging-market debt over U.S. Treasuries widened five basis points to 3.02 percentage points, JPMorgan Chase & Co.’s EMBI+ Index shows.

- The cost to protect against a default by Dubai surged to the highest since state-controlled Dubai World delayed debt repayments in November, as Greece’s financial crisis reignited concern riskier emerging-market debt might not be repaid. Credit-default swaps linked to Dubai debt jumped the most in two months, rising 53 basis points to 638 basis points at 9:15 a.m. in New York, according to CMA Datavision. The contracts are at the highest since Nov. 27. Dubai’s Islamic bond due 2014 fell to 87.125 cents on the dollar from 89 cents, the lowest since the debt was sold in October, according to Royal Bank of Scotland Group Plc prices.

- Crude oil and copper paced the worst decline for commodities in a week as China, the world’s fastest- growing major economy, sought to cool growth. The S&P GSCI Index of 24 raw materials fell 1.5 percent to 494.132 as of 1:22 p.m. in London, the most since Feb. 5. Oil dropped 1.9 percent in New York trading and copper slid 2.1 percent in London. Aluminum, wheat and gold also declined. “It’s taking everyone by surprise,” said Daniel Brebner, an analyst at Deutsche Bank AG in London. “It’s going to get everybody thinking, ‘How much more tightening will we see out of China?’ This will obviously impact industrial materials.”

- Just 8 percent of Americans want the members of Congress re-elected, according to a CBS News-New York Times poll taken nine months before roughly one-third of the Senate and the entire House face voters. The Feb. 5-10 survey found 81 percent of respondents saying the lawmakers shouldn’t receive another term. By 80 percent to 13 percent, Americans said members of Congress are more interested in serving special interests than the people they represent. Also, 75 percent disapproved of the job Congress is doing, the highest level since 74 percent said they disapproved in October 2008. Congress’s job approval rating was 15 percent in the current survey; it was 12 percent in October 2008.

- Gary Gensler, chairman of the Commodity Futures Trading Commission, is shattering any illusions that his 18 years at Goldman Sachs Group Inc.(GS) would make him sympathetic to Wall Street’s effort to weaken derivatives legislation.

- Jack Rodman, who has made a career of selling soured property loans from Los Angeles to Tokyo, sees a crash looming in China. He keeps a slide show on his computer of empty office buildings in Beijing, his home since 2002. The tally: 55, with another dozen candidates. “I took these pictures to try to impress upon these people the massive amount of oversupply,” said Rodman, 63, president of Global Distressed Solutions LLC, which advises private equity and hedge funds on Chinese property and banking. Rodman figures about half of the city’s commercial space is vacant, more than was leased in Germany’s five biggest office markets in 2009. Beijing’s office vacancy rate of 22.4 percent in the third quarter of last year was the ninth-highest of 103 markets tracked by CB Richard Ellis Group Inc., a real estate broker. Those figures don’t include many buildings about to open, such as the city’s tallest, the 6.6-billion yuan ($965 million) 74- story China World Tower 3. Empty buildings are sprouting across China as companies with access to some of the $1.4 trillion in new loans last year build skyscrapers. Former Morgan Stanley chief Asia economist Andy Xie and hedge fund manager James Chanos say the country’s property market is in a bubble. “There’s a monumental property bubble and fixed-asset investment bubble that China has underway right now,” Chanos said in a Jan. 25 Bloomberg Television interview. “And deflating that gently will be difficult at best.”

- Rome was today hit by its heaviest snowstorm since 1986, covering the Italian capital’s historic monuments with a veil of white and slowing traffic in a city unaccustomed to extreme winter weather.

Wall Street Journal:

- President Barack Obama will sign a $1.9 trillion increase in the federal government's borrowing limit into law Friday, the White House said. The debt-limit boost, passed last week by the House of Representatives, brings the total amount the federal government can borrow to $14.3 trillion and will allow the government to function for the rest of the year. Though the increase represents money already spent by the Treasury Department, it comes as lawmakers struggle to convince voters that they are taking steps to address the record budget deficit, which is on course to reach $1.6 trillion in the current fiscal year.

CNBC:

- The tremors from Europe and China are sparking selloffs in stocks, but the turmoil could be setting up the US market for a strong buying opportunity, strategists say.

NY Times:

- The tiny Baltic states have pursued closer integration with Europe with enormous zeal. But the price of monetary union may be giving them pause. Economists and ordinary citizens alike are watching the protests rumbling through the streets of Athens and the slow response to Greece’s problems coming out of Brussels. “Countries like Estonia and Latvia were once desperate to get in,” said Alf Vanags, director of the Baltic International Center for Economic Policy Studies in Riga. “The euro is not looking so attractive now.”

The Business Insider:

- Hugh Hendry: Here are Four Reasons China Will Start Sucking Wind. Here's why China is not that great, according to Hendry: China, now the world's biggest creditor, is also running persistent trade surpluses. That's only happened twice before: with the US economy in the 1920s and with the Japanese economy in the 1980s. Unlike in most countries, China's share of consumption within its economy has fallen relentlessly, reaching 35% of GDP in 2008. Foreign demand for its exports dropped. Now China relies on a massive surge in domestic bank lending to fuel its growth rate. China's state planners have favored investment over consumption. China's investment spending has tripled since 2001. Domestic consumption never grows fast enough to absorb the supply, and Chinese profitability is already low.

- The Secret Aluminum Shipments That Show China Is De-Stockpilng Its Commodities.

- Financial Times Forcing Journalists Into ‘Risky Situation’ In China, Staffers Say.

- Upstart research firm Waverley Advisors continues to put out some very interesting research and analysis. In a note today they apply Dow Theory to the surging dollar and conclude this move is real.

CNNMoney.com:

- The iPad that launched a thousand apps. Data gathered in January show a rush of new projects on the iPhone operating system.

Detroit Free Press:

- Saying that body scanners violate Islamic law, Muslim-American groups are supporting a “fatwa” – a religious ruling – that forbids Muslims from going through the scanners at airports.

Rassmussen:

- The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 25% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty percent (40%) Strongly Disapprove which gives Obama a Presidential Approval Index rating of -15 (see trends).

Politico:

- House Speaker Nancy Pelosi’s increasingly public disagreements with President Barack Obama are a reflection of something deeper: the seething resentment some Democrats feel over what they see as cavalier treatment from a wounded White House. For months, the California lawmaker has been pushing Obama hard in private while praising him in public. But now she’s being more open in her criticism, in part because she feels the White House was wrong — in the wake of the Democrats’ loss in Massachusetts — to push the Senate health care bill on the House when she knew there was no way it would pass.

The Detroit News:

- JD Power sees positive year ahead for automakers.

TheMacObserver:

- Charlie Wolf, an analyst with Needham, sent a note to investors on Friday noting that Mac and iPhone sales are considerably higher than his projection in September, 2009. He estimates that Apple will sell 48+ million iPhones in 2011 and 6 million iPads in 2011. His target price for AAPL is now US$280.00. In a long term projection seldom seen amongst analysts, Mr. Wolf predicted that Apple would sell 142+ million iPhones in 2019.

Financial Times:

- Wall Street loves a piñata party – singling out a company or country, making it the piñata, grabbing their sticks and banging it until it breaks. As in the child’s game, the piñata is left in shreds. Unlike the child’s game, in the Wall Street version the piñata is stuffed with money for the bankers to scoop up with both hands, instead of sweets. We see this game being played today, with Greece as the piñata. Investors trying to understand why their portfolios have begun to melt down for the second time in five years are becoming experts in the fiscal policy of Greece. A look at the piñata party might make things clearer. Greece’s travails are often measured by reference to the market in credit default swaps (CDS), a kind of insurance against default by Greece. As with any insurance, greater risks entail higher prices to buy the protection. But what happens if the price of insurance is no longer anchored to the underlying risk? When we look behind CDS prices, we don’t see an objective measure of the public finances of Greece, but something very different. Sellers are typically pension funds looking to earn an “insurance” premium and buyers are often hedge funds looking to make a quick turn. In the middle you have Goldman Sachs or another large bank booking a fat spread. Now the piñata party begins. Banks grab their sticks and start pounding thinly traded Greek bonds and pushing out the spread between Greek and the benchmark German CDS price. Step two is a call on the pension funds to put up more margin, or security, as the price has moved in favor of the buyer. The margin money is shoveled to the hedge funds, which enjoy the cash and paper profits and the 20 per cent performance fees that follow. How convenient when this happens in December in time for the annual accounts, as was recently the case. This dynamic of pushing out spreads and calling in margin is the same one that played out at Long-Term Capital Management in 1998 and AIG in 2008 and it is happening again, this time in Europe. Eventually the money flow will be reversed, when a bail-out is announced, but in the meantime pension funds earn premium, banks earn spreads, hedge funds earn fees and everyone’s a winner – except the hapless hedge fund investors, who suffer the fees on fleeting performance, and the unfortunate inhabitants of the piñata. What does any of this have to do with Greece? Very little. It is not much more than a floating craps game in an alley off Wall Street. This is where the idea of CDS as insurance breaks down. For over 250 years, insurance markets have required buyers to have an insurable interest; another name for skin in the game. Your neighbor cannot buy insurance on your house because they have no insurable interest in it. Such insurance is considered unhealthy because it would cause the neighbor to want your house to burn down – and maybe even light the match. When the CDS market started in the 1990s the whiz-kid inventors neglected the concept of insurable interest. Anyone could bet on anything, creating a perverse wish for the failure of companies and countries by those holding side bets but having no interest in the underlying bonds or enterprises. We have given Wall Street huge incentives to burn down your house.

Caijing:

- China’s bank loans slowed in the first week of February, citing a person close to the regulator. Many banks have set smaller bank loan quotas for February compared with January, citing the person.

Bull Radar

Style Outperformer:
Small-Cap Growth (-.35%)

Sector Outperformers:
Wireless (+.57%), Semis (-.25%) and I-Banks (-.27%)

Stocks Rising on Unusual Volume:
CRESY, FOSL, BTI, SKIL, PRAA, CAKE, PNRA, NTES, CGNX, ROVI, HOLI, ASPS, TSTC, RVBD, APKT, GSIC, RIMM, NIHD, PRGO, ATHR, USTR, SWM, CMG, MFE and KCP

Stocks With Unusual Call Option Activity:
1) NAV 2) MFE 3) MOT 4) ALL 5) AMTD

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Friday Watch

Late-Night Headlines
Bloomberg:

- European leaders closed ranks to defend Greece from the punishment of investors in a pledge of support that may soon be tested. German Chancellor Angela Merkel and her counterparts yesterday pledged “determined and coordinated action” to support Greece’s efforts to regain control of its finances. They stopped short of providing taxpayers’ money or diluting their own demands for the country to cut the European Union’s biggest budget deficit. While bonds rallied, the euro slipped and pressure is now on the governments to show how they would back up their words with action. The attention of investors now turns to a meeting of finance ministers in Brussels on Feb. 15-16. “They’ve got to deliver next week,” said Andrew Bosomworth, head of portfolio management at Pacific Investment Management Co., which oversees the world’s largest mutual fund. “They’ve expressed the principle of solidarity and now they need to explain and quantify it.”

- Investors may be too optimistic about emerging-market stocks as 10 years of outsized gains mask a longer-term record of lower returns than advanced-nation shares, according to the London Business School. While emerging market stocks outpaced advanced shares by about 10 percentage points a year during the past decade, returns since 1975 show emerging shares were a less-profitable investment, according to a report by Elroy Dimson, Paul Marsh and Mike Staunton of LBS. $100 invested in emerging market stocks at the end of 1975 grew at a rate of 9.5% a year to $2,215 by the end of 2009. The same amount invested in developed market shares climbed 10.6% a year to $3,037, the authors wrote, using indexes compiled by Standard & Poor's, the International Finance Corp. and MSCI Inc. "The case for emerging markets is often oversold" to investors, Dimson, Marsh and Staunton wrote in a report titled "Global Investment Returns Yearbook 2010" that was distributed by CSFB on Feb. 9. "Their longer term returns have been less stellar than many imagine."

- Dallas-Fort Worth has received 5.3 inches of snow today, making this the region’s eighth-snowiest winter on record, according to the National Weather Service. The season total so far is 8.5 inches, shy of the record 17.6 inches set in 1977-78, and snow will fall until midnight, said Bill Bunting, chief meteorologist in charge of the National Weather Service’s Fort Worth office. “This is unusual,” Bunting said in a telephone interview. “This is going to be a significant snow event in our history.” “From Texas to the Southeast we are not breaking records with this cold but we are seeing it persist,” Rogers said in a telephone interview. “To me, the more impressive aspect is the durability of this cold. It is a pattern that is really stuck.” The pattern will continue from Texas to Atlanta, Rogers said. Temperatures throughout the region will be 4 to 8 degrees below normal, he said.

- China’s inflation slowdown in January may provide only temporary respite for policy makers after property prices and lending surged in the world’s fastest- growing major economy. “Weaker inflation is a temporary blip and consumer prices may resume rising more quickly in February and peak at about 6 percent in August,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd., a research and trading company in Hong Kong. He said causes will include credit growth, raw- material costs, property-price gains, and low bases for comparison in 2009.

- Traders are driving relative yields on Fannie Mae and Freddie Mac mortgage bonds that most influence the interest rates consumers pay to the lowest in 17 years, speculating cash the companies use to buy delinquent loans will be recycled back into the securities. The difference between yields on Fannie Mae’s current- coupon 30-year securities, which trade closest to face value, and 10-year Treasuries narrowed to as little as 0.66 percentage point yesterday, matching the lowest since 1992, according to data compiled by Bloomberg.

- Investors pulled the most money from emerging-market equity funds in 19 months as Greece’s debt crisis escalated and the Federal Reserve laid the groundwork for exiting its record credit expansion. Outflows from emerging-market equity funds reached $2.9 billion in the week to Feb. 10, the highest since the period ended July 9, 2008, according to Cambridge, Massachusetts-based research firm EPFR Global in an e-mailed release. “Investors fretted that Greece’s sovereign debt woes could drive up yields, and hence credit costs, worldwide,” EPFR said. “Further talk by U.S. Federal Reserve officials about an ‘exit strategy’ also weighed on sentiment.”

- Bill Clinton’s cardiologist said a procedure performed on the former president today to open a blocked coronary artery went “very smoothly” and he may be released from the hospital tomorrow.

- Snowstorms shut 30 highways across China, disrupting travel on a day when more than 66 million people were expected to take to the roads for the nation’s biggest festival of the year. As many as 43 highways were closed last night, according to the Ministry of Transport. Ordos in Inner Mongolia has had as much as 13 centimeters of snow in the past three days, according to the weather bureau.

Wall Street Journal:

- About a quarter of the 8.4 million jobs eliminated since the recession began won't be coming back and will ultimately need to be replaced by other types of work in growing industries, according to economists in the latest Wall Street Journal forecasting survey. While the job market is constantly shifting as some sectors fade and others expand, this recession threw that process into overdrive. Thousands of workers lost jobs as companies automated more tasks or moved whole assembly lines to places like China. As growth returns, so will job creation—just with a different emphasis in the mix of jobs being created.

- The Brookfield Real Estate Opportunity Fund announced Thursday that it acquired 16 properties covering 2.9 million square feet from JPMorgan Chase, continuing an established relationship. The price was about $200 million, according to a person familiar with the matter.

- The balance in the Iranian uprising is shifting in the regime's favor. Iran dealt a blow to the opposition Thursday, rallying tens of thousands of pro-regime marchers and disrupting, sometimes violently, protests long-planned to show continuing dissatisfaction with the regime on the 31st anniversary of the Islamic republic's founding. The show of force came as President Mahmoud Ahmadinejad told a pro-government crowd in Tehran that Iran had successfully enriched uranium to higher levels than before. Iranian officials also said Thursday they could enrich uranium further still, though Mr. Ahmadinejad said Iran had no intention of producing a nuclear bomb.

- Last fall Lloyd Blankfein, reportedly with tongue firmly in cheek, told the Times of London that Goldman Sachs does “God’s work.” By “God’s work” Blankfein was referring to Goldman’s role in helping companies raise money and grow — traditional investment banking activities. More than a year after the government injected $10 billion, Goldman turned in the most profitable year in Wall Street history. But it didn’t do it by performing “God’s work.” Goldman generated its profits through trading. Paul Solman on PBS NEWSHOUR tonight examines whether Goldman is actually a hedge fund. Solman looks at the issue and practice of front-running and risk management at the investment bank. Here are some excerpts from the piece: NARRATOR: So that’s how Goldman Sachs is making money: as a traditional investment bank. Well, not according to Nomi Prins, a former Goldman Sachs trading strategist — now a senior fellow at Demos, a progressive think tank. NOMI PRINS: the classical investment banking function is a very small portion of their revenues. I think it’s about 10% or so. So if he’s doing God’s work he’s only doing it at 10% capacity. NARRATOR: Most of the rest, says Prins, is so-called “proprietary” trading, for the firm’s own profit, rather than its clients’. NARRATOR: But consider HOW they’re making those bucks, says Nomi Prins. On knowledge that, as when she was there, comes in with every trade a client asks Goldman to make. NOMI PRINS: And just by evidence from the profits they make and where they make them, what divisions they make them in, they’re not sitting on that knowledge. They are trading on that knowledge. PS REASK: so they know somebody is going to buy a commodity or currency so they either buy that commodity or currency first or a commodity and currency very much like it. NOMI PRINS: any information that you get, particularly if it’s going to move the markets a lot, is going to filter into the trading positions you take. NARRATOR [NYSE B-roll]: But isn’t this “front running” — trading ahead of your clients (to profit from the price changes that will come from the clients’ trades) for your OWN firm’s benefit? And isn’t that, strictly speaking, illegal? DAVID STOCKMAN: the long and ancient secret of Wall Street is they’ve always been front running their clients!

NY Times:

- A top European farm official has suggested that yet-to-be-released studies by the European Commission could be used to “kill” heavily promoted and subsidized biofuels by focusing on their total environmental impact. The suggestion, written in the margins of internal correspondence seen by The International Herald Tribune, could foreshadow a further retreat from the biofuel-friendly policies that the commission once called crucial in the fight against global warming.

Business Week:

- Yum! Brands (YUM) has done remarkably well in the battle to win Chinese hearts and bellies, but some investors are now wondering whether the fast-food giant is faltering. Fears that Chinese tastes may be shifting away from Yum's KFC and Pizza Hut chains have hobbled the company's shares. Yum earned $216 million on global sales of $3.36 billion in the fourth quarter, with China revenue up by 8%. Sales at Chinese outlets that have been open for more than a year, though, were off for a third consecutive quarter, dropping 3%. Jitters about what Deutsche Bank (DB) describes as "stubbornly weak sales in China" helped send Yum stock down more than 6% in the two days after the company announced its results on Feb. 3. Yum Chairman David C. Novak says he's not worried: "If this is a problem, it's a Class A problem." Novak points to the company's many successes in China and blames the same-store sales decline on the lousy global economy. Today, Yum is China's top restaurant operator, with more than 3,400 outlets, and the country accounts for 36% of total sales, just behind the U.S. "When the consumer rebounds [in China]," Novak says, "we're well placed."

- Toyota Motor Corp. may lose U.S. market share this year as recalls crimp sales, falling to third place after Ford Motor Co.(F) retakes the No. 2 spot, auto researcher Edmunds.com said.

Politico:

- Members of the Senate Finance Committee unveiled a long-awaited bipartisan jobs bill Thursday morning — only to have it scrapped within hours by Senate Majority Leader Harry Reid. The Nevada Democrat killed the bill after hearing complaints from members of his own caucus, who argued that Finance Committee Chairman Max Baucus (D-Mont.) had gone too far beyond the core goal of job creation in order to win over Republican support. It was a major rebuke for Baucus, who’d spent weeks working with Iowa Sen. Chuck Grassley, the ranking Republican on his committee, trying to come up with a bill that Republicans would support.

- Rhode Island Democratic Rep. Patrick Kennedy, the last member of his legendary family currently serving in Congress, will announce on Friday that he is retiring, according to Democratic insiders. Kennedy, 42, was first elected to Congress in 1994. He did a stint as chairman of the Democratic Congressional Campaign Committee in the 1999-2000 cycle but has not served in the House Democratic leadership beyond that. His congressional tenure was marked by repeated substance abuse problems, including a drunk-driving incident in 2006. He entered a rehab facility at that time and again in 2009. Sen. Ted Kennedy (D-Mass.), the congressman's father, passed away last year. Democrats unexpectedly lost his seat last month to Republican Scott Brown.

Rasmussen Reports:

- State Attorney General Tom Corbett continues to hold big leads over three potential Democratic rivals in this year’s race for governor in Pennsylvania. The latest Rasmussen Reports telephone survey in the state shows Corbett leading former Congressman Joe Hoeffel 51% to 29%. Against Allegheny County Chief Executive Dan Onorato, he leads 52% to 26%. When State Auditor Jack Wagner is his Democratic opponent, Corbett is ahead 49% to 28%.

zerohedge:

- Guest Post: Will Obama Destroy Any Hope Of US Energy Independence? The U.S. consumes nearly three times the amount of oil that it produces domestically on a daily basis. How can this statistic get any worse, you might ask? Imagine in 2010 the Obama administration persuades Congress to pass a budget that results in a reduction of domestic oil production by 10% - 20%, making the supply/demand imbalance even more lopsided. Foreign oil companies will gain a distinct advantage over American domestic operators as an unintended consequence of these proposals. Sound farfetched? It’s closer to reality than you may think… If it comes to pass, it will likely be the biggest structural change in the U.S. domestic oil and gas industry in decades and have far-reaching implications for investors and for the entire country. In early 2009, the Obama administration proposed to eliminate significant tax incentives for the oil and gas industry. These tax benefits were put in place decades ago to incentivize oil and gas producers to develop domestic sources of energy, while recognizing that oil and gas exploration entailed special risks. Two of the proposed repeals with the most potential impact relate to what the industry refers to as “percentage depletion” as well as “intangible drilling costs” (IDC).

Weekly Standard:

- Kristol: I agree with Paul Krugman. Obama cozies up to too-big-to-fail bankers. Paul Krugman is, I think, right to be amazed by Obama's embrace of the $17 million bonus given to JPMorgan Chase Chief Executive Officer Jamie Dimon and the $9 million issued to Goldman Sachs CEO Lloyd Blankfein. If Obama's idea of moving to the middle politically is to embrace Wall Street's too-big-to-fail banks, he's crazy. Usually Republicans are the party of Big Business and Democrats of Big Government, and the public's hostility to both more or less evens the politics out. But if Obama now becomes the spokesman for Big Government intrusiveness and the apologist for Big Business irresponsibility all at once--good luck with that. Conservatives and Republicans should not--as some seem to be tempted to do--praise Obama for being friendlier to business in this interview than he has been in the past. They should point out that he's friendly to big businessmen who are friendly to him, and to businessmen whose businesses are enmeshed in an unhealthy way with big government--and that he remains hostile to markets and indifferent, at best, to businessmen who are actually trying to make it without depending on the goodwill of politicians and favors from the government.

Arizona Republic:

- Arizona will no longer participate in a groundbreaking attempt to to limit greenhouse-gas emissions across the West, a change in policy by Gov. Jan Brewer that will include a review of all the state's efforts to combat climate change. Brewer stopped short of pulling Arizona out of the multistate coalition that plans to regulate greenhouse gases starting in 2012. But she made it clear in an executive order that Arizona will not endorse the emission-control plan or any program that could raise costs for consumers and businesses. State officials said the policy shift was rooted in concerns that the controversial emissions plan would slow the state's economic recovery. Brewer says the state should focus less on regulations and more on renewable energy and investments by businesses that can create green jobs. The governor also ordered the Arizona Department of Environmental Quality to take another look at stricter vehicle-emissions rules set to take effect in 2012. Automakers said the rules, based on those adopted by California, would raise the cost of a new car significantly. The governor's order is another blow to the Western Climate Initiative, a group of seven states and four Canadian provinces that joined forces in 2007 after growing impatient with the federal government to address climate change. The coalition agreed to implement a regional "cap and trade" system, which limits how much pollution companies can emit, then allows them to buy and sell pollution credits. "Arizona needs a green-and-grow approach rather than a cap-and-trade approach," ADEQ Director Benjamin Grumbles said. "It's very important for the state to stay engaged, to be at the table, but it's also important to convey clearly our position on how to make progress," Grumbles said. "Right now, given the economic downturn, given the complexity of the cap-and-trade scheme being developed, we're not going to be supportive of it." Arizona joined the effort under its previous governor, Janet Napolitano.

Financial Times:

- Greece’s budgetary and economic policies will be subjected to an unprecedented degree of surveillance by European Union authorities as the price of a promise of support agreed on Thursday by Germany and other EU governments. Pensions and healthcare policies, the public administration, labor and product markets, the use of EU structural funds, financial sector supervision and official statistics will all be rigorously monitored by the European Commission to ensure that Greece is not let off the hook. The measures are more intrusive than anything adopted in the EU’s 53-year history and, if applied to the letter, will amount to a significant curtailment of Greece’s fiscal sovereignty in return for its right to continue sharing the euro currency with Germany, France and the other 13 eurozone nations. Experts from the European Central Bank and the International Monetary Fund will be brought in to back up the Commission, but on the insistence of eurozone leaders the IMF will stay largely in the background and will not be asked to provide credit lines for Greece, EU officials said. All these initiatives are expected to be approved by eurozone and EU finance ministers at meetings next Monday and Tuesday. “If the Greek government shows signs of being unable to implement the required conditions, then market pressures could remain high or intensify again,” one investment bank analyst said. Greece’s track record, not just as a member of the eurozone since 2001 but throughout its modern history, does not inspire complete confidence. The country had been in a state of default for about 50 per cent of the time since its recognition as an independent country in 1832, according to calculations in a book published last year by Kenneth Rogoff and Carmen Reinhart, two Harvard economics professors. Prof Rogoff perceives a risk that many Greeks will seek to evade their government’s attempt to boost tax collection and slash the budget deficit by shifting their wealth abroad or disappearing into the underground economy – which is already estimated to be about 30 per cent of gross domestic product. EU officials say the bloc’s recently adopted Lisbon treaty gives them concrete powers to influence Greek behavior and enforce Greek compliance with the Commission’s policy recommendations, once EU finance ministers have approved them next week. The Commission’s recommendations include a reduction in Greece’s public sector wage bill, to be achieved partly by the replacement of only one in five retiring civil servants, the establishment of a contingency fund for budgetary emergencies amounting to 10 per cent of current expenditure, increases in tax and excise duties, and reform of the tax administration. Greece will also be required to submit a report as early as mid-March, spelling out the timetable according to which it will implement its deficit-cutting measures this year. Quarterly reports will be required from mid-May on how it is implementing the broader reform program.

- Goldman Sachs(GS) has been chosen as one of the banks that will manage the $10bn-plus listing of AIG’s Asian unit – in spite of the political controversy over Goldman’s actions during the insurer’s near-collapse in 2008. Goldman’s selection underlines its strength as an equity underwriter in Asia and the fact that the political storm in the US over its role during AIG’s crisis has not soured its relations with the insurer and its government paymasters. The US government owns 80 per cent of AIG after bailing it out in September 2008. Goldman’s role, alongside Citigroup, Credit Suisse, Bank of America Merrill Lynch and UBS, as well as two Chinese lenders, will ensure that the Wall Street firm shares in the estimated $300m in fees the giant IPO is expected to generate. Competition for bookrunner roles had been particularly fierce because of the IPO’s size. It is expected to be the world’s largest this year. Members of Congress have attacked the government’s decision to rescue AIG and pay its counterparties, including Goldman, billions of dollars owed under derivatives contracts without demanding a discount, as a back-door rescue of the banks. Goldman’s critics have also questioned its aggressive stance in demanding collateral on derivatives from AIG before the insurer ran into deep trouble in 2008.

- Transcript: Video interview with Paul Volcker. FT: One of the criticisms of the Volcker rule has been that it doesn’t address the direct causes of this latest financial crisis. What’s your response to that? PV: Well my response first of all, is we’re looking ahead; not backwards, but certainly proprietary trading in all its forms was an important part of the crisis and people say the specifics of this plan apply to banks. There was a lot of problem in non-banks. That’s not directly addressed by these proposals. What is addressed by these proposals is a combination of what banks can do, which are protected, that have the safety net, they have deposit insurance, they have access to the Federal Reserve and what non-banks can do. Non-banks in my view by and large are not regulated as tightly as banks, but they’re going to be subject to this resolution procedure. If they got in trouble, the theory is they will not be rescued, but they will have an orderly demise where I think of as euthanasia rather than life support and that’s a big difference. We have to kind of embed this in consciousness. So much of the early part of this crisis was the non-banks were actively engaged in trading and proprietary activity, which in some sense was at the heart of the crisis. But you remember back with Société Générale and Moralli I guess it was, they had one rogue trader that cost them how much? I think the threat was several billion dollars from one rogue trader. Had a rogue trader in Barings some years ago that brought down the whole organization. Those are kind of one-off things where you see the damage that one trader can do in purely proprietary trading. In those cases, for their own interests as well as the banks’ interests I’m afraid. It’s the kind of things you don’t want banks doing.

National Post:

- Terence Corcoran: Stimulating our way into debt crises. The fiscal fall of Greece is a reminder that fiscal mismanagement produces monetary hurricanes without warning.

Daily Telegraph:

- Goldman Sachs(GS) faces 'Robin Hood tax' vote-rigging claims. Goldman Sachs is investigating claims that one of its computers was used to rig a public vote on the introduction of a so-called “Robin Hood tax” on bankers. The Robin Hood Tax campaign alleged that a Goldman computer was one of two computers that allegedly “spammed” the internet poll with more than 4,600 “no” votes in less than 20 minutes on Thursday. Technical staff for the Robinhoodtax.org.uk website said the “no” counter increased at a “dramatic rate” from 3.41pm. The number of “no” votes jumped from 1,400 to 6,000 before campaigners – who are calling for the introduction of 0.05pc tax on banking transactions – tightened the site’s security. Robin Hood’s security team claimed it traced the erroneous votes to two computers, one of which is allegedly registered as belonging to Goldman.

Oriental Daily:

- China Petroleum and Chemical Corp. said it discovered 100 million tons of oil in a field in Urumqi, Xinjiang province, citing a company spokesman. The new discovery will help the field reach its output target of 10 million tons of crude oil a year by 2015, the spokesman said.

Xinhua:

- China urges the US to "immediately withdraw" a decision for President Barack Obama to meet with the Dalai Lama, citing Chinese Foreign Ministry spokesman Ma Zhaoxu.

Evening Recommendations

Citigroup:

- Reiterated Buy on (BWA), target $42.

Night Trading
Asian indices are +.25% to +1.0% on avg.

Asia Ex-Japan Inv Grade CDS Index 113.0 -6.50 basis points.
S&P 500 futures -.11%.
NASDAQ 100 futures -.21%.

Morning Preview
BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Asian Financial News

European Financial News

Latin American Financial News

MarketWatch Pre-market Commentary

U.S. Equity Preview

TradeTheNews Morning Report

Briefing.com In Play

SeekingAlpha Market Currents

Briefing.com Bond Ticker

US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/Estimate
- (A)/.32

- (IR)/.53

- (DUK)/.25

Economic Releases

8:30 am EST

- Advance Retail Sales for January are estimated to rise +.3% versus a -.3% decline in December.

- Retail Sales Less Autos for January are estimated to rise +.5% versus a -.2% decline in December.

9:55 am EST

- Preliminary Univ. of Mich. Consumer Confidence for February is estimated to rise to 75.0 versus a reading of 74.4 in January.

10:00 am EST

- Business Inventories for December are estimated to rise +.2% versus a +.4% gain in November.

Upcoming Splits

- None of note

Other Potential Market Movers
- The Fed's Tarullo speaking could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by commodity and financial stocks in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.