- New-Home Sales Unexpectedly Fall to Record Low. The median sales price dropped 2.4 percent from January 2009 and the supply of unsold homes increased. The median price of a new home in the U.S. decreased to $203,500 in January, the lowest since December 2003, from $208,600 in the same month last year. The supply of homes at the current sales rate increased to 9.1 months’ worth, the highest since May 2009.
- German Aid to Greece Would Prompt 'Spiral,' CSU Says. Germany must resist any moves to provide financial aid for Greece because any assistance would provoke a “spiral without end,” said a ruling coalition lawmaker who sits on the finance committee in parliament. “We must have the principle that financial aid is legally not possible,” Hans Michelbach a lawmaker for Chancellor Angela Merkel's CSU Bavarian allies, told reporters in Berlin today. The government must “massively” assert that Germany “cannot assume responsibility out of principle,” he said. Otherwise, “Where do you start and where do you end?”
- German Consumers and Companies Put Brake on Recovery. German consumers and companies cut spending in the final quarter of 2009, putting a brake on the economic recovery. Private consumption dropped 1 percent from the third quarter and capital investment fell 0.7 percent, the Federal Statistics Office in Wiesbaden said today.
- Emerging Stocks Drop Most in 3 Days on Turkey Military Tension. Turkey led declines in emerging- market stocks after tensions escalated between the country’s military and its government, while a bigger-than-expected drop in U.S. consumer confidence damped the earnings outlook for exporters in developing economies. Turkey’s ISE National 100 Index fell to the lowest in more than two months, dropping 3.4 percent, after military leaders said the arrest of more than 40 retired officers over an alleged coup plot was a “serious situation,” deepening strains with Prime Minister Recep Tayyip Erdogan. The opposition Nationalist Action Party called for snap parliamentary elections. “Turkish politics have moved center stage and the markets are becoming increasingly nervous,” Matteo Ferrazzi, an economist at UniCredit SpA in Milan, wrote today in a client note. “The news is clearly a negative in terms of market confidence.”
- Germany May Curb 'Dangerous' Swaps Over Greek Crisis. German Chancellor Angela Merkel's government is looking at limiting the use of credit-default swaps, joining France in targeting financial instruments linked to Greece’s debt crisis. “We’re considering ways to tighten up rules for CDSs,” as credit-default swaps are known, Leo Dautzenberg, finance spokesman for Merkel’s Christian Democratic Union, said in Berlin today. “But this has to be internationally agreed.” France is studying CDSs as they become “disconnected” from the real economy in an effort to “draw some lessons from this crisis,” Finance Minister Christine Lagarde said Feb. 17.
- Gold Falls to One-Week Low as Inflation Outlook May Curb Demand. Gold futures declined to a one-week low on speculation that a sluggish economic recovery will curb the metal’s appeal as an inflation hedge. Sales of new homes in the U.S. unexpectedly declined in January to a record low, government data showed today. Consumer confidence in February fell to the lowest level in 10 months, a report showed yesterday. Before today, the Reuters/Jefferies CRB Index of 19 raw materials fell 3.9 percent this year. “The main driver for gold is as an inflation hedge,” said Jesper Dannesboe, a senior commodity strategist at Societe Generale SA in London. “If people are worried about economic growth, then they are less worried about inflation.”
- India Seeks Lowest Potash Price in Four Years. India, the world’s biggest potash importer, may offer the lowest price in four years in annual talks with suppliers after Chinese buyers secured reduced terms, said three industry officials with direct knowledge of the plan.
- April, May Are Cruelest Months for Greek Funding. A Greek bond sale, which borrowing chief Petros Christodoulou said this week is "not on the cards," will need to come soon as debt repayments add to the country's financial burdens in coming months. The nation, which has the biggest budget deficit in Europe, must find more than $22 billion to repay investors in April and May, with maturing bonds split about evenly between those two months. Greece then has a repite until March 2011, when almost 9 billion euros of debt is scheduled for payment. Greece said earlier this month that it would sell 10-year bonds by the end of February or in early March. Christodoulou, who was appointed head of the Public Debt Management Agency on Feb. 18, said this week that he won't comment on bond sales "even one minute" before an official announcement because the country had "lost control of the communication game."
- Silver, the worst-performing precious metal this year, may drop as much as 11% to $14 an ounce, according to technical analysis by Barclays Capital. Prices formed a so-called "head and shoulders top" and then failed to hold above a 27-moth pivot line, which the bank says is a bearish signal.
- Goldman Sachs Closes Copper Bet on Recovery Outlook. Goldman Sachs Group Inc. ended its recommendation to bet on higher copper prices because of concern that economic recovery in developed markets is not “yet on solid footing.” Stockpiles in warehouses monitored by the bourse have more than doubled since July and prices dropped 3.5 percent this year on speculation that mines will expand supply faster than gains in demand. Demand from China, the world’s biggest copper consumer, for global supplies may weaken because prices on the Shanghai Futures Exchange are now close to those in London, discouraging arbitrage trading, the bank said.
- Greece Holds Back Bond Sale in Game of 'Chicken,' Ignis Says. Greece may be playing “a game of chicken” over a planned 10-year bond sale as it negotiates with European Union officials on budget targets, according to Ignis Asset Management. The longer Greece delays the note issue, the more likely it can win concessions on the severity of spending cuts demanded by its neighbors to reduce the region’s largest deficit, said Stuart Thomson, who helps oversee more than $100 billion at Ignis in Glasgow. The Greek debt agency said Feb. 2 the country will probably sell bonds by March. “There’s a game of chicken going on,” said Thomson, who is “underweight” Greek bonds. “If Greece turns up at the next European finance ministers’ meeting and says it’s about to run out of money, it can avoid demands for further budget cuts.”
- Freddie Mac to Resume Treasury Aid as Accounting Rules Change. Freddie Mac, the mortgage-finance company that tapped $50.7 billion in federal aid, said it may resume draws from a taxpayer-funded bailout package this quarter as new accounting rules reduce its net worth. Net worth will drop by about $11.7 billion in the first quarter, requiring the company to go back to the U.S. Treasury Department for more aid, Freddie Mac said in a regulatory filing today as it reported a $6.5 billion net loss for the fourth quarter. The McLean, Virginia-based company’s last request for federal help was for the first quarter of 2009. Capping a “trying and turbulent year” with $7.1 billion in credit losses and foreclosure-related expenses, as well as $5.2 billion in annual dividends owed to the Treasury, Freddie Mac said there can be “no assurances regarding when, or if, we will return to profitability.” Regulators seized the company, along with Fannie Mae, in 2008 as mortgage delinquencies rose. “Starting in the first quarter again, they’re going to start having pretty material draws on their Treasury line, which they haven’t done” in a year, said Bose George, an equity analyst at Keefe Bruyette & Woods in New York. “We’re assuming pretty meaningful increases in delinquencies, and partly that’s driven by the whole negative equity problem.” George is predicting overall delinquency rates to rise to about 18 percent for 2010 from 15 percent last year, which will deepen Freddie Mac’s losses as will rising interest rates.
- Bernanke Says 'Nascent' Recovery Requires Low Rates.
- U.S. Imposes Preliminary Duties on Chinese Steel Pipe.
The Business Insider:
- Hedge Funds Shorting The Pants Off Of Tech. Goldman's David Kostin highlights how hedge funds, in aggregate, seem to have switched out of Tech and into Industrials during the fourth quarter of 2009 (latest data).
- A Simple Guide To How Algorithms Are Manipulating The Market Right Now.
- Why China's Declining Population Will Take 100 Years To Fix.
Chicago Tribune:
- Restructuring of Fannie Mae, Freddie Mac Highly Likely, Says Former Treasury Secretary Henry Paulson. After market settle, those companies should be scaled way back, he tells University of Chicago audience.
- 71% Give Congress Poor Rating. Voter unhappiness with Congress has reached the highest level ever recorded by Rasmussen Reports as 71% now say the legislature is doing a poor job. That’s up ten points from the previous high of 61% reached a month ago. Only 10% of voters say Congress is doing a good or excellent job. Nearly half of Democratic voters (48%) now give Congress a poor rating, up 17 points since January. The vast majority of Republicans and voters not affiliated with either party also give Congress poor ratings.
- Exclusive: White House Privately Plots 2012 Campaign Run. President Barack Obama’s top advisers are quietly laying the groundwork for the 2012 re-elction campaign, which is likely to be run out of Chicago and managed by White House deputy chief of staff Jim Messina, according to Democrats familiar with the discussions. The planning for now consists entirely of private conversations, with Obama aides at all levels indulging occasionally in closed-door 2012 discussions while focusing ferociously on the midterm elections and health care reform, the Democratic sources said. “The gathering storm is the 2010 elections,” one top official said. But the sources said Obama has given every sign of planning to run again and wants the next campaign to resemble the highly successful 2008 effort.
- Hedge Funds to Invest More in Troubled Companies. Hedge funds will increase their investments in distressed debt and equity this year and expect to make more money doing it, the Reuters HedgeWorld & Dykema 2010 Insolvency Outlook Survey found.
- Russia Says Won't Back "Crippling" Iran Sanctions. Russia will not support "crippling" sanctions against Iran, including any that may be slapped on the Islamic Republic's banking or energy sectors, a senior Russian diplomat said on Wednesday. Israeli Prime Minister Benjamin Netanyahu visited Moscow last week to press the Kremlin to back tougher sanctions against Iran over its suspected nuclear weapons project. This week, Netanyahu called for an immediate embargo on Iran's energy sector. "We are not got going to work on sanctions or measures which could lead to the political or economic or financial isolation of this country," Oleg Rozhkov, deputy director of the security affairs and disarmament department at Russia's Foreign Ministry, told reporters. "What relation to non-proliferation is there in forbidding banking activities with Iran? This is a financial blockade. And oil and gas. These sanctions are aimed only at paralysing the country and paralysing the regime."
- Show Hedge Funds a Little Love to Keep Them in Britain. Hedge fund managers have been listening to politicians, and they are voting with their feet. Over the past three years, more than 50 London hedge funds have abandoned the UK or – like Brevan Howard and BlueCrest, two of the largest – set up branch offices in low-tax countries so staff can leave. The main reason for quitting the country is obvious: the new 50 per cent top rate of tax. This will attract no sympathy from the rest of the population, facing the prospect of rising taxes and cuts to public services. But tax has always been a reason to leave, as tax exiles from Sir Sean Connery to Lewis Hamilton can testify. Hedge fund managers are more likely than most to be motivated by money, so more are bound to flee. The real danger to London’s position as the hedge fund capital of Europe, though, comes from the feeling in the industry that government and regulators are no longer on its side. It remains unclear whether the trickle of fund managers leaving will turn into a flood. But the danger is serious: not just for the 450 or so remaining managers, and the estimated £5bn they, their staff and their private equity confrères pay in tax (even at the old, lower, rate). If they leave, so will the legions of lawyers, accountants and prime brokers who nurture the industry. Already lawyers have begun to follow their clients to Switzerland.