Late-Night Headlines
Bloomberg:
- Greece’s biggest union is set to approve the second mass strike this month, showing that Prime Minister George Papandreou’s parliamentary majority may not be enough to guarantee implementation of his plan to cut the European Union’s largest deficit. GSEE, which represents about 2 million workers in the private sector, is scheduled to meet in Athens at 10 a.m. to approve the walkout for Feb. 24. The main public-employee union plans a Feb. 10 job action to protest spending cuts as Papandreou steps up budget cuts to persuade investors Greece won’t need a bailout. Greek stocks fell after news yesterday the union group planned a strike and bonds pared gains. The risk premium investors demand to buy Greek debt over comparable German 10- year bonds narrowed 10 basis points to 347 basis points after reaching as low as 328 basis points. Greece’s benchmark ASE Index fell 2 percent. Papapandreou yesterday widened the wage freeze to all public workers. State pay increases provide a gauge for increases given to workers in the private sector. “Our worst expectations were confirmed,” ADEDY Chairman Spyros Papaspyros said yesterday. “There is more to come.”
- Look through President Barack Obama’s proposed 2011 budget, and you’ll see a line calling for a $235 million increase in the Justice Department’s funding to fight financial fraud. Lucky for them, the people who wrote the budget can’t be prosecuted for cooking the government’s books. Whether on Wall Street or in Washington, the biggest frauds often are the perfectly legal ones hidden in broad daylight. And in terms of dollars, it would be hard to top the accounting scam that Obama’s budget wonks are trying to pull off now. The ploy here is simple. They are keeping Fannie Mae and Freddie Mac off the government’s balance sheet and out of the federal budget, along with their $1.6 trillion of corporate debt and $4.7 trillion of mortgage obligations. Never mind that the White House budget director, Peter Orszag, in September 2008 said Fannie and Freddie should be included. That was when he was director of the Congressional Budget Office and the two government-backed mortgage financiers had just been seized by the Treasury Department. The White House is already forecasting a $1.3 trillion budget deficit for 2011, which is about $3 of spending for every $2 of government receipts. By all outward appearances, it seems Obama and his budget wizards decided that including the liabilities at Fannie and Freddie would be too much reality for the world to handle. So they left the companies out, in a trick worthy of Enron’s playbook, except not quite so hidden. Obama’s White House didn’t invent this kind of fudging. President George W. Bush, for example, kept most war costs out of the budget. Obama’s proposal shows about $289 billion of war costs for 2010 and 2011, plus a $50 billion placeholder estimate for each year after that. Those dollars are small compared with the numbers at Fannie and Freddie, though. Excluding Fannie and Freddie, the national debt held by the public is about $7.9 trillion. With them, it exceeds last year’s $13.2 trillion gross domestic product. Even the geniuses at Moody’s Investors Service are warning that the country’s AAA rating might not last. No country can owe more than its yearly productive output for long without giving up its accustomed lifestyle and influence.
- Investors should place bets on gold to fall as the “fear” that helped send the metal to a record last year disappears, said Brian Nick, an investment strategist at Barclays Wealth, which manages $221 billion. “The gold price has gotten way out of whack with where it should be,” Nick said in a telephone interview from New York. “With investment demand playing such a large role, it leaves the market vulnerable to a correction,” Nick said. “We could see a rapid unwinding of investment when sentiment changes. We’ll be left with far more gold supply out there than there is demand.” Yields on U.S. treasuries remain low enough to signal that investors are confident that the government can pay back its debt and that inflation will be “under control,” Nick said. A “fair value” for gold would be $700 to $800 an ounce, he said. “We’re not seeing signs of fear in any other market,” Nick said. “Gold stands alone, in a bubble.”
- U.S. Transportation Secretary Ray LaHood, charged with getting to the bottom of Toyota Motor Corp.’s vehicle-safety crisis, served up more confusion than clarity yesterday. At about 9:30 a.m., LaHood told reporters that drivers of recalled Toyota cars and trucks should “exercise caution” until repairs can be made. Then he told a House panel that owners should “stop driving” them. Then he told reporters his stop-driving comment was “obviously a misstatement.” Toyota’s American depositary receipts, each representing two ordinary shares, gyrated on his remarks. They fell as much as 8 percent to a 10-month intraday low of $71.90 in New York Stock Exchange composite trading after he said owners shouldn’t drive, and then climbed to close at $73.49 following the retraction.
- The yen and dollar strengthened against higher-yielding currencies on speculation the Asia- Pacific region’s economic recovery will slow and European nations will struggle to reduce their deficits. Japan’s currency advanced versus 13 of its 16 major counterparts after reports today showed Australian retail sales unexpectedly shrank and New Zealand’s jobless rate rose to the highest level since 1999. The euro was near a seven-month low against the dollar on speculation the European Central Bank will refrain from ending any more emergency measures at a meeting today as Greece struggles to contain its deficit. “Emerging uncertainties about the Australian economy hurt sentiment toward higher-yielding currencies,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “Lingering sovereign woes in Europe also helped strengthen risk aversion.” “Almunia warned that Greece and Portugal have ‘quite big’ financing needs and that he sees a permanent loss of competitiveness in Spain, Portugal and Greece, with the need for better adjustment in economies,” analysts led by Hans-Guenter Redeker, London-based global head of foreign-exchange strategy at BNP Paribas SA, wrote in a research note today. “The euro- dollar is on the edge of its next leg down.”
- Copper slumped in Shanghai by the most in three weeks, tracking losses on the London Metal Exchange overnight, as the dollar’s rally reduced the investment appeal of metals. “Metals such as copper will continue to be pressured as the dollar appears to strengthen,” Zhu Mingyuan, an analyst at Xinguolian Futures Co., said from Shanghai today.
- Corn fell to a four-month low and soybeans dropped as sales from record crops by U.S. farmers topped demand. The 2009 corn harvest rose 8.8 percent to 13.2 billion bushels, the Department of Agriculture said last month. The soybean crop jumped 13 percent to 3.36 billion bushels. Global production of the oilseed will surge 20 percent because of record South American output, the agency said. “Farmers are eager to sell corn and soybeans on any rallies,” said Jim Gerlach, the president of A/C Trading Inc. in Fowler, Indiana. “Weather in South America remains favorable for big crops.”
- Yale University, the second-richest institution of higher learning in the U.S., will cut more than $50 million from its 2010-11 budget, partly by freezing officers’ salaries, and seeks $100 million more in savings. The university, in New Haven, Connecticut, will lower the number of new students by 10 to 15 percent in the Graduate School of Arts & Sciences, reduce time off for some staff and require employees making more than $83,000 a year to contribute to their health-care plans, President Richard Levin and Provost Peter Salovey said today in an e-mailed letter. Individual schools at Yale will be asked to make additional reductions, they said. Yale’s endowment, second to that of Harvard University in Cambridge, Massachusetts, fell to $16.3 billion in June from $22.9 billion a year earlier. The decline means the university must reduce spending by $350 million annually, according to the letter.
- Yahoo! Inc.(YHOO) plans to sell its HotJobs employment Web site to Monster Worldwide Inc.(MWW) for $225 million in cash as the company focuses on its traditional properties, including the home page. As part of the sale, Monster will become the provider of career and job content on Yahoo’s home page in the U.S. and Canada for three years, Monster said today in a statement.
Wall Street Journal:
- For the first time, government programs next year will account for more than half of all U.S. health-care spending, federal actuaries predict, as the weak economy sends more people into Medicaid and slows growth of private insurance. Government health programs are a growing burden on the federal budget, which is running annual deficits of more than $1 trillion, and rising health costs continue to batter private industry. By 2020, according to the new projections, about one in five dollars spent in the U.S. will go to health care, a proportion far beyond any other industrialized nation. "It's going to be a desperate issue five to 10 years out," said Gail Wilensky, the former top Medicare official in the George H.W. Bush administration. She said the U.S. will have to decide soon between raising revenue to pay for Medicare or reducing benefits.
- Hedge funds and private-equity funds based outside the European Union should be subject to strict rules if they do business in the 27-nation bloc, according to legislation drafted by the Spanish government. Spain, which currently holds the EU's six-month rotating presidency, wants foreign funds that market their services in the bloc to make their annual report available to investors and regulators as well as be subject to close scrutiny by a regulator that shares information with EU authorities. The funds targeted generally are loosely regulated hedge funds, venture capital funds and private-equity investments based in the U.S. and elsewhere; mutual funds sold to individual investors tend to be registered in an EU country. The foreign-funds clause has been one of the more contentious aspects of the EU's controversial Alternative Investment Fund Managers legislation and has prompted accusations of protectionism by hedge-fund industry officials and the U.S. and U.K. governments.
- A Silicon Valley start-up is trying to shake up the market for camera phones with an unusual technology that can change the focus of a lens using no moving parts. The closely held company, LensVector Inc., says it has developed tiny transparent components for autofocus systems that replace larger mechanical parts. With sturdier and less-expensive components, autofocus could change from an option found only on certain handsets into a standard feature of mainstream phones, the company said.
- Senate Democrats used an on-camera question-and-answer session with President Barack Obama on Wednesday to boost lawmakers facing tough re-election fights this fall, an event that showed how the 2010 campaign is already under way. All but two of the eight questioners who were chosen face stiff challenges, and most of their questions addressed topics central to their campaigns. There was minimal discussion of how to move forward with health care, energy, financial regulation, education or other tough issues stuck in Congress. The session offered Democratic senators the chance to be seen questioning the president, a signal back home of both stature and perhaps willingness to challenge the man in charge. The White House believes it can use such events to counter criticism of Washington's partisan gridlock and show the president at work with allies and critics.
MarketWatch.com:
- Just when they thought the worst of the mortgage crisis was behind them, billions of dollars in bad loans from the debacle may be rising from the dead and creeping back on the balance sheets of the largest U.S. banks. Big lenders including Bank of America(BAC) , J.P. Morgan Chase(JPM) and Wells Fargo(WFC) may be forced to repurchase troubled home loans from insurers and mortgage-finance giants like Freddie Mac(FRE) that had agreed to take on risks associated with those assets during the real estate boom. The banks are setting aside more reserves to cover the potential costs of such repurchases, cutting into earnings.
NY Times:
Business Insider:
- This morning, the EU announced that it stands by Greece's new budget. Great, maybe that will give investors confidence that they don't have to worry about Greece actually missing a payment. But now there's a new loser: Portugal. It's the weak link for Europe to throw to the wolves.
Politico:
- The Special Olympics is disputing the White House claim that its chairman, Tim Shriver, accepted Rahm Emanuel's apology for calling liberals "retarded." Seeking to damp down the controversy over Rahm Emanuel's reported, months-old use of the word, a White House official yesterday told me and other reporters that Emanuel had called Special Olympics Chairman Tim Shriver to apologize. "The apology was accepted," the official said yesterday. The vice president for communications at the Special Olympics, Kirsten Seckler, told me that this account of the conversation is "inaccurate." "Tim didn't accept his apology," she said. "Tim can't do that. He can't accept an apology on behalf of all people with disabilities." Shriver had simply said, she said, that he was willing to continue the conversation with the chief of staff. The Special Olympics is disputing the White House claim that its chairman, Tim Shriver, accepted Rahm Emanuel's apology for calling liberals "retarded." Seeking to damp down the controversy over Rahm Emanuel's reported, months-old use of the word, a White House official yesterday told me and other reporters that Emanuel had called Special Olympics Chairman Tim Shriver to apologize. "The apology was accepted," the official said yesterday. The vice president for communications at the Special Olympics, Kirsten Seckler, told me that this account of the conversation is "inaccurate." "Tim didn't accept his apology," she said. "Tim can't do that. He can't accept an apology on behalf of all people with disabilities." Shriver had simply said, she said, that he was willing to continue the conversation with the chief of staff.
The Daily Beast:
USAToday:
- Wall Street's Goldman Sachs(GS) is taking a pounding in the blogsphere for failing to step up to serious relief efforts in Haiti. First, people scoffed at the donation of $1 million by the firm, calculated to be 11 minutes of GS' 9 billion profits in 2009. Now, the National Council of Churches is whacking GS under the popular headline: GDP of Haiti: $8.5 billion. Goldman Sachs bonus pool: $20 billion. Princeton Theological Seminary professor George Hunsinger and George Kinnamon, NCC general secretary suggest "A Modest Proposal" for GS. The churchmen propose GS turn around its bad press by handing off just $10 billion. That's enough to lap the $100 million pledged by the total U.S. government by 100 times around the ring.
Reuters:
- Cisco Systems Inc's (CSCO) quarterly results and outlook exceeded Wall Street expectations as more customers upgraded their networks to handle growing Internet traffic, leading CEO John Chambers to declare a very strong recovery. Shares in the leading network equipment maker rose 4 percent as the company forecast revenue growth of 23 percent to 26 percent in the current quarter, far exceeding the average analyst forecast for a rise of 16.5 percent. "We're hitting on all cylinders," Chambers told analysts on a conference call, citing a "dramatic across-the-board acceleration" in the business. "We saw very strong, balanced growth from a year-over-year perspective in almost all of the major geographies and market segment categories," he said.
- Broadcom Corp (BRCM) on Wednesday posted a quarterly profit versus a year-ago loss and revenue that beat Wall Street expectations, citing a better-than-expected holiday season and strong demand in Asia. The stock rose 1.8 percent after Broadcom said it would start paying a dividend of 8 cents per share as of March 8 and forecast that first-quarter revenue would be better than usual for this time of year.
Financial Times:
- It is the poor who pay for the weak renminbi. China’s exchange rate policy has largely been viewed through the prism of global imbalances. That has had three unfortunate consequences. It has allowed China to deflect attention away from its policy. It has obscured the real victims of this policy. And it has made political resolution of this policy more difficult. No sooner is China’s exchange rate policy criticized for creating global imbalances, and hence contributing to the recent global financial crisis, than the door is opened for China to muddy the intellectual waters. Why single us out, the Chinese say? Why not the other surplus-running countries such as Japan or Germany or the oil exporters? And, in any case, countries on the other side of the imbalance – namely, the large current account deficit-running countries – should carry the greatest responsibility for pursuing irresponsible macroeconomic and regulatory policies that led to “excessive consumption”. This debate cannot be settled. But inconclusiveness is just what China needs – and creates – to escape scrutiny of its policies. The second consequence of the global imbalance perspective is that it has created an opposition between current account deficit and current account surplus countries, which has become a slanging match between the US and China. But an undervalued exchange rate is above all a protectionist trade policy, because it is the combination of an import tariff and an export subsidy. It follows therefore that the real victims of this policy are other emerging market and developing countries – because they compete more closely with China than the US and Europe, whose source of comparative advantage is very different from China’s.
Caijing:
- China's Ministry of Finance has no plan to boost its investment in China Investment Corp., the country's sovereign wealth fund, citing a ministry official.
arabianbusiness.com:
- Uncertainty about state owned Dubai World's $22 billion debt restructuring is starting to weigh on the credit again, pushing up bond yields and Dubai's debt insurance costs, just six weeks after a multi-billion dollar bailout by neighboring Abu Dhabi. Five year credit default swaps (CDS) for Dubai have risen sharply in the past week and are now quoted at 510 basis points, up about 45 bps on the week, meaning it costs over half a million dollars a year to insure $10 million of the emirate's debt for a five-year period. Nish Popat, head of fixed income, ING Investment Management Middle East, Dubai: "Since the Dubai World statement which came out of the blue, we have not had any sort of clarity as to how the talks are progressing, we have not had any statements or any proposals." He added: "We are hearing they are still talking to the banks, but it's been two months and there is still this uncertainty and lack of clarity." The CDS surge back to levels seen just before the mid December bailout is fuelling a rise in debt insurance costs, albeit on a smaller scale, for other regional corporates and names such as Abu Dhabi and Bahrain, according to prices from CDS monitor CMA DataVision. Analysts say the rise comes against the backdrop of wobbly global equity markets and the debt crisis in Greece and other euro zone peripherals. But they said a recent move by Standard & Poor's to withdraw its rating for Dubai Holding Commercial Group (DHCOG), owned by the emirate's ruler, had hit sentiment for the region. Luis Costa, emerging debt strategist, Commerzbank, said: "We don't think headlines will go back to the emergency mode in the coming quarters but clearly people are cautious because there is some danger of debt rescheduling." He added: "The $10 billion package from Abu Dhabi means Dubai World can plug refinancing for 2010, but huge chunks of refinancing remain still for 2011."
Evening Recommendations
Citigroup:
- Reiterated Buy on (THO), boosted estimates, raised target to $42.
- Reiterated Buy on (NKE), target $75.
Night Trading
Asian indices are -1.0% to +.25% on avg.
S&P 500 futures -.12%.
NASDAQ 100 futures +.08%.
Morning Preview
BNO Breaking Global News of Note
Yahoo Most Popular Biz Stories
MarketWatch Pre-market Commentary
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
Who’s Speaking?
Upgrades/Downgrades
Politico Headlines
Rasmussen Reports Polling
Earnings of Note
Company/Estimate
- (ATK)/2.16
- (CME)/3.43
- (BKC)/.34
- (BG)/.90
- (HOT)/.22
- (CI)/.95
- (DO)/2.32
- (RGLD)/.19
- (KLIC)/.11
- (SLE)/.23
- (K)/.49
- (NOC)/1.27
- (MA)/2.49
- (AGN)/.77
- (ILMN)/.19
- (N)/.02
- (CLX)/.75
- (SRCL)/.55
- (AVP)/.62
- (PBO)/.61
Economic Releases
8:30 am EST
- Preliminary 4Q Non-farm Productivity is estimated to rise +6.5% versus a +8.1% gain in 3Q.
- Preliminary 4Q Unit Labor Costs are estimated to fall -3.5% versus a -2.5% decline in 3Q.
- Initial Jobless Claims are estimated to fall to 455K versus 470K the prior week.
- Continuing Claims are estimated to fall to 4581K versus 4602K prior.
10:00 am EST
- Factory Orders for December are estimated to rise +.5% versus a +1.1% increase in November.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Fed's Hoenig speaking, Geithner's testimony before Senate Budget Committee, January retail same-store-sales before the open, BoE rate decision, ECB rate decision, EIA weekly natural gas inventory report, Raymond James Growth Airline Conference, (WFR) capital markets day, CSFB Energy Summit and the (EK) analyst meeting could also impact trading today.
