BETWEEN THE HEDGES: Today's Headlines

Bloomberg:
- Emerging-market corporate profits may drop 12% in 2009 because of the slowing global economy and a slump in commodity prices, UBS AG said. The decline in commodity prices will contribute most to lower earnings next year, citing a survey of analysts forecasts. Earnings before interest and taxes may drop 30% for South Korean companies in 2009, compared with a 5.5% decline for Chinese firms and an 11% contraction in Brazil, according to UBS. Within industries, earnings before interest and taxes of raw material producers may decline 32% next year, while profit of energy producers will drop 17%, UBS said.

- Investors should buy originally top- rated subprime-mortgage bonds because the government is lowering borrowing rates and taking other steps that will end home-price declines next year, a JPMorgan Chase & Co. analyst said. “The indications are quite strong that policy makers now ‘get it’ and are prepared to take the appropriate actions,” Chris Flanagan, a JPMorgan analyst in New York, wrote in a report yesterday. Subprime bonds may now “rally significantly,” he said.

- Crude oil fell below $36 a barrel for the first time since July 2004 on speculation the drop in demand will outpace OPEC supply cuts as the economy weakens. JPMorgan Chase & Co., the largest U.S. bank by assets, reduced its 2009 average oil price forecast to $43 a barrel from $69 as a global economic slowdown causes a contraction in demand. The prospect of oil falling to $25 is “hard to dismiss amid a serious deterioration of economic conditions and building stocks,” the bank said in a report released yesterday. “When you look at the spare capacity that is being created, even if prices do start to pick up, you will see more leakage of supply onto the market,” Lawrence Eagles, global head of commodities research at JPMorgan Chase in New York, said in a conference call today.

- The US dollar rose from a 12-week low against the euro as traders judged the greenback’s 5 percent plunge after the Federal Reserve slashed interest rates two days ago as too fast to be sustained. The yen fell from near the highest since 1995 against the dollar and tumbled versus the euro as Japan’s government signaled it may intervene in the foreign-exchange market for the first time in four years to stem the currency’s advance. The pound edged closer to parity with the euro, sinking to a record for a ninth day. “This is a little bit of an unwind of some pretty ridiculous, exhaustive extensions,” said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York. “You’re going to see a little bit more euro selling.”

- Oil at less than $20 a barrel? Gold at $300 an ounce? Both are possible next year, according to a list of 10 surprises compiled by UBS AG.

- General Electric Co.’s(GE) debt ratings outlook and those of its GE Capital finance arm were changed to negative from stable by Standard & Poor’s, reflecting concern earnings could deteriorate further than previously thought.

- The benchmark index for U.S. stock options headed for its lowest close in 2 1/2 months as the Federal Reserve’s rate helped calm the equity market’s swings. The VIX, as the Chicago Board Options Exchange Volatility Index is known, retreated for a third day, losing 9.7 percent to 44.99 at 1:37 p.m. in New York.

Wall Street Journal:

- Fourteen U.S. technology companies are joining forces and seeking $1 billion in federal aid to build a plant to make advanced batteries for electric cars, in a bid to catch up to Asian rivals that are far ahead of the U.S.

CNBC.com:
- With the Bush administration unlikely to seek the second half of the $700 billion Wall Street bailout fund before it leaves office, many experts think that money will now go toward foreclosure relief—and possibly an economic stimulus plan—under the Obama administration.

MarketWatch.com:

- Bernard Madoff, the alleged perpetrator of what could be the largest Ponzi scheme in history, relied on a network of leverage providers and controversial fee arrangements built up over more than a decade to feed his operation. The scandal, which may trigger at least $17 billion in losses, shows how much the hedge-fund business relied on trust and personal relationships rather than the rigorous due diligence typically demanded by institutional investors and lenders that have come to dominate the industry in recent years.

NY Times:
- Nearly 18 percent of households in the United States have no traditional telephone and rely on wireless services only, which is up several percentage points from a year earlier, the government said on Wednesday. In the first half of 2008, 17.5 percent of households were wireless only, up from 13.6 percent a full year earlier, according to the U.S. Centers for Disease Control and Prevention.