Friday, February 13, 2009

Today's Headlines


- Carlyle Group LP, the world’s second- largest buyout firm, has lined up about $1 billion to invest in banks as the Obama administration seeks to attract private capital to troubled financial institutions, according to two people familiar with the matter. Carlyle, based in Washington, plans to raise as much as $3 billion for the new fund this year after initially gathering $600 million in October, said the people, who asked not to be named because the fund is private. Firms including Carlyle and J.C. Flowers & Co. are increasing investments in financial assets as loans for leveraged buyouts of companies remain scarce. Treasury Secretary Timothy Geithner is trying to coax private investors into the effort to bail out the U.S. financial system. Regulators have eased some rules to promote private takeovers of banks.

- High-yield, high-risk bond sales almost tripled to $2.38 billion this week, the most in seven months, as borrowers took advantage of a rally in corporate debt to increase cash reserves and pay down credit lines. Forest Oil Corp. of Denver raised $600 million in the largest junk bond offering this week, while Nashville, Tennessee- based hospital chain HCA Inc. sold $310 million of notes, according to data compiled by Bloomberg. Both came to the bond market to repay bank debt.

- Warren Buffett’s Berkshire Hathaway Inc. agreed to buy $250 million of debt in Tiffany & Co., the world’s second-largest luxury-jewelry retailer. The bonds will pay 10 percent annually, the New York-based retailer said today in a regulatory filing.

- Investors’ confidence in a sustained rebound in commodity shipping has evaporated in three days, derivatives tied to future shipping rates indicate. Rates have gained on demand to haul iron ore to China, where stockpiles have dropped from all-time highs in September. “While the front-end of the freight forward curve remains supported, there are certainly signs of selling calendar years in the back,” Joel Crrane, a strategist at Deutsche Banks AG in NY, wrote. “Upward momentum remains in the Baltic Dry Index, but given spot iron-ore prices have flattened and Chinese steel prices are easing, we would expect a slowdown in the growth rate of the index in the coming weeks,” Crane wrote.

- Citadel Investment Group LLC, the $13 billion hedge-fund firm run by Kenneth Griffin, plans to allow clients to make withdrawals from its two largest funds after freezing them last year. Citadel will decide each quarter whether to make payments from its Wellington and Kensington funds, Griffin, 40, said in an investor letter yesterday. Clients will be notified of any amounts available for redemption. “We believe that this plan will allow us to maximize the value of our portfolio holdings and capitalize on opportunities in the marketplace,” Griffin said in the letter, a copy of which was obtained by Bloomberg News. He said the firm had “significantly” cut its holdings in hard-to-sell assets.

- OPEC’s crude sells for a record premium to New York oil as the group’s biggest supply cut fails to draw down brimming U.S. stockpiles. Crude inventories in the U.S. are at their highest since July 2007, even after OPEC announced a record production cut, as the recession curbs consumer demand. Stockpiles at Cushing, Oklahoma, where the blend traded on Nymex is delivered, swelled to an all-time high last week. “What this says most is that Cushing is awash with oil,” said Gareth Lewis-Davies, an analyst at Dresdner Kleinwort in London. “Evidence that the OPEC cuts are sufficient hasn’t yet shown up in inventories, and it could be because demand is even worse than people thought.”

- Germany’s economy contracted for the third successive quarter and by the most in 22 years in the final three months of 2008 as the global financial crisis sapped export demand and companies cut investment. Gross domestic product dropped a seasonally adjusted 2.1 percent from the third quarter, when it fell 0.5 percent, the Federal Statistics Office in Wiesbaden said today. That’s the biggest decline since the first quarter of 1987. Economists expected a 1.8 percent contraction, the median of 34 forecasts in a Bloomberg News survey showed.

- Mexican stocks, Latin America’s worst performers this year, are pricier than their emerging-market peers by the widest gap in a decade, a sign they may drop more. Mexico’s Bolsa index has tumbled 13 percent this year while benchmark gauges in Brazil, Argentina and Chile climbed. Even after the declines, Mexican shares fetch about 52 percent more than all emerging-market stocks, the biggest premium since 1998, based on monthly price-to-earnings ratios for MSCI indexes as of the end of January.

- Lego A/S, Europe’s biggest toymaker, said U.S. consumer sales climbed a record 38 percent last year, as parents sought cheaper, more durable toys for their children in the sputtering economy. Sales in 2009 may continue to grow, Soren Torp Laursen, head of the company’s Americas unit said yesterday in a telephone interview.

Wall Street Journal:

- J.P. Morgan Chase and Citigroup Inc. have formally committed to weeks-long moratoriums on foreclosures as the government works on a financial stability plan slated to include billions of dollars aimed at keeping people in their homes."We will not add to the foreclosure process any new owner-occupied residential loans that are owned and serviced by JPMorgan Chase," the company's chief executive, Jamie Dimon, said in a Feb. 12 letter to Rep. Barney Frank (D., Mass.), chairman of the House Financial Services Committee. The moratorium on new foreclosure actions would remain in effect through March 6 and is similar to a 90-day foreclosure freeze J.P. Morgan announced Oct. 31.
- Confidence in US economy systems must be restored, Christopher Galvin, a former chairman of Motorola Corp. and member of the Business Council, said today. The council, which included the heads of Fortune 500 companies, will meet today with President Barack Obama. “At this stage, you simply have to do everything one can to get people to believe they should buy a car, get on an airplane and take that trip,” said Galvin.

- The stimulus package approved by congressional negotiators spends money too late and on the wrong things, Representative Paul Ryan of Wisconsin told CNBC. “It’s a laundry list of special interest spending,” said Ryan, a Republican, who said Democratic lawmakers who wrote the bill ignored Republican proposals. The stimulus spends 7.13% this year, 37% in 2010 and the rest afterward, Ryan said.

- Why Are Gas Prices Going Up While Oil Keeps Falling?

NY Post:

- After suffering embarrassing flops on more than 130 tech ventures he has backed, for a total of about $9 billion, Paul Allen is now looking to banking for his new fortunes. His Vulcan Ventures fund is considering rolling the dice for up to $15 billion with a proven winner, celebrated banking analyst Richard Bove, in a venture to buy up banks wrecked in the recession.

LA Times:

- Wall Street optimists think stocks may be near bottom. Many Wall Street professionals note that the S&P and other broad indexes have largely moved sideways since hitting their 2008 lows in late November, despite a continuing barrage of ugly economic data and horrid earnings reports. "The longer [the S&P] stays in a trading range like this, the more bullish it becomes," said Gail Dudack, head of Dudack Research Group in New York. "Sideways works in the long run. It's a base-building period for something better down the road." Under the surface, there are other positive signs for the market, said Anthony Dwyer, market strategist at FTN Midwest Securities Corp. "Most stocks have not broken their lows, the new-low list is not expanding like it had been, the advance-decline line is holding up well and volatility is well below where it was," Dwyer said.

Loyd’s List:

- The number of container ships idling because of declining cargo demand climbed 500% since October, citing data from BRS-Alphaliner. Vessels able to haul 800,000 twenty-foot-equivalent boxes are inactive, compared with an amount equal to 150,000 containers in October. Four hundred and twenty-seven vessels are seeking cargoes, citing data from Llyod’s Marine Intelligence Unit. That’s equal to 6.8% of the fleet by capacity.

- Bank of America Corp.(BAC) Chief Financial Officer Joe Price assured employees Friday the company has enough cash to finance operations for more than two years. Price went on to say Bank of America believes it has the best deposit franchise in the world, which is a "very cost-effective funding source," and that the company's liquidity "continues to be strong despite the difficult market environment." The company's Tier-1 ratio — the measure commonly used to rate a bank's strength — was 9.15 percent at Dec. 31, well in excess of what regulators regard as well-capitalized.

- As the crisis in the biotech sector deepens, opportunities abound for companies looking to acquire cheap assets. But it will likely be mid-cap companies with cash that profit most from the bonanza, not the drug giants.

- Google(GOOG) will allow developers to sell applications for its Android cell phone operating system beginning next week in the United States. The move is a further step by the search giant into the mobile phone market, where Apple Inc has encountered success with its iPhone. Developers such as Electronic Arts Inc have been anxious to expand sales of their mobile phone games to the Android Market, which has been limited to free applications until now. Google said in a statement on Friday that consumers will have to pay for the applications via its Google Checkout payment product. Google's Android Market will initially carry paid applications from developers in the United States and Britain, with plans to allow developers in Germany, Austria, the Netherlands, France and Spain to participate later this quarter.


- US Open to Working With Russia on Missile Shield.

- China’s toy exports may have declined 18% in January from a year earlier. Toy exports in the southern Guangdong province plunged 18% to $340 million last month, citing local customs statistics. Guangdong accou nts for 70% of China’s production and export of toys and is representative of the total country’s trade in the products. Lower demand from the US and Europe during a financial crisis and more stringent quality and safety controls on toys in the importing countries were the main reasons for the decline.

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