Monday, December 14, 2009

Today's Headlines


- Credit-default swaps tied to the debt of US banks fell, signaling an increase in perceptions of credit quality. Contracts on Citigroup Inc. dropped 22 basis points to 137.5 basis points, according to CMA DataVision prices. JPMorgan Chase(JPM) declined 8 basis points to 46, while Morgan Stanley fell 17.5 basis points to 100, CMA prices show. Swaps on debt issued by Goldman Sachs Group slipped 7.5 to 82.5, according to CMA.

- The Standard & Poor’s 500 Index is posed to rise about its highest closing level of the past month as it breaks out of a so-called consolidation phase, according to MKM Partners LLC. The S&P 500 “remained firm within its month-long consolidation phase,” said Katie Stockton, chief market technician at Greenwich, Conn.-based MKM, with the difference between the lowest and highest closing levels not exceeding 2.2 percent since Nov. 11. A crossing of the so-called daily stochastics is a “positive catalyst” and may trigger more gains in the index, she wrote today. “The period of consolidation has been constructive in that it has relieved short-term overbought conditions without a breakdown below support,” Stockton said. “Momentum remains supportive of the S&P 500 from a short- and long-term perspective.

- The Wall Street strategists who correctly predicted U.S. stocks would rebound from the steepest plunge since the Great Depression now say the Standard & Poor’s 500 Index will rally 11 percent next year.

- President Barack Obama’s $1 trillion health-care overhaul won’t buy corporate America relief from medical costs that more than doubled in the last decade, chief executive officers of more than a dozen U.S. companies said. Private companies, providers of benefits to 132 million Americans, will see little savings from legislation under debate in Congress, CEOs at United Parcel Service Inc., Safeway Inc. and Verizon Communications Inc. said in interviews over the past two weeks. The measures are more likely to add expenses, through taxes and fees on employers who don’t offer affordable coverage, said Ellen Kullman, chief of Wilmington, Delaware-based DuPont Co., the world’s third-largest chemical maker. “They’re disasters,” said John Riccitiello, CEO of Electronic Arts Inc., of Redwood City, California, the second- largest video-game maker with 8,000 employees. “What part of either the House or Senate bill is going to do anything with cost? I don’t see anything.”

- Citigroup Inc.(C), recipient of the biggest U.S. bank bailout, struck a deal with regulators to repay $20 billion to taxpayers and escape government-imposed pay restrictions. Citigroup, the only major U.S. lender still dependent on what the government calls “exceptional financial assistance,” will raise the funds with a sale of $20.5 billion of equity and debt. The New York-based company also plans to substitute “substantial common stock” for cash compensation, the bank said in a statement today.

- Asset bubbles are the No. 1 threat to financial stability in Asia, meaning policy makers should avoid an excessive focus on inflation, said Norman Chan, the head of Hong Kong’s de facto central bank. Asia’s experience in the past 20 years shows the biggest threat “is from asset bubbles, rather than inflation,” Chan, chief executive of the Hong Kong Monetary Authority, said in a speech posted on the organization’s Web site today. “I’m not saying that Asia does not need to worry about or guard against inflation, but I think we should focus more on the risk of asset bubbles forming and the associated damages.”

- Iran will put on trial three American hikers who illegally entered the country, Foreign Minister Manouchehr Mottaki said. Interrogation of the three U.S. citizens who “illegally entered Iran with suspicious aims is ongoing,” Mottaki was quoted as saying today by the Iranian Labour News Agency. “They will be put on trial by the judiciary and rulings will be made,” he said, according to ILNA.

- The worst recession since the Great Depression is creating advantages for the U.S. Census Bureau as it prepares for the 2010 count. Unemployed business-school graduates and other highly skilled workers are applying for some of the estimated 1.3 million jobs the agency expects to fill by the middle of 2010. “Our applicant pool contains a set of people with experience and background and training that is unprecedentedly rich,” Robert Groves, director of the Census Bureau, said during a briefing with reporters. “The high unemployment rate has helped us.” The hiring should provide a boost for next year’s unemployment picture. November’s unemployment rate fell to 10 percent from a 26-year high of 10.2 percent in October. Much is at stake with the national head count. More than $400 billion in federal funding is distributed each year based at least partially on demographic data, a Census Bureau report released in June showed.

- The yen is poised to replace the dollar as the top funding currency for investments in cities from Sydney to Sao Paulo after borrowing from Japan became almost as cheap as U.S. loans for the first time in four months.

Wall Street Journal:

- Tensions flared Monday at the United Nations climate summit, as representatives from a group of poor nations briefly walked out of the conference to protest the slow pace of negotiations, and European Union officials expressed exasperation with the U.S. and China.

- The View From Britain. Alistair Darling, the UK’s chancellor of the Exchequer, on the dollar, poor judgment and too big to fail.

- Daimler AG plans to start a pilot program for an electric version of its Smart minicar in China next year, joining a growing list of firms evaluating the potential for next-generation clean-energy vehicles in the world's biggest automobile market.

- Morgan Stanley(MS) Smith Barney is launching a pricing plan for fee-based accounts in April that will charge clients based on the level of service provided rather than the product. Morgan Stanley thinks this change from current pricing procedures will be easier for clients and advisers to understand.

- Heard on the Street: Days Numbered for Oil Bulls. (video)

- Abu Dhabi has given fellow emirate Dubai $10 billion in financing that will be used to pay part of the debt held by state-owned conglomerate Dubai World and its property unit Nakheel.

- Has Inc. just won the ebook war? That's not as crazy as it may sound.

NY Times:

- Embedded in sweeping health legislation passed by the House and being debated on the Senate floor is a major new federal insurance program for long-term care intended to help people like Anne M. Rader. Critics say that the program is unsustainable and that it could ultimately create serious fiscal problems for the government. “It would create a huge new liability down the road,” said Senator John Thune, Republican of South Dakota. The effort to eliminate the program won support from 11 Democrats, including the chairman of the Finance Committee, Max Baucus of Montana, and the chairman of the Budget Committee, Kent Conrad of North Dakota. Six of those Democrats said the program “would not be fiscally responsible.” The bill would “create a new federal entitlement program with large, long-term spending increases that far exceed revenues,” they said in a letter to the Senate majority leader, Harry Reid, Democrat of Nevada.

- President Obama’s approval rating fell to its lowest ever level in the daily Rasmussen Reports Presidential Tracking Poll published Monday. The telephone poll of 1,500 likely voters found only 44 percent said they somewhat approved of Obama’s performance, a new low in his 11-month presidency. A majority of voters, 55 percent, said they disapproved of the job Obama was doing.

The Business Insider:

- It might feel satisfying to hear the President criticize “reckless”, “fat cat” bankers, but the financial reform legislation passed by the House last Friday (and lauded by the President) provides little incentive to change their behavior. In reality, populism — with nothing of substance behind it — is just cynical posturing designed to mask genuine failure. To use an expression favored by his predecessor, this president is once again showing himself to be all hat, no cattle.

- Uber-bull Jeff Saut says to keep buying, and he would disagree with our recent report on the trebling economic recovery.

Chicago Sun-Times:

- Rod Blagojevich's lawyers want the FBI to give up details of interviews conducted last year of President Obama, his chief of staff, Rahm Emanuel, White House adviser Valerie Jarrett and others as part of the investigation into the former governor. In a Friday filing, Blagojevich attorneys also asked for information regarding first lady Michelle Obama. Then-President-elect Obama, Emanuel and Jarrett sat down with the FBI about a year ago -- just after Blagojevich was arrested on charges of trying to sell Obama's recently vacated Senate seat to the highest bidder.

Chicago Tribune:

- One very big-ticket item has made its way to the top of some high-profile shopping lists this holiday season: the shopping mall itself. Making strides to emerge from a mammoth bankruptcy, Chicago-based General Growth Properties may be in play, as competitors seek to acquire some or all of the nation's second-largest mall company. Valued at about $30 billion, the owner of Water Tower Place, Northbrook Court and more than 200 other malls in 44 states, is exploring its options with "multiple parties," Chief Executive Adam Metz told the Tribune. At least one rival -- Toronto-based Brookfield Asset Management -- already has gained a sizable interest through debt acquisition.

Washington Post:

- Energy Secretary Steven Chu will announce on Monday an international plan to deploy clean technology in developing countries, a $350 million, five-year effort that will include everything from putting solar lanterns in poor households to promoting advanced energy-efficient appliances worldwide, administration officials said. The initiative -- which includes $85 million from the United States and donations from industrialized nations such as Italy and Australia -- aims to make energy-saving technology that already exists cheap enough to penetrate markets in India, parts of Africa and elsewhere. It is distinct from the major financing package the United States is expected to unveil this week as part of a broader climate deal.

LA Times:

- The unemployment rate dropped last month for men and women, blacks and whites, lifting hopes that the long dry spell in the jobs market may be coming to an end. But for recent college graduates and other young adults, the labor situation didn't just remain dire -- it got worse. For 20- to 24-year-olds, the jobless rate rose four-tenths of a percent to 16% in November, even as unemployment nationally slipped to 10% from 10.2%. And data from the Labor Department show that the unemployment figure for college graduates in that age group was 10.6% in the third quarter -- the highest since early 1983 and more than double the rate for older college-educated workers.

The Detroit News:

- Sales of fuel-efficient gas-electric hybrids are expected to rise next year, outpacing the U.S. auto market's overall growth, according to a new forecast. Automotive research firm predicted U.S. auto sales would recover modestly next year, to 11.5 million cars and light trucks from an estimated 10.3 million this year. Its forecasters expect hybrids to outperform the market, even though they cost more, on average, than comparable gas-powered models. Hybrids are expected to increase their share of the market to 3.2 percent in 2010 from around 2.8 percent this year, according to Edmunds. It expects the market share for hybrids to grow by about half a percentage point a year for the foreseeable future.

- Save jobs from questionable climate rules. Far too many of our family, friends and neighbors have lost their jobs as the auto companies have gone through painful restructuring and manufacturing jobs have been outsourced to lower-wage nations. There is no more pressing issue facing America than getting our economy moving again so jobs can be created. That is why the endangerment finding last week by the Obama administration's Environmental Protection Agency administrator that could trigger regulation of greenhouse gas emissions is so troubling. The announcement coincided with President Barack Obama's trip to the U.N. climate change summit in Copenhagen, Denmark, in a seeming sop to the international community to show movement on this issue in the United States.


- Fifty-six percent (56%) of U.S. voters now oppose the health care plan proposed by President Obama and congressional Democrats. That’s the highest level of opposition found - reached three times before - in six months of polling. The latest Rasmussen Reports national telephone survey finds that just 40% of voters favor the health care plan. Perhaps more significantly, 46% now Strongly Oppose the plan, compared to 19% who Strongly Favor it.


- The heated Capitol Hill debate over health care coverage for mammograms has exploded onto the political scene, shaping the 2010 electoral landscape and recalibrating the battle for a crucial constituency: the women’s vote. With women’s health issues increasingly at the forefront of the health care debate, pols have turned breast cancer into a potent campaign weapon. The volume in the war has ramped up in recent weeks after a government task force released findings – widely criticized by women’s groups – recommending that it was unnecessary for women under 50 to screen for breast cancer. “It resonates with 52 percent of the electorate,” said Jennifer Duffy, a senior editor for the Cook Political Report. “You can get yourself in a good bit of trouble being on the wrong side of the issue.”

- For critics of the Democrats’ $849 billion health care bill, this may be the ultimate irony: millions of dollars set aside so the government can help teach citizens how to handle their own money better. The funding is part of a broader, $375 million program aimed at promoting responsible lifestyles — a five-year plan to fund state efforts to educate adolescents on abstinence, contraception and other “adult preparation subjects” such as healthy relationships, increased child-parent communication and “financial literacy.”


- Steel – Higher input costs presage higher finished product pricing as scrap prices jumped with #1 heavy melt scrap rising $50/ton (+24%) to $260/ton, shredding rising $65/ton (+28%) to $300, and #1 busheling rising $80/ton (+30%) to $345/ton.


- A report says that 38 percent of all U.S. stock trading is now done by firms that have "naked sponsored access" to markets, the controversial trading practice said to imperil the marketplace, and which faces a regulatory crackdown. Naked access gives trading firms, using brokers' licenses, unfetted access to stock markets. The firms, usually high-frequency traders, are then able to shave microseconds from the time it takes to trade. Aite Group, a Boston consultancy, found that naked access accounted for just 9 percent in 2005.

- Exxon Mobil Corp(XOM) will buy XTO Energy Inc(XTO) for about $30 billion in stock, in a move that thrusts the U.S. energy giant to the forefront of North America's fast-growing natural gas industry. With the buy, Exxon, the largest publicly traded energy company, gains a major foothold in the newest energy discoveries as it bets on natural gas expanding its share of the world's largest energy market.

Financial Times:

- The crude oil demand issue is perhaps the most glaring right now, considering the year-on-year comparatives relate to what was already a substantial demand retraction last year. On that note, here’s a chart presented by JBC Energy last week on the matter:

- China is reported to have revoked permission for cable operators to distribute commercial network Sun TV due to its outspoken talk shows, as part of a government crackdown on content deemed sensitive and too bold. Censors have become increasingly intolerant of content that pushes the envelope on politically incorrect or sensitive topics. "Sun's broadcast rights were revoked because guests called for political reform." Sun TV is fully owned by Hong Kong-listed Sun Television Cybernetworks Enterprise Ltd.

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