Tuesday, December 15, 2009

Today's Headlines


- The three largest U.S. banks are preparing for a comeback in the market for collateralized debt obligations backed by high-yield, high-risk loans, two years after issuance tumbled when credit markets seized up. JPMorgan Chase & Co.(JPM), Bank of America Corp.(BAC) and Citigroup Inc.(C) are approaching managers of leveraged loans to offer terms for new collateralized loan obligations following a record rally this year in the debt, according to people familiar with the discussions who declined to be identified because the talks are private. “Market conditions have improved dramatically over the course of this year, which we see carrying on into 2010,” said Philippe Roger, JPMorgan’s global head of structured credit trading. “We are actively discussing the market environment with our clients, and think that they are going to be increasingly attracted both to the leveraged-loan asset class and securitization technology and applications related to the high-yield space.”

- Wells Fargo & Co.(WFC), seeking to wipe away the tarnish of U.S. government bailout funds, kept pace with rival banks by selling $10.65 billion of common stock to help repay the Troubled Asset Relief Program. The bank priced 426 million common shares at $25 each, the San Francisco company said in a statement today, raising more than the $10.4 billion target.

- The Federal Deposit Insurance Corp. gave banks including Citigroup Inc.(C), Bank of America Corp. and JPMorgan Chase & Co.(JPM) a reprieve of at least six months from raising capital to support billions of dollars of securities the firms will be adding to their balance sheets.

- Genworth Financial Inc.(GNW), the life insurer and mortgage guarantor, said its unit that backs U.S. home loans may return to operating profit in the middle of 2011.

- US auto sales will rise 20% in 2010, buoyed by pent-up demand and stronger credit markets, as the industry starts recovering from its worst year in almost three decades, a researcher said. Deliveries will climb to 12.4 million from 10.3 million in 2008, the Ann Arbor, Michigan-based Center for Automotive Research said today. US sales were 13.2 million last year, after averaging 16.8 million this decade through 2007. The forecast exceeded four projections by consultants and analysts for domestic industry deliveries in a range of 11.3 million to 11.8 million light vehicles. Cars on US roads now average a record 10.5 years old, and the sales rate has fallen to 42 autos for each 1,000 adults, McAlinden said. In the 1992 recession, the rate was 66 autos per 1,000 adults, he said. “It’s unbelievable how people have stopped buying cars,” McAlinden told reporters after a speech. “There’s enormous pent-up demand.”

- Paul A. Volcker visited nine cities in five countries in the past eight weeks to warn that bankers and regulators “have not come anywhere close to responding with necessary vigor” to the worst economic crisis in 70 years. “There is a lot of evidence that financial weaknesses brought us to the brink of a great depression,” Volcker, 82, said Dec. 8. at a conference in West Sussex, England. He told executives there that the changes they’ve proposed are “like a dimple.” Two years after the start of the deepest recession since the 1930s, no U.S. or European authority has put in force a single measure that would transform the financial system, based on data compiled by Bloomberg. No rule- or law-making body is actively considering the automatic dismantling of banks that Volcker told Congress are sheltered by access to an implicit safety net. There’s little evidence that policy makers are heeding Volcker, the former chairman of the U.S. Federal Reserve.

- Crude oil prices will probably continue to decline even after a short-term rise, according to technical analysis by Newedge Group. West Texas Intermediate oil futures for February delivery are in “an underlying downtrend” that wouldn’t be affected by a small, short-term rise in prices, Veronique Lashinski, a senior research analyst at Newedge USA LLC, said in a note to clients. “As long as prices remain under $74.50, the overall picture will remain bearish.”

- Exxon Mobil Corp.’s(XOM) $30 billion purchase of XTO Energy Inc., the largest U.S. petroleum takeover since 2006, may signal a wave of acquisitions as major producers seek to tap growing gas and oil output from shale formations.

- U.S. retail sales rose for the 14th straight week as holiday promotions spurred spending. Sales at stores open at least a year climbed 2.4 percent in the week ended Dec. 12 from a year ago, the International Council of Shopping Centers and Goldman Sachs Group Inc. said today in a statement. Sales in December will rise about 2 percent, Michael Niemira, chief economist of the New York-based ICSC, reiterated today. With one Saturday left before Christmas after last weekend, procrastinating consumers were motivated to start their holiday shopping, according to Amy Noblin, an analyst at Pali Capital Inc. in San Francisco. Retailers offered more promotions than they did a week ago, Noblin said. Retailers’ fourth-quarter gross profit margins may be more robust than they were a year ago, Jaffe said.

- Fannie Mae and Freddie Mac’s federal regulator is renegotiating the companies’ financing plan with the U.S. Treasury Department and may seek an increase to their $400 billion federal lifeline before the end of the year, according to people familiar with the talks.

- Chrysler LLC, now known as Old Carco LLC, filed a reorganization plan, giving nothing back to the U.S. for its loans under the Troubled Asset Relief Program while repaying some secured lenders in full. The rough outline of a Chapter 11 plan, filed in Manhattan bankruptcy court today, says the U.S. won’t recover anything from its $4 billion TARP loan. Creditors classified as “other secured claims” of $20.6 million will get an estimated 100 percent recovery and a recovery for unsecured claims is “undetermined” according to the plan.

- Southern California house and condominium prices halted their slide for the first time in more than two years last month as federal tax credits and low mortgage rates increased sales, MDA DataQuick said. The median price was $285,000 in November, little changed from a year earlier and up 1.8 percent from $280,000 in October, the San Diego-based research company said today in a statement.

- Boeing Co.’s(BA) 787 Dreamliner took off on its maiden flight today, more than two years late, starting a testing process that will last at least nine months before the new plane enters service.

- Best Buy Co.(BBY), the largest electronics retailer, said its fourth-quarter gross margin will be lower than it anticipated as the chain relies on less profitable notebook computers and televisions to drive sales.

- CME Group Inc.(CME), the world’s largest futures market, guaranteed its first credit-default swap with its clearinghouse as a Federal Reserve deadline to improve the $27 trillion market expires. The trades cleared today were between a bank and a client, spokesman Michael Shore said in an e-mail. The Chicago-based exchange has struggled to attract bank business to process trades as competitor Intercontinental Exchange Inc.(ICE) has guaranteed more than $4.3 trillion of the contracts with its two clearinghouses since March.

Wall Street Journal:

- The United Nations' effort to muster global action against climate change appeared to move backward Tuesday, as the world's leading economies traded barbs over the most basic questions about how to divide responsibility for curbing greenhouse-gas emissions.

Even as world leaders began arriving for the climax of the two-week U.N. climate conference in the Danish capital, disagreements deepened among negotiators for the U.S., the European Union and a bloc of developing nations led by China.

- Support for the euro has turned very soggy very quickly, with sovereign credit risk in Greece, banking stress in Austria and weak economic data all suddenly proving a major drag. The currency has plunged from over $1.51 against the dollar at the start of this month to trade under $1.4550 Tuesday for the first time since early October. Now it seems that traders are latching onto every available sliver of negative news on the euro and using it as a trigger to punish the currency, particularly against the resurgent dollar.

- CardioNet Inc. (BEAT) executives said during a conference call Tuesday it has hired an investment bank to evaluate its options, an indication the medical-device company is considering a sale.

NY Times:

- Paramount Pictures, looking for new ways to turn its old movies into cash, especially as DVD sales continue to decline, is creating an online video clip service that will allow users to search hundreds of feature films on a frame-by-frame basis.

- The Two Faces of O by Charles Gasparino.
Prez’s lovefest with Wall St. ‘fat cats’ In public, President Obama is on a tear against Wall Street. In private, not so much Over the weekend, Obama attacked fat-cat investment bankers, telling "60 Minutes" he didn't become president to aid and abet Wall Street -- which, only a year after the financial meltdown and taxpayer bailout, is now scheduled to hand out tens of billions of dollars in bonuses to its bankers and traders. But the president's meeting yesterday with the CEOs of the largest banks was nearly a lovefest, I'm told by attendees. The White House last week sent the CEOs the president's talking points: bonuses (too high), lending (more loans to small businesses), the need for more regulation of the financial business (support the bill now before Congress), etc. So there were no surprises for the likes of Jaime Dimon of JP Morgan, Lloyd Blankfein of Goldman Sachs, John Mack of Morgan Stanley or Citigroup's Richard Parsons. Said one CEO who attended: "I expected to be taken to the woodshed, but the tone was quite the opposite." Said another senior exec with knowledge of the meeting: "The whole thing was so telegraphed that not much was accomplished, other than giving Obama a PR stunt . . . He might have sounded mean on '60 Minutes,' but during the meeting he was a hell of a lot nicer." Maybe Obama's softened tone was recognition of Wall Street's election help. Campaign-finance filings show that firms like Goldman -- now getting ready to dish out $20 billion in bonuses after nearly imploding last year -- favored Obama over John McCain by a fairly wide margin. Nearly all the major Wall Street CEOs -- including Dimon, Blankfein and Mack -- have told people that they voted for Obama.

Washington Times

- A new report shows that lean economic times didn't stop members of Congress from splurging taxpayer dollars on food and drink, including a $6,090 meal tab racked up in a single day by Guam Delegate Madeleine Z. Bordallo during a visit home with members of the House Natural Resources Committee. The meal bill that Mrs. Bordallo, a Democrat, charged to taxpayers Aug. 11 was the largest expenditure by a House member on food and beverages during the third quarter, according to an analysis of the members' $145 million in disbursements for the quarter conducted by watchdog.org. House Majority Leader Steny H. Hoyer, Maryland Democrat, had the second most expensive meal: $5,380 on Aug. 28 at the Middleton Hall, a posh banquet facility in Mr. Hoyer's Southern Maryland district. Mr. Hoyer did not immediately respond to inquiries about the expensive meals. The 3,400 pages of expenditure information culled by the group was made available for the first time on the Web, in keeping with a promise House Speaker Nancy Pelosi, California Democrat, made in June. The information previously was available only by visiting government offices.

The Business Insider:

- Jim Chanos: We’re Shorting Autos, China, And Commodities But Not Financials. Kynikos Associates founder Jim Chanos stopped by the Fast Money set for an interview with CNBC's Melissa Lee this afternoon. A few highlights from the video:

- 12 Huge Takeover Deals That Will Happen In 2010.

- 10 American Industries That Will Boom In The Next Decade.

Institutional Investor:

- To help make sense of the shifting landscape of Wall Street, we introduce our first ranking of the 25 most powerful people in the world of investment banking. Our list includes bank CEOs, star traders and high-priced rainmakers, and ranges from New York to London to Beijing. Subjective to be sure, our ranking nonetheless highlights some incontestable features about the industry during a time of historic transformation.
Click on the names below to read the executive profiles.

The Philadelphia Inquirer:

- Comcast Corp.(CMCSA) today is launching its "TV Everywhere" service for 8 million to 10 million Comcast customers in the United States who subscribe to the company's cable-TV and broadband Internet services. Subscribers will be able to go a Web site to view Comcast entertainment and news not previously available on the Internet. The service is free for Comcast subscribers and can't be viewed by those who don't subscribe to Comcast.


- Compared to the average government worker, most Americans think they work harder, have less job security and make less money. In fact, 59% of Americans say the average government worker earns more annually than the average taxpayer, according to the latest Rasmussen Reports national telephone survey. Just 15% don’t believe that to be true.


- In a provocative argument designed to rescue his foundering health care plan, President Barack Obama will warn Senate Democrats in a White House meeting Tuesday that this is the "last chance" to pass comprehensive reform. Obama will contend that if it fails now, no other president will attempt it, aides said. White House Communications Director Dan Pfeiffer told POLITICO: "If President Obama doesn't pass health reform, it’s hard to imagine another president ever taking on this Herculean task. For those whose life's work is reforming health care, this may be the last train leaving the station." Previewing the message, Vice President Joe Biden said on MSNBC's "Morning Joe": "If health care does not pass in this Congress ... it's going to be kicked back for a generation." The new argument comes as the Senate races to pass the measure by Christmas, in the face of a costly setback this week. Senate Democrats say they are prepared to drop a plan to expand Medicare coverage after Sen. Joe Lieberman (I-Conn.) said he could not support it. That could keep the bill alive but would infuriate the party's liberals, who feel the moderate Lieberman has thwarted them once again.

- It’s not been the year that labor had hoped for when it helped Democrats seize control of both Congress and the White House in 2008. The top labor legislative priority, a measure easing union organizing rules, hasn’t seen so much as a committee vote after negotiations over modified language took a back seat to passage of health care reform. Some members have grown frustrated with President Barack Obama’s decision to push health care as his first domestic priority, rather than focusing on economic recovery. And those feelings only intensified as the unemployment rate rose and automakers and other labor-dominated industries took debilitating blows during the economic downturn. Now, labor leaders are trying to defeat a Senate proposal to raise money for health care reform by taxing so-called Cadillac health insurance packages, which could apply to some union members.


- A push to spread the gospel about the 2010 Census this Christmas is stoking controversy with a campaign that links the government count to events surrounding the birth of Jesus. The National Association of Latino Elected Officials is leading the distribution to churches and clergy of thousands of posters that depict the arrival of Joseph and a pregnant Mary in Bethlehem more than 2,000 years ago. As chronicled in the Gospel of Luke, Joseph returned to be counted in a Roman census, but he and Mary found no room at an inn, and Jesus was born in a manger. "This is how Jesus was born," the poster states. "Joseph and Mary participated in the Census."


- Lockheed Martin Corp (LMT) will likely make more acquisitions in 2010, focusing on areas such as cybersecurity, energy security, logistics support and intelligence surveillance, the company's chief executive said on Monday. Speaking at the Reuters Aerospace and Defense Summit in Washington, Robert Stevens said: "When we look to the future of cybersecurity, we are all just scratching the surface of the demands that will be placed on all of us to secure the databases, the networks, the information technology environment that we have." Stevens also said the company remained interested in healthcare information technology. "We all recognize the cost of healthcare continues to escalate," he said. "We understand large database management, we understand the security in databases, whether that's personal privacy protection or whether it's classified information protection ... so we'll continue to explore that horizon."


- There are many kinds of truth. Al Gore was poleaxed by an inconvenient one yesterday. he former US Vice-President, who became an unlikely figurehead for the green movement after narrating the Oscar-winning documentary An Inconvenient Truth, became entangled in a new climate change “spin” row. r Gore, speaking at the Copenhagen climate change summit, stated the latest research showed that the Arctic could be completely ice-free in five years. In his speech, Mr Gore told the conference: “These figures are fresh. Some of the models suggest to Dr [Wieslav] Maslowski that there is a 75 per cent chance that the entire north polar ice cap, during the summer months, could be completely ice-free within five to seven years.” However, the climatologist whose work Mr Gore was relying upon dropped the former Vice-President in the water with an icy blast. It’s unclear to me how this figure was arrived at,” Dr Maslowski said. “I would never try to estimate likelihood at anything as exact as this.” The embarrassing error cast another shadow over the conference after the controversy over the hacked e-mails from the University of East Anglia’s Climate Research Unit, which appeared to suggest that scientists had manipulated data to strengthen their argument that human activities were causing global warming. Gore is not the only titan of the world stage finding Copenhagen to be a tricky deal. Perhaps Mr Gore had felt the need to gild the lily to buttress resolve. But his speech was roundly criticized by members of the climate science community. “This is an exaggeration that opens the science up to criticism from skeptics,” Professor Jim Overland, a leading oceanographer at the US National Oceanic and Atmospheric Administration said. Richard Lindzen, a climate scientist at the Massachusets Institute of Technology who does not believe that global warming is largely caused by man, said: “He’s just extrapolated from 2007, when there was a big retreat, and got zero.”

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