Wednesday, December 16, 2009

Today's Headlines


- To combat a nationwide shortage of doctors, medical schools in the U.S. plan to add 3,000 first- year students by 2018. It won’t be enough. The expansion, pushed for by the Association of American Medical Colleges, is being undercut by a U.S. health-care overhaul designed to supply medical insurance to an additional 31 million Americans and a cap on government-funded physician training programs that’s been frozen in place for 12 years, said Steven Safyer, of Montefiore Medical Center. Last year, there were 16,721 fewer primary-care doctors than needed in inner city and rural areas, according to the U.S. Health and Human Services Department. Residencies, the hospital based-training doctors undergo before they can practice medicine on their own, have been capped by Congress at about 90,000 since 1997 as a way to curb rising medical costs. “Do the math,” said Safyer, president and chief executive officer at the New York hospital, in a telephone interview. “You give millions more people insurance, and it adds up to a much worse shortage.” The doctor crunch is a result of an aging population and a rising demand for specialists, according to the federal health department. By 2025, the nation as a whole will confront a shortfall of as many as 159,300 doctors of all varieties, said Ed Salsberg, director of the Center for Workforce Studies at the Washington-based medical college association. Still, “it takes years to produce doctors,” said Steven Lipstein, president and chief executive officer of the 13- hospital BJC HealthCare in St. Louis, that trains residents from Washington University. “It’s a very long pipeline and right now it doesn’t have enough in it to meet our needs.” To reduce the shortfall, federal officials need to follow up on the commitment medical schools have made to growth and raise the number of residencies available to students, said Robert Feinstein, senior associate dean for education at the University of Colorado medical school in Denver. “The number of residencies nowhere near meets the demand from the number of students who will be in the pipeline in the coming years, or the need the nation has for doctors,” Feinstein said.

- Housing starts in the U.S. rose in November and a gauge of consumer prices was unchanged, supporting forecasts for an economic recovery that will generate little inflation.

- Crude oil futures rose the most in two months after U.S. oil inventories dropped to the lowest level since January and Iran successfully tested a medium-range missile, drawing threats of sanctions.

- The U.S. Federal Trade Commission accused Intel Corp.(INTC), the world’s largest computer-chip maker, of illegally using its dominant market position for a decade to stifle competition and strengthen its monopoly. The complaint, which will be heard by an FTC administrative law judge, says Intel tried to block “superior” products by rivals and deprived consumers of choice and innovation for 10 years.

- Greece’s credit rating was cut by Standard & Poor’s, which said the government may fail to tackle its rising debt burden. The rating was lowered by one level to BBB+, from AAA-, S&P said today in a statement. Greece was put on “creditwatch negative,” signaling the company may reduce it again.

- U.S. Senators John McCain and Maria Cantwell proposed reinstating the Depression-era Glass-Steagall Act that split commercial and investment banking to rein in Wall Street firms in response to the financial crisis. “Under our proposal, too-big-to-fail banks would be forced to return to the business of conventional banking, leaving the task of risk taking or management to others,” McCain, an Arizona Republican, said at a Washington news conference. A former bank regulator said splitting up companies is “crazy.”

- World leaders will arrive in the Danish capital of Copenhagen in the next three days to agree on an accord to fight global warming. There may be nothing to sign. Envoys from China, the U.S., the European Union and India, the world’s top polluters, have bickered, quarreled and walked out during talks among 193 nations. They’ve left presidents and prime ministers a choice between a fudge or a flop for the accord that the United Nations framed as the most comprehensive deal to curb global warming. “Countries and blocks of countries have come here with very hard positions,” Guyana’s President Bharrat Jagdeo said yesterday in an interview in Copenhagen. “You need some seismic shifts to really close a deal.”

- Prudential Financial Inc.(PRU), the second-biggest U.S. life insurer, rose the most in a month after saying it will record a $1.5 billion gain from the sale of a stake in a Wells Fargo & Co. securities brokerage unit. Prudential advanced $2.48, or 5.1 percent, to $51.63 at 11:29 a.m. in New York Stock Exchange composite trading.

- Financial Rules Bill Permits Commercial-Mortgage Debt Loophole.

- “Buy American” rules requiring the use of U.S. goods in construction projects would be strengthened under legislation the U.S. House of Representatives is set to vote on today. Provisions in the $154 billion economic-aid measure would make it more difficult for government agencies to waive the requirement that most steel and manufactured goods used for highway and bridge projects be produced in the U.S.

- Nasdaq OMX Group Inc.(NDAQ), the owner of the second-largest U.S. equity exchange, was rated “overweight” in new coverage at Morgan Stanley, which said the stock is cheap and revenue and earnings are poised to grow.

- The U.S. Senate abandoned efforts for now to extend the federal estate tax on multimillionaires, ensuring that a one-year expiration of the levy will begin on Dec. 31.

Wall Street Journal:

- Pfizer Inc.(PFE) is eyeing fast growth and market-share gains in China, hoping to capitalize on unmet healthcare needs as China's population starts to be beset by lifestyle diseases traditionally seen in the West. Pfizer aims to increase its sales in China at a rate of more than 25% per year, aided by its recent acquisition of Wyeth, but its market share remains low due to tough competition and unique challenges in this market, said Allan Gabor, Regional President of North Asia.

- Lawmakers hoping to build momentum for a powerful deficit-reduction commission likely will get a boost this week: former Federal Reserve Chairman Alan Greenspan is expected to endorse the idea. Greenspan is scheduled to testify at a Senate hearing on Thursday that will examine ideas for getting a handle on the government’s financial situation. Greenspan “does support the deficit-reduction commission” in concept, a person close to the former chairman said on Tuesday. Also on the witness list for Thursday’s hearing before the Homeland Security and Governmental Affairs Committee are Sens. Kent Conrad (D., N.D.) and Judd Gregg (R., N.H.), the two chief sponsors of the main Senate version of the commission measure. The bipartisan commission, composed mainly of lawmakers, would be able to make recommendations for spending cuts and tax increases on which Congress would have to vote yes or no, without amendments.

- The fund-of-hedge-funds industry has seen its assets continue to drop sharply this year, amid investor withdrawals as its performance has fallen farther behind actual hedge funds. In terms of asset flows, 2009 has been the worst year on record for funds of hedge funds, with net redemptions amounting to $164 billion world-wide in the first 11 months of the year, leaving total assets at $440 billion, according to data provider Eurekahedge. Value of assets under management peaked at $823 billion in May 2008, meaning assets have now dropped by nearly half. Funds of hedge funds have underperformed the hedge-fund industry by more than eight percentage points so far this year, significantly worse than in previous years. The Eurekahedge fund of funds index was up 9.17% for the year to the end of November, while the overall Eurekahedge hedge fund index was up 18.24%; similarly, the HFRI fund-of-funds index published by data provider Hedge Fund Research was up 10.69%, while its overall hedge-fund index was up 18.72%. In previous years, funds of hedge funds generally underperformed hedge funds by at most a couple of percentage points, according to Hedge Fund Research's figures, with the difference largely attributable to fees. Richard Watkins, chief executive of hedge fund placement agent Liability Solutions, said: "Why are the funds of hedge funds eight percentage points below their benchmark? There are some that have made less than 5% year to date. It is a big issue."

- Taking its cue from Britain, the French government plans to introduce a one-off 50% tax on bonuses awarded to bank employees next year, in a move aimed at soothing public outcry over excessive remuneration in the financial industry.

- Insider Pushes Ma Bell Beyond Just Phones.

- Exxon Mobil Corp.'s(XOM) $31 billion deal to acquire gas-producer XTO Energy Inc., includes language that would terminate the deal if Congress passes laws making hydraulic fracturing illegal or "commercially impracticable." Hydraulic fracturing, known as fracking, is the method XTO and other natural-gas companies use to produce gas from hard shale-rock formations.

- Philips Electronics on Wednesday said the improving trend at its consumer lifestyle division continued in the fourth quarter, and maintained its prediction that its television business would break even next year.


- Although the economy is growing by as much as 4.5 percent in the current quarter, it’s expected to slow in 2010, well-known market analyst Abby Joseph Cohen told CNBC. While debt remains a problem for households as well as federal and local governments, said Cohen, the average corporation is now flush with cash. “Many of them have been using their reasonably good profits over the last year or so, even as the recession was coming to an end, to rebuild their balance sheets,” she said. “And those cash positions we think will be used for something in 2010.” Goldman’s U.S. portfolio strategy team expects the S&P 500 to be between 1250 and 1300. “We’re seeing many consumers are coming back, but very importantly we’re seeing very good growth in exports but also in business investment, especially for equipment and things that enhance productivity,” she said. “And we expect less pop from stimulus, but that’s still a good environment from the stock market.” Meanwhlie, many investors are pricing in some concern about inflation rising, said Cohen, and extra capacity is one of the most important things that drives inflation over a longer-period of time. “Capacity in the nation’s factories and mines depending upon industry is only operating at 70-75 percent,” she said. “But one of the areas that we have the most spare capacity, unfortunately is the labor market with a 17 percent unemployment rate when you include those people who are underemployed or discouraged workers.” (video)

- The Standard & Poor’s 500 Index may rise as high as 1,250 in 2010, BlackRock Inc.’s(BLK) Robert Doll told CNBC in an interview.

- The Federal Reserve, as expected, decided to hold interest rates at a record low for an "extended period" to keep the economic recovery going and drive down double-digit unemployment. In a more upbeat assessment, the Fed says the economy has "continued to pick up" and that "deterioration in the labor market is abating," a nod to the recent slowdown in the pace of layoffs. The Fed says it expects to wind down some emergency lending programs when they are set to expire next year.

NY Times:

- Iran announced Wednesday that it had test-fired an improved version of its most advanced missile capable of reaching Israel and parts of Europe, in a move that appeared aimed to discourage a military attack on its nuclear sites and to defy Western pressure over its nuclear program. The announcement provoked immediate rebukes from the White House and leaders in Europe, and appeared likely to intensify pressure from the United States and other Western powers to impose tougher economic sanctions on Iran. A White House spokesman told Reuters that the test undermined Iran’s claims that its nuclear program is peaceful, and said it would “increase the seriousness and resolve of the international community to hold Iran accountable” for its provocations.

Washington Times

- Work on a high-priority project to integrate the Pentagon and Department of Veterans Affairs health care systems has been delayed by up to two years because of a "potentially unethical" relationship between a government staffer and a contractor, according to an internal Pentagon report obtained by The Washington Times. The 16-page report says a staffer in the military health care system gave California-based Adara Networks a "potentially unfair advantage" in securing a contract to work on the program. That advantage could have led to other multimillion-dollar contracts for Adara.

The Business Insider:

- YouTube published a list of its most viewed videos of the year on its blog today.

- Apple's(AAPL) stock has a 25% chance of soaring above $325 next year, says Morgan Stanley analyst Katherine Huberty in a report (via Philip Elmer DeWitt.) How does it happen?


- Person of the Year 2009: Ben Bernanke.

- The political backlash against investment bankers' bonuses could see an exodus of top traders to hedge funds, which are likely to be less restricted in paying talented managers what they want. Investment bankers' hefty payouts have provoked public outrage since many of the banks were propped up with taxpayers' money during the credit crisis. But hedge funds can argue that they should be free from state intervention since they were not bailed out by taxpayers' money and many funds have already benefited from the banks' woes during the credit crisis.

Loyd’s List:

- THE shipping industry’s worst fears appear to be coming true as high level support for a multi-billion dollar global tax on shipping and aviation fuel outside of the International Maritime Organization’s control is now growing at the Copenhagen climate change talks.


- Voter support for offshore oil drilling remains as strong as it was during last year’s presidential election, but many also continue to believe individual states should be able to stop it off their own coastlines. A new Rasmussen Reports national telephone survey finds that 68% of U.S. voters believe offshore oil drilling should be allowed. Just 20% oppose drilling for oil off the coast of the United States.

- The New York Times reports that “economists across the political spectrum say a consumption tax may be inevitable once the economy fully recovers.” One of the reasons cited by the newspaper is the lack of political will to cut spending, but implementing a national sales tax may be even more of a political challenge. The latest Rasmussen Reports national telephone survey finds that just 24% of voters favor a national sales tax. Sixty-five percent (65%) are opposed.


- I realize it’s fashionable to say that Sen. Joe Lieberman (I-Conn.) is to blame for making the Senate health care bill what it’s going to be. But really, that’s unfair. Majority Leader Harry Reid (D-Nev.) and President Barack Obama have been setting the table for months for Lieberman to do exactly what he’s doing right now. In reality, Lieberman is the answer to everyone’s prayers. Reid has to worry about a 38 percent approval rating that leaves him 10 points behind any Republican in Nevada with a pulse, and Obama’s numbers are slipping below the magic 50 percent mark. So someone has to take the hit for delivering a massively unpopular bill.


- Too Bigger To Fail? St. Louis Fed Warns Over Concentration Of Risk In Ever Growing, Ever Fewer “Big Banks.”


- Global regulators will give banks a grace period before forcing them to implement stricter capital rules, three people said on Wednesday, easing concerns that lenders might need to issue massive amounts of shares in the near future. Shares of major Japanese banks surged on the news, with Mizuho Financial Group Inc and Sumitomo Mitsui Financial Group Inc both gaining more than 14 percent. European bank shares rose 1.3 percent on relief that banks would have more time to adjust to new rules being drafted by the Basel Committee on Banking Supervision, made up of central bankers and regulators from nearly 30 countries.

Financial Times:

- Distressed debt – defined as a bond trading at less than 50 cents on the dollar – is rapidly disappearing from US financial markets as yield-hungry investors push up the prices for even the most beaten-down securities. Bonds trading at less than 50 cents on the dollar now account for only 1.1 per cent of the high-yield market, or $8.9bn in securities, down from 27.5 per cent, or $202bn in bonds, a year ago, according to JPMorgan data.


- Supply of high-density NAND flash memory will fall short of demand in 2010, as suppliers' overall output has not been increased substantially to keep up with the potential growth in demand for smartphone applications, according to sources at memory makers. Despite this shortage, the sources estimated prices for low-density parts based on mature processes will be slashed significantly next year. Though the outlook for NAND flash is rosy in 2010, the sources pointed out major chip suppliers are still reluctant to spend on expanding capacity. They tend to boost production through migration to more advanced process geometries. However, increases of this scale will not be sufficient if the market for high-end phones heats up more, according to the sources. As a result of tight supply, major NAND flash producers are giving supply priority to new products from system vendors, prompting downstream module makers and distributors to move to diversify their upstream suppliers, the sources indicated. With more chipmakers gearing up to expand shipments of high-density chips using 30nm-class processes next year, the suppliers' ability to lower production costs for the high-density segment will set off a major price erosion for low-density ones used in entry-level USB drives and flash cards, according to the sources.

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