Wednesday, December 23, 2009

Today's Headlines


- The cost to protect U.S. corporate bonds from default fell for a fourth straight day following a report that consumer spending increased in November as shoppers took advantage of holiday discounts. Credit-default swaps on the Markit CDX North America Investment-Grade Index, used to speculate on the creditworthiness of 125 companies in the U.S. and Canada or to protect against losses on their debt, declined 0.75 basis point to 83.5 basis points as of 8:47 a.m. in New York, according to broker Phoenix Partners Group. The index reached its lowest since Jan. 2, 2008, when it ended at 81.035, according to CMA DataVision.

- The Congressional Budget Office challenged claims by health-care overhaul proponents that Medicare savings in Senate legislation would help finance expanded coverage and postpone the bankruptcy of the medical program for the elderly. The nonpartisan agency said the $246 billion it projected the legislation would save Medicare can’t both finance new programs and help pay future expenses for elderly covered under the federal program. Nor could those savings be used to extend the solvency of Medicare, set to run out of money in 2017, the budget office said in a letter to Senate Republicans. Alabama Senator Jeff Sessions told reporters the letter was “a potential game-changer.” The Medicare savings CBO found in the legislation overstates “the improvement in the government’s fiscal position,” the CBO said in the letter. “The true increase in the ability to pay for future Medicare benefits or other programs would be a good deal smaller,” the budget office said.

- Copper prices rose the most in a week on speculation that demand will strengthen in China and the U.S., the world’s largest users of the metal. Sales of existing U.S. homes rose in November to the highest level in almost three years, figures from the National Association of Realtors showed yesterday. “Economic data support expectations that demand growth will continue into next year,” Nicholas Snowdon, a commodity analyst at Barclays Capital, said today from London.

- Crude oil rose for a second day in New York as positive housing and fuel-inventory data signaled a recovery in the U.S., the world’s largest energy user.

- The debate over legislation overhauling the U.S. health-care system turned into a argument over whether Democrats made “sweetheart deals” to win the votes of lawmakers such as Nebraska Senator Ben Nelson. Nelson provided the 60th vote that Senate Democrats needed to get the health bill past three procedural hurdles the Republicans set up to try to block the bill. Later today, the Senate will conduct the last test vote to clear the measure for final passage tomorrow. On and off the Senate floor, Republicans attacked an agreement Nelson made to exempt his state from paying its share of a plan to expand the Medicaid insurance program for low- income Americans. They accused Democrats of corrupting the Senate by making deals that benefit individual states. Democrats were “playing ‘The Price is Right,’ by offering sweetheart deals” to Nelson and other lawmakers to get their votes, Texas Republican John Cornyn told reporters yesterday. “The rest of us have to pay the price for these additional sweeteners.” Cornyn said Texas would have to pay $21 billion over the next 10 years. “Of course, the folks in Nebraska and other places -- Louisiana and others -- will not feel that same burden,” he said. Republicans called a deal to exempt Nebraska from paying its share of expanding Medicaid the “Cornhusker Kickback,” referring to the state’s nickname. They termed an agreement to give Louisiana an extra $300 million in federal assistance for Medicaid the “Louisiana Purchase” for helping secure the support of the state’s Democratic senator, Mary Landrieu.

- Loans at .57% to Family Members Could Save Millions on Taxes. Estate planner Richard Behrendt helped his client make $5 million loans to each of his children this year, avoiding gift taxes of 45 percent and saving the kids as much as $837,000 apiece in interest. Rates for so-called intra-family loans have declined as much as 53 percent since 2008. The rate for an intra-family loan made in January 2010 for less than three years is 0.57 percent. The rate is 2.45 percent for a loan of three years to nine years and 4.11 percent for a loan of nine years or more, according to the Internal Revenue Service, which sets the rates monthly. That compares with an average rate of 10.55 percent for a personal bank loan in the New York metro area and 12.51 percent for a credit-union loan, based on data from

- Best Buy Co.(BBY), the largest electronics retailer, outpaced rivals in electronics sales this holiday shopping season. Consumer spending at Best Buy rose faster than at competitors such as Newegg Inc., Fry’s Electronics Inc. and RadioShack Corp., according to Best Buy captured a larger share of the consumer-electronics market after Circuit City Store ceased operations this year and CompUSA closed stores. “Their market share gains accelerated through the last quarter,” said Dan Binder, an analyst at Jeffries in NY. “I expect they’re going to show good numbers this holiday season. They don’t have a major competitor around to nip at their heels this year.”

- Federal Reserve tests of tri-party reverse repurchase agreements have “gone extremely well,” according to the head of the industry group that works to improve trading in U.S. government securities. The Federal Reserve Bank of New York has drained $990 million in reserves from the banking system through five trials this month as part of its “tri-party reverse repo operational readiness program” announced Nov. 30. The central bank stressed at that time that the tests don’t represent a change in policy and were one tool at its disposal for the eventual withdrawal of the unprecedented monetary stimulus added to the economy.

- Iran has held six of Osama bin Laden’s children and one of his wives under house arrest since the 2001 U.S. invasion of Afghanistan, Asharq al-Awsat reported, citing Omar bin Laden, the fourth son of the al-Qaeda leader. The children include Saad, 29, Uthman, 25, Fatima, 22, Hamza, 20, and Bakr, 15, along with Hamza’s mother, Khairiya, according to the Saudi-owned newspaper, which is based in London. Iman, a 17-year-old daughter of bin Laden, escaped and has sought asylum at the Saudi Embassy in Tehran, the newspaper said, citing 29-year-old Omar.

- The combination of the steepest-ever Treasury yield curve and a rally in credit markets signals the recovery in the world’s largest economy will accelerate, according to MKM Partners LP. “A record-wide yield curve has collided with the most powerful credit market rally in 75 years, suggesting that the recovery now under way will broaden and strengthen over the next year,” Michael Darda, chief economist at MKM Partners LP in Greenwich, Connecticut, wrote in a note to clients.

- OGX Petroleo & Gas Participacoes SA rose to the highest in more than a week after it said an offshore Brazilian well could hold up to 2 billion barrels of recoverable oil in what may be the company’s biggest discovery.

- Morgan Stanley(MS) appointed 212 new managing directors, the most to achieve the company’s highest rank for executives since 2007.

- The former IndyMac Bancorp, one of the biggest casualties of the U.S. mortgage meltdown, has recovered so much under new owners and a new name that regulators used it to absorb another failed California lender. Now known as OneWest Bank FSB, the Pasadena-based firm assumed most operations of First Federal Bank of California after that lender collapsed on Dec. 18 and was put into Federal Deposit Insurance Corp. receivership. OneWest, whose private- equity backers include billionaire hedge-fund manager John Paulson, acquired IndyMac’s banking operation in March from the FDIC, which hadn’t been able to find a bank to run the company after it failed in July 2008.

Wall Street Journal:

- Credit Suisse: Big Oil To Lift Capex In 2010 To Near-Peak Levels.

- Google(GOOG) has bought six companies since August, and has many more in its sights. Here’s one category the company is looking at, according to people familiar with the company’s thinking: “Demand-side platforms”.

- I've put together a quick and dirty guide for new Apple users that explains some of the ways the Mac operating system differs from Windows. It's true: The way you'll quit programs is different, the keyboards are set up a little differently and even the mouse is different. But once you adjust to these changes, you'll be fine. Here's some help:

- Once again Citigroup(C) looks like the sad sack of the bunch as banks exit TARP, thanks to its poorly orchestrated capital raising and the government's abortive attempt to sell down its own stake last week. But it pays to remember what a bad idea TARP capital injections were in the first place.

- A 20% return in 2010? That may seem too good to be true, given the stock market's nearly 70% gain over the last 9 months. Most investors, scared about the possibility of a double-dip recession and the resumption of a bear market, would be relieved if the stock market just held its own next year--much less produced a return that is double the long-term historical average. Yet a careful analysis of stock market history gives decent odds that 2010 could very well be a very good year for equities.


- Convicted swindler Bernard Madoff was moved last week to the medical center within a federal prison for undisclosed reasons, a spokeswoman for the Federal Bureau of Prisons said Wednesday.

NY Times:

- One need only recall what a shock it was when Bernard L. Madoff confessed to the largest Ponzi scheme in history to understand that a year from now there will be prosecutions or events that no one could have predicted. With the end of the year approaching, the White Collar Watch takes a look at cases and investigations that will continue to make news in 2010.

Washington Times

- A retired Florida couple would appear an unlikely source to have given $83,000 in campaign donations over a five-year period to members of Congress from all over the country. Both in their 80s, they lived in a $118,000 Daytona Beach house they didn't own; they each voted only twice since 1992; and they seemed to lack the financial means to make the contributions. Yet, both were listed as having given dozens of donations to lawmakers, nearly half of which went to members of the House Appropriations Committee - legislators who were especially important to their then-son-in-law, superlobbyist Paul Magliocchetti, who owned the house in which they lived. Mr. Magliocchetti is now the focus of a federal investigation into whether he made illegal campaign contributions by reimbursing people, or "straw donors," who made contributions in their names to his favored candidates - helping the lobbyist avoid federal limits on his personal donations.


- As rumors of Apple's forthcoming tablet device pick up steam once again, one Wall Street analyst sees a 50-50 chance of the device being unveiled in January.
Gene Munster with Piper Jaffray said in a new note to investors Wednesday afternoon that he expects the long-rumored tablet device to ship by the end of March. Current models for AAPL stock do not include the potential additional revenue the company would receive in 2010 from releasing the device. In other words, he said, shares are currently undervalued
. "We expect the multiple to increase as tablet hype builds and Street models begin to include tablet estimates," Munster said. "While the tablet is not currently in our model, we believe Apple could sell about 1.4M units if the tablet shipped in March, adding 2% to revenue." Those numbers are based on an average selling price of $600. Speculation on the unannounced product's price has ranged from "shockingly" inexpensive to as much as $2,000. Munster also believes the device would run a new version of the iPhone OS that would run a new category of applications, as well as existing software available from the App Store. "We believe Apple's tablet would compete well in the netbook category even though it would not be a netbook," he said. "Rather it would focus more on apps, entertainment content (from the iTunes Store), and Web surfing." In addition, Boy Genius Report said Wednesday it has heard from a "connected" source that Apple will be announced in January. That person allegedly said they are confident that the device will come in a 7-inch size -- smaller than the 10-inch screen that has been widely reported. The smaller model reportedly could be in addition to the 10-inch model. "Would we bet the farm on this?" the report said. "No, but they’ve been amazingly accurate for us in the past and as usual, Apple rumors seem to get more interesting." But Munster said he believes there is a 75 percent chance of an Apple event in January. It could also be used to introduce a new iPod touch with video, which sources have told AppleInsider has been told remains in Apple's pipeline. The note to investors also said that such an event could be used to introduce a new Apple TV that supports a subscription service. Numerous reports this week have claimed that Apple is in talks with CBS and Disney in an attempt to offer a subscription plan for TV shows. Sources have said that both companies are currently considering an offer from Apple that would provide them $2 to $4 per month for a subscriber to a broadcast network like CBS or ABC, and $1 to $2 per month for subscribers to a basic cable network. Munster has long believed that Apple is pursuing a subscription service for iTunes. He also believes the company could add DVR capabilities to the Apple TV, and, at some point in the future, release a connected television set. Piper Jaffray has maintained its overweight rating for AAPL stock, and has kept its price target of $277.

Washington Post:

- When word spread earlier this year that American International Group had paid more than $165 million in retention bonuses at the division that had precipitated the company's downfall, outrage erupted, with employees getting death threats and President Obama urging that every legal avenue be pursued to block the payments. New York Attorney General Andrew M. Cuomo threatened to publicize the recipients' names, prompting executives at AIG Financial Products to hastily agree to return about $45 million in bonuses by the end of the year. But as the final days of 2009 tick away, a majority of that money remains unpaid. Only about $19 million has been given back, according to a report by the special inspector general for the government's bailout program. Some of the employees who had offered to return their bonuses have instead left the company, taking their cash with them. Others remain at Financial Products but are also holding on to their money until they see what Kenneth R. Feinberg, the Obama administration's "compensation czar," decides about whether they should get future bonus payments they have also been promised.


- Quant Hedge Funds Poised To Benefit From High-Frequency Trading.

Huffington Post:

- Treasury Cover-Up of Goldman’s(GS) Role in AIG(AIG) Crisis? The global financial crisis and the special circumstances surrounding AIG's bailout were extraordinary. It is unconscionable to reward value destroying activity that damaged not only AIG, but enabled massive damage to the U.S. economy. It is in the public interest to claw back public money. Goldman should buy back these mortgage assets at full price, or we should impose a reparations tax. Furthermore, Goldman should pay off its FDIC guaranteed debt, and once again become an investment bank with no access to Fed borrowing, before it pays taxpayer-subsidized bonuses to its employees.

Real Clear Politics:

- For years, global warming alarmists have pointed to every drought and heat wave as proof that global warming was a real environmental threat. They had few qualms about blurring the line between weather and climate to make a PR point. Perhaps, then, it was karma that brought a blizzard and freezing temperatures to the U.N. climate change Conference of Parties confab in Copenhagen (or COP-15 for short) last week. You may have read about the 1,200 limos and 140 private planes commissioned to transport COP-15 dignitaries in style. Critics love to point to the hypocrisy of world leaders -- such as Prince Charles and British Prime Minister Gordon Brown -- touching down in separate private planes to a conference ostensibly dedicated to curbing greenhouse gas emissions. But it's the Flying High Lords of Greendom's air of unreality that concerns me. If world leaders truly believed that global warming will lead to famine, rising sea levels and melting of the North Pole ice -- along with countless deaths -- surely they would want to set an example by flying commercial. Instead, they travel like pooh-bahs of the stratosphere, then justify their excesses by tossing $100 or so into a carbon-offset fund. In that godlike spirit, President Obama lauded the COP-15's pact to limit global warming to a rise of only 2 degrees Celsius by 2050 as "an unprecedented breakthrough."


- The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 26% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-four percent (44%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -18 (see trends).

- Voters, as they have all year, rate cutting the federal deficit in half by the end of his first term as President Obama’s number one budget priority. A new Rasmussen Reports national telephone survey finds that 42% put deficit cutting in first place, followed by 22% who say health care reform is most important.


- The White House privately anticipates health care talks to slip into February — past President Barack Obama’s first State of the Union address — and then plans to make a “very hard pivot” to a new jobs bill, according to senior administration officials. Obama has been told that disputes over abortion and the tight schedule are highly likely to delay a final deal, a blow to the president, who had hoped to trumpet a health care victory in his big speech to the nation. But he has also been told that House Democratic leaders seem inclined, at least for now, to largely accept the compromise worked out in the Senate, virtually ensuring he will eventually get a deal.

Market Folly:

- John Griffin’s Hedge Fund Blue Ridge Capital Fancies JPMorgan Chase(JPM).


- Google(GOOG) Nexus One Hands On. Thanks to a clandestine meeting with a source, I got a chance to play with and try out the Nexus One. It's basically, from my time with it, Google's Droid killer. It's thin, it's fast, it's better in every way. My source was very firm about no photography, and I didn't want to jeopardize anything on my source's end, so there are no photos, hence these photos are ones we've already shown you. But, based on all the leaked shots this week, plus the very pretty and very clear one last week from Boy Genius, everyone knows what the phone looks like already.


- Video Dispatch: Iraq’s Rising Output Poses OPEC With A Problem.


- Two French citizens have been charged by U.S. regulators with using inside information to buy securities of Chattem Inc (CHTT) before Sanofi-Aventis (SASY) said it would buy the healthcare group.

- Shares of Compugen Ltd (CGEN) jumped as much as 96 percent after the Israeli biotech company said it entered into a collaboration deal with Pfizer Inc (PFE) to develop peptide products for three drug candidates.

- Auto forecasting firm J.D. Power and Associates on Wednesday said it expected U.S. December vehicle sales to rise to 11.2 million units on an annualized basis, up 9 percent from a year earlier. "The market is continuing to improve, with the relative strength of December sales supporting a year-end rally," Gary Dilts, senior vice president at J.D. Power said in a statement.

- American Greetings Corp (AM) posted a third-quarter profit, helped by portfolio changes, operational improvements and cost cuts, sending its shares up as much as 5 percent to a year high.

- Wells Fargo & Co (WFC), the fourth-largest U.S. bank by assets, on Wednesday said it repaid the $25 billion government bailout it received during the financial crisis, after last week selling $12.25 billion in stock.

Financial Times:

- Iran has sacked opposition leader Mir-Hossein Moussavi from his government appointed position amid renewed calls from fundamentalists that he be put on trial for his role in the post-election unrest. Although many of his supporters were detained in the clampdown by the regime that followed the June presidential election it is the first time Mr Moussavi has been directly punished since his defeat to Mahmoud Ahmadi-Nejad sparked the biggest social unrest in the history of the Islamic republic.

Deutschland Kultur Radio:

- The European Central Bank probably won’t raise interest rates until economic growth no longer depends on extra government spending, said German Deputy Finance Minister Steffen Kampeter. Kampeter said he expects cooperation between the Federal Reserve, the ECB and Bank of England on the timing of lifting their benchmark rates. “The timing has to be right,” he said. “I expect the central banks will stick their heads together,” raising rates once economic growth “runs on its own without fiscal priming.”

Finance Markets:

- The Daily Mail has reported that the Bank of England is set to extend its quantitative easing (QE) scheme by as much as £25 billion next year. QE, also known as printing money, is a process whereby the Treasury injects funds into the financial system to ease pressure on banks by giving them extra capital.


- OmniVision Technologies(OVTI) is expected to see CMOS image sensor (CIS) orders for Apple's iPhone devices grow to 40-45 million units in 2010 from 20-21 million estimated this year, according to industry sources. The sources said OmniVision has secured 5-megapixel CIS orders for the next-generation iPhone model, which will hit shelves sometime during the second half of 2010. OmniVision snatched 3.2-megapixel CIS orders for Apple's iPhone 3GS, beating out Aptina Imaging which supplies the 2-megapixel CIS solution for the iPhone 3G. Including orders for iPods, the sources estimated OmniVision's total shipments to Apple at around 65 million units in 2009. OmniVision is set to raise its CIS wafer starts at Taiwan Semiconductor Manufacturing Company (TSMC) around the beginning of first-quarter 2010, according to the sources.

- China-based foundry Semiconductor Manufacturing International Corporation (SMIC) has seen tight capacity at its 12-inch fabs and orders for advanced processes heat up, according to company acting CFO Morning Wu. Facing better market conditions, Wu said the company stands a good chance of returning to profitability in 2010. SMIC will be able to make a profit in 2010 if revenues increase amid decreased depreciation and amortization expense, said Wu. Wu said SMIC is running at almost full capacity at their 12-inch fabs, buoyed by growing demand for advanced processes.

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