Thursday, December 24, 2009

Today's Headlines


- The cost to protect US corporate bonds from default fell for a fifth straight day, trading in a benchmark credit derivatives index shows. Credit-default swaps on the Markit CDX North America Investment-Grade Index declined .87 basis point to 82.63 basis points as of 8 am in NY, according to CMA DataVision.

- The number of Americans filing claims for unemployment benefits last week declined to the lowest level since September 2008, signaling firings are easing as employers gain confidence in the economic recovery. Initial jobless claims fell by 28,000, more than forecast, to 452,000 in the week ended Dec. 19, from 480,000 the prior week, Labor Department figures showed today in Washington. The number of people receiving unemployment insurance dropped in the prior week to 5.08 million, and those receiving extended benefits decreased. Improving sales combined with increases in production mean companies may not need to trim staff further after implementing the deepest payroll cuts in the post-World War II era. A strengthening labor market may boost consumer spending, the biggest part of the U.S. economy, and help sustain the recovery. The report showed the four-week moving average of initial claims, a less volatile measure, declined to 465,250 last week from 468,000. The average is the lowest since the week ended Sept. 20, 2008. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.9 percent in the week ended Dec. 12, today’s report showed.

- Orders for goods meant to last several years rose in November, pointing to increases in spending and production that will help sustain the expansion into 2010. Bookings minus demand for transportation equipment, which is often volatile, gained 2 percent last month, almost twice as much as forecast, figures from the Commerce Department showed today in Washington. “Businesses are starting to respond to a stabilization in demand by increasing production,” Michelle Meyer, an economist at Barclays Capital Inc. in New York, said before the report. “We’re seeing an improving trend and we’re seeing a continued rebound in manufacturing.” Orders excluding transportation were projected to rise 1.1 percent, according to the Bloomberg survey median. Estimates for this ranged from increases of 0.3 percent to 3 percent. Gains outside of transportation were broad-based, with increases in demand for machinery, metals, computers and communications gear. Shipments of non-defense capital goods excluding aircraft, which is used in calculating gross domestic product, climbed 0.8 percent in November and October’s reading was revised to show a 1.5 percent jump, compared with a previously estimated 0.3 percent drop. Bookings for such goods, a proxy for future business spending, increased 2.9 percent in November. Combined sales at manufacturers, wholesalers and retailers have been increasing since June, giving businesses the confidence to begin updating machinery. Purchases of equipment and software increased at a 1.5 percent pace in the third quarter, the first gain since 2007, the Commerce Department reported this week. Inventories of durable goods decreased 0.2 percent, today’s report showed. The need to prevent stockpiles from falling much more will push factories to increase production, supporting economic growth in coming months. At the same time, exports are growing, which is also a boon for factories. “Overall commercial spending is looking better than what we had hoped for,” Steve Felice, president of Round Rock, Texas-based Dell Inc.’s small- and medium-business division, said Dec. 21 in a Bloomberg Television interview. “We’re coming into this holiday season much more optimistic than a year ago.”

- Economic growth in the U.S. this quarter is accelerating even more than previously anticipated as business investment picks up and stockpiles fall at a slower pace, according to economists at Morgan Stanley in New York. The world’s largest economy is poised to grow at a 5.1 percent annual rate from October through December, according to a revised forecast by Morgan Stanley following the Commerce Department’s report today on durable goods. The new estimate is a percentage point higher than their earlier projection. It was a “much stronger than expected report,” Ted Wieseman, an economist at Morgan Stanley wrote in note to clients. Combined with revisions to October, the figures are “pointing to a much better outlook” for fourth-quarter corporate spending, he said.

- Al-Qaeda planned to carry out a suicide attack on the U.K. Embassy in the Yemeni capital that was foiled last week by security forces, the Defense Ministry’s newspaper reported.

- Investors should buy “good stocks” in 2010 as the rally in equities continues in spite of skepticism that it will last, Laszlo Birinyi said. “I see a basic continuation of what we have seen for the last nine months,” Birinyi, the founder of Westport, Connecticut-based research and money-management firm Birinyi Associates Inc., said today in a Bloomberg Television interview. “There’s going to be a drift back to stocks because people are realizing alternatives aren’t happening and the negative case isn’t all that compelling.” “People continue to be skeptical,” Birinyi said. Stocks will keep rising because “the economy is going to surprise us,” he said. “Right now the strongest force in the market is momentum going up.”

Wall Street Journal:

- The Senate approved sweeping health-overhaul legislation on Thursday, a landmark moment for White House-led efforts to expand insurance coverage to more than 30 million Americans.

- Technology stocks looked to close the week on an upbeat note Thursday as most sector leaders rose in what was expected to be a quiet, and shortened, trading session ahead of the Christmas holiday.


- Memory chips for computers are likely to be in short supply by the second half of next year as consumers demand more capacity and companies embark on a delayed drive to replace PCs, industry tracker DRAMeXchange believes. Prices for DRAM chips, the most common type of computer memory, have stabilized over the past two months after rising for most of the year as recession-struck chipmakers slashed capacity and capital spending, causing shortages.DRAMeXchange forecast on Thursday that shipments of PCs would rise 13 percent next year, driven by notebooks, with 22.5 percent growth to 160 million units, and pared-down netbooks, set to rise 22 percent to 35 million units."DRAM will likely face a serious shortage in 2H10 triggered by the hot PC sales," DRAMeXchange said. "The DRAM price decline will likely be eased in 2Q10. That is, DRAM vendors will have a great opportunity to remain in profit for the whole year." Top U.S. memory chipmaker Micron on Tuesday delivered its first quarterly profit in nearly three years as rising prices lifted sales beyond expectations.

- Warren Buffett is in talks to buy GMAC's Residential Capital, one of the biggest residential mortgage-servicing firms and originators, sources told The Post. Buffett, along with Appaloosa Management and Avenue Capital, is said to have large debt positions in ResCap.

Detroit Free Press:

- Detroit is part of expanded federal scrutiny of Medicare fraud. Since 2007, a joint task force from the U.S. Justice and Health and Human Services departments has indicted more than 460 people nationwide on charges of bilking the federal program out of more than $1 billion in fraudulent claims, particularly unnecessary medical tests. The investigations started in Miami and Los Angeles and were expanded this year to Detroit, Houston and Brooklyn.

- The sale of Volvo Car Corp. would help Ford Motor Co.(F) reduce its debt and eliminate a longtime distraction, analysts said Wednesday after Ford said it is close to a final deal. Both Ford and Chinese automaker Zhejiang Geely Holding Group Co. Ltd. announced that they have reached an agreement on all major commercial terms related to the deal. That news boosted Ford's stock price past $10 per share for the first time in more than four years. Shares of Ford stock closed at $10.08, 18 cents higher than Tuesday.


- Investigative financial reporter Teri Buhl says hedge funds are scrambling to put as much distance as possible between themselves and the increasingly radioactive SAC Capital, which is rumored to be the next target of the FBI's crackdown on insider trading. Hedge funds Third Point and Kynikos will find it quite impossible to delete all their correspondence with SAC, given possesses several emails which, it just so happens, implicate all three funds in insider trading of a different sort; specifically, influencing and trading ahead of an analyst's report. Here's the short version:


- Bernie Madoff was admitted to Duke University Hospital last Friday with serious injuries consistent with an assault, an ABC affiliate has learned.

USA Today:

- Despite the hotel industry's worst crisis in modern times, Donald Trump's luxury hotel group is in the midst of its biggest growth spurt that will take the Trump name far outside of its traditional locales.

Real Clear Politics:

- Anthropogenic Global Warming is a Farce.


- The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 27% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-three percent (43%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -16 (see trends).


- POLITICO's Manu Raju gets in touch with Nebraska's Republican Gov. David Heineman, who pulls a Sanford, telling Manu he doesn't want hundreds of millions in free Medicaid money. Plus he suggests that 'Husker voters will punish onetime Gov. Ben Nelson (D-Neb.) for securing the cash at the cost of implementing the overall reform package.

- On the eve of an historic Senate health care reform vote, more than half of the Republican state attorneys general have organized to provide a legal analysis of the constitutionality of a controversial provision in the Senate bill and to explore potential legal challenges. The provision in question is the result of a deal Senate Democratic leaders struck with Nebraska Sen. Ben Nelson to win his critical vote. Under the agreement — dubbed the “Nebraska Compromise” or the “Cornhusker Kickback” by GOP critics — Nebraska will get an exemption from the state share of Medicaid expansion, a carve out that is expected to cost the federal government $100 million over 10 years.

- A $290 billion increase in the federal debt ceiling narrowly cleared Congress Thursday, giving Treasury just enough leeway to pay the government’s bills into February and setting the stage for a showdown over fiscal policy early next year. Senate Republicans insisted that 60 votes be required for passage and then held back their own members in order to force as many Democrats as possible to walk the plank on what has never been a popular or easily-explained decision back home.

The Weekly Standard:

- Senator Jim DeMint (R-S.C.) pointed out some rather astounding language in the Senate health care bill during floor remarks tonight. First, he noted that there are a number of changes to Senate rules in the bill--and it's supposed to take a 2/3 vote to change the rules. And then he pointed out that the Reid bill declares on page 1020 that the Independent Medicare Advisory Board cannot be repealed by future Congresses:


- A weekly measure of future U.S. economic growth edged slightly lower in the latest week, along with its yearly growth rate, but remained high enough to signal economic improvement ahead, a research group said on Thursday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index inched down to 130.4 in the week ended Dec. 18 from 130.7 the previous week. The index's annualized growth rate edged down to 24.4 percent from 24.7 percent a week ago. "With WLI growth remaining robust, the economy will keep improving in the months ahead," said Lakshman Achuthan, Managing Director at ECRI.

- The U.S. commercial paper market expanded in the latest week, resuming growth after four weeks of contraction, Federal Reserve data showed on Thursday. For the week ended Dec. 23, the size of the U.S. commercial paper market, a vital source of short-term funding for companies' daily operations, rose by $9.3 billion to $1.160 trillion outstanding.

Financial Times:

- Record fees from debt issuance and a big jump in capital raisings this year have offset plunging deal revenues, annual figures show. Investment banks earned $18bn from debt capital markets in 2009 as companies tapped bond markets heavily to shore up balance sheets, according to Dealogic. A 33 per cent rise in revenues from debt issuance coincided with a 64 per cent jump in earnings from equity raisings, which earned banks $23.3bn in fees. Bankers said on Wednesday that optimism among chief executives was growing, encouraged by more benign financial markets, and that next year could see a recovery in mergers and acquisitions activity and initial public offerings. Henrik Aslaksen, global co-head of M&A at Deutsche Bank, said that would change next year. “We’re likely to see private equity activity rapidly increase in 2010. Their business model isn’t buy and hold. Buy-out exits will lift both the M&A and IPO markets.” Emerging markets provided one bright spot during the year, taking 23 per cent of global M&A volumes, the highest level since records began in 1995. “I expect to see a growing number of Japanese and [other] Asian acquirers coming to Europe and the US,” said Carlo Calabria, head of international M&A at Bank of America Merrill Lynch.

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