Monday, December 28, 2009

Today's Headlines


- The U.S. economy next year will turn in its best performance since 2004 as spending perks up and companies increase investment and hiring, says Dean Maki, the most-accurate forecaster in a Bloomberg News survey. The world’s largest economy will expand 3.5 percent in 2010, according to Maki, the chief U.S. economist at Barclays Capital Inc. in New York. The rebound in stocks and rising incomes will prompt Americans to do what they do best --consume, said Maki, a former economist at the Federal Reserve. Faced with dwindling inventories and growing demand, companies will soon become confident the expansion will be sustained, he said. Household spending “will pick up steam as we move into the second half of 2010,” said Maki, 44, who topped all 60 forecasters in the Bloomberg News ranking of gross domestic product projections for the first three quarters of 2009. “The overall picture for 2010 will be an economy growing rapidly enough to bring down the unemployment rate” to an average of 9.6 percent.

Maki, who specialized in researching household finances at the Fed from 1995 to 2000, said the economic recovery this time will be similar to past rebounds.

- U.S. retail sales rose an estimated 3.6 percent this holiday season from a year earlier, signaling a higher-than-forecast outcome helped by an extra shopping day. A jump in purchases the week before Christmas helped year- over-year electronics sales increase 6 percent from Nov. 27 to Dec. 24, and 5.9 percent from the period starting Nov. 1, MasterCard Advisors’ SpendingPulse said in a statement yesterday. Jewelry and luxury sales also gained, it said. SpendingPulse said. Improving consumer sentiment aided holiday sales of discretionary items, said David Schick, an analyst with Stifel Nicolaus & Co. in Baltimore. Jewelry sales rose 5.6 percent for November and December, while luxury retail excluding jewelry gained 0.8 percent, SpendingPulse said. Men’s clothing sales gained 3.9 percent for the season and footwear rose 5 percent.

- The cost to protect US corporate bonds from default fell again today, trading in a benchmark credit derivatives index shows. Credit-default swaps on the Markit CDX North America Investment-Grade Index declined .2 basis point from Dec. 24 to 82.2 basis points as of 9:19 am in NY, according to CMA DataVision. The swaps have fallen every trading day since Dec. 17.

- A 26-mile-long line of idled oil tankers, enough to blockade the English Channel, may signal a 25 percent slump in freight rates next year. The ships will unload 26 percent of the crude and oil products they are storing in six months, adding to vessel supply and pushing rates for supertankers down to an average of $30,000 a day next year, compared with $40,212 now, according to the median estimate in a Bloomberg News survey of 15 analysts, traders and shipbrokers. That’s below what Frontline Ltd.(FRO), the biggest operator of the ships, says it needs to break even. Traders booked a record number of ships for storage this year, seeking to profit from longer-dated energy futures trading at a premium to contracts for immediate delivery, according to SSY Consultancy & Research Ltd., a unit of the world’s second- largest shipbroker. Ships taken out of that trade would return to compete for cargoes just as deliveries from shipyards’ largest-ever order book swell the global fleet. “The tanker market has been defying gravity,” said Martin Stopford, a London-based director at Clarkson Plc, the world’s largest shipbroker. Stopford has covered shipping since 1971. More than half of the ships are in European waters, with the rest spread out across Asia, the U.S. and West Africa. Lined up end to end, they would stretch for about 26 miles.

- The U.S. government’s expanded capital backstops and portfolio limits for Fannie Mae and Freddie Mac increase “the prospect of large-scale” purchases by the companies of delinquent mortgages out of the securities they guarantee, according to Credit Suisse Group analysts. The Treasury Department announced Dec. 24 that the two mortgage-finance companies, which were seized by the U.S. almost 16 months ago, could tap an unlimited amount of capital for three years, up from as much as $200 billion each. It reworked caps on Fannie Mae and Freddie Mac’s mortgage-asset portfolios to require the holdings to fall to $810 billion by Dec. 31, 2010, rather than about $690 billion. “This announcement increases the prospect of large-scale voluntary buyouts by removing the portfolio cap hurdle and helping funding by potentially increasing debt-investor confidence,” Mahesh Swaminathan and Qumber Hassan, the Credit Suisse debt analysts in New York, wrote in a report yesterday.

- OSI Systems Inc.(OSIS), a maker of scanning equipment for airport-security checkpoints, rose the most in 11 months in Nasdaq trading after U.S. officials said a passenger tried to blow up a plane on a Christmas Day flight. OSI jumped $2.27, or 10 percent, to $24.29 at 11:23 a.m. New York time in Nasdaq Stock Market trading. The shares climbed by as much as 13 percent, the most since Jan. 29. OSI’s Rapiscan unit makes machines that can detect liquids and other potential explosives beneath passengers’ clothing. The U.S. Transportation Security Administration placed an order valued at $25 million for Rapiscan’s imaging equipment, the Hawthorne, California-based company said in October.

- Options traders are doubling down on MGM Mirage(MGM), betting a new 67-acre (27 hectares) complex of gaming tables, hotels, condominiums and stores will restore the casino operator’s profits. Investors buying contracts to purchase MGM for twice its current stock price through January 2011 helped drive the number of bullish options on the shares to 1.5 times the level of bearish ones, the highest ratio since June 2008, according to data compiled by Bloomberg.

- Heating oil futures surged as a forecast for colder weather increased speculation demand for the fuel will improve. Heating oil prices gained as much as 2.2 percent as private forecaster Weather Derivatives predicted fuel demand in the U.S. will rise as temperatures fall. Cold weather will raise U.S. consumption of heating fuels by 6.7 percent in the next seven days, according to a forecast from Weather Derivatives. The temperature in New York may fall as low as 20 degrees Fahrenheit (minus 7 Celsius) tomorrow, 5 degrees below average, according to

- Iran will have the technology to build a nuclear weapon by early next year, Israeli Defense Minister Ehud Barak told a parliamentary committee today, an official said. The Israeli minister said that a newly discovered nuclear facility near the Iranian city of Qom was immune to attack by regular bombs, according to the parliamentary official, who spoke on the condition of anonymity because the meeting was held behind closed doors.

Wall Street Journal:

- Iranian opposition Web sites reported Monday the arrest of several prominent reformists, including aides to opposition leaders and a former foreign minister, a day after clashes killed at least eight, the deadliest day of protests since the summer. According to the opposition Web site RaheSabz, authorities early Monday arrested Ebrahim Yazdi, Iran's one-time foreign minister. He has led a banned but tolerated reform group. The site also reported the morning round-up of top aides to leading opposition figure Mir Hossein Mousavi, including his chief of staff, a top adviser, his presidential campaign chief and the head of Mr. Mousavi's Web site.Security forces stormed a foundation run by reformist former President Mohammad Khatami, arresting two people and carting away documents, a foundation official told the Web site Parlemannews. By nightfall Monday, Tehran's streets appeared mostly peaceful, with no reports of significant clashes.

- Computer-memory chip makers expect to see their fortunes improve next year after two tough years, allowing them to boost capital spending to improve their technology. Industry heavyweights and observers see the notoriously up-and-down industry turning positive this year. Weak capital investments over the past two years have led to a gradual decrease in global supply of dynamic random access memory chips, which are the main chips used to store data in personal computers. The decrease in supply, coupled with improving demand, has led to a recovery in prices of DRAM chips in recent months. The launch of the new Windows 7 operating system from Microsoft Corp. may also prompt consumers and corporations to replace their aging computers with new ones that require more memory storage next year, providing a much needed demand boost for DRAM makers. Daiwa Securities expects shipments of personal computers to rise 13% in 2010 and smart phones, which also use DRAM chips, to jump 55% from 2009. "We expect 2010 to be a strong year for the industry, as we forecast increases in shipments" of personal computers and smart phones, Daiwa analyst Jae H. Lee said. Researcher Gartner expects revenue in the global DRAM industry to increase by 25% next year to US$29.1 billion. That would be a sharp improvement from an 11.5% decline in global DRAM revenue of US$21.6 billion estimated for this year. Andrew Norwood, research vice president for semiconductors at Gartner, forecasts average DRAM selling prices to decline about 8% next year, much milder than the 30% decline the industry typically sees annually. The average spot price of the most widely used DRAM chip—a one gigabit double data rate two chip that runs at 667 megahertz—fetched $2.53 each early Monday, up from $2.29 each on Dec. 21, according to Taiwan-based online chip clearinghouse DRAMeXchange. In a sign of confidence in the industry's recovery, most chip makers have plans to raise their capital spending. Samsung Electronics Co. the world's biggest DRAM maker by revenue, said it plans to boost capital spending next year from an estimated 7 trillion South Korean won (US$5.95 billion) in 2009, without disclosing specific figures. Second-ranked Hynix Semiconductor Inc. plans to more than double its capital expenditure in 2010 to about 2.3 trillion won, while Japan's Elpida Memory Inc. plans to boost spending to about $600 million from almost US$500 million for its current fiscal year ending in March 2010. Citigroup estimates global memory-chip capital spending will more than double next year to about $14.8 billion as companies upgrade their technology at existing manufacturing facilities.


- The Unhappiest States in America.

- The Chicago Federal Reserve Bank said Monday its Midwest manufacturing index rose in November to the highest in nearly a year in a broad-based expansion that covered all of the major industry sectors. The index climbed 1.2 percent to a seasonally adjusted 84.2 — the highest since December 2008 — from an upwardly revised 83.2 in October. The October reading was originally reported at 82.9.


- Apple (AAPL) moved further into uncharted territory this morning, getting a fresh boost from a pair of bullish analyst notes. As Tiernan Ray noted earlier, Thomas Weisel analyst Doug Reid lifted his target today to $250, from $245. Meanwhile, Broadpoint.AmTech analyst Brian Marshall boosted his target this morning to $260, from $235, repeating his Buy rating. Marshall’s note focused on explaining his higher-than-consensus estimate for December quarter iPhone sales: he sees 11.3 million units in the quarter, above the Street at an estimated 8.8 million. Marshall sees U.S. units down 20% sequentially, to about 2.5 million units, but with international units more than doubling sequentially to 8.8 million units. Marshall says the iPhone is now sold in about 90 countries, by more than 140 carriers. The analyst writes that Apple “remains the best technology company on the planet.”

- So, this is your Homeland Security Department working. A Nigerian man named Umar Farouk Abdulmutallab boards a flight in Amsterdam bound for the United States, despite, according to one passenger, having no passport. Abdulmutallab, a Muslim, boards the plane despite having been reported to the US Embassy by his own father a few months ago. The young man may be plotting an attack against the US, the father had implored. He gets on the flight despite having raised the suspicion of US intelligence officials. When he takes his seat -- after passing through every layer of security -- Abdulmutallab is still wearing a bomb made with highly explosive powder. And 20 minutes from landing, just a few thousand feet above US soil, Abdulmutallab ignites his bomb and very nearly pulls off the first terror bombing attack inside the US since 9/11.

Washington Times

- Veterans groups hailed the passage last year of the National Defense Authorization Act (NDAA), which made it easier for wounded soldiers to have their injuries rated and treated by the federal government. But less than a year after President Bush signed the bill, the Defense Department interpreted the law in a way that reduced its scope and denied many veterans the benefits they thought they had been promised. The Pentagon's interpretation, which veterans groups are challenging, is laid out in two memos written in 2008 by David S.C. Chu, who was undersecretary of defense for personnel and readiness. The effect of the memos, which have been obtained by The Washington Times, is to disqualify numerous soldiers who suffer from post-traumatic stress disorder from receiving medical benefits and to prevent others from receiving extra pay that the NDAA promised to veterans with combat-related injuries.


- While few of the firms that survived had to make massive changes in their investment processes or reconstruct their portfolios, executives ruefully acknowledged they learned some painful lessons in the fourth quarter of 2008 that will shape their future portfolio management. Among the lessons was the critical importance of matching the liquidity of the underlying hedge funds with that of the funds-of-funds portfolio, said James McKee, director of hedge fund research at Callan Associates Inc., San Francisco. “Over the last year, hedge funds of funds have become very shy of redemptions and very respectful of their own liquidity needs,” Mr. McKee said. One tangible result is that institutional hedge funds-of-funds managers are moving toward single-strategy hedge funds and away from a reliance on multistrategy hedge funds in their portfolios because “so many multistrats had a large proportion of their assets in credit strategies that got so hammered in 2008 and halted redemptions or closed,” said Timothy Galbraith, head of alternative investment strategies at Morningstar Associates, the consulting arm of Morningstar Inc., Chicago.


- The LAPD is struggling to fill vacancies in gang units as a financial disclosure rule meant to fight corruption has been received by many rank-and-file cops as an insult -- and a deal-breaker when it comes to working the tough gangland assignments. After years of contentious battles with police union representatives over the issue, Los Angeles Police Department officials pushed through a policy in April that requires gang officers to disclose details of their personal finances. Intended to help supervisors catch cops who are taking bribes or to identify officers in financial straits who might be tempted to stray, the policy has considerable reach: Officers must disclose outside income, real estate, stocks and other assets. They also have to report the size of bank accounts and debts, including mortgages and credit cards. And the disclosures apply to any financial holdings a cop shares with family members and business partners. When it went into effect, then-Chief William J. Bratton and other officials insisted that the policy would have little effect on recruiting and retaining gang cops and vowed to block efforts by officers to leave gang units en masse in protest. But erosion in the ranks is apparent. According to interviews with police officers and gang unit supervisors across the city, the number of officers dedicated to fighting gangs is beginning to drop. And top brass now acknowledge that they must do more to confront discontent and distrust. Percolating indications of trouble can be found across the city.

USA Today:

- More than $2.7 billion of stimulus aid for struggling parts of rural America has gone to the nation's biggest metropolitan areas. That's nearly a quarter of the $12 billion in rural assistance the government has paid out so far under President Obama's economic stimulus package, a USA TODAY review shows. It went to small, far-flung suburbs in metropolitan areas with more than a million residents, including growing towns around Atlanta and Phoenix. The spending reignites a longstanding debate over what "rural" really means in an increasingly urban nation.


- Sixty-seven percent (67%) of voters nationwide now expect that health care reform legislation will pass this year. That’s up from 49% before the Senate passed its version of the legislation on Christmas Eve - and by far the highest level of expectation yet measured. The latest Rasmussen Reports national telephone survey, conducted on Sunday, finds that just 22% now consider passage of the plan unlikely. However, while expectations for passage have risen dramatically, support for the plan has not. Just 40% of voters nationwide now favor it while 55% are opposed.


- Back in early June, Utah Republican Rep. Jason Chaffetz inserted a little-noticed, widely-popular amendment into the House's massive Homeland Security appropriations bill barring the use of full-body image scans as "primary" screening tools at airports. The amendment, which died in the Senate, passed on a bipartisan 310-to-118 vote, with conservative libertarians joining liberals, all decrying the scans as a major invasion of privacy. The amendment was backed by a nearly irresistible coalition of interest groups, ranging from the ACLU to the NRA.

- The next round of the battle over climate change policy on Capitol Hill will involve more than the usual suspects — way more. Watch soup makers face off against steel companies. Witness the folks who pump gas from the ground fight back against those who dig up rock. And watch the venture capitalists who have money riding on new technology try to gain advantage in a game that so far has been deftly controlled by the old machine. An analysis of the latest federal records by the Center for Public Integrity shows that the overall number of businesses and groups lobbying on climate legislation has essentially held steady at about 1,160, thanks in part to a variety of interests that have left the fray. But a close look at the 140 or so interests that jumped into the debate for the first time in the third quarter shows a marked trend: Companies and organizations that feel they’ve been overlooked are fighting for a place at the table.


- As predicted here on MobileCrunch earlier this month, Apple(AAPL) rocked it this holiday season, and the early numbers are showing it. According to Flurry, the biggest mobile app analytics company, iPod Touch download volume saw a nearly 1,000% jump in downloads on Christmas Day. Overall, the App Store saw a 51% increase in downloads from November to December (downloads only increased by 15% from October to November). Christmas also marked the first day that iPod Touch app downloads surpassed iPhone app downloads, which makes sense (the iPod Touch is a more common gift than an iPhone; more on that later). Furthermore, the Android Market saw a nice 20% bump in app sales as well, sparked primarily by an uptick in downloads from the Motorola Droid.


- 2 Top Stocks for 2010.


- Google(GOOG) is getting serious about realtime search, adding Twitter, Facebook, and MySpace streams into results and adding a recent “updates” option which is addictive. But behind the scenes Google is also getting ready to push out an entirely new way for indexing the Web. Codenamed “Caffeine,” Google has been testing it since last summer in one datacenter, and is now getting ready to push it out across all of Google. Some SEO-minded tipsters say that they are starting to notice faster search response times, but Google is sticking to the party line that Caffeine won’t roll out until after the New Year(in part so that everybody can enjoy the holidays).


- Shares of American Science & Engineering Inc (AS&E) (ASEI) rose 8 percent Monday, after the U.S Army posted a notice on Thursday that it intends to negotiate solely with the company for Z-Backscatter military trailers. Also on Monday, Stifel Nicolaus' analyst Stephen Levenson said AS&E could see more orders for its cargo- and personnel-screening equipment, after a passenger on a Detroit-bound flight on Christmas day attempted to detonate an explosive device. "AS&E's SmartCheck and Analogic's eXaminer SX are among a handful of products that are capable of detecting the materials that were carried aboard and assembled during the flight," Levenson said.

- Compugen Ltd (CGEN), the Israeli drug maker which recently signed a deal with Pfizer Inc (PFE), said it discovered a drug target for treatment of a certain type of cancer, sending its shares up as much as 44 percent to a near five-year high.

- Israel's Radware Ltd (RDWR) raised its fourth-quarter outlook, citing continued sales growth and industry-high gross margins, sending its shares up to a 2-year high.

- As of December 15, short interest rose to about 13.53 billion shares, compared to 13.18 billion shares as of November 30. The NYSE's short interest amounted to 3.54 percent of outstanding shares during the period, an increase from 3.45 percent during the previous period, according to NYSE's data.


- GE Energy, a General Electric Co.(GE) unit, plans to produce wind turbines and other equipment in Turkey to supply markets around the Mediterranean and Black Sea, citing Mete Maltepe, GE Energy’s executive for Turkey.

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