Tuesday, December 29, 2009

Today's Headlines


- Home prices in 20 U.S. cities rose in October for a fifth consecutive month, putting the housing market and economy farther along the path to recovery. The S&P/Case-Shiller home-price index increased 0.4 percent from the prior month on a seasonally adjusted basis, after a 0.2 percent rise in September, the group said today in New York. The gauge was down 7.3 percent from October 2008, the smallest year- over-year decline since October 2007. The median forecast of economists surveyed by Bloomberg News anticipated a 7.2 percent drop.

- Confidence among U.S. consumers rose in December for a second month as pessimism over the outlook for jobs diminished. The Conference Board’s confidence index increased to 52.9, in line with the median forecast of economists surveyed by Bloomberg News, from 50.6 in November, the New York-based research group said today. The gauge of expectations for the next six months climbed to 75.6, the highest since the recession began two years ago, from 70.3 the prior month. The share expecting more jobs improved to 16.2 percent from 15.8 percent.

- The cost to protect US corporate bonds from default declined to the lowest in almost two years, trading in a benchmark credit derivatives index shows. Credit-default swaps on the Markit CDX North America Investment Grade Index fell .5 basis point to 81.5 basis points, according to broker Phoenix Partners Group. The index reached its lowest since Jan. 2, 2008, when it ended at 81.04 basis points, according to CMA DataVision.

- A suspected terrorist’s attempt to blow up a U.S. airliner may override privacy concerns and intensify a push for full-body scanning equipment at airports as the U.S. plans to buy more of the machines. Companies such as OSI(OSIS), Smiths Group Plc, Safran SA and L-3 Communications Holdings Inc.(LLL) may benefit from any requirement that airports get more security equipment. London-based Smiths is the world’s biggest maker of airport scanners. Safran, based in Paris, is the world leader in biometric technologies, such as fingerprint scanners. New York-based L-3 also makes scanners for airport use. L-3 has “developed a more sophisticated system that could prevent smuggling of almost anything on the body,” said Howard Rubel, an analyst at Jefferies & Co., who has a “hold” rating on the stock. “Speed and privacy issues have slowed its introduction.”

- Stores, factories and public transportation in Pakistan’s biggest city of Karachi remained closed today after the deadliest bombing in more than two years triggered riots by protesters. Bus operators kept their vehicles off the roads, while traders kept their shop shutters down to protest against the violence that gutted about 3,000 shops in the nation’s commercial capital after the bombing. Smoke still billowed from the city’s biggest wholesale market where protesters set fire to stores and vehicles. “In addition to the 43 dead, five unidentified bodies were also found,” Sagheer Ahmed, provincial health minister said in a telephone interview from Karachi. “Around fifty to sixty injured are undergoing treatment.”

- Apple(AAPL) May Gain on New Products After Reaching Record.

- Netflix Inc.(NFLX) Chief Content Officer Ted Sarandos bypassed Hollywood to jumpstart the company’s online film-rental business last year. Now he has to convince the studios the company is a friend and not a foe.

- Morgan Stanley(MS) was accused in a lawsuit of defrauding investors in a collateralized-debt obligation, called the Libertas CDO, by collaborating with ratings companies to place triple-A ratings on the notes. Morgan Stanley, the sixth-biggest U.S. lender by assets, arranged the offering as it was short-selling almost the entire $1.2 billion worth of assets in the CDO, according to a complaint filed today in federal court in New York. “Morgan Stanley was betting the entire investment it was promoting would fail,” the public employees’ retirement system of the Virgin Islands said in the complaint. “The firm achieved its objective.”

Wall Street Journal:

- Alexis de Tocqueville never met Harry Reid. Had he encountered the Senate Democratic leader—or President Barack Obama or House Speaker Nancy Pelosi—de Tocqueville might have learned about a new twist on his concept of the "tyranny of the majority." The Frenchman toured America in the 1830s and published his conclusions in the classic "Democracy in America." He noted the powerful impact of public opinion. "That is what forms the majority," he wrote. Congress merely "represents the majority and obeys it blindly" and so does the president. They are free to brush aside minority opinion, creating a threat de Tocqueville described as the "tyranny of the majority." Democrats in Washington do have large majorities in Congress. But instead of reflecting popular opinion, they are pursuing wide-ranging initiatives in defiance of the views of the majority of Americans. This stands de Tocqueville's concept on its head. The most striking example is health-care reform. It is intensely unpopular but was approved by the House in November and the Senate on Christmas Eve. Asked in a Rasmussen poll in mid-December if they'd prefer no bill to ObamaCare, 57% said they would. Only 34% said they'd rather ObamaCare be enacted.

- U.S. investigators are pursuing possible links between the Christmas Day airline bomb plot and former Guantanamo Bay prisoners now thought to be leaders of an al Qaeda affiliate in Yemen.

- Iran lashed back at the U.S. and Britain Tuesday, accusing the two governments of interfering in its affairs, in the wake of rebukes issued earlier in the week from Washington and London over Tehran's crackdown on protesters. Iranian foreign-ministry spokesman Ramin Mehman-Parast also signaled a hardening of resolve in Tehran's response to protesters, who have dogged the regime since June, when large-scale demonstrations erupted amid accusations of vote rigging in presidential elections.

- The U.S. International Trade Commission will rule Wednesday on U.S. steelmakers' claims that they have been severely injured as a result of $2.8 billion of subsidized Chinese steel being dumped into the U.S. The findings, which involve Chinese-made steel pipes and tubes used by energy and exploration companies, could lead to stiff fines, an import quota or both.


- The latest effort by the government to auction off debt received decent enthusiasm for investors, a day after a disappointing auction for shorter-term notes.

- Online retailer eBay(EBAY) saw purchases made from mobile apps soar this holiday season, with three-times as many items purchased via mobile device than a year ago.

- Investors poured $11.1 billion to U.S. equity funds in the week ending Dec. 23, the highest amount in 79 weeks and slightly offsetting the record outflows from such funds this year, fund tracker EPFR Global said on Tuesday. The outflow from money market funds slowed in the penultimate week of 2009 while emerging market funds remained on track to post a record annual inflow.

- US gross domestic product could grow at an annual rate of as much as 3 percent next year as consumers and businesses start to regain confidence, Peter Cardillo, chief market economist from Avalon Partners, told CNBC Tuesday. “It's all a question of confidence and that confidence is coming back. It's not only coming back among the consumers, but it's also coming back among the businesses," Cardillo said.


- Thomas Weisel Partners analyst Tim Klasell this morning repeated his Overweight rating on Microsoft (MSFT), while lifting his target on the stock to $35, from $31. At the same time, Klasell upped his EPS forecast for the June 2010 fiscal year to $1.86, from $1.73; for FY 2011 he goes to $2.11, from $1.96. “The outlook for hardware shipments and the overall IT spending environment in 2010 has improved and the company has reduced its cost structure,” he writes.

NY Times:

- There is a middle-class tax time bomb ticking in the Senate’s version of President Obama’s effort to reform health care. The bill that passed the Senate with such fanfare on Christmas Eve would impose a confiscatory 40 percent excise tax on so-called Cadillac health plans, which are popularly viewed as over-the-top plans held only by the very wealthy. In fact, it’s a tax that in a few years will hammer millions of middle-class policyholders, forcing them to scale back their access to medical care. Which is exactly what the tax is designed to do. The tax would kick in on plans exceeding $23,000 annually for family coverage and $8,500 for individuals, starting in 2013. In the first year it would affect relatively few people in the middle class. But because of the steadily rising costs of health care in the U.S., more and more plans would reach the taxation threshold each year. Within three years of its implementation, according to the Congressional Budget Office, the tax would apply to nearly 20 percent of all workers with employer-provided health coverage in the country, affecting some 31 million people. Within six years, according to Congress’s Joint Committee on Taxation, the tax would reach a fifth of all households earning between $50,000 and $75,000 annually. Those families can hardly be considered very wealthy.

- Greed may be out of style, but risk is still good. That seems to be the lesson big banks like Goldman Sachs(GS) and JPMorgan Chase(JPM) have learned from the credit crisis. The amount of risk they're taking, as measured by their exposure to losses from brokering derivatives, is still significant -- and in some cases has actually risen since the height of the crisis. Goldman Sachs Bank is the biggest risk taker, with almost three times as much credit exposure as the next biggest gambler, JPMorgan, according to a third-quarter report recently released by the Office of the Comptroller of the Currency. The amounts are so large that if the swaps and other derivative contracts the banks broker go bad because the parties on either side of the deal collapse, the banks could be in trouble. Indeed, in 2008 Goldman received billions in rescue dollars that had been loaned to insurer American International Group, because of its huge role in AIG's derivatives program. As of Sept. 30, Goldman posted $42 billion in derivatives and had $115 million in assets. JPMorgan brokered $79 billion in derivatives against $1.7 billion in assets as of Sept. 30. Since the last quarter of 2006, near the peak of the credit boom, JPMorgan has reduced its total credit exposure to risk-based capital by 16 percent. Citibank in the same time period has cut its exposure by 24 percent. Meanwhile, Bank of America has increased its exposure by almost 50 percent, though it is still well below the levels of the other three. Former Fed Chairman Paul Volcker earlier this month said credit default swaps had taken the economy to the "brink of disaster" and "proprietary trading should be pushed out of investment banks and to hedge funds where they belong."

- On Christmas Day, an Islamist fanatic tried to blow up an airplane whose passengers were mostly Christians. And we helped. Our government gets no thanks for preventing a tragedy. Only the bomber's ineptitude preserved the lives of nearly 300 innocents. How did we help Umar Abdulmutallab, a wealthy Muslim university graduate who decided that Allah wanted him to slaughter Christians on their most joyous holiday? By continuing to lie to ourselves. Although willing -- at last -- to briefly use the word "terror," yesterday President Obama still refused to make a connection between the action, the date and Islam.

The Business Insider:

- Russia's Lukoil has won the rights to develop one of Iraq's largest oilfields -- the 12.9 billion barrel West Qurna Phase 2 field. This upcoming mega-field is seen as the 'crown jewel' of 15 fields offered during the second post-war licensing round. It's just the beginning of what will likely be Iraq's oil renaissance.

Detroit Free Press:

- Leaders in metro Detroit's Muslim community are gathering today in Southfield to condemn Al Qaeda's claims of involvement in the foiled Christmas Day airline attack. "No faith or legitimate political ideology could ever justify the injuring or murdering of innocent civilians," Dawud Walid, director of the Michigan chapter of the Council on American-Islamic Relations said at a news conference at the center's Southfield offices today. "No cause or grievances can ever justify such wanton violence. "These people are outside the true religion and the true fold of Islam," he said, also condemning racial or ethnic profiling as a reaction to the Christmas Day attack. "They are enemies of peace-loving Muslims throughout the world." Abdulmutallab's failed attempt to blow up Flight 253 from Amsterdam as it landed in Detroit is not "jihad," or "striving in the cause of God," Walid pointed out. Instead, attacks are "irhab," or "terrorism," and "hirabah," or "unlawful warfare," according to Islam's holy book, the Koran, he said. Walid's group is launching its own jihad, an online endeavor to provide legitimate information to young, uneducated Muslims who might fall prey to Internet rhetoric from religious extremists. He expects the online presence to launch by spring.


- China Unicom has reportedly sold over 300,000 iPhones in the country according to iPhonAsia. The mobile operator had reported sales of just 5,000 units during the first weekend of sales at the end of October and reached 100,000 phones sold in early December. This means it took the company 40 days to reach the 100,000 mark and less than 20 days to sell an additional 200,000. This represents an impressive acceleration in sales for the initially struggling Chinese market. The report comes from TechQQ who gathered the information from a China Unicom executive who spoke to the press on December 27. China Unicom is the only iPhone carrier in China at the moment, although China Mobile, who boasts the most subscribers in the world, is said to be still in talks with Apple to start selling the device.

USA Today:

- Diplomats are concerned about an intelligence report that says Iran is trying to import 1,350 tons of purified uranium ore from Kazakhstan in violation of U.N. Security Council sanctions. Such a deal would be significant because Tehran appears to be running out of that material, which it needs to feed its uranium enrichment program. A summary of the report obtained by The Associated Press on Tuesday said the deal could be completed within weeks. It said Tehran was willing to pay $450 million, or close to 315 million euros, for the shipment.


- Closing the Guantanamo Bay detention facility remains “a national security imperative” despite a news report that two of the planners behind the attempted airborne bombing on Christmas Day had been released from Gitmo in 2007, a senior administration official said. ABC News’ Brian Ross reported: “Two of the four leaders allegedly behind the Al Qaeda plot to blow up a Northwest Airlines passenger jet over Detroit were released by the U.S. from the Guantanamo prison in November 2007, according to American officials and Department of Defense documents.”

- A new poll suggests that Sen. Ben Nelson (D-Neb.) seriously endangered his political prospects by becoming the decisive 60th vote allowing health care legislation to pass through the Senate. The Rasmussen survey shows Nelson, who isn’t up for re-election until 2012, badly trailing Gov. Dave Heineman by 31 points in a hypothetical matchup, 61 to 30 percent. A 55 percent majority of Nebraska voters now hold an unfavorable view of the two-term senator, with 40 percent viewing him favorably. The health care bill is currently very unpopular in Nebraska, according to the Rasmussen poll. Nearly two-thirds of voters (64 percent) oppose the legislation while just 17 percent approve.

- There is a sense of déjà vu in the Obama administration’s response to the attempted terrorist attack on Christmas Day. A by-now familiar pattern has been established for dealing with unexpected problems. First, White House aides downplay the notion that something may have gone wrong on their part. While staying out of the spotlight, the president conveys his efforts to address the situation and his feelings about it through administration officials. After a few days, the White House concedes on the issue, and perhaps Barack Obama even steps out to address it. That same scenario unfolded over the summer, when Obama said Sgt. James Crowley, a white Cambridge, Mass., police officer, “acted stupidly” when he arrested Henry Louis Gates Jr., a black Harvard professor, in his own home. It happened in March when the public was outraged over AIG dishing out hefty bonuses. More recently the public witnessed the dynamic after a security breach at President Barack Obama’s first state dinner. But the fact that the issue now is a terrorist incident — albeit an unsuccessful one — makes the stakes much higher, and the White House’s usual approach more questionable. That this test of his leadership comes while he’s on vacation in tropical Hawaii further complicates things.


- You know what was so 2009? Television in HD. You know what is so 2010? Television in HD and 3D. HD Guru is reporting that DirecTV is planning to launch an all HD and 3D channel in 2010; with an announcement forthcoming at this years CES show in Las Vegas. The new service will be made possible by a new DirecTV satellite being shot into orbit sometime in the very near future, a satellite slated to be fully operational by March of 2010. The channel will play a variety of movies and sports all conforming to the latest 3D standard. Now before we all get too excited, the new service will work with your current DirecTV HD box, thanks to a firmware update, but you will have to purchase yourself a new 3D compatible HD TV — many of which are to be announced at CES this year. Will 3D be the new buzz word of the 2010 television market? We will see.

- Google(GOOG) Nexus One sold directly and only by Google, officially supported by T-Mobile.


- Google(GOOG) Might Get Into Hosted Gaming Via YouTube.


- The Internet made shopping without checkout lines a no-brainer. Now, some Web companies are betting that people are ready to forsake another shopping tradition: tangible products. Virtual goods, which exist as digital bits on computers and cellphones, have grown more popular in the past year as important accoutrements for increasingly Web-oriented lives. Often available for a $1 or less, virtual goods range from video game accessories like extra weapons for shooting games, to electronic birthday cards and flowers for friends on Facebook or dating sites like Zoosk and flirtomatic.com.

- Redbook Research on Tuesday released the following seasonally adjusted weekly data on U.S. chain store sales: Year-over-year: Week (w/e 12/26/09 vs year ago) +3.0 pct Year-over-year: Month (December 2009 vs December 2008) +1.9 pct Month-over-month: (December 2009 vs November 2009) -4.5 pct.

De Telegreaaf:

- Al-Qaeda uses its own scanning and x-ray machines to test the concealment of bombs, citing a former Dutch military intelligence official. Al-Qaeda has performed test-runs to mislead scanning machines in European airports, the official said.

Le Figaro:

- Apple Inc.’s(AAPL) 2009 French sales of iPhones will total between 1.8 million and 2 million units. That’s enough to give Apple an 8.5% share of the French mobile-phone market.


- LG Display (LGD) expects its share of the global e-paper display (EPD) market to reach 20% in 2010, up from 15% in 2009, according to company CEO Kwon Young Soo at the signing of a strategic alliance with Taiwan-based EPD maker Prime View International (PVI) on December 28. Kwon noted that the collaboration with PVI will help LGD secure EPD material supply from E-Ink in the future. PVI has acquired E-Ink. The global e-book reader market is expected to reach 9.3 million units in 2010, up from 3.82 million in 2009, and E-Ink will account for over 90% of the market, according to Digitimes Research.

The Korea Times:
- KT is obviously enjoying being the country's exclusive carrier for Apple's(AAPL) iPhone, which has been flying off shelves since its domestic release on Nov. 30. Now bitter industry rival SK Telecom is looking to generate just as much buzz by getting out of the gate early on premium phones powered by the Google(GOOG)-backed Android operating system. SK Telecom, the country's biggest mobile telephony operator, currently plans to release its first Android phone, produced by Motorola(MOT), sometime around mid-January, industry sources said.

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