Thursday, December 31, 2009

Today's Headlines


- Fewer Americans than anticipated filed claims for unemployment benefits last week, pointing to an improvement in the labor market that will help sustain economic growth next year. Initial jobless claims fell by 22,000 to 432,000 in the week ended Dec. 26, the lowest level since July 2008, Labor Department figures showed today in Washington. The number of people collecting unemployment insurance fell in the prior week to 4.98 million, and those receiving extended benefits jumped. “It’s boding well for outright job growth,” said Stephen Gallagher, chief U.S. economist at Societe Generale in New York, who forecast claims would drop to 430,000. “It seems that some of the layoffs that took place in the early part of the year were excessive.” “What we’ve seen is definite stability and just a hint toward things trying to get better,” Jeffrey Joerres, chief executive officer of Manpower Inc., said in a Bloomberg Television interview today. The world’s second-largest provider of temporary workers, is experiencing “slow but steady increases in people who are out on assignment,” he said. “It’s a little in every office, which is a good sign because it’s broad-based.” The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.8 percent in the week ended Dec. 19, today’s report showed. The four-week moving average of initial claims, a less volatile measure, dropped to 460,250 last week from 465,750 the prior one. Claims are down from a 26-year high of 674,000 in the week ended March 27.

- US consumers are becoming more confident, suggesting the retail sales rally in November probably accelerated this month, according to Dennis Gartman, an economist who publishes the daily Gartman Letter market report. “When December’s retail sales figures are finally released sometime next month, they shall register a strong year-on-year comparison.”

- The Mayo Clinic, praised by President Barack Obama as a national model for efficient health care, will stop accepting Medicare patients as of tomorrow at one of its primary-care clinics in Arizona, saying the U.S. government pays too little. More than 3,000 patients eligible for Medicare, the government’s largest health-insurance program, will be forced to pay cash if they want to continue seeing their doctors at a Mayo family clinic in Glendale, northwest of Phoenix, said Michael Yardley, a Mayo spokesman. Obama in June cited the nonprofit Rochester, Minnesota-based Mayo Clinic and the Cleveland Clinic in Ohio for offering “the highest quality care at costs well below the national norm.” Mayo’s move to drop Medicare patients may be copied by family doctors, some of whom have stopped accepting new patients from the program, said Lori Heim, president of the American Academy of Family Physicians, in a telephone interview yesterday. “Many physicians have said, ‘I simply cannot afford to keep taking care of Medicare patients,’” said Heim, a family doctor who practices in Laurinburg, North Carolina. “If you truly know your business costs and you are losing money, it doesn’t make sense to do more of it.” The Mayo organization had 3,700 staff physicians and scientists and treated 526,000 patients in 2008. It lost $840 million last year on Medicare, the government’s health program for the disabled and those 65 and older, Mayo spokeswoman Lynn Closway said. Mayo’s hospital and four clinics in Arizona, including the Glendale facility, lost $120 million on Medicare patients last year, Yardley said. Reid Cherlin, a White House spokesman for health care, declined comment on Mayo’s decision to drop Medicare primary care patients at its Glendale clinic.

- Gold may rise as investors buy futures to reflect the metal’s increased weighting in a benchmark raw-materials index.

- The dollar advanced to a three-month high against the yen as a government report showed U.S. initial jobless claims unexpectedly fell last week. The greenback was headed for its first monthly gain since June versus the currencies of major U.S. trading partners on speculation the Federal Reserve is moving closer to withdrawing stimulus measures as the economy recovers, pushing Treasury yields higher. “There’s a good labor market recovery coming through,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “Bond yields have gone up, and that should give the dollar a boost.”

- AT&T Inc.(T), with $6.63 billion of debt coming due, may be the biggest beneficiary of the record rally in U.S. corporate bonds in 2009. Borrowing costs have fallen to almost a five-year low, meaning the Dallas-based phone company and the rest of corporate America with $429 billion of debt maturing are poised to shave $17.4 billion off annual interest expense in 2010, according Moody’s Investors Service and data compiled by Bloomberg.

- Iran’s chief prosecutor threatened to put the country’s opposition leaders on trial for “supporting apostates” if they don’t distance themselves from anti-government protests earlier this week. The comments by Prosecutor General Gholam Hossein Mohseni Ejei regarding Mir Hossein Mousavi and Mehdi Karrubi were published in the state-owned Iran newspaper today. Thousands of government supporters massed in the capital Tehran yesterday, some calling for the death of Mousavi and Karubbi, whose supporters have rallied in protest since the disputed June 12 election won by President Mahmoud Ahmadinejad. The authorities warned they will crush any further anti-regime demonstrations.

- Leveraged loans posted record returns this year while buyouts such as Blackstone Group LP’s purchase of Anheuser-Busch InBev NV’s amusement-park business helped fuel more than $150 billion of new debt financing. The Standard & Poor’s/LSTA U.S. Leveraged Loan 100 Index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, recorded a total return of 52.03 percent this year as of yesterday, an all-time high since the inception of the index in January 2002, according to data provided by S&P.

- Taxpayer losses from supporting Fannie Mae and Freddie Mac will top $400 billion, according to Peter Wallison, a former general counsel at the Treasury who is now a fellow at the American Enterprise Institute. “The situation is they are losing gobs of money, up to $400 billion in mortgages,” Wallison said in a Bloomberg Television interview. The Treasury Department recognized last week that losses will be more than $400 billion when it raised its limit on federal support for the two government-sponsored enterprises, he said. The U.S. seized the two mortgage financiers in 2008 as the government struggled to prevent a meltdown of the financial system. The debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks grew an average of $184 billion annually from 1998 to 2008, helping fuel a bubble that drove home prices up by 107 percent between 2000 and mid-2006, according to the S&P/Case- Shiller home-price index.

- President Barack Obama is being urged to strengthen anti-terrorism efforts as he awaits initial results of an investigation into the Dec. 25 attempted bombing of a U.S. airliner. Senate Intelligence Committee Chairwoman Dianne Feinstein asked the president in a letter yesterday to change a 2008 policy that limits the government’s ability to place people on a watch list requiring extra screening or banning them from flying. “The U.S. government should watch-list, and deny visas to, anyone who is reasonably believed to be affiliated with, part of, or acting on behalf of a terrorist organization,” Feinstein, a California Democrat, said in the letter. Obama has requested the criteria used for placing people on watch lists as part of the examination of anti-terror policies.

- AT&T Inc.(T) ended its sponsorship deal with Tiger Woods after his admissions of marital infidelity, becoming at least the third company to scale back ties to the professional golfer.

Wall Street Journal:

- An 11-person European Parliament delegation is scheduled to visit Tehran next week, drawing a rebuke from U.S. lawmakers concerned the visit could legitimize Iranian President Mahmoud Ahmadinejad's government. The Jan. 7-11 mission marks the first visit by a Western parliamentary body to Tehran in more than a year. It comes as Mr. Ahmadinejad's security forces have accelerated a crackdown on Iran's political opposition. The trip, set to occur a week after the expiration of President Barack Obama's deadline for Iran to respond to international calls for negotiations over its nuclear program, is feeding debate among the U.S. and its European allies over how long to keep open the window for diplomacy with Tehran. "We believe that a visit from the EP would send the wrong message to the Iranian government and undermine the international efforts to end their nuclear program," 15 U.S. House members wrote European Parliament President Jerzy Buzek last week. "We urge you not to authorize the visit at this time."

- In 2009, consumers flocked to the new smartphones hitting the market, and the world's wireless operators felt the pressure to upgrade their networks in response. 2010 will be the year that the carriers - and maybe even consumers - start placing orders for network-boosting products, investors and entrepreneurs say. And among the gizmos that will be in high demand are femtocells, the small base stations that boost coverage. Long a subject of debate in the telecom world, femtos are poised to become a household word, as some of the barriers to widespread deployment will fall away with the end of 2009 and the beginning of 2010. "In the latter quarter of 2009, we were shipping a few thousand units per month," said Tom Hussey, the head of American sales and business development at venture-backed Ubiquisys Ltd. "It's going to go to tens of thousands per month after the first quarter of 2010." U.K.-based Ubiquisys is one of several privately held femto companies that will be competing with well known public companies that are making a play in the same market. But rather than settling for the crumbs that fall off the table, Ubiquisys and other start-ups will go head to head with major manufacturers in 2010. "No operator wants just one source" for this kind of technology, Hussey said, indicating that the market will be big enough for several players to prosper. The company, which has raised nearly $50 million from Accel Partners, Advent Venture Partners, Atlas Venture, Google and T-Mobile Venture Fund, expects to break even in 2010. Ubiquisys also expects to sell femtos directly to consumers, having reached the "magic number" of $100 per unit, he said. Femtocells - a cousin technology to picocells and macrocells - are small boxes that function like miniature cell towers. The devices, also called access-point base stations, plug directly into the broadband connection in a home or business, ironing out glitches in coverage. Inside a femtocell is a system of chips and antennas that can rout voice and data traffic over the Internet rather than a carrier's main cell network. This capability makes femtos a good business proposition for the operators, who want to handle increasing amounts of traffic without building new towers. "It's ten times cheaper" to use femtos instead of building towers, said John Bayless, a general partner at Sevin Rosen Funds who holds a board seat at AirWalk. "The operators are beginning to have firm plans" to deploy them. As CDMA operators beef up their networks, they are turning to well-known manufacturers like Samsung, Motorola (MOT) and Ericsson for femtocells. UMTS operator AT&T has placed femto orders with Cisco Systems Inc.

- The market for full-body scanners, now being considered for wider use in airport security, includes many more potential end users, according to manufacturer L-3 Communications Holdings Inc. (LLL). In an interview, Tom Ripp, president of Security and Detection Systems at L-3, said 200 of the company's SafeView body scanners have been deployed worldwide. The potential market includes thousands of airport locations as well as courthouses, prisons, border crossings and rail facilities. L-3 and OSI Systems Inc. (OSIS) are the only two companies certified to make full-body scanners for the U.S. government.

- In a brutal year, technology companies responded by hunkering down and developing new products at a faster rate as they tried to wrest sales from one another. While 2010 isn't expected to be a blockbuster, consumers have shown they are still willing to spend on gadgets, at least for hot products like Apple Inc.'s iPhone and Inc.'s Kindle. There are also signs that frozen corporate budgets are thawing—driven by aging equipment, falling hardware prices and new offerings, notably Microsoft Corp.'s Windows 7.

- New Year’s Resolutions for Washington.

- What to expect in 2010. Commentary: Winners and losers to watch in the tech industry.


- China on Thursday decried a U.S. decision to impose duties of 10 to 16 percent on Chinese-made steel pipe, the biggest U.S. trade case to date against China, and said it had been made a scapegoat of protectionist interests. The Ministry of Commerce said it was "strongly dissatisfied with and resolutely opposed" to the vote of the U.S. International Trade Commission for countervailing duties, which Washington said were needed to balance out unfair state subsidies to Chinese makers of pipes for oil wells. The global financial crisis and fall in demand for oil, not Chinese policies, were to blame for pressures on U.S. manufacturers, said a statement issued on the ministry's website.

- Billionaire investor Carl Icahn plans to pump more money into his bid to buy Donald Trump's bankrupt casinos. In court papers filed in U.S. Bankruptcy Court in New Jersey, the billionaire's investment company says it will commit $125 million more in financing to buy struggling Trump Entertainment Resorts.

NY Times:

- The United Nations is moving as many as 60 foreign employees, or about one-quarter of its international staff, out of Pakistan for at least six months out of safety concerns, a United Nations official said Thursday.

The Business Insider:

- The 50 Worst Gadgets Of The Decade.


- According to analysts at Kaufman Brothers, form factor innovation across computing and mobile devices would drive additional growth for semiconductors. Kaufman Brothers expects the semiconductor product cycles to be driven further by content access and the concept of connected living rooms. New products are likely to be launched during 2010, driven by processor innovation from Intel (INTC), Qualcomm (QCOM), Texas Instruments (TXN [FREE Stock Trend Analysis]), NVIDIA (NVDA) and Marvell Technology (MRVL), the analysts add. Some companies, particularly Intel and Broadcom (BRCM [FREE Stock Trend Analysis]), are likely to benefit significantly from the form factor innovation around computing and living room. This trend also creates opportunities for newer players, such as MRVL and NVDA, the analysts say.


- Signal Hill analyst Mayank Tandon initiated coverage of MasterCard(MA) with a buy rating on Dec. 31, saying the second-biggest credit-card company "is positioned at the heart of the global shift from paper to plastic". Tandon expects a return to low double-digit revenue growth for MasterCard on a global consumer recovery in fiscal 2010. "Combined with continued operating margin gains, we see MasterCard growing earnings at a 20-30% pace over the next 3-5 years," the analyst wrote in a note. Tandon noted that after seeing a decline in payment volumes as consumers cut back on spending, MasterCard "is seeing early signs of life". Better payment volumes, favorable currency effects, and easier comparisons should all translate into accelerating revenue trends through fiscal 2010 and into fiscal 2011, acting as a catalyst for the shares, the analyst said. "As one of the premier companies in the payment space, with strong secular tailwinds, we believe MasterCard is a core holding name for investors", Tandon wrote. The analyst sees upside in the share price to $325 within 12-18 months.

San Francisco Chronicle:

- Trans fat will become oil non grata in California restaurants on New Year's Day, when the state becomes the first in the country to ban the use of the artery-clogging, partially hydrogenated vegetable substance. Gov. Arnold Schwarzenegger signed the bill outlawing trans fats in July 2008, but the measure gave restaurants until Friday to comply. Bakeries will have until Jan. 1, 2011.

Washington Post:

- In sign of rebound, D.C. population set to surpass 600,000. The District is on the verge of a watershed in its turnaround, with the city's population set to break 600,000 for the first time in almost two decades. Demographer William H. Frey of the Brookings Institution attributed the growth to three factors: Fewer people are moving to the exurbs because of the mortgage meltdown; fewer people are leaving the region for former Sunbelt growth magnets during the recession; and more newcomers are moving to the nation's capital to join the Obama administration. The most recent population count is the District's highest since 1991, when it was almost 601,000. From a high-water mark in the years after World War II, when the population exceeded 800,000, it began slipping in the 1950s as residents started moving to the suburbs, a trend that continued unabated through the 1990s. The population hit its lowest modern point of 565,230 in 1998. "It's a real benchmark," Frey said. "Now we can start dreaming about 700,000."

- New Jersey Senate President and acting Gov. Richard Codey today waded into the national furor over the attempted airline bombing on Christmas Day, firing off a letter calling for the resignation of U.S. Homeland Security Secretary Janet Napolitano. "Based on the handling of this entire affair, I think it’s time for you to consider stepping down and making room for an individual with more law enforcement and counterterrorism experience to take the reins at the Office of Homeland Security," Codey (D-Essex) wrote. "The entire episode was handled poorly, from start to finish."


- CES 2010 preview: Six trends to watch for at this year’s show.


- Fifty-eight percent (58%) of U.S. voters say waterboarding and other aggressive interrogation techniques should be used to gain information from the terrorist who attempted to bomb an airliner on Christmas Day. A new Rasmussen Reports national telephone survey finds that just 30% oppose the use of such techniques. Seventy-one percent (71%) of all voters think the attempt by the Nigerian Muslim to blow up the airliner as it landed in Detroit should be investigated by military authorities as a terrorist act. Only 22% say it should be handled by civilian authorities as a criminal act, as is currently the case.

- The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-two percent (42%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -18 (see trends). Twenty-nine percent (29%) now say the country is heading in the right direction.


- Lawmakers are calling for an investigation of the Treasury Department's decision to lift the cap on government cash for Fannie Mae and Freddie Mac, a move that essentially gives unlimited aid to the mortgage giants for the rest of President Barack Obama's term. Rep. Dennis Kucinich (D-Ohio) said Wednesday that his subcommittee of the Oversight and Government Reform Committee will launch a probe. Separately, Reps. Scott Garrett (R-N.J.) and Spencer Bachus (R-Ala.) requested that the Financial Services Committee hold a hearing on the matter. On Christmas Eve, the Treasury announced that the government would be able to exceed the $400 billion cap on emergency aid without the consent of Congress, adding another dose of controversy to an already unpopular bailout. While many Wall Street firms have repaid their bailout assistance, Fannie and Freddie, which have together received $111 billion, are unlikely do so. And their executives have received multimillion-dollar compensation packages even as the public rages against lavish executive payments at firms that have received taxpayer money.

- Apple(AAPL) updated an existing patent application today that describes the implementation of a previously dubbed "Magic Wand" remote control to provide a more natural control experience when navigating a product like the Apple TV. Readers will recognize that many of the described technologies work like the Nintendo Wiimote. Similarly, Apple describes the use of a accelerometers as well as fixed points of reference to determine the movement of the remote. Other patent applications in the past have shown us more of this research coming out of Apple. Naturally, the use of this "Magic Wand" could be used to browse media, fast forward/rewind, rotate images and even zoom in and out by moving the wand closer or further from the screen.

- Southridge/Technology Insight Reseach put out an interesting sensitivity analysis on Apple’s (Nasdaq: AAPL) highly anticipated, though still rumored, tablet device.
The firm suggests the most important datapoint that has been reported is that Apple has already started negotiations with Disney (NYSE: DIS) and CBS (NYSE: CBS) to offer subscriptions on the device. They believe buy-ins from the TV industry could place Apple's tablet into a class of it own. They said based on an iPod-like adoption profile, the NPV of an the tablet ranges from $4 to $24 billion, or 2-14% accretive to AAPL's market cap (pre-tablet speculation runup)
. The firm sees the tablet addoption more likely to mimic that of the iPod rather than the iPhone since the e-reader/MID space is in the nascent 5 million number phase rather than the 80+ million unit stake that the smartphones were already in at the end of 2006. That said, the firm said since actual functionality is still a big unknown, addressable market is the biggest variable in assessing the NPV of a potential iTablet launch. The firm has an Outperform rating and 12-month price target of $245 on Apple, based on a 21x multiple on their non-GAAP CY10 EPS estimate of $10.06 (from $9.82) plus $37 in net cash/share AAPL reported at the end of the Sept Q.

USA Today:

- After $787 billion in stimulus spending and $700 billion in bank bailouts, 2010 is fast shaping up to be the year of the federal budget diet.Bipartisan support is growing in Congress for action to stabilize the nation's bulging debt, which is now $12.1 trillion. Influential experts from former Federal Reserve Board chairman Alan Greenspan to former comptroller general David Walker have joined the cause. The public debt is the amount owed to individual investors, including foreign countries, but excluding money the government owes to its own trust funds. It has soared from $5.8 trillion to $7.6 trillion this year alone — and is more than half the size of the nation's economy for the first time since 1956. Without action to reduce that unprecedented rise in red ink, lawmakers and experts say, Washington risks a fiscal crisis. The Congressional Budget Office projects annual interest on the public debt would be about $800 billion by 2019, but the Heritage Foundation's Brian Riedl and other analysts estimate it could surpass $1 trillion by then. Foreign creditors could refuse to buy more Treasury securities. The focus is on the White House as President Obama prepares his State of the Union address and 2011 budget.


- A weekly gauge of future U.S. economic growth edged higher in the latest week, and though its yearly growth rate slipped, recent patterns in the index still point to a steady recovery and growth in the job market as well, a research group said on Thursday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to a 77-week high of 131.2 for the week ended Dec. 25, from a downwardly revised 130.3 the prior week, which was originally reported as 130.4. The index's annualized growth rate ticked down to a three-week low of 24.2 percent from 24.4 percent the previous week. Recent steady growth in the leading index "points to continuing improvement in economic activity and the jobs market in coming months," said Lakshman Achuthan, Managing Director at ECRI.

- New York City business activity expanded in December for the fifth consecutive month, though at a slower rate than November, while a gauge of business optimism was at its highest in more than three years, according to an industry report on Thursday.

- Camulos Partners LP, launched by a former Soros Fund Management trader, was sued by an investor seeking to recover $67 million that was "unlawfully seized," according to a Delaware court filing. The fund and Richard Brennan, who controls Camulos, used a "calculated scheme and brazen abuse of power" to force William Seibold out of the Camulos partnership and deprive him of his investments, according to the suit, which was filed on Wednesday in Delaware's Court of Chancery.

Les Echos:

- German carmakers plan to focus on sales in China, India and the US next year to offset an anticipated drop at home after government-funded trade-in incentives are terminated, citing Matthias Wissmann, president of the VDA industry group.

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