Late-Night Headlines
Bloomberg:
- “Washington doesn’t get it.” That generic statement is tripping off the tongues of populists and Tea Partiers, business groups and bankers alike. In short, the public is peeved at the politicians. I heard it this week from William Dunkelberg, chief economist of the National Federation of Independent Business, who used his group’s latest survey to opine on Washington’s deaf ear for helping small business. The president and Congress “pay lip service to the fact that small business generates half of private-sector GDP and employs 60 percent or more of private-sector workers,” Dunkelberg says. As far as Washington’s efforts to help this sector of the economy, “instead of stimulus, give consumers a tax cut,” he says. Each month the NFIB tallies small-business optimism, or pessimism, which has been the dominant emotion of late. At 89.3 in January, the index is up 8.3 points from its March low, yet it’s languished under 90 for a record seven quarters. The only other time the index plumbed those depths, and for one quarter only, was during the 1980-1982 back-to-back recessions. The news from the nation’s growth engine is getting less bad, but it’s still far from good. Why is small business so glum?
- CME Group Inc.(CME) agreed to take control of News Corp.’s(NWSA) stock-index business, owner of the 114- year-old Dow Jones Industrial Average, to bolster revenue by licensing equity benchmarks. News Corp. will contribute a unit that runs more than 130,000 stock indexes to a joint venture called CME Group Index Services, according to a statement today. CME will shift some of its market-data operations to the new business, and will own 90 percent of the combined company. The venture will issue about $613 million in debt, using the proceeds to pay $607.5 million to News Corp.
- It is so widely accepted that Lehman Brothers Holdings Inc.’s balance sheet was bogus that even former Treasury Secretary Hank Paulson can say it in his new memoir. And still, the government hasn’t found anyone who did anything wrong at the failed investment bank. How could that be, 17 months after Lehman collapsed and sent the global credit crisis into overdrive? While Congress and the White House dither about reforming the U.S. financial system, the wheels of justice are grinding so slowly, if at all, that it seems there’s no appetite in Washington for holding Wall Street executives accountable for anything. In his new book, “On the Brink,” Paulson doesn’t point fingers at specific Lehman executives for violating any rules. He displays amazing candor, though, in describing how Lehman’s asset values were a gross distortion of the truth. It doesn’t take much imagination to figure out they didn’t get that way all by themselves.
- South Korea’s stock index may drop a further 11 percent within three months as a leading economic indicator falls from a 7 1/2-year high, LIG Investment & Securities Co. said. South Korea’s Kospi index may drop as low as 1,400 after losing 8.8 percent from its Jan. 21 high to 1,570.12 at yesterday’s close, said Chi Ki Ho, a technical strategist at LIG Investment. He said the Leading Index in January probably reached its highest since May 2002, and may fall in February. Stocks have slumped an average of 23 percent after the last three occasions since 2004 when the Leading Index of economic indicators, which provides a gauge of future business activity, fell from a peak, Chi said.
- The European Union’s experiment with a single currency is deep in crisis because Europe failed to learn from the Greeks. Not today’s Greeks -- the ancient Greeks, specifically Odysseus, the hero of Homer’s epic poem. Odysseus knew his limitations. Realizing he was vulnerable to temptation, he ordered his sailors to tie him to the mast of his ship. That way he could listen to the bewitching song of the Sirens without obeying their call to steer the ship onto the rocks. Today’s Sirens are the investors and traders of the global bond market, who lure nations into tapping abundant credit at low rates when times are good. If a nation borrows too much, those open-handed investors abruptly turn into vigilantes who punish the country by making new loans scarce and expensive.
Wall Street Journal:
- Federal Reserve Chairman Ben Bernanke outlined the likely path the Fed would take to tighten credit once the economy has recovered enough. In another step toward unwinding its crisis-lending programs, he said Wednesday the Fed could soon begin raising its discount rate, charging more for emergency loans it makes directly to banks.
- The military will formally discipline at least six officers, mostly from Walter Reed Army Medical Center in Washington, for failing to take action against the officer accused of carrying out last year's deadly shooting rampage at Fort Hood, according to people familiar with the matter. Senior Army officials said the decision to punish so many officers reflects the military's belief that the November assault, which killed 13 people at the Army base in central Texas, could have been prevented if Maj. Nidal Hasan's superiors had alerted authorities to his increasing Islamist radicalization.
- Iranian authorities deployed in force across Tehran Wednesday to conduct last-minute security sweeps and warn residents to refrain from joining antigovernment protests planned for Thursday. The government typically orchestrates large, carnival-like rallies and demonstrations to mark the anniversary of the Islamic Republic. For this year's events on Feb. 11, the day marking the culmination of the annual celebrations, opposition leaders have called for protesters to demonstrate against the regime. That has set the stage for clashes between authorities and demonstrators, who have taken to the streets repeatedly to protest the outcome of presidential elections in June. Government officials, meanwhile, ratcheted up threats against any protests Thursday, vowing to confront demonstrators on the streets and calling for government supporters to turn out in large numbers. Iranian officials have branded protesters as agents of foreign powers. The Iranian judiciary has handed down a number of harsh sentences against protesters arrested in previous demonstrations, including at least 10 pending death sentences.
- The atmosphere in Washington is chilly - and we’re not talking about the weather. This storm involves Interior Secretary Ken Salazar and the American Petroleum Institute, the oil industry’s main trade group in D.C. The latest gust: A week ago, with only a few days’ notice, Salazar quietly asked top executives from API member companies to come to Washington for a meeting. At the session, he told them API’s attacks on the administration are “not helpful,” according to a person familiar with the matter. The meeting came shortly after Salazar and API President Jack Gerard traded shots in the press for several days over Salazar’s decisions reversing certain industry-friendly policies on drilling. Because the Interior Department controls access to the nation’s onshore and offshore oil and natural gas reserves, API members can’t easily ignore his complaints. It’s not clear, however, whether the meeting will bring the Obama administration and the oil industry any closer to resolving their differences over President Barack Obama’s proposals to raise taxes on the industry and to require companies to pay for their emissions of heat-trapping gases linked to climate change.
Business Insider:
Politico:
- Sen. Kit Bond (R-Mo.) called Tuesday for the removal of the White House's top counterterrorism official, intensifying Republican criticism of the administration's handling of the attempted terrorist attack on Christmas Day. Bond said John Brennan, a special assistant to the president for counterterrorism, needs to resign because of the political role he has played. Brennan "needs to go," Bond told the National Review Online, a position spokeswoman Shana Marchio confirmed. "Our problem now is that we have to wonder whether we can trust Brennan after he has been a mouthpiece for the political arm that I thought only came out of the White House press office," Bond said. "Instead of having real debates on our nation's terror-fighting policies, the national security team has become a bench of political spokespeople."
Real Clear Politics:
- Why Voters Turned Against Obama Policies. You've got to like President Obama's articulateness, his command of information, his obviously swift intelligence, but here is what you don't have to like about him: his fierce unbending ideology, his endless and increasingly absurd posturing as a saint while insisting opponents are scoundrels and what could turn out to be political klutziness. He's not an ideologue, he told congressional Republicans when he boldly faced them at a televised caucus meeting, but he is, at least if you define an ideologue not as a stop-at-nothing fanatic, but instead as someone obedient to one or two controlling ideas and values that then tend to inform virtually every aspect of the person's political thinking. It seems to me that Obama has a controlling idea -- the efficacy and responsibility of big government in taking care of people -- and that his foremost political value is equality, not just equality under the law or even equality of opportunity, but equality of outcome.
zerohedge:
- And you thought the $23 trillion in backstops for the financial system was bad, you ain't seen nothing yet. Earlier today, the Depository Trust & Clearing Corporation, best known for its Cede & Co. partnership nominee which is the holder of virtually every single physical stock certificate in the known universe, and accounts for over $2 quadrillion in stock transactions per year, announced that "the Federal Reserve Board had approved its application to establish a DTCC subsidiary that is a member of the Federal Reserve System to operate the Trade Information Warehouse (Warehouse) for over the-counter (OTC) credit derivatives." With this approval the DTCC is now the de facto legally accepted global repository for over-the-counter credit derivative transactions. Simply said, the Federal Reserve is now the guarantor behind all CDS transactions that clear via DTCC, which would be pretty much all of them (sorry CME, you lose). The total bottom line in terms of gross notional? 2.3 million contracts with a gross notional value of $25.5 trillion. When the next AIG implodes, and the CDS market is once again facing annihilation in the face, who will be on the hook? You dear taxpayer, that's who.
The Atlantic:
LA Times:
- Uncle Sam is trying to get out of the business of running the U.S. mortgage market. The trick will be withdrawing support without toppling the nation's fragile housing recovery in the process. The government rescued the sector last year with a series of unprecedented measures that staved off a catastrophic collapse, including pumping more than $1 trillion into home loans. But Washington now has effective control of the housing market, either owning or guaranteeing an estimated 9 out of 10 new mortgages. That has critics worried that the government has asserted too much control over a critical segment of the economy while inflating the federal deficit at what some consider an alarming pace. Pressure is building on the Obama administration to scale back a variety of stimulus efforts.
- Wine lovers in California have something to toast. The state's grape growers and wineries saw a bigger-than-expected harvest in 2009, according to a report issued Wednesday, amounting to the second-biggest crop in California history. For consumers, the year's bounty is expected to bring more availability and cheaper prices for all types of California wine, particularly premium and ultra-premium wines.
Forbes:
- America's 15 Most Powerful CEOs 40 And Under.
- California Web Tax Grab Hits Small Businesses.
Washington Examiner:
- The winter of 2009-10 is now the snowiest on record for the nation's capital. The National Weather Service measured 9.8 inches of snow accumulation at Ronald Reagan National Airport Wednesday afternoon, lifting the season's total to 54.8 inches and eclipsing the previous mark of 54.4 inches set during the winter of 1898-99. The Washington area had endured roughly 45 inches of accumulated snowfall heading into Tuesday's storm, according to the National Weather Service, and the latest blast was enough to break the 111-year-old record. This winter is also threatening to break another seasonal snowfall mark. The snowiest month in recorded history for Washington is February of 1899, when 35.2 inches of snowfall blanketed the District. The total for February 2010 had reached 30.9 inches as of Wednesday afternoon.
Financial Times:
- Greek banks have been virtually shut out of the international lending markets in the past fortnight as confidence in the country’s economy has collapsed. In spite of a sharp rally in Greek stocks and bonds, amid hopes of a European rescue plan, the squeeze on lending highlights the scale of the crisis over the country’s public finances. Some strategists point to the collapse of the Icelandic banks, which simply ran out of money shortly after the fall of Lehman Brothers in September 2008, as a warning of what could happen to Greece. Gary Jenkins, head of fixed income research at Evolution, said: “The absolute number one core lesson every economist and investor should learn is: cash is king. Without access to cash or liquidity, you are bust. Without European Union support, it is quite possible Greece, as well as its banks, will run out of money.” Don Smith, economist at Icap, the interdealer broker, added: “Credit worries relating to Greece have grown to the extent that international banks appear to have severely reduced lending to Greek banks.” The banks can borrow only in the repurchase markets, which means that they must use government bonds as collateral to raise money. They have been completely frozen out of the unsecured markets. That has forced the Greek institutions to raise money at punitive interest rates through private deals with international banks, say bankers. Until about 10 days ago the liquidity squeeze had appeared manageable, a Greek banker said. But as markets ratcheted up pressure on the country’s bond market, problems mounted.
- Apple(AAPL) could begin selling US television shows for $1, half of its charge on its iTunes digital media store, when the computer maker’s iPad tablet computer hits the stores. The test, expected to coincide with the April consumer debut of the iPad, will offer some shows at the lower price as a way to test whether reducing the cost of video programming will ignite sales, people familiar with the discussions said.
- Gordon Brown said on Wednesday the world’s leading economies were close to agreeing a global bank tax, amid hopes in Downing Street that a deal can be concluded at the G20 summit in Canada in June. Mr Brown believes that opinion has shifted decisively in favor of a globally co-ordinated tax after President Barack Obama’s move last month to raise $90bn (£57.7bn) from a US bank levy. The tax could cost the financial services sector tens of billions of pounds a year. Mr Brown believes that the IMF will endorse a global bank levy before its April meeting in Washington. Downing Street hopes an agreement in principle can then be agreed by world leaders at the G20 summit in June, although the implementation of the levy and the detail of how it would work could take longer.“ People are now prepared to consider the best mechanism by which a levy could be raised,” Mr Brown said. The prime minister said those with the “broadest shoulders” should pay more, and insisted that the tax would raise “a substantial amount of additional money”. He admitted: “It’s not as high as you would like it to be because of avoidance.”
TimesOnline:
- European leaders are poised to announce a multibillion-pound rescue of the Greek economy today to try to stop its debt crisis spreading to other countries and wrecking the euro. Finance ministers from the main economies in the single currency area, led by Germany and France, worked through the night to let the EU’s new President, Herman Van Rompuy, save his first one-day summit from disaster by announcing a guarantee that Greece would not be allowed to fail. There were sharp disagreements yesterday over how to restore market confidence in Greece, with the Netherlands continuing to argue for the Washington-based International Monetary Fund (IMF) to be called in despite strong opposition from Angela Merkel, the German Chancellor. Mr Van Rompuy is among those insisting that the 16 nations in the eurozone find a solution themselves. Instead of an EU state going cap in hand to Washington, he is proposing an IMF-style austerity program for Greece. Athens would have to meet stringent reform targets.
Telegraph:
- China has ordered managers of its vast currency reserves to withdraw from risky dollar assets and retreat to core debt guaranteed by the US government, a clear sign that Beijing is battening down the hatches for fresh trouble on global markets. A Communist Party directive leaked to the Chinese-language edition of the Asia Times said dollar reserves should be limited to US Treasuries or agency mortgage debt such as Freddie Mac that enjoys Washington's implicit backing. BNP Paribas said the move has major implications for global risk assets. "The message from Beijing is that we don't like this environment," said Hans Redeker, the bank's currency chief. "When the world's biggest investor turns risk-averse, that is something you take notice of. We think this could become the new theme for the markets in the medium-term," he said. The directive covers both the State Administration of Foreign Exchange (SAFE) and China's state-controlled commercial banks. Together they have an estimated $3 trillion (£1.9 trillion) of foreign holdings. The exact break-down of China's holdings are a state secret but it is understood that SAFE bought large amounts of corporate debt as well as municipal and state bonds during the boom years of 2006 and 2007. Any move to liquidate holding of California debt at this crucial juncture could have serious implications. The exact motives for China's shift of strategy are unclear. Mr Redeker said this will have the paradoxical result of boosting the dollar. Flight from risk can lead to an automatic rise as hedge funds, banks, and investors across the world cut back leverage on dollar balance sheets. David Bloom, head of currencies at HSBC, said the explosive dollar rally over the last six weeks has been the reversal of the dollar carry trade. "It has been short, sharp, and vicious. People borrowed in US dollars to invest in places like Brazil, Turkey, and New Zealand and now it is unwinding."
Financial Post:
- The former head of the Bank of Canada has jumped into the debate over the housing market, warning that prices have reached a point where they are almost unsustainable. "One would have to say that the relation of house prices to Canadians' income is right at the high end of what one would think would likely be sustainable over time," David Dodge told Business News Network on Wednesday. Mr. Dodge, the central bank chief from 2001 to 2008, said the remedy is not necessarily higher interest rates. Rather, the Canada Mortgage and Housing Corp. should start scrutinizing more closely the kind of mortgages that it insures.
China Business News:
- China will reduce the expansiveness of its monetary policy this year and increase the force and frequency of fine-tuning measures, citing a report by the Chinese Academy of Sciences.
South China Morning Post:
- Short lives spent on a short fuse. Fireworks are part and parcel of Lunar New Year, but increasingly it is child workers employed in illegal, and often deadly, workshops that meet the huge seasonal demand. Thousands of children are working long, dangerous hours on the Chinese mainland, inserting fuses into firecrackers ahead of the Lunar New Year.
Evening Recommendations
Citigroup:
- Reiterated Buy on (OMC), target $47.
Night Trading
Asian indices are -.25% to +1.25% on avg.
S&P 500 futures +.57%.
NASDAQ 100 futures +.50%.
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Earnings of Note
Company/Estimate
- (MAR)/.26
- (PTEN)/-.08
- (ALXN)/.24
- (STRA)/2.30
- (PEP)/.90
- (PM)/.79
- (CMG)/.82
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Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to fall to 465K versus 480K the prior week.
- Continuing Claims are estimated to fall to 4600K versus 4602K prior.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Treasury's $16B 30-year bond auction, (ZION) analyst meeting, (MU) analyst meeting, (QGEN) analyst day, (HNT) investor day, Stifel Nicolaus Transport Conference, Cowen Aerospace/Defense Conference and the BB&T Transport Conference could also impact trading today.
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