Today's Headlines

Bloomberg:

- Companies in the U.S. cut an estimated 22,000 jobs in January, in line with forecasts, according to data from a private report based on payrolls.

- Expectations that U.S. stocks will tumble 10 percent or more rose to highest level since April 1984 this week, according to Investors Intelligence’s weekly survey of newsletter writers. The proportion of investment writers who anticipate a so- called correction climbed to 38.9 percent in the week ended yesterday, an increase from 36.7 percent in the period ended Jan. 27. The New Rochelle, New York-based company has tracked the projections of newsletters since 1963.

- Airbus SAS and Boeing Co., the world’s two biggest planemakers, expect a demand slump to continue for at least two more years as airlines pare growth following a record drop in air travel. “The market will stay slow for new orders until 2012,” Airbus Chief Operating Officer John Leahy said in a Bloomberg TV interview at the Singapore Air Show yesterday.

- The gap between the U.S. manufacturing expansion and growth in the rest of the world’s largest economy widened to a record in January, signaling the recovery will slow to less than a 2% pace later this year, according to Harm Bandholz. The jump in manufacturing was the result of efforts to stabilize inventories after running down the supply of goods during the recession. Stockpiles will contribute less to economic growth in coming months. “The economy is particularly dependent on inventories and probably the stimulus program and apart from that final demand is still sluggish,” Bandholz, a senior economist at UniCredit Global Research in NY, said.

- Moody’s Investors Service said it will cut its rating on a portion of New York’s Metropolitan Transportation Authority’s $28.6 billion of bonds after the busiest U.S. transit agency said it may get $350 million less from a new payroll tax than it projected two months ago.

- US farm and transportation-industry groups called for stricter limits on commodities trading and urged Congress to pass laws reining in speculators. The House of Representatives in December passed legislation designed to shed more light on the $605 trillion over-the-counter market for derivatives contracts such as swaps, options and futures. Businesses including oil companies and airlines that use derivatives to hedge operational risks would be exempted from many of its rules. The Senate has not yet acted on a similar bill. Senator Maria Cantwell said the House bill is “riddled with loopholes” and said she’d work for stricter rules.

- Kenneth Naehu, who invests $2.5 billion for Bel Air Investment Advisors in Los Angeles, sold California bonds late last year as he saw deficits mounting -- and says he’s not ready to buy back in yet. Naehu, 43, is among investors including Newport Beach, California-based Pacific Investment Management Co. and Thornburg Investment Management in Santa Fe, New Mexico, forecasting that the state’s yields -- which move inversely to prices -- may increase relative to other municipal bonds because of the financial strains. Pimco, the world’s biggest fixed-income manager, predicts the yield on 30-year debt may rise above 6 percent, the highest since last summer’s fiscal crisis.

Wall Street Journal:

- Venezuela energy and oil minister Rafael Ramirez arrived in Beijing Tuesday for talks with government and company officials on joint-venture refinery projects and Chinese investment in Venezuela's heavy crude oil reserves. While Chinese oil companies didn't bid in Venezuela's Carabobo oil round a week ago, the two sides have extensive energy ties, which were recently expanded by new oil pacts.

- The cost of insuring Portuguese sovereign debt against default using credit derivatives reached a record high Wednesday, after the country sold fewer treasury bills than expected at an auction. Portugal's five-year sovereign credit default swap spreads rose to 197 basis points Wednesday afternoon from 165 basis points Wednesday morning, according to data provider CMA DataVision.

- Spreads on a credit-default-swap index of developed European sovereign borrowers rose above 90 basis points Wednesday, as euro-zone government bond markets experienced another volatile day. The SovX Western Europe index, which lets investors buy or sell default insurance on a basket of 15 sovereigns, widened over four basis points to 92.5 basis points, Gavan Nolan, vice president of credit research at index owner Markit said in a note. The index, which began trading last September, has never closed above 90 basis points, although it was at 89.5 basis points in late January. The gross notional value of trades on the index is now over $71 billion, a 17% increase from the previous week.

CNBC:

- The Obama administration’s plan to help community banks would help “upwards of a thousand” institutions if the regulations are looser than those of TARP, Camden Fine, CEO of Independent Community Bankers of America, told CNBC. “You need to design this program to get the money into the hands of the right banks and drop all these strings that were attached to TARP and allow these banks to use this money to both strengthen their bank and make local loans,” Fine said.

NY Times:

- California is preparing to introduce the first statewide system of monitoring devices to detect global-warming emissions, installing them on towers throughout the state. The monitoring network, which is expected to grow, will initially focus on pinpointing the sources and concentrations of methane, a potent contributor to climate change. The California plan is an early example of the kind of system that may be needed in many places as countries develop plans to limit their emissions of greenhouse gases. “This is the first time that this is being done anywhere in the world that we know of,” said Jorn Dinh Herner, a scientist with the California Air Resources Board. While monitoring stations around the globe already detect carbon dioxide, methane and other greenhouse gases, they are deliberately placed in remote locations and are generally intended to measure average global concentrations of greenhouse gases rather than local emissions. The California network, by contrast, is meant to help the state find specific sources of emissions, as well as to verify the state’s overall compliance with a plan it adopted to limit greenhouse gases.

The Business Insider:

- This is a great sign of just how smoking hot China has become. Burton Malkiel, the author of A Random Walk Down Wall Street, and a huge critic of active portfolio management, is starting a long-only China-focused hedge fund, according to FinAlternatives (via PragCap). The fact that he's doing this -- apparently in contravention of the gospel he preaches -- is a sign of just how big a lure the China moneypot is to everyone. It's still tiny, with just $30 million, but with a famous name, and a hot country, it should have a good shot at growing. But anyway, are we to presume that efficient markets don't apply in China like they do here, and that it's worth paying high fees for the ability to go long only the Shanghai market?

- Obama’s Budget Will Cost Us Freedom, Security, And Influence by Sarah Palin.

- Citi's Alan Heap warns that gold could soon lose a lot of the factors supporting its price right now. That's because a stronger U.S. dollar and rising interest rates would be bad news for gold, based on history.

- Ray LaHood: WHOOPS, What I Really Meant To Say Is That You Should Get Your Toyota Fixed.

- Roger Altman, the CEO of boutique investment bank Evercore and former Clinton Deputy Treasury Secretary, has some harsh words about Obama's new budget. He flat out calls the projected debts "not viable" over the medium or long term. One of two things will happen, he says: Either the government will address this pro-actively, or in the next two years, we'll have a financial market revolt leading to massive instability in forex.

Lloyd’s List:

- Freight-derivative traders will meet Feb. 16 to discuss pricing their contracts in US dollars, citing Andrew Jamieson, chairman of the Forward Freight Agreement Brokers’ Association. The contracts are currently denominated in Worldscale points.

SeekingAlpha:

- 3 Best Hedge Fund Healthcare Ideas.

LATimes:

- After the news last week that Apple and AT&T are now allowing VoIP apps to make phone calls over the 3G network, Skype said it's still waiting to release a new 3G-ready version of its software for the iPhone. Today the company offered a few updates on the progress of the app, which it is apparently putting the finishes touches on and which Skype says will be available "really soon." In a YouTube video, David Ponsford, the leader of Skype's iPhone team, said the app would have "CD-quality sound" for calls between Skype users. He also mentioned that the app would have a red-yellow-green-coded indicator that will show users what kind of signal quality they're getting on a call in real time.

NY1:

- A group of leading United States senators wants to cut off funding for civilian trials of accused September 11th terrorists. A bipartisan coalition led by Senators John McCain and Joe Lieberman introduced the measure yesterday. President Barack Obama's proposed budget for next year includes funds for the Justice Department to handle the trial of five alleged terrorists suspected of participating in the 9/11 attacks, including self-proclaimed mastermind Khalid Sheikh Mohammed. A growing chorus of opposition led the Obama administration to reconsider holding the trials in Federal Court in Lower Manhattan. Senators say they want the suspects tried by military commission, not in a criminal court. "The law enforcement model being used by the Obama administration should be rejected,” said South Carolina Senator Lindsey Graham. “We're not fighting a crime, we're fighting a war." "We should not try these people in New York, we should not try them in Illinois, we should not try them in Phoenix,” said Senator John McCain of Arizona. “We should try them in the courtroom at Guantanamo Bay."

Rassmussen:

- With concerns about the economy and mounting federal deficits before them, 46% of voters nationwide favor an across-the-board tax cut for all Americans. The latest Rasmussen Reports national telephone survey finds that 35% oppose such a tax cut.

Politico:

- With the broader health care bill still perilously close to collapse, House Speaker Nancy Pelosi plans to take a shot at the health insurance industry next week by scheduling a vote on a smaller bill to revoke its half-century-old exemption from antitrust laws. The vote is part of her new two-track strategy to tackle things that won’t be included in a more sweeping bill — if Congress ever passes one — while giving her members something politically popular to vote on. The move also puts pressure on Republicans, the industry and wavering Democrats, who wish their leaders would abandon the push altogether. The bill comes as party brass struggles to find a path forward in the broader health care reform effort and amounts to a concession to her caucus as more sweeping legislation twists in the wind.

- Senate Majority Leader Harry Reid chided President Barack Obama Tuesday for making Las Vegas a “poster child” for excessive spending. “I just spoke to the White House and told them that while the president is correct that people saving for college need to be fiscally responsible, the president needs to lay off Las Vegas and stop making it the poster child for where people shouldn't be spending their money,” Reid, a Democrat from Nevada, said in a statement.

Market folly:

- Bank of America Merrill Lynch is out with the newest iteration of their hedge fund monitor report and they highlight that hedge funds suffered heavy losses last week and ended January on a weak note. As such, hedge funds were looking to de-risk and BofA notes that global macro was by far the worst performing strategy for the month of January. Turning to overall movements, they saw that long/short equity funds pared market exposure down to 29-30% net long, below the historical average of 35-40% net long. Market neutral funds also reduced equity exposure, having been pretty long the two weeks prior. In terms of specific positioning, hedge funds sold SPX futures last week and even went net short.

Reuters:

- Australia's third largest gold miner, Resolute mining, said on Wednesday it would expand gold output by a quarter within the next three years to 500,000 ounces, boosted by its new project in Mali.

- Copper extended losses to touch a fresh two and a half month low on Wednesday, as concerns over Chinese monetary tightening and the pace of global economic recovery weighed on base metals. "We see more downward pressure in the next month," said Edward Meir, energy and metals analyst for MF Global in New York. " People are becoming a bit more uneasy about China and we're starting to see rate increases. "China's macro environment has changed from one predominantly focused on growth to one where balancing growth and inflation has become increasingly important to policymakers," Barclays Capital said in a note. "Given China's importance to key commodity markets, these moves have had a noticeable impact on sentiment."

Financial Times:

- Paulson & Co, a hedge fund that made billions of dollars betting against subprime mortgages, has received a request for information from the Securities and Exchange Commission in connection with an investigation into complex securities at the heart of the financial crisis, according to people familiar with the matter. The firm run by John Paulson profited from the subprime crisis by placing bets against securities known as collateralized debt obligations, or CDOs, which promised investors returns from pools of mortgages extended to borrowers with tarnished credit histories. The people familiar with the matter said they believed that Paulson & Co was not a target of any investigation. In December, the SEC sent subpoenas to banks including Bank of America/Merrill Lynch, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley and UBS seeking information about the sale and marketing of such CDOs. The SEC is examining whether the banks took negative positions on these securities at the same time they marketed them to investors. Mr Paulson made $15bn for his firm and his investors through his subprime bets, which often involved the purchase of credit insurance that would be paid off if slices of CDOs backed by US subprime mortgages defaulted. Mr Paulson made his move when the cost of such credit insurance was low and his returns reflected the wisdom of his move. His credit opportunity fund, created in 2006 to take advantage of a meltdown in mortgages, gained 591 per cent in 2007. In pursuing his strategy, Mr Paulson also asked banks to create “synthetic” CDOs – so-called because they pool derivatives of mortgages rather than actual mortgages – on which he could take short positions, according to an account from investors confirmed by a spokesman for Mr Paulson. This strategy would succeed if the underlying mortgages lost value. Mr Paulson sought to have these CDOs include mortgages, or derivatives based on such mortgages from regions of the country where the mortgage market was believed to be overheated. To facilitate the creation of these instruments, Mr Paulson also offered to buy the tranches that would be paid off last – the “equity” pieces, which offer the highest rates of interest. Such CDO slices are difficult to sell, which means that an offer to buy them would be of great help to a bank seeking to market the CDOs.

- Chinese regulators have imposed a partial ban on listed companies raising capital from equity markets to repay bank loans or replenish working capital, amid a general tightening of liquidity and official curbs on soaring bank debt in the country. At least 34 companies, mostly in the industrial and real estate sectors, have cancelled or reduced plans to raise money through private placements or secondary offerings in recent weeks. Many of those companies said their plans were vetoed by the securities regulator, which said they are no longer allowed to raise money for working capital or repaying bank debt. Some companies, including a number of listed cement producers, said they had been ordered to abandon their fundraising plans because they are in sectors identified by the central government as suffering from over-capacity.