Tuesday, March 16, 2010

Today's Headlines


  • Greek Downgrade Threat Lowered by S&P on Deficit Plan. Greece had the threat of a cut to its credit rating reduced by Standard & Poor’s, which cited the country’s efforts to narrow a budget deficit that is more than four times the European Union’s 3 percent limit. S&P affirmed the nation’s BBB+ rating, removing it from “creditwatch negative,” meaning the company is no longer considering an imminent reduction to the grade. Greek bonds rose and the euro extended gains against the dollar. “We view the Greek government’s total package of deficit- reduction measures as appropriate to achieve its 2010 fiscal target, given the deterioration in Greece’s growth prospects,” Marko Mrsnik and Trevor Cullinan, London-based credit analysts at S&P, said today in a statement.
  • Europe Delays Hedge Fund Rules Amid Trade War Threat. European finance ministers meeting today in Brussels opted to delay plans to discuss hedge fund and private equity regulation that would have risked a trade war by limiting access to the European Union. Transatlantic tensions grew last week when EU financial- services commissioner Michel Barnier vowed to defend the proposals after they were criticized by U.S. Treasury Secretary Timothy F. Geithner. Geithner said in a letter to Barnier the new rules may discriminate against U.S. funds. The plan would force funds based outside the EU to accept the rules if they attract investors from the 27-nation bloc. EU officials meeting today removed the fund proposals from an agenda to be discussed by finance ministers. The aim remains to reach agreement during the first half of the year, an EU official said.
  • Obama Aides See 'Extended Period' of Unemployment. U.S. employers won’t hire enough workers this year to lower the jobless rate much below the level of 9.7 percent reached in February, three Obama administration economic officials said today. The proportion of Americans who can’t find work is likely to “remain elevated for an extended period,” Treasury Secretary Timothy F. Geithner, White House budget director Peter Orszag and Christina Romer, chairman of the Council of Economic Advisers, said in a joint statement. The officials said unemployment may even rise “slightly” over the next few months as discouraged workers start job-hunting again. “We do not expect further declines in unemployment this year,” the officials said in testimony prepared for the House Appropriations Committee. They predicted the economy would add about 100,000 jobs a month on average -- not enough to bring the jobless rate down substantially. “They need to work on the message, and right now the message is that there is not a lot to be hopeful about,” Rupkey said. “Warning about a slow jobless recovery can help make it a reality.”
  • Markit Group Ltd. plans to create a benchmark for credit-default swaps on Asia-Pacific governments, according to six traders familiar with the matter. The Markit iTraxx SovX Asia Index may track swaps on the debt of China, Malaysia, Thailand, South Korea, Vietnam, the Philippines, Indonesia, Japan, Australia and New Zealand. Curbs on credit swaps linked to sovereign debt are being discusses by European finance ministers after Greek Prime Minister George Papandreou blamed traders for worsening his nation's debt crisis.
  • Platinum-Gold Ratio Climbs to Highest Since Lehman Bankruptcy. Platinum’s ratio to gold climbed to the highest level since Lehman Brothers Holdings Inc. filed for bankruptcy in September 2008 as investment demand increased.An ounce of platinum bought 1.4642 ounces of gold late yesterday, the most in 18 months. The ratio averaged 1.24 last year and soared to 2.38 in May 2008, the highest level since 2001, according to Bloomberg calculations. The metal, used mainly in catalytic converters, has climbed 11 percent this year, outperforming gold’s 1.4 percent gain, as the start of the ETFS Platinum Trust on the NYSE Arca stock exchange in January boosted purchases. “Fundamentally, platinum looks better than gold,” said Steven Zhu, head trader at Shanghai Tonglian Futures Co. “When the economy recovers, auto demand recovers. The launch of new exchange traded funds linked to platinum has also greatly increased investment demand.”
  • Shipping Market Is Worst Since World War II, James Fisher Says. The world shipping market is mired in its biggest slump since World War II, said James Fisher & Sons Plc, a U.K. hauler of oil products. “This is the worst shipping recession since the war,” Chairman Tim Harris said today in a telephone interview. He spoke after the Barrow-in-Furness, England-based company reported little-changed annual profit. Prospects for a rebound at its shipping unit hinge on the timing of any increase in industrial output in northwest Europe, Harris said. Demand to haul cargoes has plunged because of the global recession, sending charter rates lower and spurring carriers to take vessels out of service. BW Gas Ltd., the world’s biggest shipper of liquefied petroleum gas, said last week it idled four tankers because rates plunged so low that each vessel was losing the company about $25,000 a day. “There’s been an unparalleled collapse in demand,” said Harris, who was previously chairman of Clarkson Plc, the world’s largest shipbroker. Fisher has a fleet of tankers that haul oil products around U.K. waters. Weaker cargo-shipping demand from U.K. oil companies forced Fisher to put more of its fleet to work in the single-voyage, or spot, market, where rates slid as much as 40 percent, the statement shows. The portion of its ships on spot charters rose about 10 percentage points to 30 percent.
  • Nobel Winner Sharpe's Firm Advances 41% After IPO. Financial Engines Inc. jumped as much as 41 percent in its first day of trading after the investment adviser co-founded by Nobel laureate William Sharpe became the first U.S. company this year to price an initial public offering above its forecast range. The provider of portfolio-management services to individuals with employer-sponsored retirement plans climbed as high as $16.95 in Nasdaq Stock Market trading in New York after selling 10.6 million shares at $12 each yesterday. The $127 million IPO gave Financial Engines, which offered a 27 percent stake for $9 to $11 a share, a market value of $474 million.
  • Dinallo Gets 15% of Campaign Funds From Insurers. Eric Dinallo, the former insurance superintendent running for New York attorney general, has received more than 15 percent of his campaign donations from the industry he regulated until July. Dinallo got at least $290,000 of his $1.78 million in donations from companies, people and trade groups with ties to the industry, according to campaign disclosures through mid- January. Hedge-fund manager David Einhorn, chairman of reinsurer Greenlight Capital Re Ltd., gave the maximum of $55,900. So did Joseph Plumeri, chief executive officer of insurance broker Willis Group Holdings Plc, where Dinallo worked in 2006.
  • Iran Rejects 'Carrot, Stick' Strategy on Atomic Issue. Iranian parliament Speaker Ali Larijani said the “carrot and stick” strategy used against Iran by the “great powers” won’t halt its nuclear development. Larijani rejected an international proposal for Iran to export its low-enriched uranium and in return get uranium fuel at the higher concentration needed for a Tehran medical-research reactor. He said the world powers were dictating to Iran, and that negotiations on the issue should allow for alternatives without the threat of expanded United Nations sanctions.
  • Zell Sees Stocks Rising as Economy Improves, Housing Recovers. Sam Zell, the billionaire investor who once called himself a grave dancer for profiting from troubled assets, said U.S. stocks are poised to extend the biggest rally since the 1930s as the economy rebounds. “The market is not overbought,” said Zell, 68, founder of Chicago-based Equity Group Investments LLC. It’s “maybe less than or even on par of where it ought to be. If the recovery continues, and there’s less interference in the economy by the government, that bodes well for the market improving.” “I doubt that in the near future it will be in its interest to reduce its cash cushion,” Zell said when asked about boosting the payout to the prior level. The billionaire expects more takeovers in the real-estate industry. The battle for General Growth Properties Inc., owner of more than 200 U.S. malls from Boston to Los Angeles, is turning into the biggest real estate fight since the sale of Zell’s Equity Office Properties. “I wouldn’t be surprised if there’s more M&A activity in the space than has been historically,” Zell said.
  • N.J. May Boost Hedge Fund Deals to Guard Against Equity Losses. New Jersey’s $67 billion pension fund may increase its hedge fund investments to protect against losses in the stock market, according to a memo prepared for a meeting later this week of the State Investment Council. The 12th-largest U.S. public pension would boost hedge fund allocations to 6.75 percent of assets, or $4.5 billion based on the current value of the fund, from 4.3 percent, or $2.9 billion, according to the March 12 memo obtained by Bloomberg News, written by Ray Joseph, acting director of the New Jersey Treasury’s Investment Division. Holdings in domestic and international stocks, which now account for 47 percent of the state’s portfolio, would be reduced under the plan.
Wall Street Journal:
  • Corning(GLW) Exec Says LCD TV Demand Remains "Robust". The company made the comment in a release issued late Monday after it gave investors a tour of its Gen 10 LCD glass facility in Sakai City, Japan. Corning Display Technologies President Jim Clappin said on the tour that January LCD TV sales in China were up 53 percent, in line with the company’s expectations. In Japan, he added, LCD TV sales were up 79 percent in January and 65 percent in February. Clappin noted that European retail sales were up 12 percent in January. In the U.S., sales for the first two months of the year were about flat with a year ago. Clappin also said panel prices for the first two months remained firm, while panel maker utilization rates remained high. He said Corning continues to “ship everything that we can make.”
  • Saudi Arabia Warns On Rising Oil Price. Saudi Arabia said Tuesday that the Organization of Petroleum Exporting Countries won't let global oil markets get too tight, the first indication from the world's biggest crude exporter that it may be getting uneasy with oil prices recently trading over $80 a barrel. "We will never allow it [the oil market] to get to the point where it puts too much pressure on prices," Saudi Arabia Oil Minister Ali Naimi told journalists here ahead of OPEC's production policy meeting Wednesday. He didn't specify exactly what that point would be, but as as OPEC's leading member and the group's moderate voice that keeps OPEC's more hawkish nations in check, Saudi Arabia sits on a mountain of spare production capacity of over four million barrels a day that it could begin to discharge into world markets to quell runaway prices. The kingdom has helped rally other OPEC states in the past year around the notion—which isn't formal OPEC policy—of a preferred price level of between $70 and $80 a barrel. Until recent days, prices have traded safely above that range, leading some economists to question whether higher energy costs might pinch global economic recovery.
  • Fed Renews Pledge To Keep Rates Low for a Long Time. The Federal Reserve held benchmark rates near zero Tuesday and renewed a promise to keep them exceptionally low for an extended period while pointing to increased momentum in the economy's recovery.
  • Coming Soon: Economic Growth Without Oil. The world may soon achieve something long dreamed of by governments and policymakers: higher economic growth without using more oil. Rising efficiency, conservation and substitution are steadily reducing the amount of oil needed to fuel an increase in the goods and services produced around the world. Oil demand in the rich, industrialized countries of the West already appears to have peaked and the trend in developing economies is towards an ever-smaller increase in the amount of oil consumed for every extra unit of economic growth. Global oil intensity—oil demand growth divided by economic growth—has fallen by about 2 percent a year over the last decade and the decline is now accelerating, spurred by high oil prices, moves to alternative fuels and measures to curb global warming.
NY Post:
  • Icahn Crony Offers Benihana Beefy Buyout. After months of enduring the stock-price equivalent of ground chuck, investors in Japanese steakhouse Benihana are being offered prime rib in the form of a buyout offer from a disciple of billionaire activist investor Carl Icahn. Russell Glass, a former executive with Icahn Associates who's now the founder and head of New York investment firm RDG Capital, has offered to buy the Miami-based chain for $7 a share, a 20 percent premium over the current stock price, The Post has learned.
Business Insider:
  • When the Patina Fades... The Rise and Fall of Goldman Sachs(GS)??? I have warned my readers about following myths and legends versus reality and facts several times in the past, particularly as it applies to Goldman Sachs and what I have coined "Name Brand Investing". Very recent developments from Senator Kaufman of Delaware will be putting the spit-shined patina of Wall Street's most powerful bank to the test. Here is a link to the speech that the esteemed Senator from Delaware (yes, the most corporate friendly state in this country). A few excerpts to liven up your morning... Mr. President, last Thursday, the bankruptcy examiner for Lehman Brothers Holdings Inc. released a 2,200 page report about the demise of the firm which included riveting detail on the firm’s accounting practices. That report has put in sharp relief what many of us have expected all along: that fraud and potential criminal conduct were at the heart of the financial crisis.... Only further investigation will determine whether the individuals involved can be indicted and convicted of criminal wrongdoing.
  • Apartment REITs Go On The Offensive. Equity Residential(EQR) signals recovery with pace-setting deals. How do some of the smartest real estate outfits begin buying and building again after a major economic collapse? Suddenly. Adding to its recent $475 million purchase of apartment high-rise properties from the troubled Macklowe family, Equity Residential has paid $45 million for an apartment complex rental community a mile from the beach in tony Del Mar, Calif., Forbes has learned.
Advertising Age:
  • CBS(CBS) Scores $37M Beyond TV With Help of March Madness. Network Nearer to Holy Grail of Earning Same Revenue Per Viewer Whether It Be Through the Tube or Computer. CBS is turning live, ad-supported sports on the web into a real business, selling out its inventory for March Madness on Demand and bringing in about $37 million in online ad sales, up 20% from the year before. More importantly, it sold as many ads for live web coverage as it does on TV, taking CBS a little closer to the holy grail: earning the same revenue per viewer regardless of platform -- TV, online and, perhaps soon, mobile.
The Bond Buyer:
  • Jobs Bill Would Extend BABs for 3 Years. The Build America Bonds program would be extended for three years, but the direct-pay subsidy rate would shrink from the current 35% of interest costs to 33% in 2011, 31% in 2012 and 30% in 2013, under a draft of a second jobs bill unveiled yesterday by House Ways and Means Committee chairman Sander Levin, D-Mich. The bill also would exempt private-activity bonds from the alternative minimum tax for another year, permanently exempt water and sewer exempt-facility PABs from state volume caps, and extend the recovery zone bond programs for another year while modifying the allocation formula to ensure that areas of the country that were previously overlooked can issue some of the bonds. However, the bill would not extend a pair of popular provisions that encouraged banks to purchase more tax-exempt debt, even though several state and local groups sent a letter last week to Levin and other leading lawmakers urging the provisions be made permanent. The committee plans to vote on the bill Wednesday, according to a release issued by Levin.
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 25% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-three percent (43%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -18 (see trends).
  • Democrats Begin to Criticize Obama on Israel.
  • Broadband Plan Alarms Broadcasters. The Federal Communications Commission’s long-awaited plan for expanding broadband access nationally is raising concerns from the National Association of Broadcasters, whose members could be asked to give up control of some airwaves to make the system work. “We were pleased by initial indications from FCC members that any spectrum reallocation would be voluntary, and were therefore prepared to move forward in a constructive fashion on that basis,” said NAB Executive Vice President Dennis Wharton in a statement.‘However, we are concerned by reports today that suggest many aspects of the plan may in fact not be as voluntary as originally promised,” he added. According to the report and its executive summary, the government should encourage an expansion of broadband by establishing policy that promotes competition, changes the allocation of spectrum, assists expansion into low-income communities and households, and promotes educational and training programs that can enhance the knowledge of new users of the Internet.
  • Hoyer: Dems Don't Have the Votes. House Majority Leader Steny Hoyer said Tuesday that Democrats don't yet have the votes to pass a bill this week and that they're still talking with every single member of the caucus. He also told reporters during his half-hour weekly news conference that he hopes to have language for a reconciliation bill finalized later in the day and defended the possible use of the rules to deem the Senate bill passed without forcing members to actually take the uncomfortable vote to support it.
Real Clear Politics:
  • Obama Evokes Fear, Calls for Courage. Washington will inflate costs of health care, despite Obama's claims that he will cut costs. Premiums will go up if insurers have to cover more sick people. Costs will go up if the government subsidizes more Americans. Add Congress to the mix, and all sorts of extra goodies -- like a student-loan package -- will drive the price tag even higher. There is no so-called crisis in America to which Congress does not respond without cooking up more pork. And Americans are supposed to trust this bunch to curb costs? Buy me a T-shirt and call me stupid.
  • China State Fund Open to Shorting Stocks - Fund Manager. China's $300 billion sovereign wealth fund is looking at directly investing in funds that could benefit from falling equity prices, a top manager at Pyramis Global Advisors said on Monday. China Investment Corp spent last year diversifying its investments into commodities, real estate and other asset classes, though the ability to short stocks means the state-backed investor would employ a strategy traditionally used by hedge funds. "China has opened up its receptivity to looking at and understanding the benefits of long/short types of capabilities," Young Chin, chief investment officer of the institutional focused unit of Fidelity Investments, said in an interview.
  • Intel(INTC) Shares Jump on Talk of Strong Q1 Earnings. Intel Corp (INTC) shares jumped 4 percent on Tuesday on speculation that the world's top chip maker is preparing to release a positive estimate of its current-quarter earnings. Analysts said there was talk in market that the company could pre-announce strong results soon. William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York, agreed, saying the unconfirmed rumors were pushing activity both on the exchange and the options market. "There's speculation that Intel will have a positive pre-(announcement)," Auriga analyst Daniel Berenbaum said.
  • US Weekly Gasoline Demand Down 1% - Mastercard.
  • New Radiation Therapy Shows Promise in Lung Cancer.
Financial Times:
  • CFTC Chief Questions 'Naked' Short Selling Ban. Gary Gensler, head of the US agency that regulates a large part of the derivatives market, told the European parliament on Tuesday he did not believe that a ban on “nakedshort selling of credit default swaps would be effective. One technical hurdle, he added, was distinguishing between speculators and genuine hedging activity. And, even if such issues could be solved, he indicated that he believed speculators were a legitimate part of the overall market. Asked whether he would distinguish the situation of naked short selling of CDS on sovereign debt – which some observers think particularly dangerous because it can give a trader an incentive to see a country default – Mr Gensler indicated that he felt the situation did not merit special treatment. His views are likely to be influential. It is widely recognised that this is an area in which Europe would have difficulty acting alone. If EU lawmakers were to bring in a ban within the region, market traders say business would simply shift across the Atlantic to New York.
  • Google(GOOG) Rolls Back Self-Censorship in China. Google has partially lifted its strict self-censorship in China, with several previously banned keywords – including 'Tiananmen' – now accessible. The surprise move comes as the Internet search giant threatens to leave China. Websites containing the keywords “Tiananmen” and “Free Tibet”, previously censored on Google China, can now be accessed in an apparent partial lift of censorship by Google that threatens to arouse the wrath of the Chinese authorities. The search results displayed for these keywords – checked by FRANCE 24 – are even more surprising given Google’s announcement on Monday that it would continue negotiations with Beijing to stay in the country. Google.cn has not confirmed lifting the censorship.
  • NAND Flash Controller Designers Concerned About Tight Foundry Capacity. NAND flash controller design houses have seen tight capacity at their foundry partners including United Microelectronics Corporation (UMC) and Semiconductor Manufacturing International Corporation (SMIC), and are concerned growingly tight foundry capacity may disrupt their shipments and affect NAND flash pricing, according to industry sources. Some NAND flash controller suppliers have indicated that their supply may not be able to satisfy customer demand in the second quarter if their foundry partners continue to see tight capacity, the sources said. This supply disruption is likely to impact NAND flash prices for the quarter.

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