Friday, March 26, 2010

Today's Headlines


  • AT&T(T) Sees First-Quarter $1 Billion Charge on Health Care Reform. AT&T said it will take a $1 billion first-quarter charge related to the passage of the U.S. health care legislation.
  • Trichet's Diplomacy 'Mask' Slips as EU Turns to IMF. European Central Bank President Jean-Claude Trichet is struggling to disguise his unease about the International Monetary Fund’s role in any Greek bailout.Trichet said late yesterday he’s “extraordinarily happy” that governments have agreed on a Greek rescue plan, which includes funding from the Washington-based IMF. Just hours earlier, he dismissed the notion of giving any power to the IMF as “very, very bad.” “He let his mask of diplomacy slip briefly last night but he then pretty rapidly put it back on,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “He is not as happy as he claims and his earlier IMF comments show that he was disappointed and sidelined.”
  • Global oil demand growth will peak in the next 10 years, Saudi Arabian oil adviser Ibrahim Muhanna said in a speech published in the Middle East Economic Survey. Oil consumption will not rise further after reaching between 95 million and 100 million barrels a day at some point before the end of the decade, Muhanna said. Oil prices are expected to remain between $70-$90 a barrel during that period, he said. Demand will continue to decline in the OECD as the world's most industrialized countries increase fuel efficiency and use of renewable energy increases, according to Muhanna, who advises Saudi Arabian Oil Minister Ali al-Naimi.
  • Markets 'Not Pricing' Potential Risks, Artradis Says. Stock, currency and bond investors are underestimating the risk that government efforts worldwide to stabilize markets may fail, according to a hedge-fund manager at Artradis Fund Management Pte. Instruments that thrive on volatility, such as options, are “attractive,” said David Dredge, a managing director at Singapore-based Artradis, which manages $1.4 billion of funds that place wagers on price swings. “Markets are not pricing potential risks very aggressively,” Dredge said in an interview yesterday. “The price for risk once again is very, very cheap.”
  • Dubai Credit Spreads Are 'Unattractive,' Morgan Stanley Says. Investors should “unwind” exposure to Dubai government debt because the restructuring plan proposed for state-owned Dubai World won’t do enough to reduce the emirate’s debt burden, Morgan Stanley said. “At current levels the risk/reward profile of Dubai sovereign spreads looks unattractive, and we advise investors to close their exposure to the credit,” Morgan Stanley’s London- based strategist Paolo Batori wrote in a research report dated today.
  • The Baltic Dry Index, a measure of shipping costs for commodities, extended its worst losing streak this year as rates for vessels that can haul iron ore continue to be depressed by price talks involving China's steelmakers. The index tracking transport costs on international trade routes had a ninth straight drop, shedding 79 points, or 2.5%, to 3,098 points today, according to the Baltic Exchange. The gauge has fallen 13% during its current run.
  • Greenspan Calls Treasury Yields 'Canary in the Mine'. Former Federal Reserve Chairman Alan Greenspan said the recent rise in Treasury yields represents a “canary in the mine” that may signal further gains in interest rates. Higher yields reflect investor concerns over “this huge overhang of federal debt which we have never seen before,” Greenspan said in an interview today on Bloomberg Television. “I’m very much concerned about the fiscal situation,” said Greenspan, 84, who headed the central bank from 1987 to 2006. An increase in long-term interest rates “will make the housing recovery very difficult to implement and put a dampening on capital investment as well.” The U.S. budget deficit reached a record $1.4 trillion for the fiscal year that ended Sept. 30 amid falling tax revenue from the recession, a bailout of the banking and auto industries, and the $787 billion economic stimulus package. “I don’t like American politics and what’s happening,” Greenspan said. Historically, there has been “a large buffer between the level of our federal debt and our capacity to borrow,” he said. “That’s narrowing. And I’m finding it very difficult to look into the future and not worry about that.”
  • Negative Swap Spreads Indicative of Treasury Glut, Bianco Says. The decline in rates to exchange fixed- for floating-rate obligations below comparable maturity Treasury yields indicates demand may be waning for government debt amid record sales, according to Bianco Research LLC. The U.S.’s marketable debt has risen to an unprecedented $7.4 trillion to fund a budget deficit the government predicts will swell to $1.6 trillion in the fiscal year ending Sept. 30.
  • Lead Open Interest, at 15-Month High, May Signal Lower Prices. Lead futures outstanding, or open interest, rose to a 15-month high on the London Metal Exchange, suggesting investors may expect prices to extend their worst start to a year since at least 1987. The metal for delivery in three months fell 13 percent this year on the LME as open interest advanced 23 percent to 122,920 contracts, the most since December 2008, bourse data show. Rising open interest combined with declining prices suggests new short positions, or bets on lower prices, being taken, said Dan Smith, an analyst at Standard Chartered Plc in London. Stockpiles in warehouses monitored by the LME have almost tripled in a year as output surpassed demand, reaching their highest since July 2003. Lead production outpaced demand by more than 200,000 tons last year and the surplus is expected to be at least as high this year, according to Brook Hunt, a Wood Mackenzie company.
  • Recess Raises Specter of Obama Labor Move to Business Groups. U.S. business groups and Republican lawmakers are stepping up efforts to ward off a labor appointment by President Barack Obama that might trigger a surge in union organizing efforts. Obama may appoint union lawyer Craig Becker to the National Labor Relations Board after Congress leaves this week for a scheduled Easter recess, a step that would circumvent the need for Senate confirmation. Labor Secretary Hilda Solis told the AFL-CIO, the largest U.S. union organization, in a speech March 3 that it “will be very pleased” by what Obama was planning. Becker would be the second Democrat and third member of the five-seat board, providing a quorum to clear a backlog of more than 210 cases. Among them are disputes with casino owner MGM Mirage and auto-parts maker Dana Holding Corp. The Democratic majority may adopt policies helping unions to recruit while limiting employers, according to the National Association of Manufacturers. “You will see a radical overhaul of the labor law system,” said Keith Smith, director of employment and labor policy at the Washington-based industry group. “You could see significant limits on employers’ ability to communicate.” Labor unions spent a record $450 million to help elect Democrats to the White House and Congress in 2008. Becker failed to win Senate confirmation to a five-year term last month after two Democrats joined Republicans to block his nomination. Obama could now appoint Becker to serve through 2011, or until the end of the next session of Congress.
  • China to Begin Stock Index Futures Trades on April 16. China will begin trading of stock- index futures on April 16, bolstering an equities market that has been the world’s third-worst performer this year. The first contracts to trade will be for May, June, September and December, according to a statement today by the China Financial Futures Exchange. Investors must pay cash deposits equivalent to 15 percent of the contract value for May and June contracts and 18 percent for longer-term contracts.
  • Unemployment Climbs in 27 States, Falls in Seven. Unemployment increased in 27 U.S. states in February and dropped in seven, a sign the labor market needs to pick up across more regions to spur consumer spending and sustain the economic recovery. Mississippi showed the biggest jump in joblessness with a 0.4 percentage point rise to 11.4 percent, according to figures issued today by the Labor Department in Washington. Nationally, unemployment held at 9.7 percent in February for a second month and employers cut fewer jobs than anticipated, figures from the Labor Department showed on March 5. Today’s report indicates broad-based hiring is yet to develop following the loss of 8.4 million jobs since the recession began in December 2007. Florida, Nevada, Georgia, and North Carolina set record levels of joblessness last month.
  • Brazil Stocks Becoming 'Bubble,' UBS's Cremoux Says. Brazil’s stock market is forming a “bubble” and may suffer a “correction” next year as valuations soar, according to Gerard Cremoux, co-head of Latin America investment banking at UBS AG. The increase in companies issuing shares shows that Brazil’s stock market is becoming overvalued, Cremoux said. “Brazil looks like a bubble,” Cremoux said at Columbia University in New York. “The market expects a lot of activity in Brazil this year. We might see the biggest equity offering ever. You can become a bit skeptical.” Brazil’s economy is at risk of “overheating” and the country’s currency is “overvalued,” JPMorgan Chase & Co. strategist Ben Laidler said at the same conference.

Wall Street Journal:
  • Calpers Deals Part of Probe by Justice Into Pay-Play. Federal criminal investigators are looking into possible wrongdoing involving investment transactions of public pension funds including Calpers, according to people familiar with the matter. Justice Department investigators in Los Angeles have been looking at whether potentially illegal payments were made to influence decisions on where to invest public pension-fund money, these people said. Among the matters being examined, they said, are investments made by the California Public Employees' Retirement System, the nation's biggest public pension fund by assets.
  • Steelmakers Plead Case to Representatives. The chief executive officers of the biggest U.S. steelmakers warned Thursday that proposed limits on carbon emissions and underspending on infrastructure and energy markets could derail the industry's nascent recovery. At a meeting with Steel Caucus members of the U.S. House of Representatives, steel producers stepped up their lobbying efforts to ward off climate-control and energy legislation they say would add hundreds of millions of dollars in costs and lead to job losses.
  • Fed Official Backs Asset Sales Before Rate Rises. The Federal Reserve should consider selling some of its portfolio of mortgage-backed securities even before raising official interest rates in order to make monetary policy more effective, the president of the Philadelphia Fed said Friday. In an interview with The Wall Street Journal, Charles Plosser said the Fed needs to shrink its balance sheet in order to make future changes to its main policy tools, the federal funds and discount rates, more effective.
  • Allawi Bloc Wins Iraq Elections, in Upset.
  • Restaurants See Signs of Spring. Customers are coming back, suppliers have lowered prices and it's the best wild mushroom season in years.
NY Post:
  • Radioshack(RSH) Search. Retailer Exploring Sale and Share Buyback Options. RadioShack is looking to shack up with a deep-pocketed investor. The Texas-based electronics chain is exploring strategic alternatives including a possible sale of the company that could fetch more than $3 billion, sources told The Post.
  • InVentiv(VTIV) Calls Upon Goldman for Held. InVentiv Health, a New Jersey-based pharmaceutical service provider, is quietly seeking a buyer. The company, whose shares and debt total $813 million, is using Goldman Sachs to conduct an auction, and is starting to have management meetings with suitors, a source told The Post.
Business Insider:
  • New York Times Staffers Furious Over The Huge Raise Executives Gave Themselves. Some New York Times Co. (NYT) staffers are boiling about their top executives' huge $12 million payouts in 2009. Chairman Arthur Sulzberger Jr.'s compensation more than doubled in 2009, to nearly $6 million. President and CEO Janet Robinson also boosted her earnings by 32%, to $6.3 million. During the same year, the New York newsroom lost 100 staffers to buyouts and layoffs, along with pay and benefit cuts at sister publications.
Charlotte Observer:
  • Carolinas' Unemployment at Record Rates. North Carolina’s unemployment rate nudged to a new high in February as more than 11,000 workers started searching for work even as thousands of jobs were cut, the state’s Employment Security Commission reported today. North Carolina’s unemployment rate rose to 11.2 percent last month, up a notch from 11.1 percent in January. February’s jobless rate is the highest since states started their current calculation method in 1976. It’s been 13 months since the state’s jobless rate first edged above its previous high. South Carolina’s jobless rate was unchanged in February as the number of unemployed in the state shrank for the time in more than two years. The unemployment rate was 12.5 percent in South Carolina last month, same as the revised 12.5 reading from January, the S.C. Employment Security Commission reported today.
Miami Herald:
  • On The Brink? Miami is Warned of New Budget Crisis. If City Manager Carlos Migoya's projections prove accurate, Miami could be on the verge of declaring a fiscal emergency -- triggering a law requiring the city to notify the governor it's in financial jeopardy, the city attorney warned Thursday. The dire news from City Attorney Julie Bru came near the end of a lengthy discussion on the city's reeling budget and projections showing the numbers may not soon improve. Miami commissioners voted unanimously Thursday to use $53.6 million of the city's reserves to finally balance its 2009 books. At the same time, they were told 2010 is already more than $28 million in the red, and that lawsuits against the city could raise that number. The bottom line: A reserve that overflowed with more than $141 million earlier this decade now sits at $39 million and could nearly empty by year's end.
  • 2,000 House Staffers Make Six Figures. Nearly 2,000 House of Representative staffers pulled down six-figure salaries in 2009, including 43 staffers who earned the maximum $172,500 — or more than three times the median U.S. household income.
Real Clear Politics:
  • The VAT Cometh. As the night follows the day, the VAT cometh. With the passage of Obamacare, creating a vast new middle-class entitlement, a national sales tax of the kind near-universal in Europe is inevitable. We are now $8 trillion in debt. The Congressional Budget Office projects that another $12 trillion will be added over the next decade. Obamacare, when stripped of its budgetary gimmicks -- the unfunded $200 billion-plus doctor fix, the double counting of Medicare cuts, the 10-6 sleight-of-hand (counting 10 years of revenue and only 6 years of outflows) -- is at minimum a $2 trillion new entitlement.
Sydney Morning Herald:
  • South Korean Navy Ship Sinks Near Border With North. A South Korean navy ship with 104 people on board sank near the North Korean border Friday after an unexplained explosion, military officials said, and a news report said several sailors were killed. South Korea's government called an emergency security meeting but a presidential spokeswoman said it was still unclear whether the sinking resulted from a clash with North Korea.
China Daily:
  • Sino-US Tensions Show No Sign of Easing. There are no clear signals of an easing in trade and political tensions in Sino-US relations despite the hope generated by the visits of two Chinese vice-ministers to Washington. He asked Washington not to blame others for its own problems, "otherwise, the outcome would just be the opposite". Huo Jianguo, dean of the Trade Research Institute affiliated to the Ministry of Commerce, urged Washington to tread cautiously. "The US government should be sober-minded on the issue of labeling China a currency manipulator. It should not be carried away by domestic political pressure," he said.

1 comment:

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