Thursday Watch

Late-Night Headlines
Bloomberg:

- GMAC Gets $3.79 Billion Boost in Third US Bailout Package. GMAC Inc., the auto and home lender bailed out twice by the U.S. government, received a third rescue package valued at $3.79 billion that gives taxpayers a majority stake in the Detroit-based company. The infusion will bolster lending at GMAC as it absorbs $3.8 billion in new pretax charges and decides what to do with its loss-plagued home mortgage unit, according to statements from the agency and the company yesterday. The aid comes on top of about $13.5 billion previously earmarked for GMAC, which regulators have said is crucial to the U.S. auto industry. Chief Executive Officer Michael Carpenter is struggling to return the lender to profitability amid losses at the Residential Capital mortgage unit, known as ResCap, which GMAC may close or sell. GMAC is the primary lender to General Motors Co. and Chrysler Group LLC, the automakers that went into bankruptcy during the recession.

- American International Group Inc.(AIG) general counsel Anastasia Kelly, who resigned after a dispute over government-imposed pay limits, will reap about $3.8 million in severance, said people familiar with the matter. AIG concluded that Kelly, 60, was owed the money after the New York-based insurer hired a law firm to review her conduct, according to the two people, who declined to be identified because the company hasn’t announced the decision. Kelly resigned for “good reason” after her salary was cut, AIG said today in a statement. Suzanne Folsom, the company’s chief compliance officer, also left, AIG said. Kelly told at least four other executives last month how to protect their pay and hired outside attorneys for advice, the people said. The five leaders wrote in Dec. 1 letters to AIG that they were prepared to resign if their pay was cut by Kenneth Feinberg, the Obama administration’s special master for executive compensation. AIG, once the world’s biggest insurer, received a taxpayer-funded bailout valued at $182.3 billion, placing the company under Feinberg’s jurisdiction. “General counsel are supposed to be setting a prime example of good ethics at a company, not acting as carpetbaggers as they leave,” Frank Glassner, chief executive officer of Veritas Executive Compensation Consultants LLC, said today in an interview. “This severance pay is ridiculous.” Folsom, a former director of the World Bank in charge of an anti-corruption unit who was hired by Kelly in April 2008, will collect more than $1 million in severance, the people said.

- President Barack Obama or top administration officials met at the White House with Goldman Sachs Group Inc.(GS) Chairman Lloyd Blankfein, Microsoft Corp.(MSFT) co- founder Bill Gates and World Bank President Robert Zoellick, records show. Blankfein and Gates met with economic adviser Lawrence Summers, while Zoellick met with the president. The visits were among more than 27,000 added to the White House Web site as part of a periodic release of visitor logs that the Obama administration and its predecessors had sought to keep private. Steven Rattner, the former private equity executive and automotive adviser to the Obama administration, visited the White House more than 50 times between the January inauguration and mid-July, often to visit Summers. The watchdog group Citizens for Responsibility and Ethics in Washington pressed for release of records showing who was meeting with administration officials. In July, the group sued to force the Secret Service to release information about visits by coal company executives since Obama took office in January. The information is being made public at the end of each month.

- Pacific Investment Management Co., the world’s largest manager of bonds, filed with U.S. regulators to start a stock mutual fund that can also invest in bank loans, junk bonds and distressed securities. Pimco Global Opportunities Fund will buy securities and financial instruments “economically tied” to at least three countries, one of which may be the U.S., according to a registration statement filed today with the U.S. Securities and Exchange Commission. The fund will be able to purchase shares in companies of all sizes.

- News Corp.(NWS/A) said it’s not likely to reach an agreement with Time Warner Cable Inc. and expects to pull Fox broadcasting from the cable system when their deal expires tomorrow. “We deeply regret that millions of Fox customers will be deprived of our programming,” Chief Operating Officer Chase Carey said today in a memo to employees. “We need to receive fair compensation from Time Warner Cable to go forward.”

- The Federal Deposit Insurance Corp. plans to seek stakes in the companies bidding for seized banks, aiming to gain when the shares rise and helping recoup the costs of closing lenders. The arrangement would let the agency share any profits from an increase in the buyer’s stock after a takeover, said James Wigand, the FDIC’s deputy director of resolutions and receiverships.

Wall Street Journal:

- Behind the drama unfolding in the streets of Iran, the regime is quietly clamping down on some of the nation's best students by derailing their academic and professional careers. On Wednesday, progovernment militia attacked and beat students at a school in northeastern Iran. Since last Sunday's massive protests nationwide, dozens of university students have been arrested as part of an aggressive policy against what are known as Iran's "star students." In most places, being a star means ranking top of the class, but in Iran it means your name appears on a list of students considered a threat by the intelligence ministry. It also means a partial or complete ban from education. The term comes from the fact that some students have learned of their status by seeing stars printed next to their names on test results. Mehrnoush Karimi, a 24-year-old law-school hopeful, found out in August that she was starred. She ranked 55 on this year's national entrance exam for law schools, out of more than 70,000 test-takers. That score should have guaranteed her a seat at the school of her choice. Instead, the government told her she wouldn't be attending law school due to her "star" status.

- Eight Americans, including officers of the Central Intelligence Agency, were killed in a suicide attack on a U.S. compound in Afghanistan, current and former U.S. officials said, in what could be the biggest loss of American intelligence personnel since the war here began. "There was some tremendous talent lost," a former intelligence official said.

- A Cold-Blooded Foreign Policy by Fouad Ajami.

- A Honolulu television station is reporting that conservative radio talk show host Rush Limbaugh was taken to a hospital with chest pains. KITV reported Wednesday that paramedics responded to a call at 2:41 p.m. from the Kahala Hotel and Resort where Mr. Limbaugh is vacationing. The station, citing unnamed sources, said paramedics treated Mr. Limbaugh and took him to The Queen's Medical Center in serious condition.

- Anwar al-Awlaki, a radical American-born Yemeni cleric who has surfaced in multiple terror probes, is emerging as a central part of the Christmas Day airline bomber investigation, as authorities focus attention on a network of extremists in Yemen who may have helped radicalize the young Nigerian accused in the failed plot.

MarketWatch.com:

- Holdings of U.S. dollars by foreign central banks bounced back to more "normal" levels in the third quarter, according to data released Wednesday by the International Monetary Fund. The IMF's Composition of Official Foreign Exchange Reserves data, known as COFER, is reported voluntarily by 140 countries. Of those who report their holdings, adjusted for currency valuation effects, the share of U.S. dollars bounced up to 62% in the third quarter after an unusual drop to 37% in the previous period, according to Barclays Capital.

CNBC.com:
- Have Faith in Free-Market Capitalism, Will Prosper.

NY Times:

- YouTube, the video site owned by Google(GOOG), is about 10 times more popular than its nearest competitor. But Hunter Walk still thinks of it as an underdog. For Mr. Walk, director of product management at YouTube, the competition is not other Web sites: it’s TV. “Our average user spends 15 minutes a day on the site,” he said. “They spend about five hours in front of the television. People say, ‘YouTube is so big,’ but I really see that we have a ways to go.” To that end, Mr. Walk leads a team of about a dozen engineers, designers and project managers who are fine-tuning YouTube to give its users what they want, even when the users aren’t quite sure what that is. The goal is to get them to spend a few more minutes on the site every day.

McClatchy:

- Investors Could Only Lose in Goldman's(GS) Cayman Deals. When financial titan Goldman Sachs joined some of its Wall Street rivals in late 2005 in secretly packaging a new breed of offshore securities, it gave prospective investors little hint that many of the deals were so risky that they could end up losing hundreds of millions of dollars on them. McClatchy has obtained previously undisclosed documents that provide a closer look at the shadowy $1.3 trillion market since 2002 for complex offshore deals, which Chicago financial consultant and frequent Goldman critic Janet Tavakoli said at times met "every definition of a Ponzi scheme." The documents include the offering circulars for 40 of Goldman's estimated 148 deals in the Cayman Islands over a seven-year period, including a dozen of its more exotic transactions tied to mortgages and consumer loans that it marketed in 2006 and 2007, at the crest of the booming market for subprime mortgages to marginally qualified borrowers. In some of these transactions, investors not only bought shaky securities backed by residential mortgages, but also took on the role of insurers by agreeing to pay Goldman and others massive sums if risky home loans nose-dived in value — as Goldman was effectively betting they would. Some of the investors, including foreign banks and even Wall Street giant Merrill Lynch, may have been comforted by the high grades Wall Street ratings agencies had assigned to many of the securities. However, some of the buyers apparently agreed to insure Goldman well after the performance of many offshore deals weakened significantly beginning in June 2006. Goldman said those investors were fully informed of the risks they were taking. These Cayman Islands deals, which Goldman assembled through the British territory in the Caribbean, a haven from U.S. taxes and regulation, became key links in a chain of exotic insurance-like bets called credit-default swaps that worsened the global economic collapse by enabling major financial institutions to take bigger and bigger risks without counting them on their balance sheets. The full cost of the deals, some of which could still blow up on investors, may never be known.

CNNMoney.com:

- Amazon.com(AMZN) had the happiest customers this holiday season, according to a survey from ForeSee Results released Wednesday. The Seattle-based e-commerce giant scored the highest in a customer satisfaction report from online retail consulting firm ForeSee, followed by Netflix (NFLX) and QVC. Apple (AAPL, Fortune 500) and outdoor-gear retailer Cabela's rounded out the top 5 in the survey, which polls 10,000 visitors to the top 40 U.S. retail sites by revenue each November and December.

Business Insider:

- The activist hedge fund Trian Fund Management became the largest shareholder of fund management company Legg Mason(LM), after picking up two million shares on Monday. The New York firm now owns 5.6% of Legg Mason, ahead of Dodge & Cox's (a mutual fund) 5.5%.

- How To Game Cap And Trade, Destroy Jobs, Make Money, And Provide No Environmental Benefit. Conceptually, carbon credits are fine and could have potential, but their current application is horribly flawed. Metal Miner highlights how Cap & Trade can be gamed whereby it destroys developed nation jobs and doesn't protect the environment either.

Business Week:

- Not So Radical Reform. How New Democrats and Wall Street are watering down financial regulation in Congress.

- Five Ways Apple's(AAPL) Tablet May Change the World. The iPad is on the way, and it just might reduce calling costs, cut your commute, and, to the delight of journalists everywhere, pull print media back from the brink.

Politico:

- Thirteen Republican state attorneys general are threatening to file a lawsuit challenging the constitutionality of the Senate health care bill. In a letter sent to House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid Wednesday, South Carolina Attorney General Henry McMaster said he had “grave concerns” about the deal Senate leaders cut with Nebraska Democrat Ben Nelson to secure his crucial vote for the health care package. “The current iteration of the bill contains a provision that affords special treatment to the state of Nebraska under the federal Medicaid program,” writes McMaster. “We believe this provision is constitutionally flawed. As chief legal officers of our states we are contemplating a legal challenge to this provision and we ask you to take action to render this challenge unnecessary by striking that provision.” “In addition to violating the most basic and universally held notions of what is fair and just, we also believe this provision of H.R. 3590 is inconsistent with protections afforded by the United States Constitution against arbitrary legislation,” writes McMaster. Under the terms of the agreement with Nelson, the federal government will pick up the full tab for all new Medicaid enrollees in Nebraska, a deal that’s expected to cost about $100 million over the next 10 years.

- President Barack Obama promised a “thorough review” of the government’s terrorist watch-list system after a Nigerian man reported to U.S. government officials by his father to have radicalized and gone missing last month was allowed to board a Northwest Airlines flight to Detroit that he later tried to blow up without any additional security screening. Yet the individual Obama has chosen to lead the review, White House counter-terrorism adviser John Brennan, served for 25 years in the CIA, helped design the current watch-list system and served as interim director of the National Counterterrorism Center, whose role is under review. In the three years before joining the Obama administration, Brennan was president and CEO of The Analysis Corp., an intelligence contracting firm that worked closely with the National Counterterrorism Center and other U.S. government intelligence, law enforcement and homeland security agencies on developing terrorism watch-lists.

Rasmussen Reports:

- Belief that the bad guys are winning the War on Terror is now at its highest level in over two years, and nearly half of U.S. voters say America is not safer than it was before 9/11. The latest Rasmussen Reports national telephone survey finds that 30% of voters think the terrorists are winning the War on Terror. That’s the first time the number holding that pessimistic view has reached 30% since October 2007. Just 18% believed the terrorists were winning the week President Obama took office in January. At that time, 55% said America and its allies were on top. Now, just 36% say the United States and its allies are winning the War on Terror. Only once since July 2007 have voters had less confidence.

MacRumors.com:

- FoxNews.com claims to have received confirmation from a "source inside Apple" that the company will in fact be holding a media event on January 26th in San Francisco. According to the source, the "big" event will focus on the "mobility space", suggesting an iPhone, iPod touch, or, as many people expect, tablet announcement. Anticipation has continued to build as Apple appears to be coming closer to the long-rumored release of its tablet device. While the company has remained silent about any possible launch of such a device, rumors and tidbits of information, including recent discoveries suggesting that the device may be called the iSlate or iGuide, have fed the frenzy of anticipation. Earlier this week, Cloned in China pointed to a Chinese-language article[Google translation] about a blog post apparently from former Google China president Kai-Fu Lee claiming that device will in fact be introduced in January at a price point of under $1000 and will carry a 10.1" multi-touch screen and offer an "amazing user interface", video conferencing capabilities, and e-book offerings in a package described as a "large iPhone". Lee also claims that Apple is expecting first-year sales of 10 million units, far above most observers' expectations at this time. Lee theoretically could be in a position to have information about the Apple tablet, as his current venture capital company has attracted Apple manufacturing partner Foxconn as an investor. Furthermore, Lee was an executive at Apple during the early 1990s and oversaw development of the Apple Newton handheld device among other projects. Later in the decade, after a stint at SGI, Lee was reportedly personally invited back to Apple by Steve Jobs despite the two never having spoken before, an offer Lee declined in order to return to his native China with Microsoft.

Forbes:

- Risk Manager. Caught in the cross fire between Main Street and Washington, BlackRock's(BLK) Larry Fink must protect his profits and his firm's reputation.

- Monsanto's(MON) first round of attackers said its seeds were evil. Now the charge is that Monsanto's seeds are too good.

- Genomics is just starting to improve human health. But it has revolutionized dairy farming.

Reuters:

- Expect Senate majority leader Harry Reid to lose his effective 60-seat supermajority and Nancy Pelosi to hand the House back to the Republicans. Here’s why 2010 is looking like 1994 all over again:

- U.S. health officials released standards for electronic medical records on Wednesday, seeking to spur the technology in hopes of cutting health costs and reducing medical errors. Congress required the standards, partly as a condition of about $19 billion in February's economic stimulus bill that is aimed at encouraging doctors and hospitals to convert paper records into digital files.

- Venture capital investors spent 36 percent less this year on clean technology for a total of nearly $5 billion, an industry group reported on Wednesday.

- U.S. chicken producer Pilgrim's Pride Corp PPC.DE said on Wednesday it will pay $4.5 million over three years to settle U.S. government allegations that it employed illegal workers at some of its plants.

Financial Times:

- The alleged Christmas day terrorism plot has complicated plans by Barack Obama, US president, to shut the Guantánamo Bay prison camp. Following reports that two former inmates who took refuge in Yemen were behind the botched plot, senators from his own party were among those calling for detainee transfers to be halted pending an investigation into the links between Guantánamo and the Arab nation. “Guantánamo detainees should not be released to Yemen at this time,” said Dianne Feinstein, the senior Democrat on the Senate intelligence committee. “It is too unstable.” Kit Bond, the top Republican on the committee, went further, calling for a rethink of the entire policy. “The question is: are we going to take every step possible to keep our country safe? That means stop releasing Gitmo detainees now,” Mr Bond told The Hill newspaper. As it seeks to fulfill his pledge to close down the prison camp, Mr Obama’s administration has been sending detainees back to their home countries, including six Yemenis who were repatriated the week before Christmas. Even before the Christmas day incident, the administration was wary about transferring Yemenis because of concerns about the country’s instability. About 90 of the 198 inmates still in Guantánamo are from Yemen. Fears increased after a Yemen-based group calling itself al-Qaeda in the Arabian Peninsula (AQAP) said it planned the attack in retaliation for US support of a Yemeni military strike on one of its bases, which killed up to 60 of its members. Umar Farouk Abdulmutallab, the 23-year-old Nigerian charged over the alleged plot, told investigators he was given explosives by al-Qaeda operatives in Yemen, where he had been studying Arabic. The suspected masterminds of the alleged plot were Muhamad al-Awfi and Said Ali al-Shihri, Guan-tánamo inmates who were sent to Saudi Arabia in November 2007 but fled to Yemen in 2008, ABC News reported, quoting US officials. Three senators – Republicans John McCain and Lindsey Graham, and independent Joseph Lieberman – who this week wrote to the White House saying that the transfers were “highly unwise and ill-considered”, described Mr Shihri as “AQAP’s longstanding deputy”. He is thought to have orchestrated a 2008 car bombing of the US embassy in Yemen but could have been killed in a December 24 air strike. The senators said: “Many of the other leaders of AQAP were previously held in Yemeni government custody. However, they escaped in February 2006 from a maximum-security prison in Sana’a.”

- The global hedge fund industry turned in one of its best years of performance in close to a decade in 2009, according to industry data, though managers have yet to fully shake off many of the problems of 2008. The average hedge fund returned 19 per cent to investors in 2009, according to Chicago-based data provider Hedge Fund Research. Other leading hedge fund indices report average returns of between 12 and 18 per cent, after fees. On average, only dedicated short-biased funds, which aim to profit from declines in companies’ share prices, lost money this year, down 20 per cent. But many funds have yet to recoup the losses they suffered in 2008.

- At the peak of the financial crisis late in 2008, a common refrain from bankers and traders was that credit markets were enduring a calamity seen once in a hundred years. In 2009, it appears the returns from three credit strategies also represent a once in century event. ”The magnitude of the markets’ reaction to a crisis gets bigger each time,” says Jason Brady, portfolio manager at Thornburg Investment Management.“The frequency of so-called 100 year events seems to be increasing because the leverage has increased and news flow is very high now,“ he adds. Investors this year have been rewarded handsomely for betting on a normalization in specific parts of the credit markets in the US and Europe, which imploded last year and nearly sank the global financial system. For US financial bonds, the return since their nadir in March is 31 per cent, compared to a gain of 22 per cent for all investment-grade corporates, according to indexes calculated by Barclays Capital.

- The US will impose tough new duties on Chinese steel piping imports, raising tensions with its biggest trading partner and emerging geopolitical rival. With Chinese piping imports worth $2.8bn in 2008, the case is the biggest against China brought before the International Trade Commission, a US trade body.

Telegraph:

- Harbinger Capital, the hedge fund run by billionaire Philip Falcone, must answer accusations of fraud and civil conspiracy, a judge in Delaware has ruled.

Evening Recommendations

- None of note

Night Trading
Asian indices are +.25% to +1.0% on avg.

Asia Ex-Japan Inv Grade CDS Index 98.0 +3.50 basis points.
S&P 500 futures +.13%.
NASDAQ 100 futures +.25%.

Morning Preview
BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Asian Financial News

European Financial News

Latin American Financial News

MarketWatch Pre-market Commentary

U.S. Equity Preview

TradeTheNews Morning Report

Briefing.com In Play

SeekingAlpha Market Currents

Briefing.com Bond Ticker

US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/Estimate
- None of note

Economic Releases

8:30 am EST

- Initial Jobless Claims for last week are estimated to rise to 460K versus 452K the prior week.

- Continuing Claims are estimated to rise to 5100K versus 5076K prior.

Upcoming Splits

- None of note

Other Potential Market Movers
- The NAPM-Milwaukee, Bloomberg Financial Conditions Index, weekly EIA natural gas inventory report and the bond market's early close could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and commodity stocks in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish at Session Highs, Boosted by Technology, Homebuilding, Steel, Biotech and I-Banking Shares

Evening Review
BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Briefing.com In Play

SeekingAlpha Market Currents

WSJ Today’s Markets
Today’s Movers
StockCharts Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Morningstar Style Performance
Commodity Futures
S&P 500 Gallery View
Timely Economic Charts
Most Recent Guru Stock Picks
CNN PM Market Call
After-hours Stock Commentary
After-hours Movers
After-hours Stock Quote
After-hours Stock Chart

Stocks Slightly Lower into Final Hour on Profit-Taking, Terrorism Worries

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs and Retail longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mostly negative and volume is very light. Investor anxiety is very high. Today’s overall market action is mildly bearish. The VIX is rising +1.0% and is above average at 20.21. The ISE Sentiment Index is below average at 119.0 and the total put/call is slightly below average at .79. Finally, the NYSE Arms has been running very high most of the day, hitting 3.07 at its intraday peak, and is currently 1.38. The Euro Financial Sector Credit Default Swap Index is falling -4.94% to 61.91 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising +1.64% to 83.83 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising +5 basis points to 21 basis points. The TED spread is now down 444 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling -1.78% to 28.65 basis points. The Libor-OIS spread is unch. at 8 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is unch. at 2.40%, which is down -25 basis points since July 7th. The 3-month T-Bill is yielding .04%, which is up -5 basis points today. Homebuilding, Semi, Computer and Steel stocks are outperforming today, rising .5%+. Gauges of investor angst are high again today given just mild market weakness, which is a positive. I suspect terrorism jitters are holding stocks back a bit ahead of tomorrow night’s festivities. (GS), which has been a drag on financials for a couple of months, is beginning to turn higher again. As well, the euro financial sector cds index hit a new 52-week low today, which is a large positive. On the negative side, small-caps are relatively weak and the market mostly ignored today’s positive economic report. Nikkei futures indicate an +114 open in Japan and DAX futures indicate an +2 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic fear, technical buying, tech sector optimism, lower long-term rates and seasonal strength.

Today's Headlines

Bloomberg:

- Companies in the U.S. expanded in December at the fastest pace in almost four years, signaling the economic recovery is gaining speed heading into 2010. The Institute for Supply Management-Chicago Inc. said today its barometer rose to 60, exceeding the most optimistic estimate of economists surveyed by Bloomberg News and the highest level since January 2006. Economists projected the Chicago index would drop to 55.1 from 56.1 in November, based on the median estimate of 53 projections in the Bloomberg survey. The group’s gauge of orders climbed to the highest level in more than two years and its measure of employment showed growth for the first time since November 2007, the month before the recession began. Indexes of production and order backlogs also improved.

- U.S. Senate staff members arriving at work by subway this month were greeted by signs proclaiming that “98,000 patients may die” through medical malpractice. On a single day in October, lawmakers received visits from more than 70 victims of doctors’ errors and the attorneys who represented them. And the trial lawyers’ political action committee gave members of the Democratic congressional majority more money than all but two other PACs. Such efforts helped trial lawyers avoid any of the concessions that other groups were forced to make to advance the cause of overhauling health care, despite polls showing strong support for curbs such as award caps on medical-malpractice lawsuits. Even organized labor, also among the Democrats’ most loyal supporters, faced a tax on high-end health-care plans. “Every single other group is being asked to put some skin in the game,” said Lisa Rickard, president of the Washington- based U.S. Chamber of Commerce’s Institute for Legal Reform, which has run ads supporting award caps. “There’s hesitancy within both the administration and the Congress to do anything that’s really going to upset the apple cart when it comes to the trial lawyers.”

- Wall Street Waits as SEC Fails to Bring Madoff-Inspired Reforms. Schapiro joined four other commissioners in approving a rule that requires about 1,600 U.S. fund managers to submit to unannounced audits, 83 percent fewer than seven months ago. The revision came after lobbying by fund companies, including executives from T. Rowe Price Group Inc., who met with Schapiro, and Legg Mason Inc., who met with another commissioner, SEC records show. The diminished inspections rule is one of at least four Schapiro announced as a way to protect investors and boost confidence, then later scaled back or delayed. In August, she bought herself more time on a rule to rein in short-sellers, after lobbying by hedge funds. In October, Schapiro put off plans to give investors more power to decide who sits on corporate boards after the U.S. Chamber of Commerce questioned the SEC’s jurisdiction.

- Consumer backlash and cost concerns may cause delays in the nationwide rollout of “smart” utility meters at the center of the Obama administration’s $8 billion push to update the U.S. electricity grid. PG&E Corp., owner of California’s largest utility, halted meter installations in Bakersfield, north of Los Angeles, after hundreds of customers complained that readings weren’t accurate. The meters, part of a so-called smart-grid initiative billed as clearing the way for more renewable-energy use, are designed to help consumers conserve power during periods of peak demand. Martha Johnson, pastor of a church in Bakersfield, said her utility bill almost doubled from a year earlier to $874 in July after her new meter was installed. “That caught my eye because I’ve never had a bill that high,” said Johnson, 64. San Francisco-based PG&E, which faces a lawsuit from a Bakersfield customer who’s seeking class-action status, says its meters are accurate and hot weather and increased rates led to higher bills than consumers expected. Whether PG&E’s complaints stem from perception or defects, they may slow U.S. installations of the meters, a cornerstone of President Barack Obama’s plan to spur grid upgrades with $8 billion in public-private funding. Consumer groups question whether benefits of the meters justify costs passed on when regulators allow utilities to increase rates to pay for them. “If customers lose confidence in smart meters, I would expect regulators would be more reluctant to grant rate increases to install new meters across the system,” said Travis Miller, a utility analyst at Morningstar Inc. in Chicago. “Any kind of adverse impact from these projects could impact long- term growth of the meters.” The devices allow utilities to check energy use remotely, eliminating the need for employing meter readers. They can be connected to equipment that shows customers when rates are highest, allowing households and other consumers to shift power use to less costly periods. Smart meters also give utilities more control of demand, helping them match usage with renewable electricity flows, such as from wind and solar power. There are about 8 million smart electric meters in the U.S., and that count will jump sevenfold by 2019, according to the Institute for Electric Efficiency in Washington. “Other states are looking very closely at what is happening in California,” said Mindy Spatt, a spokeswoman for the Utility Reform Network, a consumer group in San Francisco. “What we know for sure about the meters is they are job killers and they are very expensive. The rest is just pie in the sky.”

- In a holiday season when retailers crawled back from last year’s record decline, three U.S. clothing chains stood out as winners. Aeropostale Inc.(ARO),Nordstrom Inc.(JWN) and Kohl’s Corp.(KSS) promoted lower prices on specific merchandise and managed inventory to outpace industry sales in November. They will probably say next week those gains continued in December, according to Liz Dunn, an analyst at Thomas Weisel Partners LLC in New York. “They all did execute pretty well in response to the slowing consumer,” said David Abella, a portfolio manager with Rochdale Investment Management LLC in New York who holds shares of Aeropostale and Nordstrom. “If retail sales pick up broadly, they should get outsized gains at the expense of competitors.”

- Crude oil rose for a sixth day, extending its longest rally since October, as heating oil prices climbed on forecasts for colder weather in the U.S. Oil increased amid outlooks that the South and East will be “predominantly cold” for the next two weeks, boosting heating fuel use, according to MDA Federal Inc.’s EarthSat Energy Weather of Rockville, Maryland. Ample supplies of distillates, including heating oil and diesel, tempered the gain. “You’re going to have to be attuned to the weather forecast, how long this cold is going to last, and, by association, the stockpile levels that are higher than normal,” said Michael Fitzpatrick, vice president of energy with MF Global in New York. U.S. distillate stockpiles were 19 percent higher than a year earlier in the week ended Dec. 18. Temperatures in New York City are forecast to be as much as 9 degrees below average by Jan. 3, according to MDA Federal. U.S. distillate fuel supplies were 17 percent above the five-year average last week, the Energy Department reported today in Washington.

- Orange-juice prices fell the most in a week as AccuWeather Inc. said Florida’s citrus crops won’t be harmed by a freeze forecast to settle on other parts of the U.S.

- Investors locking in gains from the biggest stocks rally in seven decades pushed options trading in the U.S. to a seventh straight annual record. The number of options on stocks, indexes and exchange- traded funds that changed hands in 2009 reached 3.59 billion contracts, topping the previous high of 3.58 billion set in 2008, Chicago-based Options Clearing Corp. said yesterday.

- The U.K. government’s plan to tax bankers’ 2009 bonuses may drive financial firms overseas, causing a decline in the industry similar to the deterioration in shipbuilding, the British Bankers’ Association said. “The U.K. has a record of building up great industries such as in steel, shipbuilding, engineering,” Chief Executive Officer Angela Knight said in an e-mailed statement today. “It would be the height of irresponsibility to lose this industry as we have done with others so many times before.”

Wall Street Journal:

- Royal Dutch Shell PLC has roughly doubled its financial support for biofuels start-up Codexis Inc. in the past year, the latest sign that oil companies are slowly and selectively increasing their interest in plants-to-fuels research. Shell is on pace to spend $60 million in 2009 to fund research at Codexis, nearly twice the amount as the year before, according to regulatory filings. Codexis filed paperwork this week for a $100 initial public offering. The start-up is developing microbes to speed up the chemical reactions that turn inedible plants, such as grasses or stalks, into ethanol and diesel. Other crude-oil companies also have increased spending on biofuels. Exxon Mobil Corp. said this summer it would spend $600 million over five or six years on a partnership with Synthetic Genomics Inc. to develop a way to turn algae into motor fuels. Chevron Corp. entered into a relationship in October with Mascoma Corp. to investigate plant-based fuel. And BP PLC created a venture with Verenium Corp. this year to build a fuel plant in central Florida next year.

- Sociedade Nacional de Combustiveis de Angola, better known as Sonangol, signed Wednesday in Baghdad two initial deals to develop Qaiyarah and Najmah oil fields in northern Iraq, officials said.

- The U.S. Treasury Department's surprise Christmas Eve move to uncap the potential aid to Fannie Mae (FNM) and Freddie Mac (FRE) should be investigated, lawmakers from both major political parties said Wednesday. Rep. Dennis Kucinich (D., Ohio) said his congressional subcommittee plans to investigate Treasury's decision to lift the existing $400 billion cap on government cash available to the two firms. Separately, Reps. Scott Garrett (R., N.J.) and Spencer Bachus (R., Ala.) called for the House Financial Services Committee to hold a hearing on the matter.

- Eight Americans were killed in an explosion at a U.S. compound in Afghanistan on Wednesday, officials said. Afghan officials said a suicide bomber had entered a U.S. facility. A U.S. official in Afghanistan would not confirm the report of a suicide bombing, saying an investigation is under way. The official said the attack occurred at a U.S. military base in southeastern Afghanistan's Khost province and that all of those killed were Americans.

- Supporters of President Mahmoud Ahmadinejad's regime encouraged Iranians to turn out for a series of pro-government rallies Wednesday in Tehran and across Iran, going as far as offering free travel on the capital's metro for the day. Throngs of government supporters coursed through the streets of Tehran in images broadcast live by Iranian state TV. Large crowds waved banners and colorful flags, some with pictures of Supreme Leader Ayatollah Ali Khamenei. The planned rallies follow several days of increasingly stark warnings by government and security-service officials against opposition protests after bloody clashes between demonstrators and authorities Sunday.

MarketWatch.com:

- One of the most brutal years in the history of the automotive industry is mercifully drawing to a close, and a relatively strong December of U.S. sales could very well set the stage for a recovery in 2010.

- "Go anywhere" typically describes mutual funds that roam the world's stock markets and buy wherever they see value. For Brian McMahon, co-manager of Thornburg Global Opportunities Fund(THOAX) with Vinson Walden, many of the best stock values nowadays are here at home. Six of the fund's 10-largest recent holdings were based in the U.S., including three in the financial sector.

CNBC:

- The US Treasury completed a solid week of debt auctions as investors stepped in to snap up $32 billion in seven-week notes.

Washington Times

- The Nigerian accused of trying to blow up a Detroit-bound airliner had his suicide mission personally blessed in Yemen by Anwar al-Awlaki, the same Muslim imam suspected of radicalizing the Fort Hood shooting suspect, a U.S. intelligence source has told The Washington Times. The intelligence official, who is familiar with the FBI's interrogation of Umar Farouk Abdulmutallab, said the bombing suspect has boasted of his jihad training during interrogation by the FBI and has said it included final exhortations by Mr. al-Awlaki. "It was Awlaki who indoctrinated him," the official said. "He was told, 'You are going to be the tip of the spear of the Muslim nation.'"

The Business Insider:

- OPEC Has Way Too Much Oil For 2010.

- And Just Like That, The US Amps Up The Trade War Against China.

Denverpost.com:

- The E-Mail Trail Behind the AIG Scandal. The probing e-mails came from every direction inside insurance giant American International Group during the summer and fall of 2007, all with the same underlying question: Could Joe Cassano back up his assurances — to auditors, rating companies, colleagues and shareholders — that his Financial Products unit wasn't in trouble?

Washington Post:

- The Obama administration is readying sanctions against discrete elements of the Iranian government, including those involved in the deadly crackdown on Iranian protesters, marking a shift to a more aggressive U.S. posture toward the Islamic republic, U.S. officials said. Ten months after President Obama set a year-end deadline for Iran to engage with world powers on its nuclear program, the government in Tehran has failed to respond in kind, other than an abortive gesture in the fall. Now, in what may be a difficult balancing act, officials say the administration wants to carefully target sanctions to avoid alienating the Iranian public -- while keeping the door ajar to a resolution of the struggle over Iran's nuclear program. The aim of any sanctions is to force the Tehran government to the negotiating table, rather than to punish it for either its apparent push to develop a nuclear weapon or its treatment of its people.

TheDeal.com:

- Hedge Fund Outlook 2010.

Rassmussen:

- Many have questioned whether those who favor or oppose the health care plan in Congress really know what’s in it. A new Rasmussen Reports national telephone survey suggests that they have a decent understanding of the bill and that voter attitudes towards the legislation have hardened. While several individual components of the plan are popular, reminding voters of what’s included in the plan has virtually no impact on support for the overall legislation. This suggests that there are not major surprises in the legislation that will cause people to change their opinion of it. Thirty-nine percent (39%) of voters nationwide support the heath care plan, and 58% are opposed.

- 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-one percent (41%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -16 (see trends).

Politico:

- House Minority Leader John Boehner on Wednesday echoed a Republican chorus of criticism directed at the Obama administration’s response to the Christmas terror plot, saying Obama should not close the prison at Guantanamo Bay. “It’s time for the president to halt terrorist transfers to other countries, including Yemen, and to re-evaluate his decision to close the prison at Guantanamo,” he said in a statement to be released Wednesday. Boehner added: “The administration’s response following this attempted attack is consistent with its dangerous decision to close the terrorist prison at Guantanamo Bay and bring Khalid Sheikh Mohammed and other 9/11 terrorists to trial in the United States through civilian courts, rather than the military commissions already in place. We know the decision to close this prison has not stopped Al Qaeda from plotting attacks on Americans, turning these terrorists over to other countries is not working, and we shouldn’t import them into the United States.”

- With their poll numbers dipping, a handful of their senior House members retiring and one freshman abruptly changing parties, majority-party Democrats are once again grappling with all-too-familiar questions about the way forward. Chief among them: how to reconcile an ambitious policy agenda that party loyalists expect to see fulfilled at a time when concerns about government spending are on the rise.

NetworkWorld:

- 10 IDC tech predictions 2010.

SeekingAlpha:

- Kaufman boosts its Apple (AAPL) target to $253 from $235, saying it expects a "blowout" FQ1, despite continued difficult macroeconomic conditions and ever-rising investor expectations. Firm says Apple could ship 9.5M iPhones, topping its prior quarterly record of 7.4M.

- My 10 Picks for 2010’s Tech Revolution.

- AIG(AIG) Bailout: A Wasteful Moral Hazard. The AIG bailout will go down as one of the most wasteful use of taxpayer dollars and the largest representation of moral hazard in government interventionist history. Despite the seemingly strong recovery from the financial brink of doom, the silent risk that was introduced into the economic gears was the absolute financial backing and bailouts. Moral hazard describes the way firms act differently under the knowledge that when they get in trouble, daddy (the taxpayer) will step in to save the day. Imagine how you would gamble your life savings in Vegas if you knew that if you lost every dime, someone would step in and give you back your money?

SchaeffersResearch:

- Stocks Advancing Amid Heavy Short Interest:

Reuters:

- As U.S. energy companies scramble to mine natural gas from shale deposits, state regulators are struggling to keep pace amid criticism that they lack the resources to enforce environmental laws. Shale gas trapped deep underground is considered one of the most promising sources of U.S. energy and one that is generating jobs, royalties for landowners and tax revenue for cash-strapped state governments. But environmentalists and small-town neighbors of drilling operations say officials have been slow to respond to their complaints of air and water pollution resulting from drilling, production or gas processing.

- The day after Christmas was the second-biggest shopping day during the U.S. holiday season, with $7.9 billion spent, even though traffic in stores fell 6.6 percent from a year ago, ShopperTrak said on Wednesday. Only the day after Thanksgiving, or "Black Friday," was busier in terms of traffic and sales, at $10.66 billion, the firm said. Sales during the full week ended Saturday, Dec. 26 rose an estimated 8.8 percent, while traffic at U.S. stores fell 1 percent, ShopperTrak said. Still, four of the top seven traffic days in the holiday season came last week, it said. The week was expected to take on more significance this year after a major snowstorm disrupted shopping plans for many consumers on the East coast during the final weekend before Christmas.

- U.S. online spending rose 5 percent to $27.12 billion from the start of November through Christmas Eve even though individuals spent slightly less than they did last year, according to data released by comScore (SCOR) on Wednesday. ales of consumer electronics jumped slightly more than 20 percent and jewelry and watches were also strong performers after a "very weak" season a year earlier, comScore Chairman Gian Fulgoni said in a statement.

- Kaufman Bros upgraded Marvell Technology Group Ltd (MRVL) and Nvidia Corp (NVDA) to "buy" from "hold," saying it expects the chipmakers to benefit from an improving PC market. The brokerage said it expects Marvell's storage semiconductor business to continue to grow with the rising PC demand.

Financial Times:

- Bank lending to industry in the eurozone slowed in November, the European Central Bank said on Wednesday, sending a clear signal about the fragility of economic recovery in the 16-nation currency bloc. Loans to non-financial institutions shrank at an annual rate of 1.9 per cent last month after shrinking 1.2 per cent in October, the Frankfurt-based central bank said in its monthly report on monetary developments in the euro area. Howard Archer, an analyst at Global Insight, warned the trend “maintains concerns that eurozone recovery could be held back over the coming months by a significant number of companies being unable to get the credit they need”.

TimesOnline:

- The Christmas Day airline bomb plot suspect organized a conference under the banner “War on Terror Week” as he immersed himself in radical politics while a student in London, The Times has learnt.

Telegraph:

- Yes, the buck stops in the Oval Office. Obama may have rather smugly given himself a “B+” for his 2009 performance but he gets an F for the events that led to Umar Farouk Abdulmutallab boarding a Detroit-bound plane in Amsterdam with a PETN bomb sewn into his underpants. He said today that a “systemic failure has occurred”. Well, he’s in charge of that system. The picture we’re getting is more and more alarming by the hour. Here are some key elements to consider: