Bloomberg:
- Fannie Taps Treasury for $15.3 Billion More After a 10th Loss. Fannie Mae will seek $15.3 billion in U.S. aid, bringing the total owed under a government lifeline to $76.2 billion, after its 10th consecutive quarterly loss. The mortgage-finance company posted a fourth-quarter net loss of $16.3 billion, or $2.87 a share, Washington-based Fannie Mae said in a filing yesterday with the Securities and Exchange Commission. The company, which posted $120.5 billion in losses over the previous nine quarters, and rival Freddie Mac were seized by regulators in September 2008. “Our financial results for 2009 reflected the continued adverse impact of the weak economy and housing market, which has resulted in record mortgage delinquencies and contributed to our recording significant credit-related expenses and net losses during each quarter of the year,” Fannie Mae said in the filing. For the full year, Fannie Mae’s loss widened to $74.4 billion from $59.8 billion in 2008. The company’s shares, which peaked at $87.81 in December 2000, closed at 99 cents yesterday in New York Stock Exchange composite trading. The Treasury owns 79.9 percent of the company’s outstanding common stock. Losses at Fannie Mae are likely to grow with rising unemployment and costs to implement President Barack Obama's plans to reduce foreclosures, the company said. Fannie Mae and McLean, Virginia-based Freddie Mac survived last year on investments the government made in the companies. The Treasury on Christmas Eve removed a $200 billion aid limit on each company, extending unlimited backing through 2012. The amount of nonperforming loans that Fannie Mae guarantees for other investors rose to $174.6 billion from $163.9 billion in the third quarter, according to the filing. Fannie Mae also owned $41.9 billion in non-performing loans as of Dec. 31, up from $34.2 billion in the third quarter. The fair value of Fannie Mae’s assets was negative $98.8 billion last quarter, compared with negative $90.4 billion at the end of September.
- AIG(AIG) May Sell H.K. Life Unit to Prudential Plc for $35 Billion. American International Group Inc. is in talks to sell a Hong Kong life insurance division to Prudential Plc for more than $35 billion, marking AIG’s largest asset sale since U.S. taxpayers bailed out the company in 2008, people briefed on the matter said. AIG and Prudential aim to reach an agreement to sell American International Assurance Co. in coming days, although the talks could always collapse, the people said, declining to be identified because the matter is private.
- Berkshire(BRK/A) Profit Jumps to $3.1 Billion on Derivatives. Warren Buffett's Berkshire Hathaway Inc. said fourth-quarter profit jumped on the recovery of derivative bets tied to the world’s stock markets.
- Merkel Seeks to Damp Greek 'Emotions' as Crisis Weighs on Euro. German Chancellor Angela Merkel said she aims to calm the turmoil over Greece’s budget crisis in talks with Prime Minister George Papandreou, signaling her concern that “emotions” may be spinning out of control. Merkel, who is scheduled to host Papandreou for talks on March 5, wants “to stay in close contact with him so the emotions don’t run so high,” she said in off-the-cuff studio remarks in Berlin yesterday overheard by reporters. On camera, Merkel said in an interview on ARD television that “the euro is certainly facing the most difficult phase since its inception.” The comments are further evidence of Merkel’s concern about the risk Greece poses to the single currency, to Germany and the EU as a whole. Merkel, who leads Europe’s biggest economy, warned as early as Jan. 13 that Greece “can put us under great, great pressures.”
- Copper Jumps to Five-Week High in London After Chile Quake. Copper jumped to the highest level in more than five weeks in London and by the limit in Shanghai after a magnitude-8.8 earthquake disrupted supplies from Chile, the world’s largest producer. Copper for three-month delivery on the London Metal Exchange surged as much as 5.6 percent to $7,600 a metric ton, the highest price since Jan. 20. The contract traded at $7,430 a ton at 9:46 a.m. in Shanghai. The June-delivery contract on the Shanghai Futures Exchange climbed 5 percent from the previous settlement price to 61,150 yuan ($8,958) a ton, and last traded at 60,410 yuan.
- ANZ's Clear Says Copper in 'Knee-Jerk Reaction' to Chile Quake. “For a 5 percent movement to be sustainable, you’d have to expect production to go offline for some period of time and unless that’s confirmed, I would think it’s a knee-jerk reaction. But it’s not an unreasonable one on expectation that it is a seriously big producer of copper globally but I think we have to wait for confirmation on how damaged things are.”
- Long-Time Marijuana Use Linked to Psychosis in Young Adults. Young adults who used marijuana as teens were more likely than those who didn’t to develop schizophrenia and psychotic symptoms including hallucinations and delusions, an Australian study found. Those who used the drug for six or more years were twice as likely to develop a psychosis such as schizophrenia or to have delusional disorders than those who never used marijuana, according to research released online by the Archives of General Psychiatry. They were also four times as likely to score high on a list of psychotic-like experiences.
- Pelosi Confronts Racial, Power Issues in Rangel Ethics Dilemma. The admonishment of Representative Charles Rangel by the House ethics committee over one of several accusations of misconduct surrounding him heightens a dilemma for House Speaker Nancy Pelosi, who pledged to preside over “the most ethical Congress in history.”
- Bank of America(BAC) Gave Montaq $29.9 Million Package. Bank of America Corp. gave Thomas Montag a $29.9 million compensation package in 2009 for running its global banking and markets units and to fulfill promises made when Merrill Lynch & Co. hired him in 2008. Montag, president of the unit that includes trading and investment banking, received more than the $6.51 million awarded to new Chief Executive Officer Brian Monihan, according to a regulatory filing today. He also exceeded the $6.12 million earmarked for Joe Price, the former chief financial officer now in charge of consumer banking. The filing also detailed more than $80 million in benefits accumulated by former CEO Kenneth D. Lewis, who stepped down after four decades at the bank.
- China Attacks on Google(GOOG) May Have Hit 100 Companies, ISEC Says.
- NYC Snow Storm Sets Record, Stops Flights, Cuts Power. A winter storm that pummeled New York City for two days broke a monthly record for snowfall in Central Park that stood for 114 years, according to the National Weather Service. The storm killed at least three people, knocked out power to more than 700,000 electrical customers across the U.S. Northeast and grounded thousands of flights from regional airports. As the city digs out, forecasters are already watching another storm that may hit the U.S. East Coast next week. “This is stuff that doesn’t happen too often, maybe a couple of times a century,” said Jeffrey Tongue, a weather service meteorologist in Upton, New York. Manhattan’s Central Park received 36.9 inches (93.7 centimeters) as of yesterday, the most ever for a single month, the weather service said. The previous record for February was 27.9 inches in 1934, and the mark for a single month was 30.5 inches in March 1896.
- Buffett Says Housing Woes to Ease Next Year, Barring Explosions. Billionaire Warren Buffett said the U.S. residential real estate slump will end by about 2011, predicting that’s how long it will take demand for homes to catch up with the supply. “Within a year or so, residential housing problems should largely be behind us,” Buffett wrote yesterday in his annual letter to the shareholders of his Berkshire Hathaway Inc. “Prices will remain far below ‘bubble’ levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits.” The fall in homebuilding is the only fix unless the U.S. decides to “blow up a lot of houses,” Buffett joked. “High-value houses and those in certain localities where overbuilding was particularly egregious” will take longer to recover, he wrote. “He’s very deeply invested in this,” said Tom Russo, partner at Gardner Russo & Gardner, which holds Berkshire stock. “Across his industrial companies, he’s massively poised to gain” from a housing recovery, Russo said.
- Dodd Scraps Obama's Consumer Agency, Proposes Treasury Bureau. Senate Banking Committee Chairman Christopher Dodd abandoned the Obama administration’s stand- alone consumer financial agency and is proposing a bureau in the Treasury Department, seeking to overcome Republican opposition to legislation overhauling Wall Street regulations. The Bureau of Financial Protection would be run by a director appointed by the president, have power to write rules for companies offering financial services and be funded mainly through industry fees, according to a two-page summary the Connecticut Democrat circulated this weekend.
- Nuclear Iran Would Spur Regional Arms Race, Israel's Barak Says. Saudi Arabia would obtain nuclear weapons within a “few months” as part of a broader Middle East arms race if Iran develops nuclear weapons, Israeli Defense Minister Ehud Barak said today. A nuclear-armed Iran would result in “an intensive nuclear wave in the Middle East,” Barak said on CNN’s “Amanpour” program. Turkey and Egypt would probably join Saudi Arabia in seeking nuclear weapons, he said.
- Greece Now, UK Next as Scots Investors Ready for Pound Plunge. While the eyes of the world focus on Greece’s debt crisis, investors in Edinburgh are busy preparing for the U.K. to be next.
- China Stocks to 'Struggle' on Policy, Mowat Says. China’s stocks are “likely to struggle” until there’s more clarity on government policies to rebalance the economy, according to JPMorgan & Co.’s Adrian Mowat. Investors are “concerned about rebalancing in China’s economy this year,” Mowat, JPMorgan’s Hong Kong-based head of Asian and emerging-market strategy, said in a Bloomberg Television interview. “A-shares are likely to struggle to perform until we get more clarity on policy.”
- Digi to Sell iPhone in Malaysia, Taking on Maxis. Digi.Com Bhd., the Malaysian mobile- phone company controlled by Norway’s Telenor ASA, signed an agreement to sell Apple Inc.’s iPhone in Malaysia to tap growth in a market that it forecasts will surge 10-fold in five years.
- Merck KGaA to Buy Millipore(MIL) for About $6 Billion. Merck KGaA agreed to buy Milipore Corp., a supplier of drug development equipment for biotechnology companies, for about $6 billion in cash, beating a rival offer from Thermo Fisher Scientific Inc.
- At Least 700 Dead in Chile After 8.8-Magnitude Quake.
- Greece Bailout Plan Takes Shape. A plan led by Germany and France to bail out Greece with as much as €30 billion ($41 billion) in aid began to take shape amid intense and risky jockeying between Athens and Berlin over timing and terms. Greek officials said they expected to seal a deal by Friday, when Greek Prime Minister George Papandreou meets in Berlin with German Chancellor Angela Merkel, but senior German officials insisted a bailout wasn't imminent. "There is definitely no such plan," said Ulrich Wilhelm, spokesman for German Chancellor Angela Merkel. The conflicting accounts reflect Germany's reluctance to give up any leverage it has over Greece before Athens has shown concrete progress in reining in its deficit, expected to reach nearly 13% of gross domestic product this year. Germany, the economic engine of the 16-nation euro zone, would have to shoulder the lion's share of any bailout. Polls show that a solid majority of Germans oppose extending aid to Greece. Greece, which needs to refinance more than €40 billion in debt in the coming months amid growing doubts over its solvency, is eager to lock in a rescue plan as quickly as possible. Washington is also looking for Europe to resolve the Greek crisis soon and remove the uncertainty that has rocked global markets in recent weeks. U.S. officials have publicly backed the European Union's efforts to keep the Greek crisis under control, but say privately that the EU's fiscal demands of Athens may be too severe. European policy is "short-sighted" because it will "tear Europe apart in the longer term, all in the name of rectitude," said Ted Truman, a former Obama Treasury international official, who worked with Treasury Secretary Timothy Geithner and White House chief economic adviser Lawrence Summers on the U.S. response to Asia's financial crisis a decade ago. Mr. Truman believes the electorate in Greece and other debt-ridden countries may turn against the EU as a result of harsh austerity.
- GM Mulls More Opel Funding. General Motors Co. is considering putting more of its own money into the restructuring of its Opel unit in Europe in a bid to win €2.7 billion in state aid from European governments, people familiar with the situation have said.
- Climate Panel to Approve Committee to Review Its Procedures. The world's leading authority on climate change announced Saturday it is appointing an independent committee to investigate whether it needs to change its procedures to ensure it practices rigorous science. The Intergovernmental Panel on Climate Change, beset in recent months by a string of allegations of factual mistakes and improper scientific behavior in the preparation of its high-profile reports, said it will share details of how the independent review will work in early March. The IPCC won a 2007 Nobel Peace Prize for the 2007 report, a prize the organization shared with former Vice President Al Gore. The report helped push climate change to the top of the political agenda in much of the world, including in the U.S., where it intensified discussion in Washington about potential legislation to cap greenhouse-gas emissions. But since late last year, several revelations have raised questions about the IPCC's objectiveness and accuracy in producing its reports.
- Back to the ObamaCare Future. The Massachusetts 'model' moves to price controls. Natural experiments are rare in politics, but few are as instructive as the prototype for ObamaCare that Massachusetts set in motion in 2006. The bills for "universal coverage" are now coming due, and it appears the state political class is prepared to do lasting damage to one of America's top-flight health-care systems. Last month, Democratic Governor Deval Patrick landed a neutron bomb, proposing hard price controls across almost all Massachusetts health care. State regulators already have the power to cap insurance premiums, which Mr. Patrick is activating. He also filed a bill that would give state regulators the power to review the rates of hospitals, physician groups and some specialty providers. Those that are deemed too high "shall be presumptively disapproved." Mr. Patrick ad-libbed that he had "a whole bunch of pals here who are in the health-care field, and I saw the color drain out of their faces." Little wonder. The administered prices of Medicare and Medicaid already shift costs to private patients while below-cost reimbursement creates balance-sheet havoc among providers. Now the governor wants to import these distortions to save the state's heavily subsidized insurance program as costs explode. As with all new entitlements, the rolling cost crisis began almost immediately. For fiscal 2010 taxpayer costs are $47 million over budget, in part due to the recession, and while the $913 million Mr. Patrick requested for 2011 is a 5% increase over 2010, spending has grown on average 6.7% per year. Meanwhile, average Massachusetts insurance premiums are now the highest in the nation. Since 2006, they've climbed at an annual rate of 30% in the individual market. Small business costs have increased by 5.8%. Per capita health spending in Massachusetts is now 27% higher than the national average, and 15% higher even after adjusting for local wages and academic research grants. The growth rate is faster too. Those data come from granular studies about the Massachusetts health markets published recently by the state. As in Washington, the political class and providers blame insurers, but a better culprit is the state's insurance regulation. Incredibly, the average "medical loss ratio" in Massachusetts for individual policies is 112%—that is, insurers pay $1.12 in benefits for every $1 in premiums. This is the direct result of forcing insurers to charge everyone more or less the same rate regardless of age or health status, which makes it rational for people to wait to enroll until they need expensive coverage. It is also the result of the state's decision to merge the individual and small-group insurance markets, which transfers individual costs onto small businesses. Another reason costs are so high is that state regulations have mandated that insurance coverage be far richer than the rest of the country. The average insurance deductible is 28% lower than the U.S. average, and the benefits are more generous with less cost-sharing. Patients are thus insensitive to the cost of care. All of this is merely a preview of what the entire country will face if Democrats succeed with their plan to pound ObamaCare into law in anything like its current form. Massachusetts is teaching the country a valuable lesson in how not to reform health care, if only anyone would pay attention.
- China Manufacturing Slows More Sharply Than Expected. The pace of Chinese manufacturing slowed more sharply than expected last month, an official survey of purchasing managers showed on Monday. Output and new orders -- both aggregate and overseas orders -- remained above the threshold of 50 that indicates an expansion of activity. But backlogs of orders, employment and stocks of purchases all fell below the boom-bust line, according to the survey, which is compiled by the China Federation of Logistics and Purchasing (CFLP) for the National Bureau of Statistics.
- It's Time for Swaps to Lose Their Swagger. “USING these instruments in a way that intentionally destabilizes a company or a country is — is counterproductive, and I’m sure the S.E.C. will be looking into that.” That’s what Ben S. Bernanke, chairman of the Federal Reserve, said last week when lawmakers asked him about credit default swaps during his Congressional testimony. First, Greece employed swaps to mask its true debt picture, with the help of Wall Street bankers, of course. And now it appears that some traders are using swaps to bet that Greece won’t be able to meet its debt payments and will face a possible default. Mr. Bernanke is undoubtedly an intelligent man. But his view that it’s “counterproductive” to use credit default swaps to crash an institution or a nation exhibits a certain naïveté about how the titans of finance operate now. High-octane trading may be counterproductive to taxpayers, for sure. But not to the speculators who win big when such transactions pay off. And in the case of A.I.G., the speculators got their winnings from the taxpayers. The certainty that Mr. Bernanke expressed about the S.E.C.’s inquiry into credit default swaps is quaint as well. If the past is prologue, we might see a case or two emerge from that inquiry five years from now. The fact is that credit default swaps and other complex derivatives that have proved to be instruments of mass destruction still remain entrenched in our financial system three years after our economy was almost brought to its knees. DERIVATIVES are responsible for much of the interconnectedness between banks and other institutions that made the financial collapse accelerate in the way that it did, costing taxpayers hundreds of billions in bailouts. Yet credit default swaps have been largely untouched by financial reform efforts. This is not surprising. Given how much money is generated by the big institutions trading these instruments, these entities are showering money on Washington to protect their profits. The Office of the Comptroller of the Currency reported that revenue generated by United States banks in their credit derivatives trading totaled $1.2 billion in the third quarter of 2009. Congressional “reform” plans for credit default swaps are full of loopholes, guaranteeing that another derivatives-fueled financial crisis awaits us. According to the Bank for International Settlements, credit default swaps with a face value of $36 trillion were outstanding in the second quarter of 2009, the most recent figures available. The biggest players in this world are JPMorgan(JPM), Citibank(C), Bank of America(BAC) and Goldman Sachs(GS). All of those firms fall squarely into the category of institutions that are too politically connected to fail. Because of the implicit taxpayer backing that accompanies such lofty status, derivatives become exceedingly dangerous, said Robert Arvanitis, chief executive of Risk Finance Advisors, a corporate advisory firm specializing in insurance. “If companies were not implicitly backed by the taxpayers, then managements would get very reluctant to go out after that next billion of notional on swaps,” he said. “They’d look over their shoulder and say, ‘This is getting dangerous.’” But taxpayers remain decidedly on the hook for future bailouts because Congress has done nothing to eliminate the once-implied but now explicit government guarantees backing large and interconnected companies. And on derivatives trading, lawmakers’ moves have been depressingly incremental.
- Energy Scoreboards, Designed for the Home. UTILITIES are gradually installing smart meters that can tell homeowners the price of the electricity they’re using at the time, including discounts for off-peak hours. But those meters aren’t yet in all that many homes. There will soon be new options, though, for consumers who want to save money by using energy more efficiently. Companies are coming up with dozens of computer-based devices that monitor electricity costs, outlet by outlet, inside a home.
- Another Puzzle After Iran Moves Nuclear Fuel. When Iran was caught last September building a secret, underground nuclear enrichment plant at a military base near the city of Qum, the country’s leaders insisted they had no other choice. With its nuclear facilities under constant threat of attack, they said, only a fool would leave them out in the open. So imagine the surprise of international inspectors almost two weeks ago when they watched as Iran moved nearly its entire stockpile of low-enriched nuclear fuel to an above-ground plant. It was as if, one official noted, a bull’s-eye had been painted on it. Why take such a huge risk? The theories run from the bizarre to the mundane: Under one, Iran is actually taunting the Israelis to strike first. Under another, it is simply escalating the confrontation with the West to win further concessions in negotiations. The simplest explanation, and the one that the Obama administration subscribes to, is that Iran has run short of suitable storage containers for radioactive fuel, so it had to move everything.
- Cellphones Let Shoppers Point, Click and Purchase. Shoppers will soon be able to stand outside the designer Norma Kamali’s boutique in Manhattan, point a phone at merchandise in the window and buy it — even late at night when the store is closed. Ms. Kamali is at the forefront of a technological transformation coming to many of the nation’s retailers. They are determined to strengthen the link between their physical stores and the Web, and to use technology to make shopping easier for consumers and more lucrative for themselves. The main way they plan to do it is by turning people’s mobile phones into information displays and ordering devices.
- Wary Centrists Posing Challenge in Health Care Vote. The future of President Obama's health care overhaul now rests largely with two blocs of swing Democrats in the House of Representatives — abortion opponents and fiscal conservatives — whose indecision signals the difficulties Speaker Nancy Pelosi faces in securing the votes necessary to pass the bill. With Republicans unified in their opposition, Democrats are drafting plans to try on their own to pass a bill based on one Mr. Obama unveiled before his bipartisan health forum last week. His measure hews closely to the one passed by the Senate in December, but differs markedly from the one passed by the House. That leaves Ms. Pelosi in the tough spot of trying to keep wavering members of her caucus on board, while persuading some who voted no to switch their votes to yes — all at a time when Democrats are worried about their prospects for re-election.
zerohedge:
Washington Post:
- Senators to propose abandoning cap-and-trade. Three key senators are engaged in a radical behind-the-scenes overhaul of climate legislation, preparing to jettison the broad "cap-and-trade" approach that has defined the legislative debate for close to a decade. The sharp change of direction demonstrates the extent to which the cap-and-trade strategy -- allowing facilities to buy and sell pollution credits in order to meet a national limit on greenhouse gas emissions -- has become political poison. In a private meeting with several environmental leaders on Wednesday, according to participants, Sen. Lindsey O. Graham(R-S.C.), declared, "Cap-and-trade is dead." Graham and Sens. John F. Kerry(D-Mass.) and Joseph I. Lieberman (I-Conn.) have worked for months to develop an alternative to cap-and-trade, which the House approved eight months ago. They plan to introduce legislation next month that would apply different carbon controls to individual sectors of the economy instead of setting a national target. According to several sources familiar with the process, the lawmakers are looking at cutting the nation's greenhouse gas output by targeting, in separate ways, three major sources of emissions: electric utilities, transportation and industry. Power plants would face an overall cap on emissions that would become more stringent over time; motor fuel may be subject to a carbon tax whose proceeds could help electrify the U.S. transportation sector; and industrial facilities would be exempted from a cap on emissions for several years before it is phased in. The legislation would also expand domestic oil and gas drilling offshore and would provide federal assistance for constructing nuclear power plants and carbon sequestration and storage projects at coal-fired utilities.
- Homeland Security Dept. Says it Will Drop Plans for Bush-Era Nuclear Detectors. The Department of Homeland Security office responsible for protecting the nation from nuclear and radiological terrorism is largely scrapping plans for new high-tech detectors for screening vehicles and cargo.
- The Golden Question. Don't buy a stagnant piece of metal when you could own growth.
- Behind Wynn's(WYNN) Foxwoods Move. Vegas player sees big money on the table in S. Phila.
- 3-D TV is No Longer Just a Vision. The first sets quietly go on sale at Amazon.com. All viewers need now is some content.
alternet:
- Scrutiny of Goldman's(GS) Role in Greek Debt Crisis Intensifies in US. The growing turmoil in Europe and Bernanke’s comments may signal that we’ve reached a tipping point — that these financial firms will no longer be able to avoid all substantial inquiries into their business practices, and that they’ll no longer hold sway over economic policies here and abroad. Not that Bernanke himself will follow through. But the need for a significant, public investigation of these individuals and their firms has become so pressing that even the most compromised US officials are paying it lip service. Whether it happens here or in Europe, Goldman’s day in court is drawing near.
- 44% Rate US Health Care System Good or Excellent, Just 28% Say Poor. All the talk about reforming health care over the past year hasn’t led to any legislation, but it has generated improved perceptions of the U.S. health care system and left voters divided about the need for reform. Following President Obama's bipartisan health care summit on Thursday, 44% of voters nationwide rate the U.S. health care system as good or excellent. That’s up from 35% when the President first proposed his reform ideas last May and up from 29% two years ago. In more recent months, perceptions of the system have stabilized. The latest Rasmussen Reports national telephone survey finds that just 28% now say the U.S. health care system is poor. Additionally, 76% of those with insurance rate their own coverage as good or excellent. Just three percent (3%) rate their own coverage as poor.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 25% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-two percent (42%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -17 (see trends).
Politico:
- Democrats Dig in For Last Stand. Democrats took heat over the “Louisiana Purchase,” and ultimately disavowed the “Cornhusker Kickback.” Now, they are racing to keep Republicans from defining the only legislative tool left to salvage the health care reform bill as yet another tactic hatched in a Democratic back room. During a year in which “deal” is a dirty word, Democratic congressional leaders are already waging a battle to defend reconciliation and beat back Republican charges that the fast-track rules are an abuse of power. Democrats, including President Barack Obama, like to say Americans care more about the shape of a final bill than the way it was passed. But the Senate health care bill has suffered, in part, because of a voter backlash over the tactics Democrats employed to secure 60 votes in the Senate. Republicans are craving a repeat. “I’ll tell you one thing, if Speaker Pelosi rams this bill through the House using a reconciliation process, they will lose their majority in Congress in November,” House Minority Whip Eric Cantor (R-Va.) said on NBC’s “Meet the Press.”
- Republicans Want Hearing on Fannie/Freddie Bailout. Two key Republicans are urging the U.S. House of Representatives to speed up a public hearing to investigate the administration's bailout of home funding giants Fannie Mae and Freddie Mac. In a letter dated March 1, Rep. Darrell Issa, ranking member of the Committee on Oversight and Government Report, and Jim Jordan, ranking member of the Subcommittee on Domestic Policy, criticized U.S. Treasury Secretary Timothy Geithner's statement last week that specific legislative proposals to overhaul the two companies were unlikely before 2011. "The taxpayer bailout of Fannie Mae and Freddie Mac will almost certainly be the most expensive of the financial crisis," they said in the letter to Edolphus Towns, Chairman of the House Committee on Oversight and Government Reform and Dennis Kucinich, chairman of the House Subcommittee on Domestic Policy.
- Brain Images Suggest Alzheimer's Drug is Working. New imaging technology suggests an experimental drug for Alzheimer's reduces clumps of plaque in the brain by around 25 percent, lifting hopes for a medicine that disappointed in clinical tests two years ago. Bapineuzumab -- being developed by Pfizer Inc (PFE), Irish drugmaker Elan Corp (ELN) and Johnson & Johnson (JNJ) -- is a potential game-changer because it could be the first drug to treat the underlying cause of the degenerative brain disease.
- Greeks Plan Tax Rises and Spending Cuts. Greece is preparing to announce new austerity measures and a bond issue this week, amid further signs that the European Union is crafting a multibillion-euro plan to help the country fund its borrowing if necessary. The Greek government plans to unveil the extra measures in the next few days – perhaps as early as Monday – after a visit to Athens by Olli Rehn, European commissioner for economic and monetary affairs. Athens hopes that more tax rises and spending cuts will convince the markets and the EU of its determination to slash its budget deficit at least 4 percentage points to 8.7 per cent of gross domestic product in 2010, Greek officials said. The additional measures to be announced by Athens are expected to include a rise in value added tax, another increase of up to 30 per cent in the special consumption tax on fuel, duties on tobacco and alcohol, and cuts in civil servants’ pay. It might also include references to some structural measures such as the removal of barriers to entry in a number of professions.
- Hedge Funds Prosper From Greek Debt. Hedge funds have made large profits from Greek debt and providing insurance to overexposed European banks, it emerged on Sunday. The hedge funds have been successful as traders anticipated that over-exposed European banks would drive a wave of selling against Greece, industry insiders told the Financial Times. “There are a group of funds, perhaps three or four, that have played this as a huge sovereign basis trade, and made a lot,” said a strategist at one of London’s biggest hedge funds. Paulson & Co, the $32bn fund, was identified by several industry participants as one of those involved. European politicians last week stepped up attacks on hedge funds and the credit default swaps market, arguing that tougher regulation might be necessary. An estimated 95 per cent of Greek debt is held within the eurozone – most by European banks, according to Barclays research. The hedge fund trade has worked because the funds involved were huge buyers of Greek sovereign bond default protection through the CDS market in 2009, when the price of such insurance was low, according to market participants. Having bought insurance cheaply, the hedge funds are now in the market to buy the underlying Greek debt, the yield on which has risen significantly, or else write insurance against it for other market participants – in both instances netting out their existing positions but at a significant profit, industry insiders said. The trade was calculated to succeed on the basis that European banks in particular would cause a blowout in Greek debt spreads and would be desperate to vacuum up CDS protection in the event of a deterioration in the Greek government’s economic standing, according to an insider at a large fund. Greek CDS protection traded at 125bps in late October, equivalent to an annual payment of $12,500 for every $1m of protection acquired. The same CDS contract peaked early in February at 428bps, according to Bloomberg. The price on Friday closed at 364bps.
- Time to Outlaw Naked Credit Default Swaps. I generally do not like to propose bans. But I cannot understand why we are still allowing the trade in credit default swaps without ownership of the underlying securities. Especially in the eurozone, currently subject to a series of speculative attacks, a generalised ban on so-called naked CDSs should be a no-brainer. Naked CDSs are the instrument of choice for those who take large bets against European governments, most recently in Greece. A naked CDS purchase means that you take out insurance on bonds without actually owning them. It is a purely speculative gamble. There is not one social or economic benefit. Even hardened speculators agree on this point. Especially because naked CDSs constitute a large part of all CDS transactions, the case for banning them is about as a strong as that for banning bank robberies. So why are we so cautious? From conversations with regulators and law-makers, I suspect they are not always familiar with those products, to put it kindly, and that they may be afraid of regulating something they do not understand. They understand, or think they do, what a hedge fund is. Restricting hedge funds is something they can sell to their electorates. Hedge funds were not at the centre of the crisis, but they are a politically expedient target. Banning products with ugly acronyms that nobody understands seems like unnecessarily hard work. I do not want to exaggerate the case for a ban. This speculation is neither the underlying cause of the global financial crisis, nor of the eurozone’s underlying economic tensions. But naked CDSs have played an important and direct role in destabilising the financial system. They still do. And banks, whose shareholders and employees have benefited from public rescue programmes, are now using CDSs to speculate against governments.
- Emerging Market Rate Risk Unnerves Investors. Investors are pricing in big interest rate rises in emerging market economies this year, sparking fears of a stock market sell-off and prompting worries over the global recovery, which has been driven by the developing world. With the withdrawal of cheap central bank money in the industrialised world coupled with the increasing tensions in the eurozone because of the Greek debt crisis, sharp rate rises in emerging markets could deliver a further blow to the growth outlook. Investors are concerned that emerging market central banks might be forced to tighten monetary policy quickly to keep a lid on the build-up of inflationary pressures. Significant rate increases are being forecast in Brazil, Turkey, Mexico and India. Brazilian forward markets are pricing in a 256 basis point rate increase to 11.50 per cent by the end of the year. In China, bank lending rates are not expected to rise sharply. But Beijing is restraining its economy by raising capital reserve requirements for commercial banks.
- Polar Bear is a 'New' Species. Polar bears may have come into existence only 150,000 years ago, when brown bears were trapped by an ice age and had to adapt quickly to survive, scientists have found. The suggestion follows the discovery of the jawbone of an animal that died up to 130,000 years ago, making it the oldest polar bear fossil found. The bone has yielded new insights into the origins of Earth’s largest land predator. One is the possibility that polar bears owe their existence not only to past climate change, including ice ages, but have also survived at least one long period of global warming. It means polar bears have already survived a global warming that affected the northern hemisphere from 130,000 to 115,000 years ago, when the Greenland ice sheet and the Arctic ice cap were smaller than now. Professor Chris Stringer, of the Natural History Museum in London, an expert in ice ages, said: “Early polar bears would not have had all the specialisations of modern animals and we know nothing about their behaviour. “Living through a warm period back then does not mean they are resilient to climate change now.”
- Speculators Against Greece Will Fail, EIB Chief Tells L'Echo. Speculators "attacking" Greece over its budget deficit will fail because of the European Union's pledge to maintain stability in the euro area, the head of the EU's lending arm said. "The speculators consider Greece to be the weak link of the euro zone and they are attacking it," European Investment Bank President Philippe Maystadt said in an interview. "But I believe the speculators will be defeated." On Feb. 11, EU heads of government pledged in a statement to take "determined and coordinated action, if needed, to safeguard financial stability in the euro area as a whole."
Barron's:
- Made positive comments on (GOOG), (ITRI), (ENOC), (BAX), (FRO), (CACC), (BK), (CNQ), (DEO), (BRK/A) (MDR) and (CSCO).
- Made negative comments on (OSK) and (PALM).
- Reiterated Buy on (DRC), raised target to $38.
- Asian indices are +.50% to +1.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 109.0 -7.5 basis points.
- S&P 500 futures +.43%
- NASDAQ 100 futures +.54%
- BNO Breaking Global News of Note
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Company/Estimate
- (DISH)/.32
- (OSG)/-1.20
- (IPI)/.11
- (RDC)/.49
- (DDS)/1.10
- (KWK)/.25
- (EP)/.27
- (DBRN)/.29
- (MDR)/.40
- (WRC)/.57
- (SPWRA)/.47
- (BID)/.67
8:30 am EST
- Personal Income for January is estimated to rise +.4% versus a +.4% gain in December.
- Personal Spending for January is estimated to rise +.4% versus a +.2% increase in December.
- PCE Core for January is estimated unch. versus a +.1% gain in December.
- ISM Manufacturing for February is estimated to fall to 58.0 versus 58.4 in January.
- ISM Prices Paid for February is estimated to fall to 68.0 versus 70.0 in January.
- Construction Spending for January is estimated to fall -.6% versus a -1.2% decline in December.
- (ARO) 3-for-2
- The Fed's Lacker speaking, Volcker speaking, BofA Hedge Fund Conference, Morgan Stanley Tech/Media/Telecom Conference, Citi Property Conference, BMO Metals & Mining Conference, (BEAV) investor day, (CAB) analyst day, (PCG) investor conference could also impact trading today.
