Bonds at Risk as Moody's, S&P Poised to Lower Credit Ratings: Euro Credit. Europe’s most-indebted countries are vulnerable to additional rating cuts driving up their borrowing costs, which may pressure policy makers to muster a more aggressive response to the region’s debt crisis. “To say that we are at the bottom of credit ratings cycle, by implication one will have to believe that the deleveraging process has come to an end,” said Peter Geikie-Cobb, who helps manage about $6.5 billion at Thames River Capital U.K. Ltd. in London. “I don’t think that’s the case.” Fitch Ratings cut Greece to BB+ on Jan. 14, joining Standard & Poor’s and Moody’s Investors Service in bestowing junk status on the country’s debt. Moody’s began reviewing Portugal and Spain in December after S&P started its three-month clock on whether to downgrade Spanish debt. The European Union’s so-called peripheral countries have seen their creditworthiness evaporate as surging budget deficits and slumping economic growth boosted debt. The bailouts of Greece and Ireland have focused investor scrutiny on other high- deficit countries such as Portugal, Spain and Belgium. “The risks of ratings changes in the next few months are high, and the rather more Pavlovian reaction of short-term trading books will indeed be sensitive to such changes,” said Marc Ostwald, a strategist with Monument Securities in London. A wave of ratings downgrades could begin within weeks.
House Approves Repeal of Obama's Health-Care Reform Law. The U.S. House of Representatives voted to repeal President Barack Obama’s health-care overhaul as Republicans delivered on campaign promises to reopen debate on the issue and attempt to reshape the law. The measure passed 245-189, with all of the House’s 242 Republicans joined by three Democrats to support overturning the measure signed into law by Obama last March. “Repeal means keeping a promise,” said House Speaker John Boehner in a speech on the House floor. “This is what we said we would do.” The House action officially re-ignited a debate that consumed Congress during much of Obama’s first two years in office and is likely to be a prime topic during the 2012 presidential campaign. “This ain’t repealing nothing,” said Representative Charles Rangel, a New York Democrat, on the House floor. “This is the political theater part of it.” House Majority Leader Eric Cantor, a Virginia Republican, told reporters today that “the American people deserve to see a vote in the Senate.” Senate Minority Leader Mitch McConnell, a Kentucky Republican, said he will push for one. Cantor said the repeal vote will be followed tomorrow by a vote instructing House committees “to begin work to construct an alternative health-care vision” that will be “our so-called replacement bill.” During debate today, Republicans said their plan would include many provisions that Democrats touted in the existing law, including allowing young adults to stay on their parents’ insurance plans up to age 26 and barring insurers from rejecting coverage for people based on pre-existing conditions. Boehner, an Ohio Republican, told reporters that a replacement plan would aim to “bring down the cost of health insurance for the American people and expand access.” As they work on their proposals, Republicans plan to use the House Appropriations Committee to stymie Obama’s overhaul measure, mainly by denying money for implementing some of its provisions. Forty-six percent of Americans think the health care law is likely to cut jobs, 54 percent think it will hurt the economy, and 62 percent see it as increasing the federal deficit, according to a poll conducted Jan. 13-16 by ABC News and the Washington Post. Republicans, who call the law “Obamacare,” contend it will raise taxes, destroy jobs and burden businesses with new requirements such as one that makes them report to the Internal Revenue Service any expenditure over $600. “Let’s stop payment on this check before it can destroy more jobs and put us in a deeper hole,” Boehner said in his floor speech. Representative Michele Bachmann, a Minnesota Republican, termed the overhaul measure “the crown jewel of socialism; it is socialized medicine.” The three Democratic lawmakers voting for repeal were Dan Boren of Oklahoma, Mike McIntyre of North Carolina and Mike Ross of Arkansas.
Fed Creates Diversity, Inclusion Offices at Board, 12 Banks. The Federal Reserve is establishing offices to promote diversity at the central bank’s Washington- based board and 12 regional banks as required by a law overhauling financial regulation enacted last year. The Office of Diversity and Inclusion will also develop standards to assess the practices of entities regulated by the Fed, the central bank said in a statement today. Sheila Clark, who has overseen the Equal Employment Opportunity programs at the Fed board, was named program director.
Health Journals May Force Scientists to Report Hedge Fund Ties to Research. The New England Journal of Medicine and 13 other research publications may force scientists who submit studies to disclose payments from hedge funds in the wake of insider-trading probes involving a drugmaker and technology companies. Editors for the New England Journal, the Journal of the American Medical Association and 12 other periodicals will discuss during their annual meeting in June whether researchers must reveal investment-industry ties, said Karen Buckley, a New England Journal spokeswoman. Existing rules on payments by drugmakers and device companies don’t cover arrangements with investors, Buckley said in a phone interview.
High-Frequency Traders May Accept More Risk, Liquidnet Says. Some high-frequency trading firms will transact blocks of shares away from exchanges as pending regulations restrict some of their activities, according to analyst Vlad Khandros at Liquidnet Holdings Inc. The prediction was 1 of 11 that Khandros, a market- structure and public-policy analyst, sent to some of New York- based Liquidnet’s 630 mutual fund and hedge fund clients today. He also said high-frequency trading, in which firms may transact thousands of times a second, will become an “accepted and defined” category of market participants this year.
Bankrupt Vallejo May Repay Its Creditors as Little as 5% of Claims. The city of Vallejo, California, proposed paying some creditors as little as 5 percent of what they are owed, making it the first general municipality that would fail to fully repay its debts in bankruptcy. General unsecured creditors would collect 5 percent to 20 percent of their claims under the plan of adjustment filed late yesterday in U.S. Bankruptcy Court in Sacramento, the state capital. No city or county has used federal bankruptcy laws to force creditors to take less than they are owed, according to Bruce Bennett, the lead lawyer for Orange County, California, when it filed the biggest municipal bankruptcy in the U.S. in 1994. Vallejo’s plan assumes the city can’t provide essential services, like police and fire protection, while also paying its debts, he said. Should the city succeed, the case “may become an important precedent,” Bennett said in an interview.
Finra's Ketchum Says Brokers Likely to Face Fiduciary Standard. The Financial Industry Regulatory Authority’s top executive said federal regulators are “very likely” to force U.S. brokers to meet stricter requirements for acting in the best interests of their clients. The Securities and Exchange Commission may force brokers who give personalized advice to adopt the fiduciary standard applied to investment advisers, Finra Chief Executive Officer Richard Ketchum said today at a securities law conference in Coronado, California.
Obama Dinner Menu Includes Maine Lobster, Rib Eye and Apple Pie. The guests invited to President Barack Obama’s state dinner in honor of Chinese President Hu Jintao will be served a “quintessentially American” meal, including “old fashioned apple pie with vanilla ice cream,” according to the menu released by the White House. The main course for the third state dinner hosted by the president and Michelle Obama will feature poached Maine lobster, dry aged rib eye with double stuffed potatoes and creamed spinach. Among the 225 invited guests are actor Jackie Chan, Jamie Dimon, chief executive officer of JPMorgan Chase & Co.(JPM), Walt Disney Co.(DIS) CEO Robert Iger and former Presidents Jimmy Carter and Bill Clinton.
Daley Files to Sell $8.3 Million JPMorgan(JPM) Shares After Joining Obama Team. William Daley, President Barack Obama’s new chief of staff, filed a notice with the Securities and Exchange Commission today to sell 186,190 shares of JPMorgan Chase & Co. that he valued at almost $8.3 million. The approximate date of sale was listed in the filing as today and comes as Daley, a former JPMorgan executive, divests his holdings to work at the White House.
Godrej Raises Prices for Third Time in Three Months as Indian Costs Surge. Godrej Consumer Products Ltd., India’s second-largest maker of bath soap, will raise prices for a third time in as many months to offset raw material costs that have climbed 50 percent since April. “We are facing an abnormal scenario in raw material prices,” Managing Director A. Mahendran said in a Jan. 18 interview. Godrej Consumer, controlled by billionaire Adi Godrej, plans to raise prices of soap and hair color by as much as five percent, Mahendran said at its Mumbai headquarters.
Wall Street Journal:
Spain to Ramp Up Bailout of Banks. Spain plans to pour billions more euros into its troubled savings banks and force them to be more open about their lending practices, people familiar with the matter said, an acknowledgment that previous efforts to fix the banks have fallen flat as the country seeks to ward off an international bailout. In a first step, Spain is preparing to issue €3 billion ($4 billion) in debt in coming days, the people familiar with the matter said. Government officials are putting plans in place to eventually raise as much as €30 billion, according to these people, though some say the final tally will be less. The hope is that a series of capital injections will quell investor jitters about the savings banks, known as cajas (literally, "boxes"), which have been a thorn in Spain's side as it seeks to convince investors that the country's finances are stable. The fate of the cajas is inextricably tied to the fate of Spain and potentially to the euro itself. Fear that the savings banks can't raise funds on their own and will need a government bailout was one reason ratings agency Moody's put Spain's rating on review for a downgrade last month.
China's rare-earth exports dropped 9.3% to 39,813 metric tons last year, underscoring the government's tight grip on the specialized metals, citing data from China Customs Statistics Information Center.
Rivals Seek New Balance. Obama, Hu Emphasize Common Ground, Gloss Over Lasting Disputes at Summit. U.S. President Barack Obama and Chinese President Hu Jintao, seeking a steadier footing for the often-troubled U.S.-China relationship, played up the two nations' common interests—and soft-pedaled or ignored longstanding issues that divide them.
Goldman(GS) Profit is Pinched by New Rules. Goldman Sachs Group Inc.'s profit slide of 52% in the fourth quarter showed the securities giant's size and swagger aren't enough for it to escape the tightening squeeze of a regulatory overhaul and jittery clients and investors.
As Food Prices Soar, Eateries Scramble. Soaring global food prices, particularly for meat, sugar and coffee, are putting pressure on the restaurant, travel and hotel sectors as they pursue a fragile recovery. In a bid to offset added costs without passing them on to price-sensitive consumers, many companies are scrambling to renegotiate contracts, find cheaper suppliers and reconfigure menus. Increased demand and market speculation, as well as bad weather like the recent flooding in Australia, have driven up prices for items ranging from coffee beans to beef.
The Union Threat to the Democrats' Future by Douglas E. Schoen. Unless the party confronts its allies in the public-employee unions, it will continue to lose credibility with voters around the country. There is a crisis in state and municipal finance. That much is clear. What hasn't been fully understood is that the fate of the Democratic Party is bound up in the resolution of that crisis.
The Repeal Vote. Democrats are deriding last night's House vote to repeal ObamaCare as "symbolic," and it was, but that is not the same as meaningless. The stunning political reality is that a new entitlement that was supposed to be a landmark of liberal governance has been repudiated by a majority of one chamber of Congress only 10 months after it passed. This sort of thing never happens. More House Members—245 in total—voted to rescind the new entitlement than the 219 Democrats who voted to create it last March. That partisan majority narrowly prevailed over all 178 Republicans and some 38 Democrats. The three Democrats who favored repeal yesterday confirmed the bipartisan opposition to the kind of vast new social program that historically has been built on a national bipartisan consensus.
Seagate(STX) Profit and Sales Fall Sharply; Shares Skid. Seagate Technology reported sharply lower profit on Wednesday as sales of its computer hard drives and storage devices fell and it recorded restructuring costs as it gears up for a massive share buyback after the failure of a private equity takeover deal.
Goldman(GS) CEO Talks Shop With China's President. On the same day Goldman Sachs reported a 53% drop in earnings its CEO Lloyd Blankfein was chatting it up with President Obama and China’s President Hu Jintao.
AutomatedTrader:
Private Equity Warming to For-Profit Colleges; Hurdles Remain. Private-equity firms are showing some renewed interest in operators of for-profit colleges, though deal activity still may not pick up until regulatory clouds begin to clear later this year.
Skyscraper Building Boom Driven By China. China is building 44% of the 50 skyscrapers to be completed worldwide in the next six years, increasing the number of skyscrapers in Chinese cities by over 50%, says Andrew Lawrence, an Asian property analyst at investment bank Barclays Capital.
Reuters:
EBay(EBAY) Outlook Beats Street as Turnaround Bears Fruit. Online marketplace eBay Inc provided investors with a bullish 2011 profit outlook after the holiday quarter showed signs it is delivering a promised turnaround, as improvements in its buyer experience helped boost sales at its marketplaces unit. Its shares rose 2.4 percent after hours.
F5 Networks(FFIV) Weak Q2 Revenue View Drags Down Sector. F5 Networks forecast weak second-quarter revenue, knocking down network equipment stocks on concerns that the market for managing the explosion in Internet traffic may not be growing as fast as expected. Shares of F5 Networks, which has outperformed market expectations for the past seven quarters, plunged 23 percent after the company forecast lower-than-expected revenue for the January-March quarter.
Plexus(PLXS) Warns of Sequential Fall in Q3 Revenue; Shares Down. Plexus Corp warned of sequential decline in third-quarter revenue and a "significant" production delay for its customer Coca-Cola Co, sending the electronics manufacturing services company's shares down 10 percent in after-market trade.
US Trader Hetco Drives Up Oil Price. An American trading group reportedly building up a "huge" physical position in North Sea oil has driven London Brent prices above $98 a barrel. Hetco, which is part-owned by US oil and gas group Hess Corp, was said to have taken control of eight North Sea Forties oil shipments and two Brent cargoes – and it is believed to be in the market for more. The move would give Hetco more influence over the price of oil for immediate delivery.
Brazil Slams Brakes to Curb Inflation, Risking Hot Money Tsunami. Brazil has raised interest rates sharply, following China, India and host of countries across the emerging world in acting to curb inflation and counter the flood of dollar liquidity from the US. Alexandre Tombini, the new head of Brazil’s hawkish central bank, kicked off his tenure by raising the key Selic rate a half point to 11.25pc, despite fears that this will push the over-valued real to extreme levels.
Goldman Sachs £9.6bn pay and bonuses to rouse tensions with City. Goldman Sachs' staff have been handed a compensation pot worth $430,000 (£269,000) per employee in a payout that is likely to once again stir tensions between the City and the rest of the UK.
The Economic Times:
Leaks Force RIM(RIMM) to Break Talks with India. Canada-based Research in Motion , the maker of BlackBerry smartphones, has temporarily suspended its dialogue with the government on security issues saying leakage of sensitive discussions between the company and the Indian authorities had undermined the confidence needed for such talks. Endorsing RIM’s stance, Canada has complained to Home Secretary GK Pillai that confidential information submitted by the smartphone company was being leaked to the media, and a top executive from the cellphone company would visit New Delhi and assess the situation (on the leaks) before talks resume.
China Daily:
China's policies towards protecting intellectual property rights should not be labeled "protectionist" as the country seeks to prevent monopolies on technology by foreign companies, Mei Xinyu, a researcher at the Chinese Academy of International Trade and Economic Cooperation affiliated with the Ministry of Commerce, wrote.
China will continue to diversify its foreign exchange investments from U.S. Treasuries in a bid to control risk, citing Zhang Monan, a researcher with the State Information Center.
Evening Recommendations Citigroup:
Reiterated Buy on (MRO), raised target to $50.
Night Trading
Asian equity indices are -1.25% to -.75% on average.
Asia Ex-Japan Investment Grade CDS Index 111.0 +3.5 basis points.
Asia Pacific Sovereign CDS Index 113.0 +.5 basis point.
Initial Jobless Claims for last week are estimated to fall to 420K versus 445K the prior week.
Continuing Claims are estimated to rise to 3985K versus 3879K prior.
10:00 am EST
Existing Home Sales for December are estimated to rise to 4.87M versus 4.68M in November.
Leading Indicators for December are estimated to rise +.6% versus a +1.1% gain in November.
Philly Fed for January is estimated at 20.8 versus 20.8 in December.
11:00 am EST
Bloomberg consensus estimates call for a weekly crude oil inventory decline of -500,000 barrels versus a -2,154,000 barrel decline the prior week. Distillate supplies are expected to rise by +1,000,000 barrels versus a+2,652,000 barrel gain the prior week. Gasoline inventories are expected to rise by +2,500,000 barrels versus a +5,081,000 barrel gain the prior week. Finally, Refinery Utilization is expected to rise by -.5% versus a -1.6% decline the prior week.
Upcoming Splits
(TEF) 3-for-1
Other Potential Market Movers
The $13 Bln 10-Year TIPS Auction, (SE) analyst meeting and the (WGL) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology and commodity shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.
North American Investment Grade CDS Index 83.11 -.19%
European Financial Sector CDS Index 154.35 bps -.79%
Western Europe Sovereign Debt CDS Index 190.0 bps -.78%
Emerging Market CDS Index 202.86 +2.30%
2-Year Swap Spread 23.0 unch.
TED Spread 15.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .15% +1 bp
Yield Curve 276.0 -1 bp
China Import Iron Ore Spot $182.70/Metric Tonne +.72%
Citi US Economic Surprise Index +47.20 -1.0 point
10-Year TIPS Spread 2.36% -2 bps
Overseas Futures:
Nikkei Futures: Indicating -102 open in Japan
DAX Futures: Indicating -5 open in Germany
Portfolio:
Lower: On losses in my Ag, Tech and Biotech long positions
Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short
Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades to session lows, despite gains overseas, strong earnings reports from (AAPL)/(IBM) and diminishing eurozone sovereign debt angst. On the positive side, Computer Service, Telecom and Restaurant shares are relatively strong, rising on the day. Lumber is rising +2.02%. The 10-year yield is falling -3 bps to 3.33%. The Italy sovereign cds is falling -3.73% to 197.56 bps, the Spain sovereign cds is declining -5.45% to 282.74 bps, the Belgium sovereign cds is falling -5.75% to 193.37 bps and the US sovereign cds is falling -4.32% to 49.98 bps. The Western Europe Sovereign CDS Index is now -28 bps off its record high set on January 11. Moreover, the US Muni CDS Index is dropping -4.67% to 2134.29 bps. On the negative side, Airline, Education, Gaming, Homebuilding, HMO, Hospital, Biotech, I-Banking, Bank, Networking, Disk Drive, Semi, Internet, Steel, Ag, Oil Service, Alt Energy and Coal shares are under significant pressure, falling more than 2.0%. (XLF)/(IYR) have underperformed throughout the day. Small-cap and Cyclical shares have also underperformed today. Weekly retail sales rose +2.7% this week versus a +2.8% rise the prior week and down from a +3.8% gain during the first week of Dec. The Hungary sovereign cds is rising +1.21% to 364.15 bps and the Emerging Markets Sovereign CDS Index is gaining another +.68% to 188.44 bps. Rough Rice futures have surged +9% in five days. China's 7-day Repo Rate is jumping +131 bps today to 4.05% on tightening concerns. This is the first decline for US stocks in awhile on a day with mostly positive news, which could indicate a change of character for the market. Losses are worse than the major averages suggest. January option expiration is on Friday and the DJIA has declined 10 of the last 12 with big losses seen in 2003, 2006 and 2010. I expect US stocks to trade modestly lower into the close from current levels on China inflation fears, profit-taking, technical selling and more shorting.
China Business Environment for U.S. Firms Fails to Improve, Chamber Says. The business environment in China for U.S. companies has failed to improve and has in some cases worsened, according to a survey by the American Chamber of Commerce in Shanghai. Nearly two-thirds of U.S. companies in China surveyed said the regulatory environment has “not changed” or has deteriorated over the past year, according to the report released today. A total of 71 percent of companies surveyed said China’s enforcement of intellectual property rights has remained the same or gotten worse, an increase from the 61 percent that answered similarly in the chamber’s 2009 survey. Chinese rules including one to promote domestic innovation have lead companies and the U.S. government to express concerns about the treatment of foreign investors in the world’s fastest growing major economy. U.S. companies are concerned about rising protectionism in China, with 48 percent saying they see the regulatory environment as favoring Chinese firms, according to the chamber’s “China Business Report,” which surveyed 346 companies between November and December of last year.
Congressional Leaders to Skip State Dinner With Chinese Leader. and Senate Minority Leader Mitch McConnell won’t attend the black-tie event at the White House. House Minority Leader Nancy Pelosi, a critic of China’s human-rights policy, plans to go. Three of the four top U.S. congressional leaders plan to skip a state dinner tonight with Chinese President Hu Jintao, highlighting the contentious relationship between Congress and the major economic power. House Speaker John Boehner, Senate Majority Leader Harry ReidMembers of Congress are frequent critics of China, accusing the country of currency manipulation, abusing trade laws, threatening U.S. national security and violating human rights. A January survey conducted by the Pew Research Center for the People and the Press found that 53 percent of Americans said it was important for the U.S. to get tougher with China on trade and economic issues. One in five respondents said China posed the greatest threat of any country to the U.S., up from 11 percent in November 2009.
Corporate Bond Risk Declines to Lowest Since April in Europe. The cost of insuring European corporate bonds fell to the lowest level since April after euro area finance ministers signaled they will review their rescue fund for troubled states. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings decreased for a seventh day, declining 9 basis points to 400, according to JPMorgan Chase & Co. “There are signs that European leaders are moving toward a global solution to the debt crisis, and that’s part of what’s driving things,” said Greg Venizelos, a strategist at BNP Paribas SA in London. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings declined 3.75 basis points to 100.75, JPMorgan prices show. The Markit iTraxx Financial Index of senior swaps on 25 banks and insurers dropped 12 basis points to 170 and the subordinated gauge fell 22 to 287.5.
Portugal Borrowing Costs Fall, Demand Rises at 750 Million-Euro Bill Sale. Portugal’s borrowing costs fell and demand rose at the sale of 750 million euros ($1 billion) of 12- month bills, adding to other auctions this week that signal Europe’s high-deficit countries can still finance their debt. The yield fell to 4.029 percent from 5.281 percent, the highest in more than five years, at a sale of similar maturity securities on Dec. 1, the country’s debt agency said today in Lisbon. Investors bid for 3.1 times the amount of bills offered, more than the 2.5 times in December. “A decline of 120 basis points is really a relief, but if we look further back, this yield is quite high,” Filipe Silva, who manages 60 million euros including Portuguese bonds at Banco Carregosa in Oporto, Portugal, said in an e-mailed note.
Greek Bonds Decline as Die Zeit Says Germans Are Proposing Debt Buyback. Greek bonds fell after Die Zeit reported that Germany is considering a plan that would help the Mediterranean nation buy back its own securities. Greece would be allowed to repurchase bonds with funds from the European Financial Stability Facility made available “with favorable interest conditions,” the German newspaper said, without saying where it got the information. Greek bonds pared their losses after Germany’s finance ministry denied it was working on a “restructuring” of Greek debt. “Any talk of adjustments generally makes the market nervous,” said Orlando Green, assistant director of capital- markets strategy at Credit Agricole Corporate & Investment Bank. “The progress being made hasn’t been enough to reduce the uncertainty.” The Greek 10-year bond yield was seven basis points higher at 11.36 percent at 1:09 p.m. in London. It earlier rose as high as 11.66 percent. The extra yield, or spread, investors demanded to hold Greek bonds instead of similar-maturity German bunds widened 12 basis points to 8.45 percentage points, according to Bloomberg generic data.
Default Swaps Climb to 6-Month High on Debt Sales: Japan Credit. Costs to protect against a default by Japan reached a six-month high as the nation sells longer- dated debt today and a record 144.9 trillion yen ($1.76 trillion) of bonds next fiscal year. Credit-default swaps, used to protect against nonpayment and speculate on changes in creditworthiness for five years, climbed to 86.49 basis points on Jan. 18 from as low as 52.78 on Oct. 13, before today’s sale of 1.1 trillion yen of 20-year notes. Japan’s debt load will be double its gross domestic product this year, the most in the world, according to the Organization for Economic Cooperation and Development.
Mosaic(MOS) Faces Possible Bid as Cargill Divests $24.3 Billion Stake. Mosaic Co., North America’s second- largest fertilizer producer, will be a “possible” takeover target as Cargill Inc. divests its $24.3 billion stake in the company over the next two years. Cargill, the agriculture and food business that’s the largest closely held company in the U.S., will exchange its 64 percent holding in Mosaic, or 286 million shares, for Cargill stock and debt, the companies said yesterday in a statement. The Mosaic shares will then be sold in secondary offerings. “It’s possible for Mosaic to be acquired” during the more than two years in which the secondary offerings take place, Mosaic Chief Executive Officer Jim Prokopanko said on a conference call with investors and analysts.
FDIC's Bair Calls for Foreclosure Commission Modeled on BP Fund. U.S. mortgage servicers should fund a foreclosure commission that would compensate borrowers to resolve complaints over home seizures, Federal Deposit Insurance Corp. Chairman Sheila Bair said today in a Washington speech.
Brazil Oil Fields May Hold More Than Twice Estimated. Brazilian oil depositsbelow a layer of salt in the Atlantic Ocean hold at least 123 billion barrels of reserves, more than double government estimates, according to a university study by a formerPetroleo Brasileiro SA geologist. The research, which set out to show government figures were too optimistic, found they underestimated the area’s potential, said Hernani Chaves, a professor at the Rio de Janeiro State University who worked at Petrobras for 35 years. The forecast, which the study puts at a 90 percent probability, compares with the Brazilian oil regulator’s 50 billion-barrel estimate. “We started with a skeptical view and finished with bigger numbers,” Chaves said in an interview at the university, in the city of Rio. “When we got the first results I said: ‘Something is wrong, it’s too big.’”
Issa to Hold First Hearing on TARP; Geithner Invited. Representative Darrell Issa, the new chairman of the House Committee on Oversight and Government Reform, will hold his first hearing on a report by the special inspector general for the Troubled Asset Relief Program. The California Republican’s office said he has invited Treasury Secretary Timothy Geithner and inspector general Neil Barofsky to testify on Jan. 26, the same day Barofsky plans to deliver his quarterly report to Congress.
Goldman Sachs's Earnings Drop 52%, Matching Estimates. Goldman Sachs Group Inc. shares fell the most in almost two months after the firm reported its third straight quarterly earnings decline, led by a slowdown in trading and investment banking revenue. Fixed-income, currencies and commodities trading, the firm’s largest source of revenue, tumbled 48 percent from a year earlier to $1.64 billion, the New York-based company said today in a statement. Equities-trading revenue dropped 5 percent to $2 billion and investment banking fell 10 percent to $1.5 billion. Goldman Sachs’s clients bought and sold fewer stocks, bonds and other securities during the quarter because of the European debt crisis, regulatory changes and concern the economic rebound would stall, Chief Financial Officer David A. Viniar said on a conference call. While business picked up in January, Viniar said it’s too early to make predictions for the year.
Defaults by Cities Looming as U.S. Mayors Say Deficits Hinder Debt Payment. The mayors of Los Angeles and Chicago said the financial strains still weighing on local governments in the wake of the recession may cause cities to default on their bonds. Los Angeles Mayor Antonio Villaraigosa, a Democrat, said municipalities are being squeezed as states move to balance their own budgets, a step that can involve taking more funds that would otherwise be sent to towns and cities. “There’s no question you’ll see some cities in default,” Villaraigosa told reporters today at a press conference in Washington, where the U.S. Conference of Mayors is meeting.
Wall Street Journal:
Hedge Fund Assets Hit $1.917 Trillion. Hedge-fund assets grew at a record rate in the fourth quarter, Hedge Fund Research Inc. said Wednesday, as strong investment performance and new investor capital pushed industry assets to $1.917 trillion, just shy of their mid-2008 peak. But the industry isn't entirely back to health. Only 43% of funds ended the year at the level where they can collect performance fees on gains, and HFR data show that the vast bulk of new money is going to an elite group of large hedge-fund firms.
CNBC:
US, Europe Better Bets as Inflation Hits: Marc Faber. Escalating food and energy prices will take a greater toll in poorer countries such as China and India, the author of the "Gloom, Boom and Doom" report said in a CNBC interview.
Harry Reid Calls Chinese Leader Hu Jintao a 'Dictator'. Senate Majority Leader Harry Reid (D-Nev.) labeled Chinese President Hu Jintao a “dictator,” just as President Barack Obama prepares to host the Chinese leader on Wednesday at a state dinner aimed at soothing tensions between the two world powers. Reid’s off-the-cuff comments came Tuesday night during a televised interview with Las Vegas journalist Jon Ralston.
Germany Seeks Restraint on Bank Stress Test - Source. German regulators will lobby for the parameters in a new set of European bank stress tests not to be "overly stringent," a person briefed by German regulators said on Wednesday. Banks in Germany will receive formal notification of the new stress tests from the regulator in the next 14 days, the person said.
General Motors Co.(GM) plans to invest more than $300 million in San Luis Potosi, Mexico, to expand its production facilities and assemble a new car that will be launched in 2012, citing economic development minister of state, Martha Meade Espinosa. Espinosa said that the investment will create more than 1,850 direct jobs.
