Business News

Pentagon’s Asia Shift Favors Subs, Tankers

noreply@blogger.com (Jeanny TSY) — Fri, 27 Jan 2012 03:33:00 +0000

By Tony Capaccio - Jan 27, 2012 6:40 AM GMT+0700

The Pentagon’s shift to forces focused on Asia and the Middle East in a budget outlined today may protect from deep cuts U.S. makers of aircraft carriers, submarines, surface-combat vessels, electronic-warfare sensors, drones, long-range bombers and tankers.

While the plan would slow the pace of shipbuilding, its emphasis on naval forces in an era of budget-cutting may help vessel-makers Huntington Ingalls Industries Inc., General Dynamics Corp. (GD), Lockheed Martin Corp. (LMT) and Austal Ltd. It also may provide opportunities for aircraft companies Northrop Grumman Corp. (NOC) and Boeing Co. (BA) and missile maker Raytheon Co. (RTN)

“This budget protects, and in some cases increases, investments that are critical to our ability to project power in Asia and the Middle East,” Defense Secretary Leon Panetta said at a news conference at the Pentagon today disclosing elements of a $613 billion defense proposal for fiscal 2013. That includes $88.4 billion for continuing combat, led by the war in Afghanistan.

Panetta and Joint Chiefs of Staff Chairman General Martin Dempsey presented the budget proposal as part of an effort to cut $487 billion, or 8.5 percent, from $5.62 trillion in spending that had been planned for 2012 to 2021. Of that, $259 billion in reductions would occur by 2017.

The fiscal 2013 budget proposes to save about $45 billion, increasing to $53 billion in fiscal 2014 and $54 billion by 2017, according to Pentagon figures.

‘Far More Lethal’

The biggest initiative other than military hardware is a reduction of the Army -- “gradually,” according to Panetta -- to 490,000 personnel from about 565,000 today. The Army numbered about 480,000 in February 2002, one year before the Iraq invasion. The budget also calls for reducing the Marines to 182,000 from about 202,000 today.

“They will be fundamentally shaped by a decade of war, far more lethal, battle-hardened and ready,” Panetta said of U.S. forces. The Army was increased by as much as 95,000 and the Marines by 30,000, largely because of the Iraq war.

Representative Howard “Buck” McKeon, a California Republican who is chairman of the House Armed Services Committee, said President Barack Obama “has abandoned the defense spending structure that has protected America for two generations, turning 100,000 soldiers and Marines out of the force.

‘‘Unmanned assets’’ and special forces that Panetta is relying on ‘‘are a vital component in defending America, but they are insufficient to meet the challenges America faces,’’ McKeon said.

Base Closings

Panetta said the troop reduction will be accompanied by a request to Congress for a new round of domestic base closings ‘‘with a goal of identifying additional savings and implementing them as soon as possible.’’ He provided no specifics about what bases might be at risk.

The Pentagon’s Asia and Middle East emphasis reinforces the need for a long-range, stealthy bomber, and sustaining the Navy’s 11-carrier force with 10 air wings and big-deck amphibious vessels, Panetta said.

Huntington Ingalls of Newport News, Virginia, is building the three-ship, $40 billion Gerald R. Ford class of carriers to be equipped with a new electromagnetic catapult system built by closely held General Atomics Aeronautical Systems Inc.

‘‘Modernizing our submarine fleet will be critical to our efforts to maintain maritime access in these vital regions,” Panetta said.

‘Strike Option’

The plan calls for increasing the size of the Navy’s current Virginia-class attack submarines to carry more Tomahawk cruise missiles and to develop an undersea, non-nuclear “strike option” similar to an intercontinental ballistic missile. Raytheon of Waltham, Massachusetts makes the Tomahawk. Huntington Ingalls and General Dynamics make the submarine.

The “strike option” concept was first proposed by the Bush administration and resurrected in fiscal 2011 under Obama.

The Littoral Combat vessels, made for operating close to shore by Lockheed Martin of Bethesda, Maryland, and Austal of Henderson, Australia, get an expanded role in the plan. Panetta said the Navy intends to base some of them in Singapore and other patrol craft in Bahrain. Still, two vessels are being cut from plans for 2013 to 2017, which had called for buying during that period at least 15 of the 55 ships planned.

The plan calls for retiring some existing ships, including seven cruisers that aren’t capable of defending against ballistic missiles.

Amphibious Vessel Delay

The largest shipbuilding reduction would eliminate, through 2017 eight of nine planned Austal Joint High Speed Vessels designed to carry Army personnel. There was no indication the vessels would be purchased later.

The budget proposal delays by one year the start of construction for the LHA-8 large-deck amphibious vessel to be built by Huntington Ingalls.

The budget doesn’t slow the Navy’s plan to buy additional Arleigh Burke-class DDG-51 destroyers from General Dynamics and Huntington.

F-35 Plans

Panetta said the Pentagon was making “substantial reductions to programs that are experiencing schedule, cost or performance issues.”

They include Lockheed Martin’s Joint Strike Fighter, the F-35, and the Army Ground Combat Vehicle that’s in competition between General Dynamics and a team of BAE Systems Plc (BA/) and Northrop Grumman.

The Pentagon remains committed to the F-35 “but in this budget we have slowed procurement to complete more testing and allow for developmental changes before buying significant quantities,” he said.

The Defense Department will propose spending about $9.2 billion to buy 29 F-35 jets in its fiscal 2013 budget, 13 fewer than previously planned.

Beyond the next budget year, the Pentagon’s previous plan to purchase 62 F-35s in fiscal 2014 is being reduced to 29, according to budget data. The request for 2015 is dropping to 44 from 81, and the planned purchase for 2016 will decline to 66 from 108.

The Pentagon plans to postpone 179 aircraft beyond 2017, according to officials who spoke on condition of anonymity before today’s announcement.

Global Hawk Curtailed

The Pentagon is canceling the final 10 of one version of Northrop Grumman’s Global Hawk drones it was to buy, stopping at 21 of the Block 30 model because of rising costs. Dollars will be shifted instead into maintaining U-2 manned aircraft made by Lockheed Martin.

Experience with the Block 30 version “will help other Global Hawk programs,” including the advanced Block 40 and maritime and NATO versions, according to the budget document.

The Pentagon reversed a decision to cancel the $6.8 billion Joint Air-to-Ground Missile, pitting Lockheed against Raytheon, “significantly reducing” the program instead, and continuing to buy Hellfire missiles from several contractors including Lockheed.

The Pentagon also is delaying by as much as five years an Army helicopter modernization program and terminating a multi- billion dollar program to upgrade its fleet of Humvee all- terrain vehicles.

Northrop Grumman’s Defense Weather Satellite System program also was canceled.

The fiscal 2013 budget proposal is 1 percent less, unadjusted for inflation, than this year’s $531 billion plan. The numbers include spending on military construction.

The defense number, not including combat, grows to $534 billion in fiscal 2014, $546 billion in fiscal 2015, $556 billion in fiscal 2016 and $567 billion in 2017.

Adjusted for inflation, the Pentagon projects a 1.6 percent reduction in real spending power between 2013 and 2017.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

‘Extreme’ S&P 500 Momentum, VIX Signal Drop: Technical Analysis

noreply@blogger.com (Jeanny TSY) — Fri, 27 Jan 2012 03:32:00 +0000

By Lu Wang - Jan 27, 2012 12:00 AM GMT+0700

The Standard & Poor’s 500 Index’s best January rally since 1997 has pushed a pair of momentum and sentiment gauges to levels seen only 6 percent of the time since 1993, a sign the market is due for a pullback, BTIG LLC said.

The benchmark index’s 14-day relative strength index, which measures the degree that gains and losses outpace each other, rose above 70 yesterday for the first time since Feb. 18, according to data compiled by Bloomberg. Some technical analysts consider RSI readings above 70 a sign that stocks have risen too far, too fast. The Chicago Board Options Exchange Volatility Index (VIX), a gauge known as the VIX, fell below 20 for the first time since July on Jan. 19.

The last time RSI exceeded 70 while the VIX stayed below 20, 11 months ago, the S&P 500 reached a 32-month high before dropping 6.4 percent over the next month, data compiled by Bloomberg show. The VIX is the benchmark gauge of S&P 500 options prices.

“We’re definitely in a rare spot,” Josh Dollinger, Chief quantitative and technical strategist at BTIG in New York, said in a telephone interview. “These are extreme readings. They more often than not prove to be exhaustion tops.”

The S&P 500 rose 5.4 percent this year through yesterday, poised for the best January since it rose 6.1 percent during the first month of 1997, according to data compiled by Bloomberg. Stocks are extending the measure’s 11 percent rally in the October-December period, its best fourth-quarter increase since 2003 as improvements in hiring, manufacturing and home sales bolstered confidence in the world’s largest economy.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net

‘Stop-Newt’ Republicans Confront New Base

noreply@blogger.com (Jeanny TSY) — Fri, 27 Jan 2012 03:31:00 +0000

By Julie Hirschfeld Davis - Jan 27, 2012 3:28 AM GMT+0700

Two days after Newt Gingrich defeated Mitt Romney in the South Carolina presidential primary one of Romney’s big-name backers offered a grim prediction for his fellow Republicans.

“The possibility of Newt Gingrich being our nominee against Barack Obama I think is essentially handing the election over to Obama,” former Minnesota Governor Tim Pawlenty told reporters on a Jan. 23 conference call. “I think that’s shared by a lot of folks in the Republican Party.”

Pawlenty’s comments echoed those being uttered publicly and behind the scenes by elected Republicans, party activists, fundraisers and pundits, who represent a portion of the party establishment -- a “stop-Newt” caucus -- populated largely by people who have known the former U.S. House speaker for decades.

The question is: Can they?

For two decades, the Republican Party has seen an erosion of its traditional, top-down hierarchy, a decline aided by Gingrich himself in 1990 when he led a House revolt against a budget agreement negotiated by President George H.W. Bush that raised taxes. The rise of the anti-tax Tea Party wing in 2009 splintered the internal levers of power further, making it even harder to impose a choice on the rank and file.

“There really is no Republican establishment left that can control anything,” said Matthew Dowd, a onetime aide to President George W. Bush and now a Bloomberg Television contributor. “Some try to act like they are in charge, but the fraternity is now running the campus.”

South Carolina Dynamics

Those dynamics were on display in South Carolina. Romney, a former Massachusetts governor, lost by 12 percentage points even after campaigning throughout the state with Governor Nikki Haley and just a day after receiving the endorsement of Virginia Governor Bob McDonnell, the chairman of the Republican Governors Association. Haley, who rose to power with Tea Party backing, didn’t deliver either her state or its grassroots activists.

Meanwhile, Gingrich’s campaign gained momentum after Sarah Palin, the former Alaska governor who also has support from the Tea Party faction, said she’d vote for Gingrich in South Carolina if only to extend the length of the primary.

Similar signs of an insurgence came to light in the 2010 midterm elections, when Nevada voters tapped Sharron Angle -- a Tea Party-endorsed politician opposed by many of the state’s prominent Republicans -- to challenge Senate Majority Leader Harry Reid. And Delaware Republicans chose Christine O’Donnell over former governor and nine-term U.S. House Representative Mike Castle to seek an open Senate seat. Both Angle and O’Donnell lost.

Voters ‘in Charge’

“The voters are now in charge, and Republican leaders need to come to terms with that,” Dowd said. “The media needs to drop the myth that there is a Republican establishment capable of orchestrating anything more than a one-float GOP parade.”

Romney’s campaign, backed by well-known party strategists and fundraisers, has kept up a steady rollout of endorsement announcements from Republican elected leaders that demonstrate his broad support among the insiders. As of Jan. 20, he had the nods of five governors, 14 senators and 59 U.S. House members. That compares with two governors and a dozen congressmen who have endorsed Gingrich, according to Democracy in Action, a political web site that tracks endorsements.

‘Terrified About Newt’

“There are a lot of major players in the Republican Party who are terrified about Newt,” said Gary Gerstle, a specialist on social and political movements a Vanderbilt University in Nashville, Tennessee. “At a more conventional moment in American politics, the establishment would count for a lot more, but this is not a conventional moment. There are now big segments of the Republican Party that will not bow down to the establishment.”

Gingrich -- who served 20 years in Congress, four of them as speaker, and then began a lucrative career in Washington consulting on federal policy -- has been working to turn party leaders’ angst about his candidacy to his advantage, portraying himself as a candidate feared by the ruling class.

Campaigning today in Mount Dora, Florida, Gingrich called Romney’s campaign attacks against him “the desperate last stand of the old order throwing the kitchen sink, hoping something sticks.” He added that when he speaks out about it, “the entire establishment jumps up and says, ‘That’s cheating. How can you tell the truth? Don’t you know that’s politically incorrect?’”

Internal Power Struggle

The Romney-Gingrich face-off is bringing the simmering power struggle between the Republican grassroots and the party establishment to the fore, said Richard Viguerie, a veteran Republican direct-mail strategist and the chairman of ConservativeHQ.com.

“There is a war going on here between the grassroots and the establishment,” said Viguerie, who is backing former Pennsylvania Senator Rick Santorum. “People in the grassroots see the Republican establishment as part of the problem, not part of the solution, and Gingrich has the ability to go over the heads of the Republican leaders.”

Some political analysts and Gingrich backers argue he has harnessed a transformed landscape of presidential politics, in which technology and social media -- decentralized means of communication with voters -- are powerful forces, and campaign money flows more freely from outside traditional party channels.

Social Media

Gingrich has capitalized on the social media networks Facebook and Twitter to trumpet his message, and his campaign has benefited from the super-PAC Winning Our Future, largely funded by casino magnate Sheldon Adelson, that is raising and spending unlimited sums on his behalf. The Supreme Court legalized such groups in the 2010 ruling Citizens United v. Federal Election Commission.

“It’s a different communications beast, a different communications infrastructure and vehicle out there today” than in years past, former Oklahoma Congressman J.C. Watts told reporters Jan. 23. “Newt tapped into something that I think Republicans like. I think there is a backlash.”

At the root of the concern about Gingrich is whether he will be able to appeal to the broader U.S. electorate. Polls indicate that he has high unfavorable ratings and wouldn’t fare well in a head-to-head matchup against Obama. A January Gallup study found that all national political figures are viewed negatively.

‘Intensely Negative’

Still, “Americans have become more intensely negative in their evaluations of Newt Gingrich -- who now has the lowest score overall,” the study concluded.

Some prominent Republicans say there isn’t yet enough of a consensus that Gingrich is unelectable to give rise to a concerted effort among party operatives to thwart his ascent.

“I haven’t seen that there’s an all-hands-on-deck movement to try to block any candidate -- Newt or anyone else,” said Frank Donatelli, the chairman of GOPAC, a training organization for state and local Republican candidates once headed by Gingrich, and a former top party official.

The last time there was such an effort was in 1996, he added, after Pat Buchanan won the New Hampshire primary and prominent Republicans quickly coalesced around Bob Dole, who ultimately claimed the nomination.

“I haven’t heard that kind of alarm emanating about Newt,” Donatelli said.

Other prominent Republicans are sounding just such a warning. Dole endorsed Romney today, writing in a letter that the party should nominate the former governor “if we want to avoid an Obama landslide in November.”

Former Pennsylvania Congressman Bob Walker, a senior adviser to Gingrich’s campaign, said that rationale is backfiring on Romney with voters.

“It took them a little bit of time to realize that Newt Gingrich is capable of beating Obama, but now, I don’t think that they’re going to listen to party bosses anymore,” Walker said. “Newt is basically channeling the people’s anger.”

To contact the reporter on this story: Julie Hirschfeld Davis in Washington at jdavis159@bloomberg.net

To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net

BofA Said to Limit Bonuses for Investment Bankers, Traders

noreply@blogger.com (Jeanny TSY) — Fri, 27 Jan 2012 03:30:00 +0000

By Dawn Kopecki and Hugh Son - Jan 27, 2012 4:10 AM GMT+0700

Bank of America Corp., the U.S. lender seeking to preserve capital, will freeze base salary levels and limit cash bonuses to $150,000 for some investment bankers, said two people with knowledge of the plans.

The cap on cash payments applies to those getting as much as $1 million in total year-end bonuses, with the rest coming in shares of the Charlotte, North Carolina-based lender, said the people, who asked for anonymity because the matter is private. Employees are being told of their payments today and can sell some of the stock starting on Feb. 15, the people said.

“I can’t think of one banker who doesn’t have two or three times that in expenses,” said Gustavo Dolfino, a former UBS AG banker and now president of Whiterock Group LLC, a New York- based executive search firm, referring to the $150,000 limit. “They are probably making exceptions for their superstars. You haven’t seen the end of this, there will be musical chairs.”

Wall Street firms are getting bolder in curbing pay and shifting compensation methods as companies move to limit expenses. Bank of America Chief Executive Officer Brian T. Moynihan, 52, has said he may target as much as $3 billion in cost cuts in units including the investment bank as part of his plan to revive profit.

Cuts Are Coming

Earlier this month, Bank of America told investment bankers to expect compensation that averages 25 percent less than last year, people said this week. Employees in some departments were told packages were 30 percent smaller, and some managing directors will get no bonuses, said one of the people.

Awards include a combination of cash and shares, some of which can’t be sold for as long as three years. The firm’s decision to leave salaries unchanged comes after companies boosted them in 2009 to de-emphasize bonuses, which lawmakers said encouraged unwarranted risks that fueled the financial crisis. The bank uses a tiered system based on the size of the bonus when determining the percentage to pay in cash.

At Bank of America, a typical vice president’s base salary is about $175,000, while a director may make $250,000 and managing directors may earn $400,000, the people said. Bonuses, especially for senior workers, can be several times base pay.

Who Gets Cash

The restricted part of bonuses typically rises with the size of the total payout. For instance, bonuses less than $100,000 will be paid all in cash, the people said. Awards above that amount are a combination of cash and stock that vests over three years and unrestricted shares that can be sold immediately.

Bank of America said last week that it would issue about $1 billion in new stock to replace some cash incentives. The bonuses are called “special equity awards,” the people said. Jessica Oppenheim, a spokeswoman for the company, said she couldn’t comment. Reuters reported last week that the bank plans to give investment bankers more of their bonuses in stock.

Traders and investment bankers getting from $100,000 to $249,999 were told they will get 20 percent of that in cash, 20 percent in restricted stock and 60 percent in the new unrestricted shares, the people said. Employees (BAC) in this level typically received about 70 percent of awards in cash and 30 percent in restricted shares.

Bonus Allocations

Payouts between $250,000 and $499,999 will be split among 18.75 percent in cash, 25 percent in restricted stock and 56.25 percent in unrestricted stock. Historically, bonuses of that size would be split between 60 percent cash and 40 percent restricted stock.

Bonuses between $500,000 and $999,999 will be paid 15 percent in cash, 40 percent in restricted stock and the rest in unrestricted shares. That breakdown is more closely aligned with the historical practice of paying out 60 percent of awards in cash and 40 percent in restricted shares. Senior managers will get about 70 percent of their packages in restricted shares with the rest in cash or unrestricted shares.

The division, run by co-chief operating officer Thomas K. Montag, posted annual profit that plunged by half to $2.97 billion in 2011 as the European sovereign-debt crisis roiled markets. Montag, 55, told employees on Jan. 19 that the investment bank was rebounding after credit-rating downgrades last year sparked concern among clients.

Fees from investment banking, which includes advising clients on mergers and acquisitions as well as managing sales of shares and bonds, declined 35 percent in the fourth quarter to $1.1 billion, the bank said. The market was “challenging” because of Europe and the fallout from Standard & Poor’s downgrade of the U.S. credit rating, the lender said.

Cash Bonus

Compensation declines at Bank of America mirror actions by other firms. Morgan Stanley (MS) is reducing pay for senior investment bankers and traders by an average of 20 percent to 30 percent for 2011, people with knowledge of the move said. The firm is also capping immediate cash bonuses at $125,000 as it seeks to defer the pay of senior executives.

Credit Suisse Group AG, the second-biggest bank in Switzerland, told senior investment bankers that compensation for 2011 will be 30 percent lower on average than the previous year, four people briefed on the discussions said. Goldman Sachs Group Inc. (GS) Chief Financial Officer David Viniar said last week that discretionary compensation declined “significantly more” than the firm’s 26 percent drop in revenue.

To contact the reporters on this story: Dawn Kopecki in New York at dkopecki@bloomberg.net; Hugh Son in New York at hson1@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

Gingrich Attacks Romney in Florida as Swiss Account Owner

noreply@blogger.com (Jeanny TSY) — Fri, 27 Jan 2012 03:29:00 +0000

By Jonathan D. Salant and John McCormick - Jan 27, 2012 5:46 AM GMT+0700

Newt Gingrich opened a new line of attack against Mitt Romney, focusing on his wealth and ties to Goldman Sachs Group Inc. (GS), a firm he says added to the housing crisis.

Gingrich’s remarks, ahead of the Jan. 31 Florida (BEESFL) primary, were designed to blunt criticism of his work for Freddie Mac, the government-backed mortgage-lending company that Republicans link to the financial meltdown.

“We’re not going to beat Barack Obama with someone who owns Swiss bank accounts, Cayman Island accounts,” Gingrich said during a stop today in Mount Dora, Florida. “I am running for president to represent you, not to represent the Washington establishment, not to represent Goldman Sachs.”

Gingrich portrayed himself as the victim of attack ads run by Romney and his allies, calling them a “desperate last stand of the old order.” The former U.S. House speaker suggested that the ads ware being paid for by companies that foreclosed on the homes of Floridians.

With both men planning to appear tonight at a debate in Jacksonville, Gingrich also said Romney is spreading lies about him.

“We aren’t that stupid and you aren’t that clever,” Gingrich said, referring to Romney, the former Massachusetts governor and business executive.

Romney Response

Andrea Saul, a Romney spokeswoman, said it’s “puzzling to see Speaker Gingrich and his supporters continue their attacks on free enterprise. Unlike President Obama and Speaker Gingrich, Mitt Romney spent his career in business and knows what it will take to turn around our nation’s bad economy.”

Meeting later with reporters, Gingrich again brought up New York-based Goldman Sachs, whose employees and their families have provided more contributions to Romney than any other single employer. The company’s employees gave $367,200 to Romney through Sept. 30, according to the Washington-based Center for Responsive Politics, which tracks campaign finance. That’s more than the $235,275 he received from the company’s employees during his failed 2008 White House bid.

Gingrich said Romney had personal holdings in “a part of Goldman Sachs that was explicitly foreclosing on Floridians.”

David Wells, a Goldman Sachs spokesman, declined to comment.

Basis of Attack

When asked for the basis of his attacks, Gingrich’s campaign provided a link to an online post by Think Progress, whose website says it seeks to advance “progressive ideas and policies.”

The post’s author focused on Romney’s August financial disclosure that reported investments, through a blind trust, of between $1 million and $5 million in the Goldman Sachs Strategic Income Fund. Romney’s wife, Ann, also in a blind trust, placed between $200,001 and $500,000 in the fund, according to the disclosure.

That fund, which began in June 2010, held mortgage-backed obligations that constituted about a quarter of its investments as of March 31 last year, according to an annual report. Those obligations included adjustable-rate securities issued by Countrywide Financial Corp. and Washington Mutual Inc., lenders that were later purchased by Bank of America Corp. and JPMorgan Chase & Co., respectively.

Gingrich Investment

While the Think Progress report mentions that Countrywide and Wamu are involved in thousands of foreclosures filed in Florida, it doesn’t say that any of those foreclosed properties were held in the securitizations owned by the fund.

Gingrich, in a disclosure filed in July, listed retirement account investments of between $15,001 and $50,000 in the Pimco Total Return Fund and the Blackrock Global Allocation Fund, both of which listed holdings of mortgage-backed securities in their latest annual filings.

Gingrich also pointed to connections between Romney’s supporters and Freddie Mac. Romney has criticized Gingrich for his earnings of $1.6 million from Freddie Mac as a consultant.

Former Representatives Vin Weber of Minnesota, a Romney campaign adviser, and Susan Molinari of New York, who has made an anti-Gingrich TV ad, both were registered to lobby for Freddie Mac, according to the Center for Responsive Politics.

Another Romney supporter, Representative Mary Bono Mack, a California Republican, disputed Gingrich’s statements that Freddie Mac hired him as a historian.

‘Very Disingenuous’

“It is very disingenuous to say that he’s not an influence peddler,” she said in a conference call arranged by the Romney campaign. “There’s no doubt that he is. You cannot leave the speakership and not have influence, not only with your former colleagues, but future colleagues and the country as well.”

Romney, who has assailed Gingrich more vigorously following the former speaker’s Jan. 21 South Carolina primary win, pivoted back to his standard message today and focused on Obama.

Speaking at Paramount Printing in Jacksonville, a paper factory in the process of closing a plant there, Romney, 64, criticized the president for his handling of the economy.

“This has been a groundhog-day presidency,” Romney said. “He keeps saying the same things and we keep waking up to the same things going on.”

Dole Letter

The Romney campaign today released a letter from former Senate Majority Leader Bob Dole of Kansas, who led the Senate when Gingrich led the House. Dole said he is backing Romney for president.

“If we want to avoid an Obama landslide in November, Republicans should nominate Governor Romney as our standard bearer,” Dole, who lost the 1996 presidential election to incumbent President Bill Clinton by 8 percentage points, wrote.

Dole called Gingrich, 68, a “one-man-band who rarely took advice. It was his way or the highway.” Dole said Gingrich had “a new idea every minute and most of them were off the wall.”

Two polls released yesterday showed Romney and Gingrich in a virtual tie in Florida, heightening the pressure on both as they prepare for their televised debate. The surveys by Hamden, Connecticut-based Quinnipiac University and CNN/Time/ORC each showed Romney with 36 percent support and Gingrich with 34 percent.

The race’s two other remaining candidates -- former Senator Rick Santorum of Pennsylvania and U.S. Representative Ron Paul of Texas -- trailed far behind in the polls.

Santorum said today that Romney and Gingrich have refused to debate on policies because both agree on “the big issues of the day” such as cap-and-trade, health care mandates and the Wall Street bailout.

‘Real Contrasts’

“We want to have the real contrasts with President Obama,” Santorum told reporters in Tallahassee, the state capital. “Those two don’t disagree and I do. And that’s what makes us a much stronger and more viable candidate in the general election.”

As Romney’s Jan. 24 release of tax returns has provided fodder for his opponents, he has been emphasizing that he “didn’t inherit” his wealth. He also discussed yesterday why his tax rate is lower than those of many Americans.

“One of the reasons why we have a lower tax rate on capital gains is because capital gains are also being taxed at the corporate level,” Romney said during a stop in Miami. “The tax rate is really closer to 45 or 50 percent” for such income.

Romney Disclosure

His disclosure earlier this week showed he made $21.6 million in 2010 and used preferential rates for investment income and charitable contributions to hold his overall tax rate to 13.9 percent.

In Congress, Romney’s returns reignited a debate on the tax treatment of so-called carried interest, which provides some investment executives with preferential tax rates.

Romney said in an interview yesterday with CNBC that he would seek to keep the provision in the tax code, if elected, because he doesn’t want to raise taxes on anyone.

“If it’s actually a capital investment, and it’s fairly priced at the time people invest in it, and then it rises in value as a capital gain, then you treat it as a capital gain,” he said. “If someone turns it into what looks like ordinary income or a bonus, why then, obviously, it’s not a capital gain.”

To contact the reporters on this story: Jonathan D. Salant in Mount Dora, Florida at jsalant@bloomberg.net; John McCormick in Hollywood, Florida at jmccormick16@bloomberg.net

To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net

New Yorkers Face “Downward Mobility”

noreply@blogger.com (Jeanny TSY) — Fri, 27 Jan 2012 03:28:00 +0000

By Elizabeth Ody - Jan 27, 2012 1:54 AM GMT+0700

About one third of New York City residents nearing retirement age won’t be able to quit or will have to rely entirely on Social Security because they have less than $10,000 in savings, according to a study released today.

About 40 percent of New York workers had access to an employer-sponsored retirement plan in 2009, compared with the national average of 53 percent, according to the report by the New School’s Bernard Schwartz Center for Economic Policy Analysis. It was released by the Office of New York City Comptroller John Liu.

“It’s going to mean a generation of retirees will do worse than their parents and grandparents,” Teresa Ghilarducci, the center’s director, said in a telephone interview. “This means a lot more downward mobility.”

About 36 percent of households near retirement had less than $10,000 in liquid assets and about 19 percent had $10,000 to $99,999, according to the report. The median net worth of New York households where the head is nearing retirement, defined as age 55 to 64, was $442,450 including home equity, for married couples. It was $46,000 for single people.

“We have a large proportion of people who are nearing retirement, but without enough money to live comfortably,” Liu said in a telephone interview. For those households with less than $10,000, “that gives you probably a movie every couple of months,” said Ghilarducci.

The top 1 percent of New York taxpayers earned an average of $2.2 million in 2009, according to a Dec. 6 letter by the city’s Independent Budget Office. There were almost 35,000 taxpayers in that group.

Retirement Assets

Total retirement assets in the U.S. were $17 trillion in September, according to the Washington-based Investment Company Institute, a trade group for the mutual-fund industry. That included about $4.2 trillion in government-sponsored pension plans and $2.3 trillion in private-sector defined-benefit plans.

The study from the Comptroller’s Office included data from 2001 and 2010 surveys by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics, in addition to data from a 2008 nationwide survey on income levels and 2009 New York State income-tax returns, according to the report.

To contact the reporter on this story: Elizabeth Ody in New York eody@bloomberg.net

To contact the editor responsible for this story: Rick Levinson at rlevinson2@bloomberg.net.

U.S. Stocks Fall After Dow Average Gains

noreply@blogger.com (Jeanny TSY) — Fri, 27 Jan 2012 03:27:00 +0000

By Rita Nazareth - Jan 27, 2012 5:03 AM GMT+0700

U.S. stocks fell, reversing a rally that sent the Dow Jones Industrial Average toward its highest level since 2008 earlier today, as banks (S5BANKX) tumbled and a report showed that sales of new homes unexpectedly declined.

Banks had the biggest drop in the Standard & Poor’s 500 Index among 24 groups on concern about the industry’s ability to boost profits after the Federal Reserve yesterday pledged to keep the benchmark interest rate low. Wells Fargo & Co. (WFC) and Fifth Third Bancorp slumped at least 3 percent. PulteGroup Inc. (PHM) and Lennar Corp. (LEN) retreated more than 2.3 percent to pace losses in homebuilders. AT&T Inc. (T), the largest U.S. phone company, slid 2.5 percent as its profit forecast trailed estimates.

The S&P 500 lost 0.6 percent to 1,318.43 at 4 p.m. New York time, reversing a gain of as much as 0.6 percent. The Dow fell 22.33 points, or 0.2 percent, to 12,734.63, after earlier rising to the highest level on a closing basis since May 2008.

“It’s a little bit of cold water in the face,” Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a telephone interview. “We’re in risk territory because we’ve come a long way in the market and in terms of optimism on the economy. It’s premature to think that we’ve solved all problems.”

The S&P 500 has risen 4.8 percent so far this year, poised for the best January since it gained 6.1 percent during the first month of 1997, according to data compiled by Bloomberg. Stocks are extending the measure’s 11 percent rally in the October-December period, its best fourth-quarter increase since 2003, as improvements in hiring, manufacturing and home sales bolstered confidence in the world’s largest economy.

Economic Data

Equities reversed gains today after a report showed that sales of new U.S. homes unexpectedly declined in December for the first time in four months, capping the slowest year on record for builders. Claims for U.S. jobless benefits rose last week, displaying the usual volatility around holidays that has masked an improvement in the labor market. Orders for U.S. durable goods advanced more than forecast in December.

Benchmark gauges rose yesterday as the Fed signaled low rates through at least late 2014 and didn’t rule out bond purchases to bolster the economy. Investors also watched earnings reports. Of the 151 S&P 500 companies that reported results since Jan. 9, 103 posted per-share earnings that beat projections, according to data compiled by Bloomberg.

A measure of banks in the S&P 500 slumped 3.3 percent. Wells Fargo lost 3.8 percent to $29.05. Fifth Third Bancorp (FITB) slid 3 percent to $13.08.

Fed’s Pledge

The Fed’s low interest rate pledge may hurt lenders’ profits as they struggle to find loans or securities with yields high enough to support their net interest margins, a gauge of profitability that measures the difference between the cost of funds and what they earn on assets.

“The statement itself was market friendly in terms of reiterating that the Fed is going to remain largely accommodative,” Ryan Larson, Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in a telephone interview. His firm oversees $250 billion in assets. “When you talk about the banking environment and some of these companies that are directly tied to interest rates, it’s going to probably put a cap on some of those companies going forward until rates start to increase.”

A gauge of homebuilders in S&P indexes slumped 3.4 percent. PulteGroup retreated 2.4 percent to $7.80. Lennar decreased 2.9 percent to $22.13.

AT&T Slumps

AT&T lost 2.5 percent to $29.45, the biggest decline in the Dow. The carrier projected “mid-single-digit or better earnings growth” for 2012. Analysts predicted 11 percent on average. AT&T also reported a fourth-quarter net loss of $6.68 billion because of a pretax charge of about $4 billion for the failed takeover of T-Mobile USA, and expenses for revaluing benefit plans and other assets.

E*Trade Financial Corp. (ETFC) tumbled 15 percent, the most in the S&P 500, to $7.99 after the online brokerage reported results that missed analyst estimates and Sandler O’Neill & Partners LP cut its rating.

SanDisk Corp. (SNDK) dropped 11 percent to $46.39. The biggest maker of flash-memory cards gave a sales forecast that fell short of estimates, citing lower prices for chips that store data in mobile phones.

Caterpillar Inc. (CAT) rallied 2.1 percent, the biggest gain in the Dow, to $111.31. The largest construction and mining- equipment maker posted fourth-quarter earnings and forecast full-year profit that topped analysts’ estimates as demand rose for shovels and trucks.

3M, Netflix

3M Co. (MMM) added 1.3 percent to $87.58. The maker of Post-it Notes and fuel system tuneup kits reported higher profit than analysts had estimated as demand increased for aerospace and auto industry products.

Netflix Inc. (NFLX) surged 22 percent, the most since January 2010, to $116.01. The online and mail-order video-rental service reported fourth-quarter profit that topped analysts’ estimates and forecast improving margins in its streaming business.

J.C. Penney Co. climbed 19 percent to $40.72 after saying cost reductions from new Chief Executive Officer Ron Johnson’s turnaround plan may boost 2012 profit more than analysts estimated.

Time Warner Cable Inc. (TWC) advanced 7.8 percent, the biggest gain since April 2009, to $74.51. The second-largest U.S. cable- television provider reported fourth-quarter profit that beat analysts’ estimates and said it would repurchase $4 billion in shares.

‘Nightmare’

“The backdrop that is coming forth is a nightmare for those who are way underinvested,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, said in a phone interview. His firm manages $300 billion. “Earnings continue to come in better than expected, our economy is improving. In addition, it looks like the ‘euro-quake’ situation appears at least in the short term to be on the backburner.”

European stocks advanced, climbing 20 percent from a September low and entering a bull market. The Stoxx Europe 600 Index added 1.1 percent to 257.86 today.

The S&P 500’s best January rally since 1997 has pushed a pair of momentum and sentiment gauges to levels seen only 6 percent of the time since 1993, a sign the market is due for a pullback, BTIG LLC said.

Too Far

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

Apple Investors Await a Dividend Gusher

noreply@blogger.com (Jeanny TSY) — Fri, 27 Jan 2012 02:03:00 +0000

By Adam Satariano - Jan 26, 2012 12:01 PM GMT+0700

Apple Inc. (AAPL) has Wall Street’s full attention after hinting at plans for the company’s $100 billion cash pile that may lead to stockholders receiving a dividend.

Apple is “actively discussing” uses for its cash, including a dividend, buyback, acquisitions and supply-chain investments, Chief Financial Officer Peter Oppenheimer told analysts and investors Jan. 24 in an earnings conference call.

The comments were a welcome sign for investors who have called for a dividend as Cupertino, California-based Apple has added to its balance sheet. Apple’s $97.6 billion in cash and investments is larger than the market value of all but 26 companies in the Standard & Poor’s 500 index. The total could reach $150 billion by year-end if the company doesn’t give money back to shareholders, said David Rolfe, chief investment officer of Wedgewood Partners Inc.

“They have turned into the First National Bank of Cupertino,” said Rolfe, whose firm manages $1.3 billion in assets, including Apple shares. “Common sense dictates that they don’t need a cash hoard of $150 billion.”

Apple reported fiscal first-quarter profit this week that more than doubled to a record $13.1 billion, boosted by holiday purchases of the iPhone and iPad tablet. Sales jumped 73 percent to $46.3 billion. Gross margin, the percentage of sales remaining after deducting the cost of production, rose to 44.7 percent, from 38.5 percent a year earlier, the company said.

Shares Surge

A dividend is a recurring payment made by companies to its shareholders, typically as a percentage of profit given each quarter. For Apple, a dividend of 3 percent could propel the stock as high as $550 a share, said Rolfe, who expects Apple to announce such a move later this year.

Apple rose 6.2 percent to $446.66 at the close of trading yesterday. The stock is up 31 percent in the past 12 months.

A policy change would attract a new class of investors who only buy shares of companies that offer dividends, said Brian White, an analyst at Ticonderoga Securities LLC.

“It’s going to be a gusher when they tap into that thing,” White said. “It’s like tapping into an oil field out in Texas.”

Analysts at Canaccord Genuity Corp., Jefferies & Co. and Morgan Stanley also expect Apple to announce a dividend or buyback.

Showing Confidence

Even so, not all analysts say a dividend is a good idea. Apple’s refusal to return the money to shareholders -- even a one-time payment that wouldn’t recur each quarter -- speaks to the confidence of a company that intends to chase giant growth opportunities, said Trip Chowdhry, an analyst at Redwood City, California-based Global Equities Research.

“If Apple declares a dividend, it would be an indication to me that it’s time to get out of the stock,” Chowdhry said.

Oppenheimer, Apple’s finance chief, didn’t say if, or when, Apple would disclose a decision about use for its cash.

“We’re examining all uses of our cash balance -- what we might do in the supply chain, what we can do from an acquisition perspective, and otherwise,” said Oppenheimer. “In the meantime, we’re not letting it burn a hole in our pockets.”

Apple Chief Executive Officer Tim Cook said last year that he wasn’t “religious” about holding on to Apple’s cash. That signaled a change from co-founder Steve Jobs, who had been more resistant to shareholder calls for a dividend or buyback.

Ticonderoga’s White said it would be a surprise if Apple made a large acquisition, something it typically doesn’t do.

On the call, Oppenheimer described Apple’s approach to making acquisitions.

“We have done acquisitions where they tended to be smaller or medium-sized companies that have just great engineering and other talent, a great start on a product or a technology that we’d like to bring into Apple,” he said. “We tend to do several a year. We’re very, very disciplined in how we think about this and how we do it, and I think our track record here has been very strong.”

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

Apple Surges on Net Income Doubling

noreply@blogger.com (Jeanny TSY) — Thu, 26 Jan 2012 07:04:00 +0000

By Adam Satariano - Jan 26, 2012 6:02 AM GMT+0700

Apple Inc. (AAPL) shares rose to a record after quarterly profit more than doubled as holiday demand for the iPhone and iPad cemented its position as the most valuable technology company.

Apple’s stock gained 6.2 percent to a $446.66 after reporting results yesterday. Apple’s increase, the company’s biggest one-day rise since May 2010, made it the day’s best performer in the Standard & Poor’s 500 Index.

The company sold 37 million iPhones in the period ended Dec. 31, with customers snapping up the new 4S model that went on sale in October, a week after the death of co-founder Steve Jobs. Record revenue vaulted Apple ahead of Hewlett-Packard Co. as the world’s biggest computer maker by sales and quelled concern that the company’s allure may dim as it embarks on a new era with Chief Executive Officer Tim Cook at the helm.

“The momentum that Steve Jobs created, Tim Cook is maintaining,” Gene Munster, an analyst at Piper Jaffray Cos., said in a televised interview on “Bloomberg West.” “We kind of run out of adjectives to describe this quarter.”

Net income of $13.1 billion in the period that ended Dec. 31 ranked among the highest quarterly profits on record, putting Apple in the same league as energy companies such as Exxon Mobil Corp. (XOM) and Russia’s Gazprom OAO (OGZPY), data compiled by Bloomberg show. Per-share profit of $13.87 for the period was more than Apple earned in any full year before 2010, as the success of the new iPhone ramped up pressure on rivals Google Inc. and Samsung Electronics Co.

‘Stunning’ Numbers

The gain gives Apple a market value of about $416 billion, just below Exxon’s $418 billion. The two companies have been trading places atop the Standard & Poor’s 500 Index since August.

“Look at the Apple numbers, they were stunning,” Alcatel- Lucent CEO Ben Verwaayen said in an interview with Maryam Nemazee on Bloomberg Television’s “Countdown” show at the World Economic Forum’s annual meeting in Davos, Switzerland. “It shows that even in a time of difficult circumstances, if you have the right product and the right focus, you can make a difference.”

Sales rose 73 percent to $46.3 billion in the fiscal first quarter, Cupertino, California-based Apple said yesterday in a statement. Analysts surveyed by Bloomberg on average estimated net income of $10.14 a share on sales of $39 billion.

‘Unimaginable’ Numbers

In looking ahead to the second quarter, Apple forecast revenue of about $32.5 billion and profit of $8.50 a share. That compares with average analysts’ predictions for sales of $31.9 billion and profit of $7.96 a share.

Except for the period that ended in September 2011, when customers put off iPhone purchases in anticipation of the 4S, Apple’s profit has exceeded analysts’ projections in every quarter for at least six years, according to data compiled by Bloomberg.

The quarterly results mark the first time Apple’s revenue topped Hewlett-Packard’s, underscoring how the company’s focus on sleek, touch-screen mobile devices has rearranged the technology industry’s pecking order.

Apple’s net income exceeded total revenue at Google (GOOG), Apple’s largest rival in mobile operating systems, for the period.

“Those numbers are just unimaginable,” said Michael Obuchowski, chief investment officer at First Empire Asset Management, which has $4 billion under management, including Apple shares. “It’s still an extremely well-managed company and they are showing that the product pipeline is sufficient even now to generate growth rates that are unrivaled.”

Amazon’s Kindle

Apple wasn’t harmed by Amazon.com Inc.’s introduction of the Kindle Fire, a tablet designed to compete against the iPad at less than half the price. Apple sold 15.4 million iPads, topping the 13.5 million projected by analysts.

“Everybody expected the Kindle Fire to affect their sales,” said Carl Howe, an analyst at the Yankee Group in Boston. “All evidence shows it had none.”

Apple has accumulated $97.6 billion in cash and investments, money it’s “actively” discussing how to use, Chief Financial Officer Peter Oppenheimer said on a conference call yesterday. That could include supply-chain investments, acquisitions or other expenditures, he said.

The recent period was the first full quarter since Cook took over in August, when Jobs stepped down, six weeks before his death. Jobs co-founded the company with Steve Wozniak in 1976.

“This shows that the business model has lasting momentum without Steve Jobs,” said Keith Goddard, CEO of Capital Advisors Inc. in Tulsa, Oklahoma, whose firm manages more than $13 million in Apple shares.

Microsoft, Intel

Apple’s report contrasted with those of companies such as Microsoft Corp. (MSFT) and Intel Corp. (INTC), which are grappling with slower personal-computer sales in part because customers are choosing to buy smartphones and tablets like the iPad instead. While Microsoft and Intel are benefiting from business demand for servers and software, they’re playing catch-up in the consumer arena by rolling out new mobile products, including Microsoft’s Windows 8 operating system, designed to integrate more smoothly with smartphones and tablets.

Rival smartphone makers also have struggled to keep pace with Apple. HTC Corp. (2498) and Motorola Mobility Holdings Corp. (MMI), two of the biggest companies whose devices run Google’s Android operating system, disappointed investors with results for their most recent quarters. Research In Motion Ltd., which has lost 90 percent of its market value since June 2008, replaced its co- CEOs this week.

IPhone Demand

Holiday iPhone demand helped Apple gain market share on manufacturers including Samsung and HTC. In December, about 45 percent of U.S. shoppers who bought a smartphone in the previous three months said they purchased an iPhone, up from 25 percent in a study done two months earlier, according to Nielsen Co. Android phones were selected by 47 percent of buyers, down from 62 percent.

Cook said Apple couldn’t manufacture iPhones fast enough and that the record number announced yesterday could have been bigger.

Competitors also haven’t been able to match the success of the iPad, with Apple controlling 62 percent of the tablet market in the third quarter, according to researcher IDC.

The popularity of the iPad and iPhone has also buoyed sales of Apple’s lineup of Mac computers. The company sold a record 5.2 million Macs in the first quarter, up from 4.9 million in the previous period.

Hewlett-Packard (HPQ) had revenue of $32.1 billion in its most recent quarter, which ended in October. The Palo Alto, California-based computer maker will report fiscal first-quarter results next month.

On the call yesterday, Cook was asked to assess his early months at the helm.

“You can see our results,” Cook said. “The team is doing a fantastic job. We feel very good about where we are.”

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

Apple Restores S&P 500 Earnings With Enough Cash to Cover Greece Payments

noreply@blogger.com (Jeanny TSY) — Thu, 26 Jan 2012 07:03:00 +0000

By Whitney Kisling - Jan 26, 2012 4:12 AM GMT+0700
Call it the iEconomy.

With its report yesterday, Apple Inc. (AAPL), the Cupertino, California-based iPhone maker, single-handedly erased a drop in Standard & Poor’s 500 Index earnings for the December quarter, turning a 4.2 percent decline into a 4.4 percent gain. Apple’s 116 percent profit growth helped push its total cash to $97.6 billion -- enough to cover Greece’s debt payments due in the next two years, according to data compiled by Bloomberg.

While results at companies from Google Inc. to Citigroup Inc. have trailed analyst estimates and Alcoa Inc. posted a loss, the world’s largest technology company beat revenue forecasts by $7.3 billion, the most ever. The performance came during a quarter in which U.S. unemployment averaged 8.7 percent and about 12.7 million Americans were looking for work.

“They can probably bail out Greece,” Ian Ainsworth, a Toronto-based money manager at Mackenzie Financial Corp., said in a telephone interview. His firm owns Apple shares and manages $60.9 billion. “It just puts the power of the company in perspective with near $100 billion in cash on the balance sheet and generating that kind of free cash flow. It’s hard to conceive of a company with that kind of power.”

Net income more than doubled to $13.1 billion as Apple sold 37 million iPhones and posted $46.3 billion in sales. The total ranks among the highest quarterly profits on record. MediaOne Group Inc., acquired by AT&T Inc. in 2000, earned $26.6 billion in the second quarter of 1998. Ford Motor Co. earned $17.6 billion in the first three months of 1998. Apple’s earnings were about 11 times the size of Zambia’s gross domestic product.

Earnings Season

The report may salvage a fourth-quarter earnings season that was in danger of being the first since 2009 in which profits declined from a year ago. Analysts project income for S&P 500 companies climbed 3.4 percent in the period, according to data compiled by Bloomberg.

Apple shares rose 6.2 percent to $446.66 today, gaining the most in a day since May 10, 2010. The stock is trading at its highest price ever, while the S&P 500 remains 15 percent below the record reached in October 2007, data compiled by Bloomberg show.

The company’s almost $100 billion in cash and equivalents is larger than the combined market value of Boeing Co., Alcoa Inc. and Travelers Cos. -- three of the 30 Dow Jones Industrial Average companies. That’s enough money to cover Greece’s 48.2 billion euros ($62.56 billion) due in 2012 and 27.9 billion euros due next year, depending on the exchange rate. The country is facing a 14.5 billion-euro bond payment on March 20.

New Zealand

For calendar 2011, Apple’s sales rose to $127.8 billion, bigger than the size of New Zealand’s economy, according to data compiled by Bloomberg. More iPhones were sold each day in the quarter ending Dec. 31 than babies were born in the world, according to data compiled by Bloomberg and the United Nations.

Apple’s $97.6 billion in cash and equivalents is enough for the company to buy 2,000 tons of gold at current prices, the weight of 10 blue whales.

“One word: impressive,” Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., which oversees about $75 billion, said in an e- mail. “Steve Jobs has a smile on his face wherever he is.”

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net

To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net

Asia Stocks, Oil Rise as Fed Signals Low Rates

noreply@blogger.com (Jeanny TSY) — Thu, 26 Jan 2012 06:59:00 +0000

By Lynn Thomasson and Mariko Ishikawa - Jan 26, 2012 12:39 PM GMT+0700

Play Video

Jan. 26 (Bloomberg) -- Robert Horrocks, chief investment officer at Matthews Asia, talks about Federal Reserve monetary policy, Asia stocks and his investment strategy. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Play Video

Jan. 26 (Bloomberg) -- Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management Ltd., talks about Hong Kong and mainland China stocks, and his investment strategy. Do also discusses Europe's sovereign debt crisis and Federal Reserve monetary policy. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

Play Video

Jan. 26 (Bloomberg) -- Puru Saxena, chief executive officer of Puru Saxena Wealth Management, talks about the outlook for global financial markets, Federal Reserve monetary policy and his investment strategy. Saxena speaks with Susan Li on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

Asian stocks rose to a three-month high, copper climbed and South Korea’s won strengthened after Federal Reserve Chairman Ben S. Bernanke signaled plans to maintain near-zero interest rates through 2014. Crude oil advanced on data showing a pickup in U.S. fuel demand.

The MSCI Asia Pacific Index (MXAP) gained 0.7 percent as of 2:36 p.m. in Tokyo, poised for the highest close since Oct. 28. Standard & Poor’s 500 Index futures were little changed after the U.S. benchmark rallied 0.9 percent yesterday. Crude rose 0.7 percent and natural gas climbed for a fifth day. South Korea’s won reached a 10-week high, while the dollar traded near its weakest level in a month against the euro.

The Fed said yesterday it sees “exceptionally low” interest rates through 2014, having previously pledged to refrain from raising borrowing costs until at least the middle of 2013. New Zealand’s central bank signaled interest rates may stay at a record low for longer than previously intended and South Korea reported its slowest economic growth in more than a year as Europe’s debt crisis weighs on Asian exports.

“Mr. Bernanke is presenting the world with a gift,” Khiem Do, the Hong Kong-based head of multi-asset strategy at Baring Asset Management Ltd., said in a Bloomberg Television interview. The firm oversees $46 billion. “He wants to underwrite the recovery and underwriting the recovery is very good for equity markets and risk assets.”

Talks on a debt swap to avert a Greek default resume today. Charles Dallara and Jean Lemierre, negotiating on behalf of private creditors, return to Athens after European finance ministers insisted bondholders take bigger losses on their Greek debt.

Hyundai, Nintendo

NEC Corp. and Nintendo Co. are among Asian companies scheduled to report earnings today. Hong Kong’s Hang Seng Index rallied 1.2 percent in the first day of trading this week after the Lunar New Year holiday, while South Korea’s Kospi Index climbed 0.2 percent. Financial markets are shut in Australia, China, India and Taiwan.

Hyundai Motor Co. (005380) tumbled 1.9 percent. South Korea’s largest automaker said net income climbed to 2 trillion won ($1.8 billion) in the three months ended Dec. 31, missing the average analyst estimate from a Bloomberg survey.

The S&P 500 closed yesterday at the highest level since July after Apple Inc. reported quarterly profit more than doubled. The maker of iPhones and iPads single-handedly erased a drop in S&P 500 earnings for the December quarter, turning a 4.2 percent decline into a 4.4 percent gain. Apple’s 116 percent profit growth helped push its total cash to $97.6 billion -- enough to cover Greece’s debt payments due in the next two years, according to data compiled by Bloomberg.

Foxconn Jumps

Foxconn International Holdings Ltd. (2038), whose parent Hon Hai Precision Industry Co. manufactures Apple products, jumped 3.2 percent to a two-month high in Hong Kong.

Five-year Treasuries yielded 0.79 percent, after the rate reached a record-low 0.76 percent yesterday. The 10-year yield slipped two basis points to 1.97 percent. Policy makers are “prepared to provide further monetary accommodation” and bond buying is “an option that’s certainly on the table,” Bernanke said after officials gathered for a meeting yesterday. The Treasury Department is scheduled to sell $29 billion of seven- year securities today.

Ringgit, Won

The dollar traded at $1.311 per euro, little changed from yesterday when it reached $1.3121, the weakest level since Dec. 21. Malaysia’s ringgit strengthened the most in seven months, climbing 1.5 percent to 3.03075 per dollar and the won advanced 0.4 percent to 1,121.55.

Crude for March delivery rose as much as 0.8 percent to $100.19 a barrel on the New York Mercantile Exchange. U.S. total fuel consumption increased 7.5 percent to 19.2 million barrels a day in the week ended Jan. 20, the largest increase since Nov. 4, the Energy Department said yesterday.

“Most of the price movement has been driven by the announcement” from the Fed, said Tetsu Emori, a commodity fund manager at Astmax Ltd. in Tokyo. “Continuing the zero-interest- rate policy should fuel the economy. People could expect oil demand to go up.”

Natural gas headed for the longest winning streak in a year on speculation a supply glut may ease. Gas for February delivery rose 0.9 percent to $2.753 per million British thermal units on the New York Mercantile Exchange. It has gained 19 percent since Jan. 19.

Copper, Gold

Three-month copper climbed 0.9 percent to $8,459.75 per metric ton on the London Metal Exchange. The LME Index of the six main industrial metals has jumped 12 percent this month, after tumbling 22 percent in 2011. Gold futures for April delivery advanced as much as 0.8 percent to $1,717.20 an ounce, the highest level in more than six weeks.

The cost of protecting bonds in Asia against non-payment declined, according to credit-default swap traders. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped four basis points to 185.5, Royal Bank of Scotland Group Plc prices show. The gauge is on course for its lowest close since Oct. 31, according to data provider CMA.

To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net.

To contact the editor responsible for this story: James Regan in Hong Kong at jregan19@bloomberg.net.

Geithner: Obama Wouldn’t Ask Me to Stay

noreply@blogger.com (Jeanny TSY) — Thu, 26 Jan 2012 06:58:00 +0000

By Ian Katz and Trish Regan - Jan 26, 2012 12:00 PM GMT+0700

Treasury Secretary Timothy F. Geithner, the last member of the Obama administration’s original economic team, said he doesn’t expect to remain in office if the president is re-elected.

“He’s not going to ask me to stay on, I’m pretty confident,” Geithner said in an interview with Bloomberg Television yesterday in Charlotte, North Carolina. “I’m confident he’ll be president. But I’m also confident he’s going to have the privilege of having another secretary of the Treasury.”

Geithner, 50, has led President Barack Obama’s efforts to pull the U.S. economy out of the worst recession since World War II, including overseeing bailouts of automakers General Motors Co. (GM) and Chrysler Group LLC, which have since emerged from bankruptcy. Before joining the administration in 2009, Geithner was president of the Federal Reserve Bank of New York, playing a key role in the government’s rescue packages for banks such as Citigroup Inc. (C) and Bank of America Corp. (BAC)

In the interview, Geithner said he would do “something else” after leaving the Treasury Department, without specifying what that would be. In August, an administration official said Geithner would stay in his job at least through this year’s presidential election.

Erskine Bowles, chief of staff under President Bill Clinton, and Democratic Senator Kent Conrad of North Dakota could be among the potential candidates to succeed Geithner, said Mark Calabria, director of financial regulation studies at the Cato Institute in Washington.

‘Budget Hawk’

Conrad, 63, chairman of the Senate Budget Committee who said a year ago he won’t seek another term, is “a serious budget hawk on the left, well-liked and respected,” Calabria said.

Bowles, 66, is the former co-leader of Obama’s commission that drafted a plan to reduce the federal government’s debt.

Geithner told White House officials earlier last year that he was considering leaving after negotiations on raising the nation’s debt limit were completed. An agreement was signed into law by Obama in August.

The Treasury secretary said in June that his son would be returning to New York to finish high school, and that “I’m going to be commuting for a while.”

Geithner is the last remaining member of Obama’s original economic team after the departures of advisers including National Economic Council Director Lawrence Summers, Office of Management and Budget Director Peter Orszag, and Austan Goolsbee, who was a member of the Council of Economic Advisers and later replaced Christina Romer as chairman.

Dodd-Frank

Geithner also said in the Bloomberg TV interview he wasn’t concerned about Wall Street complaints over the Dodd-Frank Act’s financial overhaul and regulation.

“I would not worry too much about them,” Geithner said. “I would worry more about the basic confidence of Americans that they’re going to face more opportunities, more likely to find a job, keep a job, save for college, save for a dignified retirement.”

Geithner said that “no industry likes reforms that change the way we do business. But we’re doing that because we have to protect the economy from ever facing again the type of crisis we saw. And I am very confident that these reforms will make our financial system a stronger financial system.”

The unemployment rate in December dropped to 8.5 percent, almost a three-year low, and employers expanded payrolls by 200,000, twice the rate of the previous month and an indication that the job market is gaining momentum.

The U.S. automobile industry is reviving after the Obama administration helped push what ended up as an $82 billion bailout. President George W. Bush also supported aid for the industry as he was leaving office in late 2008.

Investing, Manufacturing

Geithner said he’s confident the administration, working with Congress, can design changes in the corporate tax system to “improve the incentives for investing, make manufacturing stronger.” Manufacturing can play “a broader role” in the economy, he said.

On Europe, Geithner said leaders there are “making some progress. They got a lot of work to do.” He said he tells European leaders that they need to “put in place a stronger, more credible firewall.”

Geithner is due to arrive today in Davos, Switzerland, for the 42nd annual meeting of the World Economic Forum, his sixth trip to the continent since September.

He also spoke at an event held by the Charlotte Chamber of Commerce in North Carolina yesterday. Geithner visited the state to tour a Siemens AG (SIE) energy plant and promote investments in manufacturing and technology to create jobs.

Geithner last visited North Carolina in October when he spoke at a Corning Inc. (GLW) factory and touted the president’s jobs bill that later stalled in Congress.

North Carolina was one of two Southern states -- the other was Virginia -- that swung for Obama in 2008 after decades of voting for Republican presidential candidates. Obama defeated Republican rival John McCain by 14,000 votes of almost 4.3 million ballots cast.

To contact the reporters on this story: Cheyenne Hopkins in Washington at chopkins19@bloomberg.net; Trish Regan in New York at tregan8@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

Dow Average Rallies to Highest Level Since May

noreply@blogger.com (Jeanny TSY) — Thu, 26 Jan 2012 06:56:00 +0000

By Rita Nazareth - Jan 26, 2012 4:57 AM GMT+0700

U.S. stocks rose, sending the Dow Jones Industrial Average to the highest level since May, as the Federal Reserve signaled low rates through at least late 2014 and didn’t rule out bond purchases to bolster the economy.

A measure of commodity shares in the Standard & Poor’s 500 Index added 1.6 percent after gold rallied as record-low rates may boost its appeal as a hedge against inflation. Banks had the biggest drop in the S&P 500 among 24 groups as the industry may face pressure on margins from the Fed’s policy on rates. Apple (AAPL) Inc. climbed 6.2 percent to an all-time high as profit more than doubled. Textron Inc. (TXT), the maker of Cessna planes, surged 15 percent after forecasting higher-than-estimated earnings.

The S&P 500 added 0.9 percent to 1,326.06 at 4 p.m. New York time, after dropping 0.5 percent earlier. The Dow gained 83.10 points, or 0.7 percent, to 12,758.85. The Nasdaq-100 Index rose 1.3 percent to 2,465.66, the highest since 2001.

“The Fed is saying that money will stay easy and the cost of money will stay low,” Madelynn Matlock, who helps oversee about $14.5 billion at Huntington Asset Advisors in Cincinnati, said in a telephone interview. “The ability for businesses to find the money they need to grow and for consumers to find the money they need to buy things is going to be easier. That makes the growth path a little simpler.”

Benchmark gauges reversed losses as the Fed extended its previous pledge to keep rates low at least until the middle of 2013 as more than two years of economic growth have failed to push unemployment below 8.5 percent. Fed Chairman Ben S. Bernanke said central bankers are still debating additional asset purchases.

Earnings Season

Investors also watched earnings reports. Of the 112 S&P 500 companies that reported results since Jan. 9, 74 posted per- share earnings that beat projections, according to data compiled by Bloomberg. Earnings probably grew 3.4 percent for S&P 500 companies in the fourth quarter, the data show. The projection has fallen from 6.2 percent at the end of last year.

The Morgan Stanley Cyclical Index of companies most- dependent on economic growth added 1 percent. The Dow Jones Transportation Average advanced 1.5 percent. All 10 groups in the S&P 500 gained.

Gold producers rallied as the metal climbed to a six-week high. Newmont Mining Corp. (NEM), the largest U.S. gold producer, jumped 4.8 percent to $60.25. Freeport-McMoRan Copper & Gold Inc. (FCX), the world’s largest publicly traded copper producer, climbed 4.8 percent to $46.08.

Apple Rallies

Apple rallied 6.2 percent, the most since May 2010, to $446.66. The company sold 37 million iPhones in the period ended Dec. 31, with customers snapping up the new 4S model that went on sale in October, a week after the death of co-founder Steve Jobs. Record revenue vaulted Apple ahead of Hewlett-Packard Co. (HPQ) as the world’s biggest computer maker by sales and quelled concern that the company’s allure may dim as it embarks on a new era with Chief Executive Officer Tim Cook at the helm.

Textron surged 15 percent, the most in the S&P 500, to $24.76. Chief Executive Officer Scott Donnelly is working to leverage the company’s businesses with measures such as having Cessna and Bell share overseas service centers and sales forces. Textron is winding down its finance unit, which struggled during the recession.

The Bloomberg U.S. Airlines Index (BUSAIRL) of 11 companies jumped 4.5 percent. Delta Air Lines Inc. (DAL) and US Airways Group Inc. (LCC) reported fourth-quarter profits that topped analysts’ projections. Delta Air climbed 6.2 percent to $9.96. US Airways rallied 17 percent to $7.52.

M&A Deal

Illumina Inc. (ILMN) surged 46 percent to $55.15. Roche Holding AG offered $5.7 billion in a hostile bid for Illumina to bolster sales of gene-mapping equipment and services. Roche proposed paying $44.50 a share, 18 percent more than yesterday’s close.

Walter Energy Inc. (WLT) gained 3.9 percent to $70.14. The company may finally lure buyers willing to bet on a recovery in coal prices with the industry’s cheapest stock. After losing almost half its value in the past year, the producer of steelmaking coal sold for 9.3 times earnings this week, according to data compiled by Bloomberg. That was less than any North American coal-mining company with $1 billion in market capitalization.

Walter Energy, which bought Western Coal Corp. for $5.3 billion in April, is an attractive target because it produces high-grade steelmaking coal, Brean Murray Carret & Co. said. A buyer could spend double Walter Energy’s closing price of $67.54 a share yesterday and still get the company for less relative to earnings than any coal takeover in the past year, data compiled by Bloomberg show.

Banks (S5BANKX) Decline

Banks had the biggest decline in the S&P 500 among 24 industries, falling 0.3 percent. Bank of America Corp. and Citigroup Inc. (C) are among lenders that may find it harder to boost profits and capital after the Fed’s pledge on low rates. Bank of America rose 0.8 percent to $7.35. Citigroup added 0.2 percent to $29.96.

“This is a very dovish Fed,” David Kelly, who helps oversee $394 billion as chief market strategist for JPMorgan Funds in New York, said in a telephone interview. “It’s an attempt to push down long-term interest rates. They are pushing the rates down to a level where consumers should find them very attractive, but banks will find them very unattractive.”

Corning Inc. (GLW) tumbled 11 percent, the biggest decline in the S&P 500, to $13.05. The largest maker of glass for flat-panel televisions said glass prices contributed to a 53 percent drop in fourth-quarter profit and are still sinking.

Xerox, WellPoint

Xerox Corp. (XRX) slumped 9.9 percent to $7.81. The provider of printers and business services gave earnings forecasts that trailed some analysts’ estimates as Europe weakens.

WellPoint Inc. (WLP) decreased 4.8 percent to $66.10. The largest U.S. health insurer by enrollment forecast 2012 earnings and reported fourth-quarter profit that were less than analyst estimates on higher medical costs.

“It’s going to be a mediocre earnings season,” Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc., said in a phone interview. His firm oversees $3.5 trillion as the world’s largest asset manager. “We’re not going to see robust growth this year and this is being reflected in corporate outlooks.”

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

Morgan Stanley CEO Says Pay-Cut Complaints Would Be ‘Naive’

noreply@blogger.com (Jeanny TSY) — Thu, 26 Jan 2012 06:55:00 +0000

By Michael J. Moore, Erik Schatzker and Patrick Clark - Jan 26, 2012 1:02 AM GMT+0700

Morgan Stanley (MS) Chairman and Chief Executive Officer James Gorman said employees understand why the investment bank had to cut pay, and those who don’t grasp the reasoning need to adjust their attitude.

“You’re naive, read the newspaper, No. 1,” Gorman said he would tell miffed employees, speaking in an interview on Bloomberg Television. “No. 2, if you put your compensation in a one-year context to define your overall level of happiness, you have a problem which is much bigger than the job. And No. 3, if you’re really unhappy, just leave. I mean, life’s too short.”

Morgan Stanley is reducing pay for senior investment bankers and traders by an average of 20 percent to 30 percent, people with knowledge of the decision said last week. The New York-based firm is also capping immediate cash bonuses at $125,000 as it defers a greater share of awards, a person briefed on the plan said.

“The world has changed and the banking industry has gone through a fundamental change, and we have to readjust,” Gorman said from Davos, Switzerland, where he’s attending the World Economic Forum’s annual meeting. “When we come out of this and we start re-performing, obviously compensation will reflect that. Until then, we have to respect the fact that shareholders have to get paid, too.”

Earnings Decline

Profit fell 13 percent last year to $4.11 billion as the firm had a 4 percent return on equity, below Gorman’s goal of the mid-teens. While Morgan Stanley posted the only trading- revenue increase among the major U.S. banks, excluding accounting gains, the firm had per-share losses in two of the past three quarters.

Goldman Sachs Group Inc. (GS) Chief Financial Officer David Viniar said last week that discretionary compensation declined “significantly more” than the firm’s 26 percent drop in revenue. Bank of America Corp. (BAC), the second-biggest U.S. lender by assets, told its investment bankers to expect compensation packages that average 25 percent less than last year, said two people with knowledge of the discussions.

Gorman’s own pay for 2011 fell 25 percent from a year earlier to $10.5 million, according to a person briefed on the figures.

Shareholders Matter

Gorman said his employees understand the need to reward shareholders with higher returns and he hasn’t seen signs of defections. The pay “is not as much as everyone would wish for, and it’s probably more than some of them expected in the world and turmoil that we’re in,” Gorman said. “They’re loyal. We’ve had very little turnover, no turnover of the top management committee at all.”

Morgan Stanley’s shares fell 44 percent in 2011, the biggest annual decline since 2008. The firm rose 5.4 percent on Jan. 19 after reporting a narrower fourth-quarter loss than analysts estimated, and had gained 20 percent this year through yesterday.

Gorman, 53, said the market gains this year have been a “relief rally” as Europe steadied and investors realized that the U.S. economy isn’t as bad as many feared. He said mergers and initial public offerings may pick up in the second half of this year.

Private investors reaching an agreement over a restructuring of Greek debt will keep Europe’s sovereign debt crisis from getting worse and could spur more efforts from the European Central Bank, he said.

Moving Forward

“Getting Greece done is something concrete that puts a line in the sand,” Gorman said. “That will be a major push towards more action by the ECB and I believe the euro staying together as we move forward.”

Charles Dallara, managing director of the Washington-based Institute of International Finance, will return to Athens tomorrow to resume talks with the Greek government on a voluntary bond swap, Greek government spokesman Pantelis Kapsis said today. Kapsis told reporters in Athens he hoped talks on the debt swap are concluded by the end of the week.

“If Greece fails, then it raises questions about much larger economies,” Gorman said. The situation has steadied as administrations have been changed in Spain, Italy and Greece, central bankers have taken action and banks are starting to raise capital, deleverage and “get their balance sheets in shape,” Gorman said. “We’ve got a lot of momentum. What we need to do is close off some of these problems.”

To contact the reporters on this story: Michael J. Moore in New York at mmoore55@bloomberg.net; Erik Schatzker in New York at eschatzker@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

China Police Open Fire on Tibetans as Protests Spread

noreply@blogger.com (Jeanny TSY) — Thu, 26 Jan 2012 06:54:00 +0000

By Bloomberg News - Jan 26, 2012 10:14 AM GMT+0700

Police in southwestern China opened fire on protesters in a Tibetan enclave during a clash Jan. 24, the second straight day of deadly protests in the area, the official Xinhua News Agency reported.

The confrontation occurred after a crowd gathered two days ago near the Chengguan Police Station, Xinhua said yesterday, citing an unidentified police officer. The crowd refused to disperse and then stormed the station with knives, gasoline bottles and stones, according to the report.

Police opened fire after attempts to disperse the crowd by non-lethal means failed, Xinhua reported. One protester was killed and another injured, in addition to 14 police wounded, according to the report.

“The Tibetan people are unhappy and restive about their lot in China,” Mohan Guruswamy, chairman of the Centre for Policy Alternatives, a New Delhi-based research group, said in an e-mail. “There is ample evidence of it, and the acute Chinese sensitivity to any comment on Tibet is only proof.”

Tibet’s spiritual leader, the Dalai Lama has lived in India since fleeing in 1959 from China’s military takeover of the region. China accuses the Dalai Lama of waging a campaign for independence while the spiritual leader says he is seeking autonomy for Tibet.

The unrest was in the county seat of Seda, Ganzi Tibetan Autonomous Prefecture, about 400 kilometers (250 miles) northwest of Sichuan’s provincial capital, Chengdu. A clash the day before in Luhuo county left one protester dead and five police officers hurt, according to Xinhua. A crowd had gathered that day to witness the self-immolation of three monks, the news agency reported.

Violent Protests

Tibetan protests began in the rural mountains of western Sichuan in March when monks at a prominent Buddhist monastery in the province immolated themselves to highlight their opposition to Chinese policies in ethnic Tibetan regions. Fourteen monks or nuns have burned themselves to death since then and unrest has “spread to the general population of the area in protest against the arrest and prosecution of many bystanders,” said Bahukutumbi Raman, a political analyst with the Chennai Center for China Studies in southern India.

The protests have become violent in recent weeks and twice have targeted police stations, Raman said in an e-mail.

Local police have adopted “harsh measures” to counter the circulation of leaflets that called for Tibetans to avoid new year celebrations amid plans for more self-immolations, the Washington-based International Campaign for Tibet said in a Jan. 23 statement that cited exiles in contact with local protesters.

Social Order

China will remain “resolute in maintaining normal social order,” Foreign Ministry spokesman Hong Lei said in a Jan. 24 statement carried by Xinhua after the first day of protests. Hong said overseas groups advocating Tibetan independence have “fabricated rumors and distorted the truth to discredit the Chinese government,” according to Xinhua.

In October, the U.S. State Department called on China to respect human rights and particularly “the rights of Tibetans” after a ninth person set herself on fire in protest at Chinese rule over the region.

“We urge Chinese leaders to address counterproductive policies in Tibetan areas that have created tensions,” the State Department said in a statement Oct. 19.

Self-Immolation

Since then, there have been at least two further deaths by self-immolation, as well at least one failed attempt. Xinhua reported on Nov. 3 a Tibetan nun died in Sichuan after setting herself on fire, and said on Jan. 9 a Tibetan Monk in northwest Qinghai province died in similar fashion.

A Tibetan farmer was hospitalized after setting fire to himself, Xinhua reported on Dec. 2.

The U.S. government is “seriously concerned” about the reports of the latest violence and urges China to hold “constructive” talks with the Dalai Lama, Tibet’s exiled spiritual leader, the State Department said on Jan. 24.

The U.S. will make “clear” its concerns on the issue of human rights for Tibetans as well as the rest of China during Chinese Vice President Xi Jinping’s visit to Washington next month, State Department spokeswoman Victoria Nuland said.

Xi will meet with President Barack Obama, Vice President Joe Biden and other senior officials to discuss bilateral and global issues, the White House said on Jan. 23.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

Fed: Benchmark Rate Will Stay Low Until ’14

noreply@blogger.com (Jeanny TSY) — Thu, 26 Jan 2012 06:52:00 +0000

By Craig Torres and Caroline Salas Gage - Jan 26, 2012 4:49 AM GMT+0700

Play Video

Jan. 26 (Bloomberg) -- Mikio Kumada, a global strategist at LGT Capital Management in Singapore, talks about Federal Reserve and European Central Bank monetary policy, and its implications for global financial markets. Kumada also discusses China's economy and central bank policy. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

Chairman Ben S. Bernanke said the Federal Reserve is considering additional asset purchases to boost growth after extending its pledge to keep interest rates low through at least late 2014.

Policy makers are “prepared to provide further monetary accommodation if employment is not making sufficient progress towards our assessment of its maximum level, or if inflation shows signs of moving further below its mandate-consistent rate,” Bernanke said at a news conference today after a Federal Open Market Committee meeting in Washington. Bond buying is “an option that’s certainly on the table.”

Stocks and Treasuries rose after the Fed extended its previous pledge to keep borrowing costs low at least until the middle of 2013. Fed officials lowered their forecasts for economic growth and price increases this year and in 2013 and set a long-term goal of 2 percent inflation.

“What they’re doing is setting the table for some sort of additional monetary easing,” said Scott Minerd, chief investment officer in Santa Monica, California for Guggenheim Partners LLC. “The changes in the statement from last month de- emphasize growth.”

The Standard & Poor’s 500 Index climbed 0.9 percent to 1,326.06 at 4:07 p.m. in New York. The yield on the current five-year note fell 10 basis points to 0.80 percent after touching the record low of 0.76 percent.

“The Committee expects to maintain a highly accommodative stance for monetary policy,” the FOMC said in a statement. “Economic conditions -- including low rates of resource utilization and a subdued outlook for inflation over the medium run -- are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

Growth Forecast

The Fed lowered its forecast for growth this year to 2.2 percent to 2.7 percent, down from a projection of 2.5 percent to 2.9 percent in November. It predicted the economy next year will expand 2.8 percent to 3.2 percent, down from a previous forecast of 3.0 percent to 3.5 percent.

The Fed has been “quite active” in its accommodative policies, including through the extension of the rate commitment today, Bernanke said.

“We hope to convey to the market the extent to which there is support on the committee for maintaining rates at a low level for a significant time,” he said.

In a separate statement of its long-range goals and strategy, the FOMC specified a 2 percent goal for inflation, as measured by the annual change in the price index for personal consumption expenditures.

‘Firmly Anchored’

“Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability,” the panel said in a statement. It also enhances “the committee’s ability to promote maximum employment in the face of significant economic disturbances.”

Policy makers declined to specify a goal for employment, saying that it “is largely determined by non-monetary factors.” The committee’s longer-run forecast for the jobless rate is 5.2 percent to 6 percent.

The Fed said it would continue to extend the average maturity of its $2.6 trillion securities portfolio, a move dubbed “Operation Twist.” The Fed also maintained its policy of reinvesting maturing housing debt into agency mortgage-backed securities.

Bernanke said that the extension of the “expected point of takeoff” for rising interest rates to 2014 implies that asset sales by the Fed would occur “later than previously thought,” and “presumably in 2015.”

Omit Description

Richmond Federal Reserve Bank President Jeffrey Lacker dissented because he “preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate,” according to the FOMC statement.

Recent reports on manufacturing, housing and employment indicated that the economy was picking up speed as the new year began.

Employers added 200,000 jobs in December, twice the previous month’s pace, and the unemployment rate dropped to 8.5 percent from 8.7 percent the month before.

Household wealth is getting a boost from rising stock prices. The Standard and Poor’s 500 Index climbed 4.5 percent in 2012 through yesterday, the best start to the year since 1997, when it rallied 6.1 percent in the first 14 days.

Motorcycle Maker

Harley-Davidson Inc., the biggest U.S. motorcycle maker, reported $54.6 million income from continuing operations in the fourth quarter compared with a loss of $42.1 million a year earlier. Sales at the maker of Fat Boy and V-Rod motorcycles rose 12 percent in the U.S.

“There has certainly been some encouraging news recently,” Bernanke said. Still, “we continue to see headwinds from Europe, coming from the slowing global economy and some other factors as well.”

The Fed is not “ready to declare that we’ve entered a new stronger phase” for the U.S. economy, he said.

To contact the reporters on this story: Craig Torres at ctorres3@bloomberg.net; Caroline Salas Gage at Csalas1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

Obama’s State of Union Audience Shrinks 12% to 37.7 Million, Nielsen Says

noreply@blogger.com (Jeanny TSY) — Thu, 26 Jan 2012 06:51:00 +0000

By Andy Fixmer - Jan 26, 2012 6:04 AM GMT+0700
Enlarge image

Barack Obama, U.S. President. Photographer: Joshua Roberts/Bloomberg

President Barack Obama, who is seeking re-election in November, drew 37.75 million viewers to last night’s State of the Union address, a 12 percent decline from a year earlier.

Obama’s 65-minute speech was watched by 13 percent fewer than the 43.4 million who tuned in for President George W. Bush’s State of the Union in 2004, before that re-election campaign, according to Nielsen data today.

The president used last night’s address to highlight themes of his bid for a second term. Obama called on Congress to require those making $1 million or more annually to pay a 30 percent federal tax rate. He called on Congress to help homeowners, crack down on U.S. financial crimes and unfair trade practices in China, and investigate lending practices that preceded the housing crisis.

The speech had a preliminary rating of 24, meaning it was seen in 24 percent of the 114.7 million U.S. TV households. The address was carried by major broadcast networks, Fox News Channel, CNN, CNBC and MSNBC, along with the Spanish outlets, Telemundo, Telefutura, Univision and Mundo2.

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

BofA, Citigroup Among Banks Facing Margin Pressure From Fed’s Rate Stance

noreply@blogger.com (Jeanny TSY) — Thu, 26 Jan 2012 06:20:00 +0000

By Dakin Campbell - Jan 26, 2012 6:00 AM GMT+0700

Bank of America Corp. and Citigroup Inc. (C) are among lenders that may find it more difficult to boost profits and capital after the Federal Reserve pledged to keep its benchmark interest rate low until at least late 2014.

“This hurts the banks, I don’t think there’s any question about that,” said Ralph Cole, a senior vice president of research at Ferguson Wellman Inc. in Portland, Oregon, which manages $2.9 billion. “Their cost of funds stays low but it makes it harder to earn a return.”

The Federal Open Market Committee said yesterday that economic conditions are likely to warrant “exceptionally low levels for the federal funds rate at least through late 2014.” The policy may hurt lenders’ profits as they struggle to find loans or securities with yields high enough to support their net interest margins, a gauge of profitability that measures the difference between the cost of funds and what they earn on assets.

The KBW Bank Index of 24 U.S. lenders advanced 0.1 percent, led by a 2.2 percent gain at Salt Lake City-based Zions Bancorp. Shares of U.S. insurers, including Radnor, Pennsylvania-based Lincoln National Corp. (LNC), slid as investors bet lower yields will crimp income from corporate debt, municipal securities and mortgage-linked assets used by the companies to cover policyholder obligations and generate profits.

Unwelcome Response

The average net interest margin at the four largest U.S. banks -- JPMorgan Chase & Co., Bank of America, Citigroup and Wells Fargo & Co. (WFC) -- dropped to 2.99 percent in the fourth quarter from 3.17 percent a year earlier. The margin at U.S. banks with more than $15 billion in assets fell to 3.44 percent in the third quarter of 2011, from 3.85 percent in the first quarter of 2010, according to Fed data.

“As a bank investor, this is not a welcome response” from the Fed, said Peter Kovalski, a money manager at Alpine Woods Capital Investors LLC in Purchase, New York, which manages about $6 billion. Bank stocks “have had a good run here, but they could give back some of the gains in the next few weeks,” he said. The KBW Bank Index (BKX) is up 11 percent this year.

Executives at New York-based JPMorgan expect low rates and the resulting margin compression to cause a $400 million decline in consumer and business banking net income this year, Barclays Capital analyst Jason Goldberg wrote in a report yesterday after meeting with bank management.

U.S. Unemployment

The Fed extended its previous pledge to keep rates low at least until the middle of 2013 as inflation remains tame and more than two years of economic growth failed to push unemployment below 8.5 percent. Some Fed officials have said further easing might be needed to put more Americans back to work and revive the housing market.

The Fed’s earlier pledge led San Francisco-based Wells Fargo to purchase more securities for its investment portfolio, Chief Financial Officer Timothy J. Sloan said in a Jan. 17 phone interview. Wells Fargo’s securities available for sale climbed to $222.6 billion as of Dec. 31 from $186.3 billion at the end of June.

“If the Fed had not said we are going to keep rates low, maybe we wouldn’t have invested as much, but they are the driver here,” Sloan said. “It’s silly not to take some of our liquidity, particularly because we’ve had good deposit growth, and invest it.”

The average yield on that portfolio fell to 4.46 percent in the fourth quarter from 4.92 percent in the third, the bank said last week in its earnings statement.

‘Economic Growth’

Banks may be able to cushion some of the negative impact of low rates if the Fed’s policy fuels economic growth and lending picks up, said Richard Staite, a London-based analyst with Atlantic Equities LLC. The yield on Wells Fargo’s loan portfolio was 4.81 percent in the fourth quarter.

“The best thing the Fed can do is promote economic growth, even if that requires a sustained period of low interest rates,” Staite said in a phone interview. “Loan growth will be the most important factor to helping banks offset the negative impact of low rates.”

Ferguson Wellman’s Cole said he’s worried about the potential for banks to make riskier loans if they grow desperate for income.

“At some point they won’t be able to make a return on their money so they will have to lend more,” said Cole, whose firm owns shares in Citigroup, JPMorgan and Wells Fargo. “Hopefully that doesn’t mean the loan quality goes down. They start reaching for yield, and that’s when they get hurt.”

Mortgage Rates

The Fed’s pledge is likely to further trim mortgage rates, which are linked to long-term government bond yields, said Greg McBride, the senior financial analyst at Bankrate.com, a unit of Bankrate Inc. Credit-card lenders, betting that their funding costs will remain low, also may boost or extend offers for zero- interest balance transfers, he said.

The national average rate on deposits, which includes checking, savings and money-market accounts, and certificates of deposit up to five years, is 0.59 percent, according to Dan Geller, executive vice president of Market Rates Insight in San Anselmo, California. That’s the lowest since he started tracking the data in January 1990. Interest rates on deposits may reach zero within the next 12 months to 18 months if lending continues to be soft, he said.

Custody Banks

Low interest rates also hurt custody banks by reducing the returns they make on investments and from lending cash and securities to institutional investors such as mutual funds and hedge funds. Bank of New York Mellon Corp. (BK), Boston-based State Street Corp. and Chicago-based Northern Trust Corp., the three largest independent custody banks, have made or planned 4,450 job cuts since November 2010.

The Fed’s announcement signals more difficulty for U.S. money-market mutual funds, which have waived some of their fees to keep customers’ returns above zero. The average annual fee charged by the largest 100 money funds fell to 0.17 percent in December, from 0.37 percent in August 2008, according to Crane Data LLC in Westborough, Massachusetts. Money fund assets had declined 31 percent in the past two years to $2.66 trillion as of Jan. 17.

To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

Wal-Mart Pulls Night-Shift Greeters as Walton Legacy Ebbs

noreply@blogger.com (Jeanny TSY) — Thu, 26 Jan 2012 06:18:00 +0000

By David Welch - Jan 26, 2012 2:32 AM GMT+0700

Wal-Mart Stores Inc. (WMT), the world’s largest retailer, has removed greeters from the overnight shift at its U.S. supercenters, chipping away at a 30-year tradition of making sure all shoppers are welcomed to the store.

The move will save money and ensure Wal-Mart has the right staffing levels during peak and non-peak hours, David Tovar, a spokesman, said in a telephone interview. For the past six months, Wal-Mart has been reassigning greeters at the company’s approximately 3,000 U.S. supercenters from the third shift, which runs from 10 p.m. to 7 a.m., to other jobs, he said.

Founder Sam Walton added greeters in 1980 to make his giant low-price stores friendly and welcoming. Cutting back, even during the early morning hours, shows Wal-Mart is rethinking longheld traditions to boost profit margins and guarantee low prices, said David Strasser, an analyst with Janney Montgomery Scott LLC in Philadelphia.

“It’s risky,” Strasser, who recommends buying Wal-Mart shares, said in a phone interview. “Consumers have been going to Wal-Mart for years, and greeters have become an expectation. To a degree it defines Wal-Mart.”

Bruce Plummer, a greeter on the first shift at a Wal-Mart in Fort Worth, Texas, said the company stopped scheduling third- shift greeters at his store in recent weeks.

“It’s important that they have it,” Plummer said in an interview. “Our job is to ask people if they have receipts. We also make them feel welcome and safe.”

Dollar-Store Competition

Wal-Mart has been minding its costs as U.S. sales growth slows and dollar stores increase price competition, Strasser said. Same-store sales at Wal-Mart’s namesake U.S. locations declined for nine straight quarters before snapping the streak with a 1.3 percent gain for the quarter ended in October.

Protecting revenue and profit margins at Bentonville, Arkansas-based Wal-Mart’s U.S. stores is important because they accounted for 60 percent of total sales and 73 percent of operating income for the nine months ended October.

Many of the former third-shift greeters are now stocking shelves to make sure there is plenty of inventory for the busier morning shopping hours, Tovar said.

Wal-Mart management decided to make the change six months ago, around the same time that the company hired consultant Acosta Inc. to help make sure its stores had adequate inventory.

Wal-Mart DNA

While greeters are an important part of Wal-Mart’s brand, so is restraining costs and prices, he said.

“We realized that it wasn’t necessary to have people greeting customers because it wasn’t peak shopping hours,” Tovar said. “It was meant to operate stores as efficiently as possible, which is also part of our DNA.”

Wal-Mart’s competitive advantage is low pricing, so constantly squeezing costs makes sense, said Matt Arnold, an analyst with Edward Jones & Co. in Des Peres, Missouri. While the company risks going too far by cutting staff, eliminating third-shift greeters may have minimal impact, said Arnold, who recommends buying the shares.

“That time of night, shopping at Wal-Mart is serve- yourself,” Arnold said in a telephone interview. “It’s probably a minimal impact on customer service.”

To contact the reporter on this story: David Welch in Detroit at dwelch12@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

Corning Quarterly Profit Falls 53% as Glass Prices Decline; Shares Retreat

noreply@blogger.com (Jeanny TSY) — Wed, 25 Jan 2012 14:10:00 +0000

By Alexander Yablon - Jan 25, 2012 8:47 PM GMT+0700

Corning Inc. (GLW), the world’s largest maker of glass for flat-panel televisions, reported fourth- quarter profit fell 53 percent as glass prices for LCD displays sank.

Net income declined to $491 million, or 31 cents a share, from $1.04 billion, or 66 cents, a year earlier, according to a statement today. While profit excluding some items matched the 33-cent average estimate of 21 analysts surveyed by Bloomberg, the company also said first-quarter earnings will fall amid “significant” price declines. Corning shares retreated 8.8 percent to $13.34 in pre-market trading.

“The real concern for investors is what happens in the glass industry and how they deal with excess capacity,” said Alkesh Shah, an analyst with Evercore Partners Inc. in New York. “Management is making the right decision to reduce capacity. The question is will they reduce enough, and what will competitors do.” He has an “equal weight” rating on Corning.

Corning said first-quarter earnings excluding some items may fall by 5 percent to 20 percent, without saying whether the comparison was with a year earlier or the previous quarter.

The company, based in Corning, New York, had cut its fourth-quarter forecast on Nov. 29, after price declines for liquid crystal display glass and the loss of a contract in Korea. Corning said then that earnings might drop 30 percent, not 5 percent as predicted in October.

A Corning spokesman, Daniel Collins, said the company will disclose more details about its expectations for 2012 at an investor meeting on Feb. 3.

“Considering that most of their products go straight to consumers, I think it’s still going to a tough year,” said Darice Liu, an analyst with Brigantine Advisors, citing uncertainty about the economy, in comments made before the earnings report.

Fourth-quarter sales for Corning advanced 6.9 percent to $1.89 billion, from $1.77 billion a year earlier. The average estimate of analysts was $1.85 billion, according to data compiled by Bloomberg.

The company makes glass and ceramic products, including glass panels for liquid crystal displays, Gorilla Glass found on smartphone touch screens, fiber-optic cables, industrial air filters, and life science equipment.

To contact the reporter on this story: Alexander Yablon in New York at ayablon@bloomberg.net

To contact the editor responsible for this story: Ville Heiskanen at vheiskanen@bloomberg.net

Apple ‘Didn’t Bet High Enough’ on Chinese Demand for IPhone 4S, Cook Says

noreply@blogger.com (Jeanny TSY) — Wed, 25 Jan 2012 14:09:00 +0000

By Bloomberg News - Jan 25, 2012 1:36 PM GMT+0700

Apple Inc. (AAPL) underestimated the “staggering” demand for the iPhone 4S when it started sales in China this month, Chief Executive Officer Tim Cook said.

“We thought we were betting bold,” Cook said about sales of the device in China on a conference call yesterday. “We didn’t bet high enough.”

Crowds pelted Apple’s oldest store in China with eggs on Jan. 13 when the shop in Beijing’s Sanlitun district failed to open on the first day of sales for the iPhone 4S. After Beijing police sealed off the area to remove more than 500 people, Apple announced that it would suspend sales of iPhones at all stores in Beijing and Shanghai “for the time being” to ensure safety.

With sales halted at its China retail outlets, Apple is now offering the iPhone in the world’s largest mobile phone market through its online store, carrier partner China Unicom (Hong Kong) Ltd., and authorized resellers. The company’s online store in China is currently sold out of the iPhone 4S.

Chinese demand for the handset is “off the charts,” Cook said on the call.

Apple, based in Cupertino, California, this month moved closer to expanding its distribution in China through a second carrier partner when regulators approved specifications for a device that would run on the network of China Telecom Corp. (728), the nation’s third-largest wireless carrier.

Cook declined to answer questions about when a second carrier would be added in China.

‘Key Partner’

“China Unicom continues to be a very key partner,” he said on the call. “I’ve got nothing to announce today on an expansion there, but as I’ve consistently said, China is an extremely important market for us and we continue to look at how to grow it further.”

Apple announced yesterday that quarterly profit more than doubled to $13.1 billion in the period that ended Dec. 31 on surging demand for the iPhone and iPad.

The company sold 5.6 million iPhones in China during the first nine months of last year, making it the No. 4 smartphone vendor in the country in the third quarter, according to Stamford, Connecticut-based research company Gartner Inc.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

ECB Said to Oppose Haircut on Its Own Greek Debt

noreply@blogger.com (Jeanny TSY) — Wed, 25 Jan 2012 13:42:00 +0000

By Jeff Black and Gabi Thesing - Jan 25, 2012 7:28 PM GMT+0700

The European Central Bank remains firmly opposed to any restructuring of its Greek bond holdings as the debt was acquired for monetary policy purposes, according to two people familiar with the Governing Council’s stance.

While the ECB faces pressure to join private-sector investors in taking losses on Greek debt, the central bank sees this as potentially damaging to confidence in the institution if it were to take part, said the people, who declined to be identified because the matter is confidential.

International Monetary Fund Managing Director Christine Lagarde said today that European governments and other public holders of Greek debt may have to increase support if private creditors don’t go far enough. Investors and European finance ministers remain at odds over how much private investors should shoulder in the Greek bailout.

“Once again, policy makers leave the room and hope the ECB will fill in,” said Thomas Costerg, an economist at Standard Chartered Bank in London. “The risk is that by putting the ECB on board, as the IMF asks, this could result in debt swap negotiations restarting from scratch, which could mean additional delay to an already over-stretched timetable.”

German Chancellor Angela Merkel’s government will oppose any attempt to make the ECB accept a writedown on its Greek bonds, senior coalition lawmaker Michael Meister said in an interview today.

Greek Talks

ECB President Mario Draghi said on Jan. 19 that the ECB is “not party” to ongoing discussions between the Greek government and the private sector. The ECB is in talks regarding a potential swap of its Greek bonds that would ease the country’s debt load and avoid losses at the central bank, the New York Times reported today, citing unnamed officials.

An ECB spokesman declined to comment.

Greek bondholders meet today in Paris to discuss their response to European officials’ demands that they take deeper losses on their holdings of Greek debt to help bring the nation’s borrowings to a sustainable level.

Institute of International Finance Managing Director Charles Dallara, who’s negotiating on behalf of the bondholders, said yesterday that all parties, public and private, should contribute to cutting Greece’s debt. Dallara stressed that private investors hold only about 60 percent of Greece’s 350 billion euros ($454 billion) of debt. The IIF is a Washington- based industry group with more than 450 members.

Dallara’s View

“It is important for all parties to recognize how much we all have at stake here and work together and co-operatively to find a solution,” Dallara told reporters in Zurich. “Some might minimize the risk of an involuntary debt exchange and point to other cases such as Argentina. I would caution against that attitude.”

European officials and Greece’s private bondholders agreed in October to implement a 50 percent cut in the face value of more than 200 billion euros of debt by voluntarily exchanging outstanding bonds for new securities, with a goal of reducing Greece’s borrowings to 120 percent of gross domestic product by 2020. The accord is tied to a second financing package for the cash-strapped country, which faces a 14.5 billion-euro bond payment on March 20.

Latest Offer

The latest offer from the IIF would lead to a loss of about 69 percent on the net-present value of Greek bonds, two people with knowledge of the talks said. The new 30-year bonds would carry an average coupon of about 4.25 percent, said the people, who declined to be identified because the talks are private.

“If the level of Greece’s privately held debt is not sufficiently renegotiated, then public creditors, holders of Greek debt, will also have to participate in the financial effort,” Lagarde told journalists in Paris.

European finance ministers meeting in Brussels signaled they would push Greece’s private investors to accept bigger losses, with coupons below 3.5 percent for debt to be serviced until 2020 and below 4 percent over the 30 years of the next Greek package.

The ECB has opposed any “involuntary” restructuring of Greek debt that would trigger the payment of credit default swaps, and extracted a 35 billion-euro guarantee for bonds held as collateral on its books from European governments last year.

‘Costly’ Move

Asking private investors to take a loss on Greek holdings has proved “costly for the euro zone” as it sends a message that “euro zone sovereign debt should no longer be considered a safe asset with the implicit promise that it would be repaid in full,” ECB Governing Council member Athanasios Orphanides wrote in the Financial Times on Jan. 5, calling for the plan to be jettisoned.

The ECB began buying Greek government debt in May 2010 as the sovereign debt crisis flared, saying the move was needed to maintain the transmission of monetary policy as bond yields soared. It now holds about 36 billion euros of the nation’s bonds, Barclays Capital estimated in a Jan. 6 report.

Greece’s creditors won’t help the country get a handle on its debt by taking losses on sovereign bonds, according to the Kiel Institute for the World Economy. Greece’s debt load will be “unbearably high” even if public creditors join investors in taking 50 percent writedowns on the debt, the institute at the University of Kiel in northern Germany said in a study published on its website.

To contact the reporters on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net; Gabi Thesing in London at gthesing@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

Capitalism Seen in Crisis by Investors: Poll

noreply@blogger.com (Jeanny TSY) — Wed, 25 Jan 2012 13:41:00 +0000

By Rich Miller - Jan 25, 2012 4:20 PM GMT+0700

Play Video

Jan. 25 (Bloomberg) -- Michael Spence, a professor of economics at New York University and nobel laureate, discusses the findings of Bloomberg's Global Poll, the U.K. economy and the outlook for euro-area economies. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse" on the sidelines of the World Economic Forum's annual meeting in Davos, Switzerland. (Source: Bloomberg)

International investors say capitalism is in crisis, with almost one in three backing radical changes to the system, according to a Bloomberg survey.

As the global financial and business elite gather in Davos for their annual forum, a majority in the Bloomberg Global Poll agree that income inequality hurts the economy and that governments need to do something to address it -- ideas at the heart of “Occupy” protests worldwide. Those surveyed also voice reservations about the financial industry’s role in society, with seven in 10 seeing at least some truth in the argument that banks have too much power over governments.

“Capitalism is in crisis because there is a huge and growing disparity in income/wealth distribution in Western economies, and an equally divisive generational disparity,” poll participant Michael Derks, chief strategist for FXPro Financial Services broker in London, said in an e-mail.

“It requires government intervention on an enormous scale, because an economy cannot survive if it does not invest in the younger generation,” Derks said.

More than 70 percent of those polled believe the system is in trouble, with 32 percent saying it needs a “radical reworking of the rules and regulations.” The other 39 percent think the turbulence will ebb on its own, according to the quarterly poll conducted Jan. 23-24 of 1,209 investors, analysts and traders who are Bloomberg subscribers. Fewer than one in four say free enterprise is working as it should.

Seventy percent of those surveyed say Europe’s economic troubles will cause social instability in 2012, including riots or other unrest.

Role for Government

The 459 U.S. investors who answered the survey view capitalism more favorably than their counterparts elsewhere, with roughly one in five saying the system needs an overhaul, according to the poll.

U.S. participants are also more wary of government action to tackle income disparities. Half say such official intervention would be inappropriate. More than three of four European investors and more than four in five Asians see a role for government in dealing with the issue.

The future of free enterprise was discussed today at the start of the World Economic Forum’s annual meeting. The opening panel featured Carlyle Group LP (CG) co-founder David Rubenstein, Bank of America Corp. Chief Executive Officer Brian Moynihan and Sharan Burrow, general secretary of the International Trade Union Confederation.

Rubenstein said the Chinese-style “state capitalism” model “will prevail” if the U.S. and Western European economies don’t fix their debt problems.

Message Resonating

As 2,600 delegates meet in the ski resort’s conference center, young Swiss Socialists are erecting igloos under the banner of “OccupyWEF,” which draws its inspiration from last year’s “Occupy Wall Street” protests against the financial industry and the concentration of wealth in the top one percent of the society.

Their message is resonating with global investors, according to the results of the poll. More than half of respondents say that income inequality hampers economic growth. Some two-thirds think it is appropriate for governments to pursue policies to tackle the issue, although a plurality -- 48 percent -- says it can be addressed over time. Fewer than one in five back urgent action to deal with the gap.

“There is a large and growing wealth disparity and I think it is unhealthy,” Steve Morton, a director at Natixis Securities in New York who took part in the survey, said in an e-mail. “The lower levels of the pyramid don’t have enough money to buy things and keep the economy going.”

Criticizing Banks

The financial industry also comes in for criticism in the quarterly poll. About two-thirds see at least some truth in the argument that bankers’ actions are driven by greed and harm the economy. More than four in five voice some sympathy for the contention that top bankers get large bonuses even when their firms don’t do well. And only 14 percent completely disagree with the statement that banks need to be regulated so that they’re not too big to fail.

“There’s too much power, it’s time to reset,” Burrow said at the Davos panel. “If you’ve got a group that is too big to fail, what it means is that you are the biggest bullies on the planet. The financial sector has lost its moral compass.”

Growing Gap

“The banking culture has evolved radically, to the point where the perception amongst most members of society is that their actions are driven by the relentless pursuit of earnings with no regard to their potential negative impact on communities,” said Anson Rosewall, a poll participant and sales trader at BBY Ltd., a financial services firm in Sydney, Australia.

“The fact that banks have taken government cash, while the average person has lost his job and house without help, will probably forever tarnish the reputation of these major institutions,” he said in an e-mail.

The gap between rich and poor is widening across most developed economies as executives, bankers and skilled workers reap more rewards, the Organization for Economic Cooperation and Development said last month.

The average income of the richest tenth of the population is now about nine times that of the poorest tenth, the Paris- based OECD said. The gap has increased about 10 percent since the mid-1980s with Mexico, the U.S., Israel and the U.K. among the countries with the biggest divide between rich and poor.

Tax Debate

President Barack Obama has signaled that he intends to highlight the issue in his re-election campaign by repeatedly calling for legislation to ensure that people with incomes of more than $1 million a year pay at least the same percentage in taxes as middle-class households.

Republican presidential candidate Mitt Romney earned $21.6 million in 2010 and paid 13.9 percent of that amount in income taxes, using the preferential rate on investment income and charitable contributions to pay a smaller share of his earnings than top wage earners typically do, according to tax returns released by the former Massachusetts governor yesterday.

U.S. investors are not convinced that income inequality is a threat to the economy: a majority of those surveyed say it does not hinder growth. More than 50 percent of Europeans and 60 percent of Asians think otherwise.

Skeptical of Regulation

Poll respondents from America are also less enthusiastic about bank regulation. Only about one in three U.S. investors are completely convinced that banks are in need of regulation to prevent them from being too big to fail. Majorities of investors in Europe and Asia are sold on that idea.

The poll’s overall results aren’t completely negative for the financial industry. Only about a quarter of investors completely disagree with the argument that banks do a good job routing capital to businesses that have the best chance of creating jobs.

More than three in four also voice at least some support for the statement that strong bank profits are good for the economy because financial institutions will have more money to lend to consumers and companies.

Structural changes, in particular new capital requirements and regulation, are holding banking profits down, according to roughly three-quarters of those surveyed. Only about a quarter blame the lower profits on a temporary slowdown in the economy and financial markets.

The Bloomberg Global Poll was conducted by Selzer & Co., a Des Moines, Iowa-based firm. It has a margin of error of plus or minus 2.8 percentage points.

To contact the reporter on this story: Rich Miller in Washington at rmiller28@bloomberg.net

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net.

Gold Retreats for a Second Day as Asian Holidays Erode Physical Demand

noreply@blogger.com (Jeanny TSY) — Wed, 25 Jan 2012 13:40:00 +0000

By Nicholas Larkin and Glenys Sim - Jan 25, 2012 6:44 PM GMT+0700

Gold dropped for a second day in London as physical demand slumped due to holidays in Asia and as investors await the outcome of a Federal Reserve meeting.

Economists expect the U.S. central bank will maintain a pledge to keep its benchmark interest rate near zero at its meeting today. European equities declined and commodities were little changed. Financial markets in China, Hong Kong and Taiwan are closed today for the Lunar New Year.

“In the absence of sustained physical interest, gold is prone to a little more downside this week as bullion continues trading with global risk sentiment,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. Still, the Fed is “set to remain accommodative for now which is, as ever, gold-beneficial in the long run.”

Bullion for immediate delivery fell 0.6 percent to $1,656.20 an ounce by 11:24 a.m. in London. Prices dropped 0.7 percent yesterday, the most since Dec. 28. Gold for February delivery was down 0.5 percent at $1,655.80 on the Comex in New York.

Gold at the morning “fixing,” used by some mining companies to sell output, declined to $1,659 an ounce in London from $1,665.50 at yesterday’s afternoon fixing.

The metal climbed 10 percent in 2011, an 11th consecutive annual gain, as investors sought to diversify from equities and some currencies. While gold slid 14 percent since touching a record $1,921.15 in September, holdings in bullion-backed exchange-traded products are within 1.9 percent of last month’s all-time high. Assets were 2,349.2 metric tons yesterday, data compiled by Bloomberg show.

Fed Forecasts

The Fed said last week it will provide two charts with the forecasts for the benchmark rate after the meeting of policy makers. It left the target for overnight loans between banks in a range of zero to 0.25 percent last month and reiterated that economic conditions may warrant “exceptionally low” rates “at least” through mid-2013. They will keep the key rate unchanged today, according to a Bloomberg survey.

“It’s all about the dollar,” said Nick Trevethan, an analyst at Australia & New Zealand Banking Group Ltd. “This is the first time the Federal Open Market Committee is giving its forecast, and I think people are keen to see what it looks like.”

Silver for immediate delivery dropped 0.6 percent to $31.865 an ounce. It’s the best-performing precious metal this year with a gain of 14 percent.

Palladium fell 0.8 percent at $674.50 an ounce after rising to a four-month high of $689.50 yesterday. Platinum was down 0.4 percent at $1,544.75 an ounce. It yesterday climbed to $1,568.50, the highest price since Dec. 2.

To contact the reporters for this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim at gsim4@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Stocks Drop in Europe as Ericsson Profit Disappoints; Nasdaq Futures Rise

noreply@blogger.com (Jeanny TSY) — Wed, 25 Jan 2012 13:39:00 +0000

By Stephen Kirkland and Shiyin Chen - Jan 25, 2012 8:05 PM GMT+0700

Play Video

Jan. 25 (Bloomberg) -- Rajiv Jain, a money manager at Vontobel Asset Management Inc. in New York, talks about U.S. stocks, Europe's debt crisis and the technology industry. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Play Video

Jan. 25 (Bloomberg) -- Thomas Murphy, managing partner at Family Office Research & Management Ltd. in Sydney, a private wealth-management firm, talks about global stocks and his investment strategy. Murphy also discusses President Barack Obama's State of the Union address. He speaks with Susan Li on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

European stocks dropped for a second day as Ericsson AB’s earnings missed estimates, Novartis AG said sales may stagnate and a report showed the U.K. economy contracted more than estimated. Nasdaq-100 Index futures rose after Apple (AAPL) Inc.’s profit more than doubled.

The Stoxx Europe 600 Index slipped 0.7 percent at 8 a.m. in New York and Standard & Poor’s 500 Index futures fell 0.3 percent. Nasdaq-100 futures jumped 0.6 percent as Apple shares climbed 7.4 percent in pre-market trading. The yen weakened 0.5 percent against the dollar after the country posted its first annual trade deficit in 31 years. The German 30-year bond yield lost three basis points as bids at an auction exceeded the government’s sales target. Oil declined 0.9 percent.

Ericsson, the world’s largest maker of wireless networks, reported profit fell amid slower spending from North American customers, and Novartis said sales probably won’t grow this year and profitability may decline. The U.K. economy shrank 0.2 percent in the fourth quarter, according to the Office for National Statistics. The Federal Reserve is set to release rate forecasts for the first time a day after President Barack Obama delivered his third State of the Union address.

“Earnings estimates still look extremely optimistic,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels. “We would be cautious on risky assets at the moment. Let’s not forget the overall economy is weak.”

Ericsson tumbled 14 percent and Novartis, Europe’s biggest drugmaker by sales, sank 3.4 percent. ARM Holdings Plc, the U.K. owner of chip technology used in Apple’s iPhone and iPad, rose 4.4 percent.

Apple Earnings

Apple said first-quarter profit surged to $13.1 billion, or $13.87 a share. Analysts surveyed by Bloomberg on average estimated profit of $10.14 a share. Apple is among the 54 of 86 S&P 500 companies that have beaten analyst estimates for quarterly profit since earnings season began on Jan. 9.

Advanced Micro Devices Inc., the second-largest maker of processors for personal computers, fell 6.3 percent after projecting lower sales than some analysts estimated. Nvidia Corp. sank 5.5 percent after the maker of graphics processors cut its fourth-quarter revenue outlook.

Boeing Co. slipped 1.1 percent after forecasting earnings per share that were less than analysts predicted. Xerox Corp. reported fourth-quarter profit more than doubled. The shares were little changed.

Illumina Inc. surged 43 percent in pre-market New York trading after Roche Holding AG offered about $5.7 billion in cash for the provider of genetic-analysis tools, the third time the Swiss drugmaker has made a hostile bid for a U.S. company since 2007.

Home Sales

A report today may show the number of Americans signing contracts to buy previously owned homes fell 1 percent in December after a 7.3 percent gain the previous month, according to the median estimate in a Bloomberg News survey of economists.

Australia’s dollar strengthened against most of its 16 counterparts on speculation the nation’s central bank may have less scope to cut borrowing costs after core inflation accelerated.

The pound lost 0.5 percent to $1.5556. The euro slipped 0.7 percent to $1.2949 as the European Central Bank was said to oppose restructuring its Greek bond holdings.

Billionaire George Soros said “the euro must survive because the alternative, a breakup, would cause a meltdown that Europe, the world, can’t afford,” Newsweek Magazine reported, citing an interview in New York before his participation at the World Economic Forum in Davos.

German Auction

The Portuguese five-year note yield climbed to a record 18.78 percent, while the yield on the Italian 10-year bond jumped 10 basis points.

The German 10-year bund yield slipped four basis points, falling for the first time in five days. Germany got bids for 5.042 billion euros ($6.6 billion) of 30-year bonds, more than the maximum sales target of 3 billion euros, the Bundesbank said in a statement today. The debt agency accepted bids for 2.458 billion euros at average yield of 2.62 percent.

The yield on the U.S. five-year Treasury note fell two basis points to 0.88 percent before the government sells $35 billion of similar-maturity securities.

Obama called on Congress to require the highest U.S. earners to pay at least 30 percent of their income in taxes, building on his election-year push for what he terms economic fairness. He also vowed to get tough on unfair trade practices by nations such as China, and said the U.S. should provide aid to help domestic companies compete.

Oil in New York dropped for a second day to $98.07 a barrel and copper declined from a four-month high. The S&P GSCI index of 24 commodities slipped 0.3 percent. Natural gas climbed 2.9 percent, the fourth consecutive gain.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Shiyin Chen in Singapore at schen37@bloomberg.net;

To contact the editor responsible for this story: Stuart Wallace at Swallace6@bloomberg.net