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(UUP/UDN/EUO) Dollar Optimism Rises to 15-Month High as Global Budget Woes Damp Outlook
By Daniel Kruger
Feb. 10 (Bloomberg) -- Investors are the most bullish on the U.S. dollar since November 2008 on concern that weakening government finances in European nations will hurt the global economic recovery, a survey of Bloomberg users showed.
The world’s reserve currency will rise over the next six months, according to respondents in the Bloomberg Professional Global Confidence Index. Confidence about the outlook for the global economy among the 2,486 participants in the survey, taken before European Union officials said they may aid Greece yesterday, dropped from the highest level since the series began two years ago.
The dollar rose last week to its strongest level against the euro since May as Greece struggled to convince investors the government can cut its deficit below the European Union’s ceiling of 3 percent of gross domestic product. Spain and Portugal are also trying to control widening deficits, prompting investors to drive the euro down 3.8 percent this year.
The drop in the euro “shows you the magnitude and momentum of the fears associated with Greece,” said Andrew Busch, a global currency strategist at Bank of Montreal in Chicago, and a survey participant.
Sentiment toward the dollar reached 55.72 this month, from 53.11 in January and 42.42 in December, according to the survey. The measure is a diffusion index, meaning a reading above 50 indicates Bloomberg users expect the dollar to strengthen.
The last time the reading was this high was November 2008, when it was 59.83. That was when the U.S. pledged to spend record amounts to bail out the financial system as credit markets froze. The Bloomberg Correlation-Weighted Index for the dollar rose as much as 10 percent the next four months.
Euro Confidence Tumbles
The fallout from the budget crisis in Greece has led German investors to become the most bearish on the 16-nation currency since November 2007, when Bloomberg began tracking survey data. Sentiment from German participants dropped to 37.5, while the readings for respondents in Spain declined to 25.19 and slid to 30 for those in France.
European officials said yesterday they may assist Greece to prevent its budget deficit from eroding confidence in the euro. Options for Greece include bilateral aid or a package put together by a group of countries using the euro, said Michael Meister, financial affairs spokesman for German Chancellor Angela Merkel’s Christian Democratic Union.
“We are talking about support in the broad sense,” Olli Rehn, the EU’s economic affairs commissioner, said yesterday. Meister said that aid would come “under strict conditions and if the Greek government undertakes far-reaching state reforms.”
Paradigm Shift
Speculation that economic growth will lag behind the U.S. and that the region’s debt won’t fall to pre-financial crisis levels for at least five years also are weighing on the euro, as well as assets denominated in the currency.
“There does seem to be a slight shift in the paradigm,” said Samarjit Shankar, a managing director for the foreign- exchange group in Boston at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $20 trillion in assets under administration and a survey participant. “No longer is just risk aversion beneficial to the dollar. The dollar has its own set of drivers.”
The Bloomberg Correlation-Weighted Index for the dollar has risen 6 percent from last year’s low on Nov. 25 as U.S. government reports showed the unemployment rate fell last month. Before the Dec. 4 payrolls report, the index fell about 21 percent from its peak last year in March as investors bought higher-yielding assets funded with dollars.
Government Bond Yields
“There are some good reasons to be confident about the dollar,” Busch said. “The economy’s coming back.”
The U.S. economy will expand 2.7 percent in 2010, about twice as much as in the euro zone and Japan, according to the median forecasts in Bloomberg surveys of economists.
The budget crisis in Greece has also bolstered the appeal of U.S. government debt. Yields on 10-year notes ended yesterday at 3.65 percent, down from the 4 percent high for the past year set in June.
The prospect for an increase in 10-year Treasury note yields declined to 68.30 in February, from a peak of 76.65 a month earlier, the survey showed.
Expectations for higher yields also declined in Germany, France and Spain last month. The index for German respondents dropped to 69.08 from 72.71. Pessimism fell to 66 from 72.08 among French participants, the least since October. In Spain, the measure slumped to 73.36 from 75.2, which was the highest since the surveys began.
To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net
Last Updated: February 10, 2010 07:00 EST
(UUP/UDN/EUO) Dollar Optimism Rises to 15-Month High as Global Budget Woes Damp Outlook
By Daniel Kruger
Feb. 10 (Bloomberg) -- Investors are the most bullish on the U.S. dollar since November 2008 on concern that weakening government finances in European nations will hurt the global economic recovery, a survey of Bloomberg users showed.
The world’s reserve currency will rise over the next six months, according to respondents in the Bloomberg Professional Global Confidence Index. Confidence about the outlook for the global economy among the 2,486 participants in the survey, taken before European Union officials said they may aid Greece yesterday, dropped from the highest level since the series began two years ago.
The dollar rose last week to its strongest level against the euro since May as Greece struggled to convince investors the government can cut its deficit below the European Union’s ceiling of 3 percent of gross domestic product. Spain and Portugal are also trying to control widening deficits, prompting investors to drive the euro down 3.8 percent this year.
The drop in the euro “shows you the magnitude and momentum of the fears associated with Greece,” said Andrew Busch, a global currency strategist at Bank of Montreal in Chicago, and a survey participant.
Sentiment toward the dollar reached 55.72 this month, from 53.11 in January and 42.42 in December, according to the survey. The measure is a diffusion index, meaning a reading above 50 indicates Bloomberg users expect the dollar to strengthen.
The last time the reading was this high was November 2008, when it was 59.83. That was when the U.S. pledged to spend record amounts to bail out the financial system as credit markets froze. The Bloomberg Correlation-Weighted Index for the dollar rose as much as 10 percent the next four months.
Euro Confidence Tumbles
The fallout from the budget crisis in Greece has led German investors to become the most bearish on the 16-nation currency since November 2007, when Bloomberg began tracking survey data. Sentiment from German participants dropped to 37.5, while the readings for respondents in Spain declined to 25.19 and slid to 30 for those in France.
European officials said yesterday they may assist Greece to prevent its budget deficit from eroding confidence in the euro. Options for Greece include bilateral aid or a package put together by a group of countries using the euro, said Michael Meister, financial affairs spokesman for German Chancellor Angela Merkel’s Christian Democratic Union.
“We are talking about support in the broad sense,” Olli Rehn, the EU’s economic affairs commissioner, said yesterday. Meister said that aid would come “under strict conditions and if the Greek government undertakes far-reaching state reforms.”
Paradigm Shift
Speculation that economic growth will lag behind the U.S. and that the region’s debt won’t fall to pre-financial crisis levels for at least five years also are weighing on the euro, as well as assets denominated in the currency.
“There does seem to be a slight shift in the paradigm,” said Samarjit Shankar, a managing director for the foreign- exchange group in Boston at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $20 trillion in assets under administration and a survey participant. “No longer is just risk aversion beneficial to the dollar. The dollar has its own set of drivers.”
The Bloomberg Correlation-Weighted Index for the dollar has risen 6 percent from last year’s low on Nov. 25 as U.S. government reports showed the unemployment rate fell last month. Before the Dec. 4 payrolls report, the index fell about 21 percent from its peak last year in March as investors bought higher-yielding assets funded with dollars.
Government Bond Yields
“There are some good reasons to be confident about the dollar,” Busch said. “The economy’s coming back.”
The U.S. economy will expand 2.7 percent in 2010, about twice as much as in the euro zone and Japan, according to the median forecasts in Bloomberg surveys of economists.
The budget crisis in Greece has also bolstered the appeal of U.S. government debt. Yields on 10-year notes ended yesterday at 3.65 percent, down from the 4 percent high for the past year set in June.
The prospect for an increase in 10-year Treasury note yields declined to 68.30 in February, from a peak of 76.65 a month earlier, the survey showed.
Expectations for higher yields also declined in Germany, France and Spain last month. The index for German respondents dropped to 69.08 from 72.71. Pessimism fell to 66 from 72.08 among French participants, the least since October. In Spain, the measure slumped to 73.36 from 75.2, which was the highest since the surveys began.
To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net
Last Updated: February 10, 2010 07:00 EST
FUTURES: OIL $73.58 (-0.23), USD: 80.115, EURO : $1.3734, GOLD: $1,072 (-0.40), PLATINUM: 1,498
DJIA Futures: 10,018, S&P: 1,067, NASD: 1,751
BL: China's Imports Surge 86% as Domestic Demand Aids Global Economic Rebound
By Bloomberg News
Feb. 10 (Bloomberg) -- China’s imports climbed for a third straight month in January, signaling increasing strength in domestic demand that’s aiding the global economic rebound.
Imports climbed a record 85.5 percent from a year before, a jump that was influenced by a shift in the lunar new year holiday to February this year from January 2009, customs bureau figures showed in Beijing today. Exports rose 21 percent in a second monthly advance after 13 declines that may reinforce overseas calls for China to allow a stronger currency.
Premier Wen Jiabao is trying to shift China toward relying on domestic demand after exports proved vulnerable during the global recession. Now, Germany’s BGA wholesale and export federation is counting on Chinese buyers to propel a 10 percent gain in German shipments abroad in 2010 and Taiwan posted the biggest export jump in 30 years due to its neighbor’s spending.
“The global economic recovery, particularly in emerging markets, is buoying China’s exports,” said Sun Mingchun, chief China economist at Nomura Holdings Inc. in Hong Kong. “Even more important is China’s booming domestic demand, which is absorbing more imports.”
Sun forecasts imports will grow 20 percent this year as exports climb 11 percent. Imports from Germany rose 50 percent in January from a year earlier, today’s data showed.
China’s trade surplus slipped to $14.17 billion. The jump in overseas shipments was the biggest since September 2008, two months after the nation halted the yuan’s appreciation against the dollar.
South Korea, Taiwan
The nation’s appetite for imports is aiding Asian economies including South Korea, Taiwan and Japan, said David Cohen, an economist at Action Economics in Singapore.
Japanese machinery orders surged 20.1 percent in December from record low a month earlier amid an export-led economic recovery, a Cabinet Office report showed today.
China’s gross domestic product climbed 10.7 percent in the fourth quarter from a year earlier, the fastest pace in two years, after the government loosed an unprecedented expansion in credit to counter the effects of the financial crisis. China this year is projected to overtake Japan as No. 2 in global GDP rankings, after the U.S.
“It’s getting too big a part of the global pie to keep relying on exports for growth, and so we do think there’s going to be a lot more policies to drive domestic consumption going forward,” Robert Subbaraman, chief economist for Asia excluding Japan at Nomura International Ltd., said in an interview on Bloomberg Television in Hong Kong today.
Pressing on Yuan
American officials may see Chinese trade gains as a sign that the nation no longer needs to protect exporters by keeping the yuan pegged to the U.S. currency. At the same time, China’s policy makers may see the below-forecast exports and trade surplus as indicating global demand is only gradually improving.
China’s export gain compared with a 17.7 percent increase in December and the median 28 percent estimate of economists. Imports rose by the most since Bloomberg data began in 1991.
Comparisons from a year earlier were also affected by depressed readings in early 2009 due to the financial crisis. China’s exports slid 17.5 percent in January 2009 and imports tumbled 43.1 percent.
“Chinese policy makers will be very cautious in interpreting the January data, which is highly distorted by the Chinese lunar new year holiday,” said Lu Ting, a Hong Kong- based economist at Bank of America-Merrill Lynch. “They may wait a few more months before making major policy moves.”
Currency Outlook
Twelve-month non-deliverable yuan forwards dropped 0.3 percent to 6.6815 per dollar as of 1:13 p.m. in Hong Kong, indicating traders expect the currency to advance 2.2 percent against the dollar in the next year. An editorial in the state- owned China Securities Journal said the yuan may not have “big gains” in the first half to sustain a recovery in exports.
Stocks pared advances after the trade report, with the MSCI Asia Pacific index up 0.3 percent after earlier rising as much as 0.8 percent.
Seasonally adjusted, exports fell 5.5 percent from December and imports dropped 0.9 percent, the customs bureau said.
Billionaire William Fung, the managing director of Hong Kong-listed Li & Fung Ltd., the world’s largest supplier of toys, clothes and furniture to retailers, said Jan. 27 that global demand seems to be recovering “very slowly, if at all.”
In contrast, Brian Jackson, an emerging-market strategist at Royal Bank of Canada in Hong Kong, said today’s report shows that for China the “positive trend remains intact,” and bolsters the case for the government to tighten policies and let the yuan strengthen in coming months.
Cooling Economy
The central bank has already raised banks’ reserve requirements to cool the world’s fastest-growing major economy. U.S. officials, pressing for a stronger Chinese currency to reduce trade imbalances, also argue that yuan gains would help China to restrain inflation.
China’s static currency is fueling tensions with the U.S. that span anti-dumping duties on American chicken, arms sales to Taiwan, and the Dalai Lama’s planned meeting with President Barack Obama. On Feb. 4, China’s Foreign Ministry rejected Obama’s call for a stronger yuan, adding that “accusations and pressure will not help solve the issue.”
The Chinese economy risks overheating this year as exports rebound, government economist Zhang Ming wrote in the China Securities Journal this month, adding that inflation pressures will encourage policy makers to let the yuan gain.
Shrinking Surplus
Policy makers may opt to shrink the trade surplus through raising wages rather than yuan gains, Credit Suisse Group AG economist Tao Dong said in an interview yesterday. Higher labor costs would cut Chinese export competitiveness while boosting domestic spending power and sustaining growth, he said.
Jiangsu, the nation’s third-largest exporting province in 2008, boosted the minimum wage 13 percent this month in an effort the local labor department said was aimed at attracting workers.
Central bank Governor Zhou Xiaochuan said yesterday that policy makers need to “closely watch” inflation. Fan Gang, the academic member of the monetary policy committee, warned Feb. 1 that asset bubbles are “the real worry” for the Chinese economy.
A report tomorrow may show consumer prices increased 2.1 percent in January from a year earlier, the most since November 2008, according to the median forecast in a Bloomberg News survey of economists. Property price figures are also due this week.
To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net
Last Updated: February 10, 2010 02:20 EST
BL: Germany Said to Consider Aid for Greece Beyond Loan Guarantees
By Brian Parkin and Rainer Buergin
Feb. 10 (Bloomberg) -- German Finance Minister Wolfgang Schaeuble told lawmakers that options for helping Greece extend beyond loan guarantees as Greek unions struck to protest budget cuts, shutting down the nation’s schools, hospitals and flights.
European Union rules on aid are more flexible than the German government first thought, according to a lawmaker who attended today’s briefing in Berlin and spoke on the condition of anonymity because the discussions were private.
Prospects that the EU would extend a financial lifeline to Prime Minister George Papandreou at a summit tomorrow sent Greek bonds to their biggest rally since the introduction of the euro. The euro’s slide to a nine-month low and a slump in bond prices prompted leaders to drop their resistance to rescuing Greece and to protect the rest of the euro region from market turmoil.
“Help for Greece is obviously on the way,” said Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt. “The EU seems bent on making sure that it reacts in time and not at the last minute.”
An EU official said today all options are being considered, including a standing facility to provide credit guarantees. The official told reporters the measures under consideration could be national or directed by the EU. An announcement of a plan may be made today, said the official, who declined to be identified because the talks remain confidential.
Papandreou, who met French President Nicolas Sarkozy in Paris today, has failed to convince investors that his plan of spending reductions, a wage freeze and stepped-up tax collections to cut the EU’s biggest deficit will work.
Policy Reversal
For weeks, European officials insisted that no bailout was planned and that Greece’s effort to reduce its deficit, estimated at 12.7 percent of gross domestic product, should be given a chance to work. EU policy makers have no “plan B” to help Greece, former Monetary Affairs Commissioner Joaquin Almunia said in a Jan. 29 interview.
Signs of a rescue helped ease investor concerns that Greece’s worsening finances would derail the global recovery. The risk premium investors demand to buy Greek debt over comparable German bonds tumbled for a second day to 2.80 percentage points, the lowest since Jan. 19. It reached as high as 3.96 percentage points on Jan. 28.
The gains in Greek securities may be short-lived.
There will be “blood on the walls” in credit markets if the EU fails to agree to a package for Greece tomorrow, Gary Jenkins, head of credit strategy at Evolution Securities Ltd. in London, said in a note to investors. “They must be aware of that and thus it is an extremely unlikely scenario,” he said.
Summit Agenda
Leaders arrive in Brussels tomorrow morning for the summit, which will be hosted by EU President Herman Van Rompuy. While Greece isn’t officially on the agenda, he will discuss the current “economic situation” over lunch, a session traditionally devoted to the most-sensitive subjects.
Schaeuble told reporters today he had “no intention to participate in speculation.” He gives a speech on tax policy and financial markets in Berlin at 5:40 p.m. local time. German Chancellor Angela Merkel is not scheduled to make any public comments today.
“We are considering support,” Michael Meister, financial- affairs spokesman for Merkel’s Christian Democratic Union, said yesterday.
“We are talking about support in the broad sense,” Olli Rehn, the EU’s economic affairs commissioner, said yesterday. Meister said aid would come “under strict conditions and if the Greek government undertakes far-reaching state reforms.”
‘Busy Working’
The French government is “busy working” on possible solutions for Greece and Sarkozy plans to hold a joint press conference with Merkel after the summit, spokesman Luc Chatel said in Paris today.
Merkel, facing rising unemployment and declining support for her three-party coalition, may face domestic criticism over an attempt to help Greece.
“We don’t help the alcoholic by giving him another bottle of schnapps,” Frank Schaeffler, deputy finance spokesman for Merkel’s Free Democratic Party allies, said in a speech to lawmakers in Berlin today.
The EU would be wiser to call on the International Monetary Fund rather that set the precedent of bailing out its weakest members, former Bank of England policy maker Charles Goodhart said in an interview today in Sydney.
“Although the amount of money required to rescue the Greek fiscal position is relatively minor, the problem is it would be a precedent,” Goodhart said. “I would ask the IMF to come in. From the European point of view, it’s the least bad option.”
German government spokesman Ulrich Wilhelm said in a statement yesterday that reports a decision to offer Greek assistance had “virtually been taken” were “unfounded.”
EU Rules
EU law bars the European Central Bank or national central banks from bailing out EU countries through buying their debt or offering loans, according to a report by the German parliament’s research unit published today.
Options for Greece include bilateral aid or a package put together by a group of countries using the euro, Meister said.
Nobel laureate Joseph Stiglitz said Greece’s budget-deficit reduction plan will prevent a default, and he reiterated his call for the EU to aid the nation against “speculative attacks” in financial markets.
“I’ve been very impressed with the comprehensive approach they’ve had,” Stiglitz said in an interview on Bloomberg Television in London yesterday. “There’s clearly no risk of default. I’m very confident about it.”
To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Rainer Buergin in Berlin at rbuergin1@bloomberg.net
Last Updated: February 10, 2010 07:17 EST
BL: Confidence in Stocks Falls, Led by U.S., on European Deficits, Job Losses
By Whitney Kisling
Feb. 10 (Bloomberg) -- Sentiment toward stocks fell around the world, led by the U.S., as investors speculated that Greece, Spain and Portugal will struggle to control budget deficits and American jobless claims unexpectedly increased.
Optimism fell in all 10 nations in the Bloomberg Professional Confidence Survey. The measure for the Standard & Poor’s 500 Index tumbled 34 percent to 35.62, the biggest decline since the survey began in November, 2007. Responses from 1,994 Bloomberg users were gathered Feb. 1-5 as the MSCI World Index lost 2.2 percent, slumping for a fourth straight week.
Financial and commodity companies have led the MSCI World’s retreat on concern European nations will need bailouts to avert a financial crisis. U.S. President Barack Obama’s proposal to limit risk taking at banks also sent shares to the biggest declines since March, when benchmark indexes sank to the lowest levels in more than a decade.
“Sentiment has clearly taken a turn for the worse,” said Francisco Salvador, a co-strategist at Iberian Equities in Madrid who participated in the survey. “Proposed regulations for banks and increased odds that countries will default on their debt have pushed the risk associated with equities higher.”
Stocks started falling after Obama proposed limits on the size of banks on Jan. 21, paring the S&P 500’s 70 percent rise since March. Losses accelerated as credit-default swaps on debt issued by Greece, Spain and Portugal surged as concerns about their deficits grew.
Predicting Gains
The sentiment index for U.S. stocks had jumped to 54.37 in January, the second time since the Bloomberg survey began that it exceeded 50. Readings above that level mean participants anticipate stock market gains in the next six months.
The MSCI World Index of 23 developed nations has retreated 8.3 percent since hitting a 15-month high on Jan. 14. The S&P 500 has slumped four straight weeks, the longest stretch since July. The benchmark gauge for U.S. stocks dropped 3.1 percent on Feb. 4, the biggest loss since April, after the U.S. Labor Department said 480,000 Americans filed first-time unemployment insurance claims, the highest in seven weeks.
“When you look at jobless claims and what happened with wages, that kind of indicates the environment for the consumer is not very strong,” said Sean Kraus, who manages $2 billion as chief investment officer at Citizens Business Bank in Pasadena, California. “That definitely spooked the market.”
The Bloomberg indexes for Spain and Japan also dropped more than 20 percent this month, decreasing to 35.34 and 50.36, respectively. Sentiment toward stocks in Madrid is the lowest among the 10 nations Bloomberg tracks.
Japan, Spain
The Nikkei 225 Stock Average has decreased 8.9 percent since reaching the highest level since October 2008 on Jan. 15. Spain’s IBEX 35 Index has plunged 14 percent since Jan. 6 as credit-default swaps linked to the nation’s debt jumped to a record high.
Germany’s sentiment index retreated 5 percent, the smallest drop among the 10 countries, to 50.66. Finance Minister Wolfgang Schaeuble is briefing lawmakers today on steps he may take to support the Greek government as it braces for a wave of strikes protesting deficit-reduction plans. Schaeuble told lawmakers that options for helping Greece extended beyond loan guarantees, said an official who attended the briefing today at the Parliament in Berlin. The DAX Index of stocks traded in Germany has lost 7.9 percent since its January peak.
The Bloomberg measure for Brazil decreased 13 percent to 68.53, still the highest among surveyed nations. The U.K.’s index declined 20 percent to 44.71, France’s retreated 8.3 percent to 53, Italy’s dropped 11 percent to 55.56 and Switzerland’s fell 18 percent to 50.22. The index for Mexico slipped 8.1 percent to 60.89.
To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.
Last Updated: February 10, 2010 07:00 EST
I have been posting TBT for a while now...and I haven't posted on that in a long time
but you know that
BL: U.S. Stock Futures Fluctuate on Prospects for Greece Rescue; Dell Advances
By Rita Nazareth
Feb. 10 (Bloomberg) -- U.S. stock-index futures fluctuated, a day after the Dow Jones Industrial Average rallied back above 10,000, as investors weighed the prospects of Germany bailing out Greece.
Futures erased most of an earlier advance as a German official said no decision has been made yet on a Greek rescue. Sprint Nextel Corp. lost 4.9 percent as the third-largest U.S. wireless carrier reported sales that trailed analyst estimates, while Dean Foods Co. slumped after the nation’s biggest dairy processor forecast profit below projections. Dell Inc., the world’s third-largest maker of personal computers, advanced as Bank of America Corp. analysts recommended the shares.
Futures on the Standard & Poor’s 500 Index expiring in March added 0.1 percent to 1,067.6 at 8:25 a.m. in New York after earlier climbing as much as 0.6 percent. Dow futures climbed 0.2 percent to 10,067.7 while Nasdaq-100 Index futures added 0.2 percent to 1,755.
“It’s going to continue to be pretty choppy,” Mark Bronzo, a money manager in Irvington, New York, at Security Global Investors, which oversees $22 billion, told Bloomberg Radio. “Domestically, the economy is very slowly getting better. That’s the good news. But, of course, we have the sovereign risk issues in Europe. And hopefully they won’t spread to other parts of the world. We’re going to remain in a choppy, volatile market.”
Dow 10,000
U.S. stocks yesterday rallied, sending the Dow Jones Industrial Average back above 10,000, as prospects for a bailout of Greece eased concern that deteriorating government finances will derail the global economic recovery. The Dow increased 1.5 percent, the biggest gain since Nov. 9.
Futures rose earlier after an official said German Finance Minister Wolfgang Schaeuble told lawmakers that options for helping Greece extended beyond loan guarantees. The lawmaker, who attended a briefing at the Parliament in Berlin today, spoke on condition of anonymity because the discussions were confidential.
Federal Reserve Chairman Ben S. Bernanke’s testimony on the central bank’s strategy to exit stimulus programs will be released at 10 a.m. in Washington. He was originally scheduled to speak before the House Financial Services Committee on “Unwinding Emergency Federal Liquidity Programs and Implications for Economic Recovery.” The hearing was postponed due to snow and hasn’t been rescheduled.
More than 300 companies in the S&P 500 have reported fourth-quarter earnings since Jan. 11, and about 76 percent have beaten analysts’ estimates, according to data compiled by Bloomberg. Sprint Nextel Corp., Dean Foods, Equinix Inc. and Omnicom Group Inc. are among companies announcing results today.
Falling Confidence
Confidence in the world economy dropped in February on concern worsening government finances in some European nations will derail the global recovery, according to a Bloomberg survey of users on six continents.
The Bloomberg Professional Global Confidence Index dropped to 54.9 from 66.6 in January, when the reading was at the highest level since the series began two years ago. The index exceeded 50 for a seventh month, which means there were more optimists than pessimists. The survey was conducted last week, before Germany and other European Union nations signaled they may help support Greece’s government finances.
Most Bloomberg users were less optimistic on the outlook for their equity markets in the next six months, with respondents in the U.S., the U.K. and Spain turning bearish.
To contact the reporter on this story: Rita Nazareth at rnazareth@bloomberg.net.
Last Updated: February 10, 2010 08:36 EST
BL: Trade Deficit in U.S. Unexpectedly Increased in December on Fuel Imports
By Courtney Schlisserman
Feb. 10 (Bloomberg) -- The trade deficit in the U.S. unexpectedly widened in December to $40.2 billion from $36.4 billion a month earlier, according to Commerce Department data released today in Washington. Imports increased more than exports.
Economists forecast the deficit would narrow to $35.8 billion from a previously estimated $36.4 billion in November, according to the median of 78 projections in a Bloomberg News survey. Estimates ranged from gaps of $31 billion to $40 billion.
To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net
Last Updated: February 10, 2010 08:32 EST
ABU: Texas secession would cause disaster
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By Ryan Self
Posted on February 2, 2010 | Columns | No comment
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Could and should Texas secede from the Union?
It’s an incredibly bogus question, and yet not one but two gubernatorial candidates are proposing the idea.
“There’s a lot of different scenarios,” Perry said. “We’ve got a great union. There’s absolutely no reason to dissolve it. But if Washington continues to thumb their nose at the American people, you know, who knows what might come out of that.”
Medina has been more blunt. According to the Dallas Morning News, “She says she won’t rule out pulling a page out of Civil War history with a move to secede from the nation.”
First of all, Texas does not have the authority to secede on a legal basis. As the Associated Press points out, “According to the Texas State Library and Archives Commission, Texas negotiated the power to divide into four additional states at some point if it wanted to but not the right to secede.” There is no provision in either the Texas or the U.S. Constitution allowing Texas to legally secede from the Union. Could Texas secede by force? Yes. It was called the Civil War, and that little experiment did not end well for those who attempted it.
However, it is an interesting question. If the State of Texas became the Republic of Texas, who would become our new president? Why, Chuck Norris of course.
“I may run for president of Texas,” Norris wrote on his blog in March of last year. “That need may be a reality sooner than we think. If not me, someone someday may again be running for president of the Lone Star State, if the state of the union continues to turn into the enemy of the state.”
The transition from state to country would unlikely be a smooth one. On a local level, all students at ACU from out of state would have to apply for a study visa, and visiting relatives outside the boundaries of Texas would require a passport. A new currency would have to be printed and distributed, which would likely be a painful changeover. Besides, the map of the United States would suddenly look really awkward.
While struggling to create a new infrastructure for the new republic, taxes would likely skyrocket because Texas would no longer receive federal funding. MSNBC reports FEMA alone has sent nearly $3.5 billion to the state since 2001 with another billion from the federal government to help with Hurricane Ike. That would come out of the state budget.
NASA, which provides 26,000 jobs in the Houston area, would relocate, along with many U.S. military bases across the state, costing thousands of jobs and several billion dollars no longer flowing into the Texas economy.
It makes a catchy bumper sticker, but the reality of Texas becoming its own country would likely be a disaster. When it comes to secession from the union, we can only hope the proposition turns out to be nothing more than an empty campaign promise.
http://www.acuoptimist.com/2010/02/texas-secession-would-cause-disaster/
AOL: Secessionist Scholars Gather in Charleston
Updated: 4 days 6 hours ago
CHARLESTON, S.C. (Feb. 5) -- They could have been just another gaggle of tourists walking down Meeting Street, a typical enough sight among the cobblestone and historic homes of Charleston, S.C. But what they wanted to explore were not the guidebook-endorsed attractions of this old town -- the Market, the Battery, Rainbow Row, the nearby plantations. Instead, they had come to the heart of the pre-Civil War South, the former center of the American slave trade, to discuss an idea that had once been all the rage among Charleston's ruling class: the end of the United States as they knew it.
The 40 or so visitors, most of them men, all but one of them white, were attendees of the Eighth Abbeville Institute Scholar's Conference, a four-day gabfest on the resurgent topics of state nullification and secession. At the conference, which runs through Sunday, a collection of scholars and lay folk will discuss what they see as the decided downsides to living in an imperial-minded, centralized-power-mad American Empire, one in which state's rights, personal liberties and personal connections to the land and fellow man have all but vanished.
Shortly before the official start of the proceedings Thursday evening, the group left the Francis Marion Hotel, the site of the conference, and headed to the state historical society to view the South Carolina Secession Banner and the Ordinance of Secession, the document declaring the Palmetto State's exit from the Union following Abraham Lincoln's election in 1860.
Leading them was Donald Livingston, a professor of philosophy from Emory University and the founder of the Atlanta-based Abbeville Institute. The institute was named after Abbeville, S.C., the birthplace of John C. Calhoun, the former U.S. vice president and defender of slavery and advocate of secession. Nary a Confederate-flag accessory was to be seen on the group, though, and there's a reason for that.
"Secession is for everybody," Livingston says.
Indeed, the intended message of the Abbeville conference is just that.
While there are certainly neo-confederates in attendance -- such as Jim Hanks, the former head of the South Carolina branch of the League of the South -- there are plenty of others who in no way are affiliated with those preoccupied with the Late Unpleasantness.
Take for instance conference speaker Yuri Maltsev, a professor of economics at Carthage College in "the People's Republic of Wisconsin." Maltsev feels he knows the dangers of an over-extended and debt-ridden empire all too well: He was born and raised in the former Soviet Union.
"The Soviet Union was definitely 'too big to fail,'" he said. "It had 11 time zones, one-sixth of the world's surface. And it failed miserably. I think that what would be interesting to discuss is 'too big not to fail' because bigness is not necessarily a good thing. Bigness in many cases leads to excessive centralization, depriving people of their liberty.
"We have a government that is spending like a drunken sailor," Maltsev added. "This is a slander against a drunken sailor because he spends his own money."
The specter of a heavily centralized national government also troubles Kirkpatrick Sale, a left-leaning scholar, neo-Luddite and founder of the Middlebury Institute, a pro-secessionist think tank in Vermont. Sale is also a member of the Second Vermont Republic, a group that hopes to one day return its state to its former status as an independent nation. For him, it's no surprise that the conference attendees would include those on the both sides of the ideological spectrum.
"There has always been a part of the left that has been anti-authoritarian and decentralist," Sale says. "And then there are anti-authoritarians on the other side. Ayn Randian types, Paulists types. But that's the guiding principle: the anti-authoritarian impulse."
Of course, the presence of men like Sale and Maltsev will do little to persuade some from declaring that the conference and its attendees have merely opted for a more-erudite, better-mannered white power movement. Livingston himself is a former member of the League of the South, which has drawn accusations of racism from groups like the Southern Poverty Law Center and the Anti-Defamation League, and the Abbeville Institute's Web site quotes a historian decrying the ignored "achievements of white people in the South."
The racism question has been a divisive (if perhaps inevitable) one for the secessionist movement. In 2008, Thomas Naylor, the head of the Second Vermont Republic, dropped his earlier measured alliance with the League and called on it to disassociate itself from hate groups. According to the Southern Poverty Law Center, Naylor wrote, "[s]o long as the albatross of racism hangs around its neck, the LOS can never be a truly effective partner for SVR," adding that the Second Vermont Republic "risks being tainted by the scourge of racism simply by associating with the LOS."
That risk would appear to extend to the scholars at the Abbeville conference, but at least one attendee had resigned himself to that. "Unfortunately, and no pun intended, we're going to get tarred with that brush anyway," said Stephen Heiner, an Asian-American MBA student who had traveled to Charleston for the weekend's festivities. He added: "From everything that I have seen, I have never had the sense from any of the events that I attended that I'm with a bunch of people that hate other races."
For evidence of secessionism's mainstream potential, he pointed to the overlap he discerns between its philosophical underpinnings and those of another crowd experiencing momentum of late: "buy local" consumers. "As we see government expand more and more these days -- OK, we're going to pay for everybody's health care, we're going to pay for all the bankers to holiday in Switzerland, and everyone has to pay for it -- people are looking more to local things," Heiner said.
Still, Heiner believes that any moves toward actual secession are a long way off. People may be suffering today, but just not enough to make that happen, he says.
"They're going to have to get a whole lot worse before secession is viable. Because you have to have pain to look at a political solution like that."
http://www.aolnews.com/nation/article/secessionist-scholars-gather-in-charleston/19345712
Filed under: Nation, Politics
>>Now Vermont wants to secede
By Adam Fogle | January 31st, 2010 | 13 comments
GREEN MOUNTAIN STATE GROUP FORMS TO WITHDRAW FROM U.S.
It’s hard to believe that, nearly 150 years after South Carolina formally cut its ties with the U.S. government, we are still talking about the possibility of states seceding from the Union. Yet, here we are.
First, Texas Gov. Rick Perry and folks in the Lone Star State began seriously discussing a withdrawal from the U.S. Now, there’s another state beating the drums, err, well… Hippie bongos of secession: Vermont.
From TIME:
On Jan. 15, in the state capital of Montpelier, nine candidates for statewide office gathered in a tiny room at the Capitol Plaza Hotel, to announce they wanted a divorce from the United States of America. “For the first time in over 150 years, secession and political independence from the U.S. will be front and center in a statewide New England political campaign,” said Thomas Naylor, 73, one of the leaders of the campaign.
A former Duke University economics professor, Naylor heads up the Second Vermont Republic, which he describes as “left-libertarian, anti-big government, anti-empire, antiwar, with small is beautiful as our guiding philosophy.” The group not only advocates the peaceful secession of Vermont but has minted its own silver “token” — valued at $25 — and, as part of a publishing venture with another secessionist group, runs a monthly newspaper called Vermont Commons, with a circulation of 10,000. According to a 2007 poll, they have support from at least 13% of state voters. The campaign slogan, Naylor told me, is “Imagine Free Vermont.” In his fondest imaginings, Naylor said, Vermonters would not be “forced to participate in killing women and children in the Middle East.”
Essentially, these are a lot of the same black helicopter Ron Paul folks that are going after Republicans in South Carolina.
But, to their credit, these individuals have gone out and started their own party rather than trying to hijack the Republican Party and contort it to meet their demands. So, much respect to these Vermont folks.
I still think there’s no need for secession — in South Carolina, anyway. And I’m pretty certain they’ll get crushed at the polls. But I respect that they’ve gone out and formed their own group rather than trying to clandestinely infiltrate the GOP.
Posted in National News |
http://www.palmettoscoop.com/2010/01/31/now-vermont-wants-to-secede/
LR: Secession Is In the Air
by Kirkpatrick Sale
February 9, 2010
I don’t know if you’ve noticed it, but secession is in the air.
First of all, a fellow named Bill Miller has started a new website, SecessionNews.com, and it is a Drudge-Report-like compilation of anything connected with secession across the land and around the world. It is an extraordinary endeavor, and it reflects a great deal of talk about, interest in, separatism and independence these days. Miller, a retired computer engineer, has undertaken this, he says, because he has a passionate interest in getting Americans to understand that secession is a legitimate and honorable political strategy. Increasingly, it seems, they’re listening.
A regular contributor to the Miller site is Russell Longcore, who has also started up a new site of his own, the bluntly named DumpDC.com. Longcore, who seems to have insurance and publishing businesses in Georgia, writes long and vigorously about secession in his fairly regular posts. "Secession," he says, "is on the lips of many Americans today. When they look at a Federal Government that is spinning wildly out of control, state secession begins to have an allure as a remedy. America has gone from a nation of sovereign states with a carefully defined Federal Government to a nation where states are but subservient territories of a rapacious, tyrannical ruling entity that entirely ignores any restrictions on its power." His site figures to do something about that.
Last December another new voice was added to the cause, from something called Attackthesystem.com that considers itself to represent the "radical Left." It argued that secession should be supported because it was the best way to bring down the American empire and all that it stands for, including its support for corporate capitalism, longtime goals of the traditional Left. Vermont liberals of the Sanders persuasion should take a look at it ("Why the Radical Left Should Consider Secession").
In January one notable event, carried by the AP to the lengths of the land, was the launch of the campaign by Dennis Steele and Peter Garritano (and others) for an independent Vermont, but you know all that. You might not have known that another secession campaign, or something very close to it, was launched just before that in Texas, where the Texas Nationalist Movement ("Independence. In our lifetime") announced its support for the Ron Paul Republican candidate for governor, Debra Medina. She is "in line with the core beliefs of our organization," it said, and she believes that the people of Texas should vote on the issue of independence, a core TNM demand.
(Just as an aside: Libertarians, particularly the smarter Paulists, are important allies for secessionists, since they get to the nullification/secession place with only a few prompts if they’re not already there. Ron himself has said it’s a workable option.)
Also in January the invaluable website TenthAmendmentCenter.com began tracking the number of legislatures coming back into session this year and considering bills to reassert their sovereignty and Tenth Amendment rights. By the end of January resolutions were introduced in 11 states (Washington, Arizona, Utah, Wyoming, Nebraska, Missouri, Mississippi, Kentucky, Illinois, Maryland, and Rhode Island). Last year (also tracked on this site) Tenth Amendment resolutions were introduced in 33 states, passed both houses in five, and were OK’d by the governors in two. The movement looks to be gaining momentum again.
In February that movement held a Tenth Amendment Summit, in Atlanta, assembling state representatives and candidates from across the country for a one-day closed meeting on strategies, and next day hearing presentations from Judge Napolitano, the Fox commentator, and Ray McBerry, a secessionist candidate for Georgia Governor.
Also in February there took place a remarkable conference boldly announced as on "Nullification, Secession, and the Human Scale of Political Order" in Charleston, South Carolina, maybe the first ever large-scale scholarly conference on secession open to the public. It featured many leading secessionist scholars, including Donald Livingston, Thomas DiLorenzo, SVR’s Thomas Naylor, Marshall DeRosa, Kent Brown, and yours truly, and was attended by upwards of 100 people, an impressive turnout, especially considering the admission cost of $2–400.
A national Tea Party Convention was also in February, not exactly a secessionist event but a measure of the underlying discontent that is leading people at least to protest the system (and the debt) they’ve been given and start thinking (some of them) about alternatives.
So what’s going on?
Basically, of course, it is the growing dissatisfaction, in blue states as well as red, and the purple and mauves, too, with a government grown too big, complicated, and corrupt to function. It can’t do health care, swine flue, stimulus payments, carbon limits, education, jobs, corporate bonus control, or airport security. It can send 30,000 soldiers to the sinkhole of Afghanistan, because Congress long ago gave up any role in military policy and the peace movement long ago folded up, but that’s what Presidents always do when they want to seem to be strong. Reagan invades Granada, Bush I Panama and Iraq, Clinton Kosovo, Bush II Iraq and Afghanistan. All for no reason than showing that they can do something in Washington.
But there’s more to it than that. There is a deep and fundamental perception that corporate America – briefly, Wall Street – really is in the saddle and runs the country, and for its own benefit, of course. Very successfully, too, and with complete impunity. It cares nothing for public opinion and has no shame. Now this may always have been true, but there used to be the accepted illusion that the corporations had some interest in making the people happy, or prosperous – "What’s good for General Motors is good for the country." But now that the country owns General Motors they make no pretense that they are interested in spreading the wealth at all. And it is because the public perceives it – unconsciously if not knowingly – that there is the general sense of unease, of anger.
Many of those feeling this unease and anger, of course, don’t know what to do about it other than going to tea parties and shouting at town halls. But it is clear that a great many others are following the inexorable logical train that leads to secessionist thinking: this system is broken and can’t be fixed, party (including third party) politics is part of the problem not the solution, armed rebellion doesn’t have a chance against an apparently ruthless state, and the only way to change things and have a chance of a better world is through peaceful secession – getting out, not getting back. It has, too, the virtue of seeming to be doable – not like revolution or regime change or socialism or any other variant of extreme politics.
It’s not that I have any great faith in the mass of people of this nation using logic, but it just feels as if more people are following this line of thinking these days than… than any time since, say, 1865.
February 9, 2010
Kirkpatrick Sale [send him mail], scholar and prolific writer, heads the Middlebury Institute.
http://www.lewrockwell.com/orig10/sale2.1.1.html
LAT: Poll shows surprising strength by Tea Party's Debra Medina in GOP race for Texas governor
February 9, 2010 | 4:06 pm
Is Debra Medina the next Scott Brown?
Nobody -- well, hardly anybody outside perhaps the Medina household -- expects the small business owner and anti-Washington crusader to be the next governor of Texas. Heck, until recently she wasn’t even much of a factor in the shoot-'em-up between the two leviathans of Lone Star politics, Gov. Rick Perry and Sen. Kay Bailey Hutchison.
Then again, up until a couple of weeks out, nobody thought Brown -- a little-known state senator and ex-Cosmo model -- stood much chance of swiping the Massachusetts Senate seat held for almost a half century by the late Edward M. Kennedy. That said, a poll out Tuesday is raising eyebrows all over Texas.
The survey by Public Policy Polling showed Perry leading the GOP field with 39%, followed by Hutchison at 28% and Medina -- a favorite of the Tea Party crowd -- at 24%.
More significant, among self-identified conservatives -- those most likely to turn out in the March 2 primary -- Perry had 42% support to Medina’s 25% and Hutchison’s 23%.
Given the survey’s 4.8% margin of error, Hutchison, long considered the most popular politician in Texas, is effectively tied with the little-known, meagerly funded Medina.
(How meagerly? As of Tuesday, she had raised less than $600,000, a pittance compared to the $50 million Perry and Hutchison are expected to spend between them.)
Of course, no poll can be taken as gospel. The survey, conducted after last month’s second and final GOP gubernatorial debate, had a fairly small sample: 423 likely Republican voters. Still, it seems...
to bear out what many political pros are saying: Hutchison is struggling, Medina is surging and Perry -- who doesn’t exactly blow the barn doors off in terms of popularity -- seems a lot better positioned than most would have imagined a few months ago. Thanks to Medina, the GOP contest seems destined for an April run-off between the two top finishers.
The big question, for the moment at least, is whether Perry will face Hutchison or Medina -- something that enters Scott Brown territory in terms of who-wudda-thunk-it. Clearly, Medina is benefiting from the anti-incumbent anger that is burning, prairie-fire-like, across the country. But she has also gained from a pair of solid debate performances; some declared Medina the winner after the first session in mid-January.
“She was the one who came across, to judge from polls and reaction afterward, as more forthright, better prepared, quite calm and confident,” said Bruce Buchanan, a University of Texas political scientist and longtime student of state politics. “She was seemingly more gubernatorial than her opponents in some respects.”
Medina enjoyed a surge in contributions after her strong showing, followed by another after the second debate. The question is whether she can sustain the momentum, lacking a prominent statewide platform (there are no more debates scheduled) or the money for a serious advertising campaign. (Turn on the TV and just try to avoid a Perry or Hutchison spot.)
Medina has also enjoyed the luxury of facing little scrutiny on issues. (How high would the state sales tax have to go if Texas eliminates its property tax, as Medina advocates?) That probably won’t last if she is seen as a serious contender.
Already, Medina has been forced to explain away a comment she made -- "stepping off into secession may in fact be a bloody war" -- in support of states’ rights at a rally last year on the Capitol steps. (Asked about her remark during the second debate, Medina said she opposes Texas’ secession from the union, something Perry hinted at last year in his own nod to the Tea Party folks.)
Still, Medina, the former chairwoman of the Wharton County GOP, has already achieved far more than anyone expected of her campaign. Failing a successful run for governor, many see her as well positioned to replace her congressman, Ron Paul, whenever he steps down. Paul is one of Medina’s key supporters.
-- Mark Z. Barabak
http://latimesblogs.latimes.com/washington/2010/02/debra-medina-texas-poll-rick-perry.html
>>One in five US mortgages "underwater" in Q4 -Zillow
1 in 5 markets show signs of "double-dip" in home prices
Bonds | Financials
* Home value bottom expected in second quarter
* More than 1 in 1,000 homes was being foreclosed in Dec
By Julie Haviv
NEW YORK, Feb 10 (Reuters) - One of every five U.S. home owners owed more on their mortgage than their home was worth in the fourth quarter, a trend that poses a serious threat to the U.S. housing market's recovery, real estate website Zillow.com said on Wednesday.
Homeowners with "underwater" mortgages are more prone to defaults and foreclosures. They typically do not qualify for refinancings and are unable to sell their homes because they would need to cough up cash at closing time to pay off their mortgage.
The percentage of American single-family homes with mortgages in negative equity rose to 21.4 percent in the fourth quarter from 21 percent in the third quarter, according to the Zillow Real Estate Market Reports.
U.S. home values declined again in the fourth quarter, as the Zillow Home Value Index fell 5 percent year-over-year and down 0.5 percent quarter-over-quarter, to $186,200. It was the 12th consecutive quarter of year-over-year declines, the reports showed.
"The prevalence of markets in or near a double-dip situation shows that we are not yet at the bottom, in terms of home values," Stan Humphries, Zillow chief economist, said in an interview.
One in five, or 29 of the 143 markets tracked by Zillow, had at least five consecutive month-over-month increases in home values during 2009 before values began to flatten or fall again in the second part of the year. These markets included the Boston, Atlanta and San Diego metropolitan areas.
Zillow said it defines a "double dip" as two periods of sustained declines in home values separated by a brief period of stabilization or recovery.
Zillow forecasts a definitive bottom in home values in the second quarter of 2010, Humphries said.
"It is important to note, however, that the arrival of the bottom does not mean that recovery is around the corner," he said.
Home values in 29 markets, including the Los Angeles and New York metro areas, increased on a month-over-month basis throughout the fourth quarter. The rate of increase, however, slowed from November to December in 21 of those markets.
Meanwhile, the number of homeowners losing their homes to foreclosure across the country rose to a new high in December, with more than one in every thousand homes being foreclosed, the highest since Zillow began recording national foreclosure data in 2000, the reports showed.
Foreclosure resales remained high, making up 20.3 percent of all U.S. home sales in December. Foreclosure resales also made up the majority of sales in several metropolitan areas, including Merced, California, at 68.3 percent; Las Vegas, at 64 percent, and Modesto, California, at 62 percent. Additionally, 28.5 percent of home sales nationwide sold for less than what the seller originally paid.
Home values increased year-over-year in 27 of 143 markets and remained flat in 15. (Editing by Leslie Adler)
http://www.reuters.com/article/idUSN0914378220100210
CBS: Obama Optimistic About Energy Bill Deal
February 9, 2010 3:05 PM
Posted by Stephanie Condon
President Obama, during an unexpected visit to the daily White House press briefing, told reporters today that he is an "eternal optimist" and expects Democrats and Republicans to reach a consensus on energy legislation.
He said Congress needs to pass a bill that includes Republican preferences such as incentives for nuclear energy and "clean coal" technology, as well as Democratic proposals for incentives to develop alternative energy sources like solar, biodiesel and geothermal energy.
"I think that on energy, there should be a bipartisan agreement that we have to take a both/and approach rather than either/or approach," Mr. Obama said.
The president's remarks followed a meeting with both Republican and Democratic congressional leaders regarding jobs and the economy. Mr. Obama said that House Minority Leader John Boehner complimented the Democrats' interest in pursuing nuclear energy and clean coal technology, but he said Republicans have to accept more than that.
"I'm willing to move off some of the preferences of my party in order to meet them halfway, but there's got to be some give from their side as well," the president said.
Promoting both clean fossil fuel use and alternative energy is "the right thing to do," Mr. Obama added. "And all I can do is just to keep on making the argument about what's right for the country and assume that over time people, regardless of party, regardless of their particular political positions, are going to gravitate toward the truth."
http://www.cbsnews.com/blogs/2010/02/09/politics/politicalhotsheet/entry6191032.shtml?tag=contentMain;contentBody
CBS: Obama Says Bipartisanship, But What He Wants Is GOP Surrender
February 9, 2010 6:42 PM
Posted by Mark Knoller
Unannounced, President Obama took to the lectern in the White House briefing room today to give a personal readout of his meeting earlier with congressional leaders of both parties.
"Despite the political posturing that often paralyzes this town, there are many issues upon which we can and should agree, he said.
It was more a plaintive plea than a political observation. His top legislative priorities are going nowhere and he's searching for a way to get them out of lockup.
In this 13th month of his presidency, he's anxious to pass a jobs bill and be seen addressing an unemployment rate that only last week declined from double digits. And his efforts to enact bills on energy, financial regulatory reform and especially health care are stuck in Congress despite the solid majority his party holds in both chambers.
He's appealing for a spirit of bipartisanship - urging Democrats and Republicans alike "to put aside matters of party for the good of the country."
It's a familiar refrain from U.S. presidents who can't get their way in Congress.
"We must put aside our political differences if we're ever to set our economy to rights," said President Reagan in 1982.
"It is time to put aside partisan rivalries and work together for our nation's future," said President Reagan in 1987 in trying to get Congress to enact deficit reduction
"We must put aside partisanship for the sake of our nation," said the first President Bush in 1990 in appealing for congressional cooperation on the budget.
"We must now put aside bitterness and rancor, move beyond partisanship," urged President Clinton in 1993 in trying to get Congress to pass his economic plan.
What these presidential appeals for bipartisanship always mean is: do it my way.
Mr. Obama said he "won't hesitate to embrace a good idea from my friends in the minority party." But he wants his way. He wants his energy policy enacted along with his jobs bill, his financial regulatory reform and his health care plan.
And if the opposition continues to block his objectives, he said he "won't hesitate to condemn what I consider to be obstinacy that's rooted not in substantive disagreement but in political expedience."
When a sitting president calls for bipartisanship by the opposition – he really means surrender. And if they block his proposals, its "obstinacy" and not political views they hold as strongly as he holds his.
Mr. Obama again said the American people are frustrated by the political stalemate in Congress. And he can be counted among the frustrated as well.
He wants to be seen calmly pursuing his legislative goals – and he told reporters today that his meeting with congressional leaders from both sides of the aisle went well. So well, in fact, he joked that the Senate leaders, Democrat Harry Reid and Republican Mitch McConnell had gone out to the South Lawn to make snow angels – together." (Watch Mr. Obama's comment.)
It still leaves them with a chilly relationship.
http://www.cbsnews.com/blogs/2010/02/09/politics/politicalhotsheet/entry6191815.shtml
BL: China January Exports Jump 21%, Adding Pressure to Calls for Stronger Yuan
By Bloomberg News
Feb. 10 (Bloomberg) -- China’s exports jumped 21 percent in January from a year earlier, providing more ammunition to trading partners calling for a stronger yuan.
Imports climbed a record 85.5 percent and the trade surplus slipped to $14.17 billion, according to data released by the customs bureau on its Web site today. The jump in overseas shipments was the biggest since September 2008, two months after the nation halted the currency’s appreciation against the dollar.
American officials may see Chinese trade gains as a sign that the nation no longer needs to protect exporters by keeping the yuan pegged to the U.S. currency. At the same time, China’s policy makers may see the below-forecast exports and trade surplus as indicating global demand is only gradually improving.
“Chinese policy makers will be very cautious in interpreting the January data, which is highly distorted by the Chinese lunar new year holiday,” said Lu Ting, a Hong Kong- based economist at Bank of America-Merrill Lynch. “They may wait a few more months before making major policy moves.”
Twelve-month non-deliverable yuan forwards dropped 0.3 percent to 6.6815 per dollar as of 1:13 p.m. in Hong Kong, indicating traders expect the currency to advance 2.2 percent against the dollar in the next year. Also today, an editorial in the state-owned China Securities Journal said that the yuan may not have “big gains” in the first half of 2010 because economic conditions haven’t improved.
Stocks pared advances after the trade report, with the MSCI Asia Pacific index up 0.3 percent after earlier rising as much as 0.8 percent.
Less Than Estimates
China’s export gain compared with a 17.7 percent increase in December and the median 28 percent estimate of economists. Imports rose by the most since Bloomberg data began in 1991. The week-long lunar holiday that affected the numbers was in January last year and February in 2010.
Seasonally adjusted, exports fell 5.5 percent from December and imports dropped 0.9 percent, the customs bureau said.
Billionaire William Fung, the managing director of Hong Kong-listed Li & Fung Ltd., the world’s largest supplier of toys, clothes and furniture to retailers, said Jan. 27 that global demand seems to be recovering “very slowly, if at all.”
In contrast, Brian Jackson, an emerging-market strategist at Royal Bank of Canada in Hong Kong, said today’s report shows that for China the “positive trend remains intact,” and bolsters the case for the government to tighten policies and let the yuan strengthen in coming months.
Cooling Economy
The central bank has already raised banks’ reserve requirements to cool the world’s fastest-growing major economy. U.S. officials, pressing for a stronger Chinese currency to reduce trade imbalances, also argue that yuan gains would help China to restrain inflation.
China last year overtook Germany as the world’s largest exporter, the German statistics office confirmed yesterday. Germany itself is benefitting from the expansion of China’s market, with its BGA wholesale and export federation projecting a 10 percent gain in shipments abroad in 2010, propelled by Chinese demand.
In Taiwan, government figures this week showed the biggest gain in its exports in more than 30 years on spending in China before the lunar holiday.
Comparisons from a year earlier are also affected by depressed readings in early 2009 due to the financial crisis. China’s exports slid 17.5 percent in January 2009 and imports tumbled 43.1 percent.
Sources of Friction
China’s static currency is fueling tensions with the U.S. that span anti-dumping duties on American chicken, arms sales to Taiwan, and the Dalai Lama’s planned meeting with President Barack Obama. On Feb. 4, China’s Foreign Ministry rejected Obama’s call for a stronger yuan, adding that “accusations and pressure will not help solve the issue.”
The Chinese economy risks overheating this year as exports rebound, government economist Zhang Ming wrote in the China Securities Journal this month, adding that inflation pressures will encourage policy makers to let the yuan gain.
Gross domestic product climbed 10.7 percent in the fourth quarter from a year earlier, the fastest pace in two years, after the government loosed an unprecedented expansion in credit to counter the effects of the financial crisis. China this year is projected to overtake Japan as No. 2 in global GDP rankings, after the U.S.
“It’s getting too big a part of the global pie to keep relying on exports for growth, and so we do think there’s going to be a lot more policies to drive domestic consumption going forward,” Robert Subbaraman, chief economist for Asia excluding Japan at Nomura International Ltd., said in an interview on Bloomberg Television in Hong Kong today.
Tackling Surplus
Policy makers may opt to shrink the trade surplus through raising wages rather than yuan gains, Credit Suisse Group AG economist Tao Dong said in an interview yesterday. Higher labor costs would cut Chinese export competitiveness while boosting domestic spending power and sustaining growth, he said.
Jiangsu, the nation’s third-largest exporting province in 2008, boosted the minimum wage 13 percent this month in an effort the local labor department said was aimed at attracting workers.
Central bank Governor Zhou Xiaochuan said yesterday that policy makers need to “closely watch” inflation. Fan Gang, the academic member of the monetary policy committee, warned Feb. 1 that asset bubbles are “the real worry” for the Chinese economy.
A report tomorrow may show consumer prices increased 2.1 percent in January from a year earlier, the most since November 2008, according to the median forecast in a Bloomberg News survey of economists. Property price figures are also due this week.
To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net
Last Updated: February 10, 2010 00:35 EST
BL: George Soros `Confident' Greece Will Do Whatever It Takes to Stay in Euro
Soros Is ‘Confident’ Greece Will Stay in Euro Region (Update2)
By Achmad Sukarsono
Feb. 10 (Bloomberg) -- Billionaire investor George Soros, who made $1 billion in 1992 correctly betting against the British pound, said he expects Greece will be able to remain in the euro region.
“I’m actually confident Greece will do whatever is necessary to meet conditions to remain a member of the euro to qualify for financing by the ECB for Greek government bonds,” Soros told reporters in Jakarta today. The European Central Bank has limits for the ratings of bonds it accepts as collateral.
World stock markets rallied since yesterday as prospects for a bailout of Greece eased concern that deteriorating government finances will derail the global economic recovery. The European Union is scheduled to hold a summit in Brussels tomorrow as the Greek government braces for a wave of strikes protesting plans to reduce the region’s largest budget deficit.
German Finance Minister Wolfgang Schaeuble will brief lawmakers today on steps he may take to support the Greek government as European leaders dropped their resistance to rescuing the nation in an effort to protect the rest of the euro region from market turmoil.
“Providing Greece meets its target, I hope the European Union, the European Central Bank, the euro zone will find a way to finance the government in a way that’s not too expensive for Greece to provide some relief,” said Soros, 79, who was in Indonesia meeting Vice President Boediono.
‘Strict Conditions’
Any support would come “under strict conditions and if the Greek government undertakes far-reaching state reforms,” Michael Meister, financial-affairs spokesman for German Chancellor Angela Merkel’s Christian Democratic Union, said in an interview yesterday. Options include bilateral aid or a package put together by a group of countries using the euro, Meister said.
Greek Prime Minister George Papandreou’s government yesterday floated new steps to reduce the deficit, including cuts of as much as 5.5 percent in government workers’ wages and a waiver on taxes for Greeks who repatriate funds held abroad.
Fitch Ratings analyst Brian Coulton said yesterday that any country leaving the euro area would likely face a “banking crisis.”
Credit Default Swaps
The cost to protect investors from default on Greek government bonds fell a record 50 basis points today, CMA DataVision prices show. Credit default swaps for Portugal and Spain also declined.
The MSCI World Index of developed-market stocks climbed 0.1 percent at 2:53 p.m. in Tokyo, a second straight gain, paring the year’s losses to 5.7 percent. The index has slumped for four straight weeks on concern that deficits and sovereign debt in Europe will slow the global recovery.
“I think the markets are generally concerned on sovereign debt and Greece is at the forefront of that issue,” Soros said.
Soros gained fame in 1992 when he reportedly made $1 billion betting that Britain would fail to keep its currency in a European exchange-rate system that pre-dated the euro. He also wagered that Germany’s mark would appreciate after the collapse of the Berlin Wall in 1989 and that Japanese stocks would start to fall in the same year.
To contact the reporter on this story: Achmad Sukarsono in Jakarta at asukarsono@bloomberg.net
Last Updated: February 10, 2010 00:56 EST
BL: Asian Stocks, Currencies Rise on Speculation of Greek Aid, Global Recovery
By Sandy Hendry and Shani Raja
Feb. 10 (Bloomberg) -- Asian stocks and emerging-market currencies rallied as Germany signaled it may help support Greece’s finances and economic reports showed recovering demand in Asia.
The MSCI Asia Pacific Index added 0.2 percent to 114.90 as of 12:36 a.m. in Tokyo, with two stocks rising for each one that dropped. The South Korean won climbed 0.3 percent and the cost of protecting Asia-Pacific bonds from default fell the most in five months.
Germany is considering assistance for Greece after the country’s deficit threatened the stability of financial markets, two lawmakers from Chancellor Angela Merkel’s governing coalition said yesterday. Reports showed rising Japanese machinery orders in December and the fastest pace of economic growth in Indonesia in a year in the fourth quarter. China’s car sales doubled from a year earlier in January.
“Whether Greece will fail to repay its debt is the crux of this issue, and I think it’s unlikely that an EU member will default,” said Masaru Hamasaki, chief strategist at Tokyo-based Toyota Asset Management Co., which oversees the equivalent of $14 billion. “With robust foreign demand, companies, especially manufacturers, will likely beat their own earnings forecasts.”
Futures on the Standard & Poor’s 500 Index fell 0.3 percent, after the index gained 1.3 percent yesterday. Walt Disney Co., the world’s biggest media company, posted fiscal first-quarter profit that beat analysts’ estimates after the market closed as television revenue rose.
Commodities Producers
The Nikkei 225 Stock Average advanced 0.5 percent in Tokyo. Markets pared gains after a Chinese government report showed exports jumped 21 percent in January from a year earlier, less than the median 28 percent estimate in a Bloomberg News survey.
“Earnings across the region reinforce the view that the recovery is gaining momentum,” said Stephen Halmarick, Sydney- based head of investment-markets research at Colonial First State Global Asset Management, which holds about $135 billion.
Japan’s industrial manufacturers advanced after the Cabinet Office reported a 20.1 percent month-on-month surge in machinery orders in December, more than twice as much as economists had estimated. Fanuc Ltd., Japan’s largest maker of industrial robots, advanced 1.8 percent to 8,950 yen, while Komatsu Ltd., the world’s second-biggest maker of earthmoving equipment, gained 4.2 percent to 1,801 yen.
Car Sales
Nissan Motor Co., Japan’s No. 3 carmaker, jumped 3 percent after scrapping its loss projection yesterday to forecast net income for the year to March 31. The company benefited from government subsidies in China and Japan.
China’s Shanghai Composite Index rose for a second day, adding 0.6 percent. SAIC Motor Corp., the largest carmaker, climbed 2.6 percent. Sales of cars, multipurpose vehicles and sport-utility vehicles increased to 1.32 million units, the China Association of Automobile Manufacturers said yesterday.
Malayan Banking Bhd., Malaysia’s biggest bank, rose 1.3 percent, the most in two months, after second-quarter profit rose 35 percent on faster loan growth. Acer Inc., the world’s second-largest computer vendor, added 1.9 percent after reporting its biggest quarterly profit in almost three years.
Won, Peso
The won climbed to 1,160.3 per dollar after South Korea’s Vice Finance Minister Hur Kyung Wook said yesterday the impact from Greece’s fiscal woes on his nation will be “limited.” The Philippine peso gained 0.1 percent to 46.36 after a report showed exports increased 23.6 percent from a year earlier in December, the fastest pace in four years. The Indonesian rupiah strengthened 0.1 percent to 9,363 as a government report showed the economy expanded 5.4 percent in the fourth quarter from a year earlier.
The dollar advanced 0.3 percent to $1.3760 per euro on speculation a Commerce Department report today will show the U.S. trade deficit narrowed. The trade gap will shrink to $35.8 billion in December from $36.4 billion the prior month, according to a Bloomberg News survey of economists.
The greenback pared losses against the yen before the release of testimony today by Federal Reserve Chairman Ben S. Bernanke on the central bank’s strategy for exiting from policies designed to stimulate growth. The dollar advanced to 89.72 yen in Tokyo from 89.69 yen in New York yesterday. It earlier touched 90.02 yen, the highest level since Feb. 4.
“Demand for the dollar will increase if Bernanke’s remarks indicate the U.S. is heading for exit,” said Toshiya Yamauchi, manager of currency margin trading at Ueda Harlow Ltd. in Tokyo.
Yuan, Commodities
Yuan forwards declined, snapping a two-day advance, after an editorial in a state-owned newspaper signaled Chinese authorities may limit appreciation to help sustain a recovery in exports. The currency may not have “big” gains in the first half because economic conditions haven’t improved, the China Securities Journal column said. Twelve-month non-deliverable yuan forwards dropped 0.3 percent to 6.6770 per dollar.
Copper dropped, reversing earlier gains, after January imports by China were less than expected. Shipments of copper and products by the world’s largest consumer of the metal totaled 292,096 metric tons last month, the customs office said today. That’s 21 percent less than December’s level, according to data compiled by Bloomberg. Copper for three-month delivery on the London Metal Exchange fell as much as 0.2 percent to $6,576.25 a ton.
Oil dropped 0.7 percent to $73.27 a barrel after the American Petroleum Institute said crude inventories rose 7.2 million barrels and gasoline supplies by 1.55 million barrels last week, more than expected.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net;
Last Updated: February 9, 2010 23:39 EST
WSJ: Sovereigns Pose Risks for Financials
FEBRUARY 9, 2010, 11:05 A.M. ET.
By ALEN MATTICH
The bank rescue engineered by governments during the depths of the financial crisis merely delayed the ultimate reckoning.
That reckoning might come sooner than many investors thought during the heady days of last year's rally. Banks and insurers have taken a beating over the past month or so, particularly in Europe.
Since their recent highs on Jan. 8, the DJ Euro Stoxx banking subindex has dropped 16% and the insurance subindex by 10% while the overall market has fallen a relatively modest 7.6%. Strip out the financials and the overall market has only hit a bump in the road.
The financial sector rescue essentially entailed lifting bad debts off banks' balance sheets and putting them on government books. The relief investors felt that the whole sector wouldn't go the way of Lehman Brothers put a rocket under the shares.
But the load of bad debt, much of it real-estate related, didn't go away. That particular millstone was wrapped around governments' already heavily-burdened necks. And it now threatens to drag sovereign states down the same road to default, starting with Dubai and Greece, probably moving to the likes of the U.K. before too long and then, who knows, maybe even massive debtors like Japan.
The size of financial-sector debt relative to many developed economies is astonishing -- between 75% and 85% of GDP for Germany, France, Italy, Spain and Switzerland; 108% for South Korea and Japan; and an astonishing 202% for the U.K., according to McKinsey.
Most worrying about these sovereign problems is the feedback effect. Banks, having offloaded their toxic rubbish onto governments, then bought paper from those same governments to fill up their balance sheets.
This, though, may prove to have been an expensive mistake.
Default would clearly cause some considerable pain to the banking sector, perhaps triggering another round of collapses and round two of the crisis. But even rising spreads -- as they have been for many of the southern euro-zone countries--cause pain. Falling bond values shrink the asset values on those banks' balance sheets and reduce the present value of future income streams.
They also push up the banks' own funding costs. Sovereign benchmarks set the bases against which other debt is priced.
The financial crisis is a long way short of being resolved.
Write to Alen Mattich at alen.mattich@dowjones.com
http://online.wsj.com/article/SB10001424052748704820904575055220879165984.html?mod=WSJ_newsreel_markets
WSJ: Deal Boosts Carbon Trading in China
Citigroup, Gazprom in Pioneering Energy-Credit Deal in China
FEBRUARY 9, 2010, 10:15 A.M. ET
By SHAI OSTER
BEIJING – Citigroup Inc. and OAO Gazprom closed a small but pioneering deal in China that could lay the foundation for a bigger nationwide market in carbon trading.
Under the deal, the American bank and the Russian gas giant bought energy-intensity credits from three Tianjin heating utilities that had outperformed efficiency targets set by the port city near Beijing. Worth a mere 500,000 yuan, or $73,250, the energy savings were packaged as carbon-emissions allowances that could be sold on to other utilities or buildings in the city that can't make this year's municipal goals.
"We see this as a start for building a fully implemented carbon-intensity market in China. This is a transaction that has a lot of thinking and systems and rules in place behind it," said John Shi, chief executive officer for carbon-credit broker Arreon Carbon which worked on the deal along with the Tianjin government and the Tianjin Climate Exchange, a joint venture with state-owned energy giant China National Petroleum Corp. and the Chicago Climate Exchange, owned by Climate Exchange PLC.
The deal's architects said that they want to use cap-and-trade schemes as part of China's energy- and carbon-intensity targets. China has a nationwide goal of reducing energy intensity, or the amount of energy used relative to economic output, by 20% by 2010 from 2005. And China has pledged to slow down the speed of its growing carbon emissions by 40% to 45% from 2005 levels by 2020. Since coal is China's primary energy source, carbon emissions are closely related to its energy use. China has rejected absolute national caps in international climate talks, but some cities are moving more aggressively.
Cap-and-trade systems have been used before, such as to lower sulfur-dioxide emissions in the U.S. Coal-fired power plants were given an emissions limit and could sell off any excess quota to other power plants that couldn't meet the standards. The global carbon trade under the Kyoto Protocol market uses similar ideas.
Other Chinese cities have established carbon exchanges. But so far, there is no legal basis for trading carbon, and Tianjin appears to be taking the lead in attracting high-profile investors such as Citigroup, Gazprom and CNPC.
In China, the few pilot projects using markets to reduce emissions have had mixed results. For example, pilot sulfur-emissions exchanges never expanded and were less effective than government orders mandating power plants install scrubbers on their smokestacks.
But Mr. Shi thinks there's room to target a type of carbon-emissions trading focused on China's buildings, which alone account for 40% of China's energy use.
In Tianjin's case, the city has thrown its support behind the idea. All the city's residential, office and government offices and the utilities that sell district heating were ordered to increase energy efficiency, something that can be relatively easily measured from electricity, heating bills or fuel consumption. The idea is that more-energy-efficient utilities or buildings could sell the credits to less-efficient ones. The tallying of energy use will provide an indirect measure of carbon emissions: The less coal the buildings burn, the less carbon they will emit.
It's unclear whether Gazprom and Citigroup will find buyers for the credits just purchased, because the heating season is almost over. But Mr. Shi said Tianjin is working on rolling out the project next year using carbon-intensity limits that will be imposed citywide and is coming up with building standards.
Third-party energy-efficiency firms could retrofit older houses and make money by selling carbon credits to institutions such as real-estate developers or power plants.
Write to Shai Oster at shai.oster@wsj.com
http://online.wsj.com/article/SB10001424052748704820904575055131451492108.html?mod=WSJ_newsreel_business
WSJ: Moody's Warns Greece: Deviate, and Risk Downgrade
FEBRUARY 10, 2010
By RIVA FROYMOVICH
NEW YORK—Greece's debt is likely to face another downgrade by Moody's Investors Service, although the ratings firm is prepared to give the country time to enforce policy changes as it implements a plan to dramatically reduce its debt levels.
In an interview, Pierre Cailleteau, managing director of Moody's Global Sovereign Risk Group, mapped out two scenarios for Greece. The more likely path, he said, would see the government deviate from its plan to stabilize finances, which would prompt Moody's to cut Greece's rating again. It last downgraded Greece to A2 with a negative outlook from A1 in December.
"If they deviate even a bit..we would move to A3 in a few months," Mr. Cailleteau said. He stressed that the rating firm is taking a measured approach.
Mr. Cailleteau's comments came amid reports that Germany is considering a plan with its European Union partners to offer Greece and other troubled euro zone members loan guarantees in an effort to calm market fears of a default.
Greece's borrowing costs have risen sharply in recent months on market fears the country can't handle its ballooning budget deficit, which soared to almost 13% of gross domestic product last year -- far above the euro-zone limit of 3%. That in turn has pushed up borrowing costs of other highly indebted countries in the 16-nation euro bloc and has pushed down the currency.
The Moody's analyst said members of the EU are "livid" at Greece for falling into this situation and having to take responsibility, particularly since Greece wasn't severely hurt by the global economic crisis. Rather, the country's debt woes are the result of poor economic policies.
Mr. Cailleteau said he expects Greece will make strides towards improving economic policy, but there will be deviations.
"It may be the first time in many decades this country is going to do something serious" about its debt, he said.
Greece has seen sharp downgrades of its sovereign debt ratings, and economists caution more cuts may be in store. As a consequence, Greece government bonds may lose their eligibility for the European Central Bank's extraordinary refinancing operations later this year. The arrangement is in place until the end of 2010.
Standard & Poor's Corp. and Fitch Ratings Inc. currently rate Greece's debt at BBB+.
Theoretically, a Moody's downgrade of Greece would block it from the ECB facility. But Mr. Cailleteau said he expects that the ECB will accept Greece's sovereign paper, even with lower grades from the rating agencies.
"We call bluff on the ECB," he said. "It would be unprecedented for a central bank to not take the paper of its government."
Write to Riva Froymovich at riva.froymovich@dowjones.com
http://online.wsj.com/article/SB10001424052748704182004575055682560684298.html?mod=WSJ_article_MoreIn
WSJ: Options Market Fights Tax Plan
FEBRUARY 10, 2010
By TENNILLE TRACY
The options industry is gearing up for another fight over taxes.
For the second year in a row, the Obama administration has proposed to raise taxes on options market makers by more than 70% and to eliminate the special tax treatment they have enjoyed for decades. The move would raise $2.6 billion in new tax revenue over the next 10 years, according to Treasury Department estimates.
But given the important role that market makers play in options, ensuring liquidity by taking the other side of investors' orders to buy and sell options, the industry is trying actively to kill the administration's proposal.
The industry fears that the tax—which is garnering more interest given the government's need to raise more tax revenue to finance heavy spending—could drive some market makers away and make buying and selling options more expensive for investors.
"This is an idea that's been out there for a while," said Susan Milligan, senior vice president of government relations for the Options Industry Council. "But when it's in the president's budget, you have to take it seriously."
After trying unsuccessfully to increase taxes on market makers in last year's budget, the Obama administration made another attempt on Feb. 1, when it released its budget for 2011.
Specifically, the administration seeks to eliminate a tax rule, called the 60/40 Rule, that was adopted in 1984 as part of a compromise over mark-to-market accounting. Rather than impose traditional income taxes, the 60/40 Rule requires options market makers to pay long-term capital gains on 60% of their profits and short-term capital gains on 40% of their profits.
A repeal of the 60/40 Rule would require market makers to pay regular income taxes on all trading profits, resulting in a rate that's 72% higher than what they currently pay. While the blended rate currently amounts to taxes of about 23%, the regular income tax would be as high as 39.6% in 2011.
"All income from dealing in securities is active business income that should be treated as such, and not as capital gains," said a Treasury Department spokeswoman.
While many Americans could face higher taxes next year—in part because the administration wants to allow tax cuts for people making more than $250,000 to expire—the repeal could have broader implications for the options market, the OIC says.
The fear is that market makers could simply abandon their current roles if the risks of the job start to outweigh the rewards. If that were to happen, investors would find less liquidity in the options market, making it far more difficult to buy and sell their contracts.
Even if market makers stuck around, they would probably pass along the costs of higher taxes to investors by widening the spreads between bids and offers, which are the prices at which they're willing to buy and sell the contracts.
"Market makers are obligated to make two-sided markets in thousands of [options] and we're concerned about losing liquidity," said William Brodsky, chief executive of the Chicago Board Options Exchange. "So my response to people is that there are unintended consequences here."
The tax battle is part of a broader effort by the options industry to preserve the advantages that market-makers enjoy over other types of traders and investors.
Since market makers shoulder a lot of responsibility in options, the OIC and the options exchanges want to make sure that market makers find their jobs lucrative enough to stick around, rather than use their knowledge of options to trade as normal customers.
Just last year, for example, several options exchanges developed new rules to strip away some of the perks enjoyed by high-frequency traders, who often compete with market makers, hoping to level the playing field between the two large players.
The repeal of the 60/40 Rule has surfaced before. In 2003, the Senate Finance Committee tried unsuccessfully to eliminate it and President Clinton also made a go at it during his time in the White House.
Because of the way Congress changes tax policies, lawmakers could conceivably repeal the 60/40 Rule at any time, particularly if they're looking for ways to reduce the federal deficit or to raise revenue to pay for new spending measures, such as a new health-care plan.
But the administration's decision to include it in the budget proposal for a second year raises the odds of that happening.
"I think we'll go back and touch base with [lawmakers] on the Ways & Means Committee and remind them of our concerns here," Ms. Milligan said. "The stakes are higher as Congress looks for ways to pay for popular tax breaks and to combat the budget deficit."
Write to Tennille Tracy at tennille.tracy@dowjones.com
http://online.wsj.com/article/SB10001424052748704182004575055410545763470.html?mod=WSJ_newsreel_markets
WSJ: Berlin's Wall Around Greek Ruins?
By THOROLD BARKER And RICHARD BARLEY
HEARD ON THE STREET
FEBRUARY 10, 2010
Is it a loan? Is it a bond? No, it's a potential euro-zone guarantee for profligate sovereigns.
After weeks of panicky markets, which caused Greek sovereign-debt spreads to balloon, neighbors appear ready to aid Athens. Talk of debt guarantees to tide Greece over and reduce the chance of contagion calmed markets Tuesday.
Loan guarantees brokered by Germany might appear an elegant solution to the crisis. Except in a default, they avoid any fiscal transfer of the kind that would be anathema to the euro zone. They may never be called on, and they carry a price to whomever uses them.
But guaranteeing Greece's debt also would raise serious questions, most obviously over moral hazard. If the European Union is willing to bow to markets and create a guarantee program, it could find it tougher to enforce fiscal discipline on Greece and other high-deficit countries. After all, once guarantees are in place, the threat of removing them would ring hollow.
Guarantees, if widely used, also would risk increasing the cost of borrowing for countries underwriting them, such as Germany, and could prove a weight on the euro itself. After all, Greece isn't exactly like the banks, which quickly used the cover of debt guarantees to raise new equity and rebuild their financial positions through a return to profitability. Greece faces a painful road to work through its problems.
If a guarantee program does get off the ground, there remain many details to sort out. Which countries would be eligible? How much would it cost to tap the guarantees? What term of debt would it cover, and how long would it last? Which states would be on the hook for any losses? How would the program be squared with EU rules against bailouts?
Of course, nothing is set in stone. The very idea that Germany is willing to back Greece could breathe confidence back into markets and head off the risk of contagion hitting the banking system again.
But it also could backfire. Politicians may be giving in too quickly. Greece raised €8 billion ($10.93 billion) in the bond market just weeks ago, and only faces major debt maturities in April and May. Athens already has announced measures, including raising the retirement age in recent weeks, and had promised regular updates, under strict European Commission scrutiny.
Guarantees could encourage countries to defer their problems. If German taxpayers effectively take on Greece's risk, it could reduce the appetite in Athens for adequate fiscal retrenchment. And Greek citizens might bridle at a program effectively overseen by Berlin. In bailing out Greece, Europe actually might set the stage for worse political tensions, unless Greece miraculously grows its way out of the problem.
— Thorold Barker and Richard Barley
http://online.wsj.com/article/SB20001424052748704820904575055804112278936.html?mod=WSJ_Markets_section_Heard
WP: In poll, Republicans gaining political ground on Obama
By Dan Balz and Jon Cohen
Washington Post Staff Writer
Wednesday, February 10, 2010; A05
Republicans have significantly narrowed the gap with Democrats on who is trusted to deal with the country's problems and have sharply reduced several of President Obama's main political advantages, according to a new Washington Post-ABC News poll.
The survey paints a portrait of a restless and dissatisfied electorate at the beginning of a critical election year. More than seven in 10 Americans disapprove of the job Congress is doing, and as many say they're inclined to look for new congressional representation as said so in 1994 and 2006, the last times that control of Congress shifted.
Asked how they would vote in the November House elections, Americans split evenly -- 46 percent siding with the Democrats, 46 percent with the Republicans. As recently as four months ago, Democrats held a 51 to 39 percent advantage on this question.
Obama's overall approval rating is holding steady, with 51 percent of respondents giving him positive marks and 46 percent rating him negatively. On the big domestic issues -- the economy, health care, jobs and the federal budget deficit -- bare majorities of Americans disapprove of the job he is doing.
Only on fighting terrorism does Obama receive majority support for his performance, with 56 percent saying they approve. But the poll shows majority opposition to the administration's plan to try terrorism suspects in federal courts.
Changes in public attitudes were most apparent when Americans were asked whether they trust Obama or congressional Republicans to handle these issues. Last summer, the president enjoyed advantages of more than 20 points over the GOP on the handling of health care, the economy, the deficit and the threat of terrorism. Those leads have all slipped, reflecting both the partisan polarization that has colored the political landscape for many months and the sharp erosion in support for Obama among independents.
But there is about as much time between now and November as has elapsed since Obama held his June advantages. The president and his allies have started a new political offensive, seeking to rebound from the Democrats' loss of the Massachusetts Senate seat long held by the late Edward M. Kennedy and salvage their effort to enact comprehensive health-care reform.
Obama has begun to try to appeal to voters who see Washington as broken by stressing his commitment to bipartisanship, while aggressively trying to rebut GOP criticisms of his policies. At the same time, he has sought to refocus his energy on the economy and job creation, which remains the public's top priority.
When compared with the early months of Obama's presidency, the GOP's overall gains are striking. A year ago, Democrats held a 26-point advantage on dealing with the big issues; that lead is now six points. At the one-month mark, Obama's lead over the Republicans on dealing with the economy was 35 points; it's now five points.
Signs for November
These findings illustrate why the political landscape looks increasingly favorable for Republicans to pick up House and Senate seats in November, with some handicappers predicting major gains of 25 to 30 seats and Republican House leaders expressing confidence that they can win the 40 seats they need to take back the majority. The president's political advisers say privately that some losses are likely but that they are looking to keep them to a minimum.
The poll offers some cautionary notes for both parties. The GOP's image has improved since last year, but a majority of poll respondents still see the party in an unfavorable light (52 percent unfavorable, 44 percent favorable). Fifty percent view the Democratic Party favorably, and 46 percent unfavorably. That marks a new low point for the party in Post-ABC polling.
Slim majorities of independents rate each party negatively, and sizable percentages of that group express skeptical views of both parties. Nearly three in 10 volunteer that they trust "neither" party to handle major issues, and a similar proportion hold unfavorable views of both parties.
Almost half of all poll respondents characterize their mood as generally "anti-incumbent," with just over a third saying they are "pro-incumbent." Two-thirds of independents say they would like to look around, the most to say so in polls since October 1994.
The question asking Americans how they plan to vote in House races, known as the generic congressional vote, is an imperfect predictor of elections, but the GOP gains here amplify the extent of the Democrats' slide since they won the House in 2006. Four years ago, Democrats led Republicans on this question by a wide margin.
Among independents who are registered to vote, it's now a 51 to 35 percent GOP lead on this question, a mirror image of the Democrats' advantage among this group of voters on the eve of the 2006 midterms.
Economy remains the key
But the wild card remains the economy, along with public perceptions of recovery.
White House officials hope that an expanding economy will buoy public ratings of Obama's performance and spare his Democratic allies at the ballot box. They point to fourth-quarter gross domestic product estimates showing a rapidly expanding economy.
But the jobless rate, even after declining from 10 percent to 9.7 percent, remains high, and whatever the statistics may show, Americans remain gloomy.
Overwhelmingly, most of those polled continue to see the economic downturn as raging unabated, with just one in eight saying the recession is over, and a majority saying that in their own experience, the economy has not even started to recover.
Nearly three-quarters of those yet to sense an upswing expect that it will take more than a year for a recovery to kick in. Even among those who say the economy is headed in the right direction, the vast majority see the recovery as "weak."
This poll was conducted by conventional and cellular telephone Thursday to Monday among a random sample of 1,004 adults. The margin of sampling error for the full poll is plus or minus three percentage points.
Polling analyst Jennifer Agiesta contributed to this report.
http://www.washingtonpost.com/wp-dyn/content/article/2010/02/10/AR2010021000010_pf.html
Just tonight?
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Congrats! Looks like you came the closest :)
Thank you, but we're not doing OTCBBs